CHAPTER-1

INTRODUCTION

Financial performance is a subjective measure of how well a firm can use assets from its
primary mode of business and generate revenues. This term is also used as a general
measure of a firm's overall financial health over a given period of time, and can be used
to compare similar firms across the same industry or to compare industries or sectors in
aggregation.

,There are many different ways to measure financial performance, but all measures
should be taken in aggregation. Line items such as revenue from operations, operating
income or cash flow from operations can be used, as well as total unit sales. Furthermore,
the analyst or investor may wish to look deeper into financial statements and seek out
margin growth rates or any declining debt.

The Balance Sheet shows the financial position (condition) of the firm at a given point of
time. It provides a snapshot that may be regarded as a static picture. “Balance sheet is a
summary of a firm’s financial position on a given date that shows Total assets = Total
liabilities + Owner’s equity.”

The Income Statement (referred to in India as the profit and loss statement) reflects the
performance of the firm over a period of time. “Income statement is a summary of a
firm’s business revenues and expenses over a specified period, ending with net income or
loss for the period.”

However, financial statements do not reveal all the information related to the financial
operations of a firm, but they furnish some extremely useful information, which
highlights two important factors profitability and financial soundness.
Financial Performance
Earning a profit is likely high on the list of things you want your business to accomplish. To
determine if you are actually earning a profit requires knowing a lot more than just how much
money you brought in that month. Determining profit means looking at things like the
company’s assets, expenses, income and equity on a regular basis. These should all be
reflected on your company’s statement of financial performance, which documents all areas
related to finances so you get the big-picture view of where your company stands.

Ratio Analysis:

Fundamental Analysis has a very broad scope. One aspect looks at the general (qualitative)
factors of a company. The other side considers tangible and measurable factors (quantitative).
This means crunching and analyzing numbers from the financial statements. If used in
conjunction with other methods, quantitative analysis can produce excellent results.
Ratio analysis isn't just comparing different numbers from the balance sheet, income
statement, and cash flow statement. It's comparing the number against previous years, other
companies, the industry, or even the economy in general. Ratios look at the relationships
between individual values and relate them to how a company has performed in the past, and
might perform in the future.

Definition
Result of one number or quantity divided by another. Ratios are the simplest mathematical
(statistical) tools that reveal significant relationships hidden in mass of data, and allow
meaningful comparisons. Some ratios are expressed as fractions or decimals, and some as
percentages. Major types of business ratios include (1) Efficiency, (2) Liquidity,
(3) Profitability, and (4) Solvency ratios.

Meaning of Ratio:
A ratio is one figure express in terms of another figure. It is a mathematical yardstick that
measures the relationship two figures, which are related to each other and mutually
interdependent. Ratio is express by dividing one figure by the other related figure. Thus a
ratio is an expression relating one number to another. It is simply the quotient of two
numbers. It can be expressed as a fraction or as a decimal or as a pure ratio or in absolute
figures as “so many times”. As accounting ratio is an expression relating two figures or
accounts or two sets of account heads or group contain in the financial statements.
Meaning of Ratio Analysis:
Ratio analysis is the method or process by which the relationship of items or group of items
in the financial statement are computed, determined and presented.
Ratio analysis is an attempt to derive quantitative measure or guides concerning the financial
health and profitability of business enterprises. Ratio analysis can be used both in trend and
static analysis. There are several ratios at the disposal of an analyst but their group of ratio he
would prefer depends on the purpose and the objective of analysis.

While a detailed explanation of ratio analysis is beyond the scope of this section, we will
focus on a technique, which is easy to use. It can provide you with a valuable investment
analysis tool.

This technique is called cross-sectional analysis. Cross-sectional analysis compares financial

ratios of several companies from the same industry. Ratio analysis can provide valuable
information about a company's financial health. A financial ratio measures a company's
performance in a specific area. For example, you could use a ratio of a company's debt to its
equity to measure a company's leverage. By comparing the leverage ratios of two companies,
you can determine which company uses greater debt in the conduct of its business. A
company whose leverage ratio is higher than a competitor's has more debt per equity. You
can use this information to make a judgment as to which company is a better investment risk.

However, you must be careful not to place too much importance on one ratio. You obtain a
better indication of the direction in which a company is moving when several ratios are taken
as a group.
Classification of Ratio:

CLASSIFICATION OF RATIO

BASED ON FINANCIAL BASED ON FUNCTION BASED ON USER

STATEMENT

1] BALANCE SHEET 1] LIQUIDITY RATIO 1] RATIOS FOR

RATIO 2] LEVERAGE RATIO SHORT TERM
2] REVENUE 3] ACTIVITY RATIO CREDITORS
STATEMENT 4] PROFITABILITY 2] RATIO FOR
RATIO RATIO SHAREHOLDER

3] COMPOSITE 5] COVERAGE 3] RATIOS FOR

RATIO RATIO MANAGEMENT

4] RATIO FOR
LONG TERM
CREDITORS
What Is a Statement of Financial Performance?
A statement of financial performance is an accounting summary that details a business
organization's revenues, expenses and net income. Three financial statements comprise the
statement of financial performance: income statement, balance sheet and cash flow statement.

Income statement: The income statement reflects a company’s revenues and expenses. It
shows the company’s bottom line so you can see how profitable your company is during a
certain period of time, such as quarterly or annually. The statement of financial performance
takes into account sales revenue, cost of goods sold and other operating expenses and income.

Balance sheet: The balance sheet reflects where your business stands financially at a certain
point in time. This statement of financial performance takes into account assets, liabilities and
shareholder equity to make sure assets are equal to the other two factors. The balance sheet
incorporates the net income determined on your income statement.

Cash flow statement: The cash flow statement looks at how money moves through your
business. It shows increases and decreases in cash from operations, investing and financing
during a period of time. This statement of financial performance shows the net change in cash
balance using numbers from both the income statement and the balance sheet.
These statements are prepared monthly, quarterly or annually, and give businesses a big
picture of there they stand financially. A corporation's accounting department may prepare a
statement of financial performance at any given point in time or throughout the year,
depending on business requirements. For example, you may ask your accounting manager to
prepare a statement of financial performance for the last two weeks of July and the first three
weeks of November to understand what factors affect sales and whether sales are seasonal.
Financial Performance Factors for a Business
Preparing a statement of financial performance means knowing a lot of important information
about how money comes into your business and how it goes out. These financial performance
factors for a business should be tracked regularly:

Assets: An asset is anything your business owns or has that will be of value in the future.
This includes tangible assets such as products, buildings and equipment. It also includes
intangible assets such as contracts, marketing and consumer mailing lists. These are all things
that can be sold in the future that would add value to your company.

Liabilities: A liability is anything you might owe in the future and is often based on a
contract. For example, if one of your employees crashes the company car, you may be liable
for paying the car’s insurance deductible since you contract with the insurance company.

Equity: Equity is the value of your business that remains after deducting liabilities from
assets. In corporations, this value is known as the shareholder’s equity.

Owner investment: Business owners typically invest their own cash and resources into the
business. This is known as the owner investment, which establishes equity in the business. If
future business partners want equity in your business, how much they invest determines their
equity share. For example, a limited liability corporation, or LLC, with two equal partners
who contributed 50 percent has an owner investment of 50 percent of the business.

Owner distribution: If those partners later sell their shares, they would receive an owner
distribution. This results in decreased equity in the business.

Revenue: Revenue represents income that a company earns during a certain period. It
includes sales, interest income and gains on short-term investments. Revenue may be a short-
term item if it is earned in a year or less or a long-term item if it is earned after a year. For
example, a business’ short-term revenues include sales and interest income, while long-term
revenues can include interest income, such as from a corporate savings account, that is earned
in two years.
Expenses: Expenses represent costs that a company incurs during a certain period. They
include the cost of sales, interest expense, production or delivery costs, as well as losses on
short-term investments.

Gains and losses: These are increases and decreases in equity that result from transactions
incidental to your business. For example, if your primary business is book printing and
distribution, you likely have machinery needed to bind books. If you sell a book binder used
to manufacture books, you would sell it either for more than you paid for it (a gain) or less (a
loss).
A statement of financial performance can also include comprehensive income, asset use,
market share and other factors that affect your business.

Why You Need a Statement of Financial Performance

There are many reasons why businesses need a statement of financial performance.
Generally, a statement of financial performance is important to understanding if your
business is profitable and, if not, where to make needed changes. It shows the current
financial status of your business, how cash is used and where the unnecessary costs are.
A statement of financial performance allows a company's top management to identify major
revenue and expense items that affect the company's bottom line, or net income. For example,
you can review your company’s statement of financial performance for the months of June,
September and November to understand and compare sales revenue levels and which expense
items increase based on seasonal business demands.

The statement of financial performance also helps management see which business segments
or products are worth investing more money in and which the company may need to stop
putting money into. If you're investing a lot of money in a product that historically costs more
to produce than it earns profit, you can make the best decision for your company based on
information learned from the statement of financial performance.

