TOPIC – Fundamental Analysis of ICICI Bank Ltd.

Name – Ashwin Kulkarni

Sr. No. 1. 2. 3. 4. 5. 6. 7. 8. 9. 10.


Page No. 6 7 16 17 18 21 30 36 51 53



It gives me great pleasure to express my gratitude towards all the individuals who have directly or indirectly helped me in completing this project. First of all, I am extremely grateful to Mr. Mayank Saxsena, Branch Manager, Anand Rathi Securities Limited, Kalyani Nagar Branch, Pune, for providing me summer project in stock market for sixty days. I would also like to express my sincere gratitude to Mr. Vikrant Darak, for his invaluable guidance during the project period which helps me in completing this project. I wish to express my sincere thanks to our Director Dr. Sharad Joshi and my project guide Prof. Mahesh Halale for providing me valuable guidance and inputs which help to complete this project in true sense. I also extend my thanks to all the staff of Anand Rathi Securities Limited, Kalyani Nagar Branch, Pune, for their support, which helped me a lot in completing this project. This project report is a collective effort of all and I sincerely remember and acknowledge all o them for their excellent help and assistance throughout the project.

- Ashwin R. Kulkarni



The stock market is the most volatile market and is difficult to understand as the weather. Though this does not mean that the markets cannot be predicted but it only means that trends may change without warning, as with weather. The stock markets are characterized by almost all factors, again starting right from weather and ending at the political environment. Effects of one market also causes a spillover into the other and an external cause in one market can lead to the reaction in another market. For instance, it’s been proved that a delayed monsoon in India will create the problems of flooding in the European countries, effecting adversely economies of both the regions. The pulse of the market also depends upon timely exit and entry. For arriving at a correct conclusion reasonable data is required to understand the mechanics of the stock and the industry – vis-à-vis global and local in which the company operates. While a practical long-term view will help reduce risks, marrying the stock on the other hand may totally increase risks. By going through the Industry Reports, Financials the investor can arm himself with reasonable information about the stocks, which are being tracked by the investor. However, for consistent monitoring of stocks, it is imperative that the investor has limited exposure to the stocks, which are being capable of being tracked by him – a too big a portfolio will divert attention and ultimately harm investor interests.


In the present project an attempt is made to study the importance of fundamental analysis for investors. SHARES: The companies Act 1956 defines Shares as “a share in the capital of a company and includes stock except where distinction between stock and share is expressed or implied. A share is regarded as property, which can be bought and sold like any other property. It also consists of other rights given by Articles of Association of company.

EQUITY OR ORDINARY SHARES: These are those shares, which do not enjoy any special rights in respect of payment of dividend or repayment of capital. The return of capital to equity shareholders is not guaranteed. Also when the company is wound up, capital of equity shareholders is lastly paid, only after all other claims have been paid in full. That is why equity is also called as “The Risk Bearing or Venture Capital.” There are two sources of return on equity shares: 1. Dividend: -When companies earn sufficient profit, then Board of Directors declares for all shares. 2. Capital Gain: -Which arises from an increase in the market price of shares, which is generally associated with growth in per share earning.


8. A share is “Transferable Property”. Bonus issue: .These are given as free gift to existing shareholders either fully or partly paid up out of accumulated profits. 4. 7. 5. 6 . Liquidity: -Because of large market for share investor can convert his investments into liquid money easily.Benefits of Investments in Equity shares: 1. 6. winding up of the company. Tax Exemption: -As per Income Tax Act. Existing shareholders can get “Right issue” in case of further issue of capital by company. 2. Shareholders get free copy of Annual Report in which details of all business conducted in last year is mentioned. It can be transferred or transmitted by shareholder to any other person. Dividend is not taxable in the hands of shareholders similarly Long Term Capital Gain on shares is exempted up to March 2007. You can earn good rate of dividend or can make better profit on market fluctuation. 3. Equity shareholders have “Right to vote” in annual general meeting and other rights like call meeting.

industry groups. fundamental analysis may involve examination of financial data. It focuses exclusively on the company's business in order to determine whether or not the stock should be bought or sold. As with most analysis. Fundamental analysis is a method used to determine the value of a stock by analyzing the financial data that is 'fundamental' to the company. fundamental analysis combines economic. and companies. That means that fundamental analysis takes into consideration only those variables that are directly related to the company itself. If fair value is not equal to the current stock price. there might be an examination of supply and demand forces for the products offered. such as its earnings. industry. By believing that prices do not accurately reflect all available information. business concept and competition. At the industry level. its dividends. Fundamentalists do not heed the advice of the random walkers and believe that markets are weak-form efficient. the goal is to derive a forecast and profit from future price movements. management. To forecast future stock prices. and company analysis to derive a stock's current fair value and forecast future value. and its sales. fundamental analysis might focus on economic data to assess the present and future growth of the economy. Fundamental analysis does not look at the overall state of the market nor does it include behavioral variables in its methodology.What is Fundamental analysis? Fundamental analysis is the examination of the underlying forces that affect the well being of the economy. fundamental analysts believe that the stock is either over or under valued and the market price will ultimately gravitate towards fair value. fundamental analysts look to capitalize on perceived price discrepancies. For the national economy. At the company level. 7 .

Investors like warren buffet made a fortune out of investments in the stock market. They consider stock market as a game of gambling. The duration of the project was two months. 8 .In India many traditional people are very risk averse. But investing in the right stock at the right price and holding for a longer time horizon would surely be a better investment. which is quiet impossible without proper research about the companies. The reason behind choosing this project is that it provides hands on experience with what goes on in the stock market on a day to day basis. The field of equity research is full of challenges. The field of equity research is very vast and one has to look into various aspects of the functioning of the company to get to any conclusion about the possible performance of the company in the market. This project gave me a chance to get valuable insights from a hoard of vastly experienced people in this field and to get various approaches each one adopts to evaluate various companies. Investing in equities involves high risk and the return on it totally depends on the company’s performance. There is no doubt that there are speculators who try to hike the price of a stock artificially. These two months were not only limited to learning and devoting time towards equity research but it also provided an insight on what various services such broking houses provide and what efforts are required to manage such organizations. But the original scenario is quite different. The project is done with Anand Rathi Securities Limited a very well known company in the field of stock broking and capital market services sector. They are not aware of the investment opportunities in the stock market.

