Cover Page for Academic Tasks

Course Code: FIN542

Course Title: FINANCIAL ANALYTICS

Course Instructor: ROHIT SHOOD

Academic Task No.: CA 2 Academic Task Title:- Social Cause posting on social media

Date of Allotment: 28-01-2020 Date of submission: 11-04-2020

Student’s Roll no: Q2E33 A45 Section :- Q2E33

Student’s Reg. no: 11806734

Evaluation Parameters:

Learning Outcomes:
1. Learn about the how to value the company.
2. Learn about how to analysis the financial statement.

Declaration: we declare that this Assignment is our group work. We have not copied it from
any other student’s work or from any other source except where due acknowledgement is made
explicitly in the text, nor has any part been written for me by any other person.

Student’s Signature: Sudhanshu

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General Observations Suggestions for Improvement Best part of assignment

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Marks Obtained: Max. Marks: …………………………

ANALYSIS OF BANK OF BARODA FINANCIAL
STATEMENT
 Bank of Baroda (BoB)

Bank of Baroda (BoB) is an Indian state-owned banking and financial services company
headquartered in Vadodara (earlier known as Baroda) in Gujarat. It is among top four largest
Bank in India and offers a range of banking products and financial services to corporate and
retail customers through its branches and through its specialized subsidiaries and affiliates.

The Bank of Baroda was founded by the Maharaja of Baroda, H. H. Sir Sayajirao Gaekwad III
on 20 July 1908 in the Princely State of Baroda, in Gujarat, under the Companies Act of 1887
with a paid up capital of Rs.10 Lakh. Two years later, in 1910, the Bank opened its first office
branch in Ahmedabad. The founder, Maharaja Sayajirao Gaekwad, with his insight into the
future, saw "a bank of this nature will prove a beneficial agency for lending, transmission, and
deposit of money and will be a powerful factor in the development of art, industries and
commerce of the State and adjoining territories." These words are etched into the mind, body
and soul of what has now become a banking legend. Following the Maharaja's words, the
emblem was crafted to represent wealth, safety, industrial development and an inclination to
better and promote the country's agrarian economy. This emblem shows a coin, symbolizing
wealth, embossed with an upraised palm, a safety cover for the depositor's money, with a
cogwheel that promotes industrial growth in tandem with the two corn ears that stand for the
progress of the staple agricultural growth in the country. Since its inception in 1908 in Gujarat,
the bank had the logo of an industrial and agriculture wheel with Sanskrit letters - `Akshayam
te Bhavishyati' (the future is secure). No history is complete without mention of its heroes,
mostly ordinary people, who turn in extraordinary performances and contribute to building an
institution. There were also the leaders, both corporate and royal, who provided the vision and
guided the Bank through trail blazing years, and departing, left behind footprints on the sands
of time. This Roll of Honor will be incomplete without mention of men, of the stature of
Maharaja Sayajirao Gaekwad, Sampatrao Gaekwad, Ralph Whitenack, Vithaldas Thakersey,
Tulsidas Kilachand and NM Chokshi. Between 1913 and 1917, as many as 87 banks failed in
India. Bank of Baroda survived the crisis, mainly due to its honest and prudent leadership. This
financial integrity, business prudence, caution and an abiding care and concern for the hard
earned savings of hard working people, were to become the central philosophy around which
business decisions would be effected. This cardinal philosophy was over the 94 years of its
existence, to become its biggest asset. It ensured that the Bank survived the Great War years.
It ensured survival during the Great Depression. 7 The bank grew domestically until after
World War II. Then in 1953 it crossed the Indian Ocean to serve the communities of Indians
in Kenya and Uganda by establishing a branch each in Mombasa and Kampala. The next year
it opened a second branch in Kenya, in Nairobi, and in 1956 it opened a branch in Dar-es-
Salaam. Then in 1957 BoB took a giant step abroad by establishing a branch in London which
was the center of the British Commonwealth and the most important international banking
center. In 1958 BoB acquired Hind Bank which was its first domestic acquisition. In 1961 it
merged New Citizen Bank of India which helped to increase its branches in Maharashtra. In
1960’s it opened new branches in Fiji and Mauritius and expanded its operation to Tamil Nadu.
In 1969 the Indian government nationalized 14 top banks, including BoB subsequent to which
it became state owned banking company. Even while big names were dragged into the Stock
Market scam and the Capital Market scam, the Bank of Baroda continued its triumphant march
along the best ethical practices and has managed to insulate itself away from fatal transactions
and has strictly adhered to the RBI guidelines.

