A Report Submitted On Fundamental Analysis of Bandhan Bank

Submitted to: Hedge Equities

Submitted by: Abhishek Ranjan

MBA- Finance

Christ (Deemed to be University), Bangalore

MAY 2020

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Summer Internship Project Report submitted in partial fulfilment of the
requirements for the degree of

Master of Business Administration

By
ABHISHEK RANJAN
1927703

Under the Guidance of

DR. SIVAKANT SHETTY

SCHOOL OF BUSINESS AND MANAGEMENT

Christ (Deemed to Be University), Bangalore MAY/JUNE

2020

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 Declaration

I hereby declare that the Summer Internship Programme report on Fundamental Analysis of
Private Sector Banking, has been undertaken by me for the award of Master of Business
Administration degree. I have completed this study under the guidance of Mr Haridasan K N, Mr
Josin Jacob and Dr. Shivakant Shetty.

I also declare that this Summer Internship Programme report has not been submitted for the award
of any Degree, Diploma, Associate ship, Fellowship or any other title, in other Organisation,
Institutes and Universities.

Place: Kochi Signature_____________

Date: Abhishek Ranjan

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 Certificate

This is to certify that the Summer Internship Programme report submitted by Abhishek Ranjan
is a record of work done by him during the academic year 2019-20 under my guidance and
supervision in partial fulfilment of the requirements of Master of Business Administration degree.

Place: Kochi Signature______________

Date:

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 Acknowledgement

I am indebted to all the people who helped me accomplish this Summer Internship
Programme successfully.

First, I thank the Hedge Equities, for giving me the opportunity to do my project.

I thank Mr Haridasan KN, Mr Jobin Jacob, Mr Nowfal, Ms Megha from Hedge Equities,
for their kind support.

I thank Prof.Sivakant Sheety for her support and guidance during my training. I remember
her with much gratitude for her patience and motivation, but for which I could not have submitted
this work.

I wish to express my sincere thanks to my corporate mentor, Mr Jobin Jacob, Usha Martin
Limited, for giving me an opportunity to work under his guidance and successfully complete my
training.

I thank my parents for their blessings and constant support, without which this training
would not have seen the light of day.

Abhishek Ranjan

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 EXECUTIVE SUMMARY
I did my Internship at Hedge Equities Ltd (School of Economics), Headquarters Situated at Kochi (Kerala
India).

My work is to build a valuation technique for the Banking sector in the Private Sector Bank which falls
under the fundamental analysis. Which gives the brief idea to the investors whether they should
invest in the shares of PSBs and at what price they can buy or sell.

This project is entirely based on the fundamental analysis of private sector banks.

There is a detailed study made on the private sector banks based on the macro economy factors and its
influential factors on the industry, same applies to the nation and the company. So, we can observe the
various factors that are interconnected.

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 CHAPTER 1

INTRODUCTION

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Fundamental Analysis is the basic stepping stone that Every Investor and analyst should be aware. It
basically starts with the Balance Sheet and the Income Statement of every Company. The main part of
the fundamental analysis is to quantify the output of the Financial Statements of the Company and
analyse accordingly. It involves looking at Assets, Liabilities, Revenues and Expenses and all other
aspects of the Company.

Fundamental Analysis should be based on the asking yourself

• Company revenue is growing Year-On- Year

• Company is actually making Profit

• Company is strong enough to beat the competitors

• Can the Company can repay its debts

• Is there any default in the management side?

Fundamental Analysis is mostly observed in stock market but it can also be done in Bond market as well
when you are strong with economic factors. It includes everything of the company like quality of the
management and Market Share.

The actual/true value is known as the Intrinsic Value. Eg: If a Company stock price is traded at Rs50,
after doing various analysis it is estimated that the actual value of the company is Rs 70. Which means
the prices are really low and the investor wishes to trade.

The biggest unknown is the market is investor really don’t know how long will it take for the intrinsic
value to get reflected in the market. Before getting inside fundamental analysis we need to know about
the business model of the company. Investing needs a lot of pre Understanding about that stock. Business
model of the company plays the vital role.

