You are on page 1of 87



HDFC Standard Life, one of Indias leading private life insurance companies, offers a range of individual and group insurance solutions. It is a joint venture between Housing Development Finance Corporation Limited (HDFC), Indias leading housing finance institution and Standard Life plc, the leading provider of financial services in the United Kingdom. HDFC Ltd. holds 72.43% and Standard Life (Mauritius Holding) Ltd. holds 26.00% of equity in the joint venture, while the rest is held by others. HDFC Standard Lifes product portfolio comprises solutions, which meet various customer needs such as Protection, Pension, Savings, Investment and Health. Customers have the added advantage of customizing the plans, by adding optional benefits called riders, at a nominal price. The company currently has 32 retail and 4 group products in its portfolio, along with five optional rider benefits catering to the savings, investment, protection and retirement needs of customers. HDFC Standard Life continues to have one of the widest reaches among new insurance companies with 568 branches servicing customer needs in over 700 cities and towns. The company has a strong presence in its existing markets with a base of 2, 00,000 Financial Consultants. Standard Life was awarded the Best Pension Provider in 2004,2005 and 2006 at the Money Marketing Awards, and it was voted a 5 star life and pension provider at the Financial Adviser Service Awards for the last 10 years running. The 5 Star accolade has also been awarded to Standard Life Investments for the last 10 years, and to Standard Life Bank since its inception in 1998. Standard Life Bank was awarded the Best Flexible Mortgage Lender at the Mortgage Magazine Awards in 2006.

Its Parentage
HDFC Limited,

India's premier housing finance institution has assisted more than 3.4

million families own a home, since its inception in 1977 across 2400 cities and towns through its network of over 271 offices. It has international offices in Dubai, London and Singapore with service associates in Saudi Arabia, Qatar, Kuwait and Oman to assist NRI's and PIO's to own a home back in India. As of December 2009, the total asset size has crossed more than Rs. 104,560 crores including the mortgage loan assets of more than Rs.90,400 crores. The corporation has a deposit base of over Rs. 23,000 crores, earning the trust of nearly one million depositors. Customer Service and satisfaction has been the mainstay of the organization. HDFC has set benchmarks for the Indian housing finance industry. Recognition for the service to the sector has come from several national and international entities including the World Bank that has lauded HDFC as a model housing finance company for the developing countries. HDFC has undertaken a lot of consultancies abroad assisting different countries including Egypt, Maldives, and Bangladesh in the setting up of housing finance companies.
Standard Life

is one of the UK's leading long term savings and investments companies

headquartered in Edinburgh and operating internationally. Established in 1825, Standard Life provides life assurance and pensions, investment management and healthcare insurance products to over 6 million customers worldwide. The Group has around 10,000 employees across the UK, Canada, Ireland, Germany, Austria, India, USA, Hong Kong and mainland China. At the end of December 2010 the Group had total assets under administration of 170.1bn. Standard Life's diverse business includes one of the largest life and pensions businesses in the UK with more than 4 million customers; Standard Life Investments, which currently manages assets of over 138.7bn globally and Standard Life Healthcare, a private medical insurance company which is one of the largest in the UK. On 10 July 2006, after 80 years as a mutual company, Standard Life Assurance Company demutualised and Standard Life plc was listed on the London Stock Exchange. Standard Life now has approximately 1.5 million individual shareholders in over 50 countries around the world

Awards & Accolades

Best Companies to Work for in India in 2010

HDFC Standard Life has been adjudged one of the Best Companies to Work for in India in 2010. The company participated in the Great Places to Work & study for the first time and ranked first in the insurance category. It ranked 34th on the Top 50 Best Companies to Work for, in India 2010 list. The company was also awarded for its unique employee initiative - Mission in-Genius national quiz. The study has shown that HDFC Standard Life conscientiously develops employee talent programmes to keep engaging and motivating its employees. The company provides some unique platforms such as 'Mission in Genius' national quiz. The management is accessible to all at all times and sincerely seeks feedback from its employees through programmes such as 'Sparsh', the study said. The Best Companies to Work in India is a study conducted by the Great Place to Work Institute, India in partnership with The Economic Times. The 2010 edition is the seventh study in India, which received overwhelming response from more than 400 companies, making it the largest such study in India. And only 50 companies made it to the Best Companies to Work list! 'Young Star Super' Voted 'Product of the Year 2010' HDFC Standard Lifes Young Star Super has been voted Product of theYear 2010 in the 'Insurance' category by more than 30,000 consumers nationwide across 36 markets.YSS is an unit linked Children Plan with unique benefits such as bumper additions, double and triple benefits, attractive allocations rates, and seven different funds. The consumer study on product innovation in India was conducted by A C Nielsen, the leading global research firm. Entries were accepted from products that

demonstrate innovation in their product function, design, packaging or process or any other specified form. Entries were then filtered by a jury of distinguished industry professionals to ensure that the products meet the innovation criteria before they were passed on to the consumer votes/survey round. Product of the Year is an Internationally Recognized Standard that celebrates and rewards the best innovations in consumer products and services. The Product of the Year is selected through an independent consumer survey across the country in 26 countries for the past 20 years.

Received CIO ' The In genius 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 honour 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.

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 PC Quest Best IT Implementation Award 2008 HDFC Standard Life received the PC Quest 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 pathbreaking implementation of an enterprise-wide workflow system Silver Abby at Goa fest 2008 HDFC Standard Life's radio spot for Pension Plans won a Silver Abby in the radio writing craft category at the Goa fest 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). The respondents were between 18 and 40 years. Mints exclusive report, New voices in a makeover outlines the survey in detail.

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 honoured 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 Standard Life the credit of bringing up one such glorious advertising and marketing moment in the last 60 years.


Vision And Values

Vision 'The most successful and admired life insurance company, which means that we are the most trusted company, the easiest to deal with, offer the best value for money, and set the standards in the industry'.

'The most obvious choice for all'.

Values Values that we observe while we work:

Integrity Innovation Customer centric People Care One for all and all for one Team work Joy and Simplicity

Board Members
Brief Profile of The Board of Directors

Mr. Deepak S. Parekh is the Chairman of the Company. He is also the Chairman and Director of Housing Development Finance Corporation Limited (HDFC Limited). He joined HDFC Limited in a senior management position in 1978. He was inducted as a wholetime director of HDFC Limited in 1985 and was appointed as its Chairman in 1993. Mr. Parekh is a Fellow of the Institute of Chartered Accountants (England & Wales).

Mr. Keki M. Mistry joined the Board of Directors of the Company in December, 2000. He is currently the Vice Chairman and Chief Executive Officer of HDFC Limited. He joined HDFC Limited in 1981 and became an Executive Director in 1993. He was appointed as its Managing Director in 2000. Mr. Mistry is a Fellow of the Institute of Chartered Accountants of India and a member of the Michigan Association of Certified Public Accountants.

