SUMMER TRAINING REPORT ON

At

TAX SAVING INVESTMENT ICICI PRUDENTIAL

Submitted to Jiwaji University, Gwalior

in partial fulfillment of the requirements for the award of Master of Business Administration. !"#! $ !"#%& SUBMITTEDTO:Ms. Anjana sax na (a)%*t+ G%#" SUBMITTED BY:Ra!anan"# $%s&'a& M.B.A. III s ! st , R-** n-...//012

NAGA3I INSTITUTE O( TEC4NOLOGY 5 MANAGEMENT G6ALIOR

1

DECLARATION
This is to declare that the Summer Training Report has been accomplished by me and being submitted in partial fulfillment of requirement for the award of the Degree Master of Business Administration From Na7aj# Inst#t%t

O8 T )&n-*-7+ 5

Mana7 ! nt G'a*#-, t- 3#'aj# Un#9 ,s#t+: G'a*#-, The wor!

has not been submitted by me anywhere else for the award of any degree or diploma All source of information are based on my on training e"perience and learning

Dat : P*a) :

Ra!anan"# $%s&'a& MBA 2RD S ! st ,

CERTIFICATE

This is to certify that MR. Ra!anan"# $%s&'a& student of MBA $RD Semester of Na7aj# Inst#t%t

O8 T )&n-*-7+ 5

Mana7 ! nt G'a*#-, has successfully completed his Summer

Training dated from %& days and this report is submitted by 'im for the completion of the training requirement under my guidance and super(ision

Dat : P*a) :

Ms. Anjana sax na (a)%*t+ G%#"

ACKNOWLEDGEMENT

)t is great pleasure for me to put on record my appreciation and gratitude towards *lacement and Training +oordinator Na7aj#

Inst#t%t O8 T )&n-*-7+ 5 Mana7 ! nt G'a*#-, my special

than!s to my respected faculty Ms. Anjana Sax na for him (aluable support and suggestions for the e"ecution of Summer Training ) than! him for the right direction and pro(iding direction for the completion of my summer training pro,ect

Dat : P*a) :

Ra!anan"# $%s&'a& MBA 2RD S ! st ,

TABLE O( CONTENTS
TOPIC
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INTRODUCTION TO ICICI GROUP

ICICI BAN$
)+)+) Ban! is )ndia-s second.largest ban! with total assets of about Rs 11# /#% crore and a networ! of about %&/ branches and offices and about 10&/ ATMs )+)+) Ban! offers a wide range of ban!ing products and financial ser(ices to corporate and retail customer through a (ariety of deli(ery channels and through its speciali1ed subsidiaries and affiliates in the areas of in(estment ban!ing2 life and non.life insurance2 (enture capital2 asset management and information technology )+)+) Ban!-s equity shares are listed in )ndia on stoc! e"changes at +hennai Delhi2 3ol!ata and 4adodara2 the Stoc! 5"change2 Mumbai and the 6ational Stoc! 5"change of )ndia 7imited and its American Depositary Receipts 8ADRs9 are listed on the 6ew :or! Stoc! 5"change 86:S59 )+)+) Ban! was originally promoted in 1;;% by )+)+) 7imited2 an )ndian financial institution2 and was its wholly owned subsidiary )+)+)-s shareholding in )+)+) Ban! was reduced to %<= through a public offering of shares in )ndia in fiscal 1;;>2 an equity offering in the form of ADRs listed on the 6:S5 in fiscal #///2 )+)+) Ban!-s acquisition of Ban! of Mathura 7imited in an all.stoc! amalgamation in fiscal #//12 and secondary mar!et sales by )+)+) to institutional in(estors in fiscal #//1 and fiscal #//# )+)+) was formed in 1;&& at the initiati(e of the ?orld Ban!2 the @o(ernment of )ndia and representati(es of )ndian industry The principal ob,ecti(e was to create a de(elopment financial institution for pro(iding medium term and long term pro,ect financing to )ndian businesses )n the 1;;/s2 )+)+) transformed its business from a de(elopment financial institution offering only pro,ect finance to a di(ersified financial ser(ices group offering a wide (ariety of products and ser(ices2 both directly and through a number of subsidiaries and affiliates li!e )+)+) Ban!2 )n 1;;;2 )+)+) become the first )ndian company and the first ban! or financial institution from non.Aapan Asia to be listed on the 6:S5 After consideration of (arious corporate structuring alternati(es in the conte"t of the emerging competiti(e scenario in the )ndian ban!ing industry2 and the mo(e towards uni(ersal ban!ing2 the management of )+)+) and )+)+) Ban! formed the (iew that the merger of )+)+) with )+)+) Ban! would be the optimal strategic <

alternati(e for both entities2 and would create the optimal legal structure for the )+)+) group-s uni(ersal ban!ing strategy The merger would enhance (alue for )+)+) shareholders through the merged entity-s access to low.cost deposits2 greater opportunities for earning fee.based income and the ability to participate in the payment system and pro(ide transaction.ban!ing ser(ices The merger would enhance (alue for )+)+) Ban! shareholders through a large capital base and scale of operations2 seamless access to )+)+)-s strong corporate relationships built up o(er fi(e decades2 entry into new business segments2 higher mar!et share in (arious business segments2 *articularly fee.based ser(ices2 and access to the (ast talent pool of )+)+) Ban! appro(ed the merger of )+)+) and two of its wholly. owned retail finance subsidiaries2 )+)+) *ersonal Financial Ser(ices 7imited and )+)+) +apital Ser(ices 7imited2 ?ith )+)+) Ban! Shareholders of )+)+) and )+)+) BA63 appro(ed the merger in Aanuary #//#2 by the 'igh +ourt of @u,arat at Aalandhar in March #//#2 and by the 'igh +ourt of Audicature at Mumbai and the Reser(e Ban! of )ndia in April #//# +onsequent to the merger2 the )+)+) group-s financing and ban!ing operations2 both wholesale and retail2 ha(e been integrated in a single entity )+)+) Ban! is the only )ndian company to be rated abo(e the country rating by the international rating agency moody Bs and the only )ndian company to be awarded an in(estment grade international credit rating The Ban! en,oys the highest AAA 8or equi(alent9 rating from all 7eading )ndian rating agencies

P,%" nt#a* P.L.C.

5stablished in 1>%>2 today prudential plc is a leading international financial ser(ices company with some 1< million customers2 policyholders and unit holders and some #/2/// employees worldwide )n the C3 *rudential is a leading life and pensions pro(ider with around se(en million customers MD@ was acquired by *rudential in 1;;; and is the @roup-s C3 and 5uropean fund manager2 responsible for managing o(er of 111 billion of funds 8as at December #//$9 7aunched by *rudential in 1;;>2 5gg is an inno(ati(e financial ser(ices company2 with o(er three million customers2 with nearly si" per cent of C3 credit card balances )n Asia2 *rudential is the leading 5uropean life insurer with #$ life and fund management operations in 1# countries ser(ing some fi(e million customers )n the CS2
0

*rudential owns Aac!son 6ational 7ife2 a leading life insurance company2 and has more than 1 & millions policies and contracts in force *rudential has brought to mar!et an integrated range of financial ser(ices products that now includes life assurance2 pensions2 mutual funds2 ban!ing2 in(estment management and general insurance )n Asia2 *rudential is C3Es 7argest life insurance company with a (ast networ! of ## life and mutual fund operations in twel(e countries F +hina2 'ong 3ong2 )ndia2 )ndonesia2 Aapan2 3orea2 Malaysia2 the *hilippines2 Singapore2 Taiwan2 Thailand and 4ietnam Since 1;#$2 *rudential has championed customer.centric products and ser(ices2 supported by o(er </2/// staff and agents across the region *rudential plc-s strong mi" of business around the world positions us well to benefit form the growth in customer demand for asset accumulation and income in retirement Gur international reach and di(ersity of earnings by geographic region and product will continue to gi(e us significant ad(antage Gur commitment to the shareholders who own *rudential is to ma"imi1e the (alue o(er time of their in(estment ?e do this by in(esting for the long term to de(elop and bring out the best in our people and our businesses to produce superior products and ser(ices2 our international peer group in terms of total shareholder returns At *rudential our aim is lasting relationships with our customers and policyholders2 through products and ser(ices that offer (alue for money and security ?e also see! to enhance our +ompany-s reputation2 built o(er 1&/ years2 for integrity and for acting responsibly within society

>

ICICI P,%" nt#a* L#8 Ins%,an) :

)+)+) *rudential 7ife )nsurance +ompany is a ,oint (enture between )+)+) Ban!2 a premier financial powerhouse and *rudential *lc2 a leading international financial ser(ices group headquartered in the Cnited 3ingdom )+)+) *rudential was amongst the first pri(ate sector insurance companies to begin operations in December #/// after recei(ing appro(al from insurance Regulatory De(elopment Authority 8)RDA9 )+)+) *rudential- s equity base stands at Rs < 0& billion with )+)+) Ban! and *rudential plc holding 0%= and #<= sta!e respecti(ely )n the year ended March $12#//% the company had issued o(er %$/2/// policies2 for a total sum assured of o(er Rs >2/// crore and premium income in e"cess of Rs ;>/ crore The company has a networ! of about $/2/// ad(isorsH as well as 1# banc assurance tie.ups Today the company is the number one pri(ate life insurer in the country
INTRODUCTION TO INSURANCE COMPANY.