A Company needs a good Management team to achieve its success. An investor doesn’t have any clue
how is their management going to act in future. As a common Investor can’t arrange for the management
meeting to invest just few thousand dollars. There needs to be a method to evaluate the company based
on the keynotes provided by the Company Management meeting held we have to look out for the
management discussion and analysis of their financial statements. We have to check out how the owner
ship works out and how they handle the strategy. Check out their past performance and how they handled
the various decisions of the company.

The Key important area is the Financial and Information Transparency sufficient financial information
enclosed by the company with the transparency makes stakeholders to understand the clear situation of the

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company. An aspect of the company’s corporate governance is to ultimately look out the stakeholders
beneficial.

Industry

Every has their own customer base, Market share, Regulations, Business Cycles and Financial health of
the company. Primary is understanding the customer base the company has got and what’s their target
customers. Followed by Market Share of the company. Example: If a company holds 90% of the market
share it means the company is the market leader. This suggests how successful the company is in beating
up the barriers.

The overall Industrial sector provides the idea to investor about the growth of the industry with the entry
of new customers. The industry should be potential enough to show the growth. Further competition
shows the comparison between two or more companies and helps to analyse them and find the better
way to invest among those companies.

Regulation plays a vital role in every industry. These are mainly to monitor the company and their
performances. They can’t publish any fake circulations that boost their profit and market share.
Governments usually decide how much profit they can make when they are limited to regulation.

Financial Statements

Investors usually use the financial statements for their investment decision, there are three main financial
statements investors peek into namely Balance Sheet, Income Statement and Cash Flow statement.

Balance Sheet gives the detail about the record of the company’s assets, liabilities and Owners Equity at a
point of time.

Assets=Liabilities + Shareholder’s Equity

Assets include machinery, inventory and cash. The other side indicates at a particular time required to
acquire those assets. Debts means liabilities which needs to be paid back at a particular point of time.
Balance sheet represents a snapshot of the business at the point of time.

Income statement specifies the performance of the company at the specific period of time. Followed by
the cash flow statement which provides the detail about the inflow & Outflow of cash.

By linking all the macroeconomic factors, country factors and the industry factors which influences the
company growth and connecting it to the valuation methods we get the forecasted price of the company.
(Mcclure, 2010)

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VALUATION TECHNIQUES

There are three valuation techniques that is used widely to predict the forecasted value of the stock. Namely

• DCF valuation

• P/E valuation

• EV/EBITDA valuation

DCF Valuation

DCF is the most preferred valuation technique among investors .It’s is based on the estimates made on
the company’s cash flow today to the forecasting of future money the company is going to make.

P/E valuation

It is otherwise known as price multiple or earnings multiple .It is done by comparing relatively by company’s
current share price to Earnings per share.

P/E ratio =

EV/EBITDA (Earnings Before interest Taxes Depreciation & amortization)

Even represents the company’s enterprise value

EV=Market Capitalization + preferred shares + minority interest + debt -total cash

This is a popular method used to analyse the company’s value, debt to the company’s cash earnings less the
non-cash earnings.

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 CHAPTER 2

INDUSTRY PROFILE

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Hedge Equities is the vertical for financial services under Baby Marine Ventures (BMV). Formed in the
year 2008 and launched Hedge commodities Ltd. In 2009 Hedge school of applied economics has been
launched. Since there is a major demand for the wealth management, they have launched Hedge Portfolio
Management. In 2012 Hedge House Inauguration has taken place.

DEPARTMENTS

Client Relation-Functional department

The customer connection office helps the customer or client to open a record in Hedge values. This division
is otherwise called the front office. A customer needs to open two kinds of records to exchange and claim
protections in the NSE and BSE.

Finance Department

In this manner an office, to sort out money related exercises might be made under the immediate control
of the top managerial staff. Account supervisor will choose the major budgetary arrangement techniques.
Lower levels can designate the other routine exercises. Marketing Department

The real elements of promoting division are:

1. Business partner improvement: the organization takes up the promoting exercises of the
different branches. It guarantees a productive advertising field at its different branches. The
organization energizes better relations in its branches and advances for the improvement of
different advertising methodologies.
2. Brand advancement: A significant capacity of showcasing office is to advance the name of
the organization. Fence values do it through diverse special exercises. The name of Hedge
values as a stockbroking firm is made known to the outside world.
3. Investment advancement: The primary customers of Hedge values were its speculators.
Subsequently, the advertising office attempts to catch whatever number as could be
expected under the circumstances to urge them to contribute.