Ms. Renu S. Karnad is the Managing Director of HDFC Limited. She is a graduate in Law and holds a Master's degree in Economics from Delhi University. She has been employed with HDFC Limited since 1978 and was appointed as the Executive Director in 2000 and Deputy Managing Director in 2007. She is responsible for overseeing all aspects of lending operations of HDFC Limited.

Mr. David Nish joined Standard Life on 1 November 2006 as Group Finance Director and remained in that position until December 2009. He is appointed as the Executive Europe on 1st January 2010. He was awarded the Scottish Business Awards Finance Director of the Year and from 2004 to 2005. He is a member of the Institute of Chartered Accountants of Scotland. He joined the Board of Directors in February 2010.

Mr. Nathan Parnaby is appointed as the Chief Executive, Europe & Asia of Standard Life in the year 2010. Nathan joined Standard Life in 1982 as Investment Manager, responsible for all UK net funds. He was appointed a Director of the Standard Life Investments board. He is a Mathematics graduate from Oxford University and the Member of the Securities Institute. He joined the Board of Directors in December 2009.

Mr. Norman K. Skeoch is currently the Chief Executive in Standard Life Investments Limited and is responsible for overseeing Investment Process & Chief Executive Officer Function. Prior to this, Mr. Skeoch was working with M/s. James Capel & Co. holding the positions of UK Economist, Chief Economist, Executive Director, Director of Controls and Strategy HSBS Securities and Managing Director International Equities. He was also responsible for Economic and Investment Strategy research produced on a worldwide basis. Mr. Skeoch joined the Board of Directors in November 2005.

Mr. Gautam R. Divan is a practising Chartered Accountant and is a Fellow of the Institute of Chartered Accountants of India. Mr. Divan was the Former Chairman and Managing Committee Member of Midsnell Group International, an International Association of

Independent Accounting Firms and has authored several papers of professional interest. Mr. Divan has wide experience in auditing accounts of large public limited companies and nationalised banks, financial and taxation planning of individuals and limited companies and also has substantial experience in structuring overseas investments to and from India.

Mr. Ranjan Pant is a global Management Consultant advising CEO/Boards on Strategy and Change Management. Mr. Pant, until 2002 was a Partner & Vice-President at Bain & Company, Inc., Boston, where he led the worldwide Utility Practice. He was also Director, Corporate Business Development at General Electric headquarters in Fairfield, USA. Mr. Pant has an MBA from The Wharton School and BE (Honours) from Birla Institute of Technology and Sciences.

Mr. Ravi Narain is the Managing Director & CEO of National Stock Exchange of India Limited. Mr. Ravi Narain was a member of the core team to set-up the Securities & Exchange Board of India (SEBI) and is also associated with various committees of SEBI and the Reserve Bank of India (RBI).

Mr. A. K.T. Chari has joined HDFC Standard Life as a Director on March 10, 2010. Mr. Chari has completed his Electrical Engineering from Madras University in 1962. He is associated with Infrastructure Development Finance Company Ltd. (IDFC) for last 11 years. Currently he is handling project finance for infrastructure projects at IDFC. Prior to this he was associated with Infrastructure Development Bank of India (IDBI) from 1975 to 1999.

Mr. Gerald E. Grimstone was appointed Chairman of Standard Life in May 2007, having been Deputy Chairman since March 2006. He became a director of the Standard Life Assurance Company in July 2003. He is also Chairman of Candover Investments plc and was appointed as one of the UKs Business Ambassadors by the Prime Minister in January 2009. Gerry held senior positions within the Department of Health and Social Security and HM Treasury until 1986. He then spent 13 years with Schroders in London, Hong Kong and New York, and was Vice Chairman of Schroders worldwide investment banking activities from 1998 to 1999. He is the Alternate Director to Mr. David Nish.

Mr. Michael G Connarty is responsible for Standard Life's investments in life assurance Joint Ventures in India and China. He holds a degree in Law and MBA. He has worked with Standard Life for 33 years in managerial positions covering a number of fields such as Pensions law, International Marketing, Operational Management, Strategy, Risk, Compliance, Company Secretarial and Banking. He has acted as Project Manager for the start-up project of the Company in 2000. He is the Alternate Director to Mr. Norman K. Skeoch.

Mr. Amitabh Chaudhry is the MD and CEO of HDFC Standard Life. Before joining HDFC Standard Life, he was the MD and CEO of Infosys BPO and was also heading an Independent Validation Services unit in Infosys Technologies. He started his career with Bank of America delivering diverse roles ranging from Head of Technology Investment Banking for Asia, Regional Finance Head for Wholesale Banking and Global Markets and Chief Finance Officer of Bank of America (India). He moved to Credit Lyonnais Securities in 2001 in Singapore where he headed their investment banking franchise for South East Asia and structured finance practice for Asia before joining Infosys BPO in 2005. Mr. Chaudhry completed his Engineering in 1985 from Birla Institute of

Technology and Science, Pilani and MBA in 1987 from IIM, Ahmedabad.

Mr. Paresh Parasnis is the Executive Director and Chief Operating Officer of the company. A fellow of the Institute of Chartered Accountants of India, he has been associated with the HDFC Group since 1984. During his 16-year tenure at HDFC Limited, he was responsible for driving and spearheading several key initiatives. As one of the founding members of HDFC Standard life, Mr. Parasnis has been responsible for setting up branches, driving sales and servicing strategy, leading recruitment, contributing to product launches and performance management system, overseeing new business and claims settlement, customer interactions etc.



To understand the information contained in financial statements with a view to know the strength or weaknesses of the firm and to make forecast about the future prospects of the firm and thereby enabling the financial analyst to take different decisions regarding the operations of the firm. RATIO ANALYSIS: Fundamental Analysis has a very broad scope. One aspect looks at the general (qualitative) factors of a company. The other side considers tangible and measurable factors (quantitative). This means crunching and analyzing numbers from the financial statements. If used in conjunction with other methods, quantitative analysis can produce excellent results. Ratio analysis isn't just comparing different numbers from the balance sheet, income statement, and cash flow statement. It's comparing the number against previous years, other companies, the industry, or even the economy in general. Ratios look at the relationships between individual values and relate them to how a company has performed in the past, and might perform in the future. MEANING OF RATIO: A ratio is one figure express in terms of another figure. It is a mathematical yardstick that measures the relationship two figures, which are related to each other and mutually interdependent. Ratio is express by dividing one figure by the other related figure. Thus a ratio is an expression relating one number to another. It is simply the quotient of two numbers. It can be expressed as a fraction or as a decimal or as a pure ratio or in absolute figures as so many times. As accounting ratio is an expression relating two figures or accounts or two sets of account heads or group contain in the financial statements. MEANING OF RATIO ANALYSIS: Ratio analysis is the method or process by which the relationship of items or group of items in the financial statement are computed, determined and presented. Ratio analysis is an attempt to derive quantitative measure or guides concerning the financial health and profitability of business enterprises. Ratio analysis can be used both in trend and static analysis. There are several ratios at the disposal of