)n order to go through the ,ourney of 7)+ F *ath of pri(ate sector insurance companies to nationali1e company to again pri(ate sector insurance companies is gi(en as belowI Pat& *ri(ate 7ife )nsurance +ompanies

6ationali1ation

*ri(ati1ation of 7ife )nsurance Sector

1>0/ F 1;&<

1;&<

1;;& Aune #/// August #/// Gctober #/// #//#

7ife )nsurance concept was accepted with almost #&/ *ri(ate 7ife )nsurance +ompanies Merging of almost #&/ *ri(ate Sector 7ife )nsurance +ompanies in one nationali1ed 7ife )nsurance +orporation of )ndia *roposal to pri(ati1e life insurance business Registration process was notified Application was filed 1 s t license was issued with introduction of )RDA During the month of Aanuary2 11 7ife and 6on.7ife *ri(ate )nsurance license were issued

)n order to elaborate the abo(e path lets go through the history of 7ife )nsurance Sector Gn $ r d December 1<0/2 se(en earnest men of Bombay with ,ust se(en rupees for initial e"penses ga(e shape to a plan of offering insurance to the public without the ris! of ruin and the Bombay Mutual 7ife )nsurance Society came into e"istence Right up to the end of the 1; t h century2 foreign insurance companies had an upper hand in the matter of insurance business and they en,oyed mere monopoly and the partiality were obser(ed in the form that )ndian li(es were insured with 1/= e"tra premium as a common practice2 at that time 7ala 'ari!ishan 7al from 7ahore was called BThe 6apoleon of )ndian FinanceE as he was then called to launch the Bharat )nsurance +ompany at 7ahore 81>;<9 in *un,ab

1/

*rior to 1;1#2 )ndia had no legislation for regulating insurance The 7ife )nsurance +ompanies Act 1;1# and the *ro(ident Fund Act 1;1# were passed The )nsurance Act 1;$> was the first comprehensi(e legislation go(erning not only life but also non.life branches of insurance to pro(ide strict state control o(er insurance business But after the introduction of )nsurance Act 1;$>2 the demand for nationali1ation of 7ife )nsurance )ndustry was raised2 there were so many reasons in order to nationali1e the insurance sector They areI *olicyholders will be pro(ided cent percent security 5"penses will be reduced due to Absence of duplication2 wasteful competition Better ser(ice due to absence of profit moti(e The funds will be a(ailable for nation building acti(ities )nsurance is ser(icing sector and so that it should be in the hands of go(ernment only ha(e contributed and then after in merged in to one into e"istence

Abo(e are few but strong reasons2 which towards nationali1ation of insurance sector2 the year 1;&<2 all insurance companies were and 7ife )nsurance +orporation of )ndia came

Till the year 1;;;2 7)+ of )ndia was the only insurance sector in economic mar!et with e(er.increasing growth rate and mar!et share with the capacity to earn high rate of profit and thus profitability )n spite of all these merits of 7)+2 the o(erall status of insurance sector was not so satisfactory

11

B%s#n ss 8#7%, < 8-, t& #nt,-"%)t#-n -8 IRDA

*opulation )nsurable *opulation 6o Gf insured indi(iduals *otential uninsured indi(iduals 6ew Business premium 1 / / / // $< /> #> Billion Billion Billion Billion

/ << Billion

Abo(e stated figures clearly shows that from 1 Billion

population of )ndia2 almost / #> Billion population was uninsured Again the e"isting go(ernment unit did not properly meet the emerging segments li!e retirement2 disability Moreo(er2 the go(ernment wanted #&= p a growth rate in new business premium from insurance sector All these factors combine forced the go(ernment to ta!e the decision about the pri(ati1ation of insurance sector )n order to increase the business acti(ities2 the introduction of )RDA was made by @o(ernment Thus2 )RDA 8)nsurance Regulatory and De(elopment Authority9 witnessed the e"istence power to co.ordinate regular and control the insurance business -

P,#9at Ins%, ,s #n In"#an Ins%,an) Ma,B t

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R 7#st,at#-n N-.

Dat -8 R 7#st,at#-n

Na! -8 t& C-!?an+

1/1 1/% 1/& 1/0 1/; 11/ 111

#$ 1/ #/// 1& 11 #/// #% 11 #/// 1/ /1 #//1 $1 /1 #//1 1# /# #//1 $/ /$ #//1

'DF+ Standard 7ife Ma" 6ew :or! 7ife )+)+) *rudential 7ife Gm 3ota! Mahindra 7ife Birla Sun 7ife )nsurance TATA A)@ 7ife )nsurance SB) 7ife )nsurance

1$

Board 'ommittees
Audit 'ommittee Mr. Sridar Iyengar Mr. Narendra Murkumbi Mr. M. K. Sharma 'ustomer Servi(e 'ommittee N. Vaghul Narendra Murkumbi M.K. Sharma P.M. Sinha K. V. Kamath +raud Monitorin, 'ommittee Mr. M. K. Sharma Mr. Narendra Murkumbi Mr. K. V. Kamath Ms. Kalpana Morparia Ms. Chanda . Ko!hhar Share .ransfer ) Shareholders/0 1nvestors/ Grievan(e 'ommittee Mr. M. K. Sharma Mr. Narendra Murkumbi
1%

Board Governan(e ) *emuneration 'ommittee Mr. N. Vaghul Mr. Anupam Puri Mr. M. K. Sharma Mr. P. M. Sinha Prof. Marti G. Subrahmanyam 'redit 'ommittee Mr. N. Vaghul Mr. Narendra Murkumbi Mr. M .K. Sharma Mr. P. M. Sinha Mr. K. V. Kamath *is- 'ommittee Mr. N. Vaghul Mr. Sridar Iyengar Prof. Marti G. Subrahmanyam Mr. V. Prem "atsa Mr. K. V. Kamath

Asset$2iability Mana,ement 'ommittee

Ms. #alita . Gupte Ms. Kalpana Morparia Ms. Chanda . Ko!hhar

Ms. Kalpana Morparia Ms. Chanda . Ko!hhar 'ommittee of 3ire(tors Mr. K. V. Kamath Ms. #alita . Gupte Ms. Kalpana Morparia Ms. Chanda . Ko!hhar r. Na!hiket Mor

r. Na!hiket Mor

1.2 Organization Structure

The organi1ation structure at )+)+) web trade is somewhat li!e thisI
+ 5 G Mr 31& 4 3amath

Board of Directors

6ational 'ead 8at Mumbai.branch9

Area mangerK )n charge of *ro,ect at Aalandhar 86a(in Aggarwal9 Assistant unit manager 8Miss *in!i @upta9

Sales

Sales

Sales

Sales

)n any organi1ation there is what is termed a Jhierarchy-2 refers to (arious le(els of authority in an organi1ation2 ranging from the Board of Directors at the top to the sales e"ecuti(es at the bottom

..2 (#nan)#a* P ,8-,!an)

Financial management2 as an academic discipline2 has undergone fundamental changes in its scope and co(erage )n the early years of its e(olution it was treated synonymously with the raising of funds )n the current literature pertaining to financial 1<

Management2 a broader scope so as to include2 in addition to procurement of funds2 efficient use of resources is uni(ersally recogni1ed Similarly2 the academic thin!ing as regards the ob,ecti(e of financial management is also characteri1ed by a change o(er the years Financial management2 as an integral part of o(erall management2 is not a totally independent area )t draws hea(ily on related disciplines and fields of study2 such as economics2 accounting2 mar!eting2 production and quantitati(e methods Although these disciplines are interrelated2 there are !ey differences among them The relationship between finance and accounting2 conceptually spea!ing2 has two dimensionsI 819 They are closely related to the e"tent that accounting is an important input in financial decision.ma!ing and 8#9 There are !ey differences in (iewpoints between them The (iewpoint of accounting relating to the funds of the firm is different from that of finance The measurement of funds 8income and e"penses9 in accounting is based on the accrual principleKsystem Ca?#ta*#;at#-n an" Ca?#ta* St,%)t%, : +apital structure can affect the (alue of a company by affecting either its e"pected earnings or the cost of capital2 or both ?hile it is true that financing. mi" cannot affect the total operating earnings of a firm2 as they are determined by the in(estment decisions2 it can affect the share of earnings belonging to the ordinary shareholders The capital structure decision can influence the (alue of the firm through the earnings a(ailable to the shareholders But the le(erage can largely influence the (alue of the firm through the cost of capital )n e"ploring the relationship between le(erage and (alue of a firm the relationship between le(erage and cost of capital from the standpoint of (aluation The importance of an appropriate capital structure is2 thus2 ob(ious There is a (iewpoint that strongly supports the close relationship between le(erage and (alue of a firm There is an equally strong body of opinion2 which belie(es that financing.mi" or the combination of debt and equity has no impact on the shareholders- wealth and the decision on financial structure is irrele(ant )n other words2 there is nothing such as optimum capital structure +apital structure theories are based on certain assumptions2 they areI L1M There are only two sources of funds used by a firmI perpetual ris! less debt and ordinary shares L#M There are no corporate ta"es This assumption is remo(ed later 10