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4. Delivery advancement: Intraday exchanging isn't constantly beneficial and might include a
lot of dangers consequently Hedge values advances for conveyance where the offers are
kept to be sold for a later date in the wake of dissecting the productivity factors.

Frameworks Department

The frameworks office is assuming an essential job in the everyday activities of the organization. It is through
the frameworks office that the customers can benefit the offices of Internet exchanging. Optic fibre links and
high transfer speed associations from the Hedge values office to the ISP, a committed server and back-up
ISDN associations were kept up straightforwardly by the frameworks office. To exchange, they have utilized
two programming specifically ODIN (Open Dealers Integrated Network)

Human asset Department

Human asset is regularly considered as the back of an association even in this time of cutting edge
computerization and motorization. Since virtual associations are not particularly well known in our piece
of the world, it is significant for any association to have a HR division. The nearness of an astounding
HR division expands the productivity of an association significantly. Human asset the board is
characterized as a benefit of practices, approaches, and projects intended to expand both individual and
hierarchical objectives.

a) Training and Induction

The chose workers will experience three days persistent acceptance. During this period, he will
experience preparing with all the division of Hedge values. There will likewise be study hall enlistment
additionally inside a quarter of a year.

b) Wages and Salary Administration

The wages and pay rates of the workers were fixed and conceded by the HR office with assent of the
money division

c) Performance examination

It was the HR office which offers advancements to all representatives, making moves and taking disciplinary
activities if necessary.

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d) Grievance Handling

The complaints of the representatives were gotten distinctly through legitimate channels i.e., through
the specific office heads. The HR office will make according to the guidelines and guidelines of the
organization.

Exchanging Department

The office manages the exchanging related exercises of the organization. The exchanging alludes to the
purchasing and selling of offers. This division is the most significant piece of the Organization. There
are two sorts of exchanging. They are:

a) Online Trading

These are the exchanging terminal of the association. The every PC of the division is named as
exchanging terminal. The every terminal is allotted with NCFM ensured sellers, who is accountable for
every entry will do the exchange as per the customer demand. The terminal is overseen by either NEAT
(National Exchange for mechanized exchanging) programming or ODIN (Open Dealers Integrated
Network) programming. The customer can likewise put his through composed solicitation or through the
phone, in this the request will be set by the seller.

Internet Trading

The web exchanging is an office gives by the organization so as to exchange the protections from his
advantageous spot like his office, home and so on., the request will be put by the customer itself, and he
can make changes before the exchange is accomplished for changing the value, scratch-off of the
request.

Conveyance and Depository Department

Conveyance alludes to the offers that purchased on a specific day are not sold on that day itself and holding
of the offers for a gratefulness in the estimation of the security and to exchange it on a future date. Convey
guidance slip: it is a slip the customer should fill and provided for the seller with respect to the buy of the
offer. There are two methodology to move the offers in particular,

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a) Power of lawyer

This is which the customer signs at the season of opening an exchanging record and store member
account. On the off chance that the customer has given the intensity of lawyer, HEDGE EQUITIES (P)
LTD will have the ability to execute the customers stocks without paying slips.

b) Easiest

It is verified web empowered administration which signifies 'Electronic Access to Securities data and
Execution of Secured Transaction'. This is office where in the customers can give conveyance directions
by means of web. Most effortless is an office given by CDSL. The exercises related with the storehouse
division.

• Depository work

• Dematerialization

• Pledging

Value Research Department

The capacity of the division is to contemplate the insights about the offer or security and to make
forecasts with respect to the future execution of the organization. The kinds of methodologies done in
the office

a) Fundamental investigation

b) Technical investigation

c) Macro monetary examination

d) Derivative investigation

e) Currency investigation

f) Commodity investigation

2.1 Introduction to Financial Services Industry

Financial Services Industry is the one which manages money of an individual or an organization. It plays
a key role in the Indian Economic growth and development. This sector turns out to be the highest
earning sector not only in the country but also in the whole world.

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 Figure 1: Major Types of Financial Services Sector

Source: IBEF

Other than that, it also includes commercial banks, co-operative banks and other small financial entities.
Now the recent entry in financial services is the payment banks. This is getting popularized majorly
because of the higher usage of technology.