an annalist but their group of ratio he would prefer depends on the purpose and the objective of analysis. While a detailed explanation of ratio analysis is beyond the scope of this section, we will focus on a technique, which is easy to use. It can provide you with a valuable investment analysis tool. This technique is called cross-sectional analysis. Cross-sectional analysis compares financial ratios of several companies from the same industry. Ratio analysis can provide valuable information about a company's financial health. A financial ratio measures a company's performance in a specific area. For example, you could use a ratio of a company's debt to its equity to measure a company's leverage. By comparing the leverage ratios of two companies, you can determine which company uses greater debt in the conduct of its business. A company whose leverage ratio is higher than a competitor's has more debt per equity. You can use this information to make a judgment as to which company is a better investment risk. However, you must be careful not to place too much importance on one ratio. You obtain a better indication of the direction in which a company is moving when several ratios are taken as a group. OBJECTIVE OF RATIOS Ratio is work out to analyze the following aspects of business organizationA) Solvency1) Long term 2) Short term 3) Immediate B) Stability C) Profitability D) Operational efficiency E) Credit standing F) Structural analysis G) Effective utilization of resources H) Leverage or external financing FORMS OF RATIO: Since a ratio is a mathematical relationship between to or more variables / accounting figures, such relationship can be expressed in different ways as follows

A] As a pure ratio: For example the equity share capital of a company is Rs. 20,00,000 & the preference share capital is Rs. 5,00,000, the ratio of equity share capital to preference share capital is 20,00,000: 5,00,000 or simply 4:1. B] As a rate of times: In the above case the equity share capital may also be described as 4 times that of preference share capital. Similarly, the cash sales of a firm are Rs. 12,00,000 & credit sales are Rs. 30,00,000. so the ratio of credit sales to cash sales can be described as 2.5 [30,00,000/12,00,000] or simply by saying that the credit sales are 2.5 times that of cash sales. C] As a percentage: In such a case, one item may be expressed as a percentage of some other item. For example, net sales of the firm are Rs.50,00,000 & the amount of the gross profit is Rs. 10,00,000, then the gross profit may be described as 20% of sales [ 10,00,000/50,00,000] STEPS IN RATIO ANALYSIS The ratio analysis requires two steps as follows: 1] Calculation of ratio 2] Comparing the ratio with some predetermined standards. The standard ratio may be the past ratio of the same firm or industrys average ratio or a projected ratio or the ratio of the most successful firm in the industry. In interpreting the ratio of a particular firm, the analyst cannot reach any fruitful conclusion unless the calculated ratio is compared with some predetermined standard. The importance of a correct standard is oblivious as the conclusion is going to be based on the standard itself. TYPES OF COMPARISONS The ratio can be compared in three different ways 1] Cross section analysis: One of the way of comparing the ratio or ratios of the firm is to compare them with the ratio or ratios of some other selected firm in the same industry at the same point of time. So it involves the comparison of two or more firms financial ratio at the same point of time. The cross section analysis helps the analyst to find out as to how a particular firm has performed in relation to its competitors. The firms performance may be compared with the performance of the leader in the industry in

order to uncover the major operational inefficiencies. The cross section analysis is easy to be undertaken as most of the data required for this may be available in financial statement of the firm. 2] Time series analysis: The analysis is called Time series analysis when the performance of a firm is evaluated over a period of time. By comparing the present performance of a firm with the performance of the same firm over the last few years, an assessment can be made about the trend in progress of the firm, about the direction of progress of the firm. Time series analysis helps to the firm to assess whether the firm is approaching the long-term goals or not. The Time series analysis looks for (1) important trends in financial performance (2) shift in trend over the years (3) significant deviation if any from the other set of data. 3] Combined analysis: If the cross section & time analysis, both are combined together to study the behavior & pattern of ratio, then meaningful & comprehensive evaluation of the performance of the firm can definitely be made. A trend of ratio of a firm compared with the trend of the ratio of the standard firm can give good results.

For example, the ratio of operating expenses to net sales for firm may be higher than the industry average however, over the years it has been declining for the firm, whereas the industry average has not shown any significant changes. The combined analysis as depicted in the above diagram, which clearly shows that the ratio of the firm is above the industry average, but it is decreasing over the years & is approaching the industry average.

PRE-REQUISITIES TO RATIO ANALYSIS In order to use the ratio analysis as device to make purposeful conclusions, there are certain pre-requisites, which must be taken care of. It may be noted that these prerequisites are not conditions for calculations for meaningful conclusions. The accounting figures are inactive in them & can be used for any ratio but meaningful & correct interpretation & conclusion can be arrived at only if the following points are well considered. 1) The dates of different financial statements from where data is taken must be same. 2) If possible, only audited financial statements should be considered, otherwise there must be sufficient evidence that the data is correct. 3) Accounting policies followed by different firms must be same in case of cross section analysis otherwise the results of the ratio analysis would be distorted. 4) One ratio may not throw light on any performance of the firm. Therefore, a group of ratios must be preferred. This will be conductive to counter checks. 5) Last but not least, the analyst must find out that the two figures being used to calculate a ratio must be related to each other, otherwise there is no purpose of calculating a ratio.








BASED ON FINANCIAL STATEMENT Accounting ratios express the relationship between figures taken from financial statements. Figures may be taken from Balance Sheet , P& P A/C, or both. One-way of classification of ratios is based upon the sources from which are taken. 1] Balance sheet ratio: If the ratios are based on the figures of balance sheet, they are called Balance Sheet Ratios. E.g. ratio of current assets to current liabilities or ratio of debt to equity. While calculating these ratios, there is no need to refer to the Revenue statement. These ratios study the relationship between the assets & the liabilities, of the concern. These ratio help to judge the liquidity, solvency & capital structure of the concern. Balance sheet ratios are Current ratio, Liquid ratio, and Proprietory ratio, Capital gearing ratio, Debt equity ratio, and Stock working capital ratio.

2] Revenue ratio: Ratio based on the figures from the revenue statement is called revenue statement ratios. These ratio study the relationship between the profitability & the sales of the concern. Revenue ratios are Gross profit ratio, Operating ratio, Expense ratio, Net profit ratio, Net operating profit ratio, Stock turnover ratio. 3] Composite ratio: These ratios indicate the relationship between two items, of which one is found in the balance sheet & other in revenue statement. There are two types of composite ratiosa) Some composite ratios study the relationship between the profits & the investments of the concern. E.g. return on capital employed, return on proprietors fund, return on equity capital etc. b) Other composite ratios e.g. debtors turnover ratios, creditors turnover ratios, dividend payout ratios, & debt service ratios BASED ON FUNCTION: Accounting ratios can also be classified according to their functions in to liquidity ratios, leverage ratios, activity ratios, profitability ratios & turnover ratios. 1] Liquidity ratios: It shows the relationship between the current assets & current liabilities of the concern e.g. liquid ratios & current ratios. 2] Leverage ratios: It shows the relationship between proprietors funds & debts used in financing the assets of the concern e.g. capital gearing ratios, debt equity ratios, & Proprietory ratios. 3] Activity ratios: It shows relationship between the sales & the assets. It is also known as Turnover ratios & productivity ratios e.g. stock turnover ratios, debtors turnover ratios. 4] Profitability ratios: a) It shows the relationship between profits & sales e.g. operating ratios, gross profit ratios, operating net profit ratios, expenses ratios

b) It shows the relationship between profit & investment e.g. return on investment, return on equity capital. 5] Coverage ratios: It shows the relationship between the profit on the one hand & the claims of the outsiders to be paid out of such profit e.g. dividend payout ratios & debt service ratios. BASED ON USER: 1] Ratios for short-term creditors: Current ratios, liquid ratios, stock working capital ratios 2] Ratios for the shareholders: Return on proprietors fund, return on equity capital 3] Ratios for management: Return on capital employed, turnover ratios, operating ratios, expenses ratios 4] Ratios for long-term creditors: Debt equity ratios, return on capital employed, proprietor ratios.

