Beruflich Dokumente
Kultur Dokumente
ON
Guided by-
Ms. Priyanka Singh
(Lecturer)
Submitted By-
ramesh
Roll. No. 1605470110
SESSION 2017-2018
DEPARTMENT OF MANAGEMENT
"I have taken efforts in this research project. However, it would not have been
possible without the kind support and help of many individuals and organizations. I
I am highly indebted to Ms. Priyanka Singh for their guidance and constant
supervision as well as for providing necessary information regarding the project &
I would like to express my gratitude towards my parents & member of BBD NITM,
Lucknow for their kind co-operation and encouragement which help me in completion
of this project.
Ramesh
PREFACE
is necessary that the theoretical must be supplemented with exposure to the real
environment.
Theoretical knowledge just provides the base and it’s not sufficient to produce a good
Therefore the research product is an essential requirement for the student of MBA.
This research project not only helps the student to utilize his skills properly learn field
realities but also provides a chance to the organization to find out talent among the
In accordance with the requirement of MBA course I have done my research project
PNB BANK”.
TABLE OF CONTENT
A. Declaration
B. Acknowledgement iii
C. Preface iv
D.
1
INTRODUCTION
The first task of financial analysis is to select the information relevant to the decision
under consideration to the total information contained in the financial statement. The
The final step is interpretation and drawing of inference and conclusions. Financial
understandable form.
rational groups.
conclusions.
2
Procedure of Financial Statement Analysis
financial statements:-
accounting. He should know the plans and policies of the managements that he
may be able to find out whether these plans are properly executed or not.
The extent of analysis should be determined so that the sphere of work may
be decided. If the aim is find out. Earning capacity of the enterprise then
necessary.
It will involve the grouping similar data under same heads. Breaking down of
the help of tools & techniques of analysis such as ratios, trends, common size,
making.
company: its liquidity, its profitability, and its insolvency. A short-term creditor, such
as a bank, is primarily interested in the ability of the borrower to pay obligations when
3
they come due. The liquidity of the borrower is extremely important in evaluating the
profitability and solvency measures that indicate the company’s ability to survive over
a long period of time. Long-term creditors consider such measures as the amount of
debt in the company’s capital structure and its ability to meet interest payments.
company. They want to assess the likelihood of dividends and the growth potential of
the stock.
1. Intra-company basis.
current year with the same item or relationship in one or more prior years. For
example, Sears, Roebuck and Co. can compare its cash balance at the end of the
current year with last year’s balance to find the amount of the increase or decrease.
Likewise, Sears can compare the percentage of cash to current assets at the end of the
current year with the percentage in one or more prior years. Intra-company
trends.
2. Industry averages.
averages (or norms) published by financial ratings organizations such as Dun &
Bradstreet, Moody’s and Standard & Poor’s. For example, Sears’s net income can be
compared with the average net income of all companies in the retail chain-store
4
industry. Comparisons with industry averages provide information as to a company’s
3. Intercompany basis.
This basis compares an item or financial relationship of one company with the same
item or relationship in one or more competing companies. The comparisons are made
on the basis of the published financial statements of the individual companies. For
example, Sears’s total sales for the year can be compared with the total sales of its
Various tools are used to evaluate the significance of financial statement data. Three
Ratio Analysis
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
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
5
relationships between individual values and relate them to how a company has
Meaning of Ratio:
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
relating two figures or accounts or two sets of account heads or group contain in the
financial statements.
Ratio analysis is the method or process by which the relationship of items or group of
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 analyst
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
financial ratios of several companies from the same industry. Ratio analysis can
6
measures a company's performance in a specific area. For example, you could use a
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
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
Objective of Ratios:
Ratios are worked out to analyze the following aspects of business organization-
A) Solvency-
1) Long term
2) Short term
3) Immediate
B) Stability
C) Profitability
D) Operational efficiency
E) Credit standing
F) Structural analysis
7
Forms of Ratio:
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
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] = 2.5 times are the credit sales that of cash sales.
C] As a percentage:
In such a case, one item may be expressed as a percentage of some other items. For
example, net sales of the firm are Rs.50,00,000 & the amount of the gross profit is Rs.
