Beruflich Dokumente
Kultur Dokumente
Submitted by: Nirmal Yadav Class: M.B.A. 5 yrs. (9th semester) Roll no. 54 Regn. No. 08-UD- 1147
ACKNOWLEDGEMENT
Gratitude is the hardest of emotions to express and often one does not find adequate words to convey that entire one feels. Perhaps it is natural to every human being that when you are really thankful and sincerely want to express you gratitude towards someone, just you run out of words; in spite of healthy vocab. There are many people whom I would like to thank for their help in preparing this report. I sincerely feel that the credit of the project work could not be narrowed down to anyone individual, by which I could complete this project. I express my sincere deep gratitude to Mr. Ajay Kumar (Manager HDFC SLIC) under whose guidance I could achieve my project completion and contributing their skills and creativity, which made my report appealing and attractive. Besides, I would like to thank my parents for their constant cooperation and help. In the absence of above mentioned people, this project would not have been in the present style.
Nirmal Yadav
PREFACE
For the deep inclination into the management concepts practical training is an important. Theoretical knowledge gives us the fundamental concepts of management, and the practical training teaches us those tacts and skills, which are successfully employed to todays competitive market. Theoretical lectures must be correlated with practical training to make learning process more effective and to provide a platform to judge and apply ones theoretical knowledge to practical situations. Practical training thus plays an important role in developing and sharpening ones skills in the field of business management and administrative. I have undergone 4 weeks summer training at HDFC SLIC Bangalore during the training I have worked on the project titled Ratio analysis of financial statement and I have submitted the project report as part of fulfillment of 5 year MBA programme. Being a student of management, this training contributed a lot in gaining knowledge about the business environment at HDFC SLIC Bangalore.
DECLARATION
I, Nirmal Yadav, Roll no. 54, student of 9th SEM. MBA 5 year, has undergone summer training at HDFC SLIC Bangalore for 4 weeks & have submitted a project report on the title Ratio analysis of financial statement as assigned by company for the partial fulfillment of degree of MBA 5 year. I hereby declare that the project report is my original work. This has not been previously submitted for the award of any other diploma, degree or other similar title.
Nirmal Yadav
Contents
Chapter
Preface 1. Industry Profile A brief history of the Insurance sector
Page no.
03 06-08
The Insurance Regulatory and Development Authority (IRDA) 2. COMPANY PROFILE Background and inception of the company Nature of the business carried Product/service profile 3. General Introduction Financial Statement Analysis Tools for Financial Statement Analysis Statement of the problem 4. Objective of the Study 5. Scope of the study 6. Methodology 7. Limitations of the study 8. ANALYSIS /DESIGN 9. SUMMARY OF FINDINGS 10.CONCLUSION 38- 62 64 66 09- 22
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35 36 37
Some of the important milestones in the life insurance business in India are: 1912: The Indian Life Assurance Companies Act enacted as the first statute to regulate the life insurance business. 1928: The Indian Insurance Companies Act enacted to enable the government to collect statistical information about both life and non-life insurance businesses. 1938: Earlier legislation consolidated and amended to by the Insurance Act with the objective of protecting the interests of the insuring public. 1956: 245 Indian and foreign insurers and provident societies taken over by the central government and nationalized. LIC formed by an Act of Parliament, viz. LIC Act,1956, with a capital contribution of Rs. 5 crore from the Government of India. The General insurance business in India, on the other hand, can trace its roots to the Triton Insurance Company Ltd., the first general insurance company established in the year 1850 in Calcutta by the British.
Insurance sector reforms In 1993, Malhotra Committee headed by former Finance Secretary and RBI Governor R.N. Malhotra was formed to evaluate the Indian insurance industry and recommend its future direction. The Malhotra committee was set up with the objective of complementing the reforms initiated in the financial sector. The reforms were aimed at creating a more efficient and competitive financial system suitable for the requirements of the economy keeping in mind the structural changes currently underway
and recognizing that insurance is an important part of the overall financial system where it was necessary to address the need for similar reforms
In 1994, the committee submitted the report and some of the key recommendations included: i) Structure Government stake in the insurance Companies to be brought down to 50%. Government should take over the holdings of GIC and its subsidiaries so that these subsidiaries can act as independent corporations. All the insurance companies should be given greater freedom to operate. ii) Competition Private Companies with a minimum paid up capital of Rs.1bn should be allowed to enter the industry. No Company should deal in both Life and General Insurance through a single entity. Foreign companies may be allowed to enter the industry in collaboration with the domestic companies. Postal Life Insurance should be allowed to operate in the rural market. Only one State Level Life Insurance Company should be allowed to operate in each state.
iii) Regulatory Body The Insurance Act should be changed An Insurance Regulatory body should be set up Controller of Insurance (Currently a part from the Finance Ministry) should be made independent iv) Investments Mandatory Investments of LIC Life Fund in government securities to be reduced from 75% to 50% GIC and its subsidiaries are not to hold more than 5% in any company (There current holdings to be brought down to this level over a period of time) v) Customer Service LIC should pay interest on delays in payments beyond 30 days Insurance companies must be encouraged to set up unit linked pension plans. Computerization of operations and updating of technology to be carried out in the Insurance industry
The committee emphasized that in order to improve the customer services and increase the coverage, the insurance industry should be opened up to competition. But at the same time, the committee felt the need to exercise caution as any failure on the part of new players could ruin the public confidence in the industry. Hence, it was decided to allow competition in a limited way by stipulating the minimum capital requirement of Rs.100 crore. The committee felt the need to provide greater autonomy to insurance companies in order to improve their performance and enable them to act as independent companies with economic motives. For this purpose, it had proposed setting up an independent regulatory body. (IRDA)
The Insurance Regulatory and Development Authority (IRDA) Reforms in the Insurance sector were initiated with the passage of the IRDA Bill in Parliament in December 1999. The IRDA since its incorporation as a statutory body in April 2000 has fastidiously stuck to its schedule of framing regulations and registering the private sector insurance companies. The other decision taken simultaneously to provide the supporting systems to the insurance sector and in particular the life insurance companies was the launch of the IRDAs online service for issue and renewal of licenses to agents. The approval of institutions for imparting training to agents has also ensured that the insurance companies would have a trained workforce of insurance agents in place to sell their products, which are expected to be introduced by early next year. Since being set up as an independent statutory body the IRDA has put in a framework of globally compatible regulations. In the private sector 12 life insurance and 6 general insurance companies have been registered.
Mission
We aim to be the top new life insurance company in the market. This does not just mean being the largest or the most productive company in the market; rather it is a combination of several things like Customer service of the highest order Value for money for customers Professionalism in carrying out business Innovative products to cater to different needs of different customers Use of technology to improve service standards Increasing market share
Values
Integrity Innovation Customer centric People Care One for all and all for one Team work Joy and Simplicity
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Quality policy
Quality road map time lines Phase-1 to phase-3 should run simultaneously
Phases
Objectives
Visible proof
when
Phase-5
Business excellence
Phase-4
Phase-3
Zone/region/branch/location certification
Phase-1
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How (1)
how (2)
how (3)
how (4)
BUSINESS EXCELLENCE
O B J E C T I V E S
Workplace organization Align and integrate long term loans Optimize value streams Process maturity Organized workplace Current business improvement Prioritized functions/CFT All locations IMPROVEMENT PROJECTS (KNOWN OPPORTUNITY)
Business Processes
How (1): How to achieve Quality awareness Identify known opportunities Implement prioritized projects Develop capability- BB/GB Deliver and quantify value Share and recognize Basic workplace hygiene
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Process rollout Process adherence Dash board How (3): How to achieve Value stream projects. SLA Service guarantee How (4): How to achieve Stake holders delight Business excellence
HDFC Home Loan Protection Plan: This plan aims to protect family from loan liabilities in case of unfortunate demise within the policy term. It ensures that family does not lose the dream house that person have purchased for them, in case person is not around to repay the outstanding monthly installments on their housing loan.