LIQUIDITY RATIO: Liquidity refers to the ability of a firm to meet its short-term (usually up to 1 year) obligations. The ratios, which indicate the liquidity of a company, are Current ratio, Quick/Acid-Test ratio, and Cash ratio. These ratios are discussed below

CURRENT RATIO Meaning: This ratio compares the current assests with the current liabilities. It is also known as working capital ratio or solvency ratio. It is expressed in the form of pure ratio. E.g. 2:1 Formula: Current assets Current ratio = Current liabilities The current assests of a firm represents those assets which can be, in the ordinary course of business, converted into cash within a short period time, normally not exceeding one year. The current liabilities defined as liabilities which are short term maturing obligations to be met, as originally contemplated, with in a year. Current ratio (CR) is the ratio of total current assets (CA) to total current liabilities (CL). Current assets include cash and bank balances; inventory of raw materials, semi-finished and finished goods; marketable securities; debtors (net of

provision for bad and doubtful debts); bills receivable; and prepaid expenses. Current liabilities consist of trade creditors, bills payable, bank credit, provision for taxation, dividends payable and outstanding expenses. This ratio measures the liquidity of the current assets and the ability of a company to meet its short-term debt obligation. CR measures the ability of the company to meet its CL, i.e., CA gets converted into cash in the operating cycle of the firm and provides the funds needed to pay for CL. The higher the current ratio, the greater the short-term solvency. This compares assets, which will become liquid within approximately twelve months with liabilities, which will be due for payment in the same period and is intended to indicate whether there are sufficient short-term assets to meet the short- term liabilities. Recommended current ratio is 2: 1. Any ratio below indicates that the entity may face liquidity problem but also Ratio over 2: 1 as above indicates over trading, that is the entity is under utilizing its current assets. LIQUID RATIO: Meaning: Liquid ratio is also known as acid test ratio or quick ratio. Liquid ratio compare the quick assets with the quick liabilities. It is expressed in the form of pure ratio. E.g. 1:1. The term quick assets refer to current assets, which can be converted into, cash immediately or at a short notice without diminution of value. Formula: Quick assets Liquid ratio = Quick liabilities Quick Ratio (QR) is the ratio between quick current assets (QA) and CL. QA refers to those current assets that can be converted into cash immediately without any value strength. QA includes cash and bank balances, short-term marketable securities, and sundry debtors. Inventory and prepaid expenses are excluded since these cannot be turned into cash as and when required. QR indicates the extent to which a company can pay its current liabilities without relying on the sale of inventory. This is a fairly stringent measure of liquidity because it is based on those current assets, which are highly liquid. Inventories are excluded from the numerator of this ratio because they are deemed the least liquid

component of current assets. Generally, a quick ratio of 1:1 is considered good. One drawback of the quick ratio is that it ignores the timing of receipts and payments. CASH RATIO Meaning: This is also called as super quick ratio. This ratio considers only the absolute liquidity available with the firm. Formula: Cash + Bank + Marketable securities Cash ratio = Total current liabilities Since cash and bank balances and short term marketable securities are the most liquid assets of a firm, financial analysts look at the cash ratio. If the super liquid assets are too much in relation to the current liabilities then it may affect the profitability of the firm. INVESTMENT / SHAREHOLDER

EARNING PER SAHRE:Meaning: Earnings per Share are calculated to find out overall profitability of the organization. An earnings per Share represents earning of the company whether or not dividends

are declared. If there is only one class of shares, the earning per share are determined by dividing net profit by the number of equity shares. EPS measures the profits available to the equity shareholders on each share held. Formula: NPAT Earning per share = Number of equity share The higher EPS will attract more investors to acquire shares in the company as it indicates that the business is more profitable enough to pay the dividends in time. But remember not all profit earned is going to be distributed as dividends the company also retains some profits for the business DIVIDEND PER SHARE:Meaning: DPS shows how much is paid as dividend to the shareholders on each share held. Formula: Dividend Paid to Ordinary Shareholders Dividend per Share = Number of Ordinary Shares DIVIDEND PAYOUT RATIO:Meaning: Dividend Pay-out Ratio shows the relationship between the dividend paid to equity shareholders out of the profit available to the equity shareholders. Formula: Dividend per share Dividend Pay out ratio = Earning per share D/P ratio shows the percentage share of net profits after taxes and after preference dividend has been paid to the preference equity holders. *100


CAPITAL GEARING RATIO:Meaning: Gearing means the process of increasing the equity shareholders return through the use of debt. Equity shareholders earn more when the rate of the return on total capital is more than the rate of interest on debts. This is also known as leverage or trading on equity. The Capital-gearing ratio shows the relationship between two types of capital viz: - equity capital & preference capital & long term borrowings. It is expressed as a pure ratio.

Formula: Preference capital+ secured loan Capital gearing ratio = Equity capital & reserve & surplus Capital gearing ratio indicates the proportion of debt & equity in the financing of assets of a concern.

PROFITABILITY These ratios help measure the profitability of a firm. A firm, which generates a substantial amount of profits per rupee of sales, can comfortably meet its operating expenses and provide more returns to its shareholders. The relationship between profit and sales is measured by profitability ratios. There are two types of profitability ratios: Gross Profit Margin and Net Profit Margin.

