CASE STUDY OF “Dhanlaxmi Bank”

1. Download the last five years’ annual reports of the company.

2. Download five years share price of the company on monthly or fortnight basis (closing
share price).
3. Go through the annual reports thoroughly and provide the following information:

1. Last five years’ trend analysis for the share price of the company in graph form along with
tables, for every major fall or decline in the share price map it with the company internal or
external environment factors. If there is a major fall or rise, then what can be the possible events
or reasons behind it.

2. Write down any ten major initiatives (with brief details of minimum 150 words) taken by firm
to increase its revenues in last five years along with the list of products launched in last five
years (give reference for each initiative or any information).

3. Write any ten Major strategies (with brief details of minimum 150 words) of the management
for sustainable business processes during last five years (give reference for each strategy or any
information).

4. Make a comparative analysis of the following financial performance indicators of the

company for last five years using trend analysis with tables as well:

Return on Asset, return on Equity, Price earnings ratio, Total sales, Net profit, EBIT, Dividend
payout ratio, Liquidity ratios (current ratio and Quick Asset ratio), Debt equity ratio, interest
coverage ratio, earning per share, dividend per share and proprietary ratio.

5. Compare the performance of the company with the industry and five major competitors of the
company from same industry using any five major parameters.

6. Read about the depreciation method used by the company for different types of assets and
make a working note for same showing its percentage of depreciation, method, and change in
method if any for last five years (Information will be available in the annual reports itself).

7. Read the business responsibility report section in annual report and get the information about
the CSR amount spend and the areas of CSR of the company. Make a table showing the CSR
amount spend by the company and the areas of CSR year wise, mention if there is any unspent
CSR amount with the company.

8. Write down in your own words how company is contributing to the development of the
society, employees, and the environment based on its business responsibility report (Minimum
1000 words for each type of contribution, support your work with the link as well in footnotes
form). Please refer business responsibility report for this section to support your writing with
facts and figures.

9. Read the disclosure section just below the balance sheet in annual reports and make short
notes on any of the major event which can have a major impact on the future profitability of the
company (year wise in table form).

10. Make a table for all the type of securities issued by the company (shares, bonds, commercial
papers etc.) during last five years and the credit rating of each of the financial instruments. Along
with the name of credit rating agencies.

11. Make a comparative analysis of the debt position of the company, and the fixed financial
burden of the company.

12. Whether company has started following IFRS? Yes, or No, since when it started and up to
what extent, and in which accounting standard?

13. Use Altman’s Z score model and map the company position based on last five years’ data.
Please find attachment for calculating Z score.

14. Please mention Any legal cases against the company for the financial frauds during last ten
years.

15. Provide the year wise information of number of employees in company, temporary and full
time employees, women employees, Employees with disabilities (refer business responsibility
report for this information).

16. Make a comparative analysis of the Customer Value, Principal 9 of business responsibility
report for this information on year wise basis using stats and other important information (such
as; number of customer complaints/cases, consumer information, unfair trade practices,
consumer survey or customer satisfaction etc.).
Note: Provide link, references or source of information, for each and every information, data at
the end of each point.

ANNEXURE
Z-Score Formula
The Z-score formula for manufacturing firms, which is built out of the five weighted financial
ratios:

where:
A=Working Capital÷Total AssetsB=Retained Earnings÷Total AssetsC=Earnings Before Interest
& Tax÷Total AssetsD=Market Value of Equity÷Total LiabilitiesE=Sales÷Total Assets

Strictly speaking, the lower the score, the higher the odds are that a company is heading for
bankruptcy. A Z-score of lower than 1.8, in particular, indicates that the company is on its way to
bankruptcy. Companies with scores above 3 are unlikely to enter bankruptcy. Scores in between
1.8 and 3 define a gray area.

The Z-Score Explained

It's helpful to examine why these particular ratios are part of the Z-score. Why is each
significant?
Working Capital/Total Assets (WC/TA)
This ratio is a good test for corporate distress. A firm with negative working capital is likely to
experience problems meeting its short-term obligations because there are simply not
enough current assets to cover those obligations. By contrast, a firm with significantly
positive working capital rarely has trouble paying its bills.

Retained Earnings/Total Assets (RE/TA)

This ratio measures the amount of reinvested earnings or losses, which reflects the extent of the
company's leverage. Companies with low RE/TA are financing capital expenditure through
borrowings rather than through retained earnings. Companies with high RE/TA suggest a history
of profitability and the ability to stand up to a bad year of losses.

Earnings Before Interest and Tax/Total Assets (EBIT/TA)

A version of return on assets (ROA), an effective way of assessing a firm's ability
to squeeze profits from its assets before deducting factors like interest and tax.

Market Value of Equity/Total Liabilities (ME/TL)

This ratio shows that if a firm were to become insolvent, how much the company's market
value would decline before liabilities exceed assets on the financial statements. This ratio adds a
market value dimension to the model that isn't based on pure fundamentals. In other words, a
durable market capitalization can be interpreted as the market's confidence in the company's
solid financial position.

Sales/Total Assets (S/TA)

This tells investors how well management handles competition and how efficiently the firm uses
assets to generate sales. Failure to grow market share translates into a low or falling S/TA.

WorldCom Test
To demonstrate the power of the Z-score, test how it holds up with a tricky test case. Consider
the infamous collapse of telecommunications giant WorldCom in 2002. WorldCom's bankruptcy
created $100 billion in losses for its investors after management falsely recorded billions of
dollars as capital expenditures rather than operating costs.
Calculate Z-scores for WorldCom using annual 10-K financial reports for years ending
December 31, 1999, 2000 and 2001. You'll find that WorldCom's Z-score suffered a sharp fall.
Also note that the Z-score moved from the gray area into the danger zone in 2000 and 2001,
before the company declared bankruptcy in 2002.

Input Financial Ratio 1999 2000 2001

X1 Working capital/ Total Assets -0.09 -0.08 0
X2 Retained earnings/Total Assets -0.02 0.03 0.04
X3 EBIT/Total Assets .09 .08 .02
X4 Market Value/Total Liabilities 3.7 1.2 .50
X5 Sales/Total Assets 0.51 0.42 0.3
Z-score 2.5 1.4 .85 -

But WorldCom management cooked the books, inflating the company's earnings and assets in
the financial statements. What impact do these shenanigans have on the Z-score? Overstated
earnings likely increase the EBIT/total assets ratio in the Z-score model, but overstated assets
would shrink three of the other ratios with total assets in the denominator. So the overall impact
of the false accounting on the company's Z-score is likely to be downward.