ANAND RATHI Group Profile 9 .

Group Overview Set up in 1994.2000 people Anand Rathi Securities Limited • • • • Wealth Management Investment Banking Member – BSE Depository Participant – CDSL 10 .

Navratan Capital & Securities Member.Dubai Gold & Commodities Exchange Anand Rathi International International Operations 11 .NSE Depository Participant-NSDL Navratan Commodities Member.NCDEX. MCX & NMCE Rathi Global Finance NBFC Anand Rathi Securities Limited AR Venture Funds Management Real Estate Private Equity Fund AR Insurance Brokers Insurance Broking AR Middle East DMCC Member.

Placements Debt Raising. Delhi. Chennai. Offers. Kolkata. Chennai. Bangalore. Delhi. Syndication and Restructuring • • • • • • Equities Derivatives Bonds Mutual Funds Commodities Insurance 12 . Bangalore.Business Overview Wealth Management Investment Banking & Corporate Finance Mumbai. Kolkata. Bangkok and Singapore • • • Institutions Private Clients Priority Clients • • • M&A IPO’s Buybacks. Hyderabad Brokerage & Distribution Present at 300 + locations across India Mumbai. Hyderabad. Dubai.

Mutual Funds Fixed Income ⇒ Bonds. PMS.Wealth Management Value Adds Comprehensive Product Range ⇒ Strong alternative investment expertise Risk Management Skills ⇒ Sophisticated asset allocation & risk modeling Proprietary global economic & investment strategy research ⇒ Focusing on long term dynamics & trends Client Centric Model Ranked amongst South Asia’s top 5 private banks by Asia Money 2006 polls ⇒ Clients with more than Us $ 20 million in assets Products Equities ⇒ Stocks. Mutual Fund Commodities & Precious Metals Life & General Insurance Real Estate Private Equity Fund Currencies Structured Products & Capital Guaranteed Notes Alternative & Non-correlated Investments 13 . Derivatives.

Investment Banking & Corporate Finance Value Adds Comprehensive Services Products Equity Capital market ⇒ IPO/Rights/Secondary issues ⇒ Delisting & Open Offers ⇒ Block Deals & Private Equity ⇒ Management Buy-outs Advisory ⇒ Business Sale/Disposal ⇒ M&A/ JV’s/ Strategic Alliances ⇒ Valuations Debt Advisory ⇒ Rupee & Foreign Currency ⇒ Debt Raising/ Negotiation ⇒ Debt Restructuring ⇒ Creditor Settlement/ OTS Deep Industry & Sector Knowledge Local Strength ⇒ Underpinned by network of national offices Truly Independent Advice ⇒ Not tied to any product. market or bank Strong Distribution Capability Resources to draw together a seasoned team of professionals 14 .

leased links and the internet. NCDEX.Brokerage & Distribution Reaching out nationwide Specialist teams providing best-of-breed research. execution and settlement through branches nationwide Licenses ⇒ Member. BSE+NSE [Cash & Derivatives] ⇒ Depository Participant [CDSL & NSDL] ⇒ Member. Dubai Gold & Commodities Exchange [DGCX] ⇒ MF Distribution [AMFI] Cutting-edge technology support providing real-time access to clients through a private broadband satellite network. 15 . NMCE [Commodities Exchanges] ⇒ Insurance Brokerage [IRDA] ⇒ Member. MCX.

Families & Corporates across India Non-Resident Indians Clients Institutional clients most leading Mutual Funds.00.000+ clients nationwide Leading distributor of IPO’s - 16 . Banks and Insurance Companies Size Daily turnover in excess of Rs 4 bn 1.Brokerage & Distribution Products Equities Derivatives Commodities IPO’s Mutual Funds Life & Non-Life Insurance Depository Services Bonds Value-add Services backed by independent research team real-time support to clients Individuals.

Key Locations Mumbai Corporate Office JK Somani Bldg. AI Attar Grand [Thailand] Co. Bin Waleed St. Road. Old 2/6 Sarat Bose Road. Prestige Central Point. New No. Chakala. Dubai. Char Rastha. Bldg.600010 Dubai Bangkok A R Middle East DMCC Anand Rathi Advisors M-14. Wattana. New Delhi-110001 Hut. Box Sukhumvit Soi 21. Poonamalee High Kolkata-700020 Hills. Off C. Asoke 120830 Road. Kasturba Gandhi Marg. Bombay Samachar Marg. Bangkok. Hyderabad-500034 Chennai. 1.G. Central Plaza. Parth. Road. Khalid 24. Klong Toey Nur. Banglore-560051 Navrangpura-380009 Chennai Kolkata Hyderabad 8A. Ega Trade Centre. 16 2nd Floor. Andheri [E]. 6-3-346/1. U. Ltd.A. 809.E. Thailand 17 .. Road Brokerage & Retail Head Office B-2. 307.O. Mumbai-400099 New Delhi Ahmedabad Banglore 911/912 Ansal Bhavan. Kilpauk. 5th Floor.. British Hotel Lane. Cardinal Gracious road. Mumbai-400023 Web Address: www. Scotia Bank Floor. Banjara No. 318. P. Near Pizza Cunningham Road.rathi. Shubham Centre. Prime Office Building. 8th 202. Swastik.


which consisted of information on understanding the level of awareness regarding the concepts and techniques of fundamental analysis. One can obtain information from dealers. brochures was limited. 2007. 19 . Pune. the project was undertaken in Anand Rathi Securities Limited. Secondary Sources: Secondary data is already collected by someone else. salesmen. The information available on the internet. in house magazines of the bank. This data is not collected for solving present problem. This information is relevant and can be used for our purpose. branch managers etc. magazines.In order to fulfill the above objectives. The information was drawn from published journals by Reserve Bank of India. journals. Pune from 1st June 2007 to 31st July. 2007 and the information is collected through: Primary Sources: The primary data was collected specifically on project hand. capital market magazine. Besides data was also collected from the internet. The employees in the branch had a busy schedule therefore there was delay in getting concepts clear. Limitations: The study was restricted only to ICICI Bank and hence may not be applicable to other banks. Data was also collected through observation during the training period of two months from 1st June to 31st July. Information was also gathered from news papers and related magazines. The entire study was conducted in Anand Rathi Kalyani Nagar branch. Kalyani Nagar Branch.