GROSS PROFIT RATIO:Meaning: This ratio measures the relationship between gross profit and sales. It is defined as the excess of the net sales over cost of goods sold or excess of revenue over cost. This ratio shows the profit that remains after the manufacturing costs have been met. It measures the efficiency of production as well as pricing. This ratio helps to judge how efficient the concern is I managing its production, purchase, selling & inventory, how good its control is over the direct cost, how productive the concern , how much amount is left to meet other expenses & earn net profit. Formula: Gross profit Gross profit ratio = Net sales * 100

NET PROFIT RATIO:Meaning: Net Profit ratio indicates the relationship between the net profit & the sales it is usually expressed in the form of a percentage. Formula: NPAT Net profit ratio = Net sales This ratio shows the net earnings (to be distributed to both equity and preference shareholders) as a percentage of net sales. It measures the overall efficiency of production, administration, selling, financing, pricing and tax management. Jointly considered, the gross and net profit margin ratios provide an understanding of the cost and profit structure of a firm. RETURN ON CAPITAL EMPLOYED:Meaning: The profitability of the firm can also be analyzed from the point of view of the total funds employed in the firm. The term fund employed or the capital employed refers to the total long-term source of funds. It means that the capital employed comprises of shareholder funds plus long-term debts. Alternatively it can also be defined as fixed assets plus net working capital. Capital employed refers to the long-term funds invested by the creditors and the owners of a firm. It is the sum of long-term liabilities and owner's equity. ROCE indicates the efficiency with which the long-term funds of a firm are utilized. Formula: NPAT Return on capital employed = Capital employed FINANCIAL These ratios determine how quickly certain current assets can be converted into cash. They are also called efficiency ratios or asset utilization ratios as they measure the efficiency of a firm in managing assets. These ratios are based on the relationship *100 * 100

between the level of activity represented by sales or cost of goods sold and levels of investment in various assets. The important turnover ratios are debtors turnover ratio, average collection period, inventory/stock turnover ratio, fixed assets turnover ratio, and total assets turnover ratio. These are described below:

DEBTORS TURNOVER RATIO (DTO) Meaning: DTO is calculated by dividing the net credit sales by average debtors outstanding during the year. It measures the liquidity of a firm's debts. Net credit sales are the gross credit sales minus returns, if any, from customers. Average debtors are the average of debtors at the beginning and at the end of the year. This ratio shows how rapidly debts are collected. The higher the DTO, the better it is for the Formula: Credit sales Debtors turnover ratio = Average debtors INVENTORY OR STOCK TURNOVER RATIO (ITR) Meaning: ITR refers to the number of times the inventory is sold and replaced during the accounting period. organization.

Formula: COGS Stock Turnover Ratio = Average stock ITR reflects the efficiency of inventory management. The higher the ratio, the more efficient is the management of inventories, and vice versa. However, a high inventory turnover may also result from a low level of inventory, which may lead to frequent stock outs and loss of sales and customer goodwill. For calculating ITR, the average of inventories at the beginning and the end of the year is taken. In general, averages may be used when a flow figure (in this case, cost of goods sold) is related to a stock figure (inventories). FIXED ASSETS TURNOVER (FAT) The FAT ratio measures the net sales per rupee of investment in fixed assets. Formula: Net sales Fixed assets turnover = Net fixed assets This ratio measures the efficiency with which fixed assets are employed. A high ratio indicates a high degree of efficiency in asset utilization while a low ratio reflects an inefficient use of assets. However, this ratio should be used with caution because when the fixed assets of a firm are old and substantially depreciated, the fixed assets turnover ratio tends to be high (because the denominator of the ratio is very low). PROPRIETORS RATIO: Meaning: Proprietary ratio is a test of financial & credit strength of the business. It relates shareholders fund to total assets. This ratio determines the long term or ultimate solvency of the company. In other words, Proprietary ratio determines as to what extent the owners interest & expectations are fulfilled from the total investment made in the business operation. Proprietary ratio compares the proprietor fund with total liabilities. It is usually expressed in the form of percentage. Total assets also know it as net worth.

Formula: Proprietary fund Proprietary ratio = Total fund OR Shareholders fund Proprietary ratio = Fixed assets + current liabilities STOCK WORKING CAPITAL RATIO: Meaning: This ratio shows the relationship between the closing stock & the working capital. It helps to judge the quantum of inventories in relation to the working capital of the business. The purpose of this ratio is to show the extent to which working capital is blocked in inventories. The ratio highlights the predominance of stocks in the current financial position of the company. It is expressed as a percentage. Formula: Stock Stock working capital ratio = Working Capital Stock working capital ratio is a liquidity ratio. It indicates the composition & quality of the working capital. This ratio also helps to study the solvency of a concern. It is a qualitative test of solvency. It shows the extent of funds blocked in stock. If investment in stock is higher it means that the amount of liquid assets is lower. DEBT EQUITY RATIO: MEANING: This ratio compares the long-term debts with shareholders fund. The relationship between borrowed funds & owners capital is a popular measure of the long term financial solvency of a firm. This relationship is shown by debt equity ratio.

Alternatively, this ratio indicates the relative proportion of debt & equity in financing the assets of the firm. It is usually expressed as a pure ratio. E.g. 2:1 Formula: Total long-term debt Debt equity ratio = Total shareholders fund Debt equity ratio is also called as leverage ratio. Leverage means the process of the increasing the equity shareholders return through the use of debt. Leverage is also known as gearing or trading on equity. Debt equity ratio shows the margin of safety for long-term creditors & the balance between debt & equity. RETURN ON PROPRIETOR FUND: Meaning: Return on proprietors fund is also known as return on proprietors equity or return on shareholders investment or investment ratio. This ratio indicates the relationship between net profit earned & total proprietors funds. Return on proprietors fund is a profitability ratio, which the relationship between profit & investment by the proprietors in the concern. Its purpose is to measure the rate of return on the total fund made available by the owners. This ratio helps to judge how efficient the concern is in managing the owners fund at disposal. This ratio is of practical importance to prospective investors & shareholders. Formula: NPAT Return on proprietors fund = Proprietors fund * 100


It is same as debtors turnover ratio. It shows the speed at which payments are made to the supplier for purchase made from them. It is a relation between net credit purchase and average creditors

Net credit purchase Credit turnover ratio = Average creditors Months in a year Average age of accounts payable = Credit turnover ratio Both the ratios indicate promptness in payment of creditor purchases. Higher creditors turnover ratio or a lower credit period enjoyed signifies that the creditors are being paid promptly. It enhances credit worthiness of the company. A very low ratio indicates that the company is not taking full benefit of the credit period allowed by the creditors. IMPORTANCE OF RATIO ANALYSIS: As a tool of financial management, ratios are of crucial significance. The importance of ratio analysis lies in the fact that it presents facts on a comparative basis & enables the drawing of interference regarding the performance of a firm. Ratio analysis is relevant in assessing the performance of a firm in respect of the following aspects: 1] Liquidity position, 2] Long-term solvency, 3] Operating efficiency, 4] Overall profitability, 5] Inter firm comparison 6] Trend analysis. 1] LIQUIDITY POSITION: With the help of Ratio analysis conclusion can be drawn regarding the liquidity position of a firm. The liquidity position of a firm would be satisfactory if it is able to meet its current obligation when they become due. A firm can be said to have the ability to meet its short-term liabilities if it has sufficient liquid funds to pay the interest on its short maturing debt usually within a year as well as to repay the

