ICICI Bank

Prepared & Presented By: Pralay Kumar Das & Rohit Sachdeva Roll No: Temp-014 & Temp-021

Introduction

The primary objective of financial reporting is to provide information to present and potential investors and creditors and others in making rational investment, credit and other decisions.
Effective decision making requires evaluation of the past performance of companies and assessment of their future prospects.

Why Financial Statement Analysis?

Mere a glance of the financial accounts of a company does not provide useful information simply because they are raw in nature. The information provided in the financial statements is not an end in itself as no meaningful conclusions can be drawn from these statements alone. A proper analysis and interpretation of financial statement can provide valuable insights into a firms performance. It enables investors and creditors to:

Evaluate past performance and financial position Predict future performance

Meaning of FSA

The term financial analysis also known as analysis and interpretation of financial statements, refers to the process of determining financial strengths and weaknesses of the firm by establishing strategic relationship between the items of the balance sheet, P&L A/c and other operative data.

Concept of FSA

It is the collective name for the tools and techniques that are intended to provide relevant information to decision makers. The purpose of financial analysis is to diagnose the information contained in financial statements so as to judge the profitability and financial soundness of the firm. Just like a doctor examines his patient by recording his body temperature, blood pressure, etc before making his conclusion regarding the illness and before giving his treatment, a financial analyst analyses the financial statements with various tool of analysis before commenting up on the financial health or weakness of an enterprise.

Types of Financial Analysis

On the basis of material used:

External Analysis Internal Analysis

On the basis of methods used:

Horizontal Analysis Vertical Analysis

On the basis of material Used

External: It is carried out by outsiders of the business investors, credit agencies, govt agencies, creditors etc. who does not access to internal records of the company depending mainly on published accounts Internal: It is carried out by persons who have access to internal records of the company executives, manager etc by officers appointed by govt or courts in legal litigations etc. under power vested in them.

On the basis of methods

Horizontal: data relating to more than one-year comparison with other years standard or base year expressed as percentage changes Dynamic analysis.
Vertical: quantitative relationships among various items in statements on a particular date inter firm comparisons inter department comparisons static analysis.

1. Horizontal Analysis: Grace Corporation Profit and Loss accounts For the years ended March 31, 20X2 andChange 20X1
20X2 Net Sales Cost of Goods Sold Gross Profit Selling and Administrative Expenses Profit before Interest and Tax Interest Expense Profit before Income Tax Income Tax Profit after Tax 0 0 0 0 0 0 0 0 20X1 Amount 0 0 0 0 0 0 0 0 0 Percentage

Grace Corporation Balance Sheets as at March 31, 20X2 and 20X1

20X2(Rs) Shareholders' Funds Share Capital Reserves and Surplus 0 Liabilities Secured Loans Unsecured Loans Current Liablities 0 0 Assets Fixed Assets Investments Current Assets: Inventories Debtors Cash Other Current Assets 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 20X1(Rs) Amount Change %

2.Common-size financial statements Grace Corporation Common-size Profit and Loss accounts For the years ended March 31, 20X2 and 20X1
20X2 (Rs) Net Sales Cost of Goods Sold Gross Profit Selling and Administartive Expenses Profit before Interest and Tax Interest Expense Profit before Income Tax Income Tax Profit after Tax 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 20X1 (Rs) 20X2 (%) 20X1 (%)

Grace Corporation Balance Sheets as at March 31, 20X2 and 20X1

20X2(Rs) Shareholders' Funds Share Capital Reserves and Surplus 0 Liabilities Secured Loans Unsecured Loans Current Liablities 0 0 Assets Fixed Assets Investments Current Assets: Inventories Debtors Cash Other Current Assets 0 Total Current Assets 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 20X1(Rs) 20X2 (%) 20X1(%)

Methods of Financial Analysis

Comparative Statements Analysis Common-Size Statement Analysis Trend Analysis Ratio Analysis Funds Flow Analysis Cash Flow Analysis Cost-Volume-Profit Analysis

Comparative Statement Analysis

Comparative financial statements are useful in analyzing the changes over time. They carry data relating to two or more years and facilitate the comparison of an item with previous years and even the future figures may be projected using time series / regression analysis. The two comparative statements are:
1. 2.

Balance Sheet Income Statement

Common-Size Statement Analysis

Taking sales to be equal to 100, all other items in the income statement of a year are expressed as percentages to the sales. In case of balance sheet the total assets are made equal to 100 and all other assets are expressed in relative percentages. The same is the case with liabilities with the total liabilities being 100.

Trend Analysis

It determines the direction upwards or downwards. Under this analysis the values of an item in different years is expressed in relation to the value in one year called the base year. Taking the value of the item in the base year to be equal to 100 The values of the item in different years are expressed as percentages to this value.

Ratio Analysis
A ratio is an arithmetic relationship between two figures. Financial ratio analysis is a study of ratios between various items or group of items in financial statements.

Types of Ratios
Profitability Ratios Activity Ratios/ Turnover Ratios Solvency Ratios/Leverage Ratios Liquidity Ratios

Cash Flow Statement

A cash flow statement is a statement showing inflows (receipts) and outflows (payments) of cash during a particular period. In other words, it is a summary of sources and applications of each during a particular span of time.

Objectives of Cash Flow Statement :

Useful for Short-Term Financial Planning. Useful in Preparing the Cash Budget. Comparison with the Cash Budget. Study of the Trend of Cash Receipts and Payments. It explains the Deviations of Cash from Earnings. Helpful in Ascertaining Cash Flow from various Separately. Helpful in Making Dividend Decisions.