thus. The growth.0% each). Growth in the agricultural sector decelerated from 6. Real GDP growth during the Tenth Five Year Plan period averaged 7. Robust growth during 2006-07.6% p. demandsupply gaps in domestic production of food grains and oil seeds. was accompanied by inflationary pressures on account of rising capacity utilization. during the four period ended 2006-07.0% during 2005-06 to 9. the highest in any plan period.7% in 2006-07. partly on account of uneven rainfall during the south-west monsoon and partly due to the base effect.4% during 2006-07.5 9.0% in 2005-06 to 2.6% p. GDP Growth % 10 8 Growth Rate 9 7. the Indian economy exhibited acceleration in growth.a.. Higher growth in the industry and services sector more than offset the deceleration in the agriculture sector. and firm global commodity prices. The sustained high growth since 2003-04 has been supported by increased in domestic savings and investment.During 2006-07. Real GDP growth accelerated from 9. averaged 8. strong growth in monetary and credit aggregates. however. Acceleration in the growth rate during 2006-07 was attributable to buoyancy in the industrial and service sector which exhibited doubledigit growth (11.4 6 4 2 0 2004-05 2005-06 2006-07 Year 20 . led by manufacturing and services sector activities.a.

53.00% 7. 5.00% 5.Macro Perspective Monetary Developments Money supply increased by 21. 4.7% on January 27th.3% (Rs.0% (Rs. 3. industry and personal loans absorbing 14%.2% (Rs.00% 4. 2006 to 5.00% 5. growth of bank credit remains high. and elevated assets price.05% Inflation (%) 29 /0 4/ 05 9/ 6/ 20 06 26 /1 0/ 06 6/ 1/ 20 07 31 /0 1/ 07 17 /0 2/ 07 3/ 3/ 20 07 30 /0 3/ 07 Year 21 14 /0 4/ 07 . Demand pressures emanated from.7% on April 15th. 7 Inflation Headline inflation firmed up from 4.00% 4. time deposits exhibited growth of 23. 2007 and a low of 3.9% on March 31st.41. high investments and consumption demand.75% 6. Higher growth in time deposits could be attributed to factors such as higher interest rates on bank deposits and availability of tax benefits under section 80C for bank deposits. year on year.00% 2. although there was some moderation.00% 6. On the sources side.3% (Rs. Amongst the major components. offering incremental expansion in overall non-food credit during 2006-07.00% 1. strong growth in credit and monetary aggregates.25% 6.913) during 2006-07 as compared with 15.00% 0. Supply side pressures emerged from demandsupply gaps in domestic production of major food grains has exhibited stagnation over the past few years. Both demand and supply side factors added to inflationary in pressure during 2006-07. April 1st.0%.00% 6.733 crore) as compared with 17. Inflation Trend 8.50% 6.056 crore) during 2005-06. 2. 2007 with an intra-year high of 6.25% 6.00% 6. 2006.878 crore) during 2005-06. 80.25% 6. 96.00% 3. Demand for bank credit was largely broad based with agriculture. 36% and 24% respectively.

2007.4 billion exceeded FII inflows (net) during 2006-07 aggregating US$ 3. By and large. barring some episodes of volatility.Balance of Payments India’s balance of payments in 2006-07 reflected a number of positive features.0 billion were led by external commercial borrowings reflecting strong investment demand. 22 . Nonetheless the current account deficits as per cent of GDP remain unchanged (1. Net capital inflows to India remained buoyant (4.9% of GDP).2 billion the debt flows (net) at US$ 25. Financial Market Financial markets remained orderly during 2006-07. to foreign exchange reserves during 2006-07. Capital inflows and movements in Government cash balances continued to be the key drivers of liquidity conditions and overnight interest rates. excluding valuation changes. Higher capital flows could be attributed to the strengthening of micro economic fundamentals. especially during the second half of March. merchandise trade continue to exhibit robust growth during 2006-07. Interest rates in the various market segments hardened during the year.1% of GDP) from the previous year since the widening of the merchandise trade deficit was offset to a large extent by the continuing buoyancy in net invisibles surplus. greater investor confidence and ample global liquidity. although there was some loss of pace from a strong growth of 2005-06. on the balance of payments basis. Net capital flows. led to accretion of US$ 36. broadly in tandem with the pre-emptive monetary tightening measures taken by the Reserve Bank of India. Net FDI inflows from abroad US$ 19. The higher growth of imports vis-à-vis experts lead to a persistent rise in trade deficit. fart exceeding the current account deficit. after financing the current account deficit. The primary segment of capital market exhibited buoyant conditions. The stock market remained buoyant with the benchmark indices reaching record highs during 2006-07 amidst intermittent corrections.6 billion. the exchange rate of the Indian rupee exhibited two-way movement with respect to the main reserve currencies during 2006-07.

the demand for banking services-especially retail banking. The stated policy of the Bank on the Indian Rupee is to manage volatility-without any stated exchange rate-and this has mostly been true. M&As. This is the first time an investor has been allowed to hold more than 5% in a private sector bank since the RBI announced norms in 2005 that any stake exceeding 5% in the private sector banks would need to be vetted by them. the Reserve Bank of India allowed Warburg Pincus to increase its stake in Kotak Mahindra Bank (a private sector bank) to 10%. product range and reach-even though reach in rural India still remains a challenge for the private sector and foreign banks. asset sales and much more action (as it is unraveling in China) will happen on this front in India. takeovers. mortgages and investment services are expected to be strong. In March 2006. 23 . Even in terms of quality of assets and capital adequacy. Indian banks are considered to have clean.Currently (2007). The Reserve Bank of India is an autonomous body. With the growth in the Indian economy expected to be strong for quite some time-especially in its services sector. banking in India is considered as fairly mature in terms of supply. overall. with minimal pressure from the government. strong and transparent balance sheets-as compared to other banks in comparable economies in its region.

Banks Working In India 24 .

