1

INTRODUCTION TO
FUNDAMENTAL ANALYSIS
(Chapter-1)






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What is analysis?

The examination and evaluation of the relevant information to select the best course of
action from among various alternatives. The methods used to analyze securities and
make investment decisions fall into two very broad categories: fundamental analysis
and technical analysis. Fundamental analysis involves analyzing the characteristics of a
company in order to estimate its value. Technical analysis takes a completely different
approach; it doesn't care one bit about the "value" of a company or a commodity.
Technicians (sometimes called chartists) are only interested in the price movement in
the market.


What is technical analysis?

Technical analysis is a method of evaluating securities by analyzing the statistics
generated by market activity, such as past prices and volume. Technical analysts do not
attempt to measure a security's intrinsic value, but instead use charts and other tools to
identify patterns that can suggest future activity.


What is 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. It
attempts to study everything that can affect the security's value, including
macroeconomic factors (like the overall economy and industry conditions) and
individually specific factors (like the financial condition and management of
companies). Fundamental analysis, which is also known as quantitative analysis,
involves delving into a company s financial statements (such as profit and loss account
and balance sheet) in order to study various financial indicators (such as revenues,
earnings, liabilities, expenses and assets). Such analysis is usually carried out by
analysts, brokers and savvy investors. Many analysts and investors focus on a single
number--net income (or earnings)--to evaluate performance. When investors attempt to
forecast the market value of a firm, they frequently rely on earnings. Many institutional
investors, analysts and regulators believe earnings are not as relevant as they once
were. Due to nonrecurring events, disparities in measuring risk and management's
ability to disguise fundamental earnings problems, other measures beyond net income
can assist in predicting future firm earnings.




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Two Approaches of fundamental analysis

While carrying out fundamental analysis, investors can use either of the following
approaches:

1 .Top-down approach: In this approach, an analyst investigates both international and
national economic indicators, such as GDP growth rates, energy prices, inflation and
interest rates. The search for the best security then trickles down to the analysis of total
sales, price levels and foreign competition in a sector in order to identify the best
business in the sector.
2. Bottom-up approach: In this approach, an analyst starts the search with specific
businesses, irrespective of their industry/region.

How does fundamental analysis works?

Fundamental analysis is carried out with the aim of predicting the future performance of a
company. It is based on the theory that the market price of a security tends to move
towards its 'real value' or 'intrinsic value.' Thus, the intrinsic value of a security being
higher than the security s market value represents a time to buy. If the value of the
security is lower than its market price, investors should sell it.

The steps involved in fundamental analysis are:

1. Macroeconomic analysis, which involves considering currencies, commodities
and indices.

2. Industry sector analysis, which involves the analysis of companies that are a part
of the sector.

3. Situational analysis of a company.

4. Financial analysis of the company.

5. Valuation
The valuation of any security is done through the discounted cash flow (DCF) model,
which takes into consideration:
1. Dividends received by investors

2. Earnings or cash flows of a company
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3. Debt, which is calculated by using the debt to equity ratio and the current ratio
(current assets/current liabilities)


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


Financial ratios are tools for interpreting financial statements to provide a basis for
valuing securities and appraising financial and management performance.

A good financial analyst will build in financial ratio calculations extensively in a
financial modeling exercise to enable robust analysis. Financial ratios allow a financial
analyst to:

Standardize information from financial statements across multiple financial years to
allow comparison of a firms performance over time in a financial model.
Standardize information from financial statements from different companies to allow
apples to apples comparison between firms of differing size in a financial model.

Measure key relationships by relating inputs (costs) with outputs (benefits) and
facilitates comparison of these relationships over time and across firms in a financial
model.

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In general, there are 4 kinds of financial ratios that a financial analyst will use most
frequently, these are:

Performance ratios

Working capital ratios

Liquidity ratios

Solvency ratios

These 4 financial ratios allow a good financial analyst to quickly and efficiently address the
following questions or concerns:
Performance ratios

What return is the company making on its capital investment?
What are its profit margins?


Working capital ratios

How quickly are debts paid?
How many times is inventory turned?


Liquidity ratios

Can the company continue to pay its liabilities and debts?


Solvency ratios (Longer term)

What is the level of debt in relation to other assets and to equity? Is the level of interest
payable out of profits?
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WHY ONLY FUNDAMENTAL ANALYSIS

Long-term Trends

Fundamental analysis is good for long-term investments based on long-term trends,
very long-term. The ability to identify and predict long-term economic, demographic,
technological or consumer trends can benefit patient investors who pick the right
industry groups or companies.

Value Spotting

Sound fundamental analysis will help identify companies that represent a good value.
Some of the most legendary investors think long-term and value. Graham and Dodd,
Warren Buffett and John Neff are seen as the champions of value investing.
Fundamental analysis can help uncover companies with valuable assets, a strong
balance sheet, stable earnings, and staying power.

Business insights
One of the most obvious, but less tangible, rewards of fundamental analysis is the
development of a thorough understanding of the business. After such pains taking
research and analysis, an investor will be familiar with the key revenue and profit
drivers behind a company. Earnings and earnings expectations can be potent drivers of
equity prices. Even some technicians will agree to that.

A good understanding can help investors avoid companies that are prone to shortfalls
and identify those that continue to deliver. In addition to understanding the business,
fundamental analysis allows investors to develop an understanding of the key value
drivers and companies within an industry. A stock's price is heavily influenced by its
industry group. By studying these groups, investors can better position themselves to
identify opportunities that are high-risk (tech), low-risk (utilities), growth oriented
(computer), value driven (oil), non-cyclical (consumer staples), cyclical (transportation)
or income-oriented (high yield).


Knowing Who's Who Stocks move as a group. By understanding a company's business,
investors can better position themselves to categorize stocks within their relevant
industry group. Business can change rapidly and with it the revenue mix of a company.
This has happened with many of the pure internet retailers, which were not really
internet companies, but plain retailers. Knowing a company's business and being able
to place it in a group can make a huge difference in relative valuations. The charts of the
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technical analyst may give all kinds of profit alerts, signals and alarms, but there s little
in the charts that tell us why a group of people make the choices that create the price
patterns

Objective of the study

To analyze economy by using some economic indicators like GDP, and inflation
rate etc for the selected period of 5 years.

To analyze the industry especially private bank industry for the selected period
of 5 years.

To carry out financial and non-financial analysis of ICICI bank as a whole for the
selected period.


Data sources

Secondary data has been collected from various sources to analyze the fundamentals.
The secondary data has been collected from

Books

Internet-websites





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PERIOD OF STUDY: The period of study for the analysis is five years from 2008-2012.

CHAPTER PLAN
It is proposed to divide the project into following chapters.

CHAPTER 1: INTRODUCTION TO STUDY
This chapter will be introductory in nature covering the relevance of study.

CHAPTER 2: CONCEPTUAL FRAMEWORK OF FUNDAMENTAL ANALYSIS
This chapter will include a comprehensive study of the concept of Fundamental
analysis and its tools.

CHAPTER 3: DATA SOURCE AND RESEARCH METHODOLOGY
This chapter will give an inside into source of data and method of undertaking research.

CHAPTER 4: DATA ANALYSIS
This is the chapter of all observations, inferences, analysis and conclusions that will be
made out of the data analysis during the course of study.

CHAPTER 5: LIMITATIONS AND SUGGESTIONS
All the limitations and stumbling blocks that will be encountered during the study will
be discussed in this chapter along with the future scope and suggestions.

BIBLIOGRAPHY
9





ECONOMIC ANALYSIS
(Chapter- 2)












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The economic analysis aims at determining if the economic climate is conclusive and is
capable of encouraging the growth of business sector, especially the capital market.
When the economy expands, most industry groups and companies are expected to
benefit and grow. When the economy declines, most sectors and companies usually face
survival problems. Hence, to predict share prices, an investor has to spend time
exploring the forces operating in overall economy. Exploring the global economy is
essential in an international investment setting. The selection of country for investment
has to focus itself to examination of a national economic scenario. It is important to
predict the direction of the national economy because economic activity affects
corporate profits, not necessarily through tax policies but also through foreign policies
and administrative procedures.

Tools for Economy Analysis

The most used tools for performing economic analysis are:

Gross Domestic Product (GDP)

Monetary policy and Liquidity

Inflation

Interest rates International influences

Fiscal policy

Influences on long term expectations

Influences on short term expectations


1. Gross Domestic product

GDP is one measure of economic activity. This is the total amount of goods and services
produced in a country in a year. It is calculated by adding the market values of all the final
goods and services produced in a year.

It is a gross measurement because it includes the total amount of goods and
services produced, of which some merely replace goods that have depreciated or
have worn out.
It is domestic production because it includes only goods and services produced
within the country.
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2. Inflation

Inflation can be defined as a trend of rising prices caused by demand exceeding supply.
Over time, even a small annual increase in prices of say 1 % will tend to influence the
purchasing power of the nation. In others word, if prices rise steadily, after a number of
years, consumers will be able to buy only fewer goods and services assuming income
level does not change with inflation.