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2. Children's Plans
HDFC Children's Plan: As a parent, everyone priority is their childs future and being able to meet their childs dreams and aspirations. With HDFC Childrens Plan, they can start building their savings today and ensure a bright future for their child. HDFC Young Star Super: This Plan provides valuable protection to insured person child in case his/her is not around and gives them an outstanding investment opportunity to maximize their savings by providing them a choice of thoroughly researched and selected investments. This plan also gives Bumper Addition to the fund value at Maturity. HDFC Young Star Super Suvidha: It is a convenient plan, which saves insured person from the need of going for Medicals. This Unit Linked Plan provides valuable protection to his/her child in case he is not around and gives him with an outstanding investment opportunity to maximize their savings by providing them a choice of thoroughly researched and selected investments. This plan also gives Bumper Addition to the fund value at Maturity. HDFC Young Star Supreme Suvidha: This Plan provides valuable protection to insured person child in case he is not around and gives him an outstanding investment opportunity to maximize his savings by providing him a choice of thoroughly researched and selected investments. This plan also gives Bumper Addition to the fund value at Maturity. HDFC SL Young Star Champion Suvidha: This is a convenient plan, which saves him from the need of going for Medicals. This Unit Linked Plan gives him with an outstanding investment opportunity to maximize his savings by providing you a choice of thoroughly researched and selected investments. This plan also gives Bumper Addition to the fund value at Maturity.
3. Retirement Plans
HDFC Personal Pension Plan: The HDFC Personal Pension Plan is a With Profits insurance policy that is designed to provide a post-retirement income for life with the freedom to choose your retirement date. HDFC Pension Super: The HDFC Personal Pension Plan is a With Profits insurance policy that is designed to provide a post-retirement income for life with the freedom to choose your retirement date.
HDFC Pension Supreme: The HDFC Pension Supreme is Unit Linked plan, designed to provide a post-retirement income for life with the freedom to choose their retirement date. This plan gives them with an outstanding investment opportunity to maximize their savings by providing them a choice of thoroughly researched and selected investments. This plan also gives Bumper Addition to the fund value at vesting.
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HDFC SL Pension Champion: The HDFC SL Pension Champion is Unit Linked plan, designed to provide a post-retirement income for life with the freedom to choose their retirement date. This plan gives them with an outstanding investment opportunity to maximize their savings by providing them a choice of thoroughly researched and selected investments. This plan also gives Bumper Addition to the fund value at vesting. HDFC SL Unit Linked Pension Maximiser II: HDFC SL Unit Linked Pension Maximiser II is a unique Single Premium unit linked plan, designed to provide a post-retirement income for life with the freedom to maximize their investment returns. This plan also gives Bumper Addition* of 5% of initial single premium at vesting and on death. HDFC Immediate Annuity: The HDFC Immediate Annuity is a contract that uses investor capital to provide them with a guaranteed gross income throughout their lifetime or over a period of their choice. The income is guaranteed and is unaffected by the rise and fall of interest rates. This means the investor can plan their life the way they want it to be, safe in the knowledge that their gross income will not fall during the period they have selected. The HDFC Immediate Annuity offers a number of options to meet all their income needs.
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HDFC Endowment Supreme Suvidha: It is a convenient plan, which saves insured person from the need of going for Medicals. This Unit Linked Plan gives them with an outstanding investment opportunity to maximize their savings by providing them a choice of thoroughly researched and selected investments. This plan also gives Bumper Addition to the fund value at Maturity. HDFC Wealth Builder: HDFC Wealth Builder is an exclusive plan crafted for elite achievers. An investment cum insurance plan that will actively help in building investor wealth and give them twin advantage of exclusive funds (actively managed ) along with choice of limited premium payment term. This plan provides the financial protection to their loved ones and builds up their wealth effortlessly. This plan also gives Bumper Addition to the fund value at Maturity. HDFC Endowment Assurance Plan: With HDFC Endowment Assurance Plan, investors can start building their savings today and ensure that their family remains financially independent, even when they are not around. This With Profits plan is designed to secure their familys future by giving their family a guaranteed lump sum on maturity or in case of their unfortunate demise, early into the policy term. HDFC Money Back Plan: With HDFC Money Back Plan, investors can plan now to ensure that they have the necessary funds to have the necessary funds to secure their long-term as well as short-term financial goals. This With Profits plan gives them a proportion of the basis Sum Assured as Cash lump sums at regular 5-year intervals within the policy term. HDFC Single Premium Whole of Life Insurance Plan: HDFC Single Premium Whole of Life Plan is a tailor made plan well suited to meet investors long-term investment needs and help them to maintain their familys financial independence. This single premium investment plan is a Whole of Life plan aimed at providing long-term real growth of their money. HDFC Assurance Plan: HDFC Assurance Plan helps investors conveniently build their long-term savings while keeping their familys future protected. This With Profits savings plan helps them to build their long-term savings while securing their familys future. HDFC Savings Assurance Plan: HDFC Savings Assurance Plan is a With Profits savings plan which helps investors conveniently build their long-term savings and ensure that their family is protected even if they are not around.
5. Health Plans
HDFC Critical Care Plan: HDFC Critical care plan provides for a lump sum payment on survival post diagnosis of a critical illness, so that in the event a critical illness strikes, investors dont have to dig into those precious savings of them.
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HDFC SurgiCare Plan: HDFC SurgiCare Plan provides investors with timely support in case they have to undergo a major surgery and hospitalization, as the case maybe, ensuring their financial independence at all times.
6. Rural Products
HDFC Gramin Bima Kalyan Yojana HDFC Gramin Bima Mitra Yojana HDFC Bima Bachat Yojana
7. Social Products
HDFC Development Insurance Plan
E) Area of operation
HDFC STANDARD LIFE is operating internationally, that means all over INDIA and outside India; it is rendering its insurance services including rural places.
F) Ownership pattern
It is a joint venture between Housing Development Finance Corporation Limited (HDFC Limited), India's leading housing finance institution and a Group Company of the Standard Life Plc, UK. As on February 28, 2009 HDFC Ltd. holds 72.43% and Standard Life (Mauritius Holding) 2006, Ltd. holds 26.00% of equity in the joint venture, while the rest is held by others. Associate Companies: HDFC Limited HDFC Bank HDFC Mutual Fund HDFC Sales HDFC ERGO General Insurance
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G. Competitors information
Aviva India
Aviva India is a joint venture between one of the countrys oldest and largest groups, Dabur, and Aviva plc, the UK's largest insurance group, whose association with India dates back to 1834.
Dabur Group
Founded in 1884, Dabur Group is one of India's oldest and largest groups of companies with a consolidated annual turnover in excess of Rs 2,396 crores. A professionally managed company, it is the country's leading producer of traditional healthcare products.
Aviva Group
Aviva Group is the UKs largest and one of the biggest Insurance groups worldwide. It is one of the leading providers of life and pensions products to Europe and has substantial businesses elsewhere around the world. With a history dating back to 1696, Aviva Group has a 50 million customer base worldwide.
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H) Awards/achievements
Received CIO 'the Ingenious 100 2009' Award HDFC Standard Life has received the CIO The Ingenious 100 - 2009 Award, for ATLAS (Agency Training Licensing and Servicing System). Additionally, the company has received the CIO 100 Security Award 2009 for pioneering LANDesk Management and Security Suite security implementation and taking its security to a higher level of technological excellence. HDFC Standard has received the CIO 100 Award for the third consecutive year. It had received the 2008 CIO Bold Award for Consultant Corner and CIO Security Award for our initiatives for a secure computing environment, including Sesame - Identity and Access Management. In 2007, the company received CIO 100 award for Wonders and a Special Award in Storage category. CIO magazine has a long tradition of honoring leading companies for business and technology leadership and innovations through its flagship award program CIO 100. Its a celebration of 100 organizations (and the people within them) that are using IT in innovative ways to deliver business value, whether by creating competitive advantage, optimizing business processes, enabling growth or improving relationships with customers.
Received Diamond EDGE Award 2009 HDFC Standard Life has received the Diamond EDGE Award 2009 for its mobile workforce portal - Consultant Corner. EDGE - Enterprises Driving Growth and Excellence (using IT) is an initiative by the ,Network Computing magazine to identify, recognize, and honors end-user companies in India that have demonstrated the best use of technology to solve a business problem, improve business competitiveness, and deliver quantifiable ROI to stakeholders. Network Computing magazine is part of CMP Technology, which brings more than 100 IT media brands to more than 18 million technology and business decision makers worldwide. Received 2008 CIO Bold 100 and CIO Security Awards HDFC Standard Life has received the 2008 CIO Bold 100 Award. This annual award recognizes organizations that exemplify the highest level of operational and strategic excellence in information technology. This year's award theme, The Bold 100, recognized those executives and organizations that embraced great risk for the sake of great reward. HDFC Standard Life has also been one of the five recipients of the Special 2008 CIO Security Award aimed at CIOs, whose pioneering implementations have taken their enterprise security to the next level. This award category identifies innovative and groundbreaking deployment of technologies aimed at creating a secure business infrastructure.