L$M L%M L&M

L<M L0M L>M L;M

The di(idend.payout ratio is 1// That is2 the total earnings are paid out as di(idend to the shareholders and there are no retained earnings The total assets are gi(en and do not change The in(estment decisions are2 in other words2 assumed to be constant The total financing remains constant The firm can change its degree of le(erage 8capital structure9 either by selling shares and use the proceeds to retire debentures or by raising more debt and reduce the equity capital The operating profits 85B)T9 are not e"pected to grow All in(estors are assumed to ha(e the same sub,ecti(e probability distribution of the future e"pected 5B)T for a gi(en firm Business ris! is constant o(er time and is assumed to be independent of its capital structure and financial ris! *erpetual life of the firm

L 9 ,a7 Ana*+s#s: A firm can ma!e use of different sources of financing whose costs are different These sources may be2 for purposes of e"position2 classified into those that carry a fi"ed rate of return and those on which the returns (ary The fi"ed returns on some sources of finance ha(e implications for those who are entitled to a (ariable return Thus2 since debt in(ol(es the payment of a stated rte of interest2 the return to the ordinary shareholders is affected by the magnitude of debt in the capital structure of a firm The employment of an asset or source of funds for which the firm has to pay a fi"ed cost or fi"ed return may be termed as le(erage +onsequently2 the earnings a(ailable to the shareholders as also the ris! are affected )f earnings les the (ariable costs e"ceed the fi"ed cost2 or earnings before interest and ta"es e"ceed the fi"ed return requirement2 the le(erage is called fa(orable ?hen they do not2 the result is unfa(orable le(erage There are # types of le(erage. Joperating- and Jfinancial- The le(erage associated with in(estment 8asset acquisition9 acti(ities is referred to as operating le(erage2 while le(erage associated with financing acti(ities is called financial le(erage ?hile we are basically concerned with financial le(erage for purposes of the financing decision of a firm2 the discussion of operating le(erage is to ser(e as a bac!ground to the understanding of financial le(erage because the two types of le(erage are closely related Gperating le(erage is determined by the relationship between the firm-s sales re(enues and its earnings before interest and ta"es 85B)T9 The earnings before interest and ta"es are also generally called as operating profits Financial le(erage represents the relationship between the 1>

firm-s earnings before interest and ta"es 8operating profits9 and the earnings a(ailable for ordinary shareholders The operating profits 85B)T9 are thus2 used as the pi(otal point in defining operating and financial le(erage )n a way2 operating and financial le(erage represents two stages in the process of determining the earnings a(ailable to the equity shareholders and2 Apart from the elaboration of the return.ris! implications2 their combined effect has also been discussed Gperating le(erage results from the e"istence of fi"ed operating e"penses in the firm-s income stream The operating le(erage may be defined as the firm-s ability to use fi"ed operating costs to magnify the effects of changes in sales on its earnings before interest and ta"es Gperating le(erage occurs any time a firm has fi"ed costs that must be met regardless of (olume ?e employ assets with fi"ed cost in the hope that (olume will produce re(enues more than sufficient to co(er all fi"ed and (ariable costs )n other words2 with fi"ed costs2 the percentage change in profits accompanying a change in (olume is greater than the percentage change in (olume This occurrence is !nown as operating le(erage Financial le(erage relates to the financing acti(ities of a firm The sources from which funds can be raised by a firm2 from the point of (iew of the costKcharges2 can be categori1ed into L1M those which carry a fi"ed financial charge2 and L#M those which do not in(ol(e any fi"ed charge The sources of funds in the first category consist of (arious types of long.term debt2 including bonds2 debentures2 and preference shares 7ong.term debts carry a fi"ed rate of interest which is a contractual obligation for the firm Although the di(idend on preference shares is not a contractual obligation2 it is fi"ed charge and must be paid before anything is paid to the ordinary shareholders The equity shareholders are entitled to the remainder of the operating profits of the firm after all the prior obligations are met Financial le(erage results from the presence of fi"ed financial charges in the firm-s income stream These fi"ed charges do not (ary with the earnings before interest and ta"es 85B)T9 or operating profits

Ca?#ta* B%"7 t#n7: +apital budgeting decision pertains to fi"edKlong.term assets which by definition refer to assets which are in operation2 and yield a return2 o(er a period of time2 usually2 e"ceeding one year They therefore2 in(ol(e a current outlay or series of outlays of cash resources in return for an anticipated flow of future benefits )n other words2 the system of capital budgeting is employed to e(aluate e"penditure decisions which in(ol(e current outlays but are li!ely to produce benefits o(er a period of time longer than one year These benefits may be either in the form of 1;

increased re(enues or reduced costs +apital e"penditure management2 therefore2 includes addition2 disposition2 modification and replacement of fi"ed assets +apital budgeting decisions are of paramount importance in financial decision. ma!ing )n the first place2 such decisions affect the profitability of a firm They also ha(e a bearing on the competiti(e position of the enterprise mainly because of the fact that they relate to fi"ed assets The fi"ed assets represent2 in a sense2 the true earning assets of the firm They enable the firm to generate finished goods that can ultimately be sold for profit The current assets are not generally earning assets Rather2 they pro(ide a buffer that allows the firms to ma!e sales and e"tend credit True2 current assets are important to operations2 but without fi"ed assets to generate finished products that can be con(erted into current assets2 the firm would not be able to operate Further2 they are Jstrategicin(estment decisions as against Jtactical-. which in(ol(e a relati(ely small amount of funds Therefore2 such capital in(estment decisions may result in a ma,or departure from what the company has been doing in the past Acceptance of a strategic in(estment will in(ol(e a significant change in the company-s e"pected profits and in the ris!s to which these profits will be sub,ect 6-,B#n7 Ca?#ta* Mana7 ! nt: ?or!ing capital management is concerned with the problems that arise in attempting to manage the current assets2 the current liabilities and the interrelationship that e"ists between them The term current assets refer to those assets which in the ordinary course of business can be2 or will be2 con(erted into cash within one year without undergoing a diminution in (alue and without disrupting the operations of the firm The ma,or current assets are cash2 mar!etable securities2 accounts recei(able and in(entory +urrent liabilities are those liabilities which are intended2 at their inception2 to be paid in the ordinary course of business2 within a year2 out of the current assets or earnings of the concern The basic current liabilities are accounts payable2 bills payable2 ban! o(erdraft2 and outstanding e"penses The goal of wor!ing capital management is to manage the firm-s current assets and liabilities in such a way that a satisfactory le(el of wor!ing capital2 it is li!ely to become insol(ent and may e(en be forced into ban!ruptcy The current assets should be large enough to co(er its current liabilities in order to ensure a reasonable margin of safety 5ach of the current assets must be managed efficiently in order to maintain the liquidity of the firm while not !eeping too high a le(el of any one of them 5ach of the short.term sources of financing must be continuously managed to ensure that they are obtained ad used in the best possible way The interaction between current assets and current liabilities is2 therefore2 the main theme of the wor!ing capital management R ) #9a<* s Mana7 ! nt: #/

The recei(ables represent an important component of the current assets of a firm The recei(ables are defined as Jdebt owned to the firm by customers arising from sale of goods or ser(ices and in the ordinary course of businesses ?hen a firm ma!es an ordinary sale of goods or ser(ices and does not recei(e payment2 the firm grants trade credit and creates accounts recei(able2 which could be collected in the future Recei(ables management is also called trade credit management Thus2 accounts recei(ables represent an e"tension of credit to customers2 allowing them a reasonable period of time in which to pay for the goods recei(ed The sale of goods on credit is an essential part of the modern competiti(e economic systems )n fact2 credit sales and2 therefore2 recei(ables are treated as a mar!eting tool to aid the sale of goods The credit sales are generally made on open account in the sense that there are no formal ac!nowledgements of debt obligations through a financial instrument As a mar!eting tool2 they are intended to promote sales and thereby profits 'owe(er2 e"tension of credit in(ol(es ris! and cost Management should weigh the benefits as well as cost to determine the goal of recei(ables management The ob,ecti(e of recei(ables management is Jto promote sales and profits until point is reached where the return on in(estment in further funding recei(ables is less than the cost of funds raised to finance that additional credit 8i e cost of capital9- The specific costs and benefits2 which are rele(ant to the determination of the ob,ecti(es of recei(ables management2 areI o o o o o +ost +ollection cost +apital cost Delinquency cost Default cost

D#9#" n" ?-*#)+:

