A Research Project On

Fundamental Analysis of ICICI Bank

On the fulfillment of two year

Full time Post Graduate Diploma in Management

Guru Nanak Institute of Management,

Punjabi Bagh, New Delhi

Submitted By Supervised By

NEETU HANS Mr. N.P SinghRoll No-6003 Asst. Prof.Specialization: Finance FinancePGDM

A Research Project On

Fundamental Analysis of ICICI Bank

On the fulfillment of two year

Full time Post Graduate Diploma in Management

Guru Nanak Institute of Management,

Punjabi Bagh, New Delhi

Submitted By Supervised By

NEETU HANS Mr. N.P SinghRoll No-6003 Asst. Prof.Specialization: Finance FinancePGDM

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Certificate

This is to certify that the project work done on “Fundamental analysis of ICICI bank” is a bonafide work carried out by Neetu Hans under my supervision and guidance. The project report is submitted towards the fulfillment of two year, full time Post Graduate Diploma in Management.

This work has not been submitted anywhere else for any other degree/diploma.

Prof N.P Singh R.P Singh

(Project Guide) (Director General)

3

AcknowledgementThe present research work cannot see the light of the day unless it is blessed by the benign assistance of eminent person. The help and co-ordination that I have received from various quarters of in bringing this work to completion makes me feel deeply indebted. This is not a work of individual but a number of persons who helped me directly or indirectly in this journey. So, I wish to express great fullness to all those who have helped & assisted me in bringing the final shape of this report.

First of all, I wish to express my deep sense of gratitude to our Director Dr R.P. Singh for his guidance and moral support all along the period of my study in the institute.

I am deeply indebted to my project guide Prof N.P Singh for his kind advice, encouragement, support & proper guidance during the course of preparation of this project. I got tremendous support in mastering fact & figures from him. Really He had been a great source of information during the period of study.

Last but not the least I wish to express my deep sense of gratitude to all those who were knowingly or unknowingly with me during the project tenure.

NEETU HANS

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TABLE CONTENTS

Sr.no TITLE Page no.

1. Introduction to fundamental analysis 6

2. Economic analysis 14

3. Industry analysis 17

4. Company analysis 26

5. Research methodology 33

6. Data analysis 36

Economic 38

Industry 45

Company 52

7. Finding & Limitations 72

8. Conclusion & Suggestion 76

9. Bibliography 80

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INTRODUCTION TO FUNDAMENTAL

ANALYSIS

(Chapter-1)

6

Andhra Bank State Bank of India

Allahabad Bank Vijaya Bank

Punjab National Bank HDFC Bank

UTI Bank ICICI Bank

Kotak Mahindra Bank Centurion Bank of Punjab

Citibank Standard Chartered Bank

HSBC Bank State Bank of Mysore

American Express Bank ABN AMRO

Year Mar Jun Sep Dec

2010 8.60 8.90 8.90 -

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

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

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INDIA INFLATION RATE

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

year Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

2010 16.22 14.86 14.86 13.33 13.91 13.73 11.25 9.88 9.82 9.70 8.33 9.47

2009 10.45 9.63 8.03 8.70 8.63 9.29 11.89 11.72 11.64 11.49 13.51 14.97

2008 5.51 5.47 7.87 7.81 7.75 7.69 8.33 9.02 9.77 10.45 10.45 9.70

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India Interest Rate

The benchmark interest rate (reverse repo) in India was last reported at 5.5 percent. In India, interest rate decisions are taken by the Reserve Bank of India's Central Board of Directors. The official interest rate is the benchmark repurchase rate. From 2000 until 2010, India's average interest rate was 5.82 percent reaching an historical high of 14.50 percent in August of 2000 and a record low of 3.25 percent in April of 2009.

