ACKNOWLEDGEMENT

Thisprojectbearsimprintofallthosewhohavedirectlyorindirectly
helpedandextendedtheirkindsupportincompletingthisproject.
AtthetimeofmakingthisreportIexpressmysinceregratitudetoallof
them.
ImustfirstexpressmygratitudetoMs.ReenaSingh,BranchManager
(SohrabHallBranch)andthestaffmembersforhavingaccordedmethe
permissiontoundertakeaprojectinIndiaInfolineLtd.
IalsomustshowmydeepestgratitudetoDirectorDr.SharadJoshiand
Prof.SmitaSovanifortheirvaluablesuggestions,guidanceandadvicein
bringingoutthisproject.
ChothaniHiteshH.

INDEX
Sr.No.
Title
PageNo.

1.
EXECUTIVESUMMARY
1

2.
COMPANYPROFILE
4

3.
OBJECTIVEOFTHESTUDY
9

4.
THEREOTICALBACKGROUND
10

5.
RESEARCHMETHODOLOGY
18

6.
DATAANAYLSIS/FINDINGS

20

7.
LIMITATIONS
55

8.
CONCLUSION
57

9.
RECOMMANDATION
60

10.
BIBLIOGRAPHY
62

INTRODUCTION
Thestockmarketsarethemostvolatilemarketsandaredifficulttounderstandasthe
weather.Thoughthisdoesnotmeanthatthemarketscannotbepredictedbutitonly
meansthattrendsmaychangewithoutwarning,aswithweather.

Thestockmarketsarecharacterizedbyalmostallfactors,againstartingrightfrom
weatherandendingatthepoliticalenvironment.Effectsofonemarketalsocauses
aspilloverintotheotherandanexternalcauseinonemarketcanleadtothe
reactioninanothermarket.Forinstance,itsbeenprovedthatadelayedmonsoon
inIndiawillcreatetheproblemsoffloodingintheEuropeancountries,effecting
adverselyeconomiesofboththeregions.
Thepulseofthemarketalsodependsupontimelyexitandentry.Forarrivingata
correctconclusionreasonabledataisrequiredtounderstandthemechanicsofthe
stockandtheindustryvisvisglobalandlocalinwhichthecompanyoperates.
Whileapracticallongtermviewwillhelpreducerisks,marryingthestockonthe
otherhandmaytotallyincreaserisks.
BygoingthroughtheIndustryReports,Financialstheinvestorcanarmhimself
withreasonableinformationaboutthestocks,whicharebeingtrackedbythe
investor.However,forconsistentmonitoringofstocks,itisimperativethatthe
investorhaslimitedexposuretothestocks,whicharebeingcapableofbeing
trackedbyhimatoobigaportfoliowilldivertattentionandultimatelyharm
investorinterests.
Inthepresentprojectanattemptismadetostudytheimportanceoffundamental
analysisforinvestors.

Shares:

ThecompaniesAct1956definesSharesasashareinthecapitalofacompanyand
includesstockexceptwheredistinctionbetweenstockandshareisexpressedorimplied.
Ashareisregardedasproperty,whichcanbeboughtandsoldlikeanyotherproperty.It
alsoconsistsotherrightsgivenbyArticlesofAssociationofcompany.

Equityorordinaryshares:

Thesearethoseshares,whichdonotenjoyanyspecialrightsinrespectofpayment
ofdividendorrepaymentofcapital.Thereturnofcapitaltoequityshareholdersis
notguaranteed.Alsowhenthecompanyiswoundup,capitalofequityshareholders
islastlypaid,onlyafterallotherclaimshavebeenpaidinfull.Thatiswhyequityis
alsocalledasTheRiskBearingorVentureCapital.
Therearetwosourcesofreturnonequityshares:
1.
Dividend:Whencompaniesearnsufficientprofit,thenBoardofDirectors
declaresforallshares.
2.
CapitalGain:Whicharisesfromanincreaseinthemarketpriceofshares,
whichisgenerallyassociatedwithgrowthinpershareearning.

BenefitsofInvestmentsinEquityshares:

Youcanearngoodrateofdividendorcanmakebetterprofitonmarketfluctuation.
Bonusissue:Thesearegivenasfreegifttoexistingshareholderseitherfullyor
partlypaidupoutofaccumulatedprofits.
ExistingshareholderscangetRightissueincaseoffurtherissueofcapitalby
company.
EquityshareholdershaveRighttovoteinannualgeneralmeetingandother
rightslikecallmeeting,windingupofthecompany.
ShareholdersgetfreecopyofAnnualReportinwhichdetailsofallbusiness
conductedinlastyearismentioned.

AshareisTransferableProperty.Itcanbetransferredortransmittedby
shareholdertoanyotherperson.
TaxExemption:AsperIncomeTaxAct,Dividendisnottaxableinthehandsof
shareholderssimilarlyLongTermCapitalGainonsharesisexempteduptoMarch
2007.
Liquidity:Becauseoflargemarketforshareinvestorcanconverthisinvestments
intoliquidmoneyeasily.

WhatisFundamentalanalysis?
Fundamentalanalysisistheexaminationoftheunderlyingforcesthataffectthewell
beingoftheeconomy,industrygroups,andcompanies.Aswithmostanalysis,thegoal
istoderiveaforecastandprofitfromfuturepricemovements.Atthecompanylevel,
fundamentalanalysismayinvolveexaminationoffinancialdata,management,business
conceptandcompetition.Attheindustrylevel,theremightbeanexaminationofsupply
anddemandforcesfortheproductsoffered.Forthenationaleconomy,fundamental
analysismightfocusoneconomicdatatoassessthepresentandfuturegrowthofthe
economy.Toforecastfuturestockprices,fundamentalanalysiscombineseconomic,
industry,andcompanyanalysistoderiveastock'scurrentfairvalueandforecastfuture
value.Iffairvalueisnotequaltothecurrentstockprice,fundamentalanalystsbelieve
thatthestockiseitheroverorundervaluedandthemarketpricewillultimatelygravitate
towardsfairvalue.Fundamentalistsdonotheedtheadviceoftherandomwalkersand
believethatmarketsareweakformefficient.Bybelievingthatpricesdonotaccurately
reflectallavailableinformation,fundamentalanalystslooktocapitalizeonperceived
pricediscrepancies.

Fundamentalanalysisisamethodusedtodeterminethevalueofastockbyanalyzing
thefinancialdatathatis'fundamental'tothecompany.Thatmeansthatfundamental
analysistakesintoconsiderationonlythosevariablesthataredirectlyrelatedtothe
companyitself,suchasitsearnings,itsdividends,anditssales.Fundamentalanalysis
doesnotlookattheoverallstateofthemarketnordoesitincludebehavioralvariablesin
itsmethodology.Itfocusesexclusivelyonthe

company'sbusinessinordertodeterminewhetherornotthestockshouldbebought

orsold.

EXECUTIVESUMMARY

InIndiamanytraditionalpeopleareveryriskaverse.Theyarenotawareofthe
investmentopportunitiesinthestockmarket.Theyconsiderstockmarketasagame
ofgambling.Buttheoriginalscenarioisquitedifferent.Thereisnodoubtthatthere
arespeculatorswhotrytohikethepriceofastockartificially.Investinginequities
involveshighriskandthereturnonittotallydependsonthecompaniesperformance.
Butinvestingintherightstockattherightpriceandholdingforalongertime
horizonwouldsurelybeabetterinvestment.

Thestrategyofselectingstocksthattradeforlessthantheirintrinsicvalueiscalled
valueinvesting.Valueinvestorsactivelyseekstocksofcompaniesthattheybelieve
themarkethasundervalued.Theybelievethemarketoverreactstogoodandbad
news,causingstockpricemovementsthatdonotcorrespondwiththecompany's
longtermfundamentals.Theresultisanopportunityforvalueinvestorstoprofitby
buyingwhenthepriceisdeflated.Theverydefinitionofvalueinvestingis
subjective.Somevalueinvestorsonlylookatpresentassets/earningsanddon'tplace
anyvalueonfuturegrowth.Othervalueinvestorsbasestrategiescompletelyaround
theestimationoffuturegrowthandcashflows.Despitethedifferentmethodologies,
itallcomesbacktotryingtobuysomethingforlessthanitsworth.Thepurpose
behindthisprojectwastolearnthemannerismsofthestockmarkettradingand
analyzingastockforagoodinvestmentopportunity.