3. Interest rate

Interest rate is the price of credit. It is the percentage fee received or paid by individual
or organization when they lend and borrow money. In general, increases in interest
rate, whether caused by inflation, government policy, rising risk premium, or other
factors, will lead to reduced borrowing and economic slowdown.

4. International influences

Rapid growth in overseas market can create surges in demand for exports, leading to
growth in export sensitive industries and overall GDP. In contrast, the erection of trade
barriers, quotas, currency restrictions can hinder the free flow of currency, goods, and
services, and harm the export sector of an economy.

5. Fiscal policy

The fiscal policy of the government involves the collection and spending of revenue. In
particular, fiscal policy refers to the efforts by the government to stimulate the economic
directly, through spending.








12




Industry Analysis
(Chapter-3)
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An industry analysis helps inform business managers about the viability of their current
strategy and on where to focus a business among its competitors in an industry. The
analysis examines factors such as competition and the external business environment,
substitute products, management preferences, buyers and suppliers. Industry analysis
involves reviewing the economic, political and market factors that influence the way the
industry develops. Major factors can include the power wielded by suppliers and
buyers, the condition of competitors. And the likelihood of new market entrants.

Data needs for industry analysis

Industry analysis requires a variety of quantitative and qualitative data. Though one
single source for all the data needs might not found, industry associates, business
publications and the department of economic analysis perform a comprehensive
industry analysis. A suggestive list of data categories that are utilized for performing
industry analysis is listed below.

Product lines
Product growth
Complementary product
Economics of scale
Suppliers
Labors
Substitute products
Buyers and their behavior
Product pattern (cyclical, seasonal)
Cost structure


Tools for industry analysis

Cross-sectional industry
Industry performance over time
Differences in industry risk
Prediction about market behavior
Competitors over the industry life cycle


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THE INDIAN BANKING SECTOR REVIEW

Without a sound and effective banking system in India it cannot have a healthy economy.
The banking system of India should not only be hassle free but it should be able to meet
new challenges posed by the technology and any other external and internal factors.

For the past three decades India's banking system has several outstanding achievements to
its credit. It is no longer confined to only metropolitans or cosmopolitans in India; in fact,
Indian banking system has reached even to the remote corners of the country. This is one of
the main reasons of India's growth process. The government's regular policy for Indian
bank since 1969 has paid rich dividends with the nationalization of 14 major private banks
of India. Not long ago, an account holder had to wait for hours at the bank counters for
getting a draft or for withdrawing his own money. Today, he has a choice. Gone are days
when the most efficient bank transferred money from one branch to other in two days. Now
it is simple as instant messaging or dial a pizza. Money has become the order of the day.

Post-independence

In 1948, the Reserve Bank of India, India's central banking authority, was nationalized, and
it became an institution owned by the Government of India.

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.

"The Banking Regulation Act also provided that no new bank or branch of an existing bank
may be opened without a license from the RBI, and no two banks could have common
directors.


Liberalization

The new policy shook the Banking sector in India completely. Bankers, till this time, were
used to the 4-6-4 method (Borrow at 4%; Lend at 6%; Go home at 4) of functioning. In the
early 1990s the then Narsimha Rao government embarked on a policy of liberalization and
gave licenses to a small number of private banks, which came to be known as New
Generation tech-savvy banks, which included banks such as 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.



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Current situation

Currently, India has 88 scheduled commercial banks (SCBs) - 28 public sector banks (that is
with the Government of India holding a stake), 29 private banks (these do not have
government stake; they may be publicly listed and traded on stock exchanges) and 31
foreign banks. They have a combined network of over 67,000 branches and 17,000 ATMs.
According to a report by ICRA Limited, a rating agency, the public sector banks hold over
78 percent of total assets of the banking industry, with the private and foreign banks
holding 18.2% and 6.5% respectively.

Over the last four years, India s economy has been on a high growth trajectory, creating
unprecedented opportunities for its banking sector. Most banks have enjoyed high growth
and their valuations have appreciated significantly during this period. Looking ahead, the
most pertinent issue is how well the banking sector is positioned to cater to continued
growth. A holistic assessment of the banking sector is possible only by looking at the roles
and actions of banks, their core capabilities and their ability to meet systemic objectives,
which include increasing shareholder value, fostering financial inclusion, contributing to
GDP growth, efficiently managing intermediation cost, and effectively allocating capital
and maintaining system stability.


BANKING STRUCTURE IN INDIA

The banking institutions in the organized sector, commercial banks are the oldest
institutions, some them having their genesis in the nineteenth century. Initially they were
set up in large numbers, mostly as corporate bodies with shareholding with private
individuals. Today 27 banks constitute a strong Public Sector in Indian Commercial
Banking. Commercial Banks operating in India fall under different sub categories on the
basis of their ownership and control over management;

Public Sector Banks

Public Sector Banks emerged in India in three stages. First the conversion of the then
existing Imperial Bank of India into State Bank of India in 1955, followed by the taking over
of the seven associated banks as its subsidiary. Second the nationalization of 14 major
commercial banks in 1969and last the nationalization of 6 more commercial Bank in 1980.
Thus 27 banks constitute the Public Sector Banks.


New Private Sector Banks

After the nationalization of the major banks in the private sector in 1969 and 1980, no new
bank could be setup in India for about two decades, though there was no legal bar to that
16

effect. The Narasimham Committee on financial sector reforms recommended the
establishment of new banks of India. RBI thereafter issued guidelines for setting up of
new private sector banks in India in January 1993. These guidelines aim at ensuring that
new banks are financially viable and technologically up to date from the start. They
have to work in a professional manner, so as to improve the image of commercial
banking system and to win the confidence of the public. Eight private sector banks have
been established including banks sector by financially institutions like SIDBI, ICICI, and
UTI etc.

Local Area Banks Such Banks can be established as public limited companies in the
private sector and can be promoted by individuals, companies, trusts and societies. The
minimum paid up capital of such banks would be 5 crores with promoters contribution
at least Rs. 2 crores. They are to be set up in district towns and the area of their
operations would be limited to a maximum of 3 districts. At present, four local area
banks are functional, one each in Punjab, Gujarat, Maharashtra and Andhra Pradesh.
Foreign Banks Foreign commercial banks are the branches in India of the joint stock
banks incorporated abroad. Their number was 38 as on 31.03.2011.

Scheduled Commercial Banks in India The commercial banking structure in India
consists of: Scheduled Commercial Banks in India Unscheduled Banks in India
Scheduled Banks in India constitute those banks which have been included in the
Second Schedule of Reserve Bank of India (RBI) Act, 1934. RBI in turn includes only
those banks in this schedule which satisfy the criteria laid down vide section42 (6) a) of
the Act.

"Scheduled banks in India" means the State Bank of India constituted under the State
Bank of India Act, 1955 (23 of 1955), a subsidiary bank as defined in the State Bank of
India (Sub sidiary Banks) Act, 1959 (38 of 1959), a corresponding new bank
constituted under section 3 of the Banking Companies (Acquisition and Transfer of
Undertakings) Act, 1970 (5 of 1970), or under section 3 of the Banking Companies
(Acquisition and Transfer of Undertakings) Act, 1980 (40 of 1980), or any other bank
being a bank included in the Second Schedule to the Reserve Bank of India Act, 1934 (2 of
1934), but does not include a co-operative bank". "Non-scheduled bank in India" means a
banking company as defined in clause (c) of section 5 of the Banking Regulation Act, 1949
(10 of 1949), which is not a scheduled bank".

17


Cooperative Banks
Besides the commercial banks, there exists in India another set of banking institutions
called cooperative credit institutions. These have been made in existence in India since
long. They undertake the business of banking both in urban and rural areas on the
principle of cooperation. They have served a useful role in spreading the banking habit
throughout the country. Yet, there financial position is not sound and a majority of
cooperative banks has yet to achieve financial viability on a sustainable basis.
The cooperative banks have been set up under various Cooperative Societies Acts
enacted by State Governments. Hence the State Governments regulate these banks. In
1966, need was felt to regulate their activities to ensure their soundness and to protect
the interests of depositors According to the RBI in March 2011, number of all Scheduled
Commercial Banks (SCBs) was 171 of which, 86 were Regional Rural Banks and the
number of Non-Scheduled Commercial Banks including Local Area Banks stood at 5.
Taking into account all banks in India, there are overall 86,640 branches or offices,
1,093,356 employees and 35,088 ATMs. Public sector banks made up a large chunk of
the infrastructure, with 87.7 per cent of all offices, 82 per cent of staff and 60.3 per cent
of all automated teller machines (ATMs).
SWOT ANALYSIS OF BANKING SECTOR
STRENGTHS
Indian banks have compared favorably on growth, asset quality and profitability with
other regional banks over the last few years. The banking index has grown at a
compounded annual rate of over 51 per cent since April 2001 as compared to a 27 per
cent growth in the market index for the same period. Policy makers have made some
notable changes in policy and regulation to help strengthen the sector. These changes
include strengthening prudential norms, enhancing the payments system and
integrating regulations between commercial and co-operative banks. Bank lending has
been a significant driver of GDP growth and employment. Extensive reach: the vast
networking & growing number of branches & ATMs. Indian banking system has
reached even to the remote corners of the country.
In terms of quality of assets and capital adequacy, Indian banks are considered to have
clean, strong and transparent balance sheets relative to other banks in comparable
economies in its region.
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WEAKNESS

Public Sector Banks need to fundamentally strengthen institutional skill levels
especially in sales and marketing, service operations, risk management and the overall
organizational performance ethic & strengthen human capital.