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The company received the 2008 CIO Bold Award for its mobile workforce portal and the CIO Security Award for its initiatives for a secure computing environment, including identity management. Received PCQuest Best IT Implementation Award 2008 HDFC Standard Life received the PCQuest Best IT Implementation Award 2008 for Consultant Corner, the applications for its financial consultants, providing centralized control over a vast geographical spread for key business units such as inventory, training, licensing, etc. HDFC Standard Life has won the PCQuest Best IT Implementation Award for two years consequently. Last year, the company received the award for Wonders, its path-breaking implementation of an enterprise-wide workflow system. Silver Abby at Goafest 2008 HDFC Standard Life's radio spot for Pension Plans won a Silver Abby in the radio writing craft category at the Goafest 2008 organized by the Advertising Agencies Association of India (AAAI). The radio commercial Pata nahin chala touched several changes in life in the blink of an eye through an old mans perspective. The objective was drive awareness and ask people to invest in a pension plan to live life to the fullest even after retirement, without compromising on ones self-respect Unit Linked Savings Plan Tops Mint Best TV Ads Survey The Unit Linked Savings Plan advertisement of HDFC Standard Life, one of the leading private insurance companies in India, has topped Mints Top Television Advertisement survey conducted, for February 2008. HDFC Standard Lifes Unit Linked Savings Plan advertisement was ranked 4th in terms of a combined score of ad awareness and brand recall and 3rd in terms of ad diagnostic scores (likeability, enjoyment, believability, and claim). Deepak M Satwalekar Awarded QIMPRO Gold Standard Award 2007 Mr. Deepak M Satwalekar, Managing Director and CEO, HDFC Standard Life, received the QIMPRO Gold Standard Award 2007 in the business category at the 18th annual Qimpro Awards function. The award celebrates excellence in individual performance and highlights the quality achievements of extraordinary individuals in an era of global competition and expectations. SAR Utha Ke Jiyo among Indias 60 Glorious Advertising Moments HDFC Standard Lifes advertising slogan honored as one of 60 Glorious Advertising & Marketing Moments' over the last 60 years in India, by 4Ps Business and Marketing magazine. The magazine said that HDFC Standard Life is one of the first private insurers to break the ice using the idea of self respect (Sar Utha Ke Jiyo) instead of 'death' to convey its brand proposition. This was then, followed by others including ICCI Prudential, thus giving HDFC
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Standard Life the credit of bringing up one such glorious advertising and marketing moment in the last 60 years.
BAJAJ ALLIANZ: 8%
BIRLA SUNLIFE: 5%
REALIANCE LIFE: 6% OTHERS: 59% LIC: 40% MAX NEW YORK: 3% SBI LIFE: 9%
HDFC SL: 5%
OTHERS: 12%
Market Share for HDFC SL has gone up from 4.10% Mar 08 to 4.5% Mar 09
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Thus from the above diagram we can say that HDFC SL is growing steadily as it is acquiring market share from 4.10% to 4.5% in march 2009. Through many strategies like: advertising, good service to customers than competitors etc, it can acquire a good market share in future
Thus from the above diagram we can say that HDFC SL is growing steadily as it is acquiring market share from 4.10% to 4.5% in march 2009. Through many strategies like: advertising, good service to customers than competitors etc, it can acquire a good market share in future also.
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Introduction:
FIVE S is a basic and the simplest methodology used to establish and maintain quality environment in organization. It is a part of a Japanese philosophy known as Kaizen; Kai in Japanese means, to change and Zen means for better. It involves setting standards and then continuously improving on those standards to achieve their goals. The ultimate goal of 5s is to make the workplace more effective and efficient by its own people in a short span of time so that efficiency of that workplace is enhanced in an innovative and sustainable manner. Thus it requires active involvement of everyone in the organization across the hierarchy and to come up with suggestions on regular basis.
BENEFITS OF 5S: Can be started immediately. Reduces wastages and fatigue. Improves the efficiency of workplace and wastages are made visible. Improves self organization and overall self appearance of company. Everyone can participate and does not require any quality background. Brings in the feelings of ownership of workplace.
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Thus the 5s are the pillars of visually managed workplace. This process starts with identifying the area where 5s is to be deployed. It can be a single workstation or area as big as entire office. Teams are nominated for carrying out the 5s and to ensure that everyone on a regular basis practices it.
In detail:
S1 sorting: The meaning of s1 that is sorting is to straighten and contain that is to divide the objects into 2 groups one that is needed and other that is wanted and then remaining the unneeded ones from the workplace. Needed items: needed items are items that are critical in terms of existence at the workplace and are required from process point of view. Wanted items: wanted items are those, which we want, but are not required from process point of view. We can also determine the criteria to distinguish between the need and want items. Red Tag Square (R.T.S) The use of a red tag square is generally during the time of a blitz, that is during the blitz the material identified as obvious scrap and other abnormal material shall be parked in a common place which will be known as Red Tag Square, however the items which are in excess quantities can also be put in the R.T.S and be noted in the Red Tag Matrix. S 2 systematic arrangements: Place for everything and everything in place. After the needed and wanted items are identified properly and the R.T items have been parked at the R.T.S. The next step is to identify the right place for all the needed /wanted items kept at workplace. Workstation illustration: The layout of the workplace should be prepared in such a manner so that the owners know the exact location. Layout helps the owner to locate the workplace and assign responsibilities to his team. Again the needed and wanted items (from need want matrix) needs to taken into consideration. So that place to keep them can be decided according to the frequency or usage. Storeroom illustration: After sorting out the needed and unneeded items and putting the unneeded items in the red tag square, one must make the layout of the store and start specifying the areas where the things are
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supposed to be placed. It is very important to allocate right areas so that no rework needs to be done. S 3: Spin N Span Cleaning with meaning and cleaning is inspection Sanitize means keeping things clean and in order. It is a maintenance made, which looks for damages, defects and potential problems. Once s1 and s2 have been done it is the responsibilities of the staff to ensure that s3 is done on regular basis so that the items stored are properly identified. S4 Standardize: This step is about making standards for all the procedures and practices followed in five s. Abnormality identification register R.T. Matrix Cabinet index Master index Store master index
S5 discipline: The main objective of five s is to follow and spread the learning to others. All employees need to keep five s as an ongoing improvement plan and for that there is a fifth s that emphasizes on sustenance. It is the culmination of s1, s2, s3, and s4, which is likely to happen over a period of time.
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STRUCTURE
In the hdfc standard life each and every department is empowered with the officer, clerk and sub staff. The authority is delegated to officer/manager to extract work from the staff. The each department consists of members based on its requirements. Thus it is having an effective work on the various activities efficiently and effectively.
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SKILLS
It is a more reputed insurance company, as it is providing financial solution of where to invest, how to invest and number of products with having more benefits to investors. It has reputed customers who are loyal to the organization. The service given to the customers are accomplished as per their requirements. Financial services generally do mass supporting services are rendered to all types (classes) of customers. More over the people feel their task is in safe hands of the industry. The organization is having various capabilities over the competitors. These skills are unique from the competitors of hdfc standard life. The skills are broadly categorized as follows:Market knowledge, analytical skills, Services, Research, Personal/administration, Soft skills, Supporting, Medical, Finance, Information relations, others
STYLE
Hdfc standard life follows top down/bottom up style in its management, where in each major decision regarding the company is taken in top down fashion and other decision like targets and growth aspects hdfc standard life follows bottom up style. We think it is important to distinguish between the basic personality of a top management team and the way the team comes across to the organization. Organization may listen to what managers say but they believe what managers do. Not words, but pattern of action is decisive. The power of style then is essentially manageable. One aspect of style is symbolic behavior. Typically have more people on board who understand exploration are have headed exploration department. Typically they fund exploration more consistently.