Their network of 6.5% respectively. 18 old private sector banks. with the private and foreign banks holding 18.3% of aggregate deposits and 8.864 urban Co-operative Banks. ICICI Bank accounted for approximately 8.2% of gross bank credit outstanding of the scheduled commercial banks.000 branches and 17. According to a report by ICRA Limited. Private Sector Banks: At December 31. 25 .567 branches accounted for 9. the public sector banks hold over 75% of assets of the banking industry. 11 new private sector banks and 31 foreign banks as on March 31. private sector banks accounted for approximately 19. 2006. They have a combined network of over 53.000 ATM’s. At December 31. there are 102 regional rural banks and 1. 2006. a rating agency.9% of aggregate deposits and 20.4% of the total branch network of scheduled commercial banks in the country.2% and 6.The Indian Banking sector comprises of 88 scheduled commercial banks of which 28 are public sector banks. 2007. In addition.8% of non-food credit outstanding of the scheduled commercial banks.

200706(3) 200606(3) 200706(3) 200606(3) (%) (%) (%) 46527.03 50 3028.61 1785.34 expenses Operating 3742.45 68 4748.36 14367.93 3265.55 -11 46 54 43 26 .07 Income Net total 8051.86 42 Interest 16055.Bs Particulars 200706(3) 200606(3) P.09 16 29023. Var.74 52 18202.86 70 2355.84 expended Net Interest 4728.35 2605.23 Profit 2544.73 15 5698.04 49 47819.45 43 8093.66 Income Other 3323.30 3835. Var.U.50 39 20972.31 18091.S.14 58 1791.88 759.Banking on strong fundamentals Pvt.S.59 21 13242.99 47 10638.40 3943. Bs are taken into consideration.96 45 7609.73 income Operating 4308.90 16 10658.91 32 11087.43 34 63875.53 6940.59 47 9884.11 -31 2989.99 11 15396.10 22 13627.41 9976. S.15 1565.95 3723.89 5332.Bs Total Var.27 Figures are in Rs.59 35 5738.55 5508.99 63 31596.74 396.67 35751.47 37 28324.05 23 16223.31 21383.83 10776.69 28 3364.41 28 8072.68 13 20951.89 provisions Net Profit 1870.44 1961.50 Earned Interest 11327.75 48 42923. crore For aggregates 26 P.39 profit Provisions 1197.42 5810.87 1388.16 before Tax Tax 673. 23901. Banks & Pvt.25 7294.49 2544.12 1975.S.90 8114.

That is the key to the way in which the bank stocks will perform in the market. it is a loss of opportunity for them. the first impact is seen in the banks. RBI announced a 50 basis points hike in CRR in two phases of 25 basis points each in February and early march. and whether they will be able to maintain this going forward. In time of boom. while a fall in rate will mean a lower proportion will be with the apex bank. The market will analyze banks on the basis of their margins. lending will give a higher rate of return to banks. This will push up the cost of funds for banks. This would mean that funds are hard to come by and hence banks will have to pay more to depositors in order to induce them to keep their funds banks. How is the impact on banks evaluated? There are specific angles that one has to consider while evaluating the impact of CRR on banks.CRR: CRR stands for the cash reserve ratio. This will bring down their earnings. For banks. An increase in CRR would also mean that money is sucked out of the system. like is the currently. A CRR rise in it self means tougher condition for banks but what is important is that they should also be able to keep pace with this entire situation. 27 . if they have to keep a large proportion of their funds away from lending and in the form of deposits. the rise in CRR would mean that a larger proportion of funds will be with RBI. Last week. Hence. Impact of CRR change: When there is a change in the CRR. Due to this banks will also have to raise lending rates in order to meet the increased cost while maintaining their margins. These are the specified proportion of deposits that a bank has to maintain with the RBI.

00% 6.75% 7.50% 5.00% 5.00% 7.00% 5.2007 March 30.00% 5.00% 5.25% 7.2004.25% 6.50% 4.75% 7.00% 6.25% 5.25% 7.00% 6.75% 6.50% 7.75% 5.00% 6.2004 September 19.2007 January 31.50% 7.00% 6.00% 6.10.00% 6.25% 5.50% 5.2006 July 25. 28 .2006 October 31.00% 5.00% 6.2005 October 26.2007 April 14.25% 6.00% 5.00% 6.2007 February 17.50% 7. Now reverse repo indicates absorption of liquidity & repo signifies injection of liquidity.00% 5.2004 October 27.00% 6.00% 5.75% 5.2006 June 9.75% 7.2007 Reverse Repo Rate 4.2007 March 03.00% 6.2004 April 29.50% 4.2006 December 23.00% 6.2005 January 24.25% 7.50% 4.50% Note: With effect from 29. Prior to 29. the nomenclature of repo & reverse repo was changed in keeping with international usage.2007 April 28. repo indicated absorption of liquidity while reverse repo meant injection of liquidity.2004 October 02.00% 6.00% 6.00% 6.10.2006 January 6.Movement in key policy rates in India Effective Rate March 31.50% 6.75% 6.50% 4.75% Cash Reserve Ratio 4.50% 5.00% 6.00% Repo Rate 6.00% 5.2004.

00-7.75-16.00 4.00-15.50-7.50 10.25 5.50 5.50-7.25 11.50 4.00 6.75 12.00-7.50 3.75 7.55-23.50-9.50-6.25 March.00-16.25 5.50 10.25-11.50 4.75 7.50 7.15-22.00-6.25-7.75 6.75-9.75-26.50 5.75-8.50 10.00 10.00-13.50 12.05-9.50 4.00-14.50-6.75-6.00-26.00 3.75 3.50 3.15-20.50 3.50-7.00 3.25-11.25-6.75 6.25-9.25 11.50 3.07 2.75-6. More than 3 yrs Private Sector Banks Upto 1 year More than 1 year & upto 3 yrs More than 3 yrs Foreign Banks Upto 1 year More than 1 year & upto 3 yrs More than 3 yrs Benchmark Prime Lending Rates Public Sector Banks Private Sector Banks Foreign Banks Actual Lending Rate Public Sector Banks Private Sector Banks Foreign Banks 2.50 3.05 2.75-7.15-25.75-9.25 3.60 March.75-6.00 4.00-17.00-9.00 3.00-16.50 10.00-9.00 March.50-9.00-14.50 3.25-7.50 29 .00 3.25 5.06 2.15 4.50 5.00-6.00-6.00-6.25-12.Deposit and Lending Rates Deposit Rate Public Sector Banks Upto 1 year More than 1 year & upto 3 yrs.00-14.00 3.50 5.