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 industry’s 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
8
compared with some predetermined standard. The importance of a correct standard is
Types of comparisons
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 firm’s 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 firm’s 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
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
9
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
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
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.
3) Accounting policies followed by different firms must be same in case of cross section
10
4) One ratio may not throw light on any performance of the firm. Therefore, a group of
5) Last but not least, the analyst must find out that the two figures being used to
calculating a ratio.
Classification of Ratio:
CLASSIFICATION OF RATIO
4] RATIO FOR
LONG TERM
CREDITORS
11
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.
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 Debt to equity ratio. 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
ratios help to judge the liquidity, solvency & capital structure of the concern. Balance
sheet ratios are Current ratio, Liquid ratio, and Proprietary ratio, Capital gearing ratio,
2] Revenue ratio:
Ratio based on the figures from the revenue statement is called revenue statement
ratios. These ratios study the relationship between the profitability & the sales of the
concern. Revenue ratios are Gross profit ratio, Operating ratio, Expense ratio, Net
3] Composite ratio:
These ratios indicate the relationship between two items, of which one is found in the
a) 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
12
b) Other composite ratios e.g. debtors turnover ratios, creditors turnover ratios, dividend
Based on Function:
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
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, & Proprietary
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
b) It shows the relationship between profit & investment e.g. return on investment,
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.
13
Based on User:
14
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 assets 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
15
The current assets 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
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, and 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
16
Liquid Ratio:
Meaning:
Liquid ratio is also known as acid test ratio or quick ratio. Liquid ratio compares 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
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
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.
17
Cash Ratio:
Meaning:
This is also called as super quick ratio. This ratio considers only the absolute liquidity
Formula:
Cash ratio =
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.
18
Investment/ Shareholder
Meaning:
Earnings per Share are calculated to find out overall profitability of the organization.
Earnings per Share represent 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
EPS measures the profits available to the equity shareholders on each share held.
Formula:
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
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Dividend per Share:-
Meaning:
DPS shows how much is paid as dividend to the shareholders on each share held.
Formula:
Meaning:
Dividend Pay-out Ratio shows the relationship between the dividends paid to equity
Formula:
D/P ratio shows the percentage share of net profits after taxes and after preference
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Gearing
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.
21
Formula:
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
22
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
Gross profit
Net sales
Meaning:
Net Profit ratio indicates the relationship between the net profit & the sales it is
Formula:
NPAT
Net sales
This ratio shows the net earnings (to be distributed to both equity and preference
23
considered, the gross and net profit margin ratios provide an understanding of the cost
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
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
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
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,
24
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 organization.
Formula:
Credit sales
Average debtors
25
Inventory or Stock Turnover Ratio (ITR)
Meaning:
ITR refers to the number of times the inventory is sold and replaced during the
accounting period.
Formula:
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).
The FAT ratio measures the net sales per rupee of investment in fixed assets.
Formula:
Net sales
26
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
In other words, Proprietary ratio determines as to what extent the owner’s 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 = OR
Total fund
Shareholders fund
Proprietary ratio =
27
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
Formula:
Stock
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
investment in stock is higher it means that the amount of liquid assets is lower.
Mening:
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
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
28
Formula:
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.
Meaning:
relationship between net profits earned & total proprietor’s 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 owner’s fund at disposal. This ratio is of
Formula:
NPAT
Proprietor’s fund
29
Creditors Turnover Ratio:
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
Average creditors
Months in a year
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.
30
Review of
Literature
31
REVIEW OF LITERATURE
Kaura, M. N and Bala Subramanian (1979) analyzed ten cement units during the
period of study 1972 to 1977 shows that the financial performance of the selected
has declined. The non availability of funds has affected the modernization of plants
and periodic rehabilitation of the kilns. Besides, the bottlenecks in supply of raw
materials and power and non remunerative prices have reduced the capacity
utilization, profits and cash flows. The profitability and liquidity position in many
cement companies have been affected adversely because of the problems in supply of
Nagarajrao B.S and Chandar K (1980) analyzed the financial efficiency of cement
companies for the selected period of the study 1970 -71 to 1977-78. It can be analyzed
profitability of selected cement companies has been found downward trend from
Kumar B. Das (1987) has made an analysis of the financial performance of the
cement industry. it can be analyzed that the net fixed assets as a percentage of total
assets decreased for the period 1970-71 to 1977-78 that was 553.5% to 44.04 %
respectively. Current liabilities have increased than the current assets. Liquidity
performance of the cement industry is not healthy during period of the study. The
Debt Asset ratio has downward During the period of the study and Debt Equity ratio
has slightly increased while net worth ratio has decreased over the years.
