PROJECT REPORT ON

“Ratio analysis on Banking sector –SBI & ICICI”

Submitted toUniversity of Mumbai

In Partial Fulfillment of the Requirement

For

M.Com (Accountancy) Semester IIIIn the subject

Advanced Financial Management

By

Name of the student : - Vivek ShriramMahajanRoll No. : - 15 -9672

Name and address of the collegeK. V. Pendharkar College

Of Arts, Science & CommerceDombivli (E), 421203

NOVEMBER 2015

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DECLARATION

I VIVEK SHRIRAM MAHAJAN Roll No. 15 – 9672, the student of

M.Com (Accountancy) Semester III (2015), K. V. Pendharkar College,

Dombivli, Affiliated to University of Mumbai, hereby declare that the

project for the subject Advanced Financial Management of Project report on

“Ratio analysis on banking sector –SBI & ICICI” submitted by

me to University of Mumbai, for semester III examination is based on actual

work carried by me.

I further state that this work is original and not submitted anywhere else for any examination.

Place: Dombivli

Date:

Signature of the Student

Name: - Vivek Shriram Mahajan Roll No: - 15 -9672

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ACKNOWLEDGEMENT

It is a pleasure to thank all those who made this project work possible.

I Thank the Almighty God for his blessings in completing this task. The successful completion of this project is possible only due to support and cooperation of my teachers, relatives, friends and well-wishers. I would like to extend my sincere gratitude to all of them.

I am highly indebted to Principal A.K.Ranade, Co-ordinater P.V.Limaye, and my subject teacher Prajakta Karmarkar for their encouragement, guidance and support.

I also take this opportunity to express sense of gratitude to my parents for their support and co-operation in completing this project.

Finally I would express my gratitude to all those who directly and indirectly helped me in completing this project.

Name of the studentVivek Shriram Mahajan

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Table of Contents:CHAPTER No Topic Page no

CHAPTER 1 Introduction

Introduction to Subject………………………..Definition ……...…………………Objectives of Financial Management.....................Functions of Financial Management.......................

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CHAPTER 2 Literature Review

Rationale of Workfare Programmes......................Conceptual Framework …................................Amendments...............................................

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CHAPTER 3 Observation

Programme Implementation ……………………Programme Outcomes.........................................Impact: Early Trends And Outcomes....................

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CHAPTER 4 Suggestions & Recommendations

Recommendations …………………….Suggestions .............…………………..

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CHAPTER 5 Conclusion

Conclusion………………………………….. 28

Webiliography………………………………. 29

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CHAPTER 1: Introduction

Introduction to Subject

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.

Definition:

James Van Morne defines Financial Management as follows:

“Planning is an inextricable dimension of financial management. The term financial management connotes that funds flows are directed according to some plan”. Financial managements can be said a good guide for allotment of future resources of an organisation.

Preparing and implementation of some plans can be said as financial management. In other words, collection of funds and their effective utilisation for efficient running of and organization is called financial management. Financial management has influence on all activities of an organisation. Hence it can be said as an important one.

Its main responsibility is to complete the finance function successfully. It also has relations with other business functions. All business decisions also have financial implications. According to Raymond Chambers, Management of finance function is the financial management’.

However, financial management shall not be considered as the profit extracting device. If finance is properly utilised through plans, they lead to profits. Besides, without profits there won’t be finance generation. All these are facts. But this is not complete.

The implication of financial management is not only attaining efficiency and getting profits but also maximising the value of the firm. It facilitates to protect the interests of various classes of people related to the firm.

Hence, managing a firm for profit maximisation is not the meaning for financial management. Financial management is applicable to all kinds of organisations. According to Raymond Chambers, ‘the word financial management is applicable to all kinds of firms irrespective of their objectives’.

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Financial management refers to the efficient and effective management of money (funds) in such a manner as to accomplish the objectives of the organization. It is the specialized function directly associated with the top management. The significance of this function is not seen in the 'Line' but also in the capacity of 'Staff' in overall of a company. It has been defined differently by different experts in the field.

The term typically applies to an organization or company's financial strategy, while personal finance or financial life management refers to an individual's management strategy. It includes how to raise the capital and how to allocate capital, i.e. capital budgeting. Not only for long term budgeting, but also how to allocate the short term resources like current liabilities. It also deals with the dividend policies of the share holders.

DEFINITION of 'Strategic Financial Management’

Managing an organization's financial resources so as to achieve its business objectives and maximize its value. Strategic financial management involves a defined sequence of steps that encompasses the full range of a company's finances, from setting out objectives and identifying resources, analyzing data and making financial decisions, to tracking the variance between actual and budgeted results and identifying the reasons for this variance. The term "strategic" means that this approach to financial management has a long-term horizon.

Objectives of Financial Management:

The aims of financial management should be useful to the firm’s proprietors, managers, employees and consumers. For this purpose the only way is maximisation of firm’s value.