2.1 Market Size of Financial Services

Mutual Fund: - There is a rapid growth in Mutual Fund industry where the total Asset under Management
stands at Rs. 23.16 trillion as of February 2019.

Insurance Companies: - Coming to the insurance companies, the new life insurance procured is worth Rs.
1, 59,004 cores as of Jan 2019

Along with all of these the Initial Public Offering is also at its raise. It amounts to Rs 14,032 crore as of Feb
2019.

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2.3 Factors Affecting Banking Industry:
Banking industry being the backbone of Indian Economy, is directly affected by many macroeconomic
and few internal factors.

Figure 2: Factors affecting Banking Industry

Source: Research Journal “An empirical analysis of macroeconomic and bank-specific factors affecting
liquidity of Indian banks”.

2.4 Macro-Economic Factors:

2.4.1. Gross Domestic Product:

It is the Indicator of overall health of an economy. It gives us the total value of Goods and services in a
country. First quarter of 2019 showcased the Year on Year growth rate of Indian economy to be at 5.8
percent. It declined from 6.6 percentage from previous year and did not meet up the market expectation
of 6.3 percentage. Expected GDP for this quarter is

2900.00 USD Billion, according to Trading Economics global macro models and analysts’ expectations. By
2020 the country’s GDP is expected to be 3420.00 USD Billion.

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Figure 3: Expected GDP over the next few years

2.4.2 Unemployment Rate:

It has been observed historically that a percent decrease in GDP will have a two-percentage point increase
in the rate of unemployment. This relationship was termed as Okun’s law.

Figure 4: Unemployment Rate in India Source:

trading economics

2.4.3. Inflation:

Inflation refers two things, there can either be an increase in the money supply or increase in the price
level. The US financial markets consider the core Consumer Price Index (CPI) to be the basic
measurement of Inflation. GDP and inflation are closely looped together. If GDP increases, inflation
increases and thus occurs hyperinflation and the bubble breaks and the process repeats itself.

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Figure 5: Expected Inflation rate over the next few years

Sources: www.statista.com

One way of calculating the inflation rate is through the increase in the price of certain basked of products.
It includes the basic products and services that a consumer spends on for the entire year which includes
clothing, rent, groceries, and raw materials.

2.4.4 Monetary Policy:

There are two major policies that runs the entire market and economy, they are monetary policy and
Fiscal Policy. Monetary policy majorly controls the interest rates prevailing in the market and is set by
the central bank. Fiscal policy talks about the government’s budget. It talks about the income and
expenses of the Government. Latest monetary policy amended by RBI was cut in the repo rate by 25
basis points. Repo rate stands at 6 percent now. There are two major types of monetary policies.
Contractionary monetary policy talks about the decrease in the money supply in the economy and the
second type is Expansionary monetary policy which involves in increasing the money supply in the
economy. Both are important and the regulators must know the time in which these policies need to be
applied.

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 CHAPTER 4

OBJECTIVES OF THE STUDY

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5. Objective of the study:

Hedge Equity is a financial service-based company which helps individual or corporates in their
investment decision. This is done by studying the share and forecasting the future performance of the
company.

The objective of the study is -:

• Observe the macro economic factors that most affects the country

• Drill down to a specific sector (Banking in this Study) and analyse those macroeconomic factors
that most affects this industry.

• Major objective is to study Private Sector Bank- Bandhan Bank, their past performance, business
models, extrapolate the future with suitable assumptions and thereby suggest an investing decision.

• According to the study, recommend a Buy/Sell for the picked stocks.

• Derive at a Fair value for the selected banks.

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 CHAPTER 5

PROJECT/PROCESS DESIGN AND

METHODOLOGY

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Process Design and Methodology:

The end objective of the study is to analyse Bandhan Bank and come up with the investing decision.
Before starting with the company analysis, the strength and weakness of the industry has to be
understood as this lays the major foundation for selection of the banks to be analysed. To know exactly
on how the industry is performing, the big picture, the macroeconomic factor needs to analysed carefully
as it can have both positive as well as negative impacts to the industry as well as on specific banks. The
economic factors and the industry analysis have been explained in the section. Post that Bandhan Bank
was picked up for analysis. Bandhan Bank was valued and the financials were projected for next three
years using PE model.