Old private sector banks also have the need to fundamentally strengthen skill levels.

The cost of intermediation remains high and bank penetration is limited to only a few
customer segments and geographies.

Structural weaknesses such as a fragmented industry structure, restrictions on capital
availability and deployment, lack of institutional support infrastructure, restrictive
labour laws, weak corporate governance and ineffective regulations beyond Scheduled
Commercial Banks (SCBs), unless industry utilities and service bureaus.

Refusal to dilute stake in PSU banks: The government has refused to dilute its stake in
PSU banks below 51% thus choking the headroom available to these banks for raining
equity capital.

Impediments in sectoral reforms: Opposition from Left and resultant cautious
approach from the North Block in terms of approving merger of PSU banks may
hamper their growth prospects in the medium term.

OPPORTUNITIES

The market is seeing discontinuous growth driven by new products and services that
include opportunities in credit cards, consumer finance and wealth management on the
retail side, and in fee-based income and investment banking on the wholesale banking
side. These require new skills in sales & marketing, credit and operations.

With increased interest in India, competition from foreign banks will only intensify.

Given the demographic shifts resulting from changes in age profile and household
income, consumers will increasingly demand enhanced institutional capabilities and
service levels from banks.

New private banks could reach the next level of their growth in the Indian banking
sector by continuing to innovate and develop differentiated business models to
profitably serve segments like the rural/low income and affluent/HNI segments;
actively adopting acquisitions as a means to grow and reaching the next level of
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performance in their service platforms. Attracting, developing and retaining more
leadership capacity.
Foreign banks committed to making a play in India will need to adopt alternative
approaches to win the race for the customer and build a value-creating customer
franchise in advance of regulations potentially opening up post 2009.
Reach in rural India for the private sector and foreign banks
Liberalization of ECB norms: The government also liberalised the ECB norms to permit
financial sector entities engaged in infrastructure funding to raise ECBs. This enabled
banks and financial institutions, which were earlier not permitted to raise such funds,
explore this route for raising cheaper funds in the overseas markets.
Hybrid capital: In an attempt to relieve banks of their capital crunch, the RBI has
allowed them to raise perpetual bonds and other hybrid capital securities to shore up
their capital. If the new instruments find takers, it would help PSU banks, left with little
headroom for raising equity.

THREATS
Threat of stability of the system: failure of some weak banks has often threatened the
stability of the system.
Rise in inflation figures which would lead to increase in interest rates.
Increase in the number of foreign players would pose a threat to the Public Sector Bank
as well as the private players.

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Key players

Andhra Bank State Bank of India
Allahabad Bank Vijaya Bank
Punjab National Bank HDFC Bank
UTI Bank ICICI Bank
Kotak Mahindra Bank Centurion Bank of Punjab
Citibank Standard Chartered Bank
HSBC Bank State Bank of Mysore
American Express Bank ABN AMRO
















21


Company analysis
(Chapter-4)











22

Analysis of the company consists of measuring its performance and ascertaining the
cause of this performance. When some companies have done well irrespective of
economic or industry failure, this implies that there are certain unique characteristics
for this particular company that had made it a success. The identification of these
characteristics, whether quantitative or qualitative, is referred to as company analysis.
Quantitative indicators of company analysis are the financial indicators and operational
efficiency indicators. Financial indicators are the profitability indicators and financial
position indicators analyzed through the income and balance sheet statements,
respectively, of the company. Operational indicators are capacity utilization and cost
versus sales efficiency of the company, which includes the marketing edge of the
company.

Besides the quantitative factors, qualitative factors of a company also influence
investment decision process of an institutional investor. The focus of the qualitative
data, as revealed in the annual report- as in the directors speech. Rather than on
quantitative data.

Tools for company analysis

Company analysis involves choice of investment opportunities within a specific
industry that comprises of several individual companies. The choice of an investible
company broadly depends on the expectations about its future performance in general.
Here, the business cycle that a company is undergoing is a very useful tool to assess the
future performance from the company.

Company analysis ought to examine the levels of competition, demand, and other
forces that affect the companys ability to be profitable. Of these factors, understanding
the competitive environment is most important.

A business faces five forces of competition (porters model) namely, sellers
competition, buyers competition, competition from new entrants, exit competition.
Competitive forces include the power of those who sell the business, those who buy the
business; those who buy from the business, how easily new businesses can enter the
industry, how costly it is to exit, and finally, the competition from those who already in
the industry. How well a company deals with each of these forces will determine
whether the company earns above or below average profit. Each of these forces is
discussed below.






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1. Porter model

Porter's Five Forces is a framework for industry analysis and business strategy
development formed by Michael E. Porter of Harvard Business School in 1979. It draws
upon Industrial Organization (IO) economics to derive five forces that determine the
competitive intensity and therefore attractiveness of a market. Attractiveness in this
context refers to the overall industry profitability. An "unattractive" industry is one in
which the combination of these five forces acts to drive down overall profitability. A
very unattractive industry would be one approaching "pure competition", in which
available profits for all firms are driven down to zero.

Three of Porter's five forces refer to competition from external sources. The remainders
are internal threats.
Porter referred to these forces as the micro environment, to contrast it with the more
general term macro environment. They consist of those forces close to a company that
affect its ability to serve its customers and make a profit. A change in any of the forces
normally, requires a business unit to re-assess the marketplace given the overall change
in industry information. The overall industry attractiveness does not imply that every
firm in the industry will return the same profitability. Firms are able to apply their core
competencies, business model or network to achieve a profit above the industry
average. A clear example of this is the airline industry. As an industry, profitability is
low and yet individual companies, by applying unique business models, have been able
to make a return in excess of the industry average.
Porter's five forces include - three forces from 'horizontal' competition: threat of
substitute products, the threat of established rivals, and the threat of new entrants; and
two forces from 'vertical' competition: the bargaining power of suppliers and the
bargaining power of customers.
This five forces analysis is just one part of the complete Porter strategic models. The
other elements are the value chain and the generic strategies

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a) The threat of the entry of new competitors

Profitable markets that yield high returns will attract new firms. This results in many
new entrants, which eventually will decrease profitability for all firms in the industry.
Unless the entry of new firms can be blocked by incumbents, the abnormal profit rate
will fall towards zero (perfect competition).

The existence of barriers to entry (patents, rights, etc.) The most attractive
segment is one in which entry barriers are high and exit barriers are low. Few
new firms can enter and non-performing firms can exit easily.
Economies of product differences
Brand equity
Switching costs or sunk costs
Capital requirements
Access to distribution
Customer loyalty to established brands
Absolute cost
Industry profitability; the more profitable the industry the more attractive it will
be to new competitors

b) The threat of substitute products or services

The existence of products outside of the realm of the common product
boundaries increases the propensity of customers to switch to alternatives:
Buyer propensity to substitute
Relative price performance of substitute
Buyer switching costs
Perceived level of product differentiation
Number of substitute products available in the market
25

Ease of substitution. Information-based products are more prone to substitution,
as online product can easily replace material product.
Substandard product
Quality depreciation

c) The bargaining power of customers (buyers)

The bargaining power of customers is also described as the market of outputs:
the ability of customers to put the firm under pressure, which also affects the
customer's sensitivity to price changes.
Buyer concentration to firm concentration ratio
Degree of dependency upon existing channels of distribution
Bargaining leverage, particularly in industries with high fixed costs
Buyer volume
Buyer switching costs relative to firm switching costs
Buyer information availability
Ability to backward integrate
Availability of existing substitute products
Buyer price sensitivity
Differential advantage (uniqueness) of industry products
RFM Analysis


d) The bargaining power of suppliers

The bargaining power of suppliers is also described as the market of inputs. Suppliers
of raw materials, components, labor, and services (such as expertise) to the firm can be a
source of power over the firm, when there are few substitutes. Suppliers may refuse to
work with the firm, or, e.g., charge excessively high prices for unique resources.
Supplier switching costs relative to firm switching costs
Degree of differentiation of inputs
Impact of inputs on cost or differentiation
Presence of substitute inputs
Strength of distribution channel
Supplier concentration to firm concentration ratio
Employee solidarity (e.g. labor unions)
Supplier competition - ability to forward vertically integrate and cut out the
BUYER

(e) The intensity of competitive rivalry

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For most industries, the intensity of competitive rivalry is the major determinant of the
competitiveness of the industry.