principal. This ability is reflected in the liquidity ratio of a firm. The liquidity ratio are particularly useful in credit analysis by bank & other suppliers of short term loans. 2] LONG TERM SOLVENCY: Ratio analysis is equally useful for assessing the long-term financial viability of a firm. This respect of the financial position of a borrower is of concern to the longterm creditors, security analyst & the present & potential owners of a business. The long-term solvency is measured by the leverage/ capital structure & profitability ratio Ratio analysis s that focus on earning power & operating efficiency. Ratio analysis reveals the strength & weaknesses of a firm in this respect. The leverage ratios, for instance, will indicate whether a firm has a reasonable proportion of various sources of finance or if it is heavily loaded with debt in which case its solvency is exposed to serious strain. Similarly the various profitability ratios would reveal whether or not the firm is able to offer adequate return to its owners consistent with the risk involved. 3] OPERATING EFFICIENCY: Yet another dimension of the useful of the ratio analysis, relevant from the viewpoint of management, is that it throws light on the degree of efficiency in management & utilization of its assets. The various activity ratios measures this kind of operational efficiency. In fact, the solvency of a firm is, in the ultimate analysis, dependent upon the sales revenues generated by the use of its assets- total as well as its components. 4] OVERALL PROFITABILITY: Unlike the outsides parties, which are interested in one aspect of the financial position of a firm, the management is constantly concerned about overall profitability of the enterprise. That is, they are concerned about the ability of the firm to meets its short term as well as long term obligations to its creditors, to ensure a reasonable return to its owners & secure optimum utilization of the assets of the firm. This is possible if an integrated view is taken & all the ratios are considered together. 5] INTER FIRM COMPARISON: Ratio analysis not only throws light on the financial position of firm but also serves as a stepping-stone to remedial measures. This is made possible due to inter firm comparison & comparison with the industry averages. A single figure of a

particular ratio is meaningless unless it is related to some standard or norm. one of the popular techniques is to compare the ratios of a firm with the industry average. It should be reasonably expected that the performance of a firm should be in broad conformity with that of the industry to which it belongs. An inter firm comparison would demonstrate the firms position vice-versa its competitors. If the results are at variance either with the industry average or with the those of the competitors, the firm can seek to identify the probable reasons & in light, take remedial measures. 6] TREND ANALYSIS: Finally, ratio analysis enables a firm to take the time dimension into account. In other words, whether the financial position of a firm is improving or deteriorating over the years. This is made possible by the use of trend analysis. The significance of the trend analysis of ratio lies in the fact that the analysts can know the direction of movement, that is, whether the movement is favorable or unfavorable. For example, the ratio may be low as compared to the norm but the trend may be upward. On the other hand, though the present level may be satisfactory but the trend may be a declining one. ADVANTAGES OF RATIO ANALYSIS Financial ratios are essentially concerned with the identification of significant accounting data relationships, which give the decision-maker insights into the financial performance of a company. The advantages of ratio analysis can be summarized as follows: Ratios facilitate conducting trend analysis, which is important for decision making and forecasting. Ratio analysis helps in the assessment of the liquidity, operating efficiency, profitability and solvency of a firm. Ratio analysis provides a basis for both intra-firm as well as inter-firm comparisons. The comparison of actual ratios with base year ratios or standard ratios helps the management analyze the financial performance of the firm. LIMITATIONS OF RATIO ANALYSIS Ratio analysis has its limitations. These limitations are described below: 1] Information problems

Ratios require quantitative information for analysis but it is not decisive about analytical output . The figures in a set of accounts are likely to be at least several months out of date, and so might not give a proper indication of the companys current financial position. Where historical cost convention is used, asset valuations in the balance sheet could be misleading. Ratios based on this information will not be very useful for decision-making. 2] Comparison of performance over time When comparing performance over time, there is need to consider the changes in price. The movement in performance should be in line with the changes in price. When comparing performance over time, there is need to consider the changes in technology. The movement in performance should be in line with the changes in technology. Changes in accounting policy may affect the comparison of results between different accounting years as misleading. 3] Inter-firm comparison Companies may have different capital structures and to make comparison of performance when one is all equity financed and another is a geared company it may not be a good analysis. Selective application of government incentives to various companies may also distort intercompany comparison. comparing the performance of two enterprises may be misleading. Inter-firm comparison may not be useful unless the firms compared are of the same size and age, and employ similar production methods and accounting practices. Even within a company, comparisons can be distorted by changes in the price level. Ratios provide only quantitative information, not qualitative information.

Ratios are calculated on the basis of past financial statements. They do not indicate future trends and they do not consider economic conditions. PURPOSE OF RATIO ANLYSIS: 1] To identify aspects of a businesses performance to aid decision making 2] Quantitative process may need to be supplemented by qualitative Factors to get a complete picture. 3] 5 main areas: Liquidity the ability of the firm to pay its way Investment/shareholders information to enable decisions to be made on the extent of the risk and the earning potential of a business investment Gearing information on the relationship between the exposure of the business to loans as opposed to share capital Profitability how effective the firm is at generating profits given sales and or its capital assets Financial the rate at which the company sells its stock and the efficiency with which it uses its assets ROLE OF RATIO ANALYSIS: It is true that the technique of ratio analysis is not a creative technique in the sense that it uses the same figure & information, which is already appearing in the financial statement. At the same time, it is true that what can be achieved by the technique of ratio analysis cannot be achieved by the mere preparation of financial statement. Ratio analysis helps to appraise the firm in terms of their profitability & efficiency of performance, either individually or in relation to those of other firms in the same industry. The process of this appraisal is not complete until the ratio so computed can be compared with something, as the ratio all by them do not mean anything. This comparison may be in the form of intra firm comparison, inter firm comparison or comparison with standard ratios. Thus proper comparison of ratios may reveal where a firm is placed as compared with earlier period or in comparison with the other firms in the same industry.

Ratio analysis is one of the best possible techniques available to the management to impart the basic functions like planning & control. As the future is closely related to the immediate past, ratio calculated on the basis of historical financial statements may be of good assistance to predict the future. Ratio analysis also helps to locate & point out the various areas, which need the management attention in order to improve the situation. As the ratio analysis is concerned with all the aspect of a firms financial analysis i.e. liquidity, solvency, activity, profitability & overall performance, it enables the interested persons to know the financial & operational characteristics of an organisation & take the suitable decision.


The team nature as applied to financial management refers to its relationship with the closely related fields of economics and accounting, its functions, scope and objectives. Financial management as an academic discipline has undergone fundamental changes as regards its scope and coverage. In the early years of its evolution it was treated synonymously with the raising of funds. In the current literature pertaining to this growing academic discipline, a broader scope so as to include, in addition to procurement of funds, efficient use of resources in universally recognized. Similarly, the academic thinking as regards the objective of financial management is also characterized by a change over the year. The object is to describe the evolving functions and objectives of financial management in the academic literature to serve as a background to a detailed account of its various facets in the discussions that follow subsequently.


MODERN APPROACH OF FINANCIAL MANAGEMENT The modern approach views the term financial management in a broad sense and provides a conceptual and analytical framework for financial decision-making. According to it, the finance function covers both acquisition of funds as well as their allocation. Thus, apart from the issues involved in acquiring external funds, the main concern of financial management is the efficient and wise allocation of funds to various uses. Defined in a broad sense, it is viewed as an integral part of cover all management. The new approach is an analytical way of viewing the financial problems of a firm. The main contents of this approach are 1. 2. 3. What is the total volume of funds an enterprise should commit? What specific assets should an enterprise acquire? How should the funds required be financed?

