Equity Analysis

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INTRODUCTION

India is a developing country. Nowadays many people are interested to invest in
financial markets especially in equities to get high returns, and to save tax in honest
way. Equities are playing a major role in contribution of capital to the
business from the beginning .Since the introduction of shares concept, large
numbers of investors are showing interest to invest in stock market.

In an industry with uncertainty, stock market is increasingly difficult to predict, if
one looks hard enough there may still be a genuine aid for the Day Trader
and Short Term Investor. The price of a security represents an agreement. It is the
price at which one person agrees to buy and another agrees to sell. The price
at which an investor is willing to buy or sell depends primarily on his
expectations. If he expects the security' s price to rise, he will buy it; if the
investor expects the price to fall, he will sell it. These simple statements are the cause
of a major challenge in forecasting security prices, because they refer to human
e x p e c t a t i o n s .

As we a l l k n o w, h u ma n s e x p e c t a t i o n s a r e n e i t h e r e a s i l y
quantifiable nor predictable. If prices are based on investor expectations,
then knowing what a security should sell for (i.e., fundamental analysis)
becomes less important than knowing what other investors expect it to sell
for.

But there is usually a fairly strong agreement of a stock's future earnings that
the average investor cannot disprove Fundamental analysis and technical analysis can
co-exist in peace and complement each ot her . Si nce al l t he i nves t or s i n t he
s t ock mar ket want t o make t he maxi mum pr of i t s possible, they just
cannot afford to ignore either fundamental or technical analysis.

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1.1 LIMITATIONS

This study has been conducted purely to understand Equity analysis of
Banking and IT sectors
The study is restricted to six companies (Banking - AXIS, ICICI, HDFC and
IT TCS, INFOSYS, WIPRO ) based on Fundamental analysis
Detailed study of the topic was not possible due to limited size of the project.
There was a constraint with regard to time allocation for the research study
i.e. for a period of 60 days.
Suggestions and conclusions are based on the limited data of one years.

1.2 OBJECTIVES OF THE STUDY

The objective of this project are
To analyze our Indian Banking and IT sectors for investment purpose by
monitoring the growth rate and performance on the basis of historical
data.
Compar at i ve anal ys i s of t he compani es under s t udy
Suggesting as to which companys shares would be best to invest.

1.3 SCOPE
The scope of the report is limited to understanding the basics of fundamental
analysis and apply it to take decision regarding investments in Indian banking and
IT sectors.

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Ch.2 OVERVIEW OF INDIAN BANKING SECTOR
The origin of banking in India can be traced back to almost the Vedic period. The
transformation from pure money lending to proper banking appears to have taken
place before the times of Manu. Manu, a great Hindu jurist, has devoted a section of
his work explaining the deposits and advances and he even laid down certain rules on
rates of interest.
Throughout Mauryan period and later desi bankers played some role in the economy
of the country. However, it was during the Moghul period that indigenous bankers
started playing a vital role in lending money and financing of the foreign trade and
commerce.
Now, India is one of the top 10 economies globally, with enormous potential for the
banking sector to grow. The last decade witnessed a tremendous rise in transactions
through ATMs, Internet and mobile banking. In 2014, the countrys Rs 81 trillion
(US$ 1.34 trillion) banking industry is set for a greater change. Two new banks have
already received licenses from the government. Additionally, the Reserve Bank of
Indias (RBI) new norms will provide incentives to banks to spot potential bad loans
and take corrective steps that will curb the practices of borrowers.

The Indian governments role in expanding the banking industry has been significant.
Through the Financial Inclusion Plan (FY 1013), banking connectivity in the country
increased more than three-fold to 211,234 villages in 2013 from 67,694 at the start of
the plan.

Banks are also looking at new ways to attract customers. In September, 2013, ICICI
bank leveraged the popularity of the social platform, and launched its Facebook
banking service. The service enables customers to transfer funds and pay bills from
the website

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2.1 Market Size

The revenue of Indian banks increased four-fold from US$ 11.8 billion to US$ 46.9
billion during the period 20012010. In the same period, the profit after tax increased
from US$ 1.4 billion to US$ 12 billion.

In 201314, Indian banks had 170 overseas branches (163 in 201213) while foreign
banks had 316 branches in India (309 in 201213).

Credit to housing sector grew at a compound annual growth rate (CAGR) of 11.1 per
cent during the period FY 200813. Total banking sector credit is expected to grow at
a CAGR of 18.1 per cent (in terms of INR) to touch US$ 2.4 trillion by 2017.

78.2 77.2
17.1 18.8
4.7 3.9
0
20
40
60
80
100
120
FY5 FY14
Public sector Banks Private sector Banks Foreign Banks
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Ch. 3 STRUCTURE OF INDIA BANKING SECTOR

Reserve Bank of
India
Banks
Scheduled
commercial Banks
(SCBs)
Public Sector
Banks (26)
Private Sector
Banks (21)
Foreign Banks (43)
Regional Rural
Banks (52)
Rural Cooperative
Credit Institutions
(96,751)
Cooperative credit
Institutions
Urban Cooperative
Banks (1,674)
Financial Institutes
All- India Financial
Institutions
State-level
Institutions
Other Institutions
Source: RBI Reserve Bank of India
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Ch.4 EVOLUTION OF INDIAN BANKING SECTOR

Indian banking industry has its foundations in the 18th century, and has had a varied
evolutionary experience since then. The initial banks in India were primarily traders
banks engaged only in financing activities. Banking industry in the pre-independence
TRIGGER

PHASES MAJOR
CHANGES
Beginning of
institutional banking
with 3 joint stock
Acceptance of
recommendations of
the Narasimham
committee
Hike in the FID ceiling
for banking sector &
roadmap for
liberalization
Nationalization of
imperial bank and 20
other scheduled
Phase 4
Liberalisation
continues
Phase 1
Per
Nationalistion
Phase
Phase 2
Era of
Nationalisation
and consolidation
Phase 3
Introduction of
Indian financial
&banking sector
Reforms and
partial
liberalisation
Phase 4
Period of
increased
Liberalisation
Birth of joint
stock banking
companies
Introduction of
deposit banking
and bank
branches
State bank of
India formed out
of imperial bank
20 SCBs
nationalized
Introduction of
social banking
FDI Ceiling for
the banking
sector increased
to 74%
Roadmap for
inclusion of
foreign banks
declared.
Major changes in
prudential
regulations
Interest rates
deregulated
Entry of Private
sector players
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era developed with the Presidency Banks, which were transformed into the Imperial
Bank of India and subsequently into the State Bank of India. The initial days of the
industry saw a majority private ownership and a highly volatile work environment.
Major strides towards public ownership and accountability were made with
nationalisation in 1969 and 1980 which transformed the face of banking in India. The
industry in recent times has recognised the importance of private and foreign players
in a competitive scenario and has moved towards greater liberalisation.
In the evolution of this strategic industry spanning over two centuries, immense
developments have been made in terms of the regulations governing it, the ownership
structure, products and services offered and the technology deployed.
4.1 RECENT DEVELOPMENTS

Infrastructure Development Finance Company (IDFC) and Bandhan Financial
Services Pvt. Ltd. have been chosen among a field of 25 banks by the RBI to set up
banks. Approval has been given to the banks, which are both non-banking finance
companies.
The bank seeks to continue catering to a rural and unbanked customer base from its
current branch network.
Banks and housing finance companies (HFCs) together enjoyed a 20 per cent growth
in home loans in FY 201314, according to Mr RV Verma, Chairman and Managing
Director, National Housing Bank.
Home loans disbursed by banks and HFCs collectively grew by Rs 1.60 trillion (US$
26.59 billion) in FY 201314 to reach Rs 9.60 trillion (US$ 159.58 billion) at the end
of the fiscal.
Jammu and Kashmir (J&K) Bank is looking at opportunities to increase its presence
outside the country. The bank is likely to establish branches in London and Dubai to
strengthen its relationships with current customers who have business interests in
Europe and West Asia.