Sustainable competitive advantage through innovation
Competition between online and offline companies; click-and-mortar -v- slags on a
bridge
Level of advertising expense
Powerful competitive strategy
The visibility of proprietary items on the Web used by a company which can
intensify competitive pressures on their rivals.

How will competition react to a certain behavior by another firm? Competitive rivalry is
likely to be based on dimensions such as price, quality, and innovation. Technological
advances protect companies from competition. This applies to products and services.
Companies that are successful with introducing new technology are able to charge
higher prices and achieve higher profits, until competitors imitate them. Examples of
recent technology advantage in have been mp3 players and mobile telephones. Vertical
integration is a strategy to reduce a business' own cost and thereby intensify pressure
on its rival.



2. The financial statements of the company:

Records that outline the financial activities of a business, an individual or any other
entity. Financial statements are meant to present the financial information of the entity
in question as clearly and concisely as possible for both the entity and for readers.
Financial statements for businesses usually include: income statements, balance sheet,
statements of retained earnings and cash flows, as well as other possible statements


3. Ratio analysis:

A tool used by individuals to conduct a quantitative analysis of information in a
company's financial statements. Ratios are calculated from current year numbers and
are then compared to previous years, other companies, the industry, or even the
economy to judge the performance of the company. Ratio analysis is predominately
used by proponents of fundamental analysis. There are many ratios that can be
calculated from the financial statements pertaining to a company's performance,
activity, financing and liquidity. Some common ratios include the price-earnings ratio,
debt-equity ratio, earnings per share, asset turnover and working capital.

27


28

























29

























30






RESEARCH METHODOLOGY
(Chapter-5)

31

Research methodology Research methodology is a way to systematically solve the
research problem. The research methodology using for find out the solution of the
research problem is analytical research methodology and some extend descriptive
research methodology

Secondary Data

The sources of secondary data for solve the problems are:-

Company Annual Report
Internet-websites


Period of study
The period of the study is 5 years i.e. (2007-2012). Company 5 years data has been taken
for the analysis.

Tools

These are the most popular tools of fundamental analysis. They focus on earnings,
growth, and value in the market.

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 Ratio Analysis

32

Liquid ratio

Turnover ratio

Valuation ratio

Techniques

The technique used in the analysis of the company is excel sheets, graphs and tables of
financial statement for example balance sheet, profit loss a/c, cash flow statement,
dividend per share, ratio analysis, valuation ratio etc.



33




DATA ANALYSIS
(Chapter-6)








34

The process of evaluating data using analytical and logical reasoning to examine each
component of the data provided. This form of analysis is just one of the many steps that
must be completed when conducting a research experiment. Data from various sources
is gathered, reviewed, and then analyzed to form some sort of finding or conclusion.
There are a variety of specific data analysis method, some of which include data
mining, text analytics, business intelligence, and data visualizations

Data can be of several types

Quantitative data is a number

Qualitative data is a pass/fail or the presence of a characteristic

Quantitative data is data measured or identified on a numerical scale. Numerical data
can be analyzed using statistical methods, and results can be displayed using tables,
charts, histograms and graphs.
The term qualitative data is used to describe certain types of information. This is almost
the converse of quantitative data, in which items are more precisely described as data in
terms of quantity and in which numerical values are used. However, data originally
obtained as qualitative information about individual items may give rise to quantitative
data if they are summarized by means of counts.
Qualitative data described items in terms of some quality or categorization that may be
'informal' or may use relatively ill-defined characteristics such as warmth and flavor.
However, qualitative data can include well-defined aspects such as gender, nationality
or commodity type.


35




ECONOMY ANALYSIS













36

Analysis of Indian Economy
India's economy expanded 8.8% in the second quarter from a year earlier, compared to
an 8.6% on-year expansion in the first, lifted by robust activity in manufacturing.
Agricultural output along with strong development in the Industrial, Mining and
banking sector have helped to boost the Indian economy. Agricultural output raised 2.8
per cent y-o-y thanks to improved harvests. Industrial production increased by 12% and
in the mining sector by 9%. According to 2011 data the shares of banking sector value
add in GDP has been increased 7.7% from 2.5%.The forecasters have assigned highest
29.6 per cent chance that it will fall in 6.0-6.9 per cent in 2011- 12. They raised their
forecasts slightly for agriculture growth to 4.0 percent from 3.5 percent, for industry to
9.0 percent from 8.1 percent and for services it was steady at 9.0 percent. The survey
showed the economists expect GDP growth in the April-June quarter to be 8.1 percent
up from 7.9 percent in the last survey. For the July-September quarter, GDP growth is
placed at 8.3 percent. The Reserve Bank of India has stated that it had seen an annual
growth of 8.5% steadily. The main priority of the Reserve Bank is to curb the ongoing
inflation, which peaked at 11% last month. Interest rates have been increased by the
banks to contain the inflation, but it could slow down the growth of the Indian economy
in the coming months. But even though there has been a rise in the interest rates there
hasnt been much change in the distribution of loans, the Indian customer is hardly
affected with the hiked interest rates. Almost every sector of the economy is poised to
grow faster and a 9 per cent growth in 2011-12 is not difficult if domestic policies and
external factors do not come in the way. Expert expects that India s economy to grow by
8.5% in 2011 based on a steep gain in industrial output and resurgent private
consumption investment and exports. Were these scenarios to continue growth would
lift further to 8.3% in 2012 said Chief Economist. They also expect the Reserve Bank of
India (RBI) to continue gradually raising interest rates and to keep a tight leash on
liquidity to tame inflation. Recently RBI changed the repo rate from 5.75% to 6% and
reverse repo rate 4.5% to 5%. CRR rate they keeping unchanged. This six time I a year
they revise key parameter to control inflation.





37

INDIA GDP SURGES 8.9% IN THE THIRD QUARTER

India's domestically-powered economy grew more than expected in the September
quarter, defying weakness elsewhere and putting pressure on the Reserve Bank of India
(RBI) to tighten monetary policy although a rate increase next month still looks
unlikely. Annual gross domestic product grew 8.9 percent in the September quarter --
matching the revised figure for the previous quarter.

Consumer price inflation eased to an annual 9.7 percent in October from 9.82 percent
the previous month, data showed on Tuesday. Wholesale price inflation, which is more
closely watched as it covers a higher number of products, eased to 8.58 percent in
October from 8.62 percent a month earlier. Investment growth slowed on an annualized
basis to 11.1 percent from 19 percent in the previous quarter, while annualized private
consumption accelerated to 9.3 percent from 7.8 percent in the previous quarter,
pointing to inflationary risks. The services sector, which accounts for over 50 percent of
GDP, grew 9.8 percent in the September quarter, higher than 9.3 percent in the previous
quarter. Signs of easing inflation, a fragile global economy and weaker industrial output
in September were likely to forestall any rise in rates in the near-term, some analysts
said. "Unless the full year growth looks likely to cross 9 percent, the central bank is
unlikely to get aggressive again in raising rates," said Anjali Varma, economist at MF
Global in Mumbai. Industrial output growth -- a key indicator of growth momentum --
in Asia's third-largest economy slowed unexpectedly in September to 4.4 percent from a
year earlier, down from the previous month's upwardly revised 6.92 percent growth.

Year March June September December
2011 8.30 7.80 7.70 6.90
2010 7.30 9.40 9.30 8.90
2009 6.10 5.80 6.30 8.60
38

Healthy economic growth, especially since 2005, has also facilitated impressive growth in
the commercial banking sector (Chart 5.2). Though the growth rate of the consolidated
balance sheet of commercial banks moderated in 2008-09 at 21 per cent as compared to 25
per cent in 2007-08, the sector continued to grow at a rate higher than that of the nominal
GDP (at current market prices). Accordingly, the ratio of commercial banking assets to GDP
increased to 98.5 per cent at end- March 2009 from 91.6 per cent as at end-March 2008.


With the impact of the financial crisis gradually affecting the global economy, credit off-
take slowed down further and the year on year growth in bank credit during the first half
year of 2009-10 stood at 12.3 per cent. During the same period, investments grew by 34.5
per cent (as compared to 6.3 per cent as on September 2008). However, there are early signs
of credit growth recovering in line with the economy, on the back of fiscal and monetary
measures. This trend is clearly shown by the movements in incremental credit-deposit (CD)
and investment-deposit (ID) ratio in recent periods (Chart 5.5).