A statement of financial performance also provides significant insight into an organization's

overall profitability. It helps investors, lenders or regulators gauge a corporation's economic
standing. This comes into play in such situations as seeking a bank loan. The bank's credit
officer may review your statement of financial performance over a five-year period to gauge
profitability levels or sales trends and ensure that you will have available cash to repay the
loan.
Potential investors look at your statement of financial performance to help them decide if
they want to invest in your company. Likewise, someone wanting to purchase or acquire the
business will use the statement of financial performance to help determine a purchase price.
When done properly, the statement of financial performance tells future investors or
purchasers everything they need to know about your company.
While only publicly traded companies are required to maintain statements of financial
performance, keeping track of your company’s finances will help you when it comes time to
file tax returns.

How to Improve Financial Performance

After all of the calculations are in, you may find that the statement of financial performance
isn’t showing the profits you expected. This can be disheartening to anyone who invests a lot
of time, energy and money into their business enterprise, but there are ways to improve the
financial performance of your company:

 Maintain ongoing financial statements. One of the best ways to improve financial
performance is to regularly review how your business is doing. Instead of preparing
the statement of financial performance annually, you may want to do it quarterly, or
even monthly, to see where improvements can be made. What you don’t want to do is
make rash decisions based on one bad month, so be sure to look at financials month-
to-month, quarter-to-quarter or year-to-year to make the most informed decisions.

 Be proactive. With regular financial performance statements, you can see if things
are operating as efficiently as they should. With ongoing financial statements, you can
get a sense of what is currently happening in your company, what is going to happen,
and if any changes need to be made. Being proactive can save you a lot of money and
positively impact your bottom line.

 Have a realistic budget. One of the quickest ways to improve financial performance
is to have a realistic budget. Don’t spend a lot of money in areas that don’t make
sense, since it will negatively affect your bottom line. Make sure you have a budget
 that is realistic and in line with company goals. When you work within that budget,
you may see the financials move in the direction you want.

 Price your products correctly. Know how much your products are actually worth on
the market by doing competitor research. If you can increase the price of your product
or service, you may be able to see immediate improvements in the company’s
financial performance, especially if costs stay the same.

 Set achievable goals. In addition to a realistic budget, make sure your goals are
achievable. Don’t try to provide services you don’t have the resources for. Don’t try
to double your profits within one month. What you want to do is strategically plan
where to invest resources and money, and then set goals that the company can
actually achieve. Meeting smaller goals helps improve financial performance in the
short-term, while ultimately meeting your long-term financial goals.

 Get everyone on board. Make sure your entire team is onboard with the budget. This
ensures they abide by how much to spend and when to cut their losses. It also ensures
that your team is engaged and committed to your company’s goals and bottom line.
Satisfied employees can boost your financial goals since they are more likely to do
what it takes to help your company succeed and stick around for the long-term.

 Make sure your systems are current. Your company is only as efficient as the
people and technology you employ. Outdated technology and systems can slow things
down so much that you waste both money and time. Periodically check in with your
staff to make sure they are making effective use of their time and efficiently
processing anything related to your company’s finances, such as invoices and
collecting overdue payments. Keeping the computers and software up to date will also
keep things operating more smoothly. Utilizing financial performance apps and newer
computer programs is key in today's fast-changing world.
Measure your financial performance
Measurement of financial performance is an important part of running a growing business.
Many businesses fail because of poor financial management or planning.
Your business' success can depend on developing and implementing sound financial and
management systems. Updating your original business plan is a good place to start.
See prepare a business plan for growth and balance sheets.

Financial performance review

Financial performance review can help you examine your business goals and plan effectively
for improving the business. When carrying out a financial review of your business, you might
want to consider:

 Cashflow - this is the balance of all of the money flowing in and out of your business.
You should regularly review and update your forecast. See cashflow management.

 Working capital - have your requirements changed? If so, try to determine why and
assess how this compares to the industry standard. See how to use your business plan to
get funding.

 Cost base - keep your costs under constant review. Make sure that your costs are covered
in your sale price - but don't expect your customers to pay for any business inefficiencies.
See price your product or service.

 Borrowing - what is the position of any overdrafts or loans? Are there more appropriate
or cheaper forms of finance you could use? See borrowing finance for your business.

 Growth - do you have plans in place to adapt your financing to accommodate your
business' changing needs and growth? Find out more about financing growth.
Financial performance measures
One of the most important areas of your finances you should review is your profitability.
This is your capacity to make a profit, ie generate revenue that exceeds your overall
expenditure (all costs, taxes and expenses). Most growing businesses ultimately target
increased profits, so it's important to know how to analyse your profitability ratios.
Profitability ratios typically fall under two broad categories: margins and returns. Most
common profitability ratios are:
 Gross profit margin - how much money is made after direct costs of sales have been
taken into account, or the contribution as it is also known.
 Operating expenses margin - this lies between the gross and net measures of
profitability. Overheads are taken into account, but interest and tax payments are not. For
this reason, it is also known as the EBIT (earnings before interest and taxes) margin.
 Net profit margin - this is a much narrower measure of profits, as it takes all costs into
account, not just direct ones. All overheads, as well as interest and tax payments, are
included in the profit calculation.
 Return on capital employed - this calculates net profit as a percentage of the total
capital employed in a business. This allows you to see how well the money invested in
your business is performing compared with other investments you could make with it,
like putting it in the bank.

Accounting ratios to measure performance

As well as measuring profit, you should consider other standard financial ratios to help you to
analyse your business' performance. These ratios look at:
 liquidity - assessing your ability to meet your short-term financial obligations
 solvency - measuring your long-term debt against your assets and equity to
determine your financial stability
 efficiency - measuring things like stock turnover to determine how well you are
using your business assets
 Measuring these ratios against industry averages, previous years and competitors
can help you to identify problems and issues within your business. See how to use
accounting ratios to assess business performance.
Financial Performance Indicators You Should Be Tracking
Your business's Key Performance Indicators (KPIs) are your tools for measuring and tracking
progress in essential areas of company performance. Your KPIs provide you with a general
picture of the overall health of your business. Acquiring insights afforded by
your KPIs allows you to be proactive in making necessary changes in under-performing
areas, preventing potentially serious losses. The KPI quantification then allows you to
measure the effectiveness of your efforts. This process ensures the long-term sustainability of
your company's operating model, and helps increase your business's value as an investment.
The first priority is to identify and understand the overall impact that the various financial
realities represented by your KPI numbers have on your business. Then, use the insights you
acquire from these invaluable financial management performance indicators to identify and
implement changes that correct problems with policies, processes, personnel, or products that
are impacting one or more of your KPI values.
Primary KPIs that you're undoubtedly already using include revenue, expense, gross profit,
and net profit. Here are other key indicators that should be tracked, analyzed, and acted upon
as needed.

1. Operating Cash Flow

Monitoring and analyzing your Operating Cash Flow is an essential for understanding your
ability to pay for deliveries and routine operating expenses. This KPI is also used in
comparison with total capital you have in use—an analysis that reveals whether or not your
operations are generating sufficient cash for support of capital investments you are making to
advance your business.
The analysis of your ratio of operating cash flow compared to your total capital employed
gives you deeper insight into your business's financial health, allowing you to look beyond
just profits, when making capital investment decisions.

2. Working Capital
Cash that is immediately available is "working capital". Calculate your Working Capital by
subtracting your business's existing liabilities from its existing assets. Cash on hand, accounts
receivable, short-term investments are all included, as well as accounts payable, accrued
expenses, and loans are all part of this KPI equation.
This especially meaningful KPI informs you of the condition of your business in terms of its
available operating funds, by showing the extent to which your available assets can cover
your short-term financial liabilities.

3. Current Ratio
While the Working Capital KPI discussed above subtracts liabilities from assets, the Current
Ratio KPI divides total assets by liabilities to give you an understanding the solvency of your
business—i.e., how well your company is positioned to meet its financial obligations
consistently on time and to maintain a level of credit rating that is required to order to grow
and expand your business.

4. Debt to Equity Ratio

Debt to Equity is a ratio calculated by looking at your business's total liabilities in contrast to
your shareholders' equity (net worth). This KPI indicates how well your business is funding
its growth and how well you are utilizing your shareholders' investments. The number
indicates how profitable the business is. It tells you and your shareholders how much debt the
business has accrued in effort to become profitable. A high debt-to-equity ratio reveals a
practice of paying for growth by accumulating debt. This critical KPI helps you focus on your
financial accountability.

5. LOB Revenue Vs. Target

This KPI compares your revenue for a line of business to your projected revenue for it.
Tracking and analyzing discrepancies between the actual revenues and your projections helps
you understand how well a particular department is performing financially. This is one of the
two primary factors in the calculation of the Budget Variance KPI—the comparison between
projected and actual operating budget totals, which is necessary in order for you to budget
more accurately for needs.