Di(idend refers to that portion of a firm-s net earnings which are paid out to the shareholders Since di(idends are distributed out of profits2 the alternati(e to the payment of di(idends is the retention of earningsKprofits The retained earnings constitute an easily accessible important source of financing the in(estment requirements of firms There is2 thus2 a type of in(erse relationship between retained earnings and cash di(idends 7arger the retention2 lesser di(idends2 and smaller retentions2 larger di(idends Thus2 the alternati(e uses of the net earnings. di(idends and retained earnings.are competiti(e and conflicting A ma,or decision of financial management is the di(idend decision in the sense that the firm has to choose between distributing the profits to the shareholders and #1

plugging them bac! into the business The choice would ob(iously hinge on the effect of the decision on the ma"imi1ing present (aluesH the firm should be guided by the consideration as to which alternati(e use is consistent with the goal of wealth ma"imi1ation That is2 the firm would be well ad(ised to use the net profits for paying di(idends to the shareholders if the payment will lead to the ma"imi1ation of wealth of the owners )f not2 the firm should rather retain them to finance in(estment programes The relationship between di(idends and (alue of the firm should2 therefore2 be the decision criterion There are howe(er2 conflicting opinions regarding the impact of di(idends on the (aluation of a firm According to one school of thought2 di(idends are irrele(ant so that the amount of di(idends paid has no effect on the (aluation of a firm Gn the other hand certain theories consider the di(idend decision as rele(ant to the (alue of the (alue of the firm measured in terms of the mar!et price of the shares The cru" of the argument supporting the irrele(ance of di(idends to (aluation is that the di(idend policy of a firm is a part of its financing decision As a part of the financing decision2 the di(idend policy of the firm is a residual decision and di(idends are a passi(e residual )f the di(idend policy is strictly a financing decision2 whether di(idends are paid out of profits2 or earnings are retained2 will depend upon the a(ailable in(estment opportunities )t implies that when a firm has sufficient in(estment opportunities2 it will retain the earnings to finance them +on(ersely2 if acceptable in(estment opportunities are inadequate2 the implication is that the earnings would be distributed to the shareholders The test of adequate acceptable in(estment opportunities is the relationship between the return on in(estments and the cost of capital As long as in(estments e"ceed cost of capital2 a firm has acceptable in(estment opportunities )n other words2 ifs firm can earn a return higher tan its cost of capitalH it will retain the earnings to finance in(estment pro,ects )f the retained earnings fall short of the total funds required2 it will raise e"ternal funds.both equity and debt.to ma!e up the shortfall

##

..0 C-st#n7 M t&-"s An" Ana*+s#s O8 Stat ! nt

Ass ts Un" , Mana7 ! nt DAUME as at t&
AUM M%t%a* (%n" Na! 1 AB6 AMRG Mutual Fund # A)@ @lobal )n(estment @roup Mutual Fund $ Benchmar! Mutual Fund % Birla Sun 7ife Mutual Fund & BGB Mutual Fund < +anban! Mutual Fund 0 DBS +hola Mutual Fund > Deutsche Mutual Fund ; DS* Merrill 7ynch Mutual Fund 1/ 5scorts Mutual Fund 11 Fidelity Mutual Fund 1# Fran!lin Templeton Mutual Fund 1$ 'DF+ Mutual Fund 1% 'SB+ Mutual Fund Ex)*%"#n7 (%n" O8 (%n"s &#0#;> <1 6KA %;$%&; 1; #1/0/$# $$ 1$1>; %< ##//&& && #<0#0# <; <$#0$> << 1$<$0;< >1 11>;# &# &<0/&# ## ##1/#1; /< $1/0;>> /& 11;<1&; %> (%n" O8 (%n"s $%0;$ 0 6KA / 1;/1 %& / / / / / / 0>>& %> $#;$; %1 / /

n" -8 ( <-=FFA (Rs in Lakhs)

A9 ,a7 AUM (-, T& M-nt& Ex)*%"#n7 (%n" O8 (%n"s &#/$&0 %1 6KA &<&$// %0 ##0<>0% 0% 1#01/ &> ##%%// >& #$<;%1 1& <%$$/; 0; 1$$0&0; ;>&0 &;%>0# 10 #$%$;/0 % $###>0$ /# 1#1;>$/ > (%n" O8 (%n"s $&;<# 1 6KA / #/1< >0 / / / / / / ><<; %0 $$&&1 $ / /

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1& )6@ 4ysya Mutual Fund 1< AM Financial Mutual Fund 10 A*Morgan Mutual Fund 1> 3ota! Mahindra Mutual Fund 1; 7)+ Mutual Fund #/ 7otus )ndia Mutual Fund #1 Morgan Stanley Mutual Fund ## *R)6+)*A7 Mutual Fund #$ )+)+) *RCD56T)A7 Mutual Fund #% Nuantum Mutual Fund #& Reliance Mutual Fund #< Sahara Mutual Fund #0 SB) Mutual Fund #> Standard +hartered Mutual Fund #; Sundaram B6* *aribas Mutual Fund $/ Tata Mutual Fund $1 Taurus Mutual Fund $# CT) Mutual Fund G,an" T-ta*

%<&/0/ $% $>#>11 ;% 6KA 1$%/<#& 0# 11%;0## ;< 1#$>&> ;; #>011; ; 1/<//$# <; %$#>/<0 &1 &$>/ 10 %##1&;1 $% 10&;< ;; 1>%0$>$ ;< 1#;;0/< 01 0>/1/0 ;< 1%1;>#; ;; #$&%$ $1 $></#;; %% 2>22FCF0.>>

;11<> ;$ / 6KA &&>$& 1$ / / / / $0$1 ;< / / / / #>>< <& / / / / =2..0=.A.

%<;&1< >0 $><0$1 $0 6KA 1$$&>1< #0 11;0/<> ># >%/;$ $& $1/%#0 1% 1/;%/#0 << $;/0;#% >& &>1> %> %$&;#>1 &$ 1<;>0 ;> 1>0%/&/ 0; 1$>1;</ %0 0;$>;0 #& 1%%>$#; 0% #&$<# /# $;#</1% && 2>/=1.=2.>=

;0;/& %& / 6KA &;#%$ $# / / / / $;># >& / / / / #><1 >< / / / / =00.C2.==

Ass t Un" , Mana7 ! nt

M%t%a* (%n" Na! AB6 AMRG Mutual Fund Alliance +apital Mutual Fund Birla Sun 7ife Mutual Fund +anban! Mutual Fund +hola Mutual Fund Deutsche Mutual Fund DS* Merrill 7ynch Mutual Fund Fidelity Mutual Fund Fran!lin Templeton Mutual Fund 'DF+ Mutual Fund 'SB+ Mutual Fund )6@ 4ysya Mutual Fund AUM 1&>/ $< 1%$1 %< 1//%; << 1&<& 1; 1//% <# #$<< 0# <%0# >/ 1<#> /< 1<0/% 0% 1&0/0 ># 0#&/ <$ #/0# >< #% EG%#t+ 5 Ba*an) %<% &>; &>; %> 1<<> 00 ##% $& #$# <$ ;< &0 1%<# $$ 1<#> /< <;<& $< <1#< /% 1;>0 ;$ $$0 #& D <t 5 MIP 111& ;# >%1 ;> >$>/ >; 1$%/ >% 001 ;; ##0/ 1& &/1/ %0 / // ;0$; $> ;&>1 0> &#<# 0/ 10$& <# EG%#t+ H #; $; %1 1> 1< <1 1% $$ #$ 1< % /> ## &; 1// // %1 0/ $; // #0 %# 1< #0 D <t H 0/ <1 &> ># >$ $; >& <0 0< >% ;& ;# 00 %1 / // &> $/ <1 // 0# &> >$ 0$

AM Financial Mutual Fund 3ota! Mahindra Mutual Fund 7)+ Mutual Fund *R)6+)*A7 Mutual Fund *rudential )+)+) Mutual Fund Reliance Mutual Fund Sahara Mutual Fund SB) Mutual Fund Standard +harted Mutual Fund Sundaram Mutual Fund Tata Mutual Fund Taurus Mutual Fund CT) Mutual Fund

$0>/ >$ <&/1 &# #;&; 1& <#<% ;< 10/;& >; ;;/0 >; &<& &/ 01>; $& 0<$< >< #/$& #1 >01$ ;& 10/ 0< #1;0& &0

>& &# 1/<& 1# #00 %< 1<># %> #1<; %< %##< %/ #& 0% #$11 &% / // ;;0 ;1 #<#; /; 1&0 &$ >0;1 >1

$<;% &1 &%$< %1 #<>1 <; %&># %> 1%;#< %% &<>1 %; &$; 0< %>00 >1 0<$< >< 1/$0 $1 </>% >< 1$ #$ 1$1>$ 00

# #< 1< $> ; $> #< >< 1# <; %# << %&& $# 1& / // %; /$ $/ 10 ;# #& %/ /1

;0 0% >$ <# ;/ <# 0$ 1% >0 $1 &0 $% ;& %& <0 >& 1// // &/ ;0 <; >$ 0 0& &; ;;

L#st -8 Ass ts Mana7 ! nt C-!?an# s an" t& #, ass ts %n" , !ana7 ! nt

As -n 3%n =FF/ DIn C,-, s.E ICICI PRUDENTIAL 1&;$ >&%< %0 ;$$< # /;0> 10; /11< =.FA.A/ 1&&1 #$< >#$ #<#$ %0; %$$< $00> %&#& 1C2=.2/0 01C.10.= %1# ;$;0 1&/ &<00 >12.>FA0 1C1..1/0= .AFC>../C

Pa,t#)%*a,s D#9 ,s#8# " Tax P*ann#n7 In" x S )t-, T-ta* EG%#t+ (MP MIP D <t ST In)-! T-ta* D <t Ba*an) " G#*t LT G#*t ST T-ta* G#*t L#G%#" T-ta*

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8Abo(e Table showing Acquisition and Ctili1ation of fund of )+)+) *RCD56T)A79 Fund Manager does utili1ation of fund2 )+)+) *RCD56T)A7 AM+ has (ariety of scheme and each scheme has different Fund Manager who is responsible of in(esting money into mar!et and also responsible to gi(e return to in(estors

..> P,-"%)t an" O? ,at#-ns

PRODUCTS.

