FINANCIAL MANAGEMENT

FIN F315
ASSIGNMENT I

BIRLA INSTITUTE OF TCHNOLOGY AND SCIENCE PILANI

HYDERABAD CAMPUS

Dated: 18th Jan, 2019

Submitted By:-Aditya Vashisht(2016A4PS0387H)
Kumar Archit(2016ABPS0647H)
Raviraj Gupta(2016A4PS0387H)
Pranav Singhania(2016A2PS0593H)
Akshit Gaur(2016A1PS0882H)
Financial Management Assignment I

State Bank Of India

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 Financial Management Assignment I

Public Banking sector

The State Bank of India (SBI) is an Indian multinational, public sector banking and financial
services company. It is a government-owned corporation headquartered in Mumbai,
Maharashtra. The company is ranked 216th on the Fortune Global 500 list of the world's
biggest corporations as of 2017. It is the largest bank in India with a 23% market share in
assets, besides a share of one-fourth of the total loan and deposits market. SBI has 16
regional hubs and 57 zonal offices that are located at important cities throughout India.

Board Structure and Corporate Governance

Chairman
Shri Rajnish Kumar

Managing Directors
Shri B. Sriram
Shri P. K. Gupta
Shri Dinesh Kumar Khara

Directors elected under Section 19(c) of SBI Act

Shri Sanjiv Malhotra (Independent Director)
Shri Bhaskar Pramanik (Independent Director)
Shri Basant Seth (Independent Director)

Directors under Section 19(d) of SBI Act

Dr. Girish K. Ahuja (Independent Director)
Dr. Pushpendra Rai (Independent Director)
Dr. Purnima Gupta (Independent Director)

Director under Section 19(e) of SBI Act

Shri Rajiv Kumar (GOI Nominee Director)

Director under Section 19(f) of SBI Act

Shri Chandan Sinha (RBI Nominee Director)

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 Financial Management Assignment I

ANALYSIS OF CORPORATE BOARD

1. The Company has an active, well-informed and independent Board that is necessary
to ensure highest standards of Corporate Governance.
2. The number of independent directors is 50% of the total number of Directors, this is
in line with SEBI regulations. This also ensures that the interests of the minority
shareholders are protected by the independent directors which do not have any
vested interest.
3. A quality Board, being at the core of its Corporate Governance Practice, plays the
most pivotal role in overseeing how the management serves and protects the long-
term interests of all our stakeholders
4. The performance evaluation of the chairman and the non-independent directors are
carried by the independent Directors.
5. The Board is broad-based and consists of eminent individuals from financial and
marketing-industry, management and technical background.
6. The Company has a judicious mix of Executive and Non-Executive Director. As on
31st March, 2018, the Board comprised of 12 Directors out of which 6 are
Independent Directors which includes one Woman Independent Director, one is
nominated by GOI and other by RBI. Remaining three board members are non-
independent board members
7. There are also women directors on the board, complying with the SEBI regulation to
have at least 1 women director on the board.

CONCLUSION
State Bank of India has a reasonably sound structure of board of directors. Compact
size of board allows the conglomerate to run efficiently. There is also an optimal mix of
independent and non-independent members in board. Thus, the work of executive branch is
can be scrutinized effectively by independent members ensuring that the interest of small
shareholders is safeguarded.

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 Financial Management Assignment I

SHAREHOLDER PATTERN AND TOP SHAREHOLDERS

TYPES OF SHAREHOLDERS

Category No. of shares Percentage

Promoters 5,149,314,961 57.70

NBFC and Mutual Funds 1,163,352,078 13.04

Financial Institutions 993,828,702 11.14

Foreign Institutions 824,000,142 9.23

General Public 466,948,654 5.23

Others 196,317,970 2.20

GDR 126,362,510 1.42

Central Government 4,462,517 0.05

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 Financial Management Assignment I

Analysis on Type of Shareholders

1. The promoter holding of the company is at a stable 58% for a long period of time.
This is a very good indicator for minority shareholders as the Promoter has not
diluted his stake and also the stake is very high. This means that the promoter
believes in the business and is not looking to cash out

2. Higher promoter’s stake is a positive sign because promoters will commit additional
fund only when they are optimistic about future growth of their company.

3. Mutual Funds are having a sizeable stake in the company hence the Market is
trusting the growth potential of the company in the long run.

4. FII’s stake signify that on the global arena company is much looked upon and DII’s
shows full confidence in the company.