6. LOB Expenses Vs. Budget

Comparing actual expenses to the budgeted amount produces this KPI. The comparison helps
you understand where and how some budgeted spending went off track, so that you can
budget more effectively going forward. Expenses vs. Budget is the other primary factor of the
Budget Variance KPI. Knowing the amount of variance between the total assumed and total
actual ratio of revenues to expenses helps you become an expert on the relationship between
your business's operations and finances.

7. Accounts Payable Turnover

The Accounts Payable Turnover KPI shows the rate at which your business pays off
suppliers. The ratio is the result of dividing the total costs of sales during a period (the costs
your company incurred while supplying its goods or services), by your average accounts
payable for that period.
This is a very informative ratio when compared over multiple periods. A declining accounts
payable turnover KPI may indicate that the length of time your company is taking to pay off
its suppliers is increasing and that action is required in order to keep your good standing with
your vendors, and to enable your business to take advantage of significant time-driven
discounts from vendors.

8. Accounts Receivable Turnover

The accounts receivable turnover KPI reflects the rate at which your business is successfully
collecting payments due from your customers. This KPI is calculated by dividing your total
sales for a period by your average accounts receivable for that period. This number can serve
as an alert that corrections need to be made in managing receivables, in order to bring
payment collections within appropriate timeframes.

9. Inventory Turnover
Inventory continuously flows in and out of your production and warehousing facilities. It can
be hard to visualize the amount of turnover that is actually taking place. The inventory
turnover KPI allows you to know how much of your average inventory your company has
sold in a period. This KPI is calculated by dividing sales within a given period by your
average inventory in the same period. The KPI gives you a picture of your company's sales
strength and production efficiency.

10. Return on Equity

The Return on Equity (ROE) KPI measures your company's net income in contrast to each
unit of shareholder equity (net worth). By comparing your company's net income to its
overall wealth, your ROE indicates whether or not your net income is appropriate for your
company's size.
Regardless of how much your company is currently worth (its net worth), your current net
income will determine its probable worth in the future. Therefore, your business's ROE ratio
both informs you of the amount of your organization’s profitability and quantifies its general
operational and financial management efficiency. An improving, or high ROE clearly
indicates to your shareholders that their investments are being optimized to grow the
business.

11. Quick Ratio

Your Quick Ratio KPI measures your organization's ability to utilize its highly liquid assets
to immediately meet your business's short-term financial responsibilities. This is the
measurement of your company’s wealth and financial flexibility. It is understood as a more
conservative evaluation of a business's fiscal health than the Current Ratio, because
calculation of the Quick Ratio excludes inventories from assets.
This Quick Ratio KPI has the popular nickname of "Acid Test" (after the nitric acid test used
in detecting gold). Similarly, the Quick Ratio is a quick and easy way of assessing the wealth
and health of your company. If you’ are a new adopter of KPIs, the Quick Ratio KPI is a
good approach to getting a quick view of your business’s overall health.
Purpose of Analysis of financial statements

 To know the earning capacity or profitability.

 To know the solvency.
 To know the financial strengths.
 To know the capability of payment of interest & dividends.
 To make comparative study with other firms.
 To know the trend of business.
 To know the efficiency of mgt.
 To provide useful information to mgt

Tools of Financial Statement Analysis

Various tools are used to evaluate the significance of financial statement data. Three
commonly used tools are these:

 Ratio Analysis
 Funds Flow Analysis
 Cash Flow Analysis
 CHAPTER-2
COMPANY PROFILE

COMPANY PROFILE

The Housing Development Finance Corporation Limited (HDFC) was amongst the first to
receive an 'in principle' approval from the Reserve Bank of India (RBI) to set up a bank in the
private sector, as part of RBI's liberalisation of the Indian Banking Industry in 1994. The
bank was incorporated in August 1994 in the name of 'HDFC Bank Limited', with its
registered office in Mumbai, India. HDFC Bank commenced operations as a Scheduled
Commercial Bank in January 1995.

HDFC is India's premier housing finance company and enjoys an impeccable track record in
India as well as in international markets. Since its inception in 1977, the Corporation has
maintained a consistent and healthy growth in its operations to remain the market leader in
mortgages. Its outstanding loan portfolio covers well over a million dwelling units. HDFC
has developed significant expertise in retail mortgage loans to different market segments and
also has a large corporate client base for its housing related credit facilities. With its
experience in the financial markets, strong market reputation, large shareholder base and
unique consumer franchise, HDFC was ideally positioned to promote a bank in the Indian
environment.

Business Focus
HDFC Bank's mission is to be a World Class Indian Bank. The objective is to build sound
customer franchises across distinct businesses so as to be the preferred provider of banking
services for target retail and wholesale customer segments, and to achieve healthy growth in
profitability, consistent with the bank's risk appetite. The bank is committed to maintain the
highest level of ethical standards, professional integrity, corporate governance and regulatory
compliance. HDFC Bank’s business philosophy is based on five core values: Operational
Excellence, Customer Focus, Product Leadership, People and Sustainability.
Capital Structure
As on 30 June 2018 the authorized share capital of the Bank is Rs. 650 crore. The paid-up
share capital of the Bank as on the said date is Rs 520,83,15,734 /- which is comprising of
260,41,57,867 equity shares of the face value of Rs 2/- each. The HDFC Group holds 20.86
% of the Bank's equity and about 18.16 % of the equity is held by the ADS / GDR
Depositories (in respect of the bank's American Depository Shares (ADS) and Global
Depository Receipts (GDR) Issues). 33.44 % of the equity is held by Foreign Institutional
Investors (FIIs) and the Bank has 5,48,942 shareholders.
The shares are listed on the BSE Limited and The National Stock Exchange of India Limited.
The Bank's American Depository Shares (ADS) are listed on the New York Stock Exchange
(NYSE) under the symbol 'HDB' and the Bank's Global Depository Receipts (GDRs) are
listed on Luxembourg Stock Exchange under ISIN No US40415F2002.

AMALGAMATION OF TIMES BANK & CENTURION BANK OF PUNJAB WITH

HDFC BANK
n May 23, 2008, the amalgamation of Centurion Bank of Punjab with HDFC Bank was
formally approved by Reserve Bank of India to complete the statutory and regulatory
approval process. As per the scheme of amalgamation, shareholders of CBoP received 1
share of HDFC Bank for every 29 shares of CBoP.
The amalgamation added significant value to HDFC Bank in terms of increased branch
network, geographic reach, and customer base, and a bigger pool of skilled manpower.
In a milestone transaction in the Indian banking industry, Times Bank Limited (another new
private sector bank promoted by Bennett, Coleman & Co. / Times Group) was merged with
HDFC Bank Ltd., effective February 26, 2000. This was the first merger of two private banks
in the New Generation Private Sector Banks. As per the scheme of amalgamation approved
by the shareholders of both banks and the Reserve Bank of India, shareholders of Times Bank
received 1 share of HDFC Bank for every 5.75 shares of Times Bank.

DISTRIBUTION NETWORK
HDFC Bank is headquartered in Mumbai. As of March 31, 2015, the Bank’s distribution
network was at 4,014 branches in 2,464 cities.All branches are linked on an online real-time
basis. Customers across India are also serviced through multiple delivery channels such as
Phone Banking, Net Banking, Mobile Banking and SMS based banking. The Bank’s
expansion plans take into account the need to have a presence in all major industrial and
commercial centres, where its corporate customers are located, as well as the need to build a
strong retail customer base for both deposits and loan products. Being a clearing / settlement
bank to various leading stock exchanges, the Bank has branches in centres where the NSE /
BSE have a strong and active member base.
The Bank also has a network of 11,766 ATMs across India. HDFC Bank’s ATM network can
be accessed by all domestic and international Visa / MasterCard, Visa Electron / Maestro,
Plus / Cirrus and American Express Credit / Charge cardholders.