The following aspects have place in maximising firm’s value:

1. Rice in profits:

If the firm wants to maximise its value, it should’ increase its profits and revenues. For this purpose increase of sales volume or other activities can be taken up. It is the general feature of any firm to increase profits by proper utilisation of all opportunities and plans.

Theoretically, firm gets maximum profits if it is under equilibrium. At that stage the average cost is minimal and the marginal cost and the marginal revenues are equal. Here, we can’t say the sales because there must be suitable market for the increased sales. Further, the above costs must also be controlled.

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2. Reduction in cost:

Capital and equity funds are utilised for production. So all types of steps should be taken to reduce firm’s cost of capital.

3. Sources of funds:

It should be decided by keeping in view the value of the firm to collect funds through issue of shares or debentures.

4. Reduce risks:

There won’t be profits without risk. But for this reason if more risk is taken, it may become danger to the existence of the firm. Hence risk should be reduced to minimum level.

5. Long run value:

It should be the feature of financial management to increase the long-run value of the firm. To earn more profits in short time, some firms may do the activities like releasing of low quality goods, neglecting the interests of consumers and employees.

These trials may give good results in the short run. But for increasing the value of the firm in the long run, avoiding; such activities are more essential.

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Functions of Financial Management

1. Estimation of capital requirements: A finance manager has to make estimation with regards to capital requirements of the company. This will depend upon expected costs and profits and future programmes and policies of a concern. Estimations have to be made in an adequate manner which increases earning capacity of enterprise.

2. Determination of capital composition: Once the estimation have been made, the capital structure have to be decided. This involves short- term and long- term debt equity analysis. This will depend upon the proportion of equity capital a company is possessing and additional funds which have to be raised from outside parties.

3. Choice of sources of funds: For additional funds to be procured, a company has many choices like-

Issue of shares and debentures Loans to be taken from banks and financial institutions Public deposits to be drawn like in form of bonds.

Choice of factor will depend on relative merits and demerits of each source and period of financing.

4. Investment of funds: The finance manager has to decide to allocate funds into profitable ventures so that there is safety on investment and regular returns is possible.

5. Disposal of surplus: The net profits decision have to be made by the finance manager. This can be done in two ways:

Dividend declaration - It includes identifying the rate of dividends and other benefits like bonus.

Retained profits - The volume has to be decided which will depend upon expansional, innovational, diversification plans of the company.

6. Management of cash: Finance manager has to make decisions with regards to cash management. Cash is required for many purposes like payment of wages and salaries, payment of electricity and water bills, payment to creditors, meeting current liabilities, maintainance of enough stock, purchase of raw materials, etc.

7. Financial controls: The finance manager has not only to plan, procure and utilize the funds but he also has to exercise control over finances. This can be done through many techniques like ratio analysis, financial forecasting, cost and profit control, etc.

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Some of the important functions which every finance manager has to take are as follows:

i. Investment decision

ii. Financing decision

iii. Dividend decision

A. Investment Decision

This decision relates to careful selection of assets in which funds will be invested by the firms. A firm has many options to invest their funds but firm has to select the most appropriate investment which will bring maximum benefit for the firm and deciding or selecting most appropriate proposal is investment decision.

The firm invests its funds in acquiring fixed assets as well as current assets. When decision regarding fixed assets is taken it is also called capital budgeting decision.

Factors Affecting Investment/Capital Budgeting Decisions

1. Cash Flow of the Project

2. Return on Investment

3. Risk Involved

4. Investment Criteria

B. Financing Decision

The second important decision which finance manager has to take is deciding source of finance. A company can raise finance from various sources such as by issue of shares, debentures or by taking loan and advances. Deciding how much to raise from which source is concern of financing decision.

C. Dividend Decision

This decision is concerned with distribution of surplus funds. The profit of the firm is distributed among various parties such as creditors, employees, debenture holders, shareholders, etc. This decision is also called residual decision because it is concerned with distribution of residual or left over income. Generally new and upcoming companies keep aside more of retain earning and distribute less dividend whereas established companies prefer to give more dividend and keep aside less profit.

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CHAPTER 2: INDUSTRY PROFLE

STATE BANK OF INDIA (SBI)

The evolution of State Bank of India can be traced back to the first decade of the 19th century. It began with the establishment of the Bank of Calcutta in Calcutta, on 2 June 1806. The bank was redesigned as the Bank of Bengal, three years later, on 2 January 1809. It was the first ever joint-stock bank of the British India, established under the sponsorship of the Government of Bengal. Subsequently, the Bank of Bombay (established on 15 April 1840) and the Bank of Madras (established on 1 July 1843) followed the Bank of Bengal. These three banks dominated the modern banking scenario in India, until when they were amalgamated to form the Imperial Bank of India, on 27 January 1921.