Year Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

2011 5.50

2010 3.25 3.25 3.38 3.63 3.75 3.75 4.08 4.50 5.00 5.25 5.25

2009 4.50 4.00 3.75 3.38 3.25 3.25 3.25 3.25 3.25 3.25 3.25 3.25

2008 6.00 6.00 6.00 6.00 6.00 6.00 6.00 6.00 6.00 6.00 6.00 5.50

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INDUSTRY ANALYSIS

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The last decade has seen many positive developments in the Indian banking sector. The policy makers, which comprise the Reserve Bank of India (RBI), Ministry of Finance and related government and financial sector regulatory entities, have made several notable efforts to Improve regulation in the sector. The sector now compares favorably with banking sectors in the region on metrics like growth, profitability and non-performing assets (NPAs). A few banks have established an outstanding track record of innovation, growth and value creation. This is Reflected in their market valuation. However, improved regulations, innovation, growth and value creation in the sector remain limited to a small part of it. The cost of banking intermediation in India is higher and bank penetration is far lower than in other markets. India‟s banking industry must strengthen itself significantly if it has to support the modern and vibrant economy which India aspires to be. While the onus for this change lies mainly with bank managements, an enabling policy and regulatory framework will also be critical to their success. The failure to respond to changing market realities has stunted the development of the financial sector in many developing countries. A weak banking structure has been unable to fuel continued growth, which has harmed the long-term health of their economies. In this “white paper”, we emphasize the need to act both decisively and quickly to build an enabling, rather than a limiting, banking sector in India.

OPPORTUNITIES AND CHALLENGES FOR PLAYERSThe bar for what it means to be a successful player in the sector has been raised. Four challenges must be addressed before success can be achieved. First, the market is seeing discontinuous growth driven by new products and services that include opportunities in credit cards, consumer finance and wealth management on the retail side, and in fee-based income and investment banking on the wholesale banking side. These require new skills in sales & marketing, credit and operations. Second, banks will no longer enjoy windfall treasury gains that the decade-long secular decline in interest rates provided. This will expose the weaker banks. Third, with increased interest in India, competition from foreign banks will only intensify. Fourth, given the demographic shifts resulting from changes in age profile and household income, consumers will increasingly demand enhanced institutional capabilities and service levels from banks.

Growth in the Indian banking industry

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

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Peer Group Comparison (Standalone)(Rs. In Crore)

Company Year NetPBIDT PAT

Adj.PBIDTM% PATM% ROCE% ROE%Name End Sales EPS(Rs)

Indusind201003 2706.99 703.89 350.31 8.53 26 12.94 7.53 19.51

Bank

ICICI Bank 201003 25706.93 9732.18 4024.98 36.1 37.86 15.66 6.18 7.96

Kotak201003 3255.62 1297 561.11 8.06 39.84 17.23 6.68 13.52Bank

HDFC201003 16172.9 6429.73 2948.7 64.42 39.76 18.23 5.95 16.31

Bank

Axis Bank 201003 11638.02 5240.56 2514.53 62.06 45.03 21.61 6.39 19.15

Interpretation

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

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Bank – Private Industry Ratios

Description 2010 2009 2008 2007 2006No Of Companies 74 89 83 71 68Margin RatiosYield on Advances 13.31 14.23 12.87 12.04 11.36Yield on Investments 6.22 7.44 7.21 6.37 6.41Cost of Liabilities 5.02 6.09 5.87 5.1 4.27NIM 5.63 5.38 4.69 4.38 4.92Interest Spread 8.28 8.14 7 6.94 7.1Performance RatiosROA (%) 1.17 1.28 1.34 1.19 1.18ROE (%) 10.65 11.07 12.02 14.45 13.36ROCE (%) 5.96 7.11 7.04 6.4 5.56Efficiency RatiosCost Income Ratio 42.89 42.45 46.35 50.66 51.38Core Cost Income Ratio 44.25 45.19 48.74 51.78 50.8Operating Costs to Assets 7.46 7.55 7.49 7.82 8.2Growth Ratio

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

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

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Interpretation

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

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

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

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

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Bank – Private Industry profit & Loss A/C