Thereasonbehindchoosingthisprojectisthatitprovideshandsonexperiencewith
whatgoesoninthestockmarketonadaytodaybasis.Thefieldofequityresearch
isveryvastandonehastolookintovariousaspectsofthefunctioningofthe
companytogettoanyconclusionaboutthepossibleperformanceofthecompanyin
themarket.Investorslikewarrenbuffetmadeafortuneoutofinvestmentsinthe
stockmarket,whichisquietimpossiblewithoutproperresearchaboutthe
companies.Thefieldofequityresearchisfullofchallenges.

TheprojectisdonewithIndiaInfolineSecuritiesLimitedaverywellknown
companyinthefieldofstockbrokingandcapitalmarketservicessector.This
projectgavemeachancetogetvaluableinsightsfromahoardofvastlyexperienced
peopleinthisfieldandtogetvariousapproacheseachoneadoptstoevaluate
variouscompanies.Thedurationoftheprojectwastwomonths.Thesetwomonths
werenotonlylimitedtolearninganddevotingtimetowardsequityresearchbutit
alsoprovidedaninsightonwhatvariousservicessuchbrokinghousesprovideand
whateffortsarerequiredtomanagesuchorganizations.

10

COMPANYPROFILE

11

INDIAINFOLINELTD
IndiaInfolinelimitedislistedonboththeleadingstockexchangesinIndia,i.e.The
BombayStockExchange(BSE)andtheNationalStockExchange(NSE).Itis
engagedinthebusinessofEquitiesbroking,WealthAdvisoryServicesandPortfolio
ManagementServices.ItoffersbrokingservicesintheCashandDerivatives
segmentsoftheNSEaswellastheCashsegmentoftheBSE.Itisregisteredwith
theNationalSecuritiesDepositoryLtd.(NSDL)aswellasCentralDepository
ServicesLtd.(CDSL)asadepositoryparticipant,providingaonestopsolutionfor
clienttradingintheequitiesmarket.ASEBIauthorizedPortfolioManager;itoffers
PortfolioManagementServicestoclients.

COMPANYVISION:
ThecompaniesVisionistobethemostrespectedcompanyinthefinancial
servicesspace.
Theboxbelowelaborateshowthecompanyproposestoattainthevisionofbeing
themostrespectedcompanyinthespace.
SHAREHOLDERS
GENERALPUBLIC

Growthataboveindustryrate

CorporateGovernance
withderisking

Transparency

HighROCE,ROE

CUSTOMERS
EMPLOYEES

Cuttingedgetechnology

Skilldevelopmentbyinvestments


Highservicestandards
intraining

Empowermentandconducive

workenvironment

12

SLOGAN:
ITSALLABOUTMONEY,HONEY!

PRODUCTANDSERVICES:
Weareaonestopfinancialservicesshop,mostrespectedforqualityofitsadvice,
personalisedserviceandcuttingedgetechnology.

EquitiesBroking:
IndiaInfolineprovidedtheprospectofresearchedinvestingtoitsclients,whichwas
hithertorestrictedonlytotheinstitutions.Researchfortheretailinvestordidnot
existpriortoIndiaInfoline.IndiaInfolineleveragedtechnologytobringthe
convenienceoftradingtotheinvestorslocationofpreference(residenceoroffice)
throughcomputerizedaccess.IndiaInfolinemadeitpossibleforclientstoview
transactioncostsandledgerupdatesinrealtime.

PortfolioManagementServices:
OurPortfolioManagementServiceisaproductwhereinanequityinvestmentportfolio
iscreatedtosuittheinvestmentobjectivesofaclient.WeatIndiainfolineinvestyour
resourcesintostocksfromdifferentsectors,dependingonyourriskreturnprofile.This
serviceisparticularlyadvisableforinvestorswhocannotaffordtogivetimeordon't
havethatexpertisefordaytodaymanagementoftheirequityportfolio.

Research:
Soundinvestmentdecisionsdependuponreliablefundamentaldataandstock
selectiontechniques.IndiaInfolineEquityResearchisproudofitsreputationfor,
andwewantyoutofindthefactsthatyouneed.Equityinvestmentprofessionals
routinelyuseourresearchandmodelsasintegraltoolsintheirwork.Theychoose
FordEquityResearchwhentheycanclearyourdoubts.

13

Commodities:
IndiaInfolinesextensionintocommoditiestradingreconcilesitsstrategicintentto
emergeasaonestopsolutionsfinancialintermediary.Itsexperienceinsecurities
brokinghasempowereditwithrequisiteskillsandtechnologies.TheCompanys
commoditiesbusinessprovidesacontracyclicalalternativetoequitiesbroking.The
CompanywasamongthefirsttoofferthefacilityofcommoditiestradinginIndias
youngcommoditiesmarket(theMCXcommencedoperationsonlyin2003).
AveragemonthlyturnoveronthecommodityexchangesincreasedfromRs0.34bn
toRs20.02bn.Thecommoditiesmarkethasseveralproductswithdifferentand
noncorrelatedcycles.Onthewhole,thebusinessisfairlyinsulatedagainstcyclical
gyrationsinthebusiness.

Insurance:
Anentryintothissegmenthelpedcompletetheclientsproductbasket;
concurrently,itgraduatedtheCompanyintoaonestopretailfinancialsolutions
provider.ToensuremaximumreachtocustomersacrossIndia,wehaveemployeda
multiprongedapproachandreachouttocustomersviaourNetwork,Directand
Affiliatechannels.Followingtheopeningofthesectorin19992000,anumberof
privatesectorinsuranceserviceproviderscommencedoperationsaggressivelyand
helpedgrowthemarket.
TheCompanysentryintotheinsurancesectorderiskedtheCompanyfroma
predominantdependenceonbrokingandequitylinkedrevenues.Theannuitybased
incomegeneratedfrominsuranceintermediationresultinsolidcorerevenuesacross
thetenureofthepolicy.

InvestInMutualFund
IndiaInfolineoffersyouahostofmutualfundchoicesunderoneroof,backedbyin
depthresearchandadvicefromresearchhouseandtoolsconfiguredasinvestor
friendly.

14

WealthManagementServices:
Imagineafinancialfirmwiththeheartandsoulofatwopersonorganization.A
worldleadingwealthmanagementcompanythatsitsdownwithyoutounderstand
yourneedsandgoals.Weofferyouadedicatedgroupforgivingyouthemost
personalattentionateverylevel.

Mortgages:
Duringtheyearunderreview,Indiainfolineacquireda75%stakeinMoneytree
ConsultancyServicestomarkitsforayintothebusinessofmortgagesandotherloan
productsdistribution.Thebusinessisstillintheinvestingphaseandatthetimeof
theacquisitionwaspresentonlyinthecitiesofMumbaiandPune.TheCompany
bringsonboardexpertiseintheloansbusinesscoupledwithexistingrelationships
acrossanumberofprincipalsinthemortgageandpersonalloansbusinesses.
IndiainfolinenowhasplanstorollthebusinessoutacrossitspanIndiannetworkto
provideitwithatrulynationalscaleinoperations.

HEADOFFICE:
IndiaInfolineLtd.,
75,NirlonComplex,
Off.WesternExpressHighway,
Goregaon(East),
Mumbai400063.
WEBADDRESS:
www.indiainfoline.com
www.5paise.com

15

OBJECTIVEOFTHEPROJECT

TOUNDERSTANDTHECONCEPTANDTECHNIQUESOF
FUNDAMENTALANALYSIS.
TOSTUDYTHEPUBLICSECTORBANKSANDKEY
PLAYERSINTHEINDIANSTOCKMARKET.
TORECOMMENDTHEBESTASAVALUEINVESTMENT

16

THEREOTICALBACKGROUND

17

ABOUTPUBLICSECTORBANKS.
Thesharesundertakenherefortheanalysisbelongstothebankingindustry.Allthe
firmshereinmentionarefromthepublicsector.Thismeansthatallthebanksare
PublicSectorUndertaking(PSUs).
APublicsectorundertakingisawhereinthemajorityofthestakeiswitheitherthe
stateorthecentralgovernment.Abetterwordinsteadofstakecanbecontrol,i.e.
eitherthecontrolisinthehandsofthestategovernmentorthecentralgovernment.
Wecanseeineachofthebankthatthemajorityofthesharesareheldbythe
promotersthatisthegovernment.
th

Nationalizationofthebankstookplaceon19 July,1969.Initiallyfourteenbanks
werenationalized.Lateronsixmorebankswereaddedtothelist.Atpresent
nineteenbanksareunderthepublicsector.
ThegovernmenthadcontributedanaggregateofRs.20,446.12croretowards
recapitalizationofthenationalizedbanksbytheendofMarch1999.The
governmentofIndiadecidedtoallowsomeofthepublicsectorbankstotapdirectly
thedomesticcapitalmarkets.Inordertoenablethenationalizedbankstoaccessthe
capitalmarketstostrengthentheircapitalbaseandmeetthecapitaladequacynorms.
TheauthorizedcapitalofeachofthepublicsectorbankswasbeensetatRs.1500,
croredividedinto150crorefullypaidupshareofRs.10each.
OrientalBankofCommercewasthefirstnationalizedbanktohaveaccesstothe
capitalmarkets.ItraisedasumofRs.387.24croreinOctober1994,reducingthe
governmentshareholdingto66.5%.Inthesewayallthethepublicsectorbanks
camedowntothecapitalmarketasandwhenrequired.Thegovernmentshare
holdingisstillthehighestinallthepublicsectorbanksthoughallthebankshave
boughttheirIPOstothemarket.