The data used to arrive at this result was taken from various secondary sources like

• Company’s Website to understand the business model of the bank

• Annual Report were used to understand the stand of the company, past performance, key measures

• SEBI or RBI website to know the latest standards to be followed by all banks.

Methodology Followed for Equity Research:

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24
 Figure 6: Methodology of Equity Research

Once the Macro Economic Factors and the company details have been analysed its financials play a vital
role in finding out the intrinsic value of the company. Therefore, the most essential ratios of the banks have
been taken into consideration while performing the analysis.

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Financial Statement Analysis

Interest Income-

The Net Interest Income (NII) went down from 11.04 per cent in the previous year 2015-16 to 10.44 per cent
in 2016-17. The financial performance of Bank during the year ended March 31, 2019, remained healthy
with Total Net Revenue (Net Interest Income Plus Other Income) rising by 48.70 per cent to ₹5,559.15 crore
from ₹3,738.42 crore in the previous year. Net Interest Income grew by 48.28 per cent to ₹4,496.10 crore
due to robust growth in advances and a healthy net interest margin (NIM) of 10.43 per cent in FY 2018-19
as against 9.69 per cent in FY 2017-18.

The bank net interest income (NII) jumped 37.10 per cent to Rs 1,541 crore for the quarter ended December
2019. This was against Rs 1,124 crore in the year-ago quarter.

Year 01-03- 01-03-2018 01-03-2017 01-03-2016

2019
Interest 6644.05 4802.3 3908.71 1581.36

Earned

Non- Interest Revenue –

Non-interest income rose 52.99 per cent to Rs 358 crore from Rs 234 crore on a YoY basis. Noninterest
revenues consist of ancillary revenue the bank makes in supporting its services. This can consist of:

• Broker fees

• Commissions and fees from products and services

• Underwriting fees

• Gain on sale of trading assets

• Other customer fees (NSF fees, swipe fees, overdrawn fees)

• These revenues come from anything that does not constitute interest revenue.

Net Profit

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Bandhan Bank total business grew by 32.9% at Rs.88,008 crore, while net profit stood at Rs.1,952 crore,
higher by 45% over the 2018. Bandhan Bank capital adequacy ratio for the year was a healthy 29.2%.

(In crore)

Year 01-03-2020 01-03-2019 01-03-2018 01-03-2017 01-03-2016

Net Profit -1025.68 -1058.55 -708.34 -591.52 275.25

CASA

CASA ratio at 34.31% (excluding GRUH deposits 35%) against 41.40% YoY and 32.90% QoQ. There was
robust traction in CASA at RS17,618 crore, which translates to a CASA ratio of 40.75%. Keeping a close
watch on costs further lowered our cost to income ratio to 32.58%. In terms of retail deposit growth, Central,
West and East India led the way with 45%, 41% and 39% growth respectively. Also, of all the total liabilities,
only 7% is from micro banking customers.

In year the number of Doorstep Service Centres (DSCs) increased from 2,022 to 2,443 between March 31,
2016 and March 31, 2017. With the expanding network of branches and DSCs, the number of customers
grew by over a quarter during 2016-17, with a corresponding growth in total deposits of 92 per cent to Rs
23,228.66 crore, of which Rs 6837.34 crore or 29.43 per cent was Current Account and Savings Account
(CASA).

Year 01-03- 01-03-2018 01-03-2017 01-03-2016

2019
CASA (%) 40.75 34.32 29.43 21.55

Ratio

Net Profit Margin

The Net Profit Margin went up from 17.4 per cent in the previous year to 28.44 per cent in 201617. The net
profit margin continuously rises every year from FY16 to FY19.

Year 01-03-2019 01-03- 01-03- 01-03-

2018 2017 2016

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 Net Profit 29.37 28.01 28.44 17.4

Margin (%)
So net profit of HDFC, ICICI, AXIS, & YES bank are as follows-:

HDFC ICICI AXIS YES

Bank Bank Bank Bank

Year Net Profit Net Profit Net Profit Net Profit

Margin Margin Margin Margin

2019 22.86 5.3 8.5 5.8
2018 21.29 12.33 0.6 20.84
2017 21.79 18.09 8.26 20.27
2016 20.99 18.44 20.06 18.76
2015 20.41 22.76 20.73 17.32

This constant growth of net profit margin is sometimes greater than its competitors.