The three questions posed above cover between them the major financial problems of a firm. In other words, financial management, according to the new approach, is concerned with the solution of three major problems relating to the financial operations of a firm corresponding to the three questions, namely, investment, financing and dividend decisions. Thus, financial management, in the modern sense of the term, can be broken down into three major decisions as functions of finance. They are 1. 2. 3. The investment decision. The financing decision, and The dividend policy decision.


To analyze the financial position of the company.

To measure Liquidity Position of the company.

To measure Long-term solvency of the company.


Data can be classified under the two main categories, depending upon the sources used for the collection purposes, i.e., Primary data and Secondary data. The validity and accuracy of final judgment is most crucial and depends heavily upon how well the data is gathered in the first place. The methodology adopted for data gathering also affects the conclusions drawn there from. Primary data: Primary data are those data, which are collected by the investigator himself for the purpose of a specific enquiry or study. Such data are original in character and are generated by surveys conducted by individuals or research institutions. Thus we can say that the data that is being collected for the first time is called primary data. Methods that can be used for collection of primary data are as follows: Direct personal observation: Under this method, the investigator presents himself personally before the informant and obtains first hand information. This method provides greater degree of accuracy. Telephone survey: Under this method the investigator, instead of presenting himself before the informants, contacts them on telephone and collects information from them. Indirect personal interview: Under this method, instead of directly approaching the informants, the investigator interviews several third persons who are directly or indirectly concerned with the subject matter of the enquiry and who are in possession of the requisite information. This method is highly suitable where the direct personal investigation is not practicable either because the informants are unwilling or reluctant to supply the information or where the information desired is complex or the study in hand is extensive. Secondary data: When a person uses data, which has already been collected by someone else, then such data is known as secondary data. Secondary data should be used with extra caution since someone else has collected it for his/her use. Before using such data the investigator must be satisfied with regard to the reliability,

accuracy, adequacy and suitability of the data to the given problem under investigation. Methods that can be used for collection of secondary data are as follows: Published sources: There are a number of national organisations and international agencies, which collect and publish statistical data relating to business, trade, labour, price, consumption, production, etc. These publications of the various organisations are useful sources of secondary data. Unpublished sources: The records maintained by private firms or business houses who may not like to release their data to any outside agency are known as unpublished sources of collection of secondary data. Both Primary data collection methods and Secondary data collection methods have various advantages as well as limitations. Thus it would be prudent to use both these methods to ones advantage. Secondary data have been used in this project. More of secondary data has been used. It is an archival study so it must proceed with the following steps : Study of financial system of HDFC SLIC. Collection of data pertaining to Financial Analysis. Tabulation of the above data. Graphical representation of above data. Analyzing the ratio on the basis of datas. Graphical representation of the various ratio. Study & results (Interpreting the above data)


(As at march 31,2009)


Revenue account for the year ended March 31, 2009

Revenue account for the year ended March 31, 2012(Continued)






CURRENT RATIO: Formula: Current Ratio = Current assets Current Liabilities (All figures in Rs.000 ) Years 2010-2011 2011-2012 Current assets 8,575,727 9,643,629 Current liabilities 6,251,168 9,029,038 Ratios 1.37 1.07

10,000,000 9,000,000 8,000,000 7,000,000 6,000,000 5,000,000 4,000,000 3,000,000 2,000,000 1,000,000 0

2010-2011 2011-2012

Current assets Current liabilities


ANALYSIS: In HDFC SLIC Company the current ratio is 1.07:1 in 2010-2011. It means that for one rupee of current liabilities, the current assets are 1.07 rupees are available to them. In other words the current assets are 1.07 times the current liabilities. Almost 2 years current ratio is same but current ratio in 2011-2012 is bit higher, which makes company more sound. The consistency increase in the value of current assets will increase the ability of the company to meets its obligations & therefore from the point of view of creditors the company is less risky.

The available working capital with the company is in decreasing order. 2010-2011 2,324,559 2011-2012 614,591 The company has insufficient working capital to meets its urgency/ obligations. A company has a high percentage of its current assets in the form of working capital, cash that would be more liquid in the sense of being able to meet obligations as & when they become due. From this working capital, the company meets its day-to-day financial obligations. Thus, the current ratio throws light on the companys ability to pay its current llliabilities out of its current assets. The HDFC SLIC has a average liquidity position of company.

LIQUID RATIO: Formula: Quick assets Liquid ratio = Current liabilities (Current Assets-Inventories = Liquid Assets) Years 2010-2011 2011-2012 Liquid Assets 8,575,727 9,643,629 Current liabilities 6,251,168 9,029,038 Ratios 1.37 1.07

12,000,000 10,000,000 8,000,000 6,000,000 4,000,000 2,000,000 0 Current liabilities Liquid Assets Ratios

2010-11 2007-2008 2011-12 2008-2009

ANALYSIS: The liquid or quick ratio indicates the liquid financial position of an enterprise. Almost in both years the liquid ratio is same, which is better for the company to meet the urgency. The liquid ratio of the HDFC SLIC has decreased from 1.37 to 1.07 in 2011-2012. Day to day solvency is more sound for company in 20102011 over the year 2011-2012. This indicates that the dependence on the short-term liabilities & creditors are more & the company is following an aggressive working capital policy. Liquid ratio of Company is favorable because the quick assets of the company are more than the quick liabilities. The liquid ratio shows the companys ability to meet its immediate obligations promptly

PROPRIETORY RATIO: Formula: Proprietary fund Proprietary ratio = Total Fund OR Shareholders fund Proprietary ratio = Fixed assets + current liabilities YEAR Proprietary fund Total fund Proprietary ratio 2010-2011 13,263,132 7582968 175 2011-2012 18,433,462 10476744 176

Proprietary ratio 176.5 176 175.5 175 174.5 Proprietary ratio

2010-11 2007-2008

2011-12 2008-2009

ANALYSIS: The Proprietary ratio of the company is 176% in the year 2011-2012. This shows that the contribution by outside to total assets is more than the owners fund. This Proprietary ratio of the Company shows an upward trend for the last 2 years. As the Proprietary ratio is favorable the Companys long-term solvency position is sound.

EARNING PER SHARE: Formula: NPAT* Earning per share = Number of equity share YEAR NPAT Earning per share *Note: less: pref. dividend including tax
Earning per share 0 -1 -2 -3 -4

2011-2012 (5,029,631) (3.28)

2010-2011 (2,435,094) (2.42)

2011-12 2008-2009

2010-11 2007-2008
Earning per share

ANALYSIS: Earning per share is calculated to find out overall profitability of the company. Earning per share represents the earning of the company whether or not dividends are declared. The Earning per share is (2.42) means shareholder losses Rs. 2.42 for each share of Rs. 10/-.. The net profit after tax of the company is decreasing. Therefore the shareholders earning per share is decreased from 2010-2011 to 2011-2012 by (2.42) to (3.28). This shows it is continuous capital reduction per unit share by (2.42) to (3.28). This is not very beneficial for the investors to invest in the company.