BUSINESS PROFILE
HDFC Bank caters to a wide range of banking services covering commercial and investment
banking on the wholesale side and transactional / branch banking on the retail side. The bank
has three key business segments
 Wholesale Banking
The Bank’s target market is primarily large, blue-chip manufacturing companies in
the Indian corporate sector and to a lesser extent, small & mid-sized corporates and
agri-based businesses. For these customers, the Bank provides a wide range of
commercial and transactional banking services, including working capital finance,
trade services, transactional services, cash management, etc. The bank is also a
leading provider of structured solutions, which combine cash management services
with vendor and distributor finance for facilitating superior supply chain management
for its corporate customers. Based on its superior product delivery / service levels and
strong customer orientation, the Bank has made significant inroads into the banking
consortia of a number of leading Indian corporates including multinationals,
companies from the domestic business houses and prime public sector companies. It
is recognised as a leading provider of cash management and transactional banking
solutions to corporate customers, mutual funds, stock exchange members and banks.
 Treasury
Within this business, the bank has three main product areas - Foreign Exchange and
Derivatives, Local Currency Money Market & Debt Securities, and Equities. With the
liberalisation of the financial markets in India, corporates need more sophisticated risk
management information, advice and product structures. These and fine pricing on
various treasury products are provided through the bank’s Treasury team. To comply
with statutory reserve requirements, the bank is required to hold 25% of its deposits in
 government securities. The Treasury business is responsible for managing the returns
and market risk on this investment portfolio.
 Retail Banking
The objective of the Retail Bank is to provide its target market customers a full range
of financial products and banking services, giving the customer a one-stop window
for all his/her banking requirements. The products are backed by world-class service
and delivered to customers through the growing branch network, as well as through
alternative delivery channels like ATMs, Phone Banking, NetBanking and Mobile
Banking.
The HDFC Bank Preferred program for high net worth individuals, the HDFC Bank
Plus and the Investment Advisory Services programs have been designed keeping in
mind needs of customers who seek distinct financial solutions, information and advice
on various investment avenues. The Bank also has a wide array of retail loan products
including Auto Loans, Loans against marketable securities, Personal Loans and Loans
for Two-wheelers. It is also a leading provider of Depository Participant (DP) services
for retail customers, providing customers the facility to hold their investments in
electronic form.
HDFC Bank was the first bank in India to launch an International Debit Card in
association with VISA (VISA Electron) and issues the MasterCard Maestro debit card
as well. The Bank launched its credit card business in late 2001. By March 2015, the
bank had a total card base (debit and credit cards) of over 25 million. The Bank is also
one of the leading players in the “merchant acquiring” business with over 235,000
Point-of-sale (POS) terminals for debit / credit cards acceptance at merchant
establishments. The Bank is well positioned as a leader in various net based B2C
opportunities including a wide range of internet banking services for Fixed Deposits,
Loans, Bill Payments, etc.
History
HDFC Bank Ltd is one of India's premier banks. Headquartered in Mumbai HDFC Bank is a
new generation private sector bank providing a wide range of banking services covering
commercial and investment banking on the wholesale side and transactional/branch banking
on the retail side. As of 30 September 2017 the bank's distribution network was at 4729
branches and 12259 ATMs across 2669 cities and towns. HDFC Bank also has one overseas
wholesale banking branch in Bahrain a branch in Hong Kong and two representative offices
in UAE and Kenya. The Bank has two subsidiary companies namely HDFC Securities Ltd
and HDB Financial Services Ltd.The Bank has three primary business segments namely
banking wholesale banking and treasury. The retail banking segment serves retail customers
through a branch network and other delivery channels. This segment raises deposits from
customers and makes loans and provides other services with the help of specialist product
groups to such customers. The wholesale banking segment provides loans non-fund facilities
and transaction services to corporate public sector units government bodies financial
institutions and medium-scale enterprises. The treasury segment includes net interest earnings
on investments portfolio of the Bank.The Bank's ATM network can be accessed by all
domestic and international Visa/MasterCard Visa Electron/Maestro Plus/Cirrus and American
Express Credit/Charge cardholders. The Bank's shares are listed on the Bombay Stock
Exchange Limited and The National Stock Exchange of India Ltd. The Bank's American
Depository Shares (ADS) are listed on the New York Stock Exchange (NYSE) and the
Bank's Global Depository Receipts (GDRs) are listed on Luxembourg Stock Exchange.
HDFC Bank Ltd Was incorporated on August 30 1994 by Housing Development Finance
Corporation Ltd. In the year 1994 Housing Development Finance Corporation Ltd was
amongst the first to receive an 'in principle' approval from the Reserve Bank of India to set up
a bank in the private sector as part of the RBI's liberalization of the Indian Banking Industry.
HDFC Bank commenced operations as a Scheduled Commercial Bank in January 1995.
Ramon House Churchgate branch was inaugurated on 16 January 1995 as the first branch of
the bank. In March 1995 HDFC Bank launched Rs 50-crore initial public offer (IPO) (5 crore
equity shares at Rs 10 each at par) eliciting a record 55 times oversubscription. HDFC Bank
was listed on the Bombay Stock Exchange on 19 May 1995. The bank was listed on the
National Stock Exchange on 8 November 1995.In the year 1996 the Bank was appointed as
the clearing bank by the NSCCL. In the year 1997 the launched retail investment advisory
services. In the year 1998 they launched their first retail lending product Loans against
Shares. In the year 1999 the Bank launched online real-time NetBanking. In February 2000
Times Bank Ltd owned by Bennett Coleman & Co. / Times Group amalgamated with the
Bank Ltd. This was the first merger of two new generation private banks in India. The Bank
was the first Bank to launch an International Debit Card in association with VISA (Visa
Electron). In the year 2001 they started their Credit Card business. Also they became the first
private sector bank to be authorized by the Central Board of Direct Taxes (CBDT) as well as
the RBI to accept direct taxes.During the year the Bank made a strategic tie-up with a
Bangalore-based business solutions software developer Tally Solutions Pvt Ltd for
developing and offering products and services facilitating on-line accounting and banking
services to SMEs. On 20 July 2001 HDFC Bank's American depositary receipt (ADR) was
listed on the New York Stock Exchange under the symbol HDB. Also they made the alliance
with LIC for providing online payment of insurance premium to the customers.During the
year 2002-03 the Bank increased the number of branches from 171 Nos to 231 Nos and the
size of the Bank's ATM network expanded from 479 Nos to 732 Nos. They also expanded
their presence in the 'merchant acquiring' business. During the year 2003-04 the Bank
expanded the distribution network with the number of branches increased from 231 Nos to
312 Nos and the size of the Bank's ATM network increased from 732 Nos to 910 Nos. In
September 2003 they entered the housing loan business through an arrangement with HDFC
Ltd whereby they sell HDFC Home Loan product.During the year 2004-05 the Bank
expanded the distribution network with the number of branches increased from 312 Nos to
467 Nos and the size of the Bank's ATM network increased from 910 Nos to 1147 Nos.
During the year 2005-06 the Bank launched the 'no-frills account' a basic savings account
offering to the customer. Also the distribution network was expanded with the number of
branches increased from 467 Nos (in 211 cities) to 535 Nos (in 228 cities) and the number of
ATMs from 1147 Nos to 1323 Nos.During the year 2006-07 the distribution network was
expanded with the number of branches increased from 535 Nos (in 228 cities) to 684 Nos (in
316 cities) and the number of ATMs from 1323 Nos to 1605 Nos. They commenced direct
lending to Self Help Groups. Also they opened a dedicated branch for lending to SHGs in
Thudiyalur village (Tamil Nadu). In September 28 2005 the Bank increased their stake in
HDFC Securities Ltd from 29.5% to 55%. Consequently HDFC Securities Ltd became a
subsidiary of the Bank. During the year 2007-08 the Bank added 77 Nos new branches take
the total to 761 Nos branches. Also 372 Nos new ATMs were also added taking the size of
the ATM network from 1605 Nos to 1977 Nos. HDB Financial Services Ltd became a
subsidiary company with effect from August 31 2007. In June 2 2007 the Bank opened 19
branches in a day in Delhi and the National Capital Region (NCR).During the year 2008-09
the Bank expanded their distribution network from 761 branches in 327 cities to 1412
branches in 528 Indian cities. The Bank's ATMs increased from 1977 to 3295 during the
year. As per the scheme of amalgamation Centurion Bank of Punjab Ltd was amalgamated
with the Bank with effect from May 23 2008. The appointed date for the merger was April 01
2008. The amalgamation added significant value to HDFC Bank in terms of increased branch
network geographic reach and customer base and a bigger pool of skilled manpower. In
October 2008 the bank opened their first overseas commercial branch in Bahrain. The branch
offers the bank's suite of banking services including treasury and trade finance products for
corporate clients and wealth management products for Non-resident Indians. During the year
2009-10 the Bank expanded their distribution network from 1412 branches in 528 cities to
1725 branches in 779 cities. The Bank's ATMs increased from 3295 Nos to 4232 Nos during
the year.During the year 2010-11 the Bank expanded their distribution network from 1725
branches in 779 cities to 1986 branches in 996 Indian cities. The Bank's ATMs increased
from 4232 to 5471 Nos.In the year 2014 HDFC Bank lunched the missed call banking service
allowing customers to use banking services without having to visit the Bank or connect
online.On 16 June 2015 HDFC Bank launched the 10-second personal loan approval service
thereby becoming the first in the retail lending space to fully automate the process of loan
approval and disbursement.In 2016 HDFC Bank introduced loans at ATMs as the country's
first innovation to turn ATMs into Loan Dispensing Machines (LDMs) further extending the
functionality of the Bank's ATMs.
Board of Director
 Mrs. Shyamala Gopinath
 Mr. Bobby Parikh
 Mr. Malay Patel
 Mr. Keki Mistry
 Mr. Aditya Puri
 Mr. Kaizad Bharucha
 Mr. Umesh Chandra Sarangi
 Mr. Srikanth Nadhamuni
 Mr. Sanjiv Sachar
 Mr. Sandeep Parekh
 CHAPTER- 3

LITERATURE REVIEW

According Definition of Financial Management

According to Dr. S. N. Maheshwari,

"Financial management is concerned with raising financial resources and their effective
utilisation towards achieving the organisational goals."