39








40

INDIA INFLATION RATE

The inflation rate in India was last reported at 9.47 percent in December of 2010. From 1969
until 2010, the average inflation rate in India was 7.99 percent reaching an historical high of
34.68 percent in September of 1974 and a record low of -11.31 percent in May of 1976.
Inflation rate refers to a general rise in prices measured against a standard level of
purchasing power. The most well-known measures of Inflation are the CPI which measures
consumer prices, and the GDP deflator, which measures inflation in the whole of the
domestic economy. This page includes: India Inflation Rate chart, historical data and news.



Year Jan Feb Mar Apr May Jun Jul Aug Sept Oct Nov Dec
2012 16.22 14.86 14.86 13.33 13.91 13.73 11.25 9.88 9.82 9.70 8.33 9.47
2011 10.45 9.63 8.03 8.70 8.63 9.29 11.89 11.72 11.64 11.49 13.51 14.97
2010 5.51 5.47 7.87 7.81 7.75 7.69 8.33 9.02 9.77 10.45 10.45 9.70

41

India Interest Rate
The benchmark interest rate (reverse repo) in India was last reported at 5.5 percent. In
India, interest rate decisions are taken by the Reserve Bank of India's Central Board of
Directors. The official interest rate is the benchmark repurchase rate. From 2000 until 2010,
India's average interest rate was 5.82 percent reaching an historical high of 14.50 percent in
August of 2000 and a record low of 3.25 percent in April of 2010.








42






INDUSTRY ANALYSIS











43


The last decade has seen many positive developments in the Indian banking sector. The
policy makers, which comprise the Reserve Bank of India (RBI), Ministry of Finance and
related government and financial sector regulatory entities, have made several notable
efforts to Improve regulation in the sector. The sector now compares favorably with
banking sectors in the region on metrics like growth, profitability and non-performing
assets (NPAs). A few banks have established an outstanding track record of innovation,
growth and value creation. This is Reflected in their market valuation. However,
improved regulations, innovation, growth and value creation in the sector remain
limited to a small part of it. The cost of banking intermediation in India is higher and
bank penetration is far lower than in other markets. India s banking industry must
strengthen itself significantly if it has to support the modern and vibrant economy
which India aspires to be. While the onus for this change lies mainly with bank
managements, an enabling policy and regulatory framework will also be critical to their
success. The failure to respond to changing market realities has stunted the
development of the financial sector in many developing countries. A weak banking
structure has been unable to fuel continued growth, which has harmed the long-term
health of their economies. In this white paper, we emphasize the need to act both
decisively and quickly to build an enabling, rather than a limiting, banking sector in
India.
OPPORTUNITIES AND CHALLENGES FOR PLAYERS
The bar for what it means to be a successful player in the sector has been raised. Four
challenges must be addressed before success can be achieved. First, the market is seeing
discontinuous growth driven by new products and services that include opportunities
in credit cards, consumer finance and wealth management on the retail side, and in fee-
based income and investment banking on the wholesale banking side. These require
new skills in sales & marketing, credit and operations. Second, banks will no longer
enjoy windfall treasury gains that the decade-long secular decline in interest rates
provided. This will expose the weaker banks. Third, with increased interest in India,
competition from foreign banks will only intensify. Fourth, given the demographic
shifts resulting from changes in age profile and household income, consumers will
increasingly demand enhanced institutional capabilities and service levels from banks.

Growth in the Indian banking industry
44

The growth in the Indian Banking Industry has been more qualitative than quantitative
and it is expected to remain the same in the coming years. Based on the projections
made in the "India Vision 2020" prepared by the Planning Commission and the Draft
10th Plan, the report forecasts that the pace of expansion in the balance-sheets of banks
is likely to decelerate. The total assets of all scheduled commercial banks by end-March
2010 are estimated at Rs 40, 90,000 crores That will comprise about 65 per cent of GDP
at current market prices as compared to 67 per cent in 2002-03. Bank assets are expected
to grow at an annual composite rate of 13.4 per cent during the rest of the decade as
against the growth rate of 16.7 per cent that existed between 1994-95 and 2002-03. It is
expected that there will be large additions to the capital base and reserves on the
liability side.

45

Peer Group Comparison (Standalone) (Rs. In Crore)
Company Name Year End Net Sales PBIDT PAT Adj. EPS(Rs) PBIDTM% PATM% ROCE% ROE%
Indusind Bank

2011 2706.99 703.89 350.31 8.53 26 12.94 7.53 19.51
ICICI Bank

2011 25706.93 9732.18 4024.98 36.1 37.86 15.66 6.18 7.96
Kotak Bank

2011 3255.62 1297 561.11 8.06 39.84 17.23 6.68 13.52
HDFC Bank

2011 16172.9 6429.73 2948.7 64.42 39.76 18.23 5.95 16.31
Axis Bank

2011 11638.02 5240.56 2514.53 62.06 45.03 21.61 6.39 19.15



Interpretation:
Here we can see that ICICI has highest net sales with 25706.93 cr. And PAT is also
highest among the peer group with 4027.93 cr. That means ICICI is most favorable
company to invest in terms of profit.
46

Bank Private Industry Ratios

Description 2012 2011 2010 2009 2008
No Of Companies
74 89 83 71 68
Margin Ratios

Yield on Advances 13.31 14.23 12.87 12.04 11.36
Yield on Investments 6.22 7.44 7.21 6.37 6.41
Cost of Liabilities 5.02 6.09 5.87 5.1 4.27
NIM 5.63 5.38 4.69 4.38 4.92
Interest Spread 8.28 8.14 7 6.94 7.1
Performance Ratios

ROA (%) 1.17 1.28 1.34 1.19 1.18
ROE (%) 10.65 11.07 12.02 14.45 13.36
ROCE (%) 5.96 7.11 7.04 6.4 5.56
Efficiency Ratios

Cost Income Ratio 42.89 42.45 46.35 50.66 51.38
Core Cost Income Ratio 44.25 45.19 48.74 51.78 50.8
Operating Costs to Assets 7.46 7.55 7.49 7.82 8.2
Growth Ratio

Core Operating Income Growth 9.09 30.55 44.08 32.44 107.35
Operating Profit Growth 2.45 20.79 60.6 37.8 127.56
Net Profit Growth 3.73 16.84 55.86 37.48 102.66
Advances Growth 8.99 14.77 46.44 38.42 86.72
Liquidity Ratios

Loans/Deposits(x) 0.2 0.26 0.22 0.18 0.19
Cash/Deposits(x) 0.09 0.07 0.1 0.07 0.06
Investment/Deposits(x) 0.47 0.44 0.43 0.41 0.43
Inc Loan/Deposit (%) 19.63 25.72 22.28 17.58 18.73




47


Interpretation

ROE: ROE examines profitably from the perspective of equity investors by relating
profits available for the equity share holders with the book value of equity
investments. The return from the point of view of equity shareholders may be
calculated by comparing the net profit less preference dividend with their total
contribution to the firm. Over the years ROE of the industry have declined

ROA: ROA measures a profitability of the firm in terms of assets employed in the
firm. ROE is calculated by establishing the relationship between the profits and the
assets employed to earn that profit. ROA shows as to how much is the profit earn by
the firm per rupee of assets used. Here industry ROA is almost stable.

NET PROFIT: the NP ratio establishes the relationship between the net profit (after
tax) of the firm and the net sales. Its measures the efficiency of the management in
generating additional revenue over and above the total cost of operations.

Net profit ratio has decreased over the years which mean that the overall profitability of the
industry has fallen down.



48

Bank Private Industry profit & Loss A/C
DESCRIPTION
2012 2011 2010 2009 2008
No of Companies 98 74 89 83 71
Interest Earned 135486.15 113327.71 136806.93 107590.8 71311.52
Other Income 35136.24 29599.54 35299.77 28016.66 20011.95
Total Income 170622.38 142927.25 172106.71 135607.47 91323.48
Interest Expended 78145.22 65332.36 84711.83 68370.19 42996.95
Operating Expenses 38681.01 33282.45 36938.65 31161.41 24155.71
Provisions and Contingencies 19010.41 16440.68 16710.7 8910.47 6848.84
Profit Before Tax 34785.74 27871.76 33745.53 27165.39 17321.97
Taxes 12304.43 9657.77 12149.69 8925.72 5498.1
Total 148141.07 124713.26 150510.87 117367.79 79499.61
Profit After Tax 22481.31 18213.99 21595.84 18239.68 11823.87
Extra items -22.08 -19.49 -30.5 -1.46 133.84
Profit brought forward 15392.55 14902.92 11246.87 5710.75 3893.12
Adjustments to PAT 24.84 -23.31 15.64 140.12 182.71
Total Profit & Loss 37898.7 33093.6 32858.35 24090.55 15899.7
IV. APPROPRIATIONS 37886.23 33074.11 32827.85 24089.09 16043.16



Interpretation:

Private bank industry profit & loss account shows that banking industry is having a large
profit yoy and growing rapidly. This is a good sign for the investor who wants to invest in
the banking industry.