18

WhyPublicSectorBanks?
APublicsectorundertakingisawhereinthemajorityofthestakeiswitheitherthe
stateorthecentralgovernment.Abetterwordinsteadofstakecanbecontrol,i.e.
eitherthecontrolisinthehandsofthestategovernmentorthecentralgovernment.
Wecanseeineachofthebankthatthemajorityofthesharesareheldbythe
promotersthatisthegovernment.
Thepublicsectorbanksareoneofthemajorsourcesoffinanceforsmall,medium
aswellaslargefirms.Thesebanksareveryimportantfromthepointofdeposit
mobilization.Thepublicsectorbanksarethosewhichhaveastrongnetworkof
branchesandtheyhavereachedtheremoteareasofthecountry.Fore.g.thestate
bankofIndiahasagreatnetworkofbranchesandATMs.SBIisthelargestbankof
thecountryandisanagentoftheReservebankOfIndia.
Thepublicsectorisagreatsourceforfundmobilizationandassetallocation.The
banksconsideredhereinarethebanksthathavehighestmarketcapitalization
amongthePublicSectorBanksofthebankingindustry.

Thebanksifrankedaccordingtotheirmarketcapitalization:
StateBankofIndia.PunjabNationalBank.BankofBaroda.
BankofIndia.

19

BANKINGSTRUCTUREOFINDIANBANK

20

KEYPOINTSABOUTTHEBANKS

Demand
Indianeconomyisgrowingatanimpressiverate . TheIndustrialproductionremained
robustduringAprilMay2007,recordingayearonyearexpansionof11.7percent.
Themanufacturingsectorremainedthekeydriverofindustrialactivity,withgrowth
of12.7percent.Whilegrowthoftheminingsectorremainedsubdued,thatofthe
electricitysectorwashigherthanthatduringAprilMay2006.Themanufacturing
sectorsrobustperformancewaslargelycontributedbymachineryandequipment,
foodproducts,basicmetalandalloyindustriesandchemicalsandchemical
products.Thehighergrowthinfoodproductsandwoodandwoodproducts
couldbepartlyattributedtothebaseeffect.
Robustgrowthinbankdepositsandnonfoodcreditofftakeandexportsofbusiness
processoutsourcingandinformationtechnologyenabledserviceshelpedin
sustainingthegrowthofthesubsectorfinancing,insurance,realestateand
businessservices.Allthesesectorsaredirectlyorindirectlyconnectedtothebank
oraredependentonthebanksforthegrowth.

Barrierstoentry
Gettinglicenseforopeningabankisarigorousprocess.TheReserveBankofIndia
haslaiddownmanycriteriaforgettingalicenseforanyorganizationtoruna
bankingbusiness.ItrequiresaspecificamountofcapitalasprescribedbytheRBI.
Thereisahugeinvestmentintechnology.Nowdaysthebusinesshousesarein
requirementofspeedbankingsoinvestmentintechnologyisveryimportant.For
growthofthebankitisveryimportantforabanktobuildastrongbranchnetwork.
AgainthereareruleslaidoutbytheRBIforopeningofthebranches.Bankshaveto
openbranchesintheruralareatogetalicensetoopenabranchintheurbanarea.

21

Bargainingpowerofsuppliers:
Thebargainingpowerofthesupplierishighduringperiodsoftightliquidity.Trade
unionsinpublicsectorbankscanbeantireforms.Depositorsmayinvestelsewhere
ifinterestratesfall.

Competition:
Thereishighcompetitioninthebankingsectorbecauseofvariouskindsofbanks
workinginIndia.Therearepublicsectorbanks,privatesectorandforeignbanks.The
privatesectorbanksarethebankswhichattractsthebusinesshouseandthehighincome
classpeople.Theynormallyareprovidingbetterservicethanthepublicsectorbank.
TheforeignbanksoperatinginIndiaaredoingtheirbusinessquiteefficiently.They
haveshownhigherreturnonassetthanthedomesticbanks,highernoninterest
income,attainedhighercapitaladequacyratioandlowerNPAs.Thepublicsector
banksarefacingagoodcompetitionfromthescheduledcooperativebanklikeThe
CosmosCooperativebank.Thenonbankingfinancialcompanies(NBFC)arealso
givingagoodcompetitionbeinginsimilarbusinesslines.

Supply:
LiquidityiscontrolledbytheReserveBankofIndia(RBI).Thismaybedonebythe
RBIbythemeansofCRRorSLR.

CRR,BANKSANDSHAREPRICE
Oneofthemajorfactorsaffectingprofitabilityofthebankandthustheshareprice
ofthebanksistheCRR.Letsunderstandhow.
CRRstandsforthecashreserveratio.Thisisthespecifiedproportionofdeposits
thatabankhastomaintainwiththeRBI.Atpresentthecashreserveratiois
7.00%.WhenthereisachangeintheCRR,thefirstimpactisseenonthebanks.
Forbanks,theriseinCRRwouldmeanthatalargerproportionoffundswillbewith
RBI,whileafallinratewillmeanalowerproportionwillbewiththeapexbank.
22

TherearespecificanglesthatonehastoconsiderwhileevaluatingtheimpactofCRR
onbanks.Intimeofboom,likeisthecurrently,lendingwillgiveahigherrateof
returntobanks.Hence,iftheyhavetokeepalargeproportionoftheirfundsaway
fromlendingandintheformofdeposits,itisalossofopportunityforthem.Thiswill
bringdowntheirearnings.
AnincreaseinCRRwouldalsomeanthatmoneyissuckedoutofthesystem.This
wouldmeanthatfundsarehardtocomebyandhencebankswillhavetopaymoreto
depositorsinordertoinducethemtokeeptheirfundsbanks.Thiswillpushupthe
costoffundsforbanks.Duetothisbankswillalsohavetoraiselendingratesinorder
tomeettheincreasedcostwhilemaintainingtheirmargins.
Themarketwillanalyzebanksonthebasisoftheirmargins,andwhethertheywillbe
abletomaintainthisgoingforward.ACRRriseinitselfmeanstougherconditionfor
banksbutwhatisimportantisthattheyshouldalsobeabletokeeppacewiththis
entiresituation.Thatisthekeytothewayinwhichthebankstockswillperformin
themarket.
RBIsmovesontheCRR.
EffectiveSince
CashReserveRatio

March31,2014
4.50

September18,2014
4.75
(+0.25)

October2,2014
5.00
(+0.25)

January24,2015
5.00

October31,2015
5.00

December23,2015
5.25
(+0.25)

January6,2016
5.50
(+0.25)

January31,2016
5.50

February17,2016
5.75
(+0.25)

March3,2016
6.00
(+0.25)

April14,2016
6.25
(+0.25)

April28,2016
6.50
(+0.25)

23

Theremayalsobeanoverallimpactoncompaniesintermsofscarcityoffundsalong
withanincreaseincostsduetowhichtheoverallinterestchargesforcapitalintensive
companieswillincrease.Thereisalsotheworrythatalowerlendingcouldleadtoa
contractioninactivities,whichmightslowdowndemandinvarioussector.Thisinturn
couldactasadampenerforseveralcompanies.Italsoaffectssharepricesofcompanies
thatoperateintheaffectedsectoroverthemediumterm.