So we can that Bandhan banks is performing way better and consistent when compared with other bank.

Operating Margin Ratio

Year 01-03-2019 01-03-2018 01-03-2017 01-03-2016

The Operating 13.37 13.31 17.92 7.92 operating
margin measures
Profit
how much profit a
company Margin (%) makes on a
rupee of sales, after paying for variable costs of production, such as wages and raw materials, but before
paying interest or tax. The positive operating profit margin which tells that banks proportion of revenues
that are available to cover non-operating costs like paying interest, which is why investors and lenders pay
close attention to it.

Net Interest Margin

Net interest margin is a profitability metric that measures how much a bank earns in interest compared to
the outgoing expenditures it pays consumers. A positive net interest margin indicates a bank invests
efficiently, while a negative return implies investment efficiencies.

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 Year 31-03-2019 31-03-2018 31-03-2017 31-03-2016
Net Interest 7.96 6.84 7.94 4.72

Margin (X)

Bandhan Bank has positive net interest margin indicates a bank invests efficiently. Whereas it is maximum
from all the other peer banks. HDFC bank as well the net interest margin ratio is moving in slow phase but
still it is increasing rather than decreasing in any way which is a good sign. As it measures how successful
an investment manager or company is at making investment decisions or investing its resources.

Return on Assets

Return on assets (ROA) is an indicator of how profitable a company is relative to its total assets. Bandhan
bank ROA has improved over a year. ROA has continuously increased. It means that company is utilizing
assets to generate income. Due to that profit has increased to optimal level.

Year 31-03-2019 31-03-2018 31-03-2017 31-03-2016

Return on 3.45 3.03 3.67 1.39

Assets (%)

Return on Equity

Return on equity (ROE) is a measure of financial performance calculated by dividing net income by
shareholders' equity. ROE is high which indicate that management is using a company’s assets to create
profits. As the ROA is being reducing over the years the ROE is also diminishing but still the company is
outperforming the others. Hence the investors can invest in the bank as they have a stable ROE and maintain
the balance in the same. Both ROA and return on equity (ROE) are measures of how a company utilizes its
resources. Essentially, ROE only measures the return on a company’s equity, leaving out the liabilities. Thus,
ROA accounts for a company’s debt and ROE does not. The more leverage and debt a company takes on,
the higher ROE will be relative to ROA.

Year 31-03-2019 31-03-2018 31-03-2017 31-03-2016

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Return on 17.42 14.34 25 8.25

Equity /

Net worth

(%)

NPA’s of Bandhan bank

Year Mar-20 Mar-19 Mar-18 Mar-17 Mar-16

Gross NPA 992.78 1,181.96 1,064.21 1,019.70 819.56

Gross NPA (%) 1.48 1.93 1.76 1.7 2.04

Net NPA 389.4 491.44 336.88 347.5 228.32

Net NPA (%) 0.58 0.81 0.56 0.59 0.58

Bandhan bank at March 31, 2019, the Bank has reported total gross loans and advances of

₹4,023,463.28 lakhs (March 31, 2018: ₹2,991,327.29 lakhs), gross nonperforming advances of ₹81,955.65
lakhs (March 31, 2018: ₹37,314.06 lakhs) and a corresponding provision for nonperforming advances of
₹59,123.91 lakhs (March 31, 2018: ₹20, 023.68 lakhs).

Whereas the Gross Non-Performing Assets (NPAs) of Bandhan Bank is at 1.48 per cent is among the lowest
in the industry. This was largely due to the Bank’s prudent credit evaluation of the targeted customer profile
and having a diversified loan book spread across customer segments, products, and sectors plus managing
risk-return decisions with discipline.

Provisional Coverage Ratio

2019 2018

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Bandhan Bank Provision Coverage 72.14% 53.66%

Ratio

Provisioning Coverage Ratio (PCR) is essentially the ratio of provisioning to gross nonperforming assets
and indicates the extent of funds a bank has kept aside to cover loan losses. RBI prescribed coverage ratios
of 70% of gross NPAs as a macro prudential measure in order to increase supply buffers on the back of good
profit by the banks in a counter-cyclical manner. Bandhan bank manage to maintain the provision coverage
ratio more than 70% which is great because many of the top private bank are facing difficulty in maintaining
the provision.