8732.73
11823.87
18239.68
21595.84
18215.99
22481.31
0
5000
10000
15000
20000
25000
1 2 3 4 5 6
Profit After Tax
Profit After Tax
49

Competition
Last Price Market Cap. (Rs.
Cr.)
Net Interest
Income
Net
Profit
Total
Assets
ICICI Bank 1,105.45 127,322.68 25,706.93 4,024.98 363,399.71
HDFC Bank 2,350.05 109,330.36 19,928.21 3,926.39 222,458.56
Axis Bank 1,333.45 54,744.24 15,154.81 3,388.49 180,647.87
Kotak Mahindra 458.00 33,748.71 3,255.62 561.11 37,436.31
IndusInd Bank 267.00 12,418.17 3,589.36 577.32 35,369.52
YES BANK 316.25 10,978.53 4,041.74 727.13 36,382.50
Federal Bank 436.05 7,454.92 3,673.23 464.55 43,675.61
Karur Vysya 417.00 4,449.13 1,757.94 336.03 21,993.49
ING Vysya
Bank
353.15 4,272.65 2,694.06 318.65 33,880.24
JK Bank 823.50 3,992.15 3,056.88 512.38 42,546.80


50


COMPANY ANALYSIS


51

ICICI BANK LTD

ICICI Bank was originally promoted in 1994 by ICICI Limited, an Indian financial
institution, and was its wholly-owned subsidiary. ICICI s shareholding in ICICI Bank
was reduced to 46% through a public offering of shares in India in fiscal 1998, an equity
offering in the form of ADRs listed on the NYSE in fiscal 2000, ICICI Bank s acquisition
of Bank of Madura Limited in an all-stock amalgamation in fiscal 2001, and secondary
market sales by ICICI to institutional investors in fiscal 2001 and fiscal 2002. ICICI was
formed in 1955 at the initiative of the World Bank, the Government of India and
representatives of Indian industry. The principal objective was to create a development
financial institution for providing medium-term and long-term project financing to
Indian businesses. In the 1990s, ICICI transformed its business from a development
financial institution offering only project finance to a diversified financial services
group offering a wide variety of products and services, both directly and through a
number of subsidiaries and affiliates like ICICI Bank. In 1999, ICICI become the first
Indian company and the first bank or financial institution from non-Japan Asia to be
listed on the NYSE. After consideration of various corporate structuring alternatives in
the context of the emerging competitive scenario in the Indian banking industry, and
the move towards universal banking, the managements of ICICI and ICICI Bank
formed the view that the merger of ICICI with ICICI Bank would be the optimal
strategic alternative for both entities, and would create the optimal legal structure for
the ICICI groups universal banking strategy. The merger would enhance value for
ICICI shareholders through the merged entitys access to low-cost deposits, greater
opportunities for earning fee-based income and the ability to participate in the
payments system and provide transaction-banking services. The merger would enhance
value for ICICI Bank shareholders through a large capital base and scale of operations,
seamless access to ICICI s strong corporate relationships built up over five decades,
entry into new business segments, higher market share in various business segments,
particularly fee-based services, and access to the vast talent pool of ICICI and its
subsidiaries. In October 2001, the Boards of Directors of ICICI and ICICI Bank approved
the merger of ICICI and two of its wholly-owned retail finance subsidiaries, ICICI
Personal Financial Services Limited and ICICI Capital Services Limited, with ICICI
Bank. The merger was approved by shareholders of ICICI and ICICI Bank in January
2002, by the High Court of Gujarat at Ahmedabad in March 2002, and by the High
52

Court of Judicature at Mumbai and the Reserve Bank of India in April 2002. Consequent
to the merger, the ICICI groups financing and banking operations, both wholesale and
retail, have been integrated in a single entity.
ICICI Bank is Indias second-largest bank with total assets of Rs.3,793.01 billion (US$ 75
billion) at March 31, 2009 and profit after tax Rs.37.58 billion for the year ended March
31, 2009. The Bank has a network of 1,454 branches and about 4,721 ATMs in India and
presence in 18 countries. ICICI Bank offers a wide range of banking products and
financial services to corporate and retail customers through a variety of delivery
channels and through its specialized subsidiaries and affiliates in the areas of
investment banking, life and non-life insurance, venture capital and asset management.
The Bank currently has subsidiaries in the United Kingdom, Russia and Canada,
branches in United States, Singapore, Bahrain, Hong Kong, Sri Lanka, Qatar and Dubai
International Finance Centre and representative offices in United Arab Emirates, China,
South Africa, Bangladesh, Thailand, Malaysia and Indonesia. Their UK subsidiary has
established branches in Belgium and Germany.
53

SNAPSHOT OF ICICI BANK LTD

Company Details

Industry Bank Private
Chairman K V Kamath
Managing Director Chanda D Kochhar
Company Secretary Sandeep Batra
ISIN INE090A01013
Bloomberg Code ICICIBC IN
Reuters Code ICBK.BO

Company Address

Registered Office Landmark,Race Course
Circle,Vadodara,390007,Gujarat
Phone 91-0265-6617200/3983200
Fax 91-0265-2339926
Website www.icicibank.com
Email investor@icicibank.com

Price Information

Latest Date 11
th
February,2012
Latest Price (Rs) 1122.55
Previous Close (Rs) 1130.10
1 Day Price Var% -0.67%
1 Year Price Var% 22.02%
52 Week High (Rs) 1231.00
52 Week Low (Rs) 767.00
Face Value (Rs) 10.00
Industry PE 12.71



54


Company Size (Standalone)

Market Cap(Rs Crore) 118741.77
EV (Rs Crore) 185491.05
Latest no. of shares 1148873022
Share holding pattern as on 201012
Promoter No of shares 0
Promoter % 0
FII No of Shares 451680100
FII % 39.23
Total No of Shares 1151422189
Free Float % 100

Financial Highlights (Standalone)
(Rs. In Crore)
DESCRIPTION 2012 2011 2010 2009 2008
Equity Paid
Up
1114.81 1113.21 1112.6 899.27 889.8
Reserve 50503.48 48419.73 45357.53 23413.92 21316.16
Deposits 202016.6 218347.83 244431.05 230510.19 165083.17
Gross Block 7114.12 7443.71 7036 6298.56 5968.57
Interest
Earned
25706.93 31092.55 30788.34 21995.59 14306.13
Operating
Profit
9732.18 8925.23 7960.68 5874.41 3888.42
PAT 4024.98 3758.13 4157.73 3110.22 2540.08
Dividend % 120 110 110 100 85
Adj. EPS(Rs) 36.1 33.76 37.37 34.59 28.55
Adj. Book
Value(Rs)
463.02 444.95 417.67 270.37 249.56
16000
17000
18000
19000
20000
A
x
i
s

T
i
t
l
e
PRICE V/S SENSEX CHART
ICICI bank
Sensex
55

Key Market Ratio (Standalone)
Latest EPS (Rs) 40.95
Latest CEPS (Rs) 45.11
Price/TTM CEPS(x) 22.91
TTM PE (x) 25.24
Price/BV(x) 2.14
EV/TTM EBIDTA(x) 20.29
EV/TTM Sales(x) 7.53
Dividend Yield% 1.16
Mcap/TTM Sales(x) 4.82
Latest Book Value (Rs) 482.44

Quarter on Quarter (Standalone)

(Rs. In Crore)
Particulars 2012 2011 Q on Q Var% 2010 Y on Y Var%
Interest Earned 6695.96 6309.1 6.13 6089.57 9.96
Total
Expenditure
1717.92 1570.37 9.4 1362.39 26.1
Operating
Profit
2342.61 2211.94 5.91 2368.84 -1.11
PAT 1437.02 1236.27 16.24 1101.06 30.51
PBIDTM% 34.99 35.06 -0.2 38.9 -10.05
PATM% 21.46 19.6 9.49 18.08 18.69
Adj. EPS(Rs) 12.48 10.74 16.2 9.88 26.32


0
5000
10000
15000
20000
25000
2008 2009 2010 2011 2012
Dividend
Dividend
56

Interpretation
BETA: A measure of the volatility, or systematic risk, of a security or a portfolio in
comparison to the market as a whole. Beta is used in the capital asset pricing model
(CAPM), a model that calculates the expected return of an asset based on its beta and
expected market returns.
Here beta is more than 1 (1.4927) beta of greater than 1 indicates that the securitys price
will be more volatile than the market. Stocks beta is 1.4927; its theoretically 49.27%
more volatile than the market.
EPS: EPS indicates the profitability of a company. Earnings per Share are the single
most popular variable in dictating a shares price. Earnings per share are the Net
Income (profit) of a company divided by the number of outstanding shares. And here
EPS of the company increasing. This shows that company is earning profit.
P/E: price-to-earnings ratio (P/E) is probably the most widely used and thus misused
investing metric. Its easy to calculate, which explains its popularity. The most common
way to calculate:
P/E = share price divided by earnings per share
DPS: The sum of declared dividends for every ordinary share issued. Dividend per
share (DPS) is the total dividends paid out over an entire year (including interim
dividends but not including special dividends) divided by the number of outstanding
ordinary shares issued. Dividends are a form of profit distribution to the shareholder.
Having a growing dividend per share can be a sign that the companys management
believes that the growth can be sustained. Here dividend is highest in last 5 years; it
indicates that company is growing YOY.
ICICI is having highest market capital, net profit and assets value as compared to
competitors this indicates that ICICI is most favorable company for investors.