Indian banks operating abroad enjoyed a higher credit growth in comparison to
foreign banks operating in India, as per an RBI survey on international trade in
banking services for 201213.
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According to the survey, growth of credit extended by Indian banks branches
operating overseas grew by 31.7 per cent to Rs 585,570 crore (US$ 97.36 billion);
credit extended by foreign banks based in India increased 27.5 per cent to touch Rs
307,700 crore ($51.15 billion).
Strong growth in agriculture and services sectors as well as the personal loans
segment has helped push bank credit growth during the period AprilNovember, 2013
to 7.2 per cent, compared to 6.6 per cent during the same period of 2012, according to
a report by credit rating agency CARE Ratings. During the period, loans to the
agriculture sector grew by 5.2 per cent compared to 2.3 per cent in 2012.

ICICI Bank is looking at different ways to maximize the digital opportunity for
growth. The bank is doubling the number of cities it covers with 'tablet banking' and
offering its customers services such as video conferencing, so they can talk to the
money managers from the comfort of their homes.

Bank of India (BoI) launched its card-less cash withdrawal facility in March 2014.
Under this service, a BOI customer can transfer money to anyone, using the banks
ATMs or through Internet banking. The sender has to provide the beneficiarys
mobile number, a sender code, and the amount through internet banking or text
message. The beneficiary, after receiving a code from the bank can visit any BOI
ATM with instant money transfer facility and withdraw the money within a fortnight
of the transfer.

4.2 GOVERNMENT INITIATIVES
The RBI has issued extra guidelines for banks giving gold metal loans (GMLs). To
safeguard against fraud, the central bank has asked lenders to check the credit
worthiness of borrowers; collateral securities against the loan; and trade cycle of the
manufacturing activity, before sanctioning the loans.
The Cabinet Committee on Economic Affairs (CCEA) has given the green signal to a
proposal to increase foreign holding in Axis Bank from 49 per cent to 62 per cent.
The move could bring in overseas investment of nearly Rs 7,250 crore (US$ 1.20
billion) into the country. The CCEA nod is dependent on FIIs holding capped at 49
per cent.
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4.3 ROAD AHEAD
Indias banking sector has the potential to become the fifth largest banking sector
globally by 2020 and the third largest by 2025. The industry has witnessed noticeable
development, with deposits growing at a CAGR of 21.2 per cent (in terms of INR) in
the period FY 0613; in FY 13 total deposits stood at US$ 1,274.3 billion.
Today, banks are turning their focus to servicing clients. Banks in the country,
including those in the public sector, are emphasizing on enhancing their technology
infrastructure, in order to improve customer experience and gain a competitive edge.
The popularity of internet and mobile banking is higher than ever before, with
Customer Relationship Management (CRM) and data warehousing expected to drive
the next wave of technology in banks. Indian banks are also progressively adopting an
integrated approach to risk management. Most banks already have in place the
framework for assetliability match, credit and derivatives risk management.

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Ch. 5 FUNDAMENTAL ANALYSIS

5.1 Economy Analysis
1) Gross Domestic product
GDP is one measure of economic activity. This is the total amount of goods and
services produced in a country in a year. It is calculated by adding the market values
of all the final goods and services produced in a year.
It is a gross measurement because it includes the total amount of goods and services
produced, of which some merely replace goods that have depreciated or have worn
out.
It is domestic production because it includes only goods and services produced
within the country.

721.6
834.2
949.1
1238.7
1224.1
1365.4
1710.9
1872.9
1841.7
0
200
400
600
800
1000
1200
1400
1600
1800
2000
2005 2006 2007 2008 2009 2010 2011 2012 2013
India GDP
Billions of U.S. Dollars
2000

1800

1600

1400

1200

1000

800

600

400

200

0
Source: www.tradingeconomics.com | World Bank Group
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The Gross Domestic Product (GDP) in India expanded 1 percent in the fourth quarter
of 2013 over the previous quarter. GDP Growth Rate in India averaged 1.62 Percent
from 1996 until 2013, reaching an all time high of 5.80 Percent in the fourth quarter
of 2003 and a record low of -1.90 Percent in the first quarter of 2009.
In India, the growth rate in GDP measures the change in the seasonally adjusted value
of the goods and services produced by the Indian economy during the quarter. India is
the worlds tenth largest economy and the second most populous.

The most important and the fastest growing sector of Indian economy are services.
Trade, hotels, transport and communication; financing, insurance, real estate and
business services and community, social and personal services account for more than
60 percent of GDP. Agriculture, forestry and fishing constitute around 12 percent of
the output, but employs more than 50 percent of the labor force. Manufacturing
accounts for 15 percent of GDP, construction for another 8 percent and mining,
quarrying, electricity, gas and water supply for the remaining 5 percent. This page
provides - India GDP Growth Rate - actual values, historical data, forecast, chart,
statistics, economic calendar and news.

60%
12%
15%
8%
5%
Contribution Towards GDP
services
Agriculture, forestry and
fishing
Manufacturing
construction
mining, quarrying, electricity,
gas and water supply
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2) Inflation
Inflation can be defined as a trend of rising prices caused by demand exceeding
supply. Over time, even a small annual increase in prices of say 1 % will tend to
influence the purchasing power of the nation.
In others word, if prices rise steadily, after a number of years, consumers will be able
to buy only fewer goods and services assuming income level does not change with
inflation.

The inflation rate in India was recorded at 8.28 percent in May of 2014. Inflation Rate
in India averaged 9.62 Percent from 2012 until 2014, reaching an all-time high of
11.16 Percent in November of 2013 and a record low of 7.55 Percent in January of
2012. Inflation Rate in India is reported by the Ministry of Statistics and Programme
Implementation (MOSPI), India.
Historically, the wholesale price index (WPI) has been the main measure of inflation
in India. However, in 2013, the governor of The Reserve Bank of India Raghuram
Rajan had announced that the consumer price index is a better measure of inflation.

9.87
9.64
9.52
9.84
10.17
11.16
9.87
8.79
8.03
8.31
8.59
8.28
0
2
4
6
8
10
12
India Inflation Rate
Annual Change on Consumer price index
12

10

8

6

4

2

0
Source: www.tradeeconomics.com | Ministry of Statistics and progamme Implementation ,India
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I ndia Consumer I nflation Declines in May
Indian annual consumer prices slow down to 8.28 percent in May of 2014 from 8.59
percent in April. It is the lowest rate in three months as food prices slowed slightly.
Provisional estimates showed food cost representation at a slower 9.4 percent year-on-
year in May, down from 9.66 percent in the previous month. Prices of fruit
accelerated to 23.17 percent (21.73 percent in April) while cost of vegetables slowed
to 15.27 percent (from 17.5 percent).
Meanwhile, prices of fuel and light decelerated to an annual 5.07 percent (5.96
percent in April) and clothing and footwear cost was marginally higher at 8.86 percent
(8.83 percent in the previous period).
The corresponding provisional inflation rates for rural and urban areas for May of
2014 are 8.86 percent and 7.55 percent.

3) Interest rate
Interest rate is the price of credit. It is the percentage fee received or paid by
individual or organization when they lend and borrow money.
In general, increases in interest rate, whether caused by inflation, government policy,
rising risk premium, or other factors, will lead to reduced borrowing and economic
slowdown.