24

RESEARCHMETHODOLOGY

25

Thepresentstudyistheoutcomeofsystematicproceduresadoptedbythe
researcher,whichincludesprimarydatacollectionaswellassecondarydata
collection.Theyareexplainedbelow:

1.PRIMARYDATACOLLECTION:
Primarydataisoriginallygatheredspecificallyonprojecthand.Onecanobtain
informationfromdealers,salesmen,etc.Itoffersmuchgreateraccuracyand
reliability.
Inthisstudy,thefactsandfiguresarerawmaterialwithwhichresearcherworks.Thus,
inprimarydatacollectionresearchercomeacrossmanymethodsasfollows:

Observationmethod

SECONDARYDATACOLLECTION:
Secondarydataisthedataalreadycollectedbysomeoneelse.Thisdataisnot
especiallycollectedtosolvepresentorspecificproblem.Theinformationisrelevant
andcanbeusedforourpurpose.
Afterdoingthedatacollectioninprimarymethod,theresearcherdidthecollection
throughthesecondarydata.Inthisthereareseveraltypessuchas:

Generallibrary
TradeBooks
Internetetc.

26

DATAANALYSISANDFINDINGS

27

THECURRENTECONOMICSCENARIO
Thestatusoftheeconomyhasamajorimpactontheoverallstockprices.Economic
analysisisthestudyoftheeconomictrendsintheeconomy.Themajorfactors
contributingtotheeconomyanalysisareasfollows.

THEGROWTHOFTHEGDP.
TheIndianeconomycontinuedtorecordrobustgrowthin200607forthefourth
successiveyear,buoyedbythesustainedmomentumintheservicesand
manufacturingsectors.ThelatestestimatesreleasedbytheCentralStatistical
Organisation(CSO)inMay2007revisedrealGDPgrowthupwardsto9.4percent
during201415from9.2percentintheadvanceestimates.
Theupwardrevisionwasmainlyduetomanufacturing(12.3percentfromthe
earlierestimateof11.3percent)andconstruction(10.7percentfrom9.4percent),
partlyoffsetbydownwardrevisioninfinancing,insurance,realestateandbusiness
services(10.6percentfrom11.1percent).RealGDPgrowthaveraged8.6percent
perannumduring200304to200607and7.6percentperannumfortheTenthPlan
period(200203to200607)
Indianeconomygrew9.3%inAprilJune2015fuelledbyindustrialandservices
sectors.TherealGDPgrowthduringthesamequarteroflastyearwasat9.6%.
Whiletheagriculturalsectorgrewat3.6%,industrialandservicesgrew10.6%each
onYoYbasis.
Despitethehigherthanexpectedgrowthduringthefirstquarter,economistsexpect
growthmomentumtoslowdowninthecomingquartersduetohighlevelofinterest
ratesandrupeeappreciation.

28

TheGrowthoftheGDP:

GDP Trend

10

9.4

GDP Growth %

7.5

2012-13
2013-14
2014-05

Year

THETRENDOFINFLATION.

Simplyput,inflationisariseinpricesitemsoveraperiodoftime.Itismeasured
throughvariousindices&eachprovidesspecificinformationaboutthepricesofitems
thatitrepresents.TheindexcouldbetheWholesalePriceIndex(WPI)ortheConsumer
PriceIndex(CPI)forspecifiedcategoriesofpeoplelikeagriculturalworkersorurban
nonmanualemployees.Eachoftheindicescreatedinthespecificmannerwiththe
certainyearasthebaseyearandtheyconsiderthepricechangeovertheyear.Therate
ofinflationdeclaredeveryweekhasanimpressiononthestockmarket.Inthegraph
youcanseethetrendfollowedbytheinflation.

29

TheTrendofInflation

Inflation Trend

6.7

6.4
6.5
6.5
6.3

5.3
6

(%)

4.9

5
4.5

Inflation

29/04/13 26/10/14 9/6/2014 31/10/14 6/1/2015 31/01/15 17/02/15 3/3/2015 30/03/15 14/04/15

Date

INFLATIONANDTHEMARKETS?
Totameinflation,thegovernmentusuallyhikesinterestrates.Thistendstomake
debtinstrumentattractiverelativetoequitiesastheformercarryalowerrisk(small
savinginstrumentsareriskfreeastheyareguaranteedbythegovernment).This
resultinsomeamountinvestmentshiftingfromequitytodebt.However,high
inflationisnotalwaysbadandlowinflationneednotalwaysbegoodforequity
markets,astheimpactwilldifferforcompaniesandsectoracrossdifferenttime
horizons.Thefirstthingtoconsideristheitemswherepricesarerising.Fore.g.a
riseinoilpriceswillimpactawiderangeofitemsfromfoodproductstothosethat
requiretransportation.
BALANCEOFPAYMENTS
Indiasbalanceofpaymentsin200607reflectedanumberofpositivefeatures,
merchandisetradecontinuetoexhibitrobustgrowthduring200607,althoughtherewas
somelossofpacefromastronggrowthof200506.Thehighergrowthofimportsvis
visexpertsleadtoapersistentriseintradedeficit,onthebalanceofpaymentsbasis.
NonethelessthecurrentaccountdeficitsaspercentofGDPremainunchanged(1.1%of
GDP)fromthepreviousyearsincethewideningof

30

themerchandisetradedeficitwasoffsettoalargeextentbythecontinuingbuoyancy
innetinvisiblessurplus.
NetcapitalinflowstoIndiaremainedbuoyant(4.9%ofGDP),fartexceedingthe
currentaccountdeficit.Highercapitalflowscouldbeattributedtothestrengthening
ofmicroeconomicfundamentals,greaterinvestorconfidenceandampleglobal
liquidity.NetFDIinflowsfromabroadUS$19.4billionexceededFIIinflows(net)
during201516aggregatingUS$3.2billionthedebtflows(net)atUS$25.0billion
wereledbyexternalcommercialborrowingsreflectingstronginvestmentdemand.
Netcapitalflows,afterfinancingthecurrentaccountdeficit,ledtoaccretionofUS$
36.6billion,excludingvaluationchanges,toforeignexchangereservesduring2006
07.

31

THECURRENTBANKINGSCENARIO
Currently(2015),overall,bankinginIndiaisconsideredasfairlymatureintermsof
supply,productrangeandreacheventhoughreachinruralIndiastillremainsa
challengefortheprivatesectorandforeignbanks.Evenintermsofqualityofassetsand
capitaladequacy,Indianbanksareconsideredtohaveclean,strongandtransparent
balancesheetsascomparedtootherbanksincomparableeconomiesinitsregion.The
ReserveBankofIndiaisanautonomousbody,withminimalpressurefromthe
government.ThestatedpolicyoftheBankontheIndianRupeeistomanagevolatility
withoutanystatedexchangerateandthishasmostlybeentrue.

WiththegrowthintheIndianeconomyexpectedtobestrongforquitesometime
especiallyinitsservicessector,thedemandforbankingservicesespeciallyretail
banking,mortgagesandinvestmentservicesareexpectedtobestrong.M&As,
takeovers,assetsalesandmuchmoreaction(asitisunravellinginChina)will
happenonthisfrontinIndia.
Thisisthefirsttimeaninvestorhasbeenallowedtoholdmorethan5%inaprivate
sectorbanksincetheRBIannouncednormsin2005thatanystakeexceeding5%in
theprivatesectorbankswouldneedtobevettedbythem.
Currently,Indiahas88scheduledcommercialbanks(SCBs)28publicsectorbanks
(thatiswiththeGovernmentofIndiaholdingastake),29privatebanks(thesedonot
havegovernmentstake;theymaybepubliclylistedandtradedonstockexchanges)and
31foreignbanks.Theyhaveacombinednetworkofover53,000branchesand17,000
ATMs.AccordingtoareportbyICRALimited,aratingagency,thepublicsectorbanks
holdover75percentoftotalassetsofthebankingindustry,withtheprivateandforeign
banksholding18.2%and6.5%respectively.

32

STATEBANKOFINDIA
BSE:500112 NSE:SBIN
INDUSTRY:BankingPSU.