STRATEGY
By strategy we mean those actions that a company plans in response to or anticipation of changes in its customers, its competitors. Strategy is the way A Company aims to improve its position vis--vis competition perhaps through low cost production or delivery, perhaps by providing better value to the customer, perhaps by achieving sales and service dominance. it is, or ought to be, an organization way of saying: here is how we will create unique value. The hdfc standard has set of objectives, strategies to achieve the objective, the course of action to be taken to achieve the objective and guidelines for the course of action. Hdfc standard adopts low pricing strategy to generate huge returns and good market share in the industry, since it has well expanded its business all over INDIA.
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Hdfc standard life charges minimal to its clients for the services. It provides more benefits to customers compared to its competitor. Hence it is known for the good pricing strategy in the industry.
SYSTEM
The hdfc standard life has various techniques to control this procedure as system like to improve the back office targets by giving addition support. Information system: the implementation of computers has made information flow fast and reliable. The information is versatile. Since hdfc standard life has good backup system. Recruitment, training and development system Recruitment process starts with the identification of the vacancies by the department head of the respective department. A form requesting for the human resource is sent from the department to HRD.
STAFF
Staff (in the sense of people, not line/staff) is often treated in one of two ways. At the hard end of the spectrum, we talk of appraisal systems, pay scales, formal training program and the like. At the soft end, we talk about morale, attitudes, motivation and behavior. The hdfc standard life is in the course of cutting down the cost of service. If it starts recruiting, the selection is done based on the education qualification first class degree. The various training program to the employees are taken like refresher course, job rotation and job training. The promotion in the organization is taken place based upon the service, seniority and educational qualification. The performance appraisal is also taken as a basis for promotion so officers staff makes it.
SHARED VALUES
Unlike the other six Ss, super ordinate goals dont seem to be present in all, or even most, organizations. They are, however, evident in most of the superior performers. The value shared by the members of an enterprise is known as the shared values. The organization of HDFC STANDARD LIFE is having a strategy of sharing values.
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SWOT ANALYSIS
STRENGTHS 1. HDFC Standard life insurance offers a range of individual and group insurance solutions. 2. HDFC Standard Life has the financial expertise required to manage long-term investments safely and efficiently. 3. Rated AAA by CRISIL and ICRA for the 10th consecutive year for High service standards 4. Life insurance industry is a rapid growing and a nobler service industry.
WEAKNESSES 1. LIC is prevalent and sustains even today a major source of population. 2. Low number of offices and network and number of life insurance agents. 3. Lack of knowledge and expertise.
OPPORTUNTIIES 1. Life insurance has captured its mere15 20% growth therefore a wide open untapped market is open to the company to develop, grow and measure its success. 2. Still the numbers of companies are few and company has every capability to grow and forward its performance areas to the widest.
THREATS 1. People are hesitant to invest and put their hard earned money to the private life insurance company with the fear of getting lost. 2. Belief towards LIC as it is a government corporation is continued to surmount the people of India despite lots of flaws and development and liberalization of life insurance. 3. Alternative financial services such as mutual fund, banking services, share and securities also pose problems and threats to the working of the life insurance sector. 4. Illiteracy and unemployment also pose threat.
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5. Rising real estate industry also pose threat as people are investing a bulk of their money over to that industry.
Strengths
Weaknesses
Opportunities
Threats
Reputation in marketplace
Well established position Large consultancies with a well defined operating at a minor level market niche
Expertise at partner level Unable to deal with multi- Identified market for in HRM consultancy disciplinary assignments consultancy in areas because of size or lack of other than HRM ability
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Financial statement helps in understanding the performance of the organization. The performance of an organization can be explained on the basis of the four important aspects of the business:
a) b) c) d)
Liquidity: Liquidity shows the ability of the business to service the short term obligation. Solvency: Solvency shows the ability of the business to meet the long term obligation. Efficiency: Efficiency shows the ability of the business to use the resources of the business. Profitability: Profitability shows the ability to the business to generate and distribute profit.
Intra firm comparison of hdfc: 1. Analysis of Short Term Liquidity: a. Current ratio = Total Current Assets / Total Current Liabilities b. Quick ratio = quick current assets / quick current liabilities
Table showing: current ratio and quick ratio of hdfc standard life insurance company ltd. for the year 2008 and 2009. Year Current assets Current liabilities Current ratio and quick ratio 2009 (RS.000) 9,643,629 9,029,038 1.07% 2008 (RS.000) 8,575,727 6,251,168 1.37%
Inference: The above table is showing the details regarding the current ratio and quick ratio of hdfc standard life insurance company ltd. The standard current ratio is 2:1, and quick ratio is 1:1, but the company has got only 1.37 and 1.07 both the year the ratio is not satisfactory. But compare to year-2009 ratio year-2008 ratio was good.
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2. Capital Structure and Long -Term Solvency Ratios: Debt equity ratio =long Term Debt / shareholders fund Table showing: debt equity ratios of hdfc standard life in the year 2008 and 2009. Years Outsiders Funds Share Holders Fund Debt Equity Ratio 2009 (RS.000) 97,578,470 18,433,462 5.29% 2008 (RS.000) 84,012,076 13,263,132 6.33%
Inference: There is continues increase in Share holders Funds and also in an outsider funds from the year 2008 to 2009. Outsiders funds are increased more than the shareholders fund. Hence the outsiders funds has been increased year by year, it shows the larger outsiders funds are available to the company. Since this is quite satisfactory and in the same way it is not good to the shareholders point of view and also to the company.
Table showing: the gross profit ratio of hdfc standard life insurance company ltd.
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Analysis: The high ratio of gross profit is considered satisfactory; hdfc standard life insurance company ltd. is suffering gross loss in the year 2008 and 2009. Inference: There is an increase in gross loss and also the percentage of loss in the year 2008 to 2009 is 0.05, and 0.09 respectively. In the year 2008 it was facing less gross loss, but later it went on increasing. In the year 2009, loss percentage is 0.09 compare to last year the loss has increased. b. Net profit ratio: Net profit ratio= net profit/sales*100 Table showing net profit ratio of hdfc standard life for the year 2008 and 2009 Year Net profit Sales Net profit ratio 2009 (RS.000) (11,913,122) 55,183,763 -0.22 2008 (RS.000) (6,883,491) 48,176,166 -0.14
Inference: The high ratio of net profit is considered satisfactory; hdfc standard life insurance company ltd. is suffering net loss in the year 2008 and 2009 respectively. There is an increase in net loss in 2009 compare to year-2008. The percentage of loss in the year 2008 and 2009 is 0.14, and 0.22 respectively. This is not good from the company point of view.
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LEARNING EXPERIENCE
In the class just we can assume how the corporate world is but it is completely different when I started to go to the company. In the class just we will read, learn and same thing we will write in the exam and we will get pass but when we go for searching job really we will feel the heat of outside world, regarding pressure for target achievement, competition for jobs etc
That was a wonderful experience to me in that company. I learnt so many things there, what is the real corporate culture, How much we have to be smart, How much talented we should, How we should achieve our target, what is our responsibity.
Chapter-4
General Introduction Financial Statement Analysis
The purpose of the financial statement analysis is to help users to understand the organization and the business decisions. These users are both internal and external. The internal users include the management, employees, and the external users include the shareholders, researchers, bankers, customers, suppliers government representatives. Boards of directors analyze the financial statements to understand the impact of the decisions and use the same for future decision making. Employees use the financial statements to negotiate the union demands. Potential investors use the financial statements to decide about the investment to be made. The common goal of these users is to understand the past and use the data to predict the future. For answering the above mentioned questions one has to undertake a detailed analysis of the financial statements. Financial statement analysis is a comprehensive analysis of all three financial statements: balance sheet, income statement, and cash flow statement. Financial statements provide useful information. However, one has to meticulously look for the right information from the right data. One can undertake the financial statement analysis from different stakeholders perspective: creditors, bankers, credit rating agencies, existing
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shareholders, potential shareholders, internal management, and employees too. There are different tools of financial statement analysis: common-size statement, comparative statements, and ratio analysis. Before we get into the financial statement analysis, in the first section we will recapitulate the financial statements.
II.
III.
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IV.