DESCRIPTION Latest 2010 2009 2008 2007 2006No of Companies 98 74 89 83 71 68Interest Earned 135486.15 113327.71 136806.93 107590.8 71311.52 50355.01Other Income 35136.24 29599.54 35299.77 28016.66 20011.95 14051.36Total Income 170622.38 142927.25 172106.71 135607.47 91323.48 64406.36Interest Expended 78145.22 65332.36 84711.83 68370.19 42996.95 28555.1Operating Expenses 38681.01 33282.45 36938.65 31161.41 24155.71 18421.37Provisions andContingencies 19010.41 16440.68 16710.7 8910.47 6848.84 4792.74Profit Before Tax 34785.74 27871.76 33745.53 27165.39 17321.97 12637.15Taxes 12304.43 9657.77 12149.69 8925.72 5498.1 3904.43Total 148141.07 124713.26 150510.87 117367.79 79499.61 55673.64Profit After Tax 22481.31 18213.99 21595.84 18239.68 11823.87 8732.73Extra items -22.08 -19.49 -30.5 -1.46 133.84 62.51Profit brought forward 15392.55 14902.92 11246.87 5710.75 3893.12 1766.31Adjustments to PAT 24.84 -23.31 15.64 140.12 182.71 85.56Total Profit & Loss 37898.7 33093.6 32858.35 24090.55 15899.7 10584.6IV. APPROPRIATIONS 37886.23 33074.11 32827.85 24089.09 16043.16 10647.11

Interpretation

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

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Competition

Last Price Market Cap. Net Interest Net Profit Total Assets(Rs. Cr.) Income

ICICI Bank 1,105.45 127,322.68 25,706.93 4,024.98 363,399.71

HDFC Bank 2,350.05 109,330.36 19,928.21 3,926.39 222,458.56

Axis Bank 1,333.45 54,744.24 15,154.81 3,388.49 180,647.87

Kotak Mahindra 458.00 33,748.71 3,255.62 561.11 37,436.31

IndusInd Bank 267.00 12,418.17 3,589.36 577.32 35,369.52

YES BANK 316.25 10,978.53 4,041.74 727.13 36,382.50

Federal Bank 436.05 7,454.92 3,673.23 464.55 43,675.61

Karur Vysya 417.00 4,449.13 1,757.94 336.03 21,993.49

ING Vysya353.15 4,272.65 2,694.06 318.65 33,880.24

Bank

JK Bank 823.50 3,992.15 3,056.88 512.38 42,546.80

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COMPANY ANALYSIS

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ICICI BANK LTD

ICICI Bank was originally promoted in 1994 by ICICI Limited, an Indian financial institution, and was its wholly-owned subsidiary. ICICI‟s shareholding in ICICI Bank was reduced to 46% through a public offering of shares in India in fiscal 1998, an equity offering in the form of ADRs listed on the NYSE in fiscal 2000, ICICI Bank‟s acquisition of Bank of Madura Limited in an all-stock amalgamation in fiscal 2001, and secondary market sales by ICICI to institutional investors in fiscal 2001 and fiscal 2002.

ICICI was formed in 1955 at the initiative of the World Bank, the Government of India and representatives of Indian industry. The principal objective was to create a development financial institution for providing medium-term and long-term project financing to Indian businesses. In the 1990s, ICICI transformed its business from a development financial institution offering only project finance to a diversified financial services group offering a wide variety of products and services, both directly and through a number of subsidiaries and affiliates like ICICI Bank. In 1999, ICICI become the first Indian company and the first bank or financial institution from non-Japan Asia to be listed on the NYSE.

After consideration of various corporate structuring alternatives in the context of the emerging competitive scenario in the Indian banking industry, and the move towards universal banking, the managements of ICICI and ICICI Bank formed the view that the merger of ICICI with ICICI Bank would be the optimal strategic alternative for both entities, and would create the optimal legal structure for the ICICI group‟s universal banking strategy. The merger would enhance value for ICICI shareholders through the merged entity‟s access to low-cost deposits, greater opportunities for earning fee-based income and the ability to participate in the payments system and provide transaction-banking services. The merger would enhance value for ICICI Bank shareholders through a large capital base and scale of operations, seamless access to ICICI‟s strong corporate relationships built up over five decades, entry into new business segments, higher market share in various business segments, particularly fee-based services, and access to the vast talent pool of ICICI and its subsidiaries.