Capital Adequacy Ratio

The reason minimum capital adequacy ratios (CARs) are critical is to make sure that banks have enough
cushion to absorb a reasonable amount of losses before they become insolvent and consequently lose
depositors’ funds.

Year 2018 2019

Capital Adequacy ratio 29.2 31.48

Bandhan bank total business grew by 32.9% at RS.88,008 crore, while net profit stood at RS.1,952 crore,
higher by 45% over the previous year and capital adequacy ratio for the year was a healthy 29.2%. Thus the
higher the bank’s capital adequacy ratio, the higher the degree of protection of depositor's assets.

HDFC Bank Year 2019 2018 2017 2016

Interest Income/Total Assets (%) 7.95 7.54 8.02 8.49
Non-Interest Income/Total Assets (%) 1.41 1.43 1.42 1.51
Operating Profit/Total Assets (%) 0.27 0.21 0.26 0.21
Operating Expenses/Total Assets (%) 2.09 2.13 2.28 2.39
Interest Expenses/Total Assets (%) 4.07 3.77 4.18 4.6

ICICI Bank Interest Income/Total Assets (%) 6.57 6.25 7.01 7.31

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 Non-Interest Income/Total Assets (%) 1.5 1.98 2.52 2.12
Operating Profit/Total Assets (%) -1.15 -1.21 -1.25 -

0.77
Operating Expenses/Total Assets (%) 1.87 1.78 1.91 1.75
Interest Expenses/Total Assets (%) 3.77 3.63 4.2 4.37

Axis Bank Interest Income/Total Assets (%) 6.86 6.62 7.4 7.8
Non-Interest Income/Total Assets (%) 1.63 1.58 1.94 1.78
Operating Profit/Total Assets (%) -1.05 -1.54 -1.33 -

0.21
Operating Expenses/Total Assets (%) 1.97 2.02 2.02 1.92
Interest Expenses/Total Assets (%) 4.15 3.92 4.39 4.59

Bandhan Interest Income/Total Assets (%) 11.77 10.83 12.92 8

Bank Non-Interest Income/Total Assets (%) 1.88 1.59 1.36 0.75

Operating Profit/Total Assets (%) 1.57 1.44 2.31 0.63
Operating Expenses/Total Assets (%) 3.2 2.95 3.38 3.11
Interest Expenses/Total Assets (%) 3.8 3.99 4.97 3.28

Other Ratios

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 Kotak- Interest Income/Total Assets (%) 7.45 8.24 8.52 9.16

Mahindra Non-Interest Income/Total Assets (%) 1.52 1.62 1.35 1.91

Operating Profit/Total Assets (%) 0.01 -0.03 -0.27 -
Bank
0.15
Operating Expenses/Total Assets (%) 2.42 2.61 2.84 3.07
Interest Expenses/Total Assets (%) 3.85 4.46 4.93 5.18

Year 2019

Bandhan Bank has the highest interest income/ total assets ratio which means that net Interest Income grew
by 48.28 per cent to ₹4,496.10 crore due to robust growth in advances and a healthy net interest margin
(NIM) of 10.43 per cent in FY 2018-19 as against 9.69 per cent in FY 2017-18. Axis Bank Net interest
income (NII) rose 17% from `18,618 crore in fiscal 2018 to `21,708 crore in fiscal 2019. HDFC Bank earned
second most of its income from loans, discounting of advances and bills. The deposit made by the bank with
RBI and other commercial banks were less than the deposits received by the bank. As a result HDFC Bank
incurred more interest for the deposits made by the public. The bank had to pay more salary and wages to
employees as they had more employees. They were less focused on advertisement. The bank was more into
commission and brokerage. The ratio of net interest income/total assets is highest for Axis bank and lowest
for ICICI Bank. ICICI Bank had an unexpected loss during the first quarters increase in provisions for NPA
as set by RBI in quarter. The non-interest income for ICICI was decreased. Yes bank has the highest
operating profit ratio which means that Yes bank has utilized its assets well than other banks to generate
profit. On comparing with previous year every factors have increased for HDFC BANK, operating loss
decreased for Axis bank, interest income, operating expense, interest expense and total assets increased for
ICICI.

