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UAE EXCHANGE
The Indian banking industry: sector overview
With the economic growth picking up pace and the investment cycle on the way to
recovery, the banking sector has witnessed a transformation in its vital role of
intermediating between the demand and supply of funds
Public sector banks have been very proactive in their restructuring initiatives be it in
technology implementation or pruning their loss assets. Windfall treasury gains made
in the falling interest rate regime were used for writing off the doubtful and loss
assets.
Retail lending (especially mortgage financing) formed a significant portion of the
portfolio for most banks and they customized their products to cater to the diverse
demands.
Apart from streamlining their processes through technology initiatives such as ATMs,
telephone banking, online banking and web based products, banks also resorted to
cross selling of financial products such as credit cards, mutual funds and insurance
policies to augment their fee based income.
Economies of scale: Since the existing players in the market are well
established and already have a customer base, they are able to bear the cost
of using the advantages of technology to their maximum advantage.
b.
i.
ii.
c.
d.
e.
c. Call money market: Banks sometimes have to borrow from other banks
to meet CRR and SLR requirements, or other capital requirements as
provided by RBI.
4) THREAT OF SUBSTITUTES:
a. Product-for-product substitution:
i.
ii.
Banking sector reforms As per the RBI roadmap for reforms in the
first stage from 2005 to 2009 foreign banks will be allowed to set up
wholly owned subsidiaries as well as get greater freedom to set up new
branches.
per cent is food credit) has forced the domestic banks to cater to this
segment despite the low profitability and vulnerability of asset quality.
2. Economic factors-:
Basell II norms for the risk management in banking sector - The new Basel
Accord have its foundation on three mutually reinforcing pillars. The first
pillar is compatible with the credit risk, market risk and operational risk. The
second pillar gives the bank responsibility to exercise the best ways to manage
the risk specific to that bank.
Concurrently, it also casts responsibility on the supervisors to review and
validate banks risk measurement models. .
Consolidation and merger and acquisitions in the banking sector-. HDFC
bank also acquired TIMES BANK in 2001 which increased its customer base
by 3 lakh customers.
Universal Banking has been introduced. ICICI Bank ,HDFCs closest
competitor is already into Universal Banking so HDFC is also getting into it
as now it is providing retail banking and also depository facilities in the form
of demat account.
3. Social factorsBig and growing middle class in India -: This has been a major factor in the
growth of the retail loans like consumer loans in the form of home loans, car
loans, education loans, auto loans etc. Retail loans have grown from 19% in
FY99 to 51% FY06.Consumer credit accounts for a meager 28.6 per cent of
the country's GDP and the buoyancy in the economy offers sufficient scope for it
to grow.
Geographical and Cultural diversity- This is leading to a greater demand for
financial products and customization by the customers.
4. Technical factorsThe Indian Financial Network (INFINET) was inaugurated in June 1999. It is
based on satellite communication using VSAT technology and would enable
faster connectivity within the financial sector.
Banks (All): No of players = 40
Sector statistics:
Table No: 4.1
We see the sector aggregates and make a financial comparison for the major banks
Top Players
FY2014
Based on Total Income
Total
ICICI BANK
PNB
WESTER UNION
Income
(Rs Mn)
63161.9
29218
Based on OPBDT
Change
(%)
54.50
ICICI BANK
14.91
PNB
WESTER UNION
MONEY
TRANSFER
BANK OF INDIA
UAE
OPBDT
(Rs Mn)
37174
22205.2
Change
(%)
19.36
39.36
16882.5
19.53
76352.8
-1.29
MONEY
27709.5
23.78
23317
25.43
TRANSFER
BANK OF INDIA
UAE
EXCAHNGE
18550.8 60.24
EXCHANGE
14324
27.48
% change - indicates the change between current and corresponding quarter.
Quarterly
Aggregates
No: of Players - 29
Previous Quarter
317927
74296.8
30481.7
126435
Latest Quarter
305290
81622.6
32705.4
77730.1
UAEBank
Market Capitalization
BBV 75.96B
5.83B
13 / 24
BMA 84.36
30.04
2 / 24
0.64
16 / 24
BFR
29.70%
45.60% 4 / 24
IRE
154.00% 33.90% 6 / 24
44.5%
30.0% 2 / 24
91.21%
N/A
BFR
N/A
LYG
6.20%
0.70% 18 / 24
COMPANY ANALYSIS:
1.
Key Highlights
Symbol: UAE
Sector: Financial
Industry: Foreign Regional Banks
Market Cap: 43882 Cr
N/A
2.
TATA MOTORS
GDP
Real GDP growth accelerated from 7.5 per cent during 2011-12 to 8.4 per cent during
2012-13 on the back of buoyant manufacturing and services activity supported by a
recovery in the agricultural sector. Real GDP growth has, thus, averaged over eight
per cent during the last three years and over seven per cent in the first four years
(2002-03 to 2005-06) of the Tenth Five Year Plan.