Ins%,an) s-*%t#-n 8-, #n"#9#"%a*sI.. )+)+) *rudential 7ife )nsurance offers a range of inno(ati(e2 customer.centric products that meet the needs of customers at e(ery life stage )ts 10 products cab is enhanced with up to < riders2 to create a customi1ed solution for each policyholder

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Savings Solutions.. Secure *lus is a transparent and feature.pac!ed sa(ings plan that offers $ le(els of protection +ash *lus is a transparent2 feature.pac!ed sa(ings plan that offers $ le(els of protection as well as liquidity options Sa(e n *rotect is a traditional endowment sa(ings plan that offers life protection along with adequate returns +ash Bac! is an anticipated endowment policy ideal for meeting milestone e"penses li!e a child-s marriage2 e"penses for a child-s higher education or purchase of an asset

Protection Solutions. 7ife@uard is a protection plan2 which offers life co(er at (ery low cost )t is a(ailable in $ coupons F le(el term assurance2 le(el term assurance with return or premium and single premium

Child Solutions. Smart !id child plans pro(ide guaranteed educational benefits to a child along with life insurance co(er for the parent who purchases the policy The policy is designed to pro(ide money at important milestones in the child-s life Smart3id child planed are also a(ailable with in unit.lin!ed form F both single premium and regular premium Market-linked Solutions

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7ife7in! is a single premium Mar!et 7in!ed )nsurance *lan2 which combines life insurance co(er with the opportunity to stay2 in(ested in the stoc! mar!et 7ife Time offers customers the fle"ibility and control to customi1e the policy to meet the changing needs at different life stages )t offers $ in(estment options F@rowth *lan2 )ncome plan and Balance plan

Retirement Solutions Fore(er 7ife is a retirement products targeted at indi(idual in there thirties Secure *lus *ension is a fle"ible pension plan that allows one to select between $ le(els of co(er Market-linked retirement products 7ife Time *ension is a regular premium mar!et.lin!ed pension plan 7ife 7in! *ension is a single premium mar!et lin!ed pension plan )+)+) *rudential also launched BSalaam OindagiE2 a social sector group insurance policy targeted at the economically underpri(ileged sections of the society Group Insurance Solutions )+)+) *rudential also offers @roup )nsurance Solutions for companies see!ing to enhance benefits to their employees

Group Gratuity Plan

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)+)+) *ruEs group gratuity plan helps employers fund their statutory gratuity obligation in a scientific manner The plan can also customi1e to structure schemes that can pro(ide benefits beyond the statutory obligations Group Superannuation Plan )+)+) Ban! offers fle"ible defined contribution superannuation scheme to pro(ide a retirement !itty for each member of the group 5mployees ha(e the option of choosing from (arious annuity options or opting for partial commutation of the annuity at the time of retirement @roup Term *lan

Group erm Plan )+)+) *ruEs fle"ible group term solution helps pro(ides affordable co(er to members of group The co(er could be uniform or based on designationKran! or a multiple of salary The benefit under the policy is paid to the beneficiary nominated by the member on hisKher death

!le"i#le Rider $ptions )+)+) *ru 7ife offers fle"ible riders2 which can be added to the basic policy at marginal cost2 depending on the specific of the customer A))#" nt 5 "#sa<#*#t+ < n 8#t: )f death occurs as the result of an accident during the term of the policy2 the beneficiary recei(es an additional amount equal to the sum assured under the policy )f the death occurs while tra(eling in an authori1ed mass transport (ehicle2 the beneficiary will be entitled to twice the sum assured as additional benefit A))#" nt < n 8#t: This rider option pays the sum assured the rider on death due to accidents #;

C,#t#)a* I**n ss B n 8#t: protects the insured against financial loss in the e(ent of ; specified critical illnesses Benefits are payable to the insured for medical prior to death Maj-, S%,7#)a* Ass#stan) B n 8#ts: pro(ides financial support in the e(ent of medical emergencies2 ensuring that benefits are payable to the life assured for medical e"penses )ncurred for surgical procedures +o(e is offered against %$ different surgical procedures In)-! B n 8#t: This rider pays the 1/= of the sum assured to the nominee e(ery year2 till maturity2 in the e(ent of the death of the life assured )t is a(ailable on Smart3id2 Secure*lus and +ashplus 6a#9 , -8 P, !#%!: )n +ase of total and permanent due to an accident2 the premiums are wai(ed till maturity This rider is a(ailable with Secure*lus and +ash*lus

..1

La+-%t an" @%a*#t+ C-nt,-*

Rat#+urrent ratio 5*S Di( payout to unit holders Di( payout

(-,!%*a +urrent assetKcurrent liability Total profitKunit capital Di( paidKunit capital Di( paidKnet profit

=FF/ #%$> $0K1>1> 1&P1 $% #$$11 %&K00// <$P$ /# ;%1 >1K00// <$P/ 1#81#=9Di( paidKunit capital ;%1 >1K#$$11 %&P/ /%8%=9 $/

=FFA 1#0& %<K1/<< ;/P1 1; 1%1#< #/K;;>1 /1P1 %1 <#1 ><K;;>1 /1P/ <#8< #= 9 <#1 ><K1%1#< #/P/ /%8%=9

Di( to total income *rofit on sales redemption to total income

Di(idendKtotal income *rofitKsales redemption

%#> %&K1>/%1 &%P/ #%8# %=9

010 &$K1%>># <>P/ %>8% > =9 1#/0% &#K1%>># <>P/ >18> 1=9

1$>$% 10K1>/%1 &%P/ 00800=9

DA<-9 Ta<* S&-'#n7 - Rat#- ana*+s#s -8 ICICI PRUDENTIAL AMC9

..A

Ma,B t#n7
Today the definition of mar!eting has been changed The mar!eting acti(ity of an organi1ation before the product is produced and continues e(en after the product is sold )n the buyer mar!et of recent times the sharpest weapon that a company can de(elop is globali1e mar!eting place in the (alue creation and deli(ery The proud and demanding customer of today brings before corporate a critical fact2 when the customer is ,ury )t is the (alue generation for the customer that will separate the (ictor from (anquished The (alue of customer ser(ice cascades all o(er the company The aim of customer focus is not ,ust satisfaction but delight satisfaction Till the year 1;;; the life insurance business was e"clusi(ely conducted by the 7ife )nsurance +orporation 87)+9 while the general insurance business in )ndia2 $1

was e"clusi(e by @eneral )nsurance +orporation and its four subsidiaries The insurance sector is opened for pri(ate participation since 6o(ember2 #/// Before 1;;; there was no mar!eting done by 7)+ due to its monopoly but now after & years the picture has changed 6ow there are pri(ate players in mar!et ?ith the effecti(e mar!eting techniques the pri(ate players has changed the whole scenario of the insurance sector They are slowly and gradually dri(ing the business out of the hands of the 7)+ Before 1;;; customer had no option other then 7)+2 but now they ha(e got many options This is the significant change in insurance industry 6ow the customer is bac! in the center state All the companies are trying to please the customer with the inno(ati(e schemes and better ser(ice R *at#-ns&#? Ma,B t#n7 #n Ins%,an) Int,-"%)t#-n )t is fi(e times more e"pensi(e to acquire a new customer than to retain an old one Relationship mar!eting is the practice of building long term satisfying relationship with !ey parties customers and suppliers They accomplish this by promoting and deli(ering high quality2 goods2 ser(ices2 and fair prices to other parties o(er(iew Relationship mar!eting results in strong economic2 technical and social ties among the parties

D 8#n#t#-n -8 R *at#-n Ma,B t#n7: Relationship mar!eting can be defined as the Bprocess to identify2 establish2 maintain and other sta!eholders at a profit so that the ob,ecti(e of all parties in(ol(ed are net and this is done by mutual e"change and fulfillment of promises The important ob,ecti(es of relationship mar!eting to acquire new customers maintain and enhance relationship with e"isting customers2 re.acti(ities of e". customers and handling of customer terminations The !ey ob,ecti(e of relationship mar!eting is to establish one to one relationship with all the customers This may ha(e sound li!e a day dream few dream few years ago but than!s to the technological brea!through and technological solution pro(iders2 it is (ery much of a reality 4-' t- a"" 9a*% t&,-%7& , *at#-ns&#? Ma,B t#n7 $#

I" nt#8+ *-+a* )%st-! ,s R )-7n#; t& #, s? )#a* n "s P,-9#" s? )#a* , 'a," 8-, *-+a*t+ Esta<*#s& )-nt#n%#n7 , *at#-ns&#? Ens%, #n), as #n )%st-! , 9a*% Relationship mar!eting is one of the hottest tread in the present mar!eting scenario Satisfied customers not only stay with a company but they are also wal!ing tal!ing ad(ertisement for the company-s product