57

ICICI BANK LTD BALANCE SHEET
DESCRIPTION
March-
2012
March-
2011
March-
2010
March-2009 March-2008
SOURCES OF FUNDS:

Share Capital
1114.89 1113.29 1462.68 1249.34 1239.83
Share Warrants &
Outstanding
0.00 0.00 0.00 0.00 0.00
Total Reserves
50503.48 48419.73 45357.53 23413.92 21316.16
Deposits
202016.60 218347.82 244431.05 230510.19 165083.17
Borrowings
94263.57 93155.45 65648.43 51256.03 38521.91
Other Liabilities &
Provisions
15501.18 18264.66 42895.38 38228.64 25227.88
Total Liabilities
363399.72 379300.96 399795.08 344658.11 251388.95
APPLICATION OF
FUNDS :


27514.29



17536.33


29377.53



18706.88



8934.37

Cash and balance with
Reserve Bank of India
Balances with banks
and money at call
11359.40 12430.23 8663.60 18414.45 8105.85
Investments
120892.80 103058.31 111454.34 91257.84 71547.39
Advances
181205.60 218310.85 225616.08 195865.60 146163.11
Gross block
7114.12 7443.71 7036.00 6298.56 5968.57
Less: Accumulated
Depreciation
3901.43 3642.09 2927.11 2375.14 1987.85
Less: Impairment of
Assets

3212.69

3801.62

4108.90

3923.42

3980.71
Net Block
Lease Adjustment
Capital Work in
Progress


Other Assets
19214.93 24163.62 20574.63 16489.92 12657.51
Total Assets
363399.72 379300.96 399795.08 344658.11 251388.95
Contingent Liabilities
727084.06 834683.00 1211082.33 562959.91 395033.67
Bills for collection
6474.95 6000.44 4278.28 4046.56 4338.46
Book Value
463.02 444.95 417.67 270.37 249.56
Adjusted Book Value
463.02 444.95 417.67 270.37 249.56




58






59

ICICI BANK LTD PROFIT AND LOSS A/C

DESCRIPTION
March-
2012
March-
2011
March-2010 March-
2009
March-2008
I. INCOME

Interest Earned 25706.93 31092.55 30788.34 21995.59 14306.13
Other Income 7477.65 7603.73 8810.76 6927.87 4180.89
Total Income 33184.58 38696.28 39599.11 28923.46 18487.02
II. EXPENDITURE
Interest Expended 17592.57 22725.93 23484.24 16358.50 9597.45
Operating Expenses 5859.83 7045.11 8154.18 6690.56 5001.15
Provisions and Contingencies 4386.86 3808.26 2904.58 2226.37 791.81
Profit Before Tax 5345.32 5116.97 5056.10 3648.04 3096.61
Taxes 1320.34 1358.84 898.37 537.82 556.53
Total 29159.60 34938.14 35441.38 25813.24 15946.94
III. PROFIT AND LOSS
Profit After Tax Extra items 4024.98 3758.13 4157.73 3110.22 2540.07
Profit brought forward
Adjustments to PAT
2809.65 2436.32 998.27 293.44 188.22
Total Profit & Loss 6834.63 6194.45 5156.00 3403.66 2728.30
IV. APPROPRIATIONS 6834.63 6194.45 5156.00 3403.66 2728.30
Equity Dividend % 120.00 110.00 110.00 100.00 85.00
Earnings Per Share 36.10 33.76 37.37 34.59 28.55
Adjusted EPS 36.10 33.76 37.37 34.59 28.55









60









61

ICICI BANK LTD FINANCIAL RATIOS

Ratios 2012 2011 2010 2009 2008
Per Share Ratios
EPS 36.10 33.76 37.37 34.59 28.55
DPS 12 11 11 10 8.50
Profitability
ratios

GP Ratio 15.06 12.36 12.99 11.41 15.10
NP Ratio 12.17 9.74 10.51 10.81 14.12
ROE 7.96 7.83 11.75 13.37 14.62
ROA 1.08 0.96 1.12 1.04 1.21
Liquidity Ratios
Current Ratio 1.94 0.78 0.72 0.61 0.62
Quick Ratio 14.70 5.94 6.42 6.04 6.64


62



Interpretation

Earnings per share (EPS):

EPS is the profitability of the firm measures in terms of number of equity shares, which
is derived by dividing the profit after tax by the number of equity shares. EPS
calculation in a time series analysis indicates whether the firm EPS is increasing or
decreasing.

Over the years EPS of the firm is increasing which indicates that per share earnings of
the firm has increased, but this increase in EPS is erroneous in the sense that the real
earnings (ROE) have not increased.


0
5
10
15
20
25
30
35
40
2008 2009 2010 2011 2012
EPS
EPS
0
2
4
6
8
10
12
14
2008 2009 2010 2011 2012
DPS
DPS
63


Dividend per share (DPS):

Sometimes the equity shareholders may not be interested in the EPS but in the return
which they are actually receiving from the firm in the form of dividends. The amount of
profits distributed to shareholders per share is known as DPS and it is calculated by
dividing total profits distributed by number of equity share.

Dividend per share over the years has increased which indicates that the amount of
dividend distributed towards the shareholder has increased.



Gross profit ratio:

The GP ratio is also called the average markup ratio. It is calculated by comparing the
gross profit of the firm with the net sales.
In 2007 GP ratio had drastically fallen, which means operating efficiency of the firm has
decreased but it has recovered over the next three years and become almost stable.

0
2
4
6
8
10
12
14
16
2008 2009 2010 2011 2012
GP ratio
GP ratio
64


Net profit ratio:

The NP ratio establishes the relationship between the net profit (after tax) of the firm
and the net sales. Its measures the efficiency of the management in generating
additional revenue over and above the total cost of operations.

Net profit ratio has decreased over the years which mean that the overall profitability of
the firm has fallen down.



0
2
4
6
8
10
12
14
16
2008 2009 2010 2011 2012
NP
NP
0
2
4
6
8
10
12
14
16
2008 2009 2010 2011 2012
ROE
ROE
65

ROE: ROE examines profitably from the perspective of equity investors by relating
profits available for the equity share holders with the book value of equity investments.
The return from the point of view of equity shareholders may be calculated by
comparing the net profit less preference dividend with their total contribution to the
firm.

Over the years ROE of the firm have declined which indicates that the funds of the
owner have not been used properly by the firm, and the firm has not been able to earn
satisfactory return for the owner.


ROA: ROA measures a profitability of the firm in terms of assets employed in the firm.
ROE is calculated by establishing the relationship between the profits and the assists
employed to earn that profit. ROA shows as to how much is the profit earn by the firm
per rupee of assets used. ROA of the firm over the year is almost stable.

0
0.2
0.4
0.6
0.8
1
1.2
1.4
2008 2009 2010 2011 2012
ROA
ROA
66


Current Ratio: Current ratio shows the firms ability to pay its current liability out of its
current assets. Generally a current ratio of 2:1 is considered to be satisfactory but
sometimes it varies from industry to industry therefore the firms current ratio should be
compared with the standard for the specific industry only.
Current ratio of the firm has increased over the year which indicates that the firm has
enough current assets to pay off its current liability.


Quick ratio: This ratio establishes the relationship between quick current assets and
current liabilities. Quick current assets excludes inventory and prepaid expenses from
current assets as they are potentially illiquid. This calculated by dividing quick assets
by total current liabilities. Generally a quick ratio of 1:1 is considered to be satisfactory.