33

BANKPROFILE:
st

StateBankofIndiawasestablishedonthe1 July,1955,byacquiringthetotalasset
andtheliabilitiesoftheImperialBankofIndia.TheStateBankofIndiahasapaid
upcapitalofRs.526.30crore.
ReserveBankofIndiaisthesinglelargestshareholderofthebank.SBIssharesand
bondsarelistedfortradingonallthemajorIndianstockexchangesviz.,Bombay,
NewDelhi,Kolkata,ChennaiandAhemdabad;andattheNationalStockexchange.
SBIhasoneofthelargestmarketcapitalizationofallthecompaniestradedonthe
exchanges.ThebanksGDRsarelistedontheLondonStockExchange.
StateBankofIndia(SBI),formedin1955isthelargestpublicsectorbankinIndia.
TheGovernmentofIndiaholds59.73percentofthetotalequitysharesofthebank;
institutionalinvestorshold23.48percentshares,whilethePublicholds6.36percent.
Mr.T.S.Bhattacharyaisthechairmanofthebank.
CoresectorstowhichservicesofthebankextendsarePersonalbanking,NRI's,
AgriculturalandRuralsectors,Internationalbanking,Corporatebanking,Smalland
MediumSizedEnterprises(SME),Governmentbanking,etc.Someoftheprimary
servicesprovidedareworkingcapitalfinance,projectfinance,deferredpayment
guarantees,capexloans,corporatetermloans,structuredfinance,dealerfinancing,
channelfinancing,equipmentleasing,loansyndication,financingIndianoverseas
firms,packingcredit,externalcommercialborrowings,foreigncurrencyloans,
LetterofCredits,guarantees,etc.FacilitiesprovidedbythebankareATMservices,
Internetbanking,epayments,erailbooking,safedepositlocker,giftcheques,
foreigninwardremittance,foreigntravelcardetc.Thebankalsoprovidesnon
bankingservicesinareaslikecapitalmarkets,mutualfunds,securitytrading,
insurance,factoringservicesandcreditcardbusinessetc.,throughitssubsidiaries.
TheregisteredofficeofSBIisinMumbai.Thebankoperatesthroughanetworkof14
LocalHeadOffices,57ZonalOfficesand5217ATMsalloverIndia.Italsohas52
foreignofficesin34countriesacrosstheglobe.Ithas3traininginstituteslocatedat

34

HyderabadandanacademyatGurgaon.Thebankhasalsoacquiredtwonew
branchesatSydneyandMuscat.

ShareholdingPattern
IndianPromoters
59.7%
Foreigncollaborators
0.01%
Indianinst/MutualFund
11.0%
FIIs
11.9%
ADR/GDR
0.0%
Freefloat
17.3%
Shareholders
526,782

Marketrelateddataason18/06/15
MarketCapital
69387(RsCrore)
FaceValue
1455/684
52WksHigh/Low
1318
MarketPrice

Rs.10

35

FINANCIALANALYSIS

BALANCESHEETOFSTATEBANKOFINDIAFORTHELASTTHREE
YEARS.
RsinCrore
MARCH2013
MARCH2014
MARCH2015
Capital
and

Liabilities

EquityShareCapital
526.30
526.30
526.30
Preference
Share
0.00
0.00
0.00
Capital

Reserves

23,545.84
27,117.79
30,772.26
RevaluationReserves
0.00
0.00
0.00
Deposits
367,047.52
380,046.06
435,521.09
Borrowings
19,184.31
30,641.24
39,703.33
OtherLiabilities&
49,767.97
55,829.23
60,283.15
Provisions

TotalLiabilities
460,071.94
494,160.62
566,806.13
ASSETS

Cash&Balancewith
16,810.33
21,652.70
29,076.43
RBI

BalancewithBanks,
22,511.77
22,907.30
22,892.26
MoneyatCall

Advances
202,374.45
261,800.94
337,336.49
Investments
197,097.91
162,534.24
149,148.88
NetBlock
2,576.42
2,673.11
2,676.92
CapitalWorkin
121.27
79.82
141.95

Progress

OtherAssets
18,579.79
22,512.51
25,533.20
TotalAssets
460,071.94
494,160.62
566,806.13

36

PROFITANDLOSSACCOUNTOFSTATEBANKOFINDIAFORTHELAST
THREEYEARS.
RsinCrore
MARCH2013
MARCH2014
MARCH2015
INCOME

InterestEarned
32,428.00
35,979.57
39,491.03
OtherIncome
7,121.73
7,528.16
7,498.94
TotalIncome
39,549.73
43,507.73
46,989.97
EXPENDITURE

Interestexpended
18,483.37
20,390.45
23,436.82
EmployeeCost
6,907.35
8,123.05
7,932.58

SellingandAdmin
2,414.61
2,872.92
3,288.55
Expenses

Depreciation
752.21
763.68
631.51
Miscellaneous
6,687.67
6,950.96
7,159.20
Expenses

PreoperativeExp
0.00
0.00
0.00
Capitalised

OperatingExpenses
10,076.00
11,759.65
13,530.15
Provisions&
6,685.84
6,950.96
5,481.69
Contingencies

TotalExpenditure
35,245.21
39,101.06
42,448.66
NetProfit
forthe
4,304.52
4,406.67
4,541.31
Year

Profit
brought
0.34
0.34
0.34
forward

TotalProfit
4,304.86
4,407.01
4,541.65
EquityDividend(%)
125.00
140.00
140.00
NoofShare
526300000
526300000
526300000

37

NETPROFITGROWTH
4,400.00

4541.65
4,350.00

Net
Profit
(Rs in

4,300.00
4407.01

Crores
)
4,250.00
4,304.86

4,200.00

SBI

4,550.0
4,150.00
0
2005
2006
2007

4,500.0
0

4,450.0
Year
0

STOCKPRICE

SBI

1800

1525

1600

1245.6

1400

1028.65

Price
1200

938
908.15
968.5

994.45

1000

727.75

654.8
681.9

800

600

400

200

Date
31/03/05
30/06/05

/0

/0

30/09/05
/12
31/03/06
30/06/06
30/09
31/12/06
31/03/07

31

Date

38

MARKETPRICEASONBALANCESHEETDATE:
(inRs)
MARCH2013
MARCH2014
MARCH2015
Marketpriceper
654.8
968
994
share

KEYFINANCIALRATIOS
Particulars
MARCH2013
MARCH2014
MARCH2015
ROE
17.88
16.25
14.51
EPS
81.79
83.73
86.29
Dividend
Payout
15.28
16.72
16.22
Ratio

BookValuePerShare
457.38

525.63
594.69
P/ERatio%
8.05
11.56
11.51

INTERPRATATION:
Theprofitofthebankisnotincreasingmuch,whichcanbethereasonwhichhasbought
thereturnonequitydown.TheotherreasonforROEdecreasingmaybehighdistribution
ofdividend.SlowgrowthoftheEPSmustnotbethereasonfortheshareholdertoworry
becausethebankisbeinggivingmorethan100%dividendwhichbringstheprofitdown
andthereforetheEPS.
AsagainstthistheP/Eisonanincrease.Theincreasingbookvalueshowsthatthebank
hascollectedagoodsumfortheshareholdersasreserves.Thedividendpayoutratiois
growingwhichisgoodfortheholderswholiketohavesomekindofcashflowfrom
theirinvestments.Themarketpriceoftheshareshowsasubstantialcapitalappreciation
intheyear200560,butshowsvolatility.

39

BANKOFINDIA
BSE532149

NSEBANKINDIA

INDUSTRYBankingPSU.

40

BANKPROFILE
BankofIndiawasfoundedon7thSeptember,1906byagroupofeminent
businessmenfromMumbai.TheBankwasunderprivateownershipandcontroltill
July1969whenitwasnationalizedalongwith13otherbanks.
BeginningwithoneofficeinMumbai,withapaidupcapitalofRs.50lakhand50
employees,theBankhasmadearapidgrowthovertheyearsandblossomedintoa
mightyinstitutionwithastrongnationalpresenceandsizableinternational
operations.Inbusinessvolume,theBankoccupiesapremierpositionamongthe
nationalizedbanks.
TheBankhas2644branchesinIndiaspreadoverallstates/unionterritoriesincluding
93specializedbranches.Thesebranchesarecontrolledthrough48ZonalOffices.There
are24branches/offices(includingthreerepresentativeoffices)abroad.

TheBankcameoutwithitsmaidenpublicissuein1997.Totalnumberof
shareholdersason30/09/2014is2,25,704.
Whilefirmlyadheringtoapolicyofprudenceandcaution,theBankhasbeeninthe
forefrontofintroducingvariousinnovativeservicesandsystems.Businesshasbeen
conductedwiththesuccessfulblendoftraditionalvaluesandethicsandthemost
moderninfrastructure.TheBankhasbeenthefirstamongthenationalizedbanksto
establishafullycomputerizedbranchandATMfacilityattheMahalaxmiBranchat
Mumbaiwaybackin1989.TheBankisalsoaFounderMemberofSWIFTinIndia.
ItpioneeredtheintroductionoftheHealthCodeSystemin1982,forevaluating/
ratingitscreditportfolio.
TheBank'sassociationwiththecapitalmarketgoesbackto1921whenitenteredintoan
agreementwiththeBombayStockExchange(BSE)tomanagetheBSEClearingHouse.
ItisanassociationthathasblossomedintoajointventurewithBSE,calledtheBOI
ShareholdingLtd.toextenddepositoryservicestothestockbrokingcommunity.Bank
ofIndiawasthefirstIndianBanktoopenabranchoutsidethecountry,atLondon,in
1946,andalsothefirsttoopenabranchinEurope,Parisin

41

1974.TheBankhassizablepresenceabroad,withanetworkof23branches
(includingthreerepresentativeoffices)atkeybankingandfinancialcentersviz.
London,NewYork,Paris,Tokyo,HongKong,andSingapore.Theinternational
businessaccountsforaround20.10%ofBank'stotalbusiness.