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The benchmark interest rate in India was last recorded at 8 percent. Interest Rate in
India averaged 6.64 Percent from 2000 until 2014, reaching an all time high of 14.50
Percent in August of 2000 and a record low of 4.25 Percent in April of 2009. Interest
Rate in India is reported by the Reserve Bank of India.
In India, interest rate decisions are taken by the Reserve Bank of India's Central Board
of Directors. The official interest rate is the benchmark repurchase rate. This page
provides - India Interest Rate - actual values, historical data, forecast, chart, statistics,
economic calendar and news.
I ndia Holds Policy Rate at 8%
At its June 3rd, 2014 meeting, Reserve Bank of India left the repo rate at 8 percent,
but cut the amount of government bonds banks must hold with the central bank - the
statutory liquidity ratio - by 50 bps to 22.5 percent, aiming to increase bank credit.
The cut in statutory liquidity ratio will take effect from the fortnight beginning June
14, 2014. The central bank also decided to reduce the liquidity provided under the
export credit refinance facility from 50 per cent of eligible export credit outstanding
to 32 per cent with immediate effect. Policymakers introduced a special term repo
facility of 0.25 per cent of net demand and time liabilities to compensate fully for the
reduction in access to liquidity under the ECR with immediate effect.
7.2
7.4
7.6
7.8
8
8.2
India Interest Rate
Benchmark Interest Rate
8.2

8

7.8

7.6

7.4

7.2
Source :www.tradingeconomics.com | Reserve Bank Of India
Page | 15

5.2 INDUSTRY ANALYSIS

Porters 5 Force Analysis For Banking Sector

Porters model is, applied microeconomic principles to business strategy and
analyzed the strategic requirements of industrial sectors, not just specific companies.
The five forces are competitive factors which determine industry competition and
include: suppliers, rivalry within an industry, substitute products, customers or buyers,
and new entrants.
Porters 5 force model can help us determine the factors involved and various market
forces that influence the functioning of the Bank business model. It helps in
understanding the level of competition the banking industry faces, competition is an
important factor to determine the level of profits the banking industry can achieve.
Understanding the model helps banking industry to gauge its market positions.
Understanding the competitors in the market can help the banking industry to gauge
its strengths and weakness, and better equip itself to face the ever changing trends in
the market, to optimize its profitability.

Let us study the factors:
1) Bargaining Power of Suppliers to Banking industry
The term 'suppliers' comprises all sources for inputs that are needed in order to
provide goods or services. Supplier bargaining power is likely to be high when:
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RBI( Reserve Bank Of India) is the supreme controller of the functioning of
the bank.
Interest rates play a major role in the functioning of the bank.
Valuations of Dollar, Euro and Rupee play a major role.
Lending and borrowing capability of the bank.
The functioning of the bank is very sensitive to the fluctuations in the interest
rates of the Federal Reserve Bank in the US.
Since the bank has offshore operations in many countries its interest rate
policy and products are directly related to the law of the land and the economy
of the country.
Analysis : The Bargaining Power of Suppliers is high as there is rise in
investment avenues like Mutual Funds, Tax-free bonds, Equity market etc.
Providers of funds could be more demanding. As quality of services provided
with minimum time matters a lot.

The bank does not have direct influence on the prevailing conditions it should adapt to
the market and economic conditions.
2) Bargaining Power of Customers for Banking industry
Similarly, the bargaining power of customers determines how much customers can
impose pressure on margins and volumes. Customers bargaining power is likely to be
high when:
They take large volumes of loans and deposit large sums of money; there is a
concentration of buyers.
The consumers have a wide choice of banks and services to choose, which
offer very attractive offers for the consumers.
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Retail lending (especially mortgage financing) formed a significant portion of
the portfolio for banking industry and they have customized their products to
cater to the diverse demands.
With better penetration in the semi urban and rural areas the bank garnered a
higher proportion of low cost deposits thereby economizing on the cost of
funds.
Apart from streamlined their processes through technology initiatives such as
ATMs, telephone banking, online banking and web based products, banking
industry also resorted to cross selling of financial products such as credit cards,
mutual funds and insurance policies to augment their fee based income.
Analysis: Bargaining power of customers is very high, as banks have also forayed
into the long-term finance.
Banking, instead of taking the conventional branch banking model for increasing its
outreach, the Bank decided to work with models which would combine the strengths
of intermediary forms of organization with the financial bandwidth of a banking
institution.
3) Threat of New Entrants for banking industry
The competition in this industry will be the higher, if it is easier for other
companies to enter this industry. The threat of new entries will depend on the extent
to which there are barriers to entry. These are typically:
Economies of scale (minimum size requirements for profitable operations)
High initial investments and fixed costs
Cost advantages of existing players due to experience curve effects of
operation with fully depreciated assets
Bank reputation and brand loyalty of customers
Protected intellectual property like patents, licenses, etc.
Scarcity of important resources, e.g. qualified expert financial experts and
adequate staff
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Good network of branches with ATMs channels are controlled by existing
players
Existing players have close customer relations, e.g. from long-term financial
service contracts
Moderate switching costs for customers
Analysis: Licensing and Government and RBI requirements, investment in
technology, skills required for financial management, distribution reach, good
branch networks. The entry of foreign banks is posing a big challenge.
4) Threat of Substitutes for banking industry
A threat from substitutes exists if there are alternative banking services available
with lower prices of better performance parameters for the same purpose. They could
potentially attract a significant proportion of market volume and hence reduce the
potential sales volume for the bank. This category also relates to complementary
products. Similarly to the threat of new entrants, the threat of substitutes is determined
by factors like:
Close customer relationships
Switching costs for customers
Performance of substitutes
Current trends
High returns during Bull market.
People are not very conservative and are risk takers.
Non-banking financial companies (NBFCs) are privately owned financial
intermediates focusing mainly on leasing, hire purchase, car and consumer durable
finance, investment banking and advisory services.
NBFCs are able to earn higher returns due to their ability to manage high-risk
assets. For instance auto financing is high yielding.
Banking industry also faces strong competition from mutual funds and stock
markets.
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Investors awareness of trading in the Indian capital markets is a serious threat to
the Revenue generation of banking industry.

Analysis: Threat of substitutes is also high as there are large numbers of
investment and borrowing avenues. NBFCs and small co-operative banks are
also posing a major threat to the market share of the bank.

5) Competitive Rivalry between Existing Players for banking industry
This force describes the intensity of competition between existing players
and banking industry in financial markets. Competition between existing players is
likely to be high when
There are many players of about the same size
Players have similar strategies
There is not much differentiation between players and their products, hence,
there is much price competition
Low market growth rates (growth of a finance organization / individual is
possible only at the expense of a competitor)
Barriers for exit are high (e.g. expensive and highly specialized service
oriented approach)
Less paper work in case of rural / local financers
Analysis: There are numerous informal financing in the rural area. There is
intense competition due to the large number of capital markets in India for
investing.

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5.3 COMPANY ANALYSIS

Company Profile
Vision

To be the preferred financial solutions provider excelling in customer delivery
through insight, empowered employees and smart use of technology

Traded as BSE: 532215
LSE: AXBC
NSE: AXISBANK
Industry Banking, Financial services
Founded 1994 (as UTI Bank)
Headquarters Mumbai, Maharashtra, India
Key people Dr. Sanjiv Misra (Chairman)
Shikha Sharma (MD & CEO)
Products Credit cards, consumer banking, corporate banking,finance and
insurance,investment banking, mortgage loans, private
banking, private equity, wealth management
Revenue 340 billion (US$5.7 billion) (2012)
Employees 42,420 (on 31-March-2014)
Website www.axisbank.com

Page | 21

Balance Sheet of Axis Bank

Mar '14
Particulars in Rs. Cr.
Capital And Liabilities:
Total Share Capital 469.84
Equity Share Capital 469.84
Preference Share Capital 0
Reserves 37,750.64
Net Worth 38,220.48
Deposits 280,944.56
Borrowings 50,290.94
Total Debt 331,235.50
Other Liabilities & Provisions 13,788.89
Total Liabilities 383,244.87
Assets:
Cash & Balances With RBI 17,041.32
Balance With Banks, Money At Call 11,197.38
Advances 230,066.76
Investments 113,548.43
Gross Block 2,310.54
Accumulated Depreciation 0
Net Block 2,310.54
Capital Work In Progress 99.67
Other Assets 8,980.79
Total Assets 383,244.89
Book Value (Rs) 813.47
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Profit & Loss Account of Axis Bank
Mar '14
Particulars In Rs. Cr.
Income
Interest Earned 30,641.16
Other Income 7,405.22
Total Income 38,046.38
Expenditure
Interest Expended 18,689.52
Employee Cost 2,601.35
Selling And Admin Expenses 0
Depreciation 363.93
Miscellaneous Expenses 10,173.91
Preoperative Exp Capitalised 0
Operating Expenses 7,900.77
Provisions & Contingencies 5,238.42
Total Expenses 31,828.71