Strengths of India today are:
A well diversified industrial base which profits from self-reliance in all core industries
.A large & sophisticated financial architecture - The robust capital Markets today have
over 9000 listed companies and boast of a massive Market capitalization.
A healthy GDP composition with agriculture contributing 22%, Industry 22% and
services, which have gone strength to strength, accounting. For 56% of the GDP an
acknowledged strength in knowledge driven industries like Information technology,
biotechnology, entertainment Software etc
India has Over 3 million scientific & technical manpower, Over 0.6 million S&T post
graduates, Over 0.7 million graduate engineers, Over 3500 doctorates in sciences
every year.
Assuming trend growth in agriculture under normal monsoon conditions and barring
domestic or external shocks, the Reserve Bank in its Annual Policy Statement for
2014-15 (April 2014) placed real GDP growth, for policy purposes, in the range of
7.5-8.0 per cent during 2014-15 Growth prospects are, however, subject to a number
of downside risks. The risks emanating from the global economy are: potential
escalation and volatility in international crude oil prices, firming up of overall
inflationary pressures and expectations, and a hardening of international interest rates
along with the withdrawal of monetary accommodation.
Indias demographic advantage In contrast to developed Countries, India will
have a younger population for the next 50 years. Hence India would be the hub for
R&D.
Inflation
Inflation was contained to 6.3 per cent by end-March 2014 within the indicative
trajectory of 5.0-5.5 per cent during 2014-15. The actual inflation was considerably
lower than the indicative trajectory and this could be mainly attributed to the deferred
pass-through of even the cognisable permanent component of international crude oil
prices.
Money Supply
Monetary and liquidity conditions remained largely comfortable during 2013-14
reflecting proactive liquidity management operations by the Reserve Bank under the
Reduction of weight
Recyclability
Safety
Aesthetics
Hindustan Motors
Hyundai Motor India Ltd.
Royal Enfield Motors
Telco
TVS Motors
Opportunities and Threats
a) Opportunities
Road Development: The ongoing road development program would improve
connectivity to ports, cities and villages through a network of highways and
interconnecting roads by 2013-14. Improved road network would help in faster
movement of goods between various cities and towns. The Company launched TATA
Novus range of vehicles in the heavy segment and TATA ACE for last mile
distribution.
Car penetration in India: Car penetration in India is 7 cars per 1,000 persons.
International: In FY 2013-14, the Company increased share of its overseas vehicle
sales from 7.6% last year to record high of 11.1% (as % of its total sales) and has
planned further increase in this year.
b) Threats
Global Competition: India is increasingly attracting global players to set up
manufacturing facility for producing cars, especially small cars. Global automobile
manufacturers are also entering India in commercial vehicle segment to leverage
Indias low cost production advantage to their favor.
Fuel Prices: The continuing fuel price increase in the domestic market could
significantly impact demand of commercial and passenger vehicles.
Input costs: Commodity items particularly steel, non-ferrous metals, rubber and
engineering plastics have witnessed huge price increases in the past. These prices are
expected to increase further affecting the Companys profitability.
Interest rate hardening and other inflationary trends: With interest rates hardening
and liquidity crunch in the system, growth in sales may be adversely impacted.
2012-13
RATIO ANALYSIS
Ratios
2014
2013
2012
Debt/equity
0.56
0.49
0.44
Current ratio
1.08
0.87
0.76
12.11
11.51
12.38
10.87
10.43
11.04
ROCE %
31.25
32.76
33.77
3.15
3.53
3.43
ROE %
27.61
30.09
22.57
Dividend-equity
497.94
453.73
282.11
Retention Ratio
67.43
63.32
65.19
DPS (Rs.)
13.01
12.5
7.99
EPS (Rs.)
25
34
41
0.39
0.42
0.37
CAGR of EPS
0.177
-0.017
Average ROE
25.74
average retention
63.54
16.36
Market return
14.54%
HPCL
Globalization and the Indian Petroleum Industry
Indian petroleum industry in the post independent period (1947-2001) it may be
divided into three distinct phases
(i) early phase (1947 to 1969)- when the government consolidated its control
over the industry with Soviet assistance;
SWOT ANALYSIS
STRENGHS
WEAKNESSES
OPPORTUNITIES
THREATS
COMPANY ANALYSIS
The Annual Report is broken down into the following specific parts:
A) The Director's Report,
B) The Auditor's Report,
C) The Financial Statements, and
D) The Schedules and Notes to the Accounts.
.
A.THE DIRECTORS REPORT
The Directors Report is a report submitted by the directors of a company to its
shareholders, advising them of the performance of the company under their
stewardship.