Methodology
This project is on descriptive research and some extent it regards to causal research, and to use the available facts as information and analyze these to make a critical evaluation of the materials this is also a causal research with an aim to find a solution for an immediate problem facing by industry or business organization. The control aim of descriptive research is to discover a solution for some pressing problem. 1. Type of research descriptive research 2. Tool Ratio analysis 3. Company annual reports and e-mail at www.hdfcinsurance.com
Source of data
Secondary data: Secondary data was collected through available records/annual reports of 5 year period from 2005-2009 and web sites of hdfc standard life insurance company.
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Data Collection: The required data was collected from the annual report of the company and direct Personal interview with the officer of the company and also through company website.
Interaction with the employees was limited because of the work schedule.
It was difficult to cover all the types of ratios because of lack of information i.e. regarding inventories, debtors turnover etc..
A ratio expresses a mathematical relation between two quantities. Ratios are tools providing us which clues and symptoms of underlying conditions. Ratios can help us to identify areas requiring further investigation. The usefulness of ratio depends on the quality of the numbers in their calculation.
That is our ability to draw useful insights and make valid intercompany comparisons is enhanced by our skill in adjusting reported numbers prior to inclusion in these analyses. Ratios are interpretable only in comparison with
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1) Prior ratios 2) Predetermined standards. 3) Ratios of competitors. Ratio analysis of a firms financial statements is of interest to shareholders, creditors, and the firms management. Stockholders are interested in the firms current and future level of risk and return, which directly affect the stock price. The firms creditors are primarily interested in the short-term liquidity of the company and in its ability to make interest and principal payments. Internal management is concerned with all aspects of the firms financial performance. Therefore, they attempt to produce financial ratios that will be considered favorable to both owners and creditors. Additionally, management uses ratios to monitor the firms performance from period to period. Unexpected changes or variances are identified to isolate developing problem areas.
Types of ratios: Ratios can be classified into six broad groups: 1. 2. 3. 4. Liquidity ratios Capital structure/ leverage ratios Profitability ratios Activity/ efficiency ratios
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1. Liquidity Ratios: It is the ability of a firm to satisfy its short- term obligations as they become due. The importance of adequate liquidity in the sense of the ability of a firm to meet current / short term obligations when they become due for payment can hardly be overstressed.
a) Current Ratio:
Current Ratio is the ratio between Current Assets and Current Liabilities. It is calculated by dividing Current Assets by Current Liabilities. Current assets include all assets, which can convert easily into near money within a year. Current assets include cash in hand, cash at bank, debtors, stock, and money at short or call notice etc. Current liabilities are the sum of all shortterm payables within a year, which include Sundry Creditors, Bills payable, Bank overdraft, Expenses outstanding etc. the current ratio of a firm measures its short term solvency that is, its ability to meet short-term obligations. As a measure of short-term current financial liquidity, it indicates the amount of current assets available for each amount of current liability. Formula for finding current ratio is given below.
Significance of the ratio Current ratio provides a margin of safety to the creditors. In a sound business, a current ratio of 2:1 is considered an ideal one. Current ratio indicates firms ability to pay its current liabilities, i.e. day-to-day financial obligation. Current ratio is an index of the firms financial stability i.e., an index of technical solvency and an index of the strength of working capital, which means excess of current assets over current liabilities. Higher ratio more than 2:1 indicates sound solvency position. Lower ratio less then 2:1 indicates inadequate working capital.
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Table: 1 Table showing: the Current Ratios of hdfc standard life from the year 2005-09.
Year
2009 (RS.000)
2008 (RS.000)
2007 (RS.000)
2006 (RS.000)
2005 (RS.000)
Current assets
9,643,629
8,575,727
5,325,536
3,869,728
1,143,024
Current liabilities
9,029,038
6,251,168
3,905,497
2,687,296
1,090,355
Current ratio
1.07%
1.37%
1.36%
1.44%
1.05%
Analysis: Hdfc standard life insurance company ltd. is having a low current ratio in the year 2005 (1.05) in the year 2006 the ratio has been increased to 1.44. It has been reduced to 1.36 in the year of 2007, and in 2008 current ratios increased further (1.37). But again the current ratio has decreased in the year 2009 (1.07). Inference: The Current assets in the year 2005 is Rs.1,143,024,000, in the year 2006 is Rs. 3,869,728,000, in the Year 2007 Rs. 5,325,536,000, in the year 2008 Rs. 8,575,727,000, and in the year 2009 Rs. 9,643,629,000. When there is an increase in current assets in the same way Current liabilities are also increasing from year to year. In the year 2005 the current liability was Rs. 1,090,355,000, in
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2006 it increased to Rs. 2,687,296 and it increased in the year 2007 to Rs. 3,905,497,000.and in the year 2008 it increased more than the last year that is Rs. 6,251,168,000. And in 2009 it increased much more i.e., 9,029,038,000. Since the current ratio is not Satisfactory in the year 2005 & 09. But in the year 2006, 2007, and 2008 Current ratios is not up to the level. Graph-1 Graph showing: the Current ratios of hdfc standard life insurance company ltd. from the year2005 to 2009.
P E R C E N T A G E
1.6 1.4 1.2 1 0.8 0.6 0.4 0.2 0 2005 2006 2007 2008 2009
Current Ratio
YEARS Quick ratio: Quick ratio is also known as liquid ratio or Acid test ratio. Quick ratio shows the liquidity of the business. Quick ratio is the ratio between quick assets and quick liabilities. The term quick asset refers to current assets, which can be converted into, cash immediately or at a short notice without diminution of value. Quick assets comprise of all current assets minus stock and pre paid expenses. The formula to find quick ratio is as follows.
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Quick liabilities comprises of all current liabilities minus Bank over draft.
Table-2 Table showing the quick or Acid Test ratios of hdfc standard life from the year 2005-09
Years
2009 (Rs.000)
2008 (Rs.000)
2007 (Rs.000)
2006 (Rs.000)
2005 (Rs.000)
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Liquid assets
9,643,629
8,575,727
5,325,536
3,869,728
1,143,024
Liquid liabilities
9,029,038
6,251,168
3,905,497
2,687,296
1,090,355
1.07%
1.37%
1.36%
1.44%
1.05%
Analysis: Hdfc standard life insurance company ltd. is having a low acid test ratio in the year 2005 and 2009 i.e. (1.05 and 1.07). When compare to next years, in the year 2006, 2007 and 2008, it has 1.44, 1.36 and 1.37 respectively. Inference: As a rule of thumb quick ratios for the past consecutive years are well above the rule of thumb. It indicates that the firm is liquid and has the ability to meet its current or liquid liabilities in time.
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Graph 2 Graph showing the quick ratios or Acid test ratio of hdfc standard life insurance.ltd from the year 2005 to 2009
1.6
P E R C E N T A G E
1.4 1.2 1 0.8 0.6 0.4 0.2 0 2005 2006 2007 2008 2009 Series 1
Years
b) Net working capital:
Working capital is the lifeblood of the business. Working capital refers to that part of the firms capital, which is used for financing short term or current assets, such as, cash, marketable securities, debtors, inventories, bills receivables etc. in a narrow sense, the term working capital refers to the net working capital. Net working capital is the excess of current assets over current liabilities.
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Years
2009 (RS.000)
2008 (RS.000)
2007 (RS.000)
2006 (RS.000)
2005 (RS.000)
9,643,629
8,575,727
5,325,536
3,869,728
1,143,024
9,029,038
6,251,168
3,905,497
2,687,296
1,090,355
614,591
2,324,559
1,420,039
1,182,432
52,669
c) Turnover ratios:
It measures the speed with which various accounts /assets are converted into sales or cash. It is concerned with measuring the efficiency in asset management. These ratios are also called efficiency ratios or asset utilization ratios. The liquidity ratios mentioned above are related to the liquidity of a firm as a whole. Another way of examining the liquidity is to determine how quickly certain current assets are converted into cash. The ratios to measure these are referred to as turnover ratio.