Net Profit For The Year 6,217.67
Extra ordionary Items 0
Profit Brought Forward 10,029.26
Total 16,246.93
Preference Dividend 0
Equity Dividend 939.69
Corporate Dividend Tax 161.44
Per Share Data (Annualised)
Earning Per Share (Rs) 132.33
Equity Dividend (%) 200
Appropriations
Transfer To Statutory Reserves 1,644.36
Transfer To Other Reserves -0.01
Proposed Dividend/Transfer To Govt 1,101.13
Balance C/F To Balance Sheet 13,501.45
Total 16,246.93
Page | 23

Company Profile
Vision

To be customer driven best managed enterprise that enjoys market leadership in
providing housing related finance.

Type Public
NSE: HDFCBANK
BSE SENSEX Constituent
Founded August 1994
Headquarters Mumbai, Maharashtra, India
Area served Worldwide
Key people Aditya Puri (MD)
Products Credit cards, consumer banking, corporate banking,finance and
banking, private equity, wealth management
Revenue US$ 6.5 billion (March 2013)
Employees 69,065 (March 2013)
Website HDFCBank.com

Page | 24

Balance Sheet of HDFC Bank
Mar '14
Particulars In Rs. Cr.
Capital And Liabilities:
Share Application Money 0
Reserves 42,998.82
Revaluation Reserves 0
Net Worth 43,478.63
Deposits 367,337.48
Assets
Cash & Balances With Rbi 25,345.63
Balance With Banks, Money At Call 14,238.01
Advances 303,000.27
Net Block 2,939.92
Capital Work In Progress 0

Page | 25

Profit & Loss account of HDFC Bank
Income
Expenditure
Interest expended 22,652.90
Selling and Admin Expenses 0
Depreciation 671.61
Net Profit for the Year 8,478.38
Extraordionary Items 0
Profit brought forward 11,132.18
Total 19,610.56
Equity Dividend 1,643.35
Per share data (annualised)
Appropriations
Transfer to Statutory Reserves 2,185.93
Transfer to Other Reserves 847.84
Proposed Dividend/Transfer to Govt 1,922.64
Balance c/f to Balance Sheet 14,654.15
Total 19,610.56

Page | 26

Company Profile
Vision

To be the leading provider of financial services in India and a major global
bank

Type Public company
NSE: ICICIBANK
Founded 1954
Headquarters Mumbai, India
Key people K.V. Kamath (Chairman)
Ms.Chanda Kochhar (MD & CEO)
Products Credit cards, Consumer banking, corporate banking,finance and
banking, wealth management
Revenue US$ 13.52 billion (2012)
Employees 81,254 (2012)
Website www.icicibank.com

Page | 27

Balance Sheet of ICICI Bank

Mar '14
Particular in Rs. Cr.
Capital and Liabilities:
Total Share Capital 1,155.04
Equity Share Capital 1,155.04
Share Application Money 6.57
Reserves 72,051.71
Net Worth 73,213.32
Deposits 331,913.66
Assets
Cash & Balances with RBI 21,821.83
Balance with Banks, Money at Call 19,707.77
Advances 338,702.65
Net Block 4,678.14
Capital Work In Progress 0
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Profit & Loss account of ICICI Bank

Mar '14
Income
Expenditure
Interest expended 27,702.59
Depreciation 575.97
Net Profit for the Year 9,810.48
Extraordionary Items 0
Profit brought forward 9,902.29
Total 19,712.77
Appropriations
Transfer to Statutory Reserves 3,506.65
Transfer to Other Reserves 0
Proposed Dividend/Transfer to Govt 2,887.53
Balance c/f to Balance Sheet 13,318.59
Total 19,712.77
Page | 29

FUNDAMENTAL ANALYSIS
Ratio analysis for 2014
Particulars Axis Bank HDFC Bank ICICI Bank

No.Of Equity Shares( in cr.) 46.984 239.905 115.504
Face Value 10 2 10

MPS (6-June-2014) 1974 814.95 1481.75
Earnings Per Share 132.34 35.34 84.94

Interpretation
It shows how much of a company's profit is allotted to the Companies
outstanding stocks.
It can be used as one of the comparison tools for picking up the stock for
investment.
From investor point Axis Bank seems to better than ICICI and HDFC as its
EPS is considerably high

0
20
40
60
80
100
120
140
Axis Bank HDFC Bank ICICI Bank
132.34
35.34
84.94
Earnings Per Share
Page | 30

Dividend Per Share 20 6.85 23
Dividend (% increase) 11 25.45 15

Interpretation
Dividends are a form of profit distribution to the shareholder. All the three banks have
a growing dividend per share which can be a sign that the Bank's management
believes that the growth can be sustained. But we can say that HDFC bank as
compared to others has a higher percentage increase in dividend, this would attract the
investors to invest. Although this doesnt provide an overall outlook on a company as
some companies retain their earnings for growth instead of paying dividends.

0
5
10
15
20
25
30
Axis Bank HDFC Bank IC ICI Bank
11%
25.45 %
15 %
20
6.85
23
Dividend (% increase) Dividend Per Share
Page | 31

Particulars ( in %) Axis Bank HDFC Bank ICICI Bank
Advance/Deposit Ratio 81.89 82.49 102.05
Investment/Deposit Ratio 40.42 32.93 53.33
Cash/Deposit Ratio 3.99 10.78 12.51

Interpretation
Advances are necessary to earn profit and service the interest being paid to the
deposits.
I nvestment deposit ratio basically gives information that where bank is using there
deposit i.e. in development , economy wealth and many other sector where bank can
put their money for investment so that
Bank earn more interest .
Cash being liquid of all the assets gives the direct picture of the liquidity of the bank.
But large volume of the cash in the system is harmful for the profit of the bank.
So, from the above chart we can infer that:
Advances to deposit ratio of axis banks and HDFC Bank as compared to ICIC
Bank shows that ICICI Bank has given large amount of advances with respect
to their deposits.
Investment to deposit ratio of axis banks and HDFC Bank as compared to
0.00
20.00
40.00
60.00
80.00
100.00
120.00
81.89 82.49
102.05
40.42
32.93
53.33
10.05
10.78 12.51
Deposit Ratios
Advance/Deposit Ratio Investment/Deposit Ratio Cash/Deposit Ratio
Page | 32

ICIC Bank shows that it has invested large amount of their deposits in various
sectors.
On an average Banks in India maintains ?? % cash in hand to the deposit that
they have.

Page | 33

Interest Expended/Interest Earned
Ratio
60.99 55.07 62.71
Other Income/Total Income 19.46 16.14 19.10

Interpretation
Interest expended to interest earned ratio represents the expenses over the
earnings. The above chart shows all the three banks have more than 50%
expenses. It means expenses are more than the earnings, which is not a good
indicator. But relatively HDFC Bank has a better expense - income ratio.
Other income/Total income ratio represents how much income of the bank is
coming from other than interest income. The chart shows that HDFC Bank
relatively has low % of income from other Income.