Year 2018

Interest income/total assets for most of the bank has reduced. Same goes for the non- interest income except
Kotak Mahindra who’s non- interest income/ total assets has actually increased by the 0.27. Bandhan bank
has the highest operating profit/ total assets ratio, whereas some of the peer bank also have negative ratio
such as ICICI Bank. HDFC Bank has positive ratio but it is quite lower as compared with their peer. In
operating/total assets ratio Bandhan bank is very performing. Operating expense/total assets of most of the
bank has reduced which shows the efficiency of the banking system. Bandhan Bank has lower its operating
expenses in comparison with the opponents. Axis bank has no change in its operating expense/ total assets
ratio.

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Interest expense/total assets has reduced which shows a positive sign in the banking industry, Bandhan Bank
is one of the bank who has actually reduced its interest expense.

Year 2017

Interest income/total assets for most of the bank has reduced. The non-interest income except HDFC who’s
non- interest income/ total asset. Bandhan bank has the highest operating profit/ total assets ratio, whereas
some of the peer bank also have negative ratio such as ICICI Bank. HDFC Bank has positive ratio but it is
quite lower as compared with their peer. In operating/total assets ratio Bandhan bank is very performing.
Operating expense/total assets of most of the bank has reduced which shows the efficiency of the banking
system. Bandhan Bank has lower its operating expenses in comparison with the opponents. Axis bank has
no change in its operating expense/ total assets ratio.

Interest expense/total assets has reduced which shows a positive sign in the banking industry, Bandhan Bank
is one of the bank who has actually reduced its interest expense.

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 CHAPTER 6

DATA ANALYSIS/PROCESS
STUDY

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Data Analysis:

Data Analysis of Bandhan Bank is being computed using Price to Book Ratio (PB ratio). It is calculated
using Market value vs. Book Value. Market Value is the current price of single stock in the market.
Thus, in P/B model, the major calculation lies in finding out the Book Value of the company. Book value
is the final amount that the investors might get when the company defunct after paying out all of its debt.

6.1 Bandhan bank: Valuation Sheet:

6.1.1 Profit and Loss Projection for next two years:

The P and L has been projected for the next three years using the Yield Percentage which is obtained using
present year’s P and L value with Balance Sheet value.

Forecasted Valuation using Appropriate Assumptions:

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 CHAPTER 7

FINDINGS &

RECOMMENDATIONS

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Findings of the Study:

• Rising Income level in the rural area tends to be a great opportunity for the Banking Industry.

• Banking Industry accounts to around 7% of the Gross Domestic Product.

• Bandhan had a steady growth in the CASA (Current Account Savings Account) Ratio. As increase
in CASA directly benefits the bottom line, this shows that the bank has taken sincere effort to reduce
their cost.

• The calculated intrinsic value of the company in much more than its expected market share price.
Hence it would be the buy decision for the investors in the Bandhan Bank.

• I will recommend to invest in Bandhan Bank. Intrinsic value of the Bandhan Bank is higher than the
market price so it showed that stock is undervalued and it will move up towards the intrinsic value.
Bandhan Bank India has the huge potential and will move up in upcoming year.

Limitations to the Study:

• Price to Book ratio cannot be considered as a stand-alone ratio for picking up any stock. It may
sometimes mislead the investor.

• The future value of the company is being found out by making assumptions based on the information
available. Therefore, the accuracy of this method will not be cent percent.

• When there is a share buyback, the PB ratio is not being captured correctly.

• Also, whenever there is an acquisition, the book value tends to increase and thus lowers the PB ratio

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 CHAPTER 8

LEARNING AND OUTCOMES

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• The first company being analysed is Bandhan. The bank had a bearish market in the last few
months but now had turned into upward trend. The company’s value dropped drastically
because of the issue with the Non-performing Assets. Now that the company has covered most
of its bad debts. It is expected to grow in the near future. Therefore, it is recommended to buy
the stock.

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References:

• 1.RBI Website

• 2.Annual Report of Bandhan Bank

• 3.Investing.com

• 4.Money control

• 5.Stats India

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