../ St, n7t& an" 6 aBn ss

STRENGT4S
5fficiently trained sales force and ad(isors There is impro(ement in response and turnaround times in specific areas such as deli(ery of first policy receipt2 policy document2 premium notice2 final maturity payment2 settlement of claims etc +ompetiti(e acti(ity2 e(olution of the distribution channels

6EA$NESSES
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More or less all players 8including the mar!et leader 7)+9 ha(e aggressi(ely recruited and trained ad(isors2 appointed agents2 launched new products2 impro(ed customer ser(ice standards and re(ampedKe"panded their distribution networ!s )f at all there was any ma,or difference between players it was only in time lag in launching of ser(ices

+onsumer awareness2 though increasing2 is still low and the different types of policies a(ailable and the specific benefits of each often confuse themH thus itQs the ,ob of insurance companies to educate them about these

O??-,t%n#t# s
There are 10 insurance companies in the mar!et today More companies li!e Reliance and Sahara will soon enter the fray According to a C6 sur(ey2 only % to < per cent of )ndiaQs population is insured Gf this2 ## per cent are under.insured So the mar!et presents opportunities for the enterprising Gnly ## per cent of the insurable population possesses life insurance ?hat-s more2 in a country of o(er one billion people2 life insurance premia forms only 1 > per cent of the @D*2 indicating the e"tent of underinsurance )+)+) *rudential 7ife )nsurance +ompany has entered into a strategic tie.up with the Federal Ban! for the distribution of life insurance products )+)+) *ru7ife financial ser(ice consultants 8FS+Qs9 could now approach Federal Ban! customers2 based on referrals from the Ban! This alliance e"pands )+)+) *rulifeQs reach to around # la!h customers across $/ ban! branches in 3erala and $/ in other cities including a large number of 6R) customers )+)+) *rudential 7ife )nsurance +ompany has recruited talent at a lateral le(el from (arious industries2 such as FM+@2 ban!ing2 telecom2 etc2 for its middle and senior management teams Says Shubhro Mitra2 +hief2 'uman Resources2 )+)+) *rudential 7ife2 RThe candidates must ha(e the requisite qualifications in their functions and rele(ant e"perience2 howe(er not necessarily in the field of insurance )n fact2 only two people amongst the senior management team has any e"perience in insurance S the head of sales and the chief actuary Most importantly2 the

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indi(iduals must ha(e a winning attitude2 energy2 willingness to learn and be able to bring fresh ideas and perspecti(es to the business R )+)+) *rudential 7ife )nsurance has flagged off operations in +hennai2 the fourth office of the company )t has accepted fi(e proposals sponsored by Madras +ements 7td and 7ucas T4S fa(ouring underpri(ileged children QSalaam 1indagiQ2 a social sector policy will co(er larger groups amongst the economically wea!er sections of society The company targets to cross the one la!h policy mar! by the end of the ne"t fiscal and has already sold 12&// policies till date )t hopes to brea! e(en in four to si" years and for now has no plans to introduce any new products The policies currently on offer are )+)+) *ru Single *remium Bond2 )+)+) *ru Sa(eQn *rotect2 )+)+) *ru Fore(er 7ife2 )+)+) *ru +ashBa! and )+)+) *ru 7ife@uard )+)+) *rulife has (ery quic!ly gone on to become )ndia-s largest pri(ate life insurance company Again the success lay in aggressi(e mar!eting2 smart ad(ertising2 omnipresence and quic! e"pansion )+)+) also has a strong presence in the general insurance sector with )+)+) 7ombard @eneral )nsurance +ompany 7imited A large part of the success of the new entrants ran be attributed to the go(ernmentappointed )nsurance Regulatory and De(elopment Agency 8)RDA92 which de(eloped the regulatory framewor! The regulations go(erningthe life and non.life insurers are pragmatic and forward.loo!ing2 ensuring the customer is protected and creating an en(ironment for thri(ing pri(ate sector participation and a le(el playing field Bancassurance and corporate agents are the two emerging channels that gi(e companies an opportunity to reach out to a much larger number of indi(iduals who might be interested in insurance Moreo(er2 people inherently trust their local ban! with which they ha(e transacted for many years2 so an insurance product through that channel is also regarded with less suspicion These channels ha(e only ,ust emerged2 but are already ma!ing their mar! ?ith time and the appropriate regulations2 the contribution of such channels is bound to dri(e penet QatHon of the category

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T4REATS )+)+) *rudential 7ife )nsurance +ompany *(t 7td 8)+)+) *ru7ife9 is a ,oint (enture company in the life insurance segment in )ndia )t is the leading pri(ate life insurance company )ndia 5"panding at a rapid pace )+)+) *ru7ife is opening branches across multiple cities and towns in )ndia ?ith multiple branches across the country a need was identified by the head office to ser(ice their internal employees in the same way as they would ser(ice an e"ternal customer The user base was growing with people being added e(ery day

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..C S? )#a* P-#nts

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C4APTER -. INTRODUCTION

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INTRODUCTION
)+)+) *rudential is a case study in the role of mar!eting in reshaping an industry )t highlights how an industry where BsellE and BpushE were oft used words and consumer was nothing more than a file no 2 has changed to one where )-ns%! , ?, 8 , n) and )-ns%! , ?%** rules the roost 'ere-s a loo! at how )+)+) *ru changed the rules of the game and emerged a leader in the process Ba)B7,-%n": ?hen the insurance sector was liberali1ed in #///2 the pri(ate players had to contend with a few issues Ratio of premium to @D* was lowI 1 $= of @D* was in(ested in insurance )nsurance penetration was at an abysmal ##= of the insurable population Besides the abo(e the pri(ate players were faced withI Attitudinal Barriers2 *erception of insurance as a ta" sa(ing tool and lac! of a consumer centric approach in ser(ice and product offerings D#88 , nt#at#-n St,at 7+ A9 Reposition the category in the consumerQs mind )nfluence the consumer to (iew it as a protection instrument and not a ta" sa(ing product alone B9 )n the process2 create differentiation for the )+)+) *ru brand as a pro(ider of social security and family protection +9 Achie(e leadership status in saliency2 image D product parameters D9 Build credibility and trust T& Ta,7 t A%"# n) : Representing an ideal mi" of medium to high net worth indi(idualsI The consumers most disposed towards buying life insurance Middle.aged professionals2 primarily male2 salaried and self employed2 age groupI #> . %& years2 household incomeI Rs #/2 /// and abo(e $;

C, at#9 St,at 7+: The essence of the creati(e strategyI To get the consumer to re loo! at )nsurance as a means to lead a worry free life and not as a necessary e(il To this effect the core brand insight highlighted was RAs head of the family itQs my responsibility to ta!e care of my lo(ed ones and protect them from the uncertainties of lifeR2 summed up in the ad(ertising ideaI J?e co(er you at e(ery step in life 8S%,aBs&aI J#n"a7# !e har !adam par2 as interpreted in 'indi 9 )+)+) *ru was positioned as an enabler of protection rele(ant to the needs of the life stage that you are in At the core of the communications strategy was appropriating the generic category benefit 8protection9 through its greatest metaphor F S#n"--,. T& C, at#9 x )%t#-n:

TVC: Building image and creating a differential in the most creati(e and compelling manner The creati(e e"ecution heightened the emotional connect with the )+)+) *ru brand . )ndianH satisfaction of !nowing that one-s lo(ed ones are protected Symbolic representation of the protector of the family through situations showcasing (arious life stages and creating endearing imagery of protection and familial bonding P, ss: @a(e the consumer a rational and tangible reason to buy insurance first and secondly from )+)+) *rudential The product specific ad(ertising focused on changing the pre(alent perception about insurance and brea!ing a few mythsI non. affordability2 insurance not being good in(estment option and the myth that insurance was good only for ta" sa(ing Ot& , C-!!%n#)at#-ns: Gther programs included direct mail2 *R of communications campaign in press D T42 website mar!etingH and database generation through Bancassurance channels M "#a St,at 7+: %/