0.00
10.00
20.00
30.00
40.00
50.00
60.00
70.00
60.99
55.07
62.71
19.46
16.14
19.10
Interest Expended/Interest earned Ratio Other Income/Total Income
Page | 34

Interest Expended/Total Funds 4.88 5.03 4.95
Interest Income/Total Funds 3.12 4.10 2.94
Non-Interest Income/Total Funds 1.93 1.76 1.86
Net Profit/Total Funds 1.62 1.88 1.75

Interpretation
The core activity of any bank is to provide credit, on which it earns interest. Thus
interest income is the most important income for any bank. Indian banks diversifying
their operation in many fields, yet interest income is one the major source of their
revenue. The interest income holds 70 to 80 percent weightage in nearly all banks
total income.
The chart above shows:
Represents the Interest income, non- Interest income, Interest expenses
and net profit over total funds.
Interest Income is more than the Interest expended for all three Banks.

has a relatively less income from interest.

4.88
5.03
4.95
1.93
1.76
1.86
1.62
1.88
1.75
8.00
8.37
7.43
0.00
1.00
2.00
3.00
4.00
5.00
6.00
7.00
8.00
9.00
Income ratios
Interest Expended/Total
Funds
Non-Interest Income/Total
Funds
Net Profit/Total Funds
Intrest income/total fund
Page | 35

Return on Net Worth [RONW] 16.27 19.50 13.40

Interpretation
The return on equity ratio (also known as the return on net worth) reveals the amount of
return earned by investors on their investments in a business. This return can be
improved by using more debt and less equity to fund its operations. But use of too
much of debt also may lead to financial problems in the business.
The above Chart shows that HDFC Bank has a Relatively higher Return on Net worth.
Having higher Return on equity presents a picture of a well-run business. Banks should
focus on this as it would attract the investors to invest in the Shares of HDFC Bank

0.00
5.00
10.00
15.00
20.00
Axis Bank
HDFC Bank
IC ICI Bank
16.27
19.50
13.40
Return on Net Worth [%]
Page | 36

Earning Retention Ratio 0.85 0.81 0.73
Dividend Payout Ratio 0.15 0.19 0.27
Sustainable growth rate (in %) 13.81 15.72 9.77

Interpretation

The dividend payout ratio is the amount of
dividends paid to stockholders relative to
the amount of total net income of a
company. The amount that is not paid out
in dividends to stockholders is held by the
company for growth. The amount that is
kept by the company is called retained
earnings.
The above chart shows that ICICI Bank is
able to give better returns to the
shareholders as compared to others.

Sustainable growth rate represents how
quickly a company can expand using
only its own sources of funding.
From the above charts we can say that
even though ICICI Bank is able to
provide better returns to its shareholder,
relatively HDFC Bank is able to better
sustain its growth rate with its own
retained earnings.

0.00
0.20
0.40
0.60
0.80
1.00
Axis
Bank
HDFC
Bank
IC ICI
Bank
0.15
0.19
0.27
0.85
0.81
0.73
Earning Retention Ratio
Dividend Payout Ratio
0.00
2.00
4.00
6.00
8.00
10.00
12.00
14.00
16.00
Axis
Bank
HDFC
Bank
IC ICI
Bank
13.81
15.72
9.77
Sustainable growth rate
Page | 37

Price earnings Ratio 14.92 23.06 17.45

Report Card
PE Ratios 14.62
EPS (Rs.)132.34
Sales (Rs. Cr)7,965.23
Face Value (Rs.)10
Net Profit
Margin (%)16.34
Last Bonus
Last Dividend(%)200
Return on
Average Equity 16.26
Report Card
PE Ratios
23.71
EPS (Rs.)
35.34
Sales (Rs. Cr)
10,788.56
Face Value (Rs.)
2
Net Profit
Margin (%)

17.28
Last Bonus
Last Dividend(%)
342.5
Return on
Average Equity

19.5

Report Card
PE Ratios
17.10
EPS (Rs.)
84.94
Sales (Rs. Cr)
11,489.25
Face Value (Rs.)
10
Net Profit
Margin (%)

17.96
Last Bonus
Last Dividend(%)
230
Return on
Average Equity

13.4

Page | 38

Interpretation
It is a valuation ratio of a company's current share price compared to its per share
earnings
Here we can see that HDFC bank has higher P/E ratio as compared to ICICI
bank and Axis Bank
A high P/E value suggests that investors are expecting higher earnings growth
in the future compared to companies with lower P/E

0.00
5.00
10.00
15.00
20.00
25.00
Axis Bank
HDFC Bank
IC ICI Bank
14.92
23.06
17.45
Price earning Ratio
Page | 39

Overview of Indian IT Sector
The power of Information Technology (IT) enables two-way communication between
consumers and the enterprise. Improved IT infrastructure like ATMs and online
payments have done away with the troubles of carrying big chunks of cash in your
pocket while travelling.
So, what exactly does IT cover? Anything involved with software, computers,
networks, intranets, Web sites, servers, databases and telecommunications falls under
the roof of IT. IT is the technology that helps companies store, process and flow data
within an organization. This sector ultimately serves other sectors like Banking,
Manufacturing, Telecom, Hotels, Hospitals etc. to improve their efficiency and
increase their revenues via customer satisfaction.
The Indian Information Technology (IT) and Information Technology enabled
Services (ITeS) sectors go hand-in-hand in every aspect. The industry has not only
transformed Indias image on the global platform, but also fuelled economic growth
by energizing higher education sector (especially in engineering and computer
science). The industry has employed almost 10 million Indians and hence, has
contributed a lot to social transformation in the country.
Furthermore, Indian firms, across all other sectors, largely depend on the IT & ITeS
service providers to make their business processes efficient and streamlined. Indian
manufacturing sector has the highest IT spending followed by automotive, chemicals
and consumer products industries.
Indian organisations are turning to IT to help them grow business in the current
economic environment.

Market Size
India's IT-business process outsourcing (BPO) industry revenue is expected to cross
US$ 225 billion mark by 2020, according to a Confederation of Indian Industry (CII)
report, titled 'The SMAC Code-Embracing New Technologies for Future Business'.
India has become world's second-largest online community after China with 213
million internet users by December 2013 and 243 million by June 2014, according to
Page | 40

a report by Internet and Mobile Association of India (IAMAI) and IMRB
International.
Indias total IT industrys (including hardware) share in the global market stands at 7
per cent; in the IT segment the share is 4 per cent while in the ITeS space the share is
2 per cent. India's IT and BPO sector exports grew by 12-14 per cent in FY14 to touch
US$ 84 billion - US$ 87 billion, according to Nasscom.
Moreover, India plans to spend around US$ 3.9 billion on cloud services during 2013-
2017, of which US$ 1.7 billion will be spent on software-as-a-service (SaaS),
according the latest outlook of IT research and advisory company, Gartner Inc.
Mumbai with 12 million internet users has emerged as the top most city in the country
with highest penetration of internet users, followed by Delhi (8.1 million) and
Hyderabad (4.7 million), according to the data released by Internet & Mobile
Association of India (IAMAI).

Page | 41

Segmentation for IT and ITeS Sectors

I
N
D
I
A
N

I
T

S
E
C
T
O
R

SOFTWARE
Software Products
Infrastructure
Software
Enterprise
Application
Software Engineering and R &
D Services
IT SERVICES
Project Oriented
Services
IT Consulting
Systems Integration
CADM
Networking
Consulting an
integration
Software Testing
IT Outsourcing
Application
Management
IS Outsourcing
Other (SOA, Web
Service, E- Commerce
Training and
Support
Hardware
Deployment and
support
Software Deployment
and support
IT education and
training
ITeS - BPO
Customer
Interaction services
Financing and
acounting
HR Services
KPO Services
Page | 42

1. IT- Software These companies help in developing and implementation of
different software for their clients worldwide. These softwares could be for
documentation, security services, banking softwares etc.

2. ITeS Business process outsourcing (BPO) Major Corporations across the world
outsources their back-office operations to some companies. E.g. Employee payroll for
a ABC companys global workforce is maintained by an Indian BPO. Slowly the
definition is expanding to Human resources, accounting, logistics, legal processes etc.