For good creditworthy borrowers bargaining power is high due to the availability of large number of banks. Barriers to Entry Bargaining power of suppliers Bargaining power of customers Competition Financial Year’07: ⇒ Incremental credit/deposit ratio on a steady decline: With most banks having run out of excess statutory liquidity ratio (SLR) holdings. High during periods of tight liquidity. private sector and foreign banks along with non banking finance.Key Points: Supply Demand Liquidity is controlled by THE Reserve Bank of India. Trade unions in public sector banks can be anti reforms. Depositors may invest elsewhere if interest rate falls.There is public sector banks. High. the gap in credit and deposit growth is slowly going to close as banks are witnessing currently. The incremental credit/deposit ratio has steadily declined from 120% to 75% at present. investment in technology and branch network. 72% 70% 68% 66% 64% 62% 60% 58% 5-Apr 5-Jun 5-Aug 5-Oct 5-Dec 6-Feb 6-Apr 6-Jun 6-Aug 140% 120% 100% 80% 60% 40% 20% 0% CD Ratio Incremental CD Ratio 30 . India is a growing economy and demand for credit is high though it could be cyclical. Licensing requirement.

(%) Y-O-Y Mortgage Loans 14 12 10 (%) 8 6 4 2 0 60 50 40 (%) 30 20 10 0 2000 2001 2002 2003 2004 2005 2006 2007 Year % of total credit [LHS] % of total loans [RHS] 31 . pick up in incremental capex lending led to a record growth of 31% (yoy) and increased the average credit deposit ratio to 65%. the fiscal benefits accorded to them kept mortgage loans relatively attractive. Retail Credit 30 25 20 15 10 5 0 2000 2001 2002 2003 2004 2005 2006 2007 Year Growth [LHS] % of total credit [RHS] 80 60 40 20 0 (%) ⇒ Mortgage Loans. Despite the rise in lending rates.⇒ Retail Credit. At the same time.Spiraling Ahead: FY’07 witnessed banks shedding their surplus investment portfolio and trading the same for a larger proportion of advance portfolio.The Growth Driver Mortgage loans comprised nearly 53% of total retail credit in FY07. Bank also leveraged on the home loan portfolio to comply with their priority sector norms.

The bank has a network of about 950 branches and 3. South Africa and Bangladesh. Hong Kong. United Arab Emirates. 3. Its UK subsidiary has established a branch in Belgium. ICICI Bank’s equity shares are listed in India on Bombay Stock Exchange and the National Stock Exchange of India Limited and its American Depositary Shares (ADRs) are listed on New York Stock Exchange (NYSE).Overview: ICICI Bank is India’s second-largest bank with total assets of Rs. ICICI Bank offers 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 affiliate’s in the areas of investment banking. 2007 and profit after tax of Rs. Bahrain. venture capital and asset management. The Bank currently has subsidiaries in the United Kingdom. 32 . ICICI Bank is the most valuable bank in India in terms of market capitalization and is ranked among top five companies in terms of free float market capitalization. China.300 ATMs in India and presence in 17 countries. branches in Singapore.4456. Thailand. Russia and Canada. Sri Lanka and Dubai International Finance Centre and representative offices in the United States.10 billion for fiscal 2007. Malaysia and Indonesia. insurance.58 billion (US$ 79 billion) at March 31. life and non.

by the High Court of Gujarat at Ahmedabad in March 2002. and would create the optimal legal structure for the ICICI group’s universal and banking strategy. ICICI was formed in 1955 at the initiative of World Bank. ICICI’s shareholding in ICICI Bank was reduced to 46% through a public offering of shares in India in fiscal 1998. The principal objective was to create a development financial institution for providing medium-term and long term project financing to Indian businesses. 10 each on May 28. ICICI Personal Financial Services and ICICI Capital Services Limited. and was its wholly owned subsidiary. Sangli Bank has merged with ICICI Bank effective April 19.008 equity shares of Rs. 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. the shareholders of Sangli Bank were allotted 34. 2007. the Government of India an Indian industry. an equity offering in the form of ADRs listed on NYSE IN FISCAL 2000. 2007.55. with ICICI Bank. After consideration of various corporate structuring alternatives in the context of emerging competitive scenario in the Indian banking industry and the move towards universal banking. 2007 as per the order of Reserve Bank of India dated April 18.History: ICICI Bank was originally promoted in 1994 by ICICI Limited. and by the High Court of Judicature at Mumbai and the Reserve Bank of India in April 2002. The merger was approved by shareholders of ICICI and ICICI Bank in January 2002. an Indian financial institution. and se4condary market sales by ICICI to institutional investors in fiscal 2201 and 2002. In October 2001. ICICI Bank’s acquisition OF Bank of Madura Limited in an all-stock amalgamation in fiscal 2001. the Board of Directors of ICICI and ICICI Bank approved the merger of ICICI and two of its wholly owned retail finance subsidiaries. 33 . Pursuant to the merger of Sangli Bank with ICICI Bank Limited.

Funds Management Manages funds that provide venture capital to start-up companies and undertake private equity investments. brokerage and primary dealership in government securities.SUBSIDIARIES/JOINT VENTURE/ ASSOCIATES ICICI Venture Company Ltd. Leading third provider. First Source Solutions Ltd. service ICICI Prudential Company Ltd. Life Insurance Retail market share of about 28% in new business by private sector life insurance companies during FY 2007. ICICI Lombard Company Ltd. (Source: AMFI) 34 . Insurance Market share of about 34% in gross written premium among the private sector general insurance companies during FY2007. Engaged in equity underwriting. Leading Investment Organization. General ICICI Prudential Asset Management Among the top two mutual funds in India in terms of total funds under management Company in the Indian Mutual Fund Industry for FY07 with a market share of over 11%. party BPO Banking ICICI Primary Dealership Ltd. ICICI Securities Ltd.