The three relevant turnover ratios are, 1. Inventory turnover ratio: This ratio is also known as stock velocity. This ratio is calculated to consider the adequacy of the quantum of capital and its justification for investing in inventory. A firm must have reasonable
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stock in comparison to sales. It is the ratio of cost of sales and average inventory. This ratio helps the finance manager to evaluate inventory policy. This ratio reveals the number of times finished
3. Creditors turnover ratio: It is a ratio between net credit purchases and the average amount of creditors outstanding during the year. It is calculated as follows:
Creditors turnover ratio= net credit purchases / average creditors
Average creditors= average of creditors (including bills payable) outstanding at the beginning and at the end of the year
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A low credit turnover ratio reflects liberal credit terms granted by suppliers, while a high ratio shows that accounts are to be settled rapidly. The creditors turnover ratio is an important tool of analysis as a firm can reduce its requirement of current assets by relying on suppliers credit. The extent to which trade creditors are willing to wait for payment can be approximated by the creditors turnover ratio.
d) Defensive interval ratios:
It is the ratio between quick assets and projected daily cash requirement.
This ratio measures liquidity of a firm by comparing actual cash flows from operations with current liability. It is calculated as per equation Cash flow from operations ratio= Cash flow the problems of actual convertibility Being a cash measure, the ratio does not encounterfrom operations/ current liabilities of current assets and the need for maintaining minimum levels of these assets. In general, the higher the ratio, the better is a firm from the point of view of liquidity. 2. Capital structure /leverage ratios:
The long term lenders/creditors would judge the soundness of a firm on the basis of the long term financial strength measured in terms of its ability to pay the interest regularly as well as repay the installment of the principal on due dates or in one lump sum at the time of maturity. The long term solvency of a firm can be examined by using leverage or capital structure ratios. It may be defined as financial ratios which throw light on the long term solvency of a firm as reflected in its ability to assure the long term lenders with regard to (1) Periodic payment of interest during the period of the loan and (2) Repayment of principal on maturity or in predetermined installments at due dates
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f)
A. Debt equity ratio: The financing of total assets of a business concern is done by owners equity as well as outsiders debts. The relationship between borrowed funds and owners capital is a popular measure of long-term financial solvency of a firm. The relationship is shown by the debt equity ratio. This ratio indicates the relative proportions of debts and equity in financing the assets of a firm the formula we use is Total long-term debts by Shareholders fund. Total long-term debts include mortgage loans, long term loans; debentures etc. share holders fund includes Preference share holders, Equity share holders, capital reserve, revenue reserve etc.
Significance of the ratio: Acceptable norm for this ratio is considered to be 2:1. A higher debt-equity ratio is allowed in the case of capital-intensive industries, a norm of 4:1 is used for fertilizer and cement units and a norm of 6:1 is used for shipping units. A high ratio shows that the claims of creditors are greater than that of owners. A very high ratio is unfavourable from the firms point of view. A high debt company, also known as highly leveraged or geared, is able to borrow funds on very restrictive terms and conditions. A low debt-equity ratio implies greater claim of owners then creditors. From the point of view of creditors, it represents a satisfactory capital structure of the business since a high proportion
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of equity provides a larger margin of safety for them. This ratio shows the extent to which debt financing is used in the business. Table: 4 The debt equity ratios of hdfc standard life insurance company ltd. from the year 2005 to 2009. Years 2009 (RS.000) 2008 (RS.000) 2007 (RS.000) 2006 (RS.000) 2005 (RS.000)
Outsiders Funds
97,578,470
84,012,076
45,999,541
23,633,655
8,470,669
5.29%
6.33%
5.50%
3.73%
2.65%
Analysis: The ratio of 2:1 is considered satisfactory, the debt equity ratios of hdfc standard life insurance company ltd is 2.65, 3.73, 5.50, 6.33, and 5.29 from the year 2005 2009 respectively. Inference:
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There is continues increase in Share holders Funds and also in an outsider funds from the year 2005 to 2009. Outsiders funds are increased more than the shareholders fund. Hence the outsiders funds has been increased year by year, it shows the larger outsiders funds are available to the company. It has crossed more than maximum level also. Since this is quite satisfactory and in the same way it is not good to the shareholders point of view and also to the company. Graph- 3 Chart showing: the debt equity ratios of HDFC STANDARD LIFE from the year 2005-09. Debt equity ratios
7 6 5 4 3 2 1 0 2005 2006 2007 2008 2009 Series 1
P e r c e n t a g e
Years B). Debt assets ratio: Another approach to calculating the debt to capital ratio is to relate the total debt to the total assets of the firm. The total debt of the firm comprises long- term debt plus current liabilities. The total assets consist of permanent capital plus current liabilities. Thus,
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Table: 5 Debt - assets ratio table 2009 Particulars (Rs.000) 2008 (Rs.000) 2007 (Rs.000) 2006 (Rs.000) 2005 (Rs.000)
Total debt
116,011,932
97,275,208
54,359,982
29,965,380
11,665,119
Total assets
11,091,335
9,907,527
6,061,590
4,471,073
1,874,848
Debt-assets Ratio
10.45%
9.82%
8.97%
6.70%
6.22%
Analysis: The ratio of 2:1 is considered satisfactory, the debt equity ratios of hdfc standard life insurance company ltd is 6.22, 6.70, 8.97, 9.82, and 10.45% from the year 2005 2009 respectively. Inference: There is continues increase in total debt and also in total assets from the year 2005 to 2009. Debt ratio is increasing more than the assets ratio. Hence the debt ratio has been increased year by year; it shows the larger total debt is more than the total assets available to the company. Since this is quite satisfactory and in the same way it is not good to the share holders point of view and also to the company.
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Graph: 4 Debt assets ratio of HDFC STANDARD LIFE, from the year 2005 to 2009
P E R C E N T A G E
12
10
Series 1
Years c) Equity assets ratio: Still another variant of the debt/equity ratio is to relate the owners/proprietors funds with total assets. This is called the proprietary ratio. The ratio indicates the proportion of total assets financed by owners. Symbolically, it is equal to: Proprietary ratio = Proprietors funds / total assets x 100
Proprietary Fund to Fixed Assets Proprietary ratio relates shareholders funds to total assets. It is a variant of debt equity ratio. This ratio shows long term or future of the business. It calculated by dividing shareholders funds by the total assets.
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Fixed Asset
1,447,706
1,331,800
736,054
601,345
731,824
Shareholders Fund
18,433,462
13,263,132
8,360,441
6,331,725
3,194,450
Proprietary ratio
12.73%
9.96%
11.36%
10.53%
4.37%
Analysis: The ratio of 1:3 is considered satisfactory; the Proprietary Ratio of Hdfc standard life insurance company is having a proprietary ratio of 4.37, 10.53, 11.36, 9.96, and 12.73 in the year 2005, 2006, 2007, 2008, and in 2009 respectively. Inference:
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The Proprietary Ratio of hdfc standard life insurance company is increasing over the years. It shows Good investment over by the company in Fixed Asset.
Graph 5 Graph showing the Proprietary Ratio of hdfc standard life insurance company ltd. from the year 2005-09 Proprietary Ratio
P E
14 12
R C E N T A
2 10 8 6 4
G E
0 2005 2006 2007 2008 2009
Years
It shows the relationship between current assets and Shareholders funds. The purpose of this ratio is to calculate the percentage of shareholders funds invested in current assets. It found by dividing current assets by proprietors funds. Significance of the ratio
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This ratio can be expressed in percentage or as a proportion. Different industries are using different norms and hence the ratio should be carefully used. Table: 7 Table showing the Proprietary Ratio of hdfc standard life insurance company ltd. from the year 2005-09
Years
2009 (RS.000)
2008 (RS.000)
2007 (RS.000)
2006 (RS.000)
2005 (RS.000)
Current Asset
9,643,629
8,575,727
5,325,536
3,869,728
1,143,024
Proprietors Fund
18,433,462
13,263,132
8,360,441
6,331,725
3,194,450
Proprietary Ratio
1.91%
1.55%
1.55%
1.64%
2.79%
Analysis: Hdfc standard life is having a current asset to proprietary ratio of 2.79, 1.64, 1.55, 1.55, and 1.91 percent in the year 2005, 2006, 2007, 2008, and in 2009 respectively.
Inference: The Proprietary ratio of hdfc standard life insurance company ltd. is varying from the year 2005 to 2009. It indicates that the Proprietary ratio is not up to the level.
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Graph -6 The Graph showing the Proprietary Ratio of hdfc standard life insurance company ltd. from the year 2005-2009.