32
Nair N.K. (1991) has focused the productivity aspect of Indian Cement Industry. This
place in the Indian economy. This study has revealed that, in 1990-91, the industry
In this study, the cement industry was forecasted to have a capacity growth of about
100 million tonnes by the year 2000. This study has also analyzed the productivity
and financial performance ratios of the cement industry with a view to identifying the
Dr. Dinesh A. Patel (1992) have analyzed Financial Analysis - A Study of Cement
Industry of India for the period of 1979-80 to 1988-89. He can analyzed the
profitability of the cement industry, to examine the short term financial strength of the
cement industry through the analysis of working capital management and to analyzed
the long term financial strength through the analysis of capital structure.
Subir Cokavn and Rejendra Vaidha (1993) have analyzed to evaluate the
performance of cement industry after decontrol. They found that the performance of
the cement industry after decontrol was characterized by outcomes that were
generally competitive and welfare enhancing. This study has revealed that the
technologically and superior capacity being created by many new entrants into the
industry. It was also noticed in this study that there were significant real price increase
strategic group was different with firms operating relatively new and large plants
33
appeared to have an advantage. Further, the study has dealt with the nature and effect
structural, as well as, behavioural variables. He also identified that the other variables
17 which influenced profitability were growth of the firm, capital turnover ratio,
management of working capital, inventory turnover ratio etc. Some of the main
changes in the cement industry environment during 1980's identified in this study
were: from complete control to decontrol, number of new entrants and substantial
dry process and from conditions of scarcity of cement to near gloat in the market.
Chandrasckaran N (1994) has studied about the market structure of the Indian
Cement industry like demand and supply. It was analyzed in that study that the
demand and supply gap has been considerably reduced and supply of cement during
the period of study has increased due to creation of additional capacity and capacity
utilization.
Srinivasa Rao.G and Indrasena Reddy.P (1995), in their study, analyzed the
financial strength of paper industry had been improving from year to year. The
and surplus was excellent and also the company was doing well in mobilizing
outsiders' funds. The liquidity position of the company was sound as revealed by
current ratio and quick ratio which were above the standard. The solvency ratio
34
showed that the company had been following the policy of low capital gearing from
the 1990-91 as these ratios had been decreasing from this year. The performance of
the company in relation to its profitability was not up to the expected level. The
company's ability to utilize assets for generation of sales had not been improved much
35
Company
Profile
36
STATE BANK OF INDIA (SBI)
commenced its operations from the year 1955, is the largest commercial bank in India
in terms of profits, assets, deposits, branches and employees. As of March 2008, the
bank has had 21 subsidiaries and 10,000 branches. SBI offering the services of
banking and as well as non- banking services to their customers. It provides a whole
range of financial services which includes Life Insurance, Merchant Banking, Mutual
Funds, Credit Cards, Factoring, Security Trading & Primary dealership in the Money
The bank also concentrate in agriculture, for that it took initiative spotlight
kharif and spotlight rabi campaigns for higher disbursement. It introduced Automated
Teller Machine with Kishan Credit Cards in all circles to assist agriculture peoples,
cumulatively the bank has credit linked 7.68 Lac. Self Help Groups and disbursed
loans to the extent of Rs 3,468 Crs. so far. In the year 2001 the SBI Life was started.
SBI is the only Bank to have been permitted a 74% stake in the insurance business.
The Bank's insurance subsidiary "SBI Life Insurance Company" is a joint venture
with Cardif S.A holds 26% stake. SBI Life enjoys the unique distinction of being the
first private sector life insurance company in India to make profits for two
consecutive years.