According to Richard A. Brealey,

"Financial management is the process of putting the available funds to the best advantage
from the long term point of view of business objectives."

Meaning of Financial Management

Financial Management means planning, organizing, directing and controlling the financial
activities such as procurement and utilization of funds of the enterprise. It means applying
general management principles to financial resources of the enterprise.

Objectives of Financial Management

The financial management is generally concerned with procurement, allocation and control of
financial resources of a concern. The objectives can be-

1. To ensure regular and adequate supply of funds to the concern.

2. To ensure adequate returns to the shareholders which will depend upon the earning
capacity, market price of the share, expectations of the shareholders.
3. To ensure optimum funds utilization. Once the funds are procured, they should be
utilized in maximum possible way at least cost.
4. To ensure safety on investment, i.e, funds should be invested in safe ventures so that
adequate rate of return can be achieved.

To plan a sound capital structure-There should be sound and fair composition of capital so
that a balance is maintained between debt and equity capital.
Financial Statements (or financial reports) are formal records of a business’ financial
activities. These statements provide an overview of business’ profitability and financial
condition in both short and long term.

Financial statement analysis refers to an assessment of the viability, stability and profitability
of a business, sub-business or project.

It is performed by professional who prepare reports using ratios that make use of information
taken from financial statements and other reports. These reports are usually presented to top
management as one of their basis in making business decision. Based on these reports,
management may

 Continue or discontinue its main operation or part of his business;

 Make or purchase certain materials in the manufacture of its product;
 Acquire or rent/lease certain machineries and equipment in the Production of its
goods.
 Issue stocks or negotiate for a bank loan to increase its working capital.
 Other decision that allow management to make an informed selection on various
alternatives in the conduct of its business.
Project Financing is the process of arranging money from its suppliers i.e. mainly Bankers.
We have to show their plans, future, prospects and all other requirements that need Finance.
But only absolute value does not help us. We have to show comparative data and this
comparative is best presented with the help of ratio. Before financing any project banker
looks into the crux of the project i.e. key ratios of that particular project.

Financial statement analysis is important to boards, management, prayers, lenders and

other who make judgment the financial health of organization. One widely accepted method
of assessing financial statements is ratios analysis; whish uses data from balance sheet and
income statement to produce values that have easily interpreted financial meaning. Most of
the organization or companies routinely evaluate financial condition by calculating various
ratios and comparing the values to those, looking for differences that could indicate
weaknesses or opportunities for improvement.
Fundamental Concepts

Management can be summarized as the process of making informed decisions in three key
areas: investment, financing and operations. Banking professionals responsible for evaluating
management success in these areas can turn to this curriculum for a set of crucial financial
statement analysis techniques, culminating in business valuation principles. Participants learn
how to compare companies financially, understand cash flow, and grasp basic profitability
and risk analysis concepts.

FINANCIAL STATEMENTS

 Understanding business as a financial system where management makes decisions in three

key areas: investment, financing and operations
 Description of profit & loss, balance sheet, and cash flow statements
 Using profitability and risk ratios to compare companies across different sizes and
industries

RISK ANALYSIS USING RATIOS

 Risk ratio analysis

 Two different perspectives on analyzing companies using financial statements
 Selecting the ratios to use in your analysis

What Study has been done on topic

A project report on ratio analysis 2013-2014 to 2017-2018. Analysis and interpretation of
various accounting ratios gives a better understanding of financial and performance of firm.
Trend ratios indicate the direction of change in the performance – improvement, deterioration
or constancy – over the year. Objective of the study:
 CHAPTER- 4

OBJECTIVES OF STUDY

1. To learn about the financial performance and growth of HDFC Bank.

2. To know about the financial position of HDFC Bank

3. To know the various financial indications through changing values of various ratios.

4. To learn the calculation of various ratios.

 CHAPTER-5

RESEARCH METHODOLOGY

Research Methodology is a purposeful, precise and systematic search for new knowledge,
skills, attitudes and values, or for the re-interpretation of existing knowledge, skills, attitudes
and values.
Research methodology is a way to systematically solve the research problem. It may be
understood as a science of studying now research is done systematically. In that various
steps, those are generally adopted by a researcher in studying his problem along with the
logic behind them.
The research design followed to study the Financial Performance of HDFC Bank For the
Year of 2014 to 2018 is Descriptive and Analytical Research Design.

Research is common parlance refers to a search for knowledge. Once can also define
research as a scientific and systematic search for pertinent information on specific topic. In
fact, research is an art of scientific investigation. It is a way of solving problems
systematically. It may be understood as a science of studying how research is done
scientifically. It studies the various methods that are generally adopted by a researcher in
studying the research problems along with logic behind them.

Research methodology is a way to systematically solve the research problem. It

may be understood as a science of studying now research is done systematically. In that
various steps, those are generally adopted by a researcher in studying his problem along
with the logic behind them. It is important for research to know not only the research
method but also know methodology. ”The procedures by which researcher go about their
work of describing, explaining and predicting phenomenon are called methodology.”
Methods comprise the procedures used for generating, collecting and evaluating data. All
this means that it is necessary for the researcher to design his methodology for his
problem as the same may differ from problem to problem.
 • RESEARCH TYPE

Research and development are not free to a company. It is a cost/benefit

operation. Well-managed firms go to great lengths to develop good Financial
Performance of HDFC Bank that provide value to the firm and the economy at
large. There are numerous types of Financial Performance of HDFC Bank.

DATA COLLECTION
Primary data collection tools:

The primary data is that data which is collected fresh or first hand, and for
first time which is original in nature. Primary data can collect through personal
interview, questionnaire etc. to support the secondary data.

Secondary data collection sources:

Secondary data means data that already available i.e. they refers to the data which have
already been collected & analyzed by some else. When the researcher utilizes secondary
data he has to look in to various sources from where he can obtain them.

Secondary data:

Data collected from financial statements of the company;

 Profit & Loss A/c of HDFC Bank.

 Balance Sheet of HDFC Bank.
 Annual Report, etc.

4. Data interpretation and analysis techniques to be used:

Analysis and interpretation of Financial Performance are an attempt to determine the
significance and meaning of the Financial Performance data so that a forecast may be made
of the prospects for future earnings, ability to pay interest, debt maturities, both current as
well as long term, and profitability of sound.
IMPORTANCE & SIGNIFICANCE OF THE STUDY

 The most important benefit if Financial Performance of HDFC Bank is that it provides
an idea to the investors about deciding on investing their funds in a particular company.
Financial statement analysis is helpful to the government agencies in analyzing the
taxation owed to the firm.

 Financial Performance of HDFC Bank is Important to Your Business. Many business

owners and company managers have found that insight gained from their examination
of company financial statements can be invaluable. Such insight can help businesses
improve their profitability, cash flow, and value.

 Financial Performance of HDFC Bank is used to identify the trends and relationships
between financial statement items. Both internal management and external users (such
as analysts, creditors, and investors) of the financial statements need to evaluate a
company's profitability, liquidity, and solvency.

The financial statements are comprised of four basic reports, which are as follows:

 Income statement. Presents the revenues, expenses, and profits/losses

generated during the reporting period.
 Balance sheet.
 Statement of cash flows.
 Statement of retained earnings.
SCOPE OF STUDY
As is apparent from the above discussion about the meaning of Financial Performance
of HDFC Bank the scope of financial management is very wide. The scope extends over the
following three dimensions.

 For the organization to minimize cost and to maximize return.

 The ability to meet its operating activities

 To overcome undue risk.
HYPOTHESIS

 Null Hypothesis (H0): Ratio Analysis does not help the business concern in
maintaining the goodwill.

 Alternate Hypothesis (H1): Ratio Analysis helps the business concern in

maintaining the goodwill.

 Null Hypothesis (H0): Ratio Analysis does not create an environment of

security, confidence, and overall efficiency in a business.

 Alternate Hypothesis (H1): Ratio Analysis creates an environment of

security, confidence, and overall efficiency in a business.
LIMITATIONS
The main limitations of the study are:-

The study fully depends on financial data collected from the published financial statement
(Annual Report) of HDFC Bank. The data collected from above the sources are not of
detailed nature. Thus study incorporates all the limitations that are inherent in the considered
financial statement.

 The accuracy of Financial Performance information largely depends on how

accurately financial statements are prepared.

 Since Financial Performance are prepared by using historical financial data,

therefore, the information derived from such statements may not be effective in
corporate planning, if the previous situation does not prevail.

