project report on fundamental analysis of scrips under banking sector
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Project Report on Fundamental Analysis of Scrips under Banking Sector
Presented By: AFTAB SHAIKH
COMPANY PROFILE
SHCIL was incorporated under the Companies Act 1956 on 28th July 1986 at the initiative of the Government
Promoted by seven all Indian financial institution Industrial Development Bank Of India Unit Trust Of India ICICI Industrial Finance Corporation of India Ltd Life Insurance Corporation Of India General Insurance Corporation of India and its
Subsidiaries. Industrial Investment Bank of India.
SUBSIDIARIES SHCIL SERVICES LIMITED HCIL PROJECTS LIMITED SHCIL COMMODITIES AND DERIVATIVES
TRADING LIMITED UNITEC VALUE SOLUTIONS PTE. LIMITED,
SINGAPORE Corporate Philosophy: People Organization Owner Mindset Equal Opportunities Employee
SHCIL OFFERS THE FOLLOWING SERVICES TO THE CLIENTS
Custodial Services Clearing & Settlement Services (Cash Segment) Electronic & Physical Safekeeping Services SHCIL offers clients Premium Offerings web-delivery Vaults Asset Servicing Clearing Services (Futures and Options segment) DEPOSITORY SERVICE:
Operating Charges Of SHCIL
Account Opening Fees: Rs 7000/- onetime refundable AMC Rs 662 Annual AMC
Brokrage charges are Rs. 15 paise for intraday and Rs. 55 paose for holding on account
Management
Directors Designation
Shri B. Ravindranath, Nominee Director of IDBI Bank Limited & Non-Executive Chairman
Shri A. R. Sekar Nominee Director of GIC
Shri Sushant Kumar Nominee Director of ICICI Bank Limited
Shri Prakash P. Mallya Nominee Director of LIC of India
Shri S. B. Mainak Independent Director
Smt Shashi Sharma Nominee Director of IFCI Limited
Shri G. Anantharaman Nominee Director of SU-UTI
Shri R. C. Razdan Managing Director & CEO
COMPETITORS ofSHCIL
Kotak Securities Limited India Bulls ICICIdirect.com Share Khan Motilal Oswal Sbi capital
INFRASTRUCTURE FACILITY:
They adopted local area network (LAN). There is mainly one server that stores all the
documents. Highly sophisticated computer system. High speed internet and telephone service. Canteen facility. Vehicles parking facility. Well ventilated with air conditioned rooms. Visual display (TV) on every corner. Well maintained sanitarian. Close circuit camera (CCTV) on each cabins. Fire extinguishing systems.
PART B
INTRODUCTION TO FUNDAMENTAL ANALYSIS
Fundamental Analysis involves examining the economic, financial and other qualitative and quantitative factors related to a security in order to determine its intrinsic value
Approaches of fundamental analysis Bottom-up approach Top-down approach
Fundamental Analysis Tools
These are the most popular tools of fundamental analysis.
Earnings per Share – EPS Price to Earnings Ratio – P/E Projected Earnings Growth – PEG Price to Sales – P/S Price to Book – P/B Dividend Payout Ratio Dividend Yield Book Value Return on Equity
Ratio analysis Performance ratios Working capital ratios Liquidity ratios Solvency ratios
Technical analysis is the practice of anticipating price changes of a financial instrument by analyzing prior price changes and looking for patterns and relationships in price history.
STAEMENY OF THE PROBLEM There is no significant relationship between return on
equity, dividend payout ratio, book value, dividend yield, earning per share, and market price.