During the year 2004-05 SBI was the only one bank in India to ranked among
top 100 banks in the world and also among the top 20 banks in Asia in the annual
survey by "The Banker" as well as in the same year bank received two prestigious
awards for technology from the same The Banker magazine. In the year 2005-06 the
bank introduced "SBI e-tax" an online tax payments facility for direct and indirect tax
37
payment, the centralized pension processing center also launched during the year. SBI
made a partnership with Tata Consultancy Services for setup C-Edg Technologies and
consulting services to the banking, financial services and insurance industry. The
Nielsen-ORG Marg along with SBI voted as The most preferred housing loan
provider in AWAAZ consumer awards for 2006. In the customer loyalty survey 2006-
07 conducted by "Business World", SBI has been ranked number One in all
customer loyalty and home loans. SBI Funds (SBIFMPL) was judged "Mutual fund of
the year" by CNBC/TV-18/CRISL. SBI FMBL Equity schemes won 11 awards and
ranging of the AMC in terms of Assets under management remained at 7th position
during the year 2006-07. SBI cards is in 2nd position in the country under market
share. During the year 2006-07 14.81 lac additional cards were issued by SBI and
The strategic initiatives that SBI have launched business groups in 2007
namely rural and agri business; treasury and marketing; corporate strategy and new
business; and fourth mid corporate group is on the anvil. They also introduced new
products and services such as web-based remittance, instant fund transfer, online-
SBI opened its 10,000th branch in March 2008; it becomes only the second
bank in the world to have more than 10,000 branches after China's ICBC. SBI is
pursuing aggressive IT policy, where the Automated Teller Machines are now also
enabled to pay utility bills, college fees, book air-line tickets and accept donations,
further bilateral sharing of ATMs was extended to thirteen banks covering 15,700
38
with the Indian railways for installing ATMs at 682 railway stations. Infrastructure
fund, private equity, venture capital and pension fund management are under in
process to assist the customer in time. SBI is targeting to emerge as the best rated
bank among public, private, foreign and state -owned banks by the end of the next
fiscal. Employee Stock Option Scheme, where employees have the option to pick up
shares as per their needs is avail in SBI. SBI plans to implement the mobile banking
technology will soon with aim of customer will no be just "Branch customers" but
undivided India, has the distinction of being the first Indian bank to have been started
solely with Indian capital. The bank was nationalized in July 1969 along with 13 other
banks. From its modest beginning, the bank has grown in size and stature to become a
front-line banking institution in India at present. With its presence virtually in all the
important centers of the country, Punjab National Bank offers a wide variety of
banking services which include corporate and personal banking, industrial finance,
agricultural finance, financing of trade and international banking. Among the clients
of the Bank are Indian conglomerates, medium and small industrial units, exporters,
A package was developed for corporate customers for fast remittance of funds
from different up-country branches to the controlling office during the year 1996. The
Bank has introduced a scheme for providing finance against mortgage of immovable
property in the year 2000. It commenced its Gold Business in the form of Gold Import
Card of Punjab National Bank and Hongkong & Shanghai Banking Corporation
39
(HSBC) was launched in New Delhi in November of the year 2000. The scheme
offers international quality gold for sale to the Bank's clientele consisting of exporters
and others at competitive prices. PNB came out with its first Initial public offer (IPO)
in March 2002 for 5,30,60,700 equity shares of Rs 10 each. During the year 2002, the
bank started its branch in M.G. Road, Bangalore named as Mid-Corporate Branch
(MCD) to provide its corporate clients with a credit limit of Rs 3.5 crore and above.