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 Financial Management Assignment I

Board Structure and Corporate Governance

Chairman
Shri Rajnish Kumar

Managing Directors
Shri B. Sriram
Shri P. K. Gupta
Shri Dinesh Kumar Khara

Directors elected under Section 19(c) of SBI Act

Shri Sanjiv Malhotra (Independent Director)
Shri Bhaskar Pramanik (Independent Director)
Shri Basant Seth (Independent Director)

Directors under Section 19(d) of SBI Act

Dr. Girish K. Ahuja (Independent Director)
Dr. Pushpendra Rai (Independent Director)
Dr. Purnima Gupta (Independent Director)

Director under Section 19(e) of SBI Act

Shri Rajiv Kumar (GOI Nominee Director)

Director under Section 19(f) of SBI Act

Shri Chandan Sinha (RBI Nominee Director)

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 Financial Management Assignment I

ANALYSIS OF CORPORATE BOARD

8. The Company has an active, well-informed and independent Board that is necessary
to ensure highest standards of Corporate Governance.
9. The number of independent directors is 50% of the total number of Directors, this is
in line with SEBI regulations. This also ensures that the interests of the minority
shareholders are protected by the independent directors which do not have any
vested interest.
10. A quality Board, being at the core of its Corporate Governance Practice, plays the
most pivotal role in overseeing how the management serves and protects the long-
term interests of all our stakeholders
11. The performance evaluation of the chairman and the non-independent directors are
carried by the independent Directors.
12. The Board is broad-based and consists of eminent individuals from financial and
marketing-industry, management and technical background.
13. The Company has a judicious mix of Executive and Non-Executive Director. As on
31st March, 2018, the Board comprised of 12 Directors out of which 6 are
Independent Directors which includes one Woman Independent Director, one is
nominated by GOI and other by RBI. Remaining three board members are non-
independent board members
14. There are also women directors on the board, complying with the SEBI regulation to
have at least 1 women director on the board.

CONCLUSION
State Bank of India has a reasonably sound structure of board of directors. Compact
size of board allows the conglomerate to run efficiently. There is also an optimal mix of
independent and non-independent members in board. Thus, the work of executive branch is
can be scrutinized effectively by independent members ensuring that the interest of small
shareholders is safeguarded.

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 Financial Management Assignment I

SHAREHOLDER PATTERN AND TOP SHAREHOLDERS

TYPES OF SHAREHOLDERS

Category No. of shares Percentage

Promoters 5,149,314,961 57.70

NBFC and Mutual Funds 1,163,352,078 13.04

Financial Institutions 993,828,702 11.14

Foreign Institutions 824,000,142 9.23

General Public 466,948,654 5.23

Others 196,317,970 2.20

GDR 126,362,510 1.42

Central Government 4,462,517 0.05

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 Financial Management Assignment I

Analysis on Type of Shareholders

5. The promoter holding of the company is at a stable 58% for a long period of time.
This is a very good indicator for minority shareholders as the Promoter has not
diluted his stake and also the stake is very high. This means that the promoter
believes in the business and is not looking to cash out

6. Higher promoter’s stake is a positive sign because promoters will commit additional
fund only when they are optimistic about future growth of their company.

7. Mutual Funds are having a sizeable stake in the company hence the Market is
trusting the growth potential of the company in the long run.

8. FII’s stake signify that on the global arena company is much looked upon and DII’s
shows full confidence in the company.

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 Financial Management Assignment I

CONSOLIDATED BALANCE SHEET

 Total Assets sum out to be Rs. 3616433,00,29 (As on 31.03.2018)

 Total Liabilities sum out to be Rs. 3616433,00,29 (As on 31.03.2018)

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 Financial Management Assignment I

CONSOLIDATED PROFIT AND LOSS ACCOUNT

 Total Income for FY2018 is Rs. 306527,52,07.

 Total Expenditure for FY2018 is Rs. 310714,93,45.
 Total Profit for FY2018 is Rs. 8896,32,96.

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 Financial Management Assignment I

CONSOLIDATED CASH FLOW STATEMENT

 EBIT for FY 2018 was ₹205156.56 Cr. and in FY 2017 was

₹164506.40 Cr.

 Depreciation in FY 2018 was ₹2919.47 Cr. and in FY 2017 was

₹2293.31 Cr.

