Axis Bank

Axis Bank was the first of the new private banks to have begun operations in 1994, after the
Government of India allowed new private banks to be established. The Bank was promoted jointly by
the Administrator of the specified undertaking of the Unit Trust of India (UTI - I), Life Insurance
Corporation of India (LIC) and General Insurance Corporation of India (GIC) and other four PSU
insurance companies, i.e. National Insurance Company Ltd., The New India Assurance Company Ltd.,
The Oriental Insurance Company Ltd. and United India Insurance Company Ltd.

The Bank today is capitalized to the extent of Rs. 408.84 crores with the public holding (other than
promoters and GDRs) at 53.81%.

The Bank's Registered Office is at Ahmadabad and its Central Office is located at Mumbai. The Bank
has a very wide network of more than 1095 branches (including 57 Service Branches/CPCs as on 30th
September 2010). The Bank has a network of over 4846 ATMs (as on 30th September 2010) providing
24 hrs a day banking convenience to its customers. This is one of the largest ATM networks in the
country.

The Bank has strengths in both retail and corporate banking and is committed to adopting the best
industry practices internationally in order to achieve excellence.

Also with associates viz. National Insurance Company Ltd., The New India Assurance Company, The
Oriental Insurance Corporation and United Insurance Company Ltd.

Axis Bank in India today is capitalized with Rs. 232.86 Crores with 47.50% public holding other than
promoters. It has more than 200 branch offices and Extension Counters in the country with over 1250
Axis Bank ATM proving to be one of the largest ATM networks in the country. Axis Bank India
commits to adopt the best industry practices internationally to achieve excellence. Axis Bank has
strengths in retail as well as corporate banking. By the end of December 2004,Axis Bank in India had
over 2.7 million debit cards. This is the first bank in India to offer the ATPAR Cheque facility, without
any charges, to all its Savings Bank customers in all the places across the country where it has
presence.

Wth the AT PAR cheque facility, customers can make cheque payments to any beneficiary at any of its
existence place. The ceiling per instrument is Rs. 50,000/-.The latest offerings of the bank along with
Dollar variant is the Euro and Pound Sterling variants of the International Travel Currency Card. The
Travel Currency Card is a signature based pre-paid travel card which enables traveler’s global access to
their money in local currency of the visiting country in a safe and convenient way. The Bank has
strengths in both retail and corporate banking and is committed to adopting the best industry practices
internationally in order to achieve excellence.

Evolution
UTI was established in 1964 by an Act of Parliament; neither did the Government of India own it nor
contributes any capital. The RBI was asked to contribute one-half of its initial capital of Rs 5crore, and
given the mandate of running the UTI in the interest of the unit-holders. The State Bank of India and
the Life Insurance Corporation contributed 15 per cent of the capital each, and the rest was contributed
by scheduled commercial banks which were not nationalized then. This kind of structure for a unit trust
is not found anywhere else in the world. Again, unlike other unit trusts and mutual funds, the UTI was
not created to earn profits.

In the course of nearly four decades of its existence, it (the UTI) has succeeded phenomenally in
achieving its objective and has the largest share anywhere in the world of the domestic mutual fund
industry.'' The emergence of a "foreign expert" during the setting up of the UTI makes an interesting
story. The announcement by the then Finance Minister that the Government of India was
contemplating the establishment of a unit trust caught the eye of Mr. George Woods, the then President
of the World Bank. Mr. Woods took a great deal of interest in the Indian financial system, as he was
one of the principal architects of the ICICI, in which his bank, First Boston Corporation Bank, had a
sizeable shareholding. Mr. Woods offered, through Mr. B.K. Nehru, who was India's Executive
Director on the World Bank, the services of an expert.
The Centre jumped at the offer, and asked the RBI to hold up the finalization of the unit trust proposals
till the expert visited India. The only point Mr. Sullivan made was that the provision to limit the
ownership of units to individuals might result in unnecessarily restricting the market for units. While
making this point, he had in mind the practice in the US, where small pension funds are an important
class of customers for the unit trusts. The Centre accepted the foreign expert’s suggestion, and the
necessary amendments were made in the draft Bill. Thus, began corporate investment in the UTI,
which received a boost from the tax concession given by the government in the 1990-91 Budget.
According to this concession, the dividends received by a company from investments in other
companies, including the UTI, were completely exempt from corporate income tax, and provided the
dividends declared by the investing company were higher than the dividends received.

The result was a phenomenal increase in corporate investment, which accounted for 57 per cent of the
total capital under US-64 scheme. Because of high liquidity the corporate sector used the UTI to park
its liquid funds. This added to the volatility of the UTI funds. The corporate lobby which perhaps
subtly opposed the establishment of the UTI in the public sector made use of it for its own benefits
later. The Government-RBI power game started with the finalization of the UTI charter itself. The RBI
draft of the UTI charter stipulated that the Chairman will be nominated by it, and one more nominee
would be on the Board of Trustees. While finalizing the draft Bill, the Centre changed this stipulation.
The Chairman was to be nominated by the Government, albeit in consultation with RBI. Although the
appointment was to be made in consultation with the Reserve Bank, the Government could appoint a
person of its choice as Chairman even if the Bank did not approve of him.