3. IT- Hardware - The stuff you can actually see and touch, and would likely break if
you threw it out a fifth-story window, is hardware. This would include laptops,
desktops, Storage devices, Networking devices, LCD, printers etc.
4. IT- Education: This segment provides training for employment in the other
segments. This would include companies providing various certification courses, like
Java, Oracle etc. These companies also provide training for employees in corporate
sector. Recently, some companies have also expanded this service to cater to schools
and colleges.

IT Hardware,
21.67%
BPO ITeS,
5.11%
IT Education,
1.52%
IT Sowftware,
71.70%
Segment- wise Market share
Page | 43

History and Evolution of IT Industry
The evolution of IT industry can be studied in 4 phases:

Phase IV: Post 2000
The dotcom crash and recession in the US
economy, proved to be a boon to Indian IT
industry.
The industry had registered a robust growth
rate because of increase in the number of
clients, large sized contracts and a strong global
delivery model.
Phase III: 1990- 2000
Trade liberalization, opening up of Indian
economy to foreign investment, devaluation of
the rupee and relaxation of entry barriers.
Due to the entry of many players in the Indian
market, the competition got intensified.
Phase II: 1980- 1990
Software exports were not picking up
because of two reasons mainly:
The exports of software, was heavily
dependent on the imports of hardware.
There was a lack of infrastructural facilities
for software development.
The government in 1986,
formulated Software Policy
which further, liberalized the
IT industry.
In 1990, government
established Software
Technology Parks of
India
Phase I: Prior to 1980
Software industry was literally
nonexistent in India until 1960.
In the West, the need for
software development was
gradually being felt
1974 marked the beginning of
Software exports from India
Page | 44

Phase I: Prior to 1980
The software industry was literally nonexistent in India until 1960. Software used in
the computers till that time, were in built with the systems. Government protected the
hardware industry through high tariff barriers and licensing. However, in the West,
the need for software development was gradually being felt as the software in built in
the system was not sufficient to perform all the operations. The Government of India
therefore, realized the potential for earning foreign exchange.
In 1972, the government formulated the Software Export Scheme. This scheme made
the provision of hardware imports in exchange of software exports. TCS became the
first firm to agree to this condition.
The year 1974 marked the beginning of Software exports from India.
Phase II: 1980- 1990
Despite the government initiatives, the software exports were not picking up because
of two reasons mainly:
was costly as well as the procedure for obtaining the same was very cumbersome.
here was a lack of infrastructural facilities for software development.
To counter these, the government formulated a New Computer Policy in 1984, which
simplified import procedures and also reduced the import duty on hardware for
software developers. In an attempt to make, software industry independent of the
hardware industry, the government in 1986, formulated Software Policy which
further, liberalized the IT industry. According to this policy, the hardware imports
were de-licensed and were also made duty free for the exporters. This along with the
world wide crash in the hardware prices reduced the entry barriers substantially.
In 1990, government established Software Technology Parks of India. This scheme
was formulated to increase the exports of software and services.

Page | 45

Phase III: 1990- 2000
This decade made several significant changes in the economy, including trade
liberalization, opening up of Indian economy to foreign investment, devaluation of the
rupee and relaxation of entry barriers.
These changes attracted many foreign entities (MNCs) to our nation. These MNCs in
India, introduced Offshore Model for software services, according to which, the
companies used to service their clients from India itself. This model further graduated
to Global Delivery Model (GDM). Global Delivery Model is a combination of Onsite
and Offshore Model. In this model, the Offshore Development Centre is located at
various locations across the globe.
During this period due to the entry of many players in the Indian market, the
competition got intensified. Therefore, the players started investing in research and
development to distinguish their services from others.
Phase IV: Post 2000
The global problems like the Y2K, the dotcom crash and recession in the US
economy, proved to be a boon to Indian IT industry. The Y2K problem demanded the
existing softwares to be compatible to the year 2000. Due to the shortage of US
based programmers during this period, many mid-sized firms were forced to utilize
the services of Indian firms. This had placed the Indian IT industry on the global map.
Post 2002- 03, the industry had registered a robust growth rate because of increase in
the number of clients, large sized contracts and a strong global delivery model.

Page | 46

TOP PLAYERS IN INDIAN IT SECTOR
This sector has made significant contributions to Indias economic growth in terms of
GDP increase, foreign exchange earnings as well as employment generation. Its
contribution to GDP has increased tenfold in last decade, from 0.6% to 6% till 2009-
10. The sector has helped India transform from a rural and agriculture-based economy
to a knowledge-based economy. Besides this, the lives of people have been positively
influenced by direct or indirect contribution of IT sector to various parameters such as
employment, standard of living, per-capita income etc.
TOP PLAYERS IN THEINDIAN IT INDUTRY
Segment Top Players
IT- Software Infosys, TCS, Wipro, HCL Tech.
ITeS- BPO Eclerx Services, iSmart Global, 3i Infotech
IT Hardware HCL infosystem, Zenith Computers, Smartlink Networking
IT Education Aptech, NIIT, Educomp Solution

In India, the IT Software segment has seen significant growth and has put India on the
global map. It contributes for almost 75% of the total revenues of the IT sector.
Though Hardware enjoys second place in terms of market share in India, it is quite
low as compared to global benchmark. The BPO segment has grown well and is
expected to make a footprint in the IT Sector.
The software sector is service-oriented and thus the products offered are tailored to
the requirement of its client. Hence, major input costs are those of human resources
(forming almost 40% of the total costs) and research and development. Companies
understand the requirements of clients and the product is developed accordingly.
In the last ten years the IT sector in India has grown at an average annual rate of 28%.
India has emerged as the preferred destination for IT services owing to the cost
advantage and talent pool.

Page | 47

India accounts for almost 51% of the global sourcing market. Exports contribute
around 75% of the total revenue of the IT sector in India. However due to increase
export-orientation and lesser domestic consumption the sector suffered major hit in
the recession that shook the globe in 2008-09. In the year 2010, different economies
began seeing recovery, but at varying pace. Indian companies have subsequently
begun tapping other geographical markets and domestic consumption has also
relatively increased.

Investments
Indian IT's core competencies and strengths have placed it on the international canvas,
attracting investments from major countries.
According to data released by the Department of Industrial Policy and Promotion
(DIPP), the computer software and hardware sector has attracted foreign direct
investment (FDI) worth Rs 54,347.88 crore (US$ 8.77 billion) between April 2000
and September 2013.
Some of the major investments in Indian IT and ITeS sector:
Wipro plans to acquire US-based mortgage due diligence and risk
management service provider Opus Capital Markets Consultants (Opus CMC)
for Rs 465 crore (US$ 75.07 million). Opus CMC provides comprehensive
risk management solutions to the mortgage industry in the US.
Infosys has opened a new centre in Sydney, Australia. This is its fourth
development centre in Australia and has a capacity to seat 140 employees.
Further, the company plans to hire 85 people in the region.
Hitachi has acquired a foothold in India's payment space with the acquisition
of Prizm Payment Services. The firm has entered into share transfer
agreements with Prizm shareholders, including Winvest Holdings (India),
Sequoia Capital and Axis Bank.
Dell has opened its India design centre for its storage technologies and has
realigned its domestic research and development (R&D) unit. The facility will
focus on developing software, integrating aspects involving back-up of emails
and related storage.
Page | 48

Tata Consultancy Services (TCS) has launched a software development
facility in Ahmedabad, Gujarat. The facility will serve global customers across
industry segments.
Cognizant Technology Solutions has acquired ValueSource, a subsidiary of
KBC Group, a Belgium-based multi-channel bank insurance group.
Schneider Electric has commissioned a services bureau in Bengaluru as a
nerve centre and a support facility for data centres in India and the Asia-
Pacific region.