ShareholdingPattern
IndianPromoters
69.5%
Foreigncollaborators
0.0%
Indianinst/MutualFund
5.7%
FIIs
16.1%
ADR/GDR
0.0%
Freefloat
8.8%
Shareholders
211,473

Marketrelateddataason18/06/15
MarketCapital
9338(RsCrore)
FaceValue
52WksHigh/Low
MarketPrice

Rs.10
217/80
191

42

FINANCIALANALYSIS

BALANCESHEETOFBANKOFINDIAFORTHELASTTHREEYEARS.
RsinCrore
MARCH2013
MARCH2014
MARCH2015
Capital
and

Liabilities

EquityShareCapital
488.14
488.14
488.14
Preference
Share
0.00
0.00
0.00
Capital

Reserves
3811.12
4338.40

5257.75
RevaluationReserves
165.61
157.35
149.48
Deposits
78,821.44
93,932.03
119,881.74
Borrowings
5,961.95
5,893.91
6,620.83
OtherLiabilities&
5,756.16
7,476.39
9,269.07
Provisions

TotalLiabilities
95,004.42
112,286.22
141,667.01
ASSETS

Cash&Balancewith
3,904.73
5,588.41

7,196.89
RBI

BalancewithBanks,
3,621.52
5,857.57
10,208.65
MoneyatCall

Advances
55,528.89
65,173.75
84,935.89
Investments
28,686.32
31,781.75
35,492.76
NetBlock
791.58
799.29
777.89
CapitalWorkin
22.59
10.68
11.41
Progress

OtherAssets
2,448.79
3,074.77
3,043.52
TotalAssets
95,004.42
112,286.22
141,667.01

43

PROFITANDLOSSACCOUNTOFBANKOFINDIAFORTHELASTTHREE
YEARS.
RsinCrore
MARCH2013
MARCH2014
MARCH2015
INCOME

InterestEarned
6,031.53
7,028.70
9,180.33
OtherIncome
1,155.79
1,184.38
1,562.95
TotalIncome
7,187.32
8,213.08
10,743.28
EXPENDITURE

Interestexpended
3,794.64
4,396.72
5,739.86
EmployeeCost

1,263.21
1,328.13
1,614.00
SellingandAdmin
570.27
690.28
897.69
Expenses

Depreciation
98.84
96.73
96.73
Miscellaneous
1,120.31
999.78
1,271.83
Expenses

PreoperativeExp
0.00
0.00
0.00
Capitalized

OperatingExpenses
1,932.32
2,115.14
2,608.42
Provisions&
1,120.31
999.78
1,271.83
Contingencies

TotalExpenditure
6,847.27
7,511.64
9,620.11
NetProfit
forthe
340.05
701.44
1,123.17
Year

Profit
brought
0.00
220.00
541.76
forward

TotalProfit
340.05
921.44
1,664.93
EquityDividend(%)
20.00
30.00
35.00
NoofShare
488140000
488140000
488140000

44

NETPROFITGROWTH

1000
1664.93
500
921.44

Net
Profit
(Rs in
Crore 340.05
s)

BOI

2000

1500

2012-13
2013-14
2014-05

Year

STOCKPRICE
BOI Price

250

231.7

207.4

200

162
168

Price
150
103.5
122.9
126.9
133.45

103.65

100.3

100

50

31/03/05
30/06/05
30/09/05
31/12/05
6
6
30/09/06
31/12/06
31/03/07
7

/0
/0

31/06/0

/03
/06

31
30

Date

45

ST

MARKETPRICEOFTHESHAREASON31 MARCH:

(inRs)
MARCH2013
MARCH2014
MARCH2015
Marketpriceper
103.65
133.45
167.8
share

KEYFINANCIALRATIOS:
Particulars
MARCH2013
MARCH2014
MARCH2015
ROE(%)
7.62
18.49
28.24
EPS(Rs)
6.96
18.89
34.10
DividendPayoutRatio
28.73
15.88
10.26
P/ERatio
14.89
7.07
4.92
BookValuePerShare
91.47
102.09
120.77
(Rs)

INTERPRETATION:
Percentagewisethenetprofitofthebankisveryfavorable.Thegrowthinreturnonequity
isalsoshowingthatthebankisearningsufficientlyfortheshareholders.Thegrowing
profitsareleadingtowardsthegrowthoftheEPS.Thepricetrendalsoshowsthattheshare
isnotmuchvolatileandalsoshowsanupwardtrend.Holdersforlongtermarebenefited
fromthecapitalappreciation.
TheP/Eratioshowingadowntrendmaybebecauseofthepricenotincreasingtothe
proportionoftheprofit.AlowerP/Eratioisconsideredoneofthemostimportantcriteria
forinvestmentpurpose.Thegrowingbookvalueindicatesthatthebankhashugereserves
andcanbeapotentialforbonus.

46

PUNJABNATIONALBANK
BSE:532461NSE:PNB
INDUSTRY:BankingPSU

47

BANKPROFILE:
Establishedin1895atLahore,undividedIndia,PunjabNationalBank(PNB)has
thedistinctionofbeingthefirstIndianbanktohavebeenstartedsolelywithIndian
capital.ThebankwasnationalisedinJuly1969alongwith13otherbanks.Fromits
modestbeginning,thebankhasgrowninsizeandstaturetobecomeafrontline
bankinginstitutioninIndiaatpresent.
PunjabNationalBankisthefourthlargestbankingentityinthecountry(intermsof
assetsize)with4.2%shareofthetotalcreditdisbursalsattheendofFY07.Given
itsgeographicconcentrationinthenorthernregions,thebankwasalaggardinterms
ofcreditgrowthuntilFY04,whichledtoitbarelysustainingitsshareofnonfood
creditat4.5%.However,notabletokeepupwithitsprivatesectorpeersin
incrementalcreditdisbursementsandlowretailcreditexposureresultedinalossof
marketshare(from4.5%inFY04to4%inFY06).Nevertheless,anoperating
overhaulintermsofassetqualityandretentionofhighmarginshashelpedthebank
positionitselffavourablyamongstitspeersandmarginallyenhanceitssharein
FY07.Adequatecapital,highNPAcoverageandinterestrateinsulationpegsthe
bankamongstthefrontrunnersinthepublicsectorbankingspace.
Aprofessionallymanagedbankwithasuccessfultrackrecordofover110years.
LargestbranchnetworkinIndia4525officesincluding432Extensioncounters
spreadthroughoutthecountry.StrategicbusinessareacoversthelargeIndo
Gangeticbeltandthemetropolitancenters.RupeedrawingarrangementswithM/s
UAEExchangeCentre,UAE,M/sAlFardanExchangeCo.Doha,Qatar,M/sBahrain
ExchangeCo,Kuwait,M/sBahrainFinanceCo,Bahrain,M/sThomasCookAl
RostamaniExchangeCo.Dubai,UAE,andM/sMusandamExchange,Ruwi,

SultanateofOman.