An important turning point in the history of State Bank of India is the launch of the first Five Year Plan of independent India, in 1951. The Plan aimed at serving the Indian economy in general and the rural sector of the country, in particular. Until the Plan, the commercial banks of the country, including the Imperial Bank of India, confined their services to the urban sector. Moreover, they were not equipped to respond to the growing needs of the economic revival taking shape in the rural areas of the country. Therefore, in order to serve the economy as a whole and rural sector in particular, the All India Rural Credit Survey Committee recommended the formation of a state-partnered and state-sponsored bank.

The All India Rural Credit Survey Committee proposed the takeover of the Imperial Bank of India, and integrating with it, the former state-owned or state-associate banks. Subsequently, an Act was passed in the Parliament of India in May 1955. As a result, the State Bank of India (SBI) was established on 1 July 1955. This resulted in making the State Bank of India more powerful, because as much as a quarter of the resources of the Indian banking system were controlled directly by the State. Later on, the

State Bank of India (Subsidiary Banks) Act was passed in 1959. The Act enabled the State Bank of India to make the eight former State-associated banks as its subsidiaries.

The State Bank of India emerged as a pacesetter, with its operations carried out by the 480 offices comprising branches, sub offices and three Local Head Offices, inherited from the Imperial Bank. Instead of serving as mere repositories of the community's savings and lending to creditworthy parties, the State Bank of India catered to the needs of the customers, by banking purposefully. The bank served the heterogeneous financial needs of the planned economic development.

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Standalone Profit & Loss account ------ in Rs. Cr. ----- Mar '15 Income Interest Earned 152,397.07Other Income 22,575.89Total Income 174,972.96Expenditure Interest expended 97,381.82Employee Cost 23,537.07Selling, Admin & Misc Expenses 39,836.01Depreciation 1,116.49Preoperative Exp Capitalised 0Operating Expenses 38,677.64Provisions & Contingencies 25,811.93Total Expenses 161,871.39 Net Profit for the Year 13,101.57Extraordinary Items 0Profit brought forward 0.32Total 13,101.89Preference Dividend 0Equity Dividend 2,557.28Corporate Dividend Tax 520.65Per share data (annualised) Earning Per Share (Rs) 17.55Equity Dividend (%) 350Book Value (Rs) 172.04Appropriations Transfer to Statutory Reserves 10,023.64Transfer to Other Reserves 0Proposed Dividend/Transfer to Govt 3,077.93Balance c/f to Balance Sheet 0.32Total 13,101.89

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Industrial Credit and Investment Corporation of India Bank (ICICI)

ICICI Bank started as a wholly owned subsidiary of ICICI Limited, an Indian financial institution, in 1994. Four years later, when the company offered ICICI Bank's shares to the public, ICICI's shareholding was reduced to 46%. In the year 2000, ICICI Bank offered made an equity offering in the form of ADRs on the New York Stock Exchange (NYSE), thereby becoming the first Indian company and the first bank or financial institution from non-Japan Asia to be listed on the NYSE. In the next year, it acquired the Bank of Madura Limited in an all-stock amalgamation. Later in the year and the next fiscal year, the bank made secondary market sales to institutional investors.

With a change in the corporate structure and the budding competition in the Indian Banking industry, the management of both ICICI and ICICI Bank were of the opinion that a merger between the two entities would prove to be an essential step. It was in 2001 that the Boards of Directors of ICICI and ICICI Bank sanctioned the amalgamation of ICICI and two of its wholly-owned retail finance subsidiaries, ICICI Personal Financial Services Limited and ICICI Capital Services Limited, with ICICI Bank. In the following year, the merger was approved by its shareholders, the High Court of Gujarat at Ahmedabad as well as the High Court of Judicature at Mumbai and the Reserve Bank of India.

ICICI Bank has its equity shares listed in India on Bombay Stock Exchange and the National Stock Exchange of India Limited. Overseas, its American Depositary Receipts (ADRs) are listed on the New York Stock Exchange (NYSE). As of December 31, 2008, ICICI is India's second-largest bank, boasting an asset value of Rs. 3,744.10 billion and profit after tax Rs. 30.14 billion, for the nine months, that ended on December 31, 2008.

ICICI Bank Limited (the Bank) is a banking company engaged in providing a range of banking and financial services, including commercial banking and treasury operations. It operates under four segments: retail banking, wholesale banking, treasury and other banking. The Bank’s subsidiaries include ICICI Prudential Life Insurance Company Limited, ICICI Lombard General Insurance Company Limited, ICICI Trusteeship Services Limited, ICICI Prudential Pension Funds, Management Company Limited, ICICI Home Finance Company Limited and ICICI Securities Limited.

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Webilography

http://www.slideshare.net http://www.nrega.nic.in https://en.wikipedia.org www.nrega.ap.gov.in

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