P E
2.5
R C E N T A G E
0 2005 2006 2007 2008 2009 1 2
1.5
0.5
YEARS
c) Coverage ratios: It measures the firms ability to pay certain fixed charges. These ratios are computed from information available in the profit and loss account. For a normal firm, in the ordinary course of business, the claims of creditors are not met out of the sale proceeds of the permanent assets of the firm. The obligations of a firm are normally met out of the earning or operating profits.
1. Interest coverage ratio: It measures the firms ability to make contractual interest payments.
Interest coverage = EBIT / interest
It is also known as time-interest- earned ratio. This ratio measures the debt servicing capacity of a firm insofar as fixed interest on long term loan is concerned. It is determined by dividing the operating profits or earnings before interest and taxes by the fixed interest charges on loans.
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2. Dividend coverage ratio: It measures the ability of a firm to pay dividend on preference shares which carry a stated rate of return. This ratio is the ratio of net profits after taxes and the amount of preference dividend. Thus,
3. Total fixed charges coverage ratio: It measures the firms ability to meet all fixed payment obligations. The total coverage ratio has a wider scope and takes into account all the committed fixed obligations of a firm, that is, 1) Interest on loan 2) Preference dividend 3) Lease payments 4) Repayment of principal Symbolically,
EBIT + Lease payment/ interest + lease payment + (preference dividend + installment of principal) / (1-t)
Total cash flow coverage = EBIT+ lease payments + depreciation + non-cash expenses / lease payment + interest + (principal repayment)/ (1-t) + (preference dividend)/ (1-t)
The overall ability of a firm to service outside liabilities is truly reflected in the total cash flow coverage ratio: the higher the coverage, the better is the ability 5. Debt services coverage ratio: Debt service capability is the ability of a firm to make the contractual payments required on a scheduled basis over the life of the debt. It is considered a more comprehensive and apt measure
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to compute debt service capacity of a business firm. It provides the value in terms of the number of times the total debt service obligations consisting of interest and repayment of principal in installments are covered by the total operating funds available after the payment of taxes: Earnings after taxes, EAT + interest + depreciation + other non cash expenditure like amortization.
3. Profitability ratios: The profitability of a firm can be measured by its profitability ratio. Apart from the creditors, both short-term and long terms, also interested in the financial soundness of a firm are the owners and the management or the company itself. The management of the firm is naturally eager to measure its operating efficiency. Similarly the owners invest their funds in the expectation of reasonable returns. The operating efficiency of a firm and its ability to ensure adequate returns to its shareholders/ owners depends ultimately on the profits earned by it. a) Gross profit ratio:
Gross profit is the result of the relationship between prices, sales volume and costs. It measures the percentage of each sales rupee remaining after the firm has paid for its goods. A change in the gross margin can be brought about by changes in any of these factors. The gross margin represents the limit beyond which fall in sales prices are outside the tolerance limit. Further, the gross profit ratio/ margin can also be used in determining the extent of loss caused by theft, spoilage, damage, and so on in the case of these firms which follow the policy of fixed gross profit margin in pricing their products. A high ratio of gross profit to sales is a sign of good management as it implies that the cost of production of the firm is relatively low. It may also be indicative of a higher sales price without a corresponding increase in the cost of goods sold. It is also likely that cost of sales might have declined without a corresponding decline in sales price. A relatively low gross margin is definitely a danger signal, warranting and careful and detailed analysis of the factors responsible for it.
x 100
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Table: 8 Table showing: the gross profit ratio of hdfc standard life insurance company ltd. Year 2009 (Rs.000) 2008 (Rs.000) 2007 (Rs.000) 2006 (Rs.000) 2005 (Rs.000)
Gross profit
(5,029,631)
(2,435,094)
(1,255,611)
(1,287,572)
(897,348)
Sales
55,183,763
48,176,166
28,226,248
15,469,501 6,866,346
-0.09%
-0.05%
-0.04%
-0.08%
- 0.13%
Analysis: The high ratio of gross profit is considered satisfactory; hdfc standard life insurance company ltd. is suffering gross loss from the year 2005 2009 respectively. Even though having a very good sales and growth in the market company is not in the position to make profit. Inference: There is continues decrease in gross loss suffered by this company and also the percentage of loss from the year 2005 to 2009 is 0.13, 0.08, 0.04, 0.05, and 0.09 respectively. In the year 2005 it was facing more gross loss, but later it went on decreasing the loss. In the year 2009, again it faced more loss percentage compare to last three years.
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Graph- 7 The gross profit ratios of hdfc standard life insurance company.ltd from the year 2005-09. Gross profit ratio in percentage YEARS
0 2005 2006 2007 2008 2009
P E R C E N T A G E
It measures the percentage of each sales rupee remaining after all costs and expenses including interest and taxes have been deducted. The net profit margin is indicative of managements ability to operate the business with sufficient success not only to recover from revenues of the period, the cost of merchandise or services, the expenses of operating the business (including depreciation) and the cost of the borrowed funds, but also to leave a margin of reasonable compensation to the owners for providing their capital at risk. The ratios of net profit (after interest and taxes) to sales essentially express the cost price effectiveness of the operation. A high net profit margin would ensures adequate return to the owners as well as enable a firm to withstand adverse economic conditions when selling price is declining, cost of production is rising and demand for the product is falling.
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x 100
Table showing net profit ratio of hdfc standard life from the year 2005 to 2009 Year 2009 (RS.000) 2008 (RS.000) 2007 (RS.000) 2006 (RS.000) 2005 (RS.000)
Net profit
(11,913,122)
(6,883,491)
(4,421,364)
(3,165,753)
(1,878,181)
Sales
55,183,763
48,176,166
28,226,248
15,469,501 6,866,346
-0.22%
-0.14%
-0.16%
-0.20%
-0.27%
The high ratio of net profit is considered satisfactory; hdfc standard life insurance company ltd. is suffering net loss from the year 2005 2009 respectively. It is having very good sales and growth in the market then also its profit is not increasing, but net loss is reducing compare to past years. Inference: There is continues decrease in net loss, which is suffered by this company and also the percentage of loss from the year 2005 to 2009 is 0.27, 0.20, 0.16, 0.14, and 0.22 respectively. In the year 2005 it was facing more net loss, but later it went on decreasing the loss. In the year 2009, again it faced more loss percentage compare to last three years.
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Graph- 8 Chart showing the Net profit ratios of hdfc standard life insurance company.ltd from the year 2005-09. YEARS
0
P e r c e n t a g e
2005 -0.05
2006
2007
2008
2009
-0.1
-0.15
-0.2
-0.25
-0.3
c. Return on capital employed: The ROCE is the second type of ROI. Here the profits are related to the total capital employed. The term capital employed refers to long- term funds supplied by the lenders and owners of the firm. It can be computed in two ways. First, it is equal to non current liabilities (long term liabilities) plus owners equity.
x100
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Particulars
2009 (Rs.000)
2008 (Rs.000)
2007 (Rs.000)
2006 (Rs.000)
2005 (Rs.000)
Net profit
(11,913,122)
(6,883,491)
(4,421,364)
(3,165,753)
(1,878,181)
Capital employed
18,433,462
13,263,132
8,360,441
6,331,725
3,194,450
-64.62%
-51.90%
-52.88%
-49.99%
-58.80%
The high ratio of rate of return on capital employed is considered satisfactory; hdfc standard life insurance company ltd. is not in the position to earn a better rate of return on total capital employed from the year 2005 2009 respectively. Inference: There is continues decrease in rate of return on capital employed, and also the percentage of capital employed is increasing continuously from the year 2005 to 2009 i.e. is 3,194,450,000, 6,331,725,000, 8,360,441,000, 13,263,132,000, and 18,433,462,000 respectively. In the year 2005 and 2009 it was earning very low return on capital employed compare to other financial years.
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Graph- 9 Chart showing the return on capital employed ratio of hdfc standard life insurance company.ltd from the year 2005-09. YEARS
0 2005 -10 2006 2007 2008 2009
P e r c e n t a g e
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SUMMARY OF FINDINGS
Ratio analysis is an important tool for financial statement analysis. Here we studied various ratios relating to measurement of the financial performance such as current ratio, quick ratio, debt equity ratio, proprietary ratio, gross profit ratio etc. In the previous chapter we made a detailed analysis of the hdfc standard life insurance company ltd. from 2005 to 2009. The major findings are given below The study shows there is a continuous changes in the current ratio and also it is not satisfactory when compare to actual standard of 2:1. Current ratio in the year 2005, it is showing 1.05% and later on it went on increasing way i.e. in 2006 1.44%, 2007 1.36, 2008-1.37%.