 Then Financial Performance provides only quantitative information about the

company's financial affairs.
 CHAPTER-6

DATA ANALYSIS & INTERPRETATION

CURRENT RATIO :-
Current ratio = current assets
Current liabilities
YEAR RATIOS

Year - 2013-2014 1.6

Year - 2014-2015 1.77

Year - 2015-2016 0.97

Year - 2016-2017 0.65

Year - 2017-2018 0.66

CURRENT RATIO
2
1.8
1.6 1.77
1.4 1.6 2017-2018
1.2 2016-2017
1
2015-2016
0.8 0.97
0.6 2014-2015
0.65 0.66
0.4 2013-2014
0.2
0
2014 2015 2016 2017 2018

INTERPRETATION:
The company current ratio is not ideal. The standard norm for current ratio is 0.8 It is evident
that in the year 2018 current ratio 0.66 is satisfactory. In remaining year current ratio is above
1 is satisfactory. Therefore it can be calculated that the liquidity performance of company is
poor.
QUICK RATIO:
Quick Ratio = current assets – (stock and prepaid expenses)

Current Liabilities – Bank overdraft

YEAR RATIOS

Year - 2013-2014 1.33

Year - 2014-2015 1.55

Year - 2015-2016 0.67

Year - 2016-2017 0.37

Year - 2017-2018 0.42

QUICK RATIO
1.8
1.6
1.4 1.55
1.2 2017-2018
1.33
1 2016-2017
0.8 2015-2016
0.6 2014-2015
0.67
0.4 2013-2014
0.37 0.42
0.2
0
2014 2015 2016 2017 2018

INTERPRETATION:

It is more test of liquidity than the current ratio. Generally a quick ratio is 0:50. It is considered to
represent a satisfactory current financial condition. The quick ratio has never exceeded the standard
ratio. The quick ratio has been decreased from 1.55 to 1.33 in 2016 as 0.67 and then decreased from
.37 to .42 in 2017 to 2018. Therefore it can be concluded the liquidity performance of the company
was not good.
NET PROFIT RATIO:

Net Profit Ratio = Net Profit x 100

Sales
YEAR RATIOS

Year - 2013-2014 5.52

Year - 2014-2015 6.37

Year - 2015-2016 7.46

Year - 2016-2017 7.9

Year - 2017-2018 10.81

NET PROFIT RATIO

12

10 10.81
2017-2018
8
7.9 2016-2017
6 7.46
6.37 2015-2016
5.52
4 2014-2015
2 2013-2014

0
2014 2015 2016 2017 2018

INTERPRETATION:

In this the net profit ratio is increased in 2014-2015 as 5.52 then slowly it gets increased from 5.52 to
6.37 in year 2014-2015 to 2015-2016. Then again it increased in 2016-2017 as 7.9. So only in the year
2014-2015 and 2017-2018 utilized the net profit effectually.
RETURN ON ASSETS

Return on assets = Net profit x 100

Total assets

YEAR RATIOS

Year - 2013-2014 8.98

Year - 2014-2015 9.08

Year - 2015-2016 11.04

Year - 2016-2017 11.66

Year - 2017-2018 14.45

RETURN ON ASSETS
16
14
14.45
12
2017-2018
10 11.66
11.04
2016-2017
8 8.98 9.08
2015-2016
6
2014-2015
4
2013-2014
2
0
2014 2015 2016 2017 2018

INTERPRETATION:

In the year 2014-2015 got the lower return on assets as 8.98 on the other hand lower ratio got in the
year 2017-2018. Therefore it indicates ideal capacity of assets.
RETURN ON EQUITY

Return on equity = Net profit x 100

Shareholders fund

YEAR RATIOS

Year - 2013-2014 12.97

Year - 2014-2015 13.27

Year - 2015-2016 15.65

Year - 2016-2017 16.93

Year - 2017-2018 20.25

RETURN ON EQUITY
25

20
20.25
2017-2018
15 16.93 2016-2017
15.65
12.97 13.27 2015-2016
10
2014-2015
5 2013-2014

0
2014 2015 2016 2017 2018

INTERPRETATION:

In this the return on equity first increased in the year 2014 as 12.97 and then it declined from 2015 to
2016 and then again it increased from 13.27 to 15.65 in the year 2016. So the higher ratio 20.25 in the
year 2017-2018 is only recorded.
CAPITAL TURNOVER RATIO

Capital turnover ratio = Sales

Capital

YEAR RATIOS

Year - 2013-2014 12.04

Year - 2014-2015 12.3

Year - 2015-2016 14.93

Year - 2016-2017 16.3

Year - 2017-2018 19.39

CAPITAL TURNOVER RATIO

25

20
19.39 2017-2018
15 16.3 2016-2017
14.93
2015-2016
10 12.04 12.3
2014-2015
5 2013-2014

0
2014 2015 2016 2017 2018

INTERPRETATION:

The high capital turnover ratio it indicates greater profit on the other hand when it is low it indicates
sufficient sales are not being made and profits and lower. The actual capital turnover ratio has
increased from 12.04 to 12.3 in 2014-2015 increased in year 2016-2017 as 14.93 and then again
increased in 2017-2018. Finally the capital turnover ratio is satisfactory.
CURRENT ASSET TO WORKING CAPITAL RATIO

Current asset to working capital ratio = current asset

Working capital

YEAR RATIOS

Year - 2013-2014 5.57

Year - 2014-2015 6.41

Year - 2015-2016 7.49

Year - 2016-2017 8.01

Year - 2017-2018 11.03

CURRENT ASSET TO WORKING CAPITAL RATIO

12

10 11.03

8 2017-2018
8.01 2016-2017
7.49
6
6.41 2015-2016
5.57
4 2014-2015
2013-2014
2

0
2014 2015 2016 2017 2018

INTERPRETATION:

In the year 2014-2015 got the higher current asset to working capital ratio as 5.57 on the other hand
lower ratio got in the year 2016-2017 of 8.01. Therefore only in the year 2014-2015 the lower ratio is
recorded and used effectively.
Fixed Asset Turnover Ratio

YEAR RATIOS

Year - 2013-2014 3.85

Year - 2014-2015 2.90

Year - 2015-2016 3.52

Year - 2016-2017 5.15

Year - 2017-2018 7.45

8
7.45
7

5 5.15
3.85
4
3.52
2.9
3
2
1
0
2013-14
2014-15
2015-16
2016-17
2017-18

Interpretation

From above table the fixed asset turnover is too high in the year 2017-18, when
compared to remaining years (i.e., 2013-14, 2014-15,2015-16, 2016-17). So, its shows that
firm is likely operating over capacity and needs to either increase its asset base (plant,
property, equipment) to support its sales or reduce its capacity.
Total Asset Turnover Ratio

YEAR RATIOS

Year - 2013-2014 2.85

Year - 2014-2015 1.46

Year - 2015-2016 2.60

Year - 2016-2017 1.59

Year - 2017-2018 2.07

3 2.85

2.6
2.5

2 2.07
1.46 1.59
1.5

0.5

0
2013-14
2014-15
2015-16
2016-17
2017-18

Interpretation

If a Company can generate more sales with fewer assets it has a higher turnover ratio
which tells it is a good Company because it is using its assets efficiently. A lower turnover
ratio tells that the Company is not using its assets optimally. Total asset turnover ratio is a
key driver of return on equity.
From above table the total asset turnover ratio is high i.e.2.85 (in the year of 2013-
14), when compared with remaining years (i.e.,2014-15, 2015-16, 2016-17,2017-18). In the
beginning the Company was in good in using asset efficiency, later it was quite normal and
negligible.
Gross Profit Margin

YEAR RATIOS

Year - 2013-2014 28.32

Year - 2014-2015 23.50

Year - 2015-2016 26.53

Year - 2016-2017 20.76

Year - 2017-2018 24.08

30 28.32
26.53
25 23.5
24.08
20 20.76

15

10

0
2013-14
2014-15
2015-16
2016-17
2017-18

Interpretation

From the above table the gross profit was high in the year 2013-14, when compared to
remaining years (i.e., 2014-15, 2015-16, 2016-17, 2017-18). A high gross profit margin
indicates that the Company can make a reasonable profit, as long as it keeps the overhead
cost in control. A low margin indicates that the business is unable to control its production
cost.
Return on Capital Employed (ROCE)

YEAR RATIOS

Year - 2013-2014 20.49

Year - 2014-2015 2.69

Year - 2015-2016 7.31

Year - 2016-2017 1.92

Year - 2017-2018 25.88

30

25 25.88
20.19
20

15

10
7.31
5 2.69

0 1.92

2013-14
2014-15
2015-16
2016-17
2017-18

Interpretation

The return on capital employed is greater or higher in the year of 2017-18, when
compared to previous years. Hence ROCE can indicate that a Company can reinvest a greater
portion of its profits back into its operations, to the benefit of shareholders. The re-invested
capital is, in turn, employed at higher rate of return, which help generate higher earnings
growth.
 CHAPTER-7

FINDINGS AND CONCLUSION

FINDINGS

 Current Ratio is 0.8 It is evident that in the year 2018 current ratio 0.66 is satisfactory.
In remaining year current ratio is above 1 is satisfactory. Therefore it can be calculated
that the liquidity performance of company is poor.