OBJECTIVE & SCOPE OF THE STUDY To assess the performance of selected banking
companies listed in NSE and BSE To evaluate the financial strength of the selected
banking companies listed in BSE and NSE To evaluate intrinsic value of shares & compare it with
present market price to decide whether a share is overvalued or undervalued
To evaluate managements efficiency & internal decisions taken by them to run the business
To calculate credit risk
METHODOLOGY Analysis of secondary data like Economy analysis Industry analysis Company analysis Limitation of the study The study is restricted to five years only. The sample is limited to two Public and Private
sector banks for analysis. This study uses only nine fundamental financial tools
for analysis. Only BSE listed (Group A) public and private limited
banking companies were taken for the study
Economy analysis
The growth in real GDP
Index of Industrial Production
2006-07 2007-08 2008-09 2009-10
9.87.5 8 8.8
Chart Title
Series 1 Column1 Column2
2006-07 2007-08 2008-09 2009-1002468
1012
11 10.98.8
4.5
Core infrastructure-supportive sectors growth
Inflation in terms of Wholesale Price Index 2006-07 2007-08 2008-09 2009-10
0
1
2
3
4
5
6
5.5 5.24.3
2.5
2006-07 2007-08 2008-09 2009-10
6 11 7 8.84
Item / Week Ended 2008-09 2009-10
Cash Reserve Ratio (per cent) 5.00 6.00
Bank Rate 6.00 6.00
Repo Rate 4.75 6.00
Reverse Repo Rate 3.25 5.00
Prime Lending Rate 11.00-12.00 7.50-8.50
Deposit Rate 6.25-7.50 7.00-8.00
Call Money Rate (Low / High)- Borrowings 2.00 /3.35 2.75/12.00
-Lending 2.00/3.35 2.75/12.00
Policy Rates/Interest Rates (per cent per annum)
INDUSTRY ANALYSIS Post independence In 1948, the Reserve Bank of India India's central banking
authority was nationalized, In 1949, the Banking Regulation Act was enacted which
empowered the Reserve Bank of India (RBI) "to regulate, control, and inspect the banks in India."
Liberalization liberalization and gave licenses to a small number of private
banks Global Trust Bank (the first of such new generation banks
to be set up) which later amalgamated with Oriental Bank of Commerce,
UTI Bank (now re-named as Axis Bank), ICICI Bank and HDFC Bank.
COMPANY ANALYSIS
INDUSTRY ANALYSIS
BANKS HDFC ICICi SBI PNB
P/E 32.58 29.558 18.75 9.06
ROE (%) 13.7 7.79 13.89 24.06
CAR (%)capital adequacy ratio 15.69 19.41 13.39 14.16
RETURN ON NET WORTH 15.32 7.79 13.89 24.06
EPS 64.42 36.10 144.37 123.86
EPS GROWTH (%) 29.32 6.85 9.72 18.77
NET PROFIT GROWTH (%) 31.35 7.10 0.49 26.35
DPS 10.00 12.00 30.00 22.00
NET PROFIT MARGIN (%) 11.35 12.17 10.54 15.64
NET INTREST MARGIN (%) 4.20 2.60 3.40 4.10
NET INTEREST SPREAD (%) 6.98 5.66 3.82 4.67
EARNING RETENTION RATIO 84.48 66.48 79.22 82.23
CASA (%) 49.00 39.61 48.17 38.21
Recommendation BUY HOLD HOLD BUY
Cont’d
Current market price
(31/03/2010)
1932.50 952.70 2079.00 1013.45
Target 2489.10 1005.95 2251.08 1181.67
Current market price
(26/02/2010)
2087.00 1038.30 2679.25 1136.55
Achieved NO YES YES NO
FINDINGS AND CONCLUSION
As per P/E ratio SBI can be considered at a fair value, PNB is undervalued and ICICI bank is growth stock with earnings expected to increase substantially in future and HDFCBANK have high expected future growth in earnings.
All selected bank has maintained the CAR% as per Basel norm.
SBI has the highest Book value of 1038.76. The net interest spread of HDFC BANK is highest at
6.98% which means there is large disparity between the rate of lending and deposit.
Except for SBI and ICICI Bank the recommendation of all selected banks are of BUY.
TANK U