B. THE AUDITOR'S REPORT
The auditor represents the shareholders and it is his duty to report to the shareholders
and the general public on the stewardship of the company by its directors
C. FINANCIAL STATEMENTS
It comprises of Balance Sheet, Profit and Loss account, Cash Flows. Its analysis
would be discussed later.
D.SCHEDULES
The schedules detail pertinent information about the items of Balance Sheet and Profit
& Loss Account. It also details information about sales, manufacturing costs,
administration costs, interest, and other income and expenses
1. THE MANAGEMENT
Many times a company has made losses in the previous years but that does not mean
that the company is bad to invest. Thus many factors are studied while studying a
company.
a) perception of competitors
HPCL is the second largest petroleum company after IOCL. Thus it is a
competitor of IOCL and it is trying hard to compete with IOCL on every front.
That is why now it has decided to diversify itself in the oil exploration sector
b) company policies
As this is a PSU thus the policies are made by the government. The oil sector is
one which is highly regulated by government. Thus from time to time it is
required to watch out the various policies changed.
3. ANNUAL REPORT
The most primary and most important source of information about a company is its
Annual Report. This is prepared every year and distributed to its shareholders.
Ratio Analysis
Table No: 4.3
Evaluation of Intrinsic Value of the Security
STDEV MKT
STDEV SEC
0.011934
0.03831
Average
RETENTION
CORRELATION
BETA
RISK
FREE
RATIO
0.485958 ROE
1.56765 G
RATE
MKT RATE
6.50%
14%
18.26%
0.60504
0.19842
0.120052
Hence we see that here our g is less than k .Thus we see that as per Dividend
Discount Model our Intrinsic value is div=22(1+.012)=24/.0626= 387
Price= Projected EPS + Weighted P/E ratio
Using CAGR EPS = 43.468
JET AIRWAYS
MARKET
Figure 4.6
Currently the market scenario is as shown:
1) ACC LIMITED
AIRLINE
Jet Airways
Air Deccan
Kingfisher
Spice Jet
GoAir
High growth potential due to economic boom and highly under penetration in
the market
It is forecasted that India would be the second fastest growing travel and
tourism economy in the world
ATF (Aviation Turbine Fuel) prices and airport charges in India are among the
highest in the world
MACRO ENVIRONMENT
Refers to the factors which influence an industry but are beyond its control. Main
factors are:
POLITICAL
ECONOMIC
SOCIO-CULTURAL
TECHNOLOGICAL
Other Factors
DEMOGRAPHIC
NATURAL ENVIRONMENT
POLITICAL
OPEN SKY POLICY
DEREGULATIONS IN DIFFERENT SPHERES
LESS ENTRY BARRIERS
REDUCTION IN FDI LIMIT: 49% for airlines
SOCIO-CULTURAL
3.2 million Foreign tourists visited India last year; tourism industry grew 8.8
per cent over 2003, the highest growth rate in the world.
SOCIAL
TECHNOLOGICAL
MODERNISATION OF AIRPORTS
ILS-INSTRUMENT LANDING SYSTEMS
DEMOGRAPHIC
CHANGING STRUCTURE OF CONSUMERS
HIGHEST % PEOPLE IN 20-50 AGE GROUP
EDUCATIONAL GROUPS
SHIFT TOWARDS NUCLEAR FAMILIES
(Source NCAER)
MIDDLE CLASS INCOME OVER RS. 90,000 P.A.
NATURAL ENVIRONMENT
HIGH ENERGY COSTS
The cost of aviation turbine fuel ATF in India for domestic airlines is almost
double for international market.
Expected retaliation
Differentiation
Exit barriers
POWER OF BUYERS
POWER OF SUPPLIERS
ATF AIRCRAFT MFG PILOT
Shortage of pilots
AVAILABILITY OF SUBSTITUTE
Substitution for need- with technology the need to travel has reduced
but it is not possible to totally do away with it. It is marginally
possible.
COMPETITIVE RIVALRY
Increased competitive pressures due to new entrants
Growth rates- high projected to be 22%
High fixed costs
Extra capacity
Acquisition of weaker companies
High exit barriers
Differentiation
S.W.O.T of the Industry
Key Attractions:
Key Problems:
JET AIRWAYS
Market Share: 35%
Strengths
Membership of IATA
Weaknesses
Opportunities
Threats
Growth Forecast
World Passenger traffic grew to 52.12 million in the last fiscal, from 43.47
million in 2008-09, to register a growth of 19.9 percent.
In the last fiscal, the Indian aviation industry logged a robust growth of 24
percent and experts say the sector will expand by at least 16 percent annually
for the next five years, riding on the overall economic growth of eight percent.
