Assignment-1

Assessing
effectiveness of
corporate board
on safeguarding
small investors
interest.
FIRM- ICICI BANK
Name ID No.

Amrit Dash 2014A3PS281H

Anuj Saxena 2014AAPS229H

Sanchit Malik 2014A8PS500H

Sai Siddhartha Metta 2014A3PS387H

Bhavesh Gupta 2014A3PS226H

About ICICI Bank-

ICICI Bank is an Indian multinational banking and financial
services company headquartered in Mumbai, Maharashtra, India, with its
registered office in Vadodara. In 2014, it was the second largest bank in India
in terms of assets and third in term of market capitalization. It offers a wide
range of banking products and financial services for corporate and retail
customers through a variety of delivery channels and specialized subsidiaries
in the areas of investment banking, life, non-life insurance, venture
capital and asset management. The bank has a network of 4,450
branches and 14,404 ATMs in India, and has a presence in 19 countries
including India.

ICICI Bank Board of Directors-

Mr. M.K Sharma, Chairman Retd. Vice Chairman of Hindustan Unilever Limited

Mr. DileepChoksi Qualified Chartered accountant, formerly the Joint

Managing Partner of Deloitte in India
Mr. Homi R. Khusrokhan Retd. Managing Director of Tata Chemicals Limited

Mr. M.S. Ramachandran Former Chairman of Indian Oil Corporation

Dr. Tushaar Shah Former Director of Institute of Rural Management,

Senior fellow of the Colombo-based International
Water Management Institute.
Mr. V.K. Sharma Chairman of LIC effective December 2016

Mr. V. Sridar Retd. Chairman and Managing Director of UCO Bank

Mr. Amit Agrawal Govt. Nominee Director, Holds post of Joint

Secretary, Department of Financial Services, Ministry
of Finance.
Ms. Chanda Kochhar Managing Director and CEO

Mr. N.S. Kannan Executive Director

Mr. Rajiv Sabharwal Executive Director

Ms. VishakhaMulye Executive Director

Mr. Vijay Chandok Executive Director

Analysis of Board Structure and Composition--

 The board of directors is headed by Mr. M.K. Sharma, who is the chairman of
the Board. Although Ms. Chanda Kochhar is the M.D and CEO of the company,
she doesnt head the board which is an extremely good practice, as it makes
sure that final authority doesnt lie with an insider who might take decisions
in the interest of the management only, rather than the shareholders.
The board consists of 13 members, with a majority i.e. 8 members directly
related to ICICI Bank in any way. The size of the board can be considered
optimal.
The board structure is well diversified as we can see representations from
HUL, UCO Bank, IOC and highly qualified professionals with extensive
experience in the field of finance.
The board consists of five insiders and eight outsiders. The greater number of
outsiders makes sure that the board does not take decisions solely in the
interest of the management, but takes decisions in the interest of the
company.
The outside representatives of the board as mainly retired employees of huge
corporations and banks, with tremendous experience in their business.

Shareholding Pattern of ICICI Bank

Major Shareholders in ICICI Bank (taken from shareholding pattern as on
31st Dec 2016)-

Public Investors-

Institutional Investors No. of equity shares % of Total Public

held in dematerialized Shareholding (Total=
form 4317972330 shares)
Mutual Funds 731742971 16.9%

Foreign Portfolio Investors 2163114577 50.09%

Insurance Companies 903799495 20.93%

Provident Funds/ Pension 29960674 0.693%

Funds

Non-Institutional
Investors
Individuals (nominal 276400250 6.4%
share capital up to Rs. 2
lakhs)
Individuals (nominal 30991732 0.71%
share capital in excess
ofRs. 2 lakhs)
Corporate Bodies 124050001 2.8%

Pie-Chart Depicting the Shareholders Pattern-

Non-Promoter Non-Public Shareholders-

Investor No. of equity shares in % of total shares

dematerialized form (Total= 1473077190
shares)

Custodian/ DR Holder 1473077190 100%

Deutsche Bank Trust
Company Americas

Employee Benefit Trust 0 0%

(under SEBI
(Share based Employee
Benefit)
Regulations, 2014)

Analysis--
 As we can see from the above tables, Deutsche Bank Trust Company
Americas is the firm that owns the highest number of shares in ICICI Bank.
Among the publicly traded shares, a huge 50.09% of the shares were owned
by foreign portfolio investors, mainly NRIs. This was followed by insurance
companies (i.e. 20.93%) and Mutual Funds (i.e. 16.9%).
Among the insurance companies, Life Insurance Corporation of India holds
most shares in ICICI Bank.
Provident Funds and Pension Funds form a mere 0.693% of the total publicly
traded shares. This might be because pension funds in India are not privately
owned, but are rather controlled by the government.
The following table gives the shareholders breakdown as of September
30, 2006-
(Can be considered as a rough estimate of the shareholding pattern at the present)
Scope of small shareholders wealth protection and
business value maximization
As mentioned above, the board consists 8 outsiders which makes sure that
the interests of the owners i.e. the shareholders are taken care of. Otherwise,
the management will have a free hand and might misuse its power for the
benefit of the management only.
The decision of the Board of Directors, i.e. the information that is shared with
the market affects the share price of the company. Thus, if the board is
concerned with the maximization of the share price for the benefit of the
stakeholders, in turn the small shareholders benefit as well.

To gauge business value maximization of ICICI

Bank-
The following data has been taken from the Annual report of ICICI Bank for FY 2015-
16.

Profit After Tax-

Key Financial Ratios-

Cash Flows-

Assets Comparison-

Analysis-
As we can see from the above data, the PAT and the cash flows of ICICI Bank
have reduced when compared to the values of FY 2014-15. This might be
because of the increased investment in assets during the financial year by
the company.
Reinvestment in assets is necessary for growth of the firm. Increased assets
help in maximizing the value of the business.
However, we see that the ROE and ROA has reduced, along with the EPS. This
suggests that the company hasnt been performing up to the standard that it
set in the previous financial year.
The reduction of EPS might suggest decreased confidence of shareholders in
ICICI, due to its reduction in performance efficiency.
The increase in assets however suggest business growth opportunities in the
future.
BUSINESS VALUE MAXIMIZATION :

From Tata Steels financial statements, we assessed its financial

performance and current standing.

At the close of fiscal 2013 Tata Steels common stock was priced at
315 per share, There were 9712.15 lakh shares (approximately 97.12
crores) outstanding, so total market capitalization was 97.12 x 315
30,593 crores. This is a big number, of course, but Tata Steel is a
sizeable company. Its shareholders have, over the years, invested
hundreds of crores of rupees in the company. Therefore,
comparing the Tata Steels market capitalization with the book value of
equity, the book value measures shareholders cumulative investment
in the company.

At the end of fiscal 2013 the book value of Tata Steels equity was T
55,210 crores. Therefore, the market value added, the difference
between the market value of the firrns shares and the amount of
money the shareholders have invested in the firm, was ? 30,593 - 1
55,210 = -? 24,616 crores. In other words, shareholders have
contributed about ? 55,210 crores and ended up with shares worth
about? 30,593 crores. They have lost about ? 24,616 crores in market
value added.