Financial Statement Analysis of ICICI Bank & HDFC Bank

ICICI Bank (BSE: ICICI) (formerly Industrial Credit and Investment Corporation of India) is India's largest private sector bank by market capitalisation and second largest overall in terms of assets. Trotal assets of Rs. 3,562.28 billion (US$ 77 billion) at December 31, 2009 and profit after tax Rs. 30.19 billion (US$ 648.8 million) for the nine months ended December 31, 2009. The Bank also has a network of 1,640+ branches (as on February 11, 2010) and about 4,721 ATMs in India and presence in 18 countries, as well as some 24 million customers (at the end of 2007). Housing Development Finance Cooperation Ltd. 1st Bank to receive an in principle approval from RBI. The authorized capital of HDFC Bank is Rs550 crore( Rs 5.5bn) Paid-up capital is Rs 424.6 crore (Rs 4.2 bn). The HDFC Group holds 19.4% of the bank's equity. 28% of the equity is held by FIIs. 11.86% is held by the General Public. The Bank has about 570,000 shareholders. The shares are listed on the BSE & NSE. The bank's American Depository Shares are listed on the New York Stock Exchange (NYSE) under the symbol HDB.

Ratio Analysis

Liquidity Ratio
Ratio = Current Assets / Current Liabilities
1.23(2011) 1.36(2010)

Current ICICI Bank

HDFC Bank 0.28(2011) 0.27(2010) Interpretation: An indication of companys ability to meet short term debt obligations, the higher the ratio the more liquid is the company. The ideal current ratio is 2,by which the creditors will be able get their payments in full. But here in both cases the current ratio is less than 2 ,however in the year 2011 icici bank has a current ratio greater than 1 which indicates that its current assets are nearly equal to the current liabilities. ICICI Bank is in a better position than HDFC Bank.

Quick ratio = (Current Assets - Inventory)/ Current liabilities ICICI Bank 0.68(2011) 0.88(2010) HDFC Bank 7.14(2011) 5.23(2010) Interpretation: Quick Ratio of 1:1 is considered favorable because for every rupee of current liability there is there is atleast one rupee of liquid assets. A ratio greater than 1 is more preferred. HDFC Bank in the year 2011 has a ratio greater than 1 ,whereas in case of ICICI Bank it is always less than 1. it indicates that the company has not utilised and managed its funds properly.

Solvency Ratio
Debt Equity Ratio = Total Debts/Total Assets ICICI Bank 6.6(2011) 7.53(2010) HDFC Bank 7.78(2011) 9.75(2010) Interpretation: This ratio shows the extent to which funds have been provided by long term creditors as compared to the funds provided by owners. This ratio is good in case of ICICI Bank as compare to HDFC Bank which shows that HDFC Bank Assets are more financed by outsiders .

Profitability Ratio
Net Profit ratio= Net profit /Net sales ICICI Bank 12.08 (2011) 13.5(2010) HDFC Bank 14.76(2011) 11.35(2010) Interpretation: This ratio indicates the relationship between every rupee of sales and the profit made on that amount of sales. It helps the management to know as to what margin of the change from year to year. The net profit ratio of HDFC Bank is good whereas it is normal in the case of ICICI Bank. HDFC Bank is more profitable company as compared to ICICI Bank.

Activity Ratio
Fixed Assets Turnover Ratio= Net Sales/Net Fixed Assets ICICI Bank 8.17(2011) 7.49(2010) HDFC Bank 5.00(2011) 4.24(2010) Interpretation: It measures the efficiency and profit earning capacity of the business. Higher the ratio, greater is the intensive utilization of fixed assets and a lower ratio shows under utilization of the fixed assets. ICICI Bank is in a better position as compared to HDFC Bank in terms of this ratio. It indicates that fixed assets in ICICI Bank has been effectively used in the business without much additional investment in the period of study and also the capital is not blocked in fixed assets.

Cash flow statement of ICICI Bank

2007 Profit before tax Net cashflowoperating activity Net cash used in investing activity Netcash used in fin. Activity Net inc/dec in cash and equivlnt Cash and equivalnt begin of year Cash and equivalnt end of year 2,527.20 2008 3,096.61 2009 3,648.04 2010 5,056.10 2011 5,116.97

9,131.72

4,652.93

23,061.95

-11,631.15

-14,188.149

-3,445.24

-7,893.98

-18,362.67

-17,561.11

3,857.88

-1,227.13

7,350.90

15,414.58

29,964.82

1,625.36

4,459.34

4,110.25

20,081.10

683.55

-8,074.57

8,470.63

12,929.97

17,040.22

37,357.58

38,041.13

12,929.97

17,040.22

37,121.32

38,041.13

29,966.56

Cash flow statement of HDFC Bank

2007 Profit before tax Net cashflowoperating activity Net cash used in investing activity Netcash used in fin. Activity Net inc/dec in cash and equivlnt Cash and equivalnt begin of year Cash and equivalnt end of year 1638.75 2008
2280.63

2009
3299.25

2010
4289.14

2011
5818.66

666.63

3583.43

-1736.14

9389.89

-375.83

-311.40

-619.82

-663.78

-551.51

-1122.74

1637.88

3228.34

2964.66

3598.91

1227.99

1993.11

6591.95

564.74

12435.78

-273.56

6188.66

8074.54

14778.34

17506.62

29942.40

8181.77

14666.49

15343.08

29942.40

29668.83

Interpretation

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