Premier Airways
Star Air
Indigo
1) ACC LIMITED
Figure No: 4.7
ANALYSIS: Trend:The stock after correcting to 50% of the long bull run [Bottom 676 Top 1197] prices
reversed back and are now in intermediary upward trend.
Moving Averages:The stock is currently trading above all the important trading moving averages. The
moving average crossover of 13 days & 40 days is observed on 22nd Dec. 2013
triggering price trend reversal and buy at current levels.
13 days: = 1037.70 40 days: = 1060.84
30 days: = 1078.65 100 days: = 991.62
Moving Average Channels: The stock on giving a close above 1070 levels has given a breakout above the
moving averagechannel signaling buy at current levels.
Relative Strength Index (RSI): RSI on falling to 34 levels in the profit booking mode bounced back to bull zone at
53.46 showing synchronization with price movement.
Pitchfork:-
The stock have broken the upper arms and moved out (at 1072) of the corrective
trend pitchfork signaling positive trend & buy at current levels.
The stock is now moving towards the median of the major pitchfork which is
INFOSYS TECH
around 1160 levels.
12th
Oscillators:Date
February
Osc (10,70) trading favorably in positive zone indicating presence of long term
2014
traders.
Close
2351.25
Osc (5,35) are pulling back to zero from negative, indicating entry of short term
traders.
Trend
Up
Support
2340
Resistance
2380
1) INFOSYS TECHNOLOGIES LIMITED
Stop loss
2317
The Trend refers to the daily trend of the stock and not intraday but one may trade
intraday based on it. If you are a slightly longer term investor, you may go on holding
the stock in long if trend is up or you may go on holding the stock in short position if
trend is down. If you are a short term trader you may use the below paragraph
information and play for small moves.
How to trade according to the data mentioned above
If an entry is made in front of support and the close is above the support, it means
that one can buy the stock intraday during market hours at support and put an
appropriate stop loss mentioned below. Once you have bought the stock
intraday, put the Stop Loss accordingly mentioned and sell it before the market
CIPLA
closes.
Close
248.35
2) CIPLA LIMITED
Resistance
260
Stop loss
205
is an intraday trader.
If we do not find the stock giving clear signal for intraday trading, than we will leave
the support or resistance field empty.
BPCL
If you are a slightly longer term investor, you may go on holding the stock in long if
2014 position if trend is down. If
trend is up or you may goDate
on holding12th
the February
stock in short
Close
you are a short term trader
you may use the 331.85
below paragraph information and play for
small moves.
Trend
Down
Support
355
Resistance
390
Stop loss
347
If we do not find the stock giving clear signal for intraday trading, than we will
leave the support or resistance field empty.
RANBAXY
12th
Date
February
2014
Close
409.15
Trend
Not Clear
Support
360
Resistance
420
4) RANBAXY LABORATORIES
LIMITED 350
Stop loss
that one can short the stock intraday during market hours at resistance and put an
appropriate stop loss mentioned below. At close one should cover if one is an intraday
trader.
TATAMOTORS
875.05
Trend
Down
Support
810
Resistance
5) TATA MOTORS LIMITED
Stop loss
895
795
If an entry is made in front of resistance and the close is less then resistance, it means
that one can short the stock intraday during market hours at resistance and put an
appropriate stop loss mentioned below. At close one should cover if one is an intraday
trader.
If we do not find the stock givingRELIANCE
clear signal for intraday trading, than we will
leave the support or resistance field empty.
Date
12th
February
2014
Close
1358.85
Trend
Not Clear
Support
1290
Resistance
6) RELIANCE INDUSTRIES
LIMITED 1370
Stop loss
1280
that one can short the stock intraday during market hours at resistance and put an
appropriate stop loss mentioned below. At close one should cover if one is an intraday
trader.
M&M
If we do not find the stock giving clear signal for intraday trading, than we will
12th
leave the support or resistance field empty.
Date
February
2014
Close
880.80
Trend
Down
Support
930
Resistance
980
7) MAHINDRA & MAHINDRA LIMITED
Stop loss
918
trader.
If we do not find the stock giving clear signal for intraday trading, than we will
leave the support or resistance field empty.
SBIN
12th
Date
February
2007
Close
1183.70
Trend
Not Clear
1120
Resistance
1170
Stop loss
1105
appropriate stop loss mentioned below. At close one should cover if one is an intraday
trader.
If we do not find the stock giving clear signal for intraday trading, than we will
leave the support or resistance field empty.
MARUTI
Date
12th
February
2014
Close
912
Trend
Down
Support
950
Resistance
990
940
If an entry is made in front of resistance and the close is less then resistance, it means
that one can short the stock intraday during market hours at resistance and put an
appropriate stop loss mentioned below. At close one should cover if one is an intraday
trader.
If we do not find the stock giving clear signal for intraday trading, than we will
leave the support or resistance field empty.