 Total interest expenses have increased from 1,13,658.50 crore in

FY2017 to 1,45,645.60 crore in FY2018
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 Financial Management Assignment I

FY 2018 FY 2017
Interest Coverage 1.4086 1.4473
Ratio

Cash Coverage 1.4286 1.4675

Ratio

CONSOLIDATED KEY FINANCIAL RATIOS

 Operating Profit per Share decreased from Rs. 81.71 in FY2017 to

Rs. 74.93 in FY2018.
 Net Operating Profit per Share decreased from Rs. 28.02 in FY2017
to Rs. 256.56 in FY2018.

Profit Ratios of State Bank of India

 Return on Long Term Fund decreased from 120.18% in FY2017 to

103.13% in FY2018.

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 Financial Management Assignment I

 Return on Net Worth decreased from 0.13% in FY2017 to -2.21%

in FY2018.
 Adjusted Return on Net Worth decreased from 37.33% in FY2017
to 35.70% in FY2018.

 Current Ratio = 0.08

 Quick Ratio = 8.09

EPS Ratios of State Bank of India

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 Financial Management Assignment I

Returns on SBIN

Annual Return of SBIN

Important Observations

Annual returns on SBIN are significantly higher than its competitors in

public banking sector.

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 Financial Management Assignment I

Volatility of SBIN shares

Volume of trading

Volume of Trading
160000
140000
120000
100000
TRADES

80000
60000
40000
20000
0
82

172

199
1
10
19
28
37
46
55
64
73

91
100
109
118
127
136
145
154
163

181
190

208
217
226
235
244

Quarterly price movement of SBI stock is 25.52 and Semi-annual price movement is
34.43 and annual is 36.65. Average stock price volatility is low and volume of trading is
significantly higher than peers indicating positive market response

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 Financial Management Assignment I

FINAL REMARKS:

State Bank of India has a reasonably sound structure of board of directors. Compact size of
board allows the conglomerate to run efficiently. There is also an optimal mix of
independent and non-independent members in board. Board is able to protect interest of
its shareholders. Shareholders’ pattern is also good with 58% of shares with promoters.

Analysis made from Interest coverage ratio, cash coverage ratio, quick ratio and current
ratio are all positive. This shows that lenders are successful are protecting their interest.

Annual, semi-annual and quarterly returns are higher than peers. SBI has high volume of
trading and significantly low stock volatility. This indicates positive market response.

Hence the objective of company should be to continue with the same rate of growth
along with increase in share price

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Bank Of Baroda
 Financial Management Assignment I

1. Nature of Business:

Bank of Baroda is involved in the following activities.

▪ Rural and Agricultural banking

▪ Corporate banking
▪ Retail banking
▪ SME
▪ Wealth management

Bank of Baroda is engaged in providing various services, such as personal banking,

corporate banking, international banking, small and medium enterprise (SME) banking,
rural banking, non-resident

Indian (NRI) services and treasury services. The Bank's segments include Treasury,

Corporate/Wholesale Banking, Retail Banking and Other Banking Operations. The Bank
offers personal banking services, such as deposits, loans, mobile banking and wealth
management services; business banking services, such as Baroda Money Express, debit
cards and collection services; corporate banking services, such as appraisal and merchant
banking, and cash management and remittances; international banking services, such as
export, import and trade finance, and correspondent banking; rural banking services, such
as deposits, priority sector advances, financial inclusion and lockers, and treasury
services, such as domestic and forex operations. The Bank operates a network of
approximately 5,330 branches.

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 Financial Management Assignment I

2) Inception and Circumstances:

The inception of the bank took place on 20th July 1908, 109 years ago. The bank was
founded by Maharaja Sayajirao Gaekwad III of Baroda to look after the financial
activities of the princely State and Gujarat after expansion. It started with a paid up
capital of Rs. 10 lakh. Bank of Baroda is a pioneer in various customer centric
initiatives in the Indian banking sector. Bank is amongst first in the industry to
complete an all–inclusive rebranding exercise wherein various novel customer centric
initiatives.

In the present day scenario, the board of directors consists of 11 members headed by
CEO and MD Mr. P. Jayakumar.