Quick ratio of the firm is much higher than the ideal and its increasing over the years
which means that the firm has enough quick assets to pay off its current liability.
0
0.5
1
1.5
2
2.5
2008 2009 2010 2011 2012
Current Ratio
Current Ratio
0
2
4
6
8
10
12
14
16
2008 2009 2010 2011 2012
Quick ratio
Quick ratio
67



ICICI BANK LTD VALUATION RATIO
DESCRIPTION
March-
2012
March-
2011
March-
2010
March-
2009
March-
2008
Adjusted PE (x) 26.39 9.85 20.61 24.67 20.64
PCE(x) 25.59 8.76 18.81 22.13 18.16
Price / Book
Value(x)
2.06 0.75 1.84 3.16 2.36
Dividend Yield (%)
1.26
3.31 1.43 1.17 1.44
EV/Net Sales(x) 7.80 4.19 4.93 5.83 6.38
EV/EBITDA(x) 20.60 14.59 19.05 21.84 23.48
EV/EBIT(x) 8.74 4.68 5.31 6.41 7.19
EV/CE(x) 0.55 0.34 0.38 0.37 0.36
M Cap / Sales 4.13 1.19 2.78 3.49 3.66
High PE 28.45 25.19 42.13 29.50 22.76
Low PE 10.35 7.03 20.61 15.96 13.24

ICICI BANK LTD CASH FLOW RATIO

DESCRIPTION
March-2012 March-2011 March-2010 March-2009 March-2008
Cash Flow Per
share
16.77

-127.46

-104.54

256.45

52.29

Price to Cash
Flow Ratio
56.82

-2.61

-7.37

3.33

11.27

Free Cash Flow
per Share
102.15

241.13

198.79

-160.91

30.12

Price to Free
Cash Flow
9.33

1.38

3.87

-5.30

19.56

Free Cash Flow
Yield
0.11

0.72

0.26

-0.19

0.05

Sales to cash
flow ratios
13.75

-2.19

-2.65

0.95

3.07




68

Intrinsic value of ICICI Bank

Year EPS P/E
2008 36.10 26.39
2009 33.76 9.85
2010 37.37 20.61
2011 34.59 24.67
2012 28.55 20.64


1) Based on the past 5 year EPS data, estimated growth % can be determine. And
the estimated growth rate is 10.1%

2) Now, by using the current EPS we can compound it with the estimated growth
i.e. 10.1%

3) Current EPS is 40.95 compounding of the EPS is 40.95+(40.95*.101)=45.085

4) Now, based on the past 5 year P/E take the average of P/E value which is 20.432

5) Now multiply the step 3 & 4 and we will get the estimated share price.

6) Estimated share price is 921.176 and current share price is 1033 which is higher
than the estimated its means that share price is overvalued and investor should
sell the shares for short term.










69

Expected Growth of ICICI in 2011 by Unicon Investment research report
ICICI Bank registered a good financial performance in Q4FY12 with standalone PAT
up by 48% to INR 18.52 Bn from INR 10.06 Bn in Q4FY11. The growth, being the highest
in last 7 years, was aided by increase in interest and non-interest income. The QoQ
increase in Net Interest Income was better than expected (a rise of 25.3% from INR 22.35
bn in Q4FY11 to INR 25.10 Bn to Q4FY12). Net interest margin increased QoQ & YoY by
10 bps to 2.7% respectively, on account of lower cost of funds, lower delinquencies and
growing CASA deposits. CASA ratio increased from 41.7% in Q4FY11 to 45.1% in
Q4FY12. The total deposits increased by 11.7% YoY (INR 668.7 Bn on March 31,2011 as
compared to INR 532.18 Bn in March 31,2011). Non-interest income decreased by 13.2%
QoQ and 11.1% YoY, this was primarily because of MTM loss in treasury income
(Q4FY12 value stood at INR 1.96 Bn) and reduction in other income by 73.6% (QoQ).
However, fee income increased by 17.8% to INR 17.91 Bn on QoQ basis. Advances
increased YoY by only 19% which was lower than the industry level of 21%, advances
to domestic 71orporate increased by 42.6% YoY. The retail advances like vehicle loan
and home loan are expected to grow in the near future. The Net NPA s improved from
1.87% in Q4FY11 to 0.94% of net advances in Q4FY12. Loan loss coverage ratio also
increased to 76% on March 31,2011 from 59.5% in March 31,2011, much above the RBI
regulation of 70%. Operating expenses rose YoY by 14.1% to INR 17.89 Bn in Q4FY12
from INR 14.58 Bn in Q4FY11. Credit to deposit ratio from domestic business stood at
75%, Cost to income ratio was 42% due to healthy operating income growth. This was
on account of expanding network of the bank with 2529 branches and 6104 ATMs.
ICICI Banks growth in the past has been mainly retail-driven, the bank is now looking
to grow its large corporate and SME segment loan book as well. Progress on the 4C
strategy (CASA, capital conservation, cost control and credit charges) has been good. At
the CMP ICICI is trading at 2x of its FY12E P/BV (standalone basis). We have
Accumulate rating on the stock for a target price of INR 1306, says Unicon Investment
research report.








70




FINDINGS
(Chapter-7)




71

In this project report there are many facts which say whether an investor should invest
in ICICI Bank or not. For the conclusion on this part, we have analyzed economic,
industry as well as company (ICICI Bank).

1) In the Economic Analysis we can see that economic is booming after 2010 and current
position shows that this is the good time to invest after the recession because GDP
growth rate is increasing. And overall economy is growing.

2) In the industry analysis here overall industry PAT is increasing over the years which
means banking industry is having much profit but on the other side banking industry
Net Profit growth has decreased very much so investor should invest carefully.

3) In the analysis of ICICI Bank we can see that EPS is increasing yoy. And dividend is
also increasing so investor can invest in the company but on other side we company s
intrinsic value is less than the current price it shows that the share price is overvalued
and invester should sell the share. But if investor want to invest in the company for long
term than he can have a good profit because company growing rapidly in terms of
profit and net sales and its EPS & DPS are increasing over the years.


72



LIMITATIONS
73

Fundamental analysis has some limitation involved in it. This limitation can be
explained as under:
Time Constrain:
Fundamental analysis may offer excellent insights, but it can be extraordinarily time-
consuming. Time-consuming models often produce valuations that are contradictory to
the current price prevailing on the exchange.
Company Specific:
Valuation techniques vary depending on the industry group and specifics of each
company. For this reason, a different technique and model is required for different
industries and different companies. This can be quite time-consuming process, which
can limit the amount of research that can be performed.
The sales and inventory ratio may be very important for the cement sector company but
these ratios are not very useful for the banking sector.
Inadequacies of Data:
While making analysis one has to often wrestle with inadequate data. While deliberate
falsification of data may be rare, subtle misrepresentation and concealment are
common.
Future Uncertainties:
Future changes are largely unpredictable; more so when the economic and business
environment is buffeted by frequent winds of change. In an environment characterized
by discontinuities, the past record is a poor guide to future performance.
Irrational Market Behavior:
The market itself presents a major obstacle while making analysis on account of neglect
or prejudice, undervaluation may persist for extended periods; likewise, overvaluations
arising from unsatisfied optimism and misplaced enthusiasm may endure for
unreasonable lengths of time.

74



CONCLUSION





75

Fundamental analysis holds that no investment decision should be without processing
and analyzing all relevant information. Its strength lies in the fact that the information
analyzed is real as opposed to hunches or assumptions. On the other hand, while
fundamental analysis deals with tangible facts, it does not tend to ignore the fact that
human beings do not always act rationally. Market prices do sometimes deviate from
fundamentals. Prices rise or fall due to insider trading, speculation, rumor, and a host of
other factors. Fundamental analysis is based on the analysis of the economic, industry
as well as the company and in this research we can see that the economic indicators
have an effect on the bank growth and assets. The above report says that our economic
is growing after the recession and it is the good time for the one who want to invest.
And according to the industry analysis investor can invest in the banks but he/she
should be careful for the investment. But according to financial analysis of ICICI bank
its performance in the private industry is good and expected to grow further in the near
future which is a good sign for investment. EPS and dividend both are increasing yoy
and its on the top in terms of profit and net interest income if we compared it with the
other banks in the same industry but we cant ignore the intrinsic value of the company
which is lower than the current value which shows then investor should sell the share
of the company if he/she is investing for short term and for long term it is good for
investor to invest in the company.
76




SUGGESTIONS

77

The analysis carried out at on the ICICI Bank, their profit and loss account, balance
sheet and ratios. I shall suggest the investors to invest in ICICI Bank than the other
banks as a value investment.

Reasons:

Largest private sector bank in India, second largest in entire banking Industry

Strong increase in profit year-on-year basis.

Increasing EPS indicate good earnings.

Increase in sharing profit with shareholders in form of dividend.

ICICI Bank is expanding its footholds on international level also; its Insurance
and asset management business are also performing well.



78




BIBLIOGRAPHY

79

Books:

Investment Analysis & Portfolio Management- Prasanna Chandra.
Financial management R.P Rustagi


Data base Websites:

http://www.business-standard.com/india/index2.php
http://www.equitymaster.com
http://economictimes.indiatimes.com/
http://finance.indiabizclub.com/info/indian_banking_industry
http://finance.indiamart.com/investment_in_india/banking_in_india.html
http://www.icicibank.com
http://www.moneycontrol.com
http://www.nseindia.com
http://www.rbi.org.in