48

ShareHoldingPattern

IndianPromoters
57.8%
Foreigncollaborators
0.0%
Indianinst/MutFund
16.2%
FIIs
20.1%
ADR/GDR
0.0%
Freefloat
6.0%
Shareholders
240,135

Marketrelateddataason18/06/15
MarketCapital
15434(RsCrore)
FaceValue
585/300
52WksHigh/Low
490
MarketPrice

Rs.10

49

FINANCIALANALYSIS
BALANCESHEETOFPUNJABNATIONALBANKFORTHELASTTHREE
YEARS.
(RsinCrore)
MARCH2013
MARCH2014
MARCH2015
Capital
and

Liabilities

Equity
Share
315.30
315.30
315.30
Capital

Preference
Share
0.00
0.00
0.00
Capital

Reserves
7,533.51
8,758.68
9,826.31
Revaluation
312.49
302.38
293.85
Reserves

Deposits
103,166.89
119,684.92
139,859.67
Borrowings
2,718.29
6,664.87
1,948.86
OtherLiabilities&
12,222.24
9,623.64

10,285.14
Provisions

TotalLiabilities
126,268.72
145,349.79
162,529.13
ASSETS

Cash&Balance
9,460.20
23,394.55
12,372.03
withRBI

Balancewith

Banks,Moneyat
1,628.83
1,397.14
3,273.49

Call

Advances
60,412.75
74,627.37
96,596.52
Investments
50,672.83
41,055.31
45,189.84
NetBlock
965.23
1,030.23
1,009.82
CapitalWorkin
0.00
0.00
0.00
Progress

OtherAssets
3,128.88
3,845.19
4,087.43
TotalAssets
126,268.72
145,349.79
162,529.13

50

PROFITANDLOSSACCOUNTOFPUNJABNATIONALBANKFORTHE
LASTTHREEYEARS.
RsinCrore
MARCH2013
MARCH2014
MARCH2015
INCOME

InterestEarned
8,459.85
9,584.15
11,537.48
OtherIncome
2,186.36
1,901.00
1,932.71
TotalIncome
10,646.21
11,485.15
13,470.19
EXPENDITURE

Interestexpended
4,453.11
4,917.39
6,022.91
EmployeeCost
2,121.23
2,114.98
2,352.45
SellingandAdmin
670.70
721.53
778.97
Expenses

Depreciation
183.28

186.64
194.80
Miscellaneous
1,807.77
2,105.30
2,580.98
Expenses

PreoperativeExp
0.00
0.00
0.00
Capitalised

Operating
3,437.48
3,300.70
4,216.64
Expenses

Provisions&
1,345.50
1,827.75
1,690.56
Contingencies

TotalExpenditure
9,236.09
10,045.84
11,930.11
NetProfitforthe
1,410.12
1,439.31
1,540.08
Year

Extraordionary
0.00
0.00
13.27
Items

Profit
brought
0.00
0.00
183.49
forward

TotalProfit
1,410.12
1,439.31
1,710.30
EquityDividend
60.00
90.00
100.00
(%)

NoofShare
315300000
315300000
315300000

51

NETPROFITGROWTH

1000
1410.12
1439.31
1710.3
800

Net
Profit
(Rs in

600

crore)

400

PNB

1800

1600

200

0
2012-13
2013-14
2014-05

1400

1200
Year

STOCKPRICE

PNB Price

600

507
541.25

466.25
470.4

474.4

500
450.6

393.35
379.5

369.5

400

Price
300

200

100

31/03/13
30/06/13
30/09/13
31/12/14
31/03/14
30/06/114
30/09/14
31/12/14
31/03/15

Date

52

ST

MARKETPRICEOFTHESHAREASON31 MARCH:

(inRs)
MARCH2013
MARCH2014
MARCH2015
Marketpriceper
393.35
470.4
474.4
share

KEYFINANCIALRATIOS:
MARCH2013
MARCH2014
MARCH2015
ROE(%)
17.28
15.35
16.40
EPS(Rs)
44.72
45.64
54.24
DividendPayoutRatio
13.42
19.72
18.44
PriceEarningRatio
8.80
10.30
8.30
BookValuePerShare
258.84
297.40
330.97
(Rs)

INTERPRETATION:
ThetrendsofprofitsareleadingtheEPS;i.e.theprofithasshownasmallgrowthinthe
year200506andshowsanincreaseintheyear201415,similarlytheEPSfollowsthe
trend.Thedividendpayoutratioisincreasingandtheshareholdersareenjoyingthecurrent
inflowofcash.
TheP/Eratioisvolatilebecauseofthepricevolatility.Thecompanywiththehelpofthe
growingprofitisretainingtheprofitwhichinturnissupportingtothebookvalueofthe
share.
Theinvestormustlookoverthereturnonequityandthedeviationsofthesharepricethatis
depictedinthepricegraph.Investorwithlowriskprofilemustbecarefuliftheyhavethis
stockintheirportfolio.

53

BANKOFBARODA
BSE:532134NSE:BANKBARODA
INDUSTRY:BankingPSU

54

BANKPROFILE:
BankofBarodaisthefifthlargestbankingentityinthecountry(intermsofasset
size)with4%shareofthetotalcreditdisbursalsattheendofFY06.Givenits
geographicconcentrationinthenorthernregions,thebankwasalaggardintermsof
creditgrowthintheinitialyearsofthisdecade,whichresultedinalossofmarket
share.However,brandandoperatingoverhaulledtoacceleratedgrowthinthelast
twofiscals,thushelpingthebankstabiliseitsshareandpositionitselffavourably
amongstitspeers.
BankofBaroda(BSE:532134)isabankinIndiaestablishedonJuly20,1908by
MaharajaofBarodaSirSayajiraoGaekwadIIIintheprincelystateofBaroda,in
Gujarat.Thebank,alongwith13othermajorcommercialbanksofIndia,was
nationalisdon19thJuly,1969,bytheGovernmentofIndia.
BankofBarodaisthefifthlargestbankinIndia.IthastotalassetsinexcessofRs.
1.78lakhcrores,orRs.1,780bn.,anetworkofover2800branchesandoffices,and
about700ATMs.BankofBarodaoffersawiderangeofbankingproductsand
financialservicestocorporateandretailcustomersthroughavarietyofdelivery
channelsandthroughitsspecialisedsubsidiariesandaffiliatesintheareasof
investmentbanking,creditcardsandassetmanagement.Initsinternational
expansionBankofBarodafollowedtheIndiandiaspora,andespeciallythatofthe
Gujaratis.ThebankhasreceivedReserveBankofIndiaapprovaltoopenofficesin
Australia,theMaldives,andNewZealand.Itisseekingapprovalforoperatonsin
Bahrain,Johannesburg,Kuwait,Mozambique,andQatar,andisseekingtoestablish
ajointventureorsubsidiaryinGhanaandTrinidadandTobago.

55

ShareholdingPattern
IndianPromoters
53.8%
Foreigncollaborators
0.0%
Indianinst/MutualFund
14.7%
FIIs
20.1%
ADR/GDR
0.0%
Freefloat
11.4%
Shareholders
224,161
Marketrelateddataason18/06/15

MarketCapital

9480(RsCrore)

FaceValue
Rs.10

52WksHigh/Low
296/176

MarketPrice
260

56

FINANCIALANALYSIS
BALANCESHEETOFBANKOFBARODAFORTHELASTTHREEYEARS.
(RsinCrore)
MARCH2013
MARCH2014
MARCH2015
Capital
and

Liabilities

Equity
Share
294.53
365.53
365.53
Capital

Preference
Share
0.00
0.00
0.00
Capital

Reserves
5,333.23
7,478.91
8,284.41
Revaluation
0.00
0.00
0.00
Reserves

Deposits
81,333.46
93,661.99
124,915.98
Borrowings
1,640.83
4,802.20
1,142.56
OtherLiabilities&
6,062.18
7,083.90
8,437.70

Provisions

TotalLiabilities
94,664.23
113,392.53
143,146.18
ASSETS

Cash&Balance
2,712.32
3,333.43
6,413.52
withRBI

Balancewith

Banks,Moneyat
6,541.88
10,121.21
11,866.85
Call

Advances
43,400.38
59,911.78
83,620.87
Investments
37,074.44
35,114.22
34,943.63
NetBlock
860.80
920.73
1,088.81
CapitalWorkin
0.00
0.00
0.00
Progress

OtherAssets
4,074.41
3,991.16
5,212.50
TotalAssets
94,664.23
113,392.53
143,146.18

57

PROFITANDLOSSACCOUNTOFBANKOFBARODAFORTHELAST
THREEYEARS.
RsinCrore
MARCH2013
MARCH2014
MARCH2015
INCOME

InterestEarned
6,431.42
7,049.95
9,212.64
OtherIncome
1,344.39
1,394.05
1,434.03
TotalIncome
7,775.81
8,444.00
10,646.67
EXPENDITURE

Interestexpended
3,452.15
3,875.09
5,426.56
EmployeeCost
1,381.05
1,523.79
1,644.07
SellingandAdmin

516.87
749.83
705.97
Expenses

Depreciation
81.88
111.13
194.28
Miscellaneous
1,667.02
1,357.20
1,649.33
Expenses

PreoperativeExp
0.00
0.00
0.00
Capitalised

Operating
2,010.81
2,547.14
2,797.04
Expenses

Provisions&
1,636.01
1,194.81
1,396.61
Contingencies

TotalExpenditure
7,098.97
7,617.04
9,620.21
NetProfitforthe
676.84
826.96
1,026.46
Year