Current ratio in past three years it was getting to meet the standard, but in the year of 2009 again it went down to 1.07%. The quick ratio for this company is same as mentioned in the above table. Because as there is no inventory and prepaid expenses to deduct in this company as it is insurance company we cannot find inventory. The study shows that the net working capital in the company is Rs.52,669,000 in 2005, Rs.1,182,432,000 in 2006, in 2007 Rs.1,420,039,000, in 2008 Rs.2,324,559,000 and in 2009 again it decreased to Rs.614,591,000. The study shows that the debt equity ratio is satisfactory from the creditors point of view that is in the year 2005 the percentage of ratio is 2.65%, in 2006 3.73%, in the year 2007 5.50%, in 2008- 6.33% and in 2009 it is 5.29%. The study shows that the proprietary ratio to fixed assets is 2005- 4.37%, 2006- 10.53%, 2007- 11.36%, 2008- 9.96%, 2009- 12.73%. The study shows that the proprietary ratio to current ratio is in 2005-2.79%, 2006- 1.64%, 2007- 1.55%, 2008- 1.55%, 2009- 1.91%.
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The study shows that gross profit ratio of the company was went on decreasing but it is recovering from more loss to less loss and the percentage of ratio is, in the year 2005 is 0.13%, in 2006 it is -0.08%, in 2007 it is -0.04%, in 2008 it is -0.05%, in 2009 it is -0.09% The study shows that the net loss was went on decreasing from the year 2005 to 2008. But in the year 2009 it has incurred more loss than 2006, 2007, and 2008 but less than 2005 (i.e. 2005 = -0.27, 2006= -.20, 2007= -.16, 2008= -0.14, 2009= -0.22) The study shows that the return on capital employed is not good because every year it is earning negative returns and also the percentage of negative returns went on increasing way (i.e. 2005= -58.80%, 2006= -49.99%, 2007= -52.88%, 2008= -51.90%, 2009= -64.62%. The return on capital employed is more negative in the year 2009 as compared to all other four years. (I.e. 64.62%)
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CONCLUSION
HDFC STANDARD LIFE has been one of the best life insurance service providers in India. It has the excellent quality service provider to their customer. The overall performance of HDFC STANDARD LIFE is very good compared to other service providers. It got fifth position in the insurance industry. They share a very good rapport with the customers.
The financial condition is not good from year to year. It is in loss condition from past five years. Its debt- equity ratio is good. Because of that the company is in a good condition to get survival in the market.
It is selling more policies from year to year that means the sales percentage is increasing from many years it is the signal to the growth of the company. Presently it is incurring more expenses and market share is very less compare to other competitors like LIC, ICICI Prudential etc.
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ANNEXURES
Balance sheet of HDFC STANDARD LIFE as at March 31 for five years
Particulars
Schedule
2009 (Rs.000)
2008 (Rs.000)
2007 (Rs.000)
2006 (Rs.000)
2005 (Rs.000)
SOURCES OF FUNDS SHAREHOLDERS FUNDS: Share Capital Share application money received pending allotment of shares Reserve and Surplus Credit / [Debit] Fair Value Change Account 6 5 17,958,180 12,706,359 8,007,148 6,192,718 3,190,898
287,391
552,892
552,892
65,902
65,902
(77,610)
3,881
73,105
3,552
Sub-Total BORROWINGS POLICYHOLDERS FUNDS: Credit / [Debit] Fair Value Change Account Policy Liabilities Insurance Reserves Provision for Linked 7
18,433,462 -
13,263,132 -
8,360,441 -
6,331,725 -
3,194,450 -
(296,885)
193,745
91,247
209,569
174,980
29,092,419 -
24,366,747 -
17,391,531 -
11,487,996 -
6,377,397 -
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84,085,083
56,317,976
25,934,264
9,732,781
1,918,292
(15,302,147 ) Total Provision for Linked Liabilities Sub-Total Funds for Future Appropriations Funds for future appropriation Provision for lapsed policies unlikely to be revived Surplus Allocated to Shareholders 68,782,936
3,133,608
2,582,499
2,203,309
59,451,584
28,516,763
11,936,090
97,578,470 586,395
84,012,076 -
45,999,541 -
23,633,655 -
8,470,669 -
531,970
246,951
59,485
25,516
TOTAL APPLICATION OF FUNDS: INVESTMENTS Shareholders 8 Policyholders 8A Assets held to cover Linked Liabilities LOANS FIXED ASSETS CURRENT ASSETS Cash and bank 11 8B 9 10
117,130,297
97,522,159
54,419,467
29,990,896
11,665,119
4,108,660
4,493,238
3,363,556
2,879,622
733,529
70
balances Advances and Other Assets 12 5,534,969 4,082,489 1,961,980 990,106 409,495
Sub-total (A)
9,643,629
8,575,727
5,325,536
3,869,728
1,143,024
13
8,820,225
6,129,149
3,874,652
2,658,567
1,069,635
14
208,813
122,019
30,845
28,729
20,720
Sub-Total (B) NET CURRENT ASSETS (C) = (A - B) MISCELLANEOUS EXPENDITURE (to the extent not written off or adjusted) DEBIT BALANCE IN PROFIT AND LOSS ACCOUNT (Shareholders account) TOTAL CONTINGENT LIABILITIES 1. Partly paid-up investments 2. Claims, other than against policies, not acknowledged as debts by the company 15 -
9,029,038
6,251,168
3,905,497
2,687,296
1,090,355
614,591 -
2,324,559 -
1,420,039
1,182,432 -
52,669
11,913,122
6,883,491
4,421,364
3,165,753
1,878,181
117,130,297
97,522,159
54,419,467
29,990,896
11,665,119
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3. Underwriting commitments outstanding (in respect of share and securities) 4. Guarantees given by or on behalf of the Company
5. Statutory demands / liabilities in dispute, not provided for 1,465,718 6.Reinsurance obligations to the extent not provided for in the accounts 7.Others
262,091
309,494
119,829
309,494
119,829
Profit & Loss Account for year ended March 31, from 2005 to 2009
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Rent - Gross (b) Profit on sale / redemption of investments (c) (Loss on sale / redemption of investments) (d) Transfer / gain on revaluation / change in fair value (e) Amortization of (premium)/disco unt on investments Sub Total Other Income TOTAL (A) Expenses other than those directly related to the insurance business Bad debts written off Provisions (other than taxation) (a) For diminution in the value of Investments (net) (b) Provision for doubtful debts 3A
302,367
242,109
126,836
138,496
65,321
13,924
98,694
114,192
7,989
10,117
(35,870)
(11,142)
(12,470)
(6,933)
(4,043)
51,887
(21,384)
(23,909)
(6,594)
(2,965)
561
(2,375)
(8,926)
(5,156)
6,148,951
3,248,208
1,450,397
1,397,003
954,744
73
(5,029,63 1) -
(2,435,094 ) (2,435,094 )
(1,255,611 ) (1,255,611 )
(1,287,572 ) -
(897,348) (897,348)
Profit / (Loss) after tax APPROPRIATIONS (a) Balance at the beginning of the Year (b) Interim dividends paid during the Year (c) Proposed final dividend (d) Dividend distribution tax (e) Transfer to liabilities on account of Employee benefits Profit / (Loss) carried forward to the Balance Sheet Earnings per share Basic Earnings per share Diluted (5,029,63 1) (1,287,572 )
(27,033)
(6,883,491 ) (2.42)
(4,421,364 ) (1.83)
(3,165,753 ) (2.92)
(1,878,181 ) (3.38)
(3.28)
(2.42)
(1.81)
(2.92)
(3.38)
74
BIBILOGRAPHY
WEBSITES: WWW.HDFCINSURANCE.COM
REFERENCE BOOKS: PRASANNA CHANDRA: FINANCIAL MANAGEMENT, (TMH), 6/e, 2004 M.Y. KHAN & P.K. JAIN: FINANCIAL MANAGEMENT, (TMH), 4/e, 2004
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