Promoters
The largest and the best Financial Institution of the country, UTI, have promoted Axis Bank Ltd.. The
Bank was set up with a capital of Rs. 115 crore, with UTI contributing Rs. 100 crore, LIC - Rs. 7.5
crore and GIC and its four subsidiaries contributing Rs. 1.5 crore each.

SUUTI - Shareholding 23.78%

Erstwhile Unit Trust of India was set up as a body corporate under the UTI Act, 1963, with a view to
encourage savings and investment. In December 2002, the UTI Act, 1963 was repealed with the
passage of Unit Trust of India (Transfer of Undertaking and Repeal) Act, 2002 by the Parliament,
paving the way for the bifurcation of UTI into 2 entities, UTI-I and UTI-II with effect from 1st
February 2003. In accordance with the Act, the Undertaking specified as UTI I has been transferred
and vested in the Administrator of the Specified Undertaking of the Unit Trust of India (SUUTI), who
manages assured return schemes along with 6.75% US-64 Bonds, 6.60% ARS Bonds with a Unit
Capital of over Rs. 14167.59 crores.

The Government of India has appointed Shri K. N. Prithviraj as the Administrator of the Specified
undertaking of UTI, to look after and administer the schemes under UTI - I, where Government has
continuing obligations and commitments to the investors, which it will uphold.

Vision 2015 and Core Values

VISION 2015:
To be the preferred financial solutions provider excelling in customer delivery through insight,
empowered employees and smart use of technology.

Core Values
 Customer Centricity
 Ethics
 Transparency
 Teamwork
 Ownership
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Stock Data
Current Price : 1,571.10

Axis Bank Limited Key Data

Ticker: 532215

Exchanges: OTH BOM

2010 Sales 154,333,215,000

(Year Ending Jan 2011).

Currency: Indian Rupees

Fiscal Yr Ends: March

Share Type: Ordinary

Recent Stock Performance

1 Week -0.1% 13 Weeks 14.0%

4 Weeks23.8% 52 Weeks 57.7%

Employees: 9,980

Market Cap: 640,128,984,000

Shares Outstanding: 407,440,000

Closely Held Shares: 134,411,516

Financial Ratios
Financial
Ratios 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010

Earnings Per
Share (Basic)
(in Rs.) 17.45 23.5 32.15 50.61 65.78
Book Value (in
Rs.) 103.06 120.5 245.14 284.5 395.99
Return on
Equity 18.44% 21.84% 16.09% 19.93% 19.89%
Return on
Assets 1.18% 1.10% 1.24% 1.44% 1.67%
Capital
Adequacy
Ratio / CAR 11.08% 11.57% 13.73% 13.69% 15.80%
Tier I Capital
(CAR) 7.26% 6.42% 10.17% 9.26% 11.18%

Dividend Per
Share (in Rs.) 3.5 4.5 6 10 12
Dividend
Payout Ratio 23.20% 22.58% 23.49% 23.16% 22.57%

Earnings per share (Basic) increased from Rs. 50.61 to Rs 65.78

Proposed Dividend up from 100% to 120%
Capital Adequacy Ratio stood at 15.80% as against the minimum regulatory
norm of 9%
The Banking Sector
The banking system in India is significantly different from that of other Asian nations because of the
country’s unique geographic, social, and economic characteristics. India has a large population and
land size, a diverse culture, and extreme disparities in income, which are marked among its regions.
There are high levels of illiteracy among a large percentage of its population but, at the same time, the
country has a large reservoir of managerial and technologically advanced talents. Between about 30
and 35 percent of the population resides in metro and urban cities and the rest is spread in several semi-
urban and rural centers. The country’s economic policy framework combines socialistic and capitalistic
features with a heavy bias towards public sector investment. India has followed the path of growth-led
exports rather than the “export led growth” of other Asian economies, with emphasis on self-reliance
through import substitution.

These features are reflected in the structure, size, and diversity of the country’s banking and financial
sector. The banking system has had to serve the goals of economic policies enunciated in successive
five year development plans, particularly concerning equitable income distribution, balanced regional
economic growth, and the reduction and elimination of private sector monopolies in trade and industry.
In order for the banking industry to serve as an instrument of state policy, it was subjected to various
nationalization schemes in different phases (1955, 1969, and 1980). As a result, banking remained
internationally isolated (few Indian banks had presence abroad in international financial centers)
because of preoccupations with domestic priorities, especially massive branch expansion and attracting
more people to the system. Moreover, the sector has been assigned the role of providing support to
other economic sectors such as agriculture, small-scale industries, exports, and banking activities in the
developed commercial centers (i.e., metro, urban, and a limited number of semi-urban centers). The
banking system’s international isolation was also due to strict branch licensing controls on foreign
banks already operating in the country as well as entry restrictions facing new foreign banks. A
criterion of reciprocity is required for any Indian bank to open an office abroad. These features have
left the Indian banking sector with weaknesses and strengths. A big challenge facing Indian banks is
how, under the current ownership structure, to attain operational efficiency suitable for modern
financial intermediation. On the other hand, it has been relatively easy for the public sector banks to
recapitalize, given the increases in nonperforming assets (NPAs), as their Government dominated
ownership structure has reduced the conflicts of interest that private banks would face.