In October 2001, the Boards of Directors of ICICI and ICICI Bank approved the merger of ICICI and two of its wholly-owned retail finance subsidiaries, ICICI Personal Financial Services Limited and ICICI Capital Services Limited, with ICICI Bank. The merger was approved by shareholders of ICICI and ICICI Bank in January 2002, by the High Court of Gujarat at Ahmedabad in March 2002, and by the High Court of Judicature at Mumbai and the Reserve Bank of India in April 2002. Consequent to the merger, the ICICI group‟s financing and banking operations, both wholesale and retail, have been integrated in a single entity.

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ICICI Bank is India‟s second-largest bank with total assets of Rs.3,793.01 billion (US$ 75 billion) at March 31, 2009 and profit after tax Rs.37.58 billion for the year ended March 31, 2009. The Bank has a network of 1,454 branches and about 4,721 ATMs in India and presence in 18 countries. ICICI Bank offers a wide range of banking products and financial services to corporate and retail customers through a variety of delivery channels and through its specialized subsidiaries and affiliates in the areas of investment banking, life and non-life insurance, venture capital and asset management.

The Bank currently has subsidiaries in the United Kingdom, Russia and Canada, branches in United States, Singapore, Bahrain, Hong Kong, Sri Lanka, Qatar and Dubai International Finance Centre and representative offices in United Arab Emirates, China, South Africa, Bangladesh, Thailand, Malaysia and Indonesia. Their UK subsidiary has established branches in Belgium and Germany.

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SNAPSHORT OF ICICI BANK LTD

Company DetailsIndustry Bank – Private

Chairman K V Kamath

Managing Director Chanda D Kochhar

Company Secretary Sandeep Batra

ISIN INE090A01013

Bloomberg Code ICICIBC IN

Reuters Code ICBK.BO

Company Address

Registered Office Landmark,Race Course Circle,Vadodara,390007,Gujarat

Phone 91-0265-6617200/3983200

Fax 91-0265-2339926

Website www.icicibank.com

Email investor@icicibank.com

Price Information

Latest Date 09-Mar-11Latest Price (Rs) 1033.55

Previous Close (Rs) 1020.851 Day Price Var% 1.241 Year Price Var% 11.76

52 Week High (Rs) 127752 Week Low (Rs) 803.3

Beta 1.4927Face Value (Rs) 10

Industry PE 20.04

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PRICE V/S SENSEX CHART Period: From 10/03/2010 To 09/03/2011

Company Size (Standalone)

Market Cap(Rs Crore) 118741.77

185491.05EV (Rs Crore)

1148873022Latest no. of shares

Share holding pattern as on 201012

0Promoter No of shares

0Promoter %

FII No of Shares 451680100

39.23FII %

1151422189Total No of Shares

100Free Float %

Financial Highlights (Standalone)

(Rs. In Crore)

Description 201003 200903 200803 200703 200603

Equity Paid Up 1114.81 1113.21 1112.6 899.27 889.8

Reserve 50503.48 48419.73 45357.53 23413.92 21316.16

Deposits 202016.6 218347.83 244431.05 230510.19 165083.17

Gross Block 7114.12 7443.71 7036 6298.56 5968.57

Interest Earned 25706.93 31092.55 30788.34 21995.59 14306.13

Operating Profit 9732.18 8925.23 7960.68 5874.41 3888.42

PAT 4024.98 3758.13 4157.73 3110.22 2540.08

Dividend % 120 110 110 100 85

Adj. EPS(Rs) 36.1 33.76 37.37 34.59 28.55

Adj. Book463.02 444.95 417.67 270.37 249.56

Value(Rs)

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Key Market Ratio (Standalone)

Latest EPS (Rs) 40.95

Latest CEPS (Rs) 45.11

Price/TTM CEPS(x) 22.91

TTM PE (x) 25.24Price/BV(x) 2.14

EV/TTM EBIDTA(x) 20.29

EV/TTM Sales(x) 7.53

Dividend Yield% 1.16

Mcap/TTM Sales(x) 4.82

Latest Book Value (Rs) 482.44

Quarter on Quarter (Standalone)