Government Initiatives
IT spending by the Government of India is projected to reach US$ 6.4 billion in 2013,
a growth of 7 per cent year-on-year, according to a report by Gartner.
Some of the major initiatives taken by the Government to promote IT and ITeS sector
in India are:
After a successful first-ever international delegation to Dubai, Gujarat-based
small and medium enterprises (SMEs) in the IT sector plan to send similar
business delegations to European and South East Asian countries.
The Government of Karnataka plans to announce a new information
technology (IT) policy to boost investments in states tier-II and tier-III cities.
The policy would enable the sector to employ about two million people in the
state directly by 2020.
The Government of India has fast tracked the process of setting up of centres
of National Institute of Electronics and Information Technology (NIELIT) in
Northeast India.
The Government of Brazil has liberalised the issue of short term work visas, a
move which will make it easier for Indian IT professionals to take up
assignments in Brazil.
India and Vietnam have signed two memorandums of understanding (MoU)
for partnership in the field of information, communications and technology
(ICT).
Page | 49

Road Ahead
Globalisation has a profound impact in shaping the Indian IT industry over the years
with India capturing a sizeable chunk of the global market for technology sourcing
and business services. Over the years the growth drivers for this sector have been the
verticals of manufacturing, telecommunication, insurance, banking, finance and of
late the fledgling retail revolution. As the new scenario unfolds it is getting clear that
the future growth of IT and ITeS will be fuelled by the verticals of climate change,
mobile applications, healthcare, energy efficiency and sustainable energy. Traditional
business strongholds would make way for new geographies, there would be new
customers and more and more of SMEs will go for IT application and services.
Demand from emerging countries is expected to show strong growth going forward.
Tax holidays are also extended to IT sector for software technology parks of India
(STPI) and special economic zones (SEZs). Further, the country is providing
procedural ease and single window clearance for setting up facilities. The countrys
cost competitiveness in providing IT services, which is approximately 3-4 times
cheaper than the US continues to be its USP in the global sourcing market.

Page | 50

Advantages India Offers for IT Companies

Since the Government of India liberalized the IT and telecommunications sector in the
late 1990s, it has provided the right impetus to companies working in this sector. India
can emerge as the clear industrial leader in the near future, if it maintains due
diligence
Today, India has one of the most robust and fastest growing economies. The recent
recession witnessed in the developed nation, and the Dubai economic crisis have had
very little effect on its growth in the IT and the industrial sectors. India offers high
quality IT and IT-enabled Services at low cost, using state-of-the-art technology.
Convergence has led to lowering of tariffs, plentiful availability of bandwidth at
increasingly lower cost, competition and growth in technology, especially fiber optics
and wireless technology. Indias Information and Communications Technology (ICT)
organizations are counted among the best known and most reputed ICT solutions and
services providers worldwide. Scores of global ICT leaders have invested in India,
making the country their hub for software development, offshore outsourcing and
R&D. India has an investor friendly environment. To encourage the growth of the IT
sector in India, the government too has lowered the entry barriers. FDI can be made in
most sectors through the automatic route.
India has a proven track record as a world-class software development centre. IT
companies in India generate about 75 per cent of their total revenue from offshore
development
Benefits of Outsourcing to India
Skilled and inexpensive IT resources
A booming software industry, backed by government initiatives
Helpful initiatives like rationalization of taxes, IT friendly budgets aimed at
promoting investment
Availability of English speaking workforce
Concrete steps to upgrade the IT infrastructure of India
The role played by academic institutes that promotes research and innovation
A stable democracy based on the parliamentary system of governance.
Highly developed banking network and financial services.
Page | 51

PORTERS 5 FORCE ANALYSIS FOR IT SECTOR

1) Power of Buyers : The Indian IT Sector has a large number of players and few
entry barriers for new entrants. Thus, the buyer has many options to choose from and
can clearly articulate their needs. However, the bigger companies also enjoy the
advantage of switching costs. It means that once a particular client selects a particular
company as its partner, it becomes dependent on that company for all its upgrades and
technology requirements, making it difficult for the client to switch. Thus, the buyers
have a MEDIUM bargaining leverage.

2) Power of suppliers: Knowledgeable human resource is the largest requirement for
it sector. Large supply of this human resource, at low cost is available from around
the world. Also, a lot of matured education and training is easily available. As there
exist many competitive suppliers in the market the supplier has very LOW or NO
power in the IT sector.

3) Competitive rivalry : No huge capital investment is required to start a new
company, leading to very large number of small and medium size companies. It is
becoming increasingly difficult for players to differentiate, which has led to decrease
in margins. However, a few top and niche players still enjoy pricing power. Thus, the
competition in the sector is HIGH.

4) Availability of substitutes : Certain countries e.g. China,Korea, Taiwan, Israel
have started to develop an environment required for growth of IT sector and are
emerging as suppliers of these products and services. Indian companies need to
continuously innovate to have an edge others. Thus, the availability of substitutes is
MEDIUM.
Page | 52

5) Threat of new entrant : Set up cost is almost negligible. Further the government
policies also promote the entrepreneurs by providing benefits in terms of tax holidays
and building software technology parks. Apart from this there are many venture
capitalists that are ready to fund new start-ups enabling them to scale up with
increased demand and higher margins the threat of new entrant is HIGH.

Page | 53

COMPANY PROFILE
POWERED BY INTELLECT DRIVEN BY VALUES
Type Public
NSE: INFY
Industry IT services, IT consulting
Founded 1981
Headquarters Electronics City, Bangalore, Karnataka, India
Key people N. R. Narayana Murthy (Executive Chairman)
Vishal Sikka (CEO & MD)
S. Gopalakrishnan (Executive Vice Chairman)
Services IT, business consulting and outsourcing services
Revenue INR 50,133 crores (US$ 8.4 billion) (2014)
[1]

Employees 160,405 (31 March 2014)
[2]

Divisions Infosys BPO
Lodestone Management Consultants
Website infosys.com

Page | 54

Balance Sheet of Infosys
Mar '14

in Rs. Cr.
Sources Of Funds
Total Share Capital 286
Equity Share Capital 286
Reserves 41,806.00
Networth 42,092.00
Secured Loans 0
Unsecured Loans 0
Total Debt 0
Application Of Funds

Less: Accum. Depreciation 4,642.00
Net Block 5,732.00
Capital Work in Progress 954
Inventories 0
Sundry Debtors 7,336.00
Cash and Bank Balance 24,100.00
Total Current Assets 31,436.00
Loans and Advances 7,873.00
Fixed Deposits 0
Total CA, Loans & Advances 39,309.00
Deffered Credit 0
Current Liabilities 4,503.00
Provisions 6,117.00
Page | 55

Total CL & Provisions 10,620.00
Net Current Assets 28,689.00
Miscellaneous Expenses 0
Contingent Liabilities
1,020.00

Page | 56

Profit & Loss account of Infosys
Mar '14
Income
Sales Turnover 44,341.00
Excise Duty 0
Net Sales 44,341.00
Stock Adjustments 0
Expenditure
Raw Materials 0
Power & Fuel Cost 0
Other Manufacturing Expenses 3,990.00
Operating Profit 12,527.00
PBDIT 15,103.00
Interest 0
PBDT 15,103.00
Depreciation 1,101.00
Other Written Off 0
Profit Before Tax 14,002.00
Extra-ordinary items 0
PBT (Post Extra-ord Items) 14,002.00
Tax 3,808.00
Reported Net Profit 10,194.00
Total Value Addition 31,814.00
Page | 57

Corporate Dividend Tax 615
Shares in issue (lakhs) 5,714.03
Equity Dividend (%) 1,260.00

Page | 58

COMPANY PROFILE
Type Public
NSE: TCS
Founded 1968
Founder(s) J.R.D Tata
Headquarters Mumbai, India
Key people Natarajan Chandrasekaran
(CEO & Managing Director)
Services IT, business consulting andoutsourcing services
Revenue US$ 13.44 billion (FY 2013-14)
Parent Tata Group
Subsidiaries CMC Limited, TCS China, TRDDC,Computational Research
Laboratories, TCS e-Serve Ltd.
Website www.tcs.com