PNB made joint venture with Infosys for the implementation of a Centralized Banking
Solution for it. The Bank received the Best Bank Award' for excellence in banking
technology. PNB tied up with Cisco Systems for networking 3,870 branches as part of
February of the year 2003. The Bank has entered into an alliance with New India
Assurance for selling its general insurance products in the same year 2003. In June of
the year 2003, PNB made Memorandum of Understanding (MoU) with Principal
Financial Services Inc. (USA) and Vijaya Bank for joint venture partnership in Life
Insurance, Pensions and Asset Management’s (MF) business. The Bank has formed a
strategic alliance with Infrastructure Leasing and Financial Services Ltd (IL&FS) to
agreement with Oriental Bank of Commerce, Indian Bank, UTI Bank and Global
Trust Bank for sharing ATMs spread across the country. In the year 2004, PNB
Sarfaesi. The Bank had signed a corporate agency agreement with Export Credit
Guarantee Corporation of India Ltd (ECGC) for marketing ECGC's export credit
insurance products through the network of the bank's branches. A MoU was signed
for the deployment of various IT-related solutions between the bank and Intel. PNB
40
and ICICI Bank had signed a MoU for ATM network sharing. PNB implements
Loans and Advances Data Desk for Evaluations and Reports, (LADDER) system for
NPA management.
The Bank has mandated the project worth of Rs 5-10 crore to Tata
Consultancy Services (TCS) for implement human capital management and payroll
solution in the year 2004. The Bank branch at Kabul, Afghanistan has commenced
soft opening on July 26th of 2004. PNB has launched its corporate Internet banking
facility during November of the year 2004. PNB has coveted as Best IT User in
Economic Times. The Bank had unveiled ATM at Edappal in the year of 2005. PNB
had adjudged with Golden Peacock Award - for Excellence in Corporate Governance
- 2005 by Institute of Directors. During 2005-06, the bank revamped its organizational
structure. Seven new Zonal Offices were created. The Bank received 'Best IT Team of
the Year Award' - at the IDRBT Banking Technology awards for the year 2005-06.
During the year 2006, PNB had tied up with MasterCard International to
launch a signature-based debit card and opened one new branch in Uttaranchal. Also
during the same year of 2006, the bank has made tie up with Indian Airlines for online
booking of air tickets and ties up with IDBI Capital. PNB had entered into MoU with
India Infrastructure Finance Company (IIFC) in October of the year 2007 with an aim
to extend its cooperation and support to IIFC in areas of creating a deal flow of
infrastructure projects. RBI rejected Punjab National Bank's proposal to float a credit
card joint venture with insurer American International Group Inc. (AIG) and Venture
InfoTech Global Pvt. Ltd, a third-party processor for credit card companies.
41
PNB aims to expand its base in the entire northern India region for providing
banking facilities at the doorsteps of the peoples. The Bank is serving over 3.5 crores
customers through 4540 Offices including 421 extension counters - largest amongst
Nationalized Banks. PNB is moving with the vision, to be India's most profitable
Universal Bank. Also wants to profitably serve the banking and the financial services
42
Research
Methodology
43
OBJECTIVES OF THE STUDY
To study the market shares in banking sector of PNB AND SBI BANK.
44
RESEARCH METHODOLOGY
Research Design:-
Data Collection:
Secondary Data: The data of the sample companies (for a period of four years from
2013 to 2016) have been collected from the annual reports, published by the
companies and the websites of the companies. A finite sample size of two banks listed
on the National Stock Exchange (NSE) has been selected for the purpose of the study.
They are the PNB Bank and the Housing Development Finance Corporation Ltd.
The variables used in the analysis of the data are Operating Profit Margin (OPM), Net
Profit Margin (NPM), Return on Equity (RoE), Earnings per Share (EPS), Price
Earnings Ratio (PER), Dividends per Share (DPS), Dividends Payout Ratio (DPR)
and etc The idea behind this type of detailed corporate analysis is to gain an
understanding of the general corporate health and prospects for future growth of the
bank.