 Generally a quick ratio is 0:50. It is considered to represent a satisfactory current

financial condition. The quick ratio has never exceeded the standard ratio. The quick
ratio has been decreased from 1.55 to 1.33 in 2015 as 0.67 and then decreased from .37
to .42 in 2017 to 2018. Therefore it can be concluded the liquidity performance of the
company was not good.

 Net Profit Ratio is increased in 2014-2015 as 5.52 then slowly it gets increased from
5.52 to 6.37 in year 2014-2015 to 2015-2016. Then again it increased in 2015-2016 as
7.9. So only in the year 2014-2015 and 2017-2018 utilized the net profit effectually.

 Return On Assets as 8.98 on the other hand lower ratio got in the year 2017-2018.
Therefore it indicates ideal capacity of assets.

 Return On Equity first increased in the year 2014 as 12.97 and then it declined from
2015 to 2016 and then again it increased from 13.27 to 15.65 in the year 2016. So the
higher ratio 20.25 in the year 2017-2018 is only recorded.

 Capital Turnover Ratio it indicates greater profit on the other hand when it is low it
indicates sufficient sales are not being made and profits and lower. The actual capital
turnover ratio has increased from 12.04 to 12.3 in 2014-2015 increased in year 2016-
2017 as 14.93 and then again increased in 2017-2018. Finally the capital turnover ratio
is satisfactory.
 Current Asset To Working Capital Ratio as 5.57 on the other hand lower ratio got in the
year 2016-2017 of 8.01. Therefore only in the year 2014-2015 the lower ratio is
recorded and used effectively.
CONCLUSION

 The overall financial position of the HDFC Bank is satisfactory. The company needs
to improve its profitable position which is ideal, but less when compared to other
years, in order to earn return on the resources committed to business.

 The company’s liquidity position is satisfactory but not ideal, as the current assets and
the current liabilities have being considerably decreased when compared to previous
year in order to meet its current obligations.

 The activity ratio of the company is i.e current asset turnover ratio needs to be
improved. In the rest of the ratios gives satisfactory result.

 Increased demand of products helps the company remain strong. The changing
lifestyle and concepts of Indians have contributing much to the growth of the
company.
 CHAPTER-8

RECOMMENDATIONS/SUGESSTIONS

On the basis of the above conclusion the researcher is suggesting the following:-

 New and advanced concept must be introduced in inventory control management.

 Adequate planning is required for procurement of store items.

 A detail of the essence of effective working Financial management is proper cash

flow forecasting. This should take into account the impact of unforeseen events,
market cycles, loss of a prime customer and actions by competitors. So the effect of
unforeseen demands of Financial capital should be factored in HDFC Bank.

 Advance payments should be avoided. If at all advance payments are required, it

should be against securities like banks guarantee etc.
 CHAPTER-9

BIBLIOGRAPHY AND ANNEXURE

BOOK’S

o I. M. Pandey - Financial Management - Vikas Publishing House Pvt. Ltd. -

Ninth Edition 2006

o M.Y. Khan and P.K. Jain, Financial management – Vikas Publishing house
ltd., New Delhi.

o Prassanna Chandra-Fundamentals of Financial Management

o Kothari C.R., “Research Methodology-methods and Techniques”, K.K Gupta

for New Age International private ltd, 2006.

Web Site Referred

 https://www.hdfcbank.com/aboutus/default.htm
 https://www.goodreturns.in/company/hdfc-bank/ratios.html
 https://www.simplilearn.com/financial-performance-rar21-article
 https://www.investopedia.com/terms/f/financialperformance.asp
 https://www.moneycontrol.com/financials/housingdevelopmentfinancecorpora
tion/balance-sheetVI/HDF#HDF
 ANNEXURE