Prudential ICICI Trust Limited. ICICI Investment Management Company Limited. ICICI Bank UK Limited. ICICI Securities Holding Inc*. ICICI Securities Inc*. 35 . International Subsidiaries ICICI Bank Canada. ICICI Home Finance Company Limited.Domestic Subsidiaries ICICI Brokerage Services Limited. ICICI Trusteeship Services Limited. ICICI Distribution Finance Private Limited. ICICI International Limited. ICICI Bank Eurasia Limited Liability Company.

icicibank.45 FY’08 Target Price: . V. Vadodra-390007. NSE. 2007 CMP: .BO INE090A01013 1 10 532174 A ICICIBANK ICICIBC IN ICBK. Alakapuri. Gujrat 91-265-2339923/25/27/28 91-265-2339926 www. Kamath Landmark. NYSE 03 Jun/Jul Jul Registered Office Telephone Fax Website Face Value [Rs] BSE Code BSE Group NSE Code Bloomberg Reuters ISIN Demat Market Lot Listing Financial Year End Book Closure Month AGM Month 36 .1.955.Background of ICICI Bank As on June 30. Race Course Circle.710 Incorporation Year Managing Director 1994 K.

88 6.01 26.68 31.00 No. Fin.SHARE HOLDING PATTERN Share holding pattern as on: Face Value 31/03/2006 31/03/2007 10.42 5..30 100.5 399746652 44.68 31.00 10.72 6. Inst.00 405033806 552358029 46685349 48971 1250 238530478 285266048 61642595 899266672 45.27 107789571 16. Insurance FII’s Sub Total Private Corporate Bodies NRI’s/OCB’S/Foreign Government Others Sub Total General Public Grand Total 37 .04 61. of Shares % Holding Promoters Holding Non Promoter’s Holding Institutional Investors 109664301 17.01 26.19 0.85 100.71 554119342 61.98 Other Investors 45010772 5.03 48971 1250 238530478 283591471 56292130 894002943 0. of Shares % Holding No.00 Sub Total Banks.

National Index for 50 major stocks. Bank nifty .Performance with major indices: The performance of ICICI Bank Price in stock market with three major indices is given below. Bank and Sensex 16000 14000 12000 10000 Sensex 8000 6000 4000 2000 0 2007/06 2007/04 2007/02 2006/12 2006/10 2006/08 2007/05 2007/03 2007/01 2006/11 2006/09 2006/07 Period 1200 1000 800 ICICI Bank Price 600 400 200 0 Sensex ICICI Bank Price NIFTY & ICICI Bank Price 5000 4500 4000 3500 3000 2500 2000 1500 1000 500 0 07 20 / 06 07 20 / 05 07 20 / 04 07 20 / 03 07 20 / 02 07 20 / 01 06 20 / 12 06 20 / 11 06 20 / 10 06 20 / 09 06 20 / 08 06 /0 7 1200 ICICI Bank P rice 1000 800 600 400 200 0 NIFTY NIFTY ICICI Bank Price 20 Peroid 38 . NIFTY .Sensitive Index for 30 Major Stocks replicates the movement of market.Replicates the movement in price of stock of various banks. Performance with• • • Sensex .

Bank Nifty & ICICI Bank Price 8000 7000 6000 5000 4000 3000 2000 1000 0 07 2 0 / 06 07 2 0 / 05 07 2 0 / 04 07 2 0 / 03 07 2 0 / 02 07 2 0 / 01 06 2 0 / 12 06 2 0 / 11 06 2 0 / 10 06 2 0 / 09 06 2 0 / 08 06 /0 7 1200 ICICI Bank P rice 1000 800 600 400 200 0 Bank Nifty Bank Nifty ICICI Bank Price 20 Period ICICI Bank Price Movement over a period of one year: Price Movement for One Year 1200 1000 800 Price 600 400 200 0 Period 39 .

Movement of Advances 70.9% for FY05.00% 20.00% 2005 2006 2007 Financial Year Retail Corporate 40 .00% 50.00% 60.STRATEGY Business Composition ICICI’s loan book is predominantly composed of retail assets as it feels retail finance offers significant risk diversification benefits with the credit risk being spread over a large number of relatively small individual loans.2% total loans for FY07 compared to 62. Retail loans constituted 65. The growth of its retrial finance portfolio has been the principal driver of its portfolio diversification strategy.00% 10.9% for FY06 and 60.00% 30.00% 0.00% Percentage 40.

UTI 39.9% and HDFC bank 57.2006 Year March.8% compared to SBI 48.2007 Against Securities and others Compared to its peers ICICI Bank’s CASA ratio (current account/saving account) is relatively lower.Total Outstanding Retail Finance Portfolio Home 60 50 Percentage Automobile Businesses Two-Wheeler Personal Credit Cards 40 30 20 10 0 March. 41 .2005 March. As of FY07 ICICI bank had a CASA ratio of 21.5%.7%.

00% 60.Outstanding Deposits 80.00% 10.00% 2005 2006 Year 2007 Current Account Savings Time Cost of Deposits 8% 6% Percentage 4% 2% 0% 2005 2006 Financial Year 2007 Savings Time 42 .00% 0.00% 30.00% 40.00% 20.00% 70.00% Percentage 50.