45
Data Analysis
46
ANALYSIS AND INTERPRETATION
25
20
15
PNB
10 SBI
0
2016 2015 2014 2013
Among all the three banks, SBI could make the highest RoE of 20.44% in 2013,
followed by PNB (15.97%) in 2013. The average RoE of SBI were (18.34%
respectively) while that of PNB was a bit lower (12.29%). Thus, SBI were more
47
(2) EARNINGS PER SHARE (EPS)
Earnings per Share is the measure of company's ability to generate after tax profits per
share held by the investors. This ratio is computed with the help of the following
formula and expressed in rupee terms:
50
45
40
35
30
25 PNB
20 SBI
15
10
0
2016 2015 2014 2013
From the above table, the EPS of PNB and SBI showed an increasing trend from year
to year during the study period. The average EPS of PNB is greater than that of SBI
during the entire study period. Thus, the analysis reveals that PNB was the most
48
(3) PRICE EARNINGS (P/E) RATIO
The Price Earnings ratio highlights the connection between the price and recent
company's performance. This ratio moves either side only when price and profits get
disconnected. This ratio is calculated using the following equation and expressed in
terms of times:
P/E RATIO
YEAR PNB SBI
2016 19.22 28.80
2015 23.26 26.29
2014 27.12 27.74
2013 13.48 25.03
AVERAGE 20.77 26.96
35
30
25
20
PNB
15
SBI
10
0
2016 2015 2014 2013
It reveal that only SBI to achieved the highest price earnings ratio in every year
during the study period, followed by PNB;. Even the four year average price earnings
ratio of SBI was significantly higher (26.96 times) than that of PNB (20.77 times).
Thus, it is inferred that there was more responsiveness between the earnings capacity
and the share price in case of SBI than that of PNB and it reveals that SBI did better
in share market when compared to other banks. However, there was a declining trend
49
(4) DIVIDEND PER SHARE (DPS)
Though Dividends per Share is similar to Earnings per share, DPS shows how much
the shareholders were actually paid by way of dividends. The DPS found out by the
following formula and expressed in rupee terms:
12
10
6 PNB
SBI
4
0
2016 2015 2014 2013
It reveals that DPS position of all the banks increased from year to year during the
period under review. On an average, PNB paid out more dividends (Rs.9.5) than that
of SBI Bank Rs. 6.37, respectively. Thus, it is concluded that it was PNB, which was
50
(5) DIVIDENDS PAYOUT RATIO (DPR)
The Dividends Payout Ratio (DPR) is a model for cash flow measurement used by the
investor to determine if a company is generating a sufficient level of cash flow to
assure a continued stream of dividends to them. It is also a measurement of the
amount of current net income paid out in dividends rather than retained by the
business. This ratio is computed by the following formula and expressed in
percentage terms:
40
30
20 PNB
SBI
10
0
2016 2015 2014 2013
An insight into the data reveals that there was a mixed trend in the distribution of
payout ratio of sample companies during the study period. Contrary to the DPS
position, on an average, PNB paid out 28.39% of its earnings as the dividends to the
shareholders, whereas SBI paid out 19.24%, the lowest. Thus, PNB was more
efficient in generating more cash inflows to the shareholders by paying the highest
ratio of earnings as the dividends than SBI, which paid relatively a lower percentage.
51
(6) NET PROFIT MARGIN (NPM)
Net Profit Margin indicates how much a company is able to earn after all direct and
indirect expenses to every rupee of revenue. This ratio is calculated using the
following formula and expressed in percentage terms:
35
30
25
20
PNB
15 SBI
10
0
2016 2015 2014 2013
The above data reveal that it was SBI, which has outperformed PNB in terms of Net
Profit Margin. However, the data also reveal there was stagnation in the NPM
position of SBI whereas PNB could increase the net profit from year to year during
the study period. On an aggregate basis, mean NPM of SBI was 24.79, the highest,
followed by PNB (12.59%), the lowest among three sample companies. Thus, it found
that it was SBI to be the most efficient company in controlling indirect expenses when
compared to PNB.
52
(7) OPERATING PROFIT MARGIN (OPM)
Operating Profit Margin indicates how effective a company is at controlling the costs
and expenses associated with their normal business operations. This ratio is found out
using the following formulae and expressed in percentage terms:
60
50
40
30 PNB
SBI
20
10
0
2016 2015 2014 2013
SBI sustained the highest operating profit margin in every year during the study
period followed by PNB, which has registered a reasonably higher margin during the
period under review. On an aggregate basis, SBI was highly successful in controlling
53
(8) RETURN ON ASSETS (ROA)
It is used to measure the profitability of the bank in terms of assets employed in the
bank. It is also an yardstick of measuring managerial efficiency in rel the utilization of
assets.