Page | 59

Balance Sheet of Tata Consultancy Services
Mar '14
Sources Of Funds
Reserves 43,856.01
Networth 44,051.88
Secured Loans 88.64
Unsecured Loans 1.05
Total Debt 89.69
Application Of Funds
Less: Accum. Depreciation 5,290.92
Net Block 5,929.19
Capital Work in Progress 3,047.53
Inventories 8.57
Sundry Debtors 14,471.89
Cash and Bank Balance 12,566.26
Total Current Assets 27,046.72
Loans and Advances 15,748.33
Fixed Deposits 0
Total CA, Loans & Advances 42,795.05
Deffered Credit 0
Current Liabilities 7,355.18
Page | 60

Provisions 6,107.44
Total CL & Provisions 13,462.62
Net Current Assets 29,332.43
Miscellaneous Expenses 0
Contingent Liabilities 10,880.43

Page | 61

Profit & Loss account of Tata Consultancy Services

Mar '14
Income

Sales Turnover 64,672.93
Excise Duty 0
Net Sales 64,672.93
Stock Adjustments 0
Expenditure
Raw Materials 0.02
Power & Fuel Cost 0
Other Manufacturing Expenses 0
Operating Profit 21,533.72
PBDIT 24,648.43
Interest 23.41
PBDT 24,625.02
Depreciation 1,080.55
Other Written Off 0
Profit Before Tax 23,544.47
Extra-ordinary items 0
PBT (Post Extra-ord Items) 23,544.47
Tax 5,069.55
Reported Net Profit 18,474.92
Page | 62

Total Value Addition 43,139.19
Preference Dividend 28.76
Shares in issue (lakhs) 19,587.28
Equity Dividend (%) 3,200.00

Page | 63

COMPANY PROFILE
"Applying Thought"
Type Public
NSE: WIPRO
Founded Mumbai, Maharashtra (in 1945)
Founder(s) M.H. Premji
Headquarters India
Key people Azim Premji (Chairman)
T K Kurien (CEO)
Services IT, business consulting and outsourcing services
Revenue 437.6 billion (US$7.3 billion) (2013-14)
Website www.wipro.com

Page | 64

BALANCE SHEET OF WIPRO LTD.
Mar ' 14
Sources of funds
Owner's fund
Equity share capital 493.2
Share application money -
Preference share capital -
Reserves & surplus 28,862.70
Loan funds
Secured loans 106
Unsecured loans 4,404.30
Total 33,866.20
Uses of funds
Fixed assets
Gross block 9,034.60
Less : revaluation reserve -
Less : accumulated depreciation 5,059.60
Net block 3,975.00
Capital work-in-progress 275.1
Net current assets
Current assets, loans & advances 30,450.80
Less : current liabilities & provisions 11,870.70
Total net current assets 18,580.10
Miscellaneous expenses not written -
Total 33,866.20
Book value of unquoted investments 14,431.40
Market value of quoted investments 1,825.70
Contingent liabilities 7,081.70

Page | 65

PROFIT AND LOSS A/C OF WIPRO LTD.
Mar ' 14
Income
Operating income 38,757.20
Expenses
Material consumed 2,549.40
Manufacturing expenses 246.8
Personnel expenses 18,337.50
Adminstrative expenses 8,515.10
Cost of sales 29,648.80
Operating profit 9,108.40
Other recurring income 1,611.20
PBDIT 10,719.60
Financial expenses 374.7
Depreciation 736.7
PBT 9,608.20
Tax charges 2,220.80
PAT 7,387.40
Other non cash adjustments -
Reported net profit 7,387.40
Earnigs before appropriation 15,224.50
Equity dividend 1,638.30
Preference dividend -
Dividend tax 335.3
Retained earnings 13,250.90

Page | 66

Indian Rupee
The Indian Rupee decreased to 59.77 in July from 60.06 in June of 2014. Indian
Rupee averaged 32.86 from 1973 until 2014, reaching an all time high of 68.61 in
September of 2013 and a record low of 7.19 in March of 1973.

2013

2014

GRAPH

COMPARE

Actual Previous Highest Lowest Dates Unit Frequency
59.77 60.06 68.61 7.19 1973 - 2014 Daily
The USDINR spot exchange rate specifies how much one currency, the USD, is currently worth in terms of the
other, the INR. While the USDINR spot exchange rate is quoted and exchanged in the same day, the USDINR
forward rate is quoted today but for delivery and payment on a specific future date. This page provides - Indian
Rupee - actual values, historical data, forecast, chart, statistics, economic calendar and news.

Markets Last Previous Highest Lowest Unit

Page | 67

Currency 59.77 60.06 68.61 7.19

FINDINGS
From the Economic analysis, Industry analysis and the ratio analysis of companies
viz.
Banking sector
o Axis Bank,
o HDFC Bank
o ICICI Bank

IT Sector
o TCS,
o Infosys
o Wipro
following findings have been given:

The economic analysis aims at determining if the economic climate is conclusive and
is capable of encouraging the growth of business sector, especially the capital market.
When the economy expands, most industry groups and companies are expected to
benefit and grow. When the economy declines, most sectors and companies usually
face survival problems. Hence, to predict share prices, an investor has to spend time
exploring the forces operating in overall economy. Exploring the global economy is
essential in an international investment setting. The selection of country for
investment has to focus itself to examination of a national economic scenario. It is
important to predict the direction of the national economy because economic activity
affects corporate profits, not necessarily through tax policies but also through foreign
policies and administrative procedures.
By analyzing the current trend of Indian Economy and Industry I have
f ound t hat bei ng a devel opi ng economy t her e i s l ot of s cope f or
gr owt h and t hi s industry still has to cross many levels so there are huge
opportunities to invest. Increase in income level, increase in consumer
demand, technology development, globalization, foreign investments are few of
the opportunities which the industry has to explore for developing the economy.
Page | 68

Gross Domestic Product (GDP):
GDP indicates the rate of growth of the economy. It represents the aggregate
value of the goods and services produced in the economy. It consists of
personal consumption expenditure, gross private domestic investment and
government expenditure on goods and services and net exports of goods
and services. The growth rate of economy points out the prospects for the
industrial sector and the return investors can expect from investment in shares.
The higher growth rate is more favorable to the stock market.

Savings and investment:
It is obvious that growth requires investment which in turn requires
substantial amount of domestic savings. Stock market is a channel through
which the savings are made available to the corporate bodies. Savings are
distributed over various assets like equity shares, deposits, mutual funds,
real estate and bullion. The savings and investment patterns of the public affect
the stock to a great extent.

Inflation:
Along with the growth of GDP, if the inflation rate also increases, then the
real growth would be very little. The effects of inflation on capital markets are
numerous. An increase in the expected rate of inflation is expected to cause a nominal
rise in interest rates. Also, it increases uncertainty of future business and
investmentdecisions. As inflation increases, it results in extra costs to businesses, ther
ebysqueezing their profit margins and leading to real declines in profitability.
Interest rates:
The interest rate affects the cost of financing to the firms. A decrease in interest rate
implies lower cost of finance for firms and more profitability. More money is
available at a lower interest rate for the brokers who are doing business with borrowed
money. Availability of cheap funds encourages speculation and rise in the price of
shares.
As the economy recovers, investment demand and the need for credit will pick up. To
the extent that this contributes eventually to supply, it is important that banks have the
Page | 69

room to finance it. A reduction in the required SLR will give banks more freedom to
expand credit to the non-Government sector. However, the Reserve Bank is also
cognizant of the significant on-going financing needs of the Government. Therefore,
the SLR is reduced by 0.50 per cent of NDTL.

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