Balance Sheet
Consolidated Balance Sheet of HDFC Bank ------------------- in Rs. Cr. -------------------
Mar 18 Mar-17 Mar-16 Mar-15 Mar-15
12 mths 12 mths 12 mths 12 mths 12 mths
EQUITIES AND LIABILITIES
SHAREHOLDER'S FUNDS
Equity Share Capital 519.02 512.51 505.64 501.3 501.3
Total Share Capital 519.02 512.51 505.64 501.3 501.3
Reserves and Surplus 109,080.11 91,281.44 73,798.49 62,652.77 62,652.77
Total Reserves and
Surplus 109,080.11 91,281.44 73,798.49 62,652.77 62,652.77
Total ShareHolders
Funds 109,599.12 91,793.95 74,304.12 63,154.07 63,154.07
Minority Interest 356.33 291.44 180.62 161.63 161.63
Deposits 788,375.14 643,134.25 545,873.29 450,283.65 450,283.65
Borrowings 156,442.08 98,415.64 71,763.45 59,478.25 59,478.25
Other Liabilities and
Provisions 48,413.49 58,708.88 38,140.33 34,018.93 34,018.93
Total Capital and 1,103,186.1
Liabilities 7 892,344.16 730,261.82 607,096.52 607,096.52
ASSETS
Cash and Balances
with Reserve Bank of
India 104,688.21 37,910.55 30,076.58 27,522.29 27,522.29
Balances with Banks
Money at Call and
Short Notice 18,373.35 11,400.57 8,992.30 9,004.13 9,004.13
Investments 238,460.92 210,777.11 161,683.34 164,272.61 164,272.61
Advances 700,033.84 585,480.99 487,290.42 383,407.97 383,407.97
Fixed Assets 3,810.56 3,814.70 3,479.70 3,224.94 3,224.94
Other Assets 37,819.29 42,960.24 38,739.48 19,664.57 19,664.57
1,103,186.1
Total Assets 7 892,344.16 730,261.82 607,096.52 607,096.52
CONTINGENT LIABILITIES,
COMMITMENTS
Bills for Collection 82,299.09 30,848.04 55,242.58 22,304.93 22,304.93
Contingent Liabilities 836,231.70 818,284.29 821,774.81 975,278.60 975,278.60
 Profit Loss Statement
Consolidated Profit & Loss account of HDFC Bank ------------------- in Rs. Cr. -----------------
Mar 18 Mar-17 Mar-16 Mar-15 Mar-15
12 mths 12 mths 12 mths 12 mths 12 mths
INCOME
Interest / Discount on Advances
/ Bills 67,658.90 55,986.18 47,736.19 39,334.66 39,334.66
Income from Investments 16,229.79 15,951.56 14,125.50 10,709.85 10,709.85
Interest on Balance with RBI
and Other Inter-Bank funds 540.62 544.86 375.16 542.94 542.94
Others 858.53 788.76 924.72 79.04 79.04
Total Interest Earned 85,287.84 73,271.35 63,161.56 50,666.49 50,666.49
Other Income 16,056.60 12,877.63 11,211.65 9,545.68 9,545.68
Total Income 101,344.45 86,148.99 74,373.22 60,212.18 60,212.18
EXPENDITURE
Interest Expended 42,381.48 38,041.58 34,069.57 27,288.46 27,288.46
Payments to and Provisions for
Employees 9,193.90 8,504.70 6,306.14 5,162.68 5,162.68
Depreciation 966.78 886.19 738.03 680.45 680.45
Operating Expenses (excludes
Employee Cost &
Depreciation) 13,766.54 11,360.18 10,787.71 8,734.40 8,734.40
Total Operating Expenses 23,927.22 20,751.07 17,831.88 14,577.52 14,577.52
Provision Towards Income Tax 10,848.11 8,424.16 6,889.36 5,492.37 5,492.37
Provision Towards Deferred
Tax -945.03 -346.04 -195.7 112.97 -112.97
Provision Towards Other Taxes 0 0 0 0.77 0.77
Other Provisions and
Contingencies 6,571.82 3,990.81 2,960.77 2,040.04 2,265.98
Total Provisions and
Contingencies 16,474.90 12,068.93 9,654.43 7,646.15 7,646.15
Total Expenditure 82,783.61 70,861.58 61,555.89 49,512.13 49,512.13
Net Profit / Loss for The Year 18,560.84 15,287.40 12,817.33 10,700.05 10,700.05
Net Profit / Loss After EI &
Prior Year Items 18,560.84 15,287.40 12,817.33 10,700.05 10,700.05
Minority Interest -51.34 -36.72 -19.72 -14.41 -14.41
Share Of Profit/Loss Of
Associates 0.52 2.34 3.73 3.25 3.25
Consolidated Profit/Loss After
MI And Associates 18,510.02 15,253.03 12,801.33 10,688.89 10,688.89
Profit / Loss Brought Forward 34,532.33 24,825.59 19,550.86 15,207.47 15,207.47
Transferred on Amalgamation 0 27.45 0 0 0
Total Profit / Loss available for
Appropriations 53,042.35 40,106.06 32,352.20 25,896.36 25,896.36
APPROPRIATIONS
Transfer To / From Statutory
Reserve 4,562.03 3,777.16 3,180.93 2,623.87 2,623.87
Transfer To / From Capital
Reserve 235.52 313.41 222.15 224.92 224.92
Transfer To / From General
Reserve 1,748.67 1,454.96 1,229.62 1,038.59 1,038.59
Transfer To / From Investment
Reserve -44.2 4.29 -8.52 27.54 27.54
Dividend and Dividend Tax for
The Previous Year 3,390.58 -1.69 -11.71 0.84 0.84
Equity Share Dividend 50.77 0 2,401.78 2,005.20 2,005.20
Tax On Dividend 0 25.6 512.35 424.54 424.54
Balance Carried Over To
Balance Sheet 43,098.98 34,532.33 24,825.59 19,550.86 19,550.86
Total Appropriations 53,042.35 40,106.06 32,352.20 25,896.36 25,896.36
OTHER ADDITIONAL INFORMATION
EARNINGS PER SHARE
Basic EPS (Rs.) 72 60 51 44 44
Diluted EPS (Rs.) 71 59 50 44 44
 Yearly Result
Consolidated Yearly Results of HDFC Bank ----------------- in Rs. Cr. -------------------
Mar '18 Mar '17 Mar '16 Mar '15 Mar '14
Interest Earned
(a) Int. /Disc. on Adv/Bills 67,658.90 55,986.18 47,736.19 39,334.66 33,077.52
(b) Income on Investment 16,229.79 15,951.56 14,125.50 10,709.85 9,039.20
(c) Int. on balances With RBI 540.62 544.86 375.16 542.94 378.6
(d) Others 858.54 788.76 924.72 79.04 59.7
Other Income 16,056.60 12,877.63 11,211.65 9,545.69 8,297.50
EXPENDITURE
Interest Expended 42,381.48 38,041.58 34,069.57 27,288.46 23,445.45
Employees Cost 9,193.90 8,504.70 6,306.14 5,162.68 4,494.47
Other Expenses 14,733.32 12,246.37 11,525.75 9,414.84 7,975.18
Depreciation -- -- -- -- --
Operating Profit before
Provisions and contingencies 35,035.75 27,356.34 22,471.76 18,346.20 14,937.42
Provisions And Contingencies 6,571.82 3,990.81 2,960.77 2,266.75 1,726.75
Exceptional Items -- -- -- -- --
P/L Before Tax 28,463.93 23,365.53 19,510.99 16,079.45 13,210.67
Tax 9,903.08 8,078.12 6,693.66 5,379.40 4,446.16
P/L After Tax from Ordinary
Activities 18,560.85 15,287.41 12,817.33 10,700.05 8,764.51
Prior Year Adjustments -- -- -- -- --
Extra Ordinary Items -- -- -- -- --
Net Profit/(Loss) For the Period 18,560.85 15,287.41 12,817.33 10,700.05 8,764.51
Minority Interest -51.34 -36.72 -19.72 -14.41 -24.65
Share Of P/L Of Associates 0.52 2.34 3.72 3.25 3.63
Net P/L After M.I & Associates 18,510.03 15,253.03 12,801.33 10,688.89 8,743.49
Equity Share Capital 519.02 512.51 505.64 501.3 479.81
Reserves Excluding
Revaluation Reserves 109,080.11 91,281.44 73,798.49 62,652.77 43,686.82
Equity Dividend Rate (%) -- -- -- -- --
ANALYTICAL RATIOS
a) % of Share by Govt. -- -- -- -- --
b) Capital Adequacy Ratio -
Basel -I -- -- -- -- --
c) Capital Adequacy Ratio -
Basel -II -- -- -- -- --
EPS Before Extra Ordinary
Basic EPS 71.7 60 50.9 44.1 36.6
Diluted EPS 70.8 59.2 50.2 43.6 36.3
EPS After Extra Ordinary
Basic EPS 71.7 60 50.9 44.1 36.6
Diluted EPS 70.8 59.2 50.2 43.6 36.3
NPA Ratios :
i) Gross NPA -- -- -- -- 2,989.28
ii) Net NPA -- -- -- -- 820.03
i) % of Gross NPA -- -- -- -- 1
ii) % of Net NPA -- -- -- -- 0.3
Return on Assets % -- -- -- -- 2
Public Share Holding
No Of Shares (Lakhs) -- -- -- 149.03 144.88
Share Holding (%) -- -- -- 59.4 60.4
Promoters and Promoter Group Shareholding
a) Pledged/Encumbered
- Number of shares (Lakhs) -- -- -- -- --
- Per. of shares (as a % of the
total sh. of prom. and promoter
group) -- -- -- -- --
- Per. of shares (as a % of the
total Share Cap. of the
company) -- -- -- -- --
b) Non-encumbered
- Number of shares (Lakhs) -- -- -- 54.32 54.32
- Per. of shares (as a % of the -- -- -- 100 100
total sh. of prom. and promoter
group)
- Per. of shares (as a % of the
total Share Cap. of the
company) -- -- -- 21.7 22.6
 Cash Flow
Cash Flow of HDFC Bank ------------------- in Rs. Cr. -------------------
Mar 18 Mar-18 Mar-17 Mar-17 Mar-16
12 mths 12 mths 12 mths 12 mths 12 mths
Net Profit/Loss Before
Extraordinary Items And Tax 26,697.30 26,697.30 22,139.08 22,139.08 18,637.92
Net CashFlow From Operating
Activities 26,074.07 26,074.07 23,585.40 23,585.40 -3,224.67
Net Cash Used In Investing
Activities -533.1 -533.1 -1,956.25 -1,956.25 -804.76
Net Cash Used From - -
Financing Activities 48,411.43 48,411.43 11,567.63 11,567.63 6,588.57
Foreign Exchange Gains /
Losses 10.59 10.59 -28.26 -28.26 28.24
Net Inc/Dec In Cash And Cash
Equivalents 73,962.99 73,962.99 10,033.26 10,033.26 2,587.39
Cash And Cash Equivalents
Begin of Year 48,952.10 48,952.10 38,918.84 38,918.84 36,331.45
Cash And Cash Equivalents
End Of Year 122,915.08 122,915.08 48,952.10 48,952.10 38,918.84
 Ratio
Consolidated Key Financial Ratios of
HDFC Bank ------------------- in Rs. Cr. -------------------
Mar 18 Mar-17 Mar-16 Mar-15 Mar-14
Per Share Ratios
Basic EPS (Rs.) 71.73 59.95 50.85 44.1 36.58
Diluted EPS (Rs.) 70.76 59.16 50.24 43.6 36.31
Cash EPS (Rs.) 75.25 63.12 53.62 45.4 39.4
Book Value [Excl.
Reval Reserve]/Share
(Rs.) 422.33 358.21 293.9 251.96 184.1
Book Value [Incl.
Reval Reserve]/Share
(Rs.) 422.33 358.21 293.9 251.96 184.1
Operating Revenue Per
Share 328.65 285.93 249.83 202.14 177.38
Net Profit/Share (Rs.) 71.52 59.66 50.7 42.69 36.53
NP After MI And
SOA / Share (Rs.) 71.33 59.52 50.63 42.64 36.45

Key Performance Ratios

Net Profit Margin (%) 21.76 20.86 20.29 21.11 20.59
Net Profit After MI
And SOA Margin (%) 21.7 20.81 20.26 21.09 20.54
Operating Profit
Margin (%) 2.93 3.28 2.54 2.27 1.09
Return On Assets
(%) 1.67 1.7 1.75 1.76 1.73
Return On
Equity/Networth (%) 16.88 16.61 17.22 16.92 19.79
Net Interest Margin
(%) 3.88 3.94 3.98 3.85 3.79
Cost To Income (%) 39.86 38.09 36.95 36.9 36.66
Interest Income/Total 7.73 8.21 8.64 8.34 8.44
Assets (%)
Non-Interest
Income/Total Assets
(%) 1.45 1.44 1.53 1.57 1.64
Operating Profit/Total
Assets (%) 0.22 0.27 0.21 0.19 0.09
Operating
Expenses/Total Assets
(%) 2.16 2.32 2.44 2.4 2.47
Interest
Expenses/Total Assets
(%) 3.84 4.26 4.66 4.49 4.65
Valuation Ratios
Enterprise Value
(Rs.Cr) 1,330,977.41 1,073,235.28 858,379.49 738,616.50 570,972.73
EV Per Net Sales (X) 15.61 14.65 13.59 14.58 13.42
Price To Book Value
(X) 4.48 4.03 3.64 4.06 4.07
Price To Sales (X) 5.76 5.04 4.29 5.06 4.22
Retention Ratios (%) 100 100 81.23 81.24 81.2
Earnings Yield (X) 0.04 0.04 0.05 0.04 0.05