Bank Of Baroda INSIDERS ON Board Members

Name (Connections) Relationships Title Age

P. Jayakumar 20 Relationships MD, CEO & Executive Director 56
Papia Sengupta 19 Relationships Executive Director 59
Shanti Jain 10 Relationships Executive Director 53
Vikramaditya Khichi 10 Relationships Executive Director 56

Other Board Members On Board Members

Type of Board
Name (Connections) Relationships Primary Company Age
Members
Bharatkumar Dhirubhai 10Relationships Member of the Board Bank of Baroda 40
Dangar of Directors
Biju Varkkey 45Relationships Member of the Board Husys Consulting Limited 53
of Directors
Gopal Agarwal 10Relationships Member of the Board Bank of Baroda 56
of Directors
Ajay Kumar 10Relationships Member of the Board Bank of Baroda 49
of Directors
Soundara Kumar 31Relationships Member of the Board Ramco Systems Limited 64
of Directors
Debasish Panda 10Relationships Member of the Board Bank of Baroda 56
of Directors
Srinivasan Sridhar 10Relationships Member of the Board Bank of Baroda 58
of Directors

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 Financial Management Assignment I

3) Analysis Of Corporate Board

• The MD ,CEO & Executive director is the same which is not a good sign.
• The Company has an active, well-informed and independent Board i.e necessary to
ensure highest standards of Corporate Governance.
• The number of independent directors are more than 50% of the total number of
Directors, this is in line with SEBI regulations. This also ensures that the interests
of the minority shareholders are protected by the independent directors which do
not have any vested interest.
• A quality Board, being at the core of its Corporate Governance Practice, plays the
most pivotal role in overseeing how the management serves and protects the long-
term interests of all our stakeholders
• The performance evaluation of the chairman and the non independent directors are
carried by the independent Directors.
• The Board is broad-based and consists of eminent individuals from financial and
marketing industry, management, technical, background.
• The Company has a judicious mix of Executive and Non-Executive Director.
• There are also women directors on the board, complying with the SEBI regulation
to have at least 1 women director on the board.

Conclusion

• The Bank Of Baroda complies with all SEBI regulations, good independent
directors who sit on the board of multiple companies and have a good track record,
they could however have some Public/Government members in the board.

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 Financial Management Assignment I

4) Public/Private Ownership:

Public Ownership: Joint Venture by Government of India

In 1996, Bob Bank entered the capital market in December with an Initial Public
Offering (IPO). The Government of India is still the largest shareholder, owning 66%
of the bank's equity.

Public Ownership- 66%

Private Ownership- 34%

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 Financial Management Assignment I

5) Analysis on Type of Shareholders

• The promoter holding of the company has increased to 63.74% . This is a very good
indicator for minority shareholders as the Promoter has not diluted his stake and also
the stake is very high. This means that the promoter believes in the business and is not
looking to cash out
• Higher promoter’s stake is a positive sign because promoters will commit additional
fund only when they are optimistic about future growth of their company.
• Mutual Funds are having a sizeable stake in the company hence the Market is trusting
the growth potential of the company in the long run.
• FII’s stake signify that on the global arena company is not much looked upon.

6) Consolidated Balance Sheet(in Rs Crore)

• Total Assets sum out to be Rs747,805 Crore (as on March 31 2018)

• Total Stockholder’s Equity sums out to be value of be Rs530Crore (as on March 31
2018)

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 Financial Management Assignment I

7) Consolidated Cash Flow(in Rs Crore)

• Clearly the cash flow of bank is negative which in long run is not a good thing
from investment point of view .
• Also the dividends paid in last two years are zero
• This shows that liquidity position of the company is bad

8) Financial Ratios

Year 31 March 18 31 March 17 31 March 16 31 March 15 31 March 14

Net Operating Profit Per

164.60 183.15 191.22 194.27 906.81
Share (Rs)

Dividend Per Share -- 1.20 -- 3.20 21.50

Adjusted Cash Margin(%) -3.11 3.86 -9.97 7.89 11.25

Adjusted Return on Net

-5.60 3.43 -13.42 8.53 12.61
Worth(%)

Current Ratio 0.05 0.04 0.05 0.02 0.02

Quick Ratio 21.18 19.38 18.27 20.78 24.05

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 Financial Management Assignment I

Earning Retention Ratio 100.00 75.94 100.00 78.58 79.67

Interest Coverage 0.9 1.09 0.79 1.18 1.2

Cash Ratio 1.0 1.02 0.92 1.01 1.05

EPS (Earning Per Share) -9.17 5.99 -23.35 15.37 105.75

Cost of Equity (CAPM 0.175187 0.187133 0.188925 0.188328 0.188925

Model)

Levered Beta 1.03 1.23 1.26 1.25 1.26

9) FINAL REMARKS:
● Net Income growth rate has declined as could be seen in Investing and
Finance ratio. Hence, primary focus and objective of the Company should be
having strategy to increase net earnings and improve the liquidity.
● As there is emergence of huge number of efficient competitors in market,
hence the company has to take steps to protect share holders’ interest.
Hence, dividends and rewards to shareholders has to be focussed upon.
● All in all, the company has a stagnant growth& bad liquidity position. Hence, its
primary objective will be Stock Price Maximization.