Net profit after tax but before interest is nothing but operating profit
1.6
1.4
1.2
0.8 PNB
SBI
0.6
0.4
0.2
0
2016 2015 2014 2013
A higher return on total assets is an indicator of high profitability and a good overall
efficiency. Reversely a low return on total assets indicates low profitability on assets
employed and poor managerial efficiency. The ROA of SBI bank is better than the
54
SHARE HOLDING PATTERN OF PNB BANK
SHARE HOLDING PATTERN
SHARES [%]
5% 0%
0% 8%
Foreign
Institutions
55
PNB BANK- RATIO ANALYSIS
BOOK VALUE
CHART No.2
40 36.02 36.11
32.88
35
25.99 27.35
30
25
20
15 10 11 11
8.5 8.5
10
5
0
2011-12
2004 - 05 2012-13
2005 - 06 2013-14
2006 - 07 20072014-15
- 08 2008 – 2015-16
09
EPS DPS
56
PAY-OUT POLICY
CHART No.3
0.327049
0.33
0.325
0.32
0.315 0.310786
PAY-OUT RATIO
57
RETURN ON EQUITY
CHART No.4
15.9777401
16
12.7922787
14
11.4386703
12
8.9470867
10 8.032651
8
0
2011-12
2004 - 05 2012-13
2005 - 06 2013-14
2006 - 07 20072014-15
- 08 2008 – 2015-16
09
ROE (%)
58
NORMALIZED PRICE EARNING RATIO
CHART NO.5
32.529654
35
30 24.954296 24.252499
25 18.198346
20
15 10.948491
10
5
0
2011-12
2004 - 05 2012-13
2005 - 06 20062013-14
- 07 2007 -2014-15
08 2015-16
2008 – 09
Average P/E
59
INTRINSIC VALUE CALCULATION:
Dividend declared
Dividend Pay-Out Ratio = ------------------------
EPS
Dividend Pay-out Ratio for 5 Years
Avg. Dividend Pay-out Ratio = ----------------------------------------------
5
0.327049+0.310786+0.304136+.305386+0.304625
= ----------------------------------------------------------
---
5
= 0.310396
15.97774+11.43867+12.792279+8.947087+8.032651
= --------------------------------------------------
-----
5
= 11.437685%
Long term Growth Rate in Equity (g) = Average Retention Ratio x Avg. ROE
= 0.68904 x 0.114377
= 0.078875
18.198346+24.954296+32.529654+24.252499+10.948491
= ---------------------------------------------------------------
-------
5
= 22.176657
60
Intrinsic Value = Projected. EPS x Normalized Avg. PE Ratio
= 38.958176 x 22.176657
= 863.962112
INTERPRETATION
The stock is said to be over priced as the intrinsic value of the security
(863.96) is less than current market price875.70. This means that the investor should
sell the share as the price of the security may come down in future. The short term and
long term solvency of the company is unsatisfactory. The projected earning per share
(EPS) and the dividend per share (DPS) of the security is estimated to be 38.95 and
11.86 respectively
61
ANALYSIS AND INTERPRETATION OF SBI BANK
SHARE HOLDING PATTERN OF SBI BANK
Table No.6
SHARE HOLDING PATTERN
SHARES [%]
11%
Foreign
Institutions
19% 48% Govt Holding
Non Promoter Corp. Hold.