Extraordionary
0.00
0.00
0.00
Items

Profit
brought
0.00
0.00
0.00
forward

TotalProfit
676.84
826.96
1,026.46

EquityDividend
50.00
50.00
60.00
(%)

NoofShare
264530000
365530000
365530000

58

NETPROFITGROWTH

600
826.96
1026.46
400
676.84

Net
Profit
(Rs in
Crore
s)
200

BOB

1200

0
2012-13
2013-14
2014-05

1000

800

Year

STOCKPRICE
BOB Price

350

300

288.45

249

250

241.05
230.55

240

217.75

215.05

196.65

196.25

Price
200

150

100

50

31/03/13

30/06/13
30/09/13
31/12/13
31/03/14
30/06/14
30/09/14
31/12/14
31/03/15

Date

59

ST

MARKETPRICEOFTHESHAREASON31 MARCH:
(inRs)
MARCH2013
MARCH2014
MARCH2015
Marketprice
per
217.75
230.15
215.05
share

KEYFINANCIALRATIOS:

MARCH2013
MARCH2014

MARCH2015
ROE(%)
12.02
10.54
11.87
EPS(Rs)
25.59
22.62
28.03
DividendPayoutRatio
19.54
22.10
21.37
PriceEarningRatio
8.51
10.17
7.67
BookValuePer
Share
212.75
214.60
236.64
(Rs)

INTERPRETATION:
Theprofitforthebankhasincreasebutthereturnonequityisshowingadownwardtrend
intheearlieryearandthenagainrising.Theissueofadditionalequitysharemaybethe
reasonforsuchatrend.Thebankisalsogivinggooddividendtotheshareholder.
ThevolatilityofthesharepricecanbethereasonfordisplayingsuchaP/Etrend.The
dividendpayoutratioshowsaminordowntrend.Theshareisquitvolatile.Wecansaythis
becausethepricehasalmostnotshownanymovementovertheperiod.

60

FINDINGS
COMPERATIVEANANLYSISOFTHEBANKS
Bank
ROE
EPS(Rs.)
P/E
Priceas
Name

on

30/06/15

Mar
Mar13
Mar14

Change
Mar14
Mar15
Change
15
SBI
17.88
14.51
3.37
81.79
86.29
4.5
11.51
1525.8
BOI
7.62
28.24
20.62
6.96
34.1
27.14
4.92
231.7
PNB
17.28
16.4
0.88
44.72
54.24
9.52
8.3
541.25
BOB
12.02
11.87
0.15
25.59
28.03
2.44
7.67
270.25

INTERPRATION
Oncomparingthemajorplayersofthepublicsectorbanking,wecanseethatbankofIndiaisbeing
greaterincreaseinthereturnofequityandEPSthantheotherplayers.Thereturnonequityisthe
highestforBankofIndia.Theprofitofthebankisalsogrowingatquickerrate.TheP/Eisconsidered
oneoftheimportantfactorthatattractthebuyer.TheP/Eratioisthelowestindicatingthatamultiple
of5ofpricetoearningsexhibitssomepotentialforcapitalappreciationinthecaseofBankofIndia.
Thepriceoftheshareisalsolowsosmallinvestorsarealsoattractedforinvestment.

TheratiosconsideredabovethusshowthatBankofIndiahasgeneratedgoodprofitovertheyears.
ThelowerP/Emultipleshowsthatthestockisundervaluedandhasagreatpotentialtogrow.

61

LIMITATIONS

62

Fundamentalanalysishassomelimitationinvolvedinit.Thislimitationcanbe
explainedasunder:

TimeConstrain:
Fundamentalanalysismayofferexcellentinsights,butitcanbeextraordinarily
timeconsuming.Timeconsumingmodelsoftenproducevaluationsthatare
contradictorytothecurrentpriceprevailingontheexchange.Thisisnottosaythat
therearenotmisunderstoodcompaniesoutthere

Industry/CompanySpecific:
Valuationtechniquesvarydependingontheindustrygroupandspecificsofeach
company.Forthisreason,adifferenttechniqueandmodelisrequiredfordifferent
industriesanddifferentcompanies.Thiscangetquitetimeconsuming,whichcan
limittheamountofresearchthatcanbeperformed.
Thesalesandinventoryratiomaybeveryimportantforthecementsectorcompany
buttheseratiosarenotveryusefulforthebankingsector.

VastnessOfFundamentalAnalysis
Fundamentalanalysisisaveryvastconcept.Itwasdifficulttoanalyseeachand
everycomponentinvolvedinit.Hereanattemptismadetolearnthebasicof
FundamentalAnalysisbecauseitisdifficulttocarryoutthewholeprocessof
fundamentalanalysiswithintwomonthsbecauseofthevastness.

63

CONCLUSION

64

Fundamentalanalysisholdsthatnoinvestmentdecisionshouldbewithout
processingandanalyzingallrelevantinformation.Itstrengthliesinthefactthe
informationanalyzedisrealasopposedtohunchesorassumptions.Ontheother
hand,whilefundamentalanalysisdealswithtangiblefact,itdoesnottendtoignore
thefactthathumanbeingsdonotalwaysactrationally.Marketpricesdosometimes
deviatefromfundamentals.Pricesriseorfallduetoinsidertrading,speculation,
rumour,andahostofotherfactors.
Thisistruetoanextentbutstrengthoffundamentalanalysisisthataninvestment
decisionisarrivedatafteranalyzinginformationandmakinglogicalassumptions
anddeductions.Furthermore,fundamentalanalysisensuresthatonedoesnot
recklesslybuyorsellsharesespeciallybuy.

Fundamentalanalysiscanbevaluable,butitshouldbeapproachedwithcaution.If
youarereadingresearchwrittenbyasellsideanalyst,itisimportanttobefamiliar
withtheanalystbehindthereport.Weallhavepersonalbiases,andeveryanalyst
hassomesortofbias.Thereisnothingwrongwiththis,andtheresearchcanstillbe
ofgreatvalue.Learnwhattheratingsmeanandthetrackrecordofananalystbefore
jumpingoffthedeepend.Corporatestatementsandpressreleasesoffergood
information,buttheyshouldbereadwithahealthydegreeofskepticismtoseparate
thefactsfromthespin.Pressreleasesdon'thappenbyaccident;theyarean
importantPRtoolforcompanies.Investorsshouldbecomeskilledreaderstoweed
outtheimportantinformationandignorethehype.

65

Toconcludewecansaythat:
Fundamentalsofanycompanyarethemostimportantinformationthatanyinvestor
mustcollectandanalyse.
Thepublicsectorbankswillseeanupswinginthenearfuturebecausethereisa
hugerequirementofthefundsfromboththesectorgoodsaswellasservices.The
bankingindustryseesabrightfutureahead.Thisindustryhashugegrowth
prospects.
OncomparingvariousPublicsectorbankswitheachotheronthebasisofthe
financialsBankofIndiawasfoundtobethebestforavalueinvestment.
Fundamentalanalysishelpsaninvestortotakerationaldecisionsonbuyingor
sellingofaspecificstockespeciallybuying.

66

RECOMMANDATION

67

TheanalysiscarriedoutatIndiaInfolineofthepublicsectorbanks,theirprofitand
lossaccount,balancesheetandratiosIshallsuggeststheinvestorstogivepriorityto
BANKOFINDIAthanotherbanksasavalueinvestment.Thereasonisobvious
thatthebankisfundamentallyverystrong.
Thereturnthatthebankhasgivenontheshareholdersinvestmentissubstantially
good.Theprofitgrowthofacompanyisatrueindicatorofacompanystrue
performanceanddueweightagemustbegiventoit.Thepriceofthestockislow
whichattractssmallinvestors.Thekindofprofitthebankisgeneratingoverthe
periodisquitappreciable.Thecapitalappreciationoftheshareisalsogoodforthe
investor.Thefundamentaloftheeconomyarealsostrongandlooksthatthemarket
wouldbetouchingnewhighs.

68

BIBLIOGRAPHY:
Websites:www.moneycontrol.comwww.bankofbaroda.com
www.bankofindia.comwww.nseindia.comwww.indiainfoline.com
www.equitymaster.comwww.rbi.org.inwww.wikipedia.com

Magazines:
DalalStreet.
FinancialDaily:
EconomicTimes.
Books:
SecurityAnalysisandPortfolioManagementPrasanaChandraBanking
LawandPractice.H.C.Agarwal

69

70