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IDBI BANK
 Financial Management Assignment I

INTRODUCTION:
IDBI Bank Limited, together with its subsidiaries, provides banking and
financial solutions to retail and corporate clients in India. It offers savings and
current accounts, corporate payroll accounts, and fixed deposits; home, auto,
education, and personal loans, as well as loans against properties and securities;
debit, credit, and prepaid cards; phone, mobile, and Internet banking services;
and investment advisory and capital market services, as well as lockers.

The company also provides fund based assistance, including term loans;
working capital; packing credit to exporters; receivable buyout with recourse;
channel financing for dealers of corporates; scheme for financing automated
teller machines (ATM)/cash dispense vendors; bill discounting; technology
upgrading fund scheme for textile and jute industries; and lending to non-
banking finance companies/housing finance companies and commercial real
estate sector. In addition, it offers non-fund based assistance, such as bank and
performance guarantees, letters of credit, and buyers credit; cash management,
treasury, trade finance, and foreign currency services; and debt syndication and
advisory services for infrastructure projects, as well as publishes a newsletter.
Further, the company provides finance to micro, small, and medium enterprises;
agriculture finance; products and services for non-resident Indians.

Additionally, it offers information technology and security, and contact centre

services; and investment management, mutual fund, security trusteeship
assignments, share pledge trustee, venture capital fund, safe keeping, escrow
agency, and other trusteeship services, as well as acts as a trustee to
securitization transactions and bond/debentures. As of March 31, 2018, the
company operated 1,916 branches and 3,779 ATMs. The company was
formerly known as IDBI Ltd. and changed its name to IDBI Bank Limited in
May 2008. IDBI Bank Limited was founded in 1964 and is headquartered in
Mumbai, India.

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 Financial Management Assignment I

OWNERSHIP:

At present the government holds 51.69% stake in IDBI Bank and LIC holds
44.31% and the remaining 4% held by public.

Holdings

GOVERNMENT LIC PUBLIC

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 Financial Management Assignment I

PROMOTER HOLDING:

NON PROMOTER NON-PUBLIC HOLDING:

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 Financial Management Assignment I

PUBLIC HOLDING:

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Financial Management Assignment I

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 Financial Management Assignment I

EMPLOYEES:
As on 31 March 2015, the bank had 16,555 employees, out of which 197 were
employees with disabilities. The average age of bank employees on the same
date was 34 years. The bank reported business of INR 25.64 crores per
employee and net profit of INR 12.17 lakhs per employee during the FY 2012-
13. The company incurred INR 1,538 crores towards employee benefit expenses
during the same financial year.

KEY EXECUTIVES:

Key Executives For IDBI Bank Limited

Board
Name Title Age
Relationships

Rakesh Kumar Sharma 62Relationships MD & Chief Executive Officer 60

Ajay Kumar Sharma 29Relationships CFO & Executive Director 56

Mythili Balasubramanian 32Relationships Executive Director 60

B.Sc, Caiib, Acib (Lon.)

Padma Vinod Betai No Relationships Chief General Manager 54

Abhay Laxman 36Relationships Executive Director 60

Bongirwar

Jorty Chacko 23Relationships Executive Director --

Buddhadev Dasgupta 23Relationships Executive Director --

Subroto Gupta 23Relationships Executive Director --

Ajoy Nath Jha No Relationships Chief GM & Chief Risk Officer 55

Inderpal Singh Kalra 23Relationships Executive Director 58

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 Financial Management Assignment I