)n a mar!et li!ely to be cluttered2 they used multiple touch points to reach the consumer The role for each medium was en(isaged The T4 medium was used to enhance the emotional lin! with the brand Strategic use of 1& sec edits facilitated high frequency le(els )n print2 cost per response rather than cost per thousand as responses were measured in form of call.ins Radio FM2 +inema2 )nternet were used to create a media multiplier effect For e g. Building an emotional connect with the audiences is their constant endea(our and one of the biggest challenges )ts these same audiences who closely follow and aspire to be li!e the characters that they see in films and on T4 e(eryday )n a unique mo(e2 Aassi2 one of T4Qs most popular personas2 will be buying a life insurance policy from none other than )+)+) *ruT So chec! out Aassi Aaisi 3oi 6ahi2 to see how this bi1.whi1 protects her familyT S%! %?: )n ,ust o(er a year )+)+) *ru has emerged as )ndia-s no I 1 *ri(ate 7ife )nsurance +ompany with almost &/= mar!et share of the pri(ate players 'as sold highest no of policies both in (olume and (alue Ma,or Milestone . G(er 1///// policies on Mar $12 #//# MAR$ET SEGMENTS The life insurance and pension business has two distinct customers segments . indi(iduals and corporates )n case of the retail business for indi(iduals2 the % sub.segments are . protection2 in(estment2 sa(ings and pension Apart from the e"isting leader 7)+2 new companies such as 'DF+ Standard 7ife2 TATA A)@2 )+)+) *rudential and more will see! to be present across all the segments of the mar!et Among the retail products for indi(iduals2 pure ris! protection products ha(e been introduced by some of the new life insurance companies in the mar!et As these products ha(e no sa(ings component to it2 the premiums are (ery low compared to other products )n(estment products pro(ide long term in(estment growth and insurance co(er This segment is growing rapidly Sa(ings products li!e 5ndowments and Money.Bac!s pro(ide a combination of protection and in(estment benefits The last segment of pension includes products that are aimed at offering customers an income during their retirement years )n case of the group business2 there are three sub.segments . protection2 statutory sa(ings and %1

pension @roup insurance products are ta!en to pro(ide low cost life insurance co(er to a group of people @roup insurance can be ta!en to pro(ide low cost life insurance co(er as part of employee benefit pac!ages to moti(ate employees or to co(er the housing or (ehicle loan gi(en by employer to employee )t can also be used as a substitute for the statutory 5D7) sub,ect to appro(al by the Regional *ro(ident Fund +ommissioner The statutory sa(ings segment essentially comprises of the gratuity products for companies The pension segment will include products li!e group superannuation2 which will enable a company to benefit from the actuarial2 in(estment and operational e"pertise of a specialist company to manage its superannuation funds SourceI +)) )nsurance +ommittee Report 1;;; MAR$ETING MIX POLICIES Different companies can choose to position themsel(es differently and hence the mar!eting mi" would be different 'owe(er2 there are certain common characteristics that one can cull out from the possible strategies that companies can adopt P,-"%)t: The de(elopment of fle"ible products to suit indi(idual requirements is what will differentiate the winners from the also.rans The !ey to success is in pro(iding insurance solutions2 not standardised insurance products The concept of ridersKoptional benefits has already been a huge inno(ation brought about by the new players2 which has led to customisation of products for indi(idual needs 'owe(er2 companies may differentiate themsel(es on the basis of product segments that they choose to focus on and e"cel in D#st,#<%t#-n: Different companies may howe(er choose different channels and different geographies to focus on The channel options are . tied agency force2 corporate agents and bro!ers and this is an area where different companies will ma!e different choices Many companies li!e 'DF+ Standard 7ife are focussing on all channels whereas companies li!e Ma" 6ew :or! 7ife are focussing on the tied agency force only +ustomer interface will be a !ey challenge for life insurance companies and includes e(ery that interaction that the customer has with the company2 such as sales2 new business underwriting2 policy ser(icing2 premium payments2 claim processing and so on Technology can play a crucial role in deli(ering the highest standards of ser(ice set by the company and it will be imperati(e for any serious player to e"cel in all of these

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P,#) : *rice is a rele(ant differentiator only in two segments . pure term insurance and in pure annuities 'ere too2 ser(ice deli(ery and financial strength will need to be present at a minimum acceptable le(el for price to be a rele(ant differentiator )n case of sa(ings oriented products2 long term returns generated will be more rele(ant than ,ust the price of the product A focus on generating good in(estment performance and !eeping a tight control on costs will help in generating good long.term maturity (alue for customers 6orms ha(e been laid down on all of these by )RDA and adhering to these while deli(ering good returns will be a challenge A"9 ,t#s#n7 an" ?,-!-t#-n: The le(el of demand is latent and will ha(e to be acti(ated considerably The mar!et needs to be de(eloped @reater awareness of insurance and the need to ha(e it as a protection tool rather than as a ta" planning measure needs to be appreciated by the )ndian people 4arious communication tools including ad(ertising2 direct mar!eting and road shows will contribute to all this and different companies will ta!e different approaches on these

1ntrodu(tion of the (on(ept

)nsurance would assist businesses to operate with less (olatility and ris! of failure and pro(ide for greater financial and societal stability from the growth pangs of an estimated growth rate o(er > = in @D*

@o(ernment has arranged for disaster management and for funds 6@Gs and public institutions assist with fund raising and relief assistance Besides go(ernment pro(ides for social security programs There is considerable impact upon go(ernment in these respects )nsurance substantially steps in to pro(ide these ser(ices The effect would be to reduce the strain on the ta" payer and assist in efficient allocation of societal resources

Facilitates trade2 business and commerce by fle"ible adaptation to changing ris! needs particularly of the burgeoning Ser(ices sector

7i!e any other financial institution insurance companies generate sa(ings from the insurance sector within the economy and ma!e a(ailable the same in well directed areas of the economy deser(ing in(estments H a sector with potential for business as is the case with )ndian insurance pro(ides incenti(e to de(elop it all the more faster %$

)t enables ris! to be managed more efficiently through ris! pricing and ris! transfers and this is an area which pro(ides unlimited opportunities in the )ndian conte"t for consulting2 bro!ing and education in the post.pri(ati1ation phase with newer employment opportunities

The insurance industry of its own accord is interested in loss minimi1ation )ts e"pertise in understanding losses assists it to share the e"perience across the economy thus enabling better loss control and preser(ation of national assets

)n its ris! pricing and in(estment decisions the insurance industry sets the tone for in(estment by others in the economy )nformed assessment by the insurance companies thus signals allocation of resources by others contributing to efficiency in allocation )n )ndia (isibility of 7)+ and @)+ ha(e been dwarfed by go(ernments actions and other high profile institutions li!e )+)+)2 )DB) and CT) Gf late A)@ is (isible in the media and its in(estment announcements are being followed !eenly by institutional in(estors in )ndia )6@ Sa(ings Trust and Ourich are acti(e in asset management and are being !eenly followed by retail in(estors

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Some insurers2 such as )+)+) *ru7ife2 ha(e fulfilled their mission to be a scale player in the mass mar!et by intro.ducing a range of 1$ products to meet the needs of each customer Gthers ha(e ta!en a more focused approach2 introducing select products that they belie(e hold potential and fill mar!et gaps STRATEGIC ALTERNATIVES )f one analyses the history of growth of the insurance industry since reforms2 it is mar!ed by all. round growth of all players More or less all players 8including the mar!et leader 7)+9 ha(e aggressi(ely recruited and trained ad(isors2 appointed agents2 launched new products2 impro(ed customer ser(ice standards and re(ampedKe"panded their distribution networ!s )f at all there was any ma,or difference between players it was only in time lag in launching of ser(ices 5(ery player would li!e the customers to belie(e that its ser(ice standards are the best or that its agents are the most informed and ethical2 but is debatable whether there are any significant differences )n other words2 each company is trying to be Je(erything to e(erybodyGur argument is that the strategy of being e(erything to e(erybody is ris!y Some players ,ustify the abo(e strategy on the basis that the )ndian mar!et is huge and it can accommodate e(erybody Still2 in a mar!et where it is difficult to distinguish oneself sufficiently on ser(ice or any other parameter to be able to charge a premium2 it will lead to unmitigated price competition to the detriment of all players Gne may achie(e sales turno(er2 but margins and profitability will suffer se(erely )n the insurance industry where large amounts of capital are required2 this is ris!y ?hile there is room for a few scale players with a finger in e(ery pie2 it is profitable for other players to focus on different segments to sur(i(e and thri(e in a multi.firm open en(ironment ?hile each company has to choose its own unique positioning based on its unique strengths2 the below.mentioned generic positioning alternati(es& appear worth considering 6eedless to say the positioning choices discussed here are not mutually e"clusi(e and can be o(erlapping C4OOSING T4E RIG4T STRATEGY %<

The right strategic choice is not a matter of positioning choice alone )t in(ol(es the (ery way a company organises itself to do business )t is the configuration of the nt#, 9a*% )&a#n of the company through a different set of acti(ities to deli(er unique (alue to consumers The set of acti(ities co(er all upstream and downstream acti(ities2 from the selection of the product mi"2 the way the products are priced2 promoted2 the type of distribution mechanism used2 the way customers are ser(iced and so on Some life insurance companies focusing on rural mar!ets ha(e adopted inno(ati(e means of distribution )nstead of appointing agents as is done typically2 they ha(e used gramse(a!s in different (illages across the country to promote life insurance and act as their sales arm

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C4APTER-2 RESULTS AND DISCUSSION

RESULTS AND DISCUSSION

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Policy Holders
A sample si1e of &/ people has underta!en The analysis of the questions has been done with the help of pie charts )t helps is presenting a clear picture of the responses of the people The analysis has been done differently for each question )t is as followsI

Do you own a life insurance policyU

:es

6o

AnalysisI

Gnly <# = people own a life insurance policy and rest of the people don-t own a policy The reasons may be lac! of awareness among people or people don-t want to in(est their money in insurance policies

%;

# Are you aware of (arious policies offered by )+)+) *rudential and 7)+U :es 6o

AnalysisI ;<= people are aware of 7)+ whereas only &%= of people are aware of )+)+) *rudential The reason behind is that 7)+ is the oldest insurance player in the mar!et since 1;&% and had been en,oying monopoly for the last %/ years ?here as )+)+) *rudential has come into the mar!et only $.% years bac!