(Rs. In Crore)

Particulars 201012 201009 Q on Q Var% 200912Y on Y

Var%

Interest Earned 6695.96 6309.1 6.13 6089.57 9.96

Total1717.92 1570.37 9.4 1362.39 26.1

Expenditure

Operating2342.61 2211.94 5.91 2368.84 -1.11

Profit

PAT 1437.02 1236.27 16.24 1101.06 30.51

PBIDTM% 34.99 35.06 -0.2 38.9 -10.05

PATM% 21.46 19.6 9.49 18.08 18.69

Adj. EPS(Rs) 12.48 10.74 16.2 9.88 26.32

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Interpretation

BETA: A measure of the volatility, or systematic risk, of a security or a portfolio in comparison to the market as a whole. Beta is used in the capital asset pricing model (CAPM), a model that calculates the expected return of an asset based on its beta and expected market returns.

Here beta is more than 1 (1.4927) beta of greater than 1 indicates that the security‟s price will be more volatile than the market. Stock‟s beta is 1.4927; it‟s theoretically 49.27% more volatile than the market.

EPS: EPS indicates the profitability of a company. Earning per Share is the single most popular variable in dictating a share‟s price. Earning per Share is the Net Income (profit) of a company divided by the number of outstanding shares. And here EPS of the company increasing. This shows that company is earning profit.

P/E: price-to-earnings ratio (P/E) is probably the most widely used – and thus misused investing metric. It‟s easy to calculate, which explains its popularity. The most common way to calculate :

P/E = share price divided by earnings per share

DPS: The the sum of declared dividends for every ordinary share issued. Dividend per share (DPS) is the total dividends paid out over an entire year (including interim dividends but not including special dividends) divided by the number of outstanding ordinary shares issued. Dividends are a form of profit distribution to the shareholder. Having a growing dividend per share can be a sign that the company‟s management believes that the growth can be sustained. Here dividend is highest in last 5 years; it indicates that company is growing YOY.

ICICI is having highest market capital, net profit and assets value as compared to competitors this indicates that ICICI is most favorable company for investors.

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ICICI BANK LTD BALANCE SHEET

DESCRIPTION Mar-10 Mar-09 Mar-08 Mar-07 Mar-06

SOURCES OF FUNDS:Share Capital 1114.89 1113.29 1462.68 1249.34 1239.83Share Warrants & Outstanding 0.00 0.00 0.00 0.00 0.00Total Reserves 50503.48 48419.73 45357.53 23413.92 21316.16Deposits 202016.60 218347.82 244431.05 230510.19 165083.17Borrowings 94263.57 93155.45 65648.43 51256.03 38521.91Other Liabilities & Provisions 15501.18 18264.66 42895.38 38228.64 25227.88Total Liabilities 363399.72 379300.96 399795.08 344658.11 251388.95APPLICATION OF FUNDS :Cash and balance with Reserve Bank ofIndia 27514.29 17536.33 29377.53 18706.88 8934.37Balances with banks and money at call 11359.40 12430.23 8663.60 18414.45 8105.85Investments 120892.80 103058.31 111454.34 91257.84 71547.39Advances 181205.60 218310.85 225616.08 195865.60 146163.11Gross block 7114.12 7443.71 7036.00 6298.56 5968.57Less: Accumulated Depreciation 3901.43 3642.09 2927.11 2375.14 1987.85Less: Impairment of AssetsNet Block 3212.69 3801.62 4108.90 3923.42 3980.71Lease AdjustmentCapital Work in ProgressOther Assets 19214.93 24163.62 20574.63 16489.92 12657.51Total Assets 363399.72 379300.96 399795.08 344658.11 251388.95Contingent Liabilities 727084.06 834683.00 1211082.33 562959.91 395033.67Bills for collection 6474.95 6000.44 4278.28 4046.56 4338.46Book Value 463.02 444.95 417.67 270.37 249.56Adjusted Book Value 463.02 444.95 417.67 270.37 249.56