Board
Name Title Age
Relationships

Suresh Kishinchand 23Relationships Executive Director 55

Khatanhar

Subrat Kumar Mohapatra No Relationships Chief General Manager --

Shailendra Govind 23Relationships Executive Director --

Nadkarni

Krishna Prasad Nair 28Relationships Deputy MD & Director 59

V. Narayanamurthy 23Relationships Executive Director 54

Rabinarayan Panda No Relationships Chief General Manager 58

Madhav Vasant Phadke 23Relationships Chief Audit Officer & Executive Director --

Aloke Sengupta 12Relationships Chief General Manager --

Gopalkrishna Annaji 23Relationships Executive Director 58

Tadas

Gurudeo Madhukar 28Relationships Deputy MD & Director 56

Yadwadkar

BOARD OF DIRECTORS:

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 Financial Management Assignment I

IDBI Bank Limited INSIDERS ON Board Members

Name (Connections) Relationships Title Age

Rakesh Sharma 62Relationships MD & Chief Executive Officer 60

Ajay Sharma 29Relationships CFO & Executive Director 56

Saumya Banerjee 23Relationships CTO & Executive Director --

Pothukuchi Sitaram 23Relationships Chief Compliance Officer & Executive Director 55

Gopalkrishna Tadas 23Relationships Executive Director 58

Abhay Bongirwar 36Relationships Executive Director 60

Mythili Balasubramanian 32Relationships Executive Director 60

B.Sc, Caiib, Acib (Lon.)

Gurudeo Yadwadkar 28Relationships Deputy MD & Director 56

Krishna Nair 28Relationships Deputy MD & Director 59

V. Narayanamurthy 23Relationships Executive Director 54

Suresh Khatanhar 23Relationships Executive Director 55

Inderpal Kalra 23Relationships Executive Director 58

Madhav Phadke 23Relationships Chief Audit Officer & Executive Director --

Subroto Gupta 23Relationships Executive Director --

Buddhadev Dasgupta 23Relationships Executive Director --

Jorty Chacko 23Relationships Executive Director --

Shailendra Nadkarni 23Relationships Executive Director --

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 Financial Management Assignment I

Other Board Members On Board Members

Type of Board
Name (Connections) Relationships Primary Company Age
Members

Gyan Joshi IAS 23Relationships Member of the Board IDBI Bank Limited --
of Directors

Ashima Goyal 29Relationships Member of the Board CARE Ratings Limited 63

of Directors

Bhuwanchandra 25Relationships Member of the Board Bank of India, New York Branch 62
Balkrishna Joshi of Directors

Pankaj Jain IAS 44Relationships Member of the Board Rail Land Development Authority 52
of Directors

Sudhir Shyam 23Relationships Member of the Board IDBI Bank Limited --

of Directors

Samaresh Parida 23Relationships Member of the Board IDBI Bank Limited 58

of Directors

Narayanan 23Relationships Member of the Board IDBI Bank Limited 63

Jambunathan of Directors

ANALYSIS OF BOARD:

1. NUMBER OF MEMBERS:

There is no definitive number of the ideal number of board members for

the consummate working of a company. The number of board members
varies from 3 to around 33 with an average of 9 board members. It is
recommended that the the board comprises 7 members for a synergic
functioning of the board.

The IDBI board consists of 24 board members which is blaringly on the

higher side. This can entail several disadvantages of the likes:

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 Financial Management Assignment I

1. Too many people on the board can make it difficult for the body to
each an agreement in a timely manner.

2. People carry with themselves some inherent biases and self-serving

motives which can derail the working of the board.

3. Having these many board members is a financial liability to the

company since the company has to meet the elevated compensation
standards for a bunch of people.

4. It is hard to convene meetings and gatherings where at least half of the

board members are present and voting.

DEGREE OF INDEPENDECE:

It is common knowledge that it is always preferred to have outsiders in the

board. An outsider can be defined as a person who has no connection to the
working of the company, no relaion to the key employees and no vested interst
in the company. The worst case scenario is the inclusion of the CEO of the
company in the body. Sometimes companies circumvent this by appointing
former CEO’s or a relative, both having a clear conflict of interest.

In our case, the situation seems pretty grim when considering the extent to
which the board safeguards the interests of the minority shareholders. A
dominating majority of insiders are part of the board with just a handful of
outsiders. Even key executives like the CFO are part of the board, which makes
their rule approachingly autocratic.

The board is supposed to keep the fanciful acts of the executives in check to
ensure the well-being of the company and its shareholders. Executives sitting on
the board makes them the governing body and answerable only to themselves,
thus nuclearizing power. Thus the boards’ decisions will always be in tune with

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 Financial Management Assignment I

the vested interests of the sitting executives, which may or may not be for the
betterment and prosperity of the company.