Bank of Baroda Analysis

Assumption

 Taking the revenue or say total income as interest earned as the bank generating their
revenue from interest earned on their loans, and other securities. So the assumption
from there last year growth and for forecasting taking the average of last 4 years.
 Employee cost are the average of the last 4 year.
 Tax rate is 22 % now as stated by the government to cut the corporate tax from 30%
to 22%.

Income Statements

 The revenue of the BOB where increased from last 4 years but in 2019 there was
double digit hike in the revenue of the company i.e. 11.5%. Which gives the
forecasted year good amount of business.
 The CAGR of total income is 4%.
 The percentage of expenses to the income is somewhat near to 80% means that only
20% are the profits. In in years 2016 & 2018 there where huge loss after. To maintain
this BOB should reduce the expenses from different head.
 Year/Particular 2015 2016 2017 2018 2019
Total Expenses/ 89% 114% 95% 105% 99%
Total income
Earning before 11% -14% 5% -5% 1%
tax (EBT)/
Total income
Profit / Total 7% -11% 3% -5% 1%
Income

In the above table we see that in Year 2017 & 2019 there were 14 % and 5% loss are
there and overall expenses are just near the total income of the company. These will
create problems in the future. At least 20% gap should be there.
Both highlighted cells are in loss. As there the profit of the company is even not in 2
digit number. So advice for the company is to reduce the expenses.
 A negative sign in front of your income represents a loss. If this is your only
"income" of the year, you fall into the category of a Net Operating Loss (NOL),
which can have additional impact on other tax years. See year 2016 & 2018.

Balance sheet

 The information where taken from the capitalline.

 The compounded annual growth rate (CAGR) of
PARTICULAR CAGR in(%)
Cash & Bank Balance with RBI 4
Bal. with bank -16
Investments 12
Advances 2
Fixed Assets 25
Other Assets 22
Total Assets 2
In the above table it is clear that Fixed Assets are increasing year by year with 25%
growth rate means that they are paying high depreciation for that each year. Buying
of new assets also led advantage to the company in valuation.
 There forecasting is done on the average of last 4 years of data due to lack of
information. In forecasting data the Assets are also increasing year by year.
 The Bank balance were taken for the cash flow starting and ending balance of the year.
 The liabilities were also increasing but with low rate which is good for the company to
maintain the operation of business.
PARTICULAR CAGR in(%)
Deposits 1
Borrowings 17
Other liabilities 3
Total liabilities 2
Retained earning 7
Shareholders’ equity 7
Total liabilities & shareholder’s equity 2
Hence we see that only borrowing from the RBI, securities, And Foreign etc. we’re
increasing means that they are taking money to increase the assets for the business.
 The shareholders equity taken as constant for the forecasting period because of the
past performance.

Cash Flow Statements

 The information is taken from the capitaline.

 Cash from operation is negative for 2018 (-61088) and 2019 (-4120) which
means that business has more outgoing than incoming money. You cannot cover
your expenses from sales alone. Although it covers a huge difference from last
years. This means that it is good for the company now as they will continue in
long run.
 The forecasting years is in positive which means that’s the business is stable and
in good position.
 Cash from investing activity is also negative which means the company is
investing in its future growth. On the other hand, if a company has a negative cash
flow from investing activities because it's made poor asset-purchasing decisions,
then the negative cash flow from investing activities might be a warning sign. As
you see in the cash flow statements it’s more investing in purchase of fixed assets.
This means they have future growth plan.
  In forecasting, this we see that in future they spend more on the purchasing the
fixed assets. The company is getting the money from selling of fixed assets which
are out of fashion or not in used and from dividend received. In 2019 dividend
received is more from last year means that they are investing much or getting
more profited shares.
 Cash from Financing Activity is also negative for first 3 years and for last 2
years it is in positive. A positive number for cash flow from financing activities
means more money is flowing into the company than flowing out, which increases
the company's assets. The company is more focusing on issue of share and not
paid the dividend from last 2 years and paid good amount for interest which the
company borrowed for their operation performed.
 In forecasting, its shows the positive balance means that they will issue more
share and some other factors also led to maintain the cash flow.

Valuation

 The assumptions are taken on the basis of information given on Internet. Moreover
there is also comment for more reference for the assumption.
 In DCF model the intrinsic value of the BOB is 47.49 whereas the value of current
stock is 50. So, we can say that the company is overvalued now.
 The RV shows that the price is undervalued in all the conditions as all the prices are
above 50. Only EV/EBITDA is coming correct.
 In the Du Pont analysis ROE is less 1%. But closer to 1% i.e. 0.97% means that the
stability of the company is good to pay their obligations.
 In DDM method we find CAPM model with where cost of equity comes to be
10.66%.
 The ratios are also saying that the company is in stable condition.