Banks are paying hefty dividends to their shareholders in recent times. In 2009-10, dividend payment
of 32 banks increased 18.2%, with the dividend payout ratio rising in 2009-10 as against 2008-09.

The Reserve Bank of India (RBI) has raised the cap on banks’ dividend payout ratio from 33.33% to
40%. The aggregate total net profit of 32 banks have increased by 15.8% to Rs 44,831 crore in 2009-10
from Rs 38,704 crore in 2008-09. Total equity dividend grew to Rs 8,640 crore from Rs 7,312 crore
during the study period, raising the equity dividend to net profit ratio to 19.27% from 18.89%.
However, no banks exceeded the RBI norm of ratio. In 2009-10, top five banks in terms of dividend
payout ratio were ICICI Bank, Karnataka Bank, IOB, Andhra Bank and Vijaya Bank. Among these,
Vijaya Bank registered significant increase. Among the 32 dividend-paying banks for 2009-10 and
2008-09, 23 raised the rates of dividend, three reduced and six maintained the same level. Among
them, those who raised their dividend payment significantly are Corporation Bank, Bank Of Baroda,
Allahabad Bank, Vijaya Bank and State Bank of Travancore. The rate of dividend of Bank of Baroda
(BoB) increased to 150% during 2009-10 from 90% during 2008-09. This can be explained from the
performance of the bank. Net profit of the bank increased by 37.3% to Rs 3,058 crore in 2009-10 from
Rs 2,227 crore. But the dividend payout ratio rose to 17.93% from 14.83% during the study period.
According to the directors’ report, BoB had delivered a strong performance in 2009-10 in the backdrop
of widespread turbulence in the global financial markets as well as a slowdown of economic growth in
India. The bank’s management had attributed the improvement in the bank’s productivity to a sharper
focus on technology and greater leverage from current branches. One of the key positives has been the
bank’s ability to manage asset quality in the current environment. Gross NPL ratio and net NPL ratio of
BoB as of March 2010 were at 1.4% and 0.35%, respectively, with a provision coverage ratio of 75%.
State Bank of India increased its dividend payment marginally by 3.4% during 2009-10.The dividend
payout ratio of the bank also rose to 20.78% from 20.19%. In terms of dividend payout ratio, Bank of
India also fared well, registering a growth of 21.14% in 2009-10.
 SBI
Mar '06 Mar '07 Mar '08 Mar '09 Mar '10

Face Value 10 10 10 10 10

Dividend Per Share 14 14 21.5 29 30

Dividend Payout Ratio Net Profit 19.06 18.98 22.64 22.9 23.36

Dividend Payout Ratio Cash Profit 16.35 16.75 20.56 21.13 21.2

Earnings Per Share 83.73 86.29 106.56 143.67 144.37

Book Value

525.25 594.69 776.48 912.73 1,038.76

ICICI

Face Value

10 10 10 10 10

Dividend Per Share 8.5 10 11 11 12

Dividend Payout Ratio Net Profit 34.08 33.89 33.12 36.6 37.31

Dividend Payout Ratio Cash Profit 27.36 28.84 29.08 31 32.33

Earnings Per Share

28.55 34.59 37.37 33.76 36.1

Book Value 249.55 270.37 417.64 444.94 463.01

Punjab National Bank

Face Value

10 10 10 10 10

Dividend Per Share 6 10 10 20 22

Dividend Payout Ratio Net Profit 14.98 30.71 23.4 23.86 20.74

Dividend Payout Ratio Cash Profit 13.26 27.26 21.61 22.47 19.62

Earnings Per Share

Conclusion
In a year of uncertainty, the Axis Bank has delivered a strong performance indicating how well the
team has remained focused on its core business strengths. It also underscored the fact that the Bank has
a well-balanced business model with diverse revenue streams, which can weather adversity. The
economic outlook for the country looks promising and while there may be concerns around the slow
pace of global recovery and inflation at home, there is unanimity in the view that we are poised at an
exciting juncture. This is a great time for India to build its physical and social infrastructure and this
will provide an impetus for overall economic growth. Axis bank team is confident that as robust
growth returns, Axis Bank will be able to capitalize on these opportunities and propel itself into the
next level of growth. It is important, therefore, that we translate our basic values into an actionable
agenda that will enable the Bank to emerge as the preferred provider of financial solutions, enhancing
shareholder value.

A committed team is another important ingredient for building a franchise of excellence. One of our
key objectives is to create a common vision for our employees, which combines business goals with
values we hold important: customer-centricity, teamwork, transparency, ownership and ethics. Axis
Bank has built its businesses with these basic values and that these will remain guiding principles as we
reach higher to step into another level of growth.