The indepent board members should evaluate the work of the non-
independent board members and other key executives.

COMMITIES:
The four key commities in a company is the:

1. Executive Committee made up of a small number of board members that

are readily accessible and easily convened, to decide on matters subject to
board consideration that must be decided on expeditiously, such as a
quarterly meeting. Executive committee proceedings are always reported
to and reviewed by the full board. Just as with the full board, investors
should prefer that independent directors make up the majority of an
executive committee.

2. The Audit Committee works with the auditors to make sure that the
books are correct and that there are no conflicts of interest between the
auditors and the other consulting firms employed by the company.

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 Financial Management Assignment I

3. The Compensation Committee is responsible for setting the pay of top

executives. It seems obvious that the CEO or other people with conflicts
of interest should not be on this committee, but you'd be surprised at the
number of companies that allow just that. It is important to check if the
members of the compensation board are also on the compensation
committees of other firms because of the potential conflict of interest.
The compensation committee should meet at least twice a year.

4. The Nominating Committee is responsible for nominating people to the

board. The nomination process should aim to bring on people with
independence and a skill set currently lacking on the board.

MISCELLANEOUS:

1. The board is varied with individuals from a rich variety of backgrounds

which is extremely helpful to the company. This enables obscure
viewpoints to gain recognition.
2. There is at least one woman on the board which is in accordance to the
SEBI regulations.

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 Financial Management Assignment I

Thus, the board is technically sound, but the negative aspect of the board is
the saturation of the board with insiders and the dearth n the representation
by government and independent members.

FINANCIAL RATIOS:

RS. IN CRORES MARCH 31,2018 MARCH 31,2017 MARCH 31, 2016 MARCH 31, 2015

OPERATING
PROFIT PER
4.11 4.71 10.56 11.58
SHARE

DIVIDEND PER
0 0 0 0.75
SHARE

ADJUSTED CASH
MARGIN(%)
-26.18 -15.11 -10.97 3.14

CURRENT RATIO
2.59 2.66 3.12 .91

QUICK RATIO
12.87 16.93 23.35 22.95

EARNING
RETENTION
100 100 100 86.23
RATIO

EPS
-26.71 -25.05 -17.8 5.45

Cash Earning _ _ _ _
Retention
Ratio

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 Financial Management Assignment I

LEVERED BETA
0.53 0.95 1.42 _

FIXED ASSET
0.07 0.08 0.08 0.08
TURNOVER
RATIO

NET OPERATING
INCOME PER
74.67 134.99 136.21 175.53
SHARE

SUGGESTED STRATEGY:
According to transcripts, IDBI has been suffering from the ailment of negative
operating cash flow for the bulk of recent years. To convey the direness of the
situation, the net cash flow from operating function at March ’18 was -12220.87
crores. Cash from operations indicates the amount of cash a company generates
from normal business activities, and excludes costs associated with capital
spending, such as long-term investments. Cash flow from operations is similar
to net income or profit, but profit takes account of all expenses, including
depreciation.
Certain things that the company can do are:

1. Increasing Sales
Since operating cash flow depends on total cash from sales, increasing sales can
increase cash flow. Companies employ all sorts of strategies to increase sales,
such as advertising, offering new products and services, altering the prices of
existing products and services and hiring more employees to increase
production. Certain industries face natural high seasons and low seasons, which
can result in periods of low sales followed by periods of higher sales.

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 Financial Management Assignment I

2. Reducing Operating Costs

Since operating cash flow is reduced by operating costs, finding ways to reduce
operating costs can increase cash flow. Finding ways to reduce the cost of
production and labour costs can improve cash flow. Struggling companies
sometimes lay off workers, cut back worker hours or reduce worker benefits in
an attempt to increase cash flow.

3. Reorganization
In some cases, companies are not successful at boosting cash flow sufficiently
on their own. Bankruptcy, also known as "reorganization" allows a company to
restructure itself under the supervision of a court, which may result in a more
efficient company better able to produce a positive operating cash flow.

Gross non-performing assets (NPAs) which were 27.95% of advances in

March will inch closer to 30% and the net NPAs which were 16.69% will
also rise. The only bank which can put up a semblance of a fight with IDBI
Bank on this front is Chennai-based Indian Overseas Bank. In the June
quarter, its gross NPAs were 25.64% and net NPAs, 15.1%. IDBI Bank’s
net worth which dropped from ₹ 17,146 crore in March 2017 to ₹ 16,156
crore in March 2018, runs the risk of being entirely eroded after adjusting
all bad assets.