CASH RATIO: Formula: Cash + Bank + Marketable securities Cash ratio = Total current liabilities YEAR Cash + Bank + Marketable securities Total current liabilities Cash ratio 2010-2011 4,493,238 6,251,168 0.72 2011-2012 4,108,660 9,029,038 0.46

10,000,000 8,000,000 6,000,000 4,000,000 2,000,000 0

2010-11 2006-2007 2011-12

Cash + Bank + Marketable securities

Cash ratio


ANALYSIS: This ratio is called as super quick ratio or absolute liquidity ratio. In the year 2010-2011 the cash ratio is 0.72 & then it is decreased to 0.46 in the year 2011-2012. This shows that the company has insufficiency of cash, bank balance, & marketable securities to meet any contingency.

Creditors Equity to Total Assets

Formula Creditors Equity to Total Assets = Total Liabilities Total Assets

Creditors equity Total Assets Ratio

2010-2011 18,433,462 9,643,629 1.91

2011-2012 13,263,132 8,575,727 1.55

Analysis Creditors Equity to total assets ratio is more than 1 for both years (i.e. 1.91 & 1.55) it shows a good financial position of the company. In other words, we can state that for every unit of assets more than one unit of equity is available.

Net Retention ratio Net Retention ratio = Net premium Gross premium 2011-2012 55183763 55646937 99.17% 2010-2011 48176166 48585616 99.16%

Net Premium Gross Premium Ratio

60000000 50000000 40000000 30000000 20000000 10000000 0 Net Premium Gross Premium Ratio
2011-12 2008-2009 2010-11 2007-2008

Analysis Net Retention ratio is approximately same for both year which is good for the income prospective of HDFC SLIC & provides financial strength to the company

Management Expenses Ratio Management expenses M.E Ratio = Total Gross Premim 2011-2012 21915907 55646937 39.38% 2010-2011 13704946 48585616 28.20%

Management Expenses Total Gross Premium Ratio

60000000 50000000 40000000 30000000 20000000 10000000 0 Management Expenses Total Gross Premium Ratio
2011-12 2008-2009 2010-11


Analysis As management expense ratio has been increased from 28.2% to 39.19%, so net income of the firm get affected

Commission Ratio Cash + Bank + Marketable securities Commission ratio = Total current liabilities

Gross commission Gross ppemium Ratio

2011-2012 4248904 55646937 7.64%

2010-2011 3512586 48585616 7.23%

60000000 50000000 40000000 30000000 20000000 10000000 0 Gross commission Gross ppemium Ratio
2011-12 2008-2009 2010-11


Analysis As gross commission has increased from 7.23% to 7.64% and as we all know HDFC SLIC has a progressive commission plan so it indicates that the overall business of the company has been increased which helps to increase the gross income of it.

Ratio of policy holders liabilities to shareholders funds Policyholders liability = Shareholders funds 2011-2012 97875355 6520340 1501.08% 2010-2011 83818331 6379640 1313.84%

Policyholders liability Shareholders funds Ratio

120000000 100000000 80000000 60000000 40000000 20000000 0 Policyholders liability Shareholders funds Ratio
2010-11 2008-2009 2011-12 2007-2008

Analysis As ratio indicates that policyholders liability has been decreased, it shows that company needs fewer funds to pay out the liabilities of policyholders

Growth rate of shareholders funds 2011-2012 6520340 2.21% 2010-2011 6379640 61.96

Shareholders funds Growth Rate Analysis

As shareholders funds is growing year by year it shows good financial position of the firm Ratio of profit after tax to total income The company does not have any profit after tax and therefore this ratio can not be calculated Change in net worth 2011-2012 6520340 140699 2010-2011 6379640 2440563

Net Worth Change Analysis

As change in net worth is positive, it shows an increase in net worth of the company

FINDINGS OF FINANCIAL POSITION OF HDFC SLIC After going through the various ratios, I would like to state that: The Working Capital of the company is satisfactory. As the Proprietary ratio is favorable the Companys long-term solvency position is sound. The cash ratio shows the lack of cash for company. Creditors Equity to Total Assets Ratio shows the fair equity position of the company The gross net premium is constant which shows financial stability in the market The operating, administrative, management expense ratio has been increased The EPS shows it is continuous capital reduction per unit share by 14.03 to 4.44 The cash ratio shows that the company has sufficient cash, bank balance, & marketable securities to meet any contingency. Commission ratio has been increased ,which shows the increase in gross income Shareholders fund is growing year by year The company does not have any profit after tax Net worth of the company is increasing



After doing the financial analysis of HDFC Life it can be concluded that :-

The working Capital of the company is satisfactory to meet the day to day expenses. The Companys long-term solvency position is good or financially sound. The day by day expenses are rising up which is a bad sign for the company because its affecting the companys profitability. The company has sufficient cash, bank balance & marketable securities to meet any contingency. However the ratio analysis suffers from different limitations also. The ratios need not be taken for granted and accepted at face values. These ratios are numerous and there are wide spread variations in the same measure. Ratios generally do the work of diagnosing a problem only and failed to provide the solution to the problem.



The analysis shows HDFC SLIC has invested higher amount in administrative, management expenses then it is required. So they should care about their expense decisions to have higher returns and to stop losing out opportunity.

HDFC SLIC should launch some more innovative and financially strong insurance product.




2010-2011 2011-2012












18-45 46 47-49 50-64 65-78 79-80 81-82 83

Project work is never the accomplishment of an individual. Rather, it is an amalgamation of the efforts, ideas and co-operation of a number of entities. The compilation and presentation of this opuscule has bestowed me with an opportunity to show my gratitude to those subservient to it. I am highly indebted to my guide Mr. NITIN AGRAWAL, Assistant Branch Manager, who has been the hallmark of this effort. Their guidelines made me comprehend the enigmatical portion of the subject and were the sole animating force that coerced me to meliorate my efforts without the support and guidance the project report would not have taken shape. At last I would like to thank my training colleagues for supporting me at every moment

Md sharique iqbal

PREFACE It is well evident that work experience is an indispensable part of every professional course. In the same manner practical training in any organization is must for each and every individual, who is undergoing management course. Without the practical exposure one cannot consider himself as a qualified capable manager. Hence to fulfill this requirement six weeks training was completed at HDFC Standard Life Insurance Co. Entering in the organization is like stepping into altogether a new world. At first every thing seems strange and unheard but as the time passes one understands the concept and working of the organization and thereby develop professional relationship. Initially it is felt as if classroom study was irrelevant and it is unless in any concern working. But gradually it is realized that all basic fundamental concepts studied are linked in one or other ways to the organization. But how and what can be done with fundamentals depends upon the intellectual and applicability of the individual.

Financial Analysis of HDFC Standard Life Insurance Corporation

Submitted in partial fulfilment of the requirement for the award of the degree of

Master of business administration Under the guidance of Dr.P. SRIDHARAN BY MD SHARIQUE IQBAL
Enrollment No: - 12382002

M.B.A:- IB