Promoters
11% Public & Others
11%
0%
62
SBI BANK- RATIO ANALYSIS
Table No.7
BOOK VALUE
60
50.67
50 43.42
40 34.55
27.04
30
20.84
20
7 8.5 8.5
10 4.5 5.5
0
2011-12
2004 - 05 2012-13
2005 - 06 2013-14
2006 - 07 2014-15
2007 - 08 20082015-16
- 09
EPS DPS
63
Table No.8
PAY-OUT POLICY
CHART No.8
0.25 0.215931
0.203402 0.202605 0.195762
0.2 0.167752
0.15
0.1
0.05
0
2011-12
2004 - 05 2012-13
2005 - 06 2006 2013-14
- 07 2014-15
2007 - 08 2008 - 09 2015-16
PAY-OUT RATIO
64
Table No.9
RETURN ON EQUITY
18.603917
20 17.743252
16.431268
14.726245
13.830984
15
10
0
2011-12
2004 - 05 2012-13
2005 - 06 20062013-14
- 07 2014-15
2007 - 08 2008 - 09 2015-16
ROE (%)
65
Table No.10
CHART No: 10
32.72929 32.914617
35 30.228006
29.023513
30
25
20
13.729031
15
10
5
0
2011-12
2004 - 05 2012-13
2005 - 06 20062013-14
- 07 2007 -2014-15
08 2008 - 092015-16
Average P/E
66
INTRINSIC VALUE CALCULATION:
Dividend declared
Dividend Pay-Out Ratio = ------------------------
EPS
Dividend Pay-out Ratio for 5 Years
Avg. Dividend Pay-out Ratio = --------------------------------------------
5
0.215931+0.203402+0.202605+0.195762+0.167752
= ----------------------------------------------------------
-----
5
= 0.197090
14.726245+16.431268+17.743252+13.830984+18.603917
= -----------------------------------------------------------
5
= 16.267133
Long term Growth Rate in Equity (g) = Average Retention Ratio x Avg. ROE
= 0.80291 x 0.162671
= 0.130610
29.023513+32.729290+38.914617+30.228006+18.729031
= ---------------------------------------------------------------------
--
5
= 29.924891
67
= 1714.337425
INTERPRETATION
The stock is said to be under priced as the intrinsic value of the security
(1714.34) is higher than current market price 1700.40. This means that the investor
should buy the share as the price of the security may come up in future. The short
term and long term solvency of the company is unsatisfactory. The projected earnings
per share (EPS) and the dividend per share (DPS) of the security is estimated to be
57.2 and 9.6 respectively
68
Findings
69
FINDINGS
On the basis of return on equity it is analyzed that SBI bank reinvested their
earnings much better than PNB banks to get the additional profits. So in ROE,
SBI is best.
On the basis of earning per share it is analyzed that PNB is the most efficient
bank in terms of generating earnings. there are PNB and SBI banks with a
From dividend per share it is analyzed that both banks shows an increasing
trend from 2011 to 2016. But the performance of PNB is better than SBI banks
From dividend payout ratio it is analyzed that PNB pays out the more dividend
than SBI.
On the net profit margin basis it is seen that after all direct and indirect
expenses SBI earns more from its revenue and after it there is PNB bank.
From operating profit margin it is analyzed that SBI controls its cost better
than PNB.
trend in all the three banks but the average CAR of PNB bank is better than
SBI.
70
On the basis of return on assets it is analyzed that SBI’s profitability and
Thus from the entire ratio analysis it is concluded that performance of SBI is best in
return on assets, operating profit margin, net profit margin, and return on equity.
Whereas performance of of PNB is best in dividend payout ratio and capital adequacy
ratio.
71
Conclusion
72
CONCLUSION
Banks are the most common institutions and media for transfer of funds and
investments. The banking business is becoming more and more complex as a result of
compare the performance of the two largest banks of India, PNB and SBI a Private
Sector banks. The analysis is based on the ratio analysis. The various ratios which is
used in study are Operating Profit Margin (OPM), Net Profit Margin (NPM), Return
on Equity (RoE), Earnings per Share (EPS), Price Earnings Ratio (PER), Dividends
per Share (DPS) , Dividends Payout Ratio (DPR) and etc The brief study of all the
two banks is done and it is found that that PNB is largest bank and then the SBI.
73
Recommendation
74
RECOMMENDATION
The time duration for the analysis should be at least 5-10 years for the sake of
better picture of analysis but due to the data availability issues the present study is
The present study suggests the companies where they are lacking in their financial
Along with the present findings of the study, the investors also has to keep in
mind about the future contracts of the companies and their future plans so as to get
75
Limitations
76
LIMITATIONS
The study has lack of contact with company personnel acted as hindrance in the
study.
The study is based on the limited knowledge & information provided by the
The basis of selection of sample for the study was vague. Randomly individuals
There are only five parameters taken for study however there are certain other
The ratings given are on the basis of data available on internet however the future
77
Bibliography
78
BIBLIOGRAPHY
Study”
79