The fresh capital will help IDBI Bank clean up its book but how will it
prevent generation of bad assets in future? This is possible only if LIC
professionalizes the management. And, this must start with restructuring
the board.

Not every board member of the bank has the credentials to be there.

This could be the story of every bank under PCA.

42
BANK OF INDIA
 FM Report

1. Nature of business

Bank of Baroda is involved in the following activities.

 Rural and Agricultural banking

 Corporate banking
 Retail banking
 SME
 Wealth management

Bank of India Limited provides various banking products and services. It operates
through Treasury Operations, Wholesale Banking, and Retail Banking segments.
The company accepts various deposit products, such as savings, current, salary,
term, and tax saving deposits. It also offers home, property, education, vehicle,
personal, pensioner, and holiday loans; housing loans to NRIs/PIOs; overdraft
against securities; loans against FCNR deposits; and loans for corporate and
MSME customers. In addition, the company provides cash management services;
trade finance; project finance and syndication services; online share trading
services; insurance products and services; mutual fund products; portfolio
management services; credit, debit, and prepaid cards; and remittance, online
banking and payment, online income tax return, and ATM and other kiosk
services, as well as cards, loans, and services to rural customers. It operates
approximately 5,016 branches in India and 29 branches internationally, as well
as 32 representative offices.

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 FM Report

2. Board details

The board members consist of the following persons:

Other members of board are:

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FM Report

3. Analysis of Corporate board:

 The MD ,CEO & Executive director is the same which is not a good
sign.
 The Company has an active, well-informed and independent Board i.e
necessary to ensure highest standards of Corporate Governance.
 The number of independent directors are more than 50% of the total
number of Directors, this is in line with SEBI regulations. This also
ensures that the interests of the minority shareholders are protected by
the independent directors which do not have any vested interest.
 A quality Board, being at the core of its Corporate Governance Practice,
plays the most pivotal role in overseeing how the management serves
and protects the long-term interests of all our stakeholders
 The performance evaluation of the chairman and the non independent
directors are carried by the independent Directors.
 The Board is broad-based and consists of eminent individuals from
financial and marketing industry, management, technical,
background.
 The Company has a not a judicial mix of Executive and Non-Executive
Director as there are hardly any non-executive directors.
 There are also women directors on the board, complying with the SEBI
regulation to have at least 1 women director on the board.

Conclusion:

The Bank of India complies with almost all the regulations of SEBI and
have a board that can protect the interest of its shareholders.

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FM Report

4. SHAREHOLDING PATTERN:

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 FM Report

TYPE OF SHAREHOLDERS:

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 FM Report

5. Analysis on Type of Shareholders:

1. The promoter holding of the company is at a stable 83% for a long period of
time. This is a very good indicator for minority shareholders as the Promoter has
not diluted his stake and also the stake is very high. This means that the promoter
believes in the business and is not looking to cash out.

2. Higher promoter’s stake is a positive sign because promoters will commit

additional fund only when they are optimistic about future growth of their
company.

3. Mutual Funds are not having a sizeable stake in the company hence the Market
is not trusting the growth potential of the company in the long run.

4. FII’s stake signify that on the global arena company is much looked upon and
DII’s shows full confidence in the company. As DII is very high, it shows people
have full confidence on bank.

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 FM Report

6. Balance Sheet:

The total assets as on 31 March,2018 stand out to be 611,426 crores. Total share
holder equity as on 31 March,2018 is 1744 crores which is a good amount for a
bank.

7. Cash Flows:

 The cash flow is increasing from year by year which is a good indication
for a company.
 But still it is negative, it should focus on making it positive.

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 FM Report

8. Financial Ratios:

9. Final Remarks:

● Net Income growth rate has been decreasing and ROI is negative as could
be seen in Investing and Finance ratio. Hence, primary focus and objective
of the Company should be having strategy to increase net earnings and
improve the liquidity.
● As there is emergence of huge number of efficient competitors in market,
hence the company has to take steps to protect share holders’ interest.
Hence, dividends and rewards to shareholders has to be focussed upon.
● All in all, the company has a stagnant growth& bad liquidity position.
Hence, its primary objective will be Stock Price Maximization.

51