Growing its International Presence ICICI intends to grow its international business based on leveraging home country links for international expansion by capturing market share in select international markets. Their corporate lending activities will focus corporate finance and working capital lending to highly rated corporation emerging global competitiveness of the Indian industry offer growth opportunities in the area of project financing. Future growth of India is depended on rural India. The focus areas are supporting Indian companies in rising corporate and project finance overseas for their investment in India and abroad. There is tremendous opportunity for the banking sector in rural India and ICICI to win big share of the same. covering advisory. execution and syndication.Enhancing its strong corporate franchise ICICI is seeking to build a global corporate and investment banking franchise focused on Indian companies. 43 . Penetrating Rural India ICICI offers a comprehensive suite of products for all customer segments operating in the rural areas-corporate. Personal financial services (including remittance and deposit products) for nonresident Indians are another area of focus. origination. small and medium enterprises and finally the individual traders and farmers. structuring.

with total assets under management approximately Rs. 44 . ICICI 51% interest in its joint venture partnership with Prudential Plc of the United Kingdom for the asset management business. credit card and debit card fees. It is the largest private sector life as well as non-life insurance company in India. 379 billion and a market share of approximately 11. Its focus is on meeting the working capital requirements. Other Income-Fee based avenues ICICI earns fee income from their commercial banking services to retail customers. with a retail market share of approximately 28% and 34% for respectively in the private sector and an overall market share of approximately 10% and 12% based on new business premiums during FY07.Insurance and Asset Management Business ICICI has a joint venture partnership both in Life as well as non life Insurance business it holds 74% interest in both the JV the balance being held by foreign partners.6% for FY07. deposit accounts and other banking products and services of small and medium enterprises. It is among the two largest mutual funds in India. transaction banking fees and fees from distribution of third party products. including retail loan processing fees.

77 37.79 62.17 5.88 1.87 40.67 10.17 53.59 80.07 55.85 2.47 11.44 25.06 59.44 77.97 22.63 9.41 68.48 NII Non-Interest Income .14 11.05 20.28 46.98 6.05 Mar-06 41.96 82.73 92.55 32.61 58.36 88.91 5.11 29.27 50.29 25.22 20.94 30.02 1029 125.57 25.17 8.77 49.08 14.39 27.FINANCIALS Profit & Loss Statement: [Rs. in billion] Mar-07 Mar-08 66.78 76. [Base year is Mar-05].42 35.60 Note: The projected Profit & Loss statement for the period Mar-08 is prepared with the help of Compounded Annual Growth Rate formulae.27 5.77 2.56 14.24 18.Fee Income .45 7.Others Core Operating Income Operating Expenses Other DMA1 Expenses Lease Depreciation Core Operating Profit Treasury Income Operating Profit Provisions Profit Before Tax Tax PAT Mar-05 28. 45 .40 71.12 67 9.91 15.43 48.95 15.49 164.27 1.38 5.5 15.59 7.

89 [Rs.66 238.03 234.91 224.01 238.513.50 7.58 211.650.83 2.676.30 344.05 128. [Base year is Mar-05].05 193. In billion] Mar-07 Mar-08 1044.90 204.676.305.89 273.14 294.50 998.Balance Sheet: Assets Mar-05 474.59 Mar-06 222.59 Mar-06 618.13 3.18 598.17 2510.87 1.82 914.26 4381.14 170.88 Cash balances with banks & SLR .Reserves Preference Deposits Borrowings eICICI Borrowings Other Liabilities Total Liabilities Mar-05 125.74 1.13 3.89 Note: The projected Balance Sheet for the year Mar-08 is prepared with the help of Compounded Annual Growth Rate formulae.99 9.39 2.40 510.21 673.50 2.77 131.50 3.24 3.37 89.461.88 Net Worth .446.48 131.446.78 108.50 1.58 527.72 371.958.73 166.13 8.68 1.06 8.89 1359.63 204. in billion] Mar-07 Mar-08 243.96 4381.Equity Capital .16 3.12 129.513.33 188.SLR Investments Advances Other Investments Fixed & Other Assets Total Assets Balance Sheet: Liabilities [Rs.24 727.90 213. 46 .13 303.37 1.37 118.10 3.10 3.90 150.Cash & bank balances .60 842.05 160.83 354.046.

the bank has given good dividends to its shareholders over a period of 7 years.Dividend: Dividend is that portion of total profit earned by the company which is distributed among shareholders of the company and is declared by the Board of directors. 47 . Year 2007 2006 2005 2004 2003 2002 2002 2001 Month April April May April April May January April Dividend [%] 100 85 85 75 75 20 20 Dividend 120 100 Percentage 80 60 40 20 0 2001 2002 2002 2003 2004 Year 2005 2006 2007 Dividend Interpretation: In case of ICICI Bank. It indicates that the bank is earning handsome profit over the years which it passes on to its shareholders.

bn % 338.058. Asset Quality and Provisioning: Mar-31. The RBI has set the minimum capital adequacy ratio at 10% as on March.20 86. 48 .98% Gross NPA’s Less: Cumulative w/offs & provisions Net NPA’s Net NPA Ratio Interpretation: NPA’s of ICICI Bank has increased from 0..Capital Adequacy Ratio: A bank’s capital ratio is the ratio of qualifying capital to risk adjusted [or weighted] assets.15 2.94 March 31.88 10.Tier Ι . in billion] Mar-31. March 31.69 215.93 Total Capital .2007 48.35 191.71% [Rs.61 4.93 4. 2006 Rs.03 7. The bank has less capital adequacy ratio in 2007 in spite of increase capital as compared to 2006 due to the pressure of cash reserve ratio and repo rate.2006 29.96 11. The higher ratio reflects rising bad quality of loans.75 0.82 9. The ratio ensures that the bank do not expand their business without having adequate capital. Net NPA’s are calculated by reducing cumulative valance of provisions outstanding at a period end form gross NPA’s. Non-Performing Asset ratio: The net non-performing asset to loans (advances) ratio is used as a major of the overall quality of the bank’s loan book.42 123.98% in 2007 which is a serious concern for the bank.50 28.63 18.Tier ΙΙ Risk Weighted Assets Interpretation: The above statistics indicates that ICICI Bank is aggressively expanding their business to increase its operations year-on-year basis.71% in 2006 to 0. 2002 for all banks. A ratio below the minimum indicates that the bank is not adequately capitalized to expand its operations.31 20. 2007 Rs. bn % 278.43 13.899.27 2.19 0.

40% 13.49 18.00% 0.90% 16. It is regarded as a very important measure it reflects the productivity of the ownership (or risk) capital employed in the firm.00% 2003 2004 2005 Year 2006 2007 2008 18.31 22.00% 10.43 28.80% 17.41 53. Earning Per Share 70 60 50 EPS 40 30 20 10 0 2003 2004 2005 Year 2006 2007 2008 13.Earning Per Share: It is widely used ratio to measure the profit available to the equity shareholders on a per share basis.40% 11.82 64.00% 5.30% 21.29 Interpretation: The EPS of bank is increasing year-on-year basis and the projected EPS is calculated on the basis of projected profit after tax for year Mar-08. The increasing EPS indicates the increasing trend of profits per share.00% (%) 15.22% 49 . Return on Equity 25. EPS is calculated on the basis of current profit and not on the basis of retained profits.00% 20. Return on Equity: The return on equity measures the profitability of equity funds invested in the firm.