&/

$ ?hat factors do you consider before purchasing a life insurance policyU

Ris! co(erage Sa(ingK)n(estment Ta" sa(ing All of the abo(e

AnalysisI 1$ out of $1 people want life insurance as a ta" sa(ing option rather than a ris! co(erage instrument ?hereas 1/ people consider life insurance policy as an in(estment option and only & people want all the features in their policies Gnly $ people are considering ris! factor as the ma,or reason for ta!ing a life insurance policy2 which is not an acceptable norm

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% Do you thin! that ser(ices ha(e impro(ed after allowing pri(ate players in insurance sectorU :es 6o

AnalysisI A large number of people are of the (iew that pri(ati1ation is the appreciatable step of )ndian go(ernment which is directly contributing in the way of growth of insurance sector in )ndia

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4.5

1s your (urrent 1nsuran(e poli(y 6Unit 2in-ed7 or 6.raditional8

C,#t ,#a Gnly Cnit 7in!ed Gnly Traditional Both

N-. -8 R s?-n" nts / $; 11

*espondents 9avin, U21: and .raditional 1nsuran(e :rodu(ts

((%

$% )nly *nit #inked )nly +raditional ,oth

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From the N 6o 0 we can say that e(en though the modern products a(ailable in the mar!et since more than two years and which are ha(ing the more fle"ibility and also gi(ing the higher return than traditional one most of the people do not ha(e or may be not aware of it which shows the lac! of brand awareness and it requires an aggressi(e promotional efforts on the part of company There is a lot of scope a(ailable for the company to attract more customers by gi(ing or introducing most suitable C7)* products and at the same time increase the customer base

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@./

I8 7#9 n a )&-#) : '& , '-%*" +-% *#B t- #n9 st +-%, !-n +K 8*lease Ran! :our +hoice9 . / % % 10 ## / / 1/ = 1 1# > $ 1# # < & 2 & 1% 1 / 1# % 1# / 0 1 % # & # 1/ 1; # > #& > # # # 1 1 1 1 1# $ & < / 1% / / A & / 1$ 1 / # $ / / 1 / 1$ / / / 1 # T-ta* &/ %& %> $% &/ $$ %# #/

C&-#) LRanB Mutual Fund )nsurance @old 5quities *ost Gffice Debenture Ban! Deposit Gther

1nvestment :riorities
;o. of *espondents 1$ 0$ /$ .$ ($ -$ $ +otal ( . / 0 1 & ' Mutual 2und Insuran!e Gold 34uities Post )ffi!e ebenture ,ank eposit )ther

*an-

This question is mainly designed to !now the in(estment priorities of the people of Aalandhar town The ob,ecti(e behind this N is that after the +harotar 6agri! +o.oprerati(e Ban! and other +redit Societies2 which are gi(ing higher interest on deposits2 the whole scenario of city is changed Most of the people prefer to in(est in post office sa(ing schemes and where their money is safe e(en though the return is (ery less So there is a great need to di(ert the efforts of the company towards the safety and security as )+)+) *rulife is a pri(ate insurance +ompany

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@.C

A))-,"#n7 t- +-% '&at a, t& 8a)t-,s t&at '-%*" a88 )t +-% " )#s#-n '&#* ?%,)&as#n7 an #ns%,an) ?-*#)+K . 1# #1 #/ 1 1 = 1& 10 1% 1 # 2 1& > 1& ; / 0 < # 1 1> 1< > # # / #1 #1 >F &/ &/ &/ &/ %/

C,#t ,#aLRanB *remium Return Safety 7iquidity Mar!et +ondition

+a(tors Affe(tin, the 1nsuran(e 3e(ision

;o. of *espondents 1$ /$ ($ $ ( . / 0 1 *anCriteria56ank Premium 6eturn Safety #i4uidity Market Condition

The question 6o ; is designed to !now which the factors are affecting the most to the prospect while ma!ing decision to in(est in insurance As far as in(estment in insurance is concerned most of the people want that it should be safe and at the same time gi(ing the compatible returns because insurance is not only for death benefit it is also a sa(ing tool for future So the mi" response of respondents is welcomed A(ailable data is such that there is a bit ambiguity But we can say that the most affecting factors to the prospect are return and safety As per the finance theory ris! and return goes in hand in hand but as far as insurance is concerned it is all about the compatible and safe returns o(er others

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C4APTER -0 SUGGESTION AND IMPLICATION

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SUGGESTION AND IMPLICATION

Gpening up the sector certainly means more awareness amongst customers and higher e"pectations2 which can be satisfied by brand awareness i e brand image has to be created2 new products2 better pac!aging and impro(ed customer ser(ice *otential buyers for most of this )nsurance lie in the middle class )+)+) *rudential will ha(e to e"plore new distribution and mar!eting channels to reach the customers They should follow proper ad(ertising strategies as they ,ust started by endorsing Aassi Aaisi 3oi 6ahin and 7aunching )+)+) *rudential Oone in Mobile *hones 8ST5* 1 A6D ST5* #2 ST5* $ A6D ST5* %2 ST5* &9 The (ast potential of the #&/million strong middle class population of )ndia2 can be unleashed by repositioning 7ife )nsurance as a ris! co(er instrument The !ey to tap the rural mar!et can be through Co-operative societies2 4illage Panchayats and Post Offices ?here the +o.operati(e societies and (illage *anchayats can act as J+orporate Agents- to create the brand image of )+)+) *RCD56T)A7 in the rural mar!et

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C4APTER-> CONCLUSION

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CONCLUSION
For the last few years ) ha(e seen the de(elopment in the insurance sector after pri(ati1ation This step of go(ernment of )ndia has resulted in form of competition in the mar!et D prospects to co(er up the huge untapped mar!et Before pri(ati1ation 7)+ had 1// = mar!et share but after pri(ati1ation it has come down to ;/ = and 1/ = for pri(ate players )nsurance sector is de(eloping at a faster pace as compare to earlier one but still it has more scope to grow at the fastest pace it e(er grows *ri(ate players are gi(ing a stiff competition to 7)+ Though 7)+ offers a wide range of products as compare to other pri(ate players li!e )+)+) *rudential 2 but still they are performing better with features li!e online ser(ices2 transparency2 fle"ibility2 quic! settlement of claims etc )+)+) *rudential has become the V 1pri(ate player in the mar!et due to its performance as ) can measure by its $ = holding of mar!et share out of 1/ = holding of all the pri(ate players in the mar!et 'owe(er2 still now there is a huge untapped mar!et for insurance in )ndia )n a sur(ey it was found that still there is #&/million strong middle class population of )ndia2 which is still untapped Gn the other hand rural areas and small towns offer a huge potential to the )nsurance companies This potential was largely untapped due to inadequate distribution )t shows that there is a great scope of insurance business in )ndia )n )ndia health insurance is also not so popular The reason behind is that people are not aware of their insurance needs )n )ndia insurance is sold only as a ta" sa(ing and in(estment option rather than a ris!.co(er instrument )n my sur(ey ) found a number of reasons for the inadequate performance of insurance sector in )ndia Reasons li!e brand image2 lac! of awareness for insurance needs2 lac! of educated D talented sales force with insurance companies2 7ac! of penetration due to inadequate mar!etingKdeli(ery system are main problems Therefore2 steps should be ta!en by )+)+) *RCD56T)A7 to o(ercome these

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hassles and try to become a leader in the insurance sector

The following are some

recommendations gi(en by me as ) analy1ed after getting the placement from IIPM in )+)+) *RCD56T)A7 and wor!ing there from last 11 months as a UNIT MANAGER

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R 8 , n)
-.
$ )nsurance Management F Anand @anguly 86ew Age )nternational9 )nsurance in )ndia F * S *alande2 Shah D M 7 7unawat 8Response boo!s9

Brochures K )nformation Boo!lets )+)+) *rudential 7 ) + Annual Report *roduct 7ist 7 ) +

ReportKActs Malhotra +ommittee Report on Reforms in the )nsurance Sector2 1;;$ The )nsurance Regulatory and De(elopment Authority Bill2 1;;;

6ewspapers K Maga1ines )nsurance *ost The 5conomic Times The )nsurance Times

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@% st#-nna#,
DICICI P,%" nt#a*E 1 ?hat do you thin! are the ma,or problems of )nsurance sector in )ndiaU

+an you mention some measures2 which are required to remo(e the difficulties faced by

insurance sector in )ndiaU

?hat are the mar!et prospects for life insurance in )ndiaU *oor W Fair W Satisfactory W @ood W 5"cellent W

Do you thin! that financial position of people in )ndia becomes a problem in the way of ta!ing insurance policyU :es W 6o W

&

)s health insurance popular in )ndiaU :es W 6o W

< ?hy people are not (ery concerned regarding insurance in )ndiaU

)ndia has huge untapped mar!et for insurance ?hat steps do you ta!e to tap this mar!etU

> ?hat type of products and ser(ices pro(ided by your organi1ation that is better than 7)+U

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