3 11.9 4. It measures the expectation of the investors. A high P/E Ratio may indicate the possibility of increase in EPS.3 35. a low P/E Ratio is considered as one of the important criteria from the point of view of investors.5 50 .4 34.4 86.671 6590 21 23.358 31.102 13.0 HDFC 37.4 20.Price Earnings ratio: P/E Ratio indicates the price currently being paid in the market for each rupee of EPS.5 2.6 4. Price Earning Ratio 40 35 30 25 PE 20 15 10 5 0 2004 2005 2006 Year 2007 2008 PE Interpretation: P/E Ratio of ICICI Bank has a declining trend from 2004 to 2008.8 UTI 15.4 ICICI 66. Peer Comparison Company NII NP ROE EPS P/E P/ABV SBI 160.5 24.098 11.8 3.413 15.74 26.542 45.415 19. A low P/E Ratio may indicate that there is no possibility of any increase in EPS and the investors will be reluctant to invest in such shares.

Variations may be there to attain this price.24 2.29 51 .68 46.14 23.60 Rs.52 7 69.51 Projected Market Price for FY08: The projected market price can be calculated asMarket Price = P/E Ratio for FY07 * Projected EPS for FY08 = = .7 5.09 1.36 19.48 2.33 2. P/E Ratio has taken as constant of FY07 26.4 2.56 2.79 1.46 41.09 26.99 71.86 1.15 6. Key Ratios Credit-Deposit (%) Investment / Deposit (%) Cash / Deposit (%) Interest Expended / Interest Earned (%) Other Income / Total Income (%) Operating Expenses / Total Income (%) Interest Income / Total Funds (%) Interest Expended / Total Funds (%) Net Interest Income / Total Funds (%) Non Interest Income / Total Funds (%) Operating Expenses / Total Funds (%) Profit before Provisions / Total Funds (%) Net Profit / Total funds (%) RONW (%) Mar-07 86.39 4.62 Mar-05 91.04 13. 1710 * 64.07 5.22 2.24 6. no assurance of target price achievement.83 27.Key Ratios: Given below are some of the key ratios for evaluating the banks performance and their performance over a period of 3 years. Note: It is a projected price which is based on various factors and mostly on EPS and P/E Ratio.74 55.59 1.78 7.21 14.14 30.93 2.24 25.33 25.97 1.77 67.46 1.8 4.37 Mar-06 89.49 6.24 2.41 2.

The failure of their restructured loans to perform as expected or a significant increase in the level of restructured loans in their portfolio could affect their business. • • Their rapid retail expansion in India and their rural initiative expose them to increased risk that may adversely affect their business.00% 60. Gross NPAs 80.00% 20.00% Percenatge 40.00% 0. the quality of their loan portfolio and their financial performance. their income from treasury operations.Concerns for ICICI Bank • Their banking and trading activities are particularly vulnerable to interest rate risk and volatility in interest rates could adversely affect their net interest margin. the value of their fixed income portfolio.00% 2005 2006 2007 Financial Year Retail Corporate 52 .

likewise. Inadequacies of Data: While making analysis one has to often wrestle with inadequate data. the past record is a poor guide to future performance. 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. 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. undervaluation may persist for extended periods. a different technique and model is required for different industries and different companies. This can be quite time-consuming process. Irrational Market Behaviour: The market itself presents a major obstacle while making analysis on account of neglect or prejudice. For this reason. which can limit the amount of research that can be performed. 53 . overvaluations arising from unsatisfied optimism and misplaced enthusiasm may endure for unreasonable lengths of time. Time-consuming models often produce valuations that are contradictory to the current price prevailing on the exchange.LIMITATIONS Fundamental analysis has some limitation involved in it. Company Specific: Valuation techniques vary depending on the industry group and specifics of each company. but it can be extraordinarily time-consuming. This limitation can be explained as under: Time Constrain: Fundamental analysis may offer excellent insights. While deliberate falsification of data may be rare. In an environment characterized by discontinuities.

and every analyst has some sort of bias. Market prices do sometimes deviate from fundamentals. it does not tend to ignore the fact that human beings do not always act rationally. rumor. It strength lies in the fact the information analyzed is real as opposed to hunches or assumptions. fundamental analysis ensures that one does not recklessly buy or sell shares. Furthermore. Prices rise or fall due to insider trading. but it should be approached with caution. Increase in sharing profit with shareholders in form of dividend. while fundamental analysis deals with tangible fact. Increasing EPS indicate good earnings. and a host of other factors. speculation. ICICI Bank is expanding its footholds on international level also. There is nothing wrong with this. On the other hand. its insurance and asset management business are also performing well. balance sheet and ratios. it is important to be familiar with the analyst behind the report. Reasons: Largest private sector bank in India. The analysis carried out at Anand Rathi Securities Limited on the ICICI Bank. I shall suggest the investors to invest in ICICI Bank than the other banks as a value investment. Fundamental analysis can be valuable. and the research can still be of great value. The bank also expanding their business in rural area.especially buy. If you are reading research written by a sell-side analyst.CONCLUSION Fundamental analysis holds that no investment decision should be without processing and analyzing all relevant information. Strong increase in profit year-on-year basis. 54 . second largest in entire banking industry. This is true to an extent but strength of fundamental analysis is that an investment decision is arrived at after analyzing information and making logical assumptions and deductions. their profit and loss account. We all have personal biases.

in ⇒ ⇒ www. News Papers: ⇒ Economic Times ⇒ Business Standard Magazines: ⇒ Capital Market ⇒ Dalal Street ⇒ Bank Quest Websites: ⇒ ⇒ ⇒ 55 .com ⇒ www.Prasanna Chandra.Bibliography Books: ⇒ Investment Analysis & Portfolio Management.rbi.

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