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ICICI BANK LTD PROFIT AND LOSS A/C

DESCRIPTION Mar-10 Mar-09 Mar-08 Mar-07 Mar-06

No of Months 12.00 12.00 12.00 12.00 12.00I. INCOMEInterest Earned 25706.93 31092.55 30788.34 21995.59 14306.13Other Income 7477.65 7603.73 8810.76 6927.87 4180.89Total Income 33184.58 38696.28 39599.11 28923.46 18487.02II. EXPENDITUREInterest Expended 17592.57 22725.93 23484.24 16358.50 9597.45Operating Expenses 5859.83 7045.11 8154.18 6690.56 5001.15Provisions andContingencies 4386.86 3808.26 2904.58 2226.37 791.81Profit Before Tax 5345.32 5116.97 5056.10 3648.04 3096.61Taxes 1320.34 1358.84 898.37 537.82 556.53Total 29159.60 34938.14 35441.38 25813.24 15946.94III. PROFIT AND LOSSProfit After Tax 4024.98 3758.13 4157.73 3110.22 2540.07Extra itemsProfit brought forward 2809.65 2436.32 998.27 293.44 188.22Adjustments to PATTotal Profit & Loss 6834.63 6194.45 5156.00 3403.66 2728.30IV. APPROPRIATIONS 6834.63 6194.45 5156.00 3403.66 2728.30Equity Dividend % 120.00 110.00 110.00 100.00 85.00Earnings Per Share 36.10 33.76 37.37 34.59 28.55Adjusted EPS 36.10 33.76 37.37 34.59 28.55

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ICICI BANK LTD FINANCIAL RATIOS

RATIOS 2010 2009 2008 2007 2006

Per Share Ratios

EPS 36.10 33.76 37.37 34.59 28.55

DPS 12 11 11 10 8.50

Profitabilityratios

GP Ratio 15.06 12.36 12.99 11.41 15.10

NP Ratio 12.17 9.74 10.51 10.81 14.12

ROE 7.96 7.83 11.75 13.37 14.62

ROA 1.08 .96 1.12 1.04 1.21

Liquidity Ratios

Current Ratio 1.94 0.78 0.72 0.61 0.62

Quick Ratio 14.70 5.94 6.42 6.04 6.64

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Interpretation

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

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

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

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

Gross profit ratio: the GP ratio is also called the average mark up ratio. It is calculated by comparing the gross profit of the firm with the net sales.

In 2007 GP ratio had drastically fallen, which means operating efficiency of the firm has decreased but it has recovered over the next three years and become almost stable.

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

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

ROE: ROE examines profitably from the perspective of equity investors by relating profits available for the equity share holders with the book value of equity investments. The return from the point of view of equity shareholders may be

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calculated by comparing the net profit less preference dividend with there total contribution to the firm.

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

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

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Current Ratio: current ratio shows the firms ability to pay its current liability out of its current assets. Generally a current ratio of 2:1 is considered to be satisfactory but sometimes it varies from industry to industry therefore the firms current ratio should be compared with the standard for the specific industry only.

Current ratio of the firm has increased over the year which indicates that the firm has enough current assets to pay off its current liability.

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

Quick ratio of the firm is much higher than the ideal and its increasing over the years which means that the firm has enough quick assets to payoff its current liability.

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ICICI BANK LTD VALUATION RATIO

Mar- Mar- Mar- Mar- Mar-DESCRIPTION 10 09 08 07 06Adjusted PE (x) 26.39 9.85 20.61 24.67 20.64PCE(x) 23.59 8.76 18.81 22.13 18.16Price / BookValue(x) 2.06 0.75 1.84 3.16 2.36Dividend Yield(%) 1.26 3.31 1.43 1.17 1.44EV/Net Sales(x) 7.80 4.19 4.93 5.83 6.38EV/EBITDA(x) 20.60 14.59 19.05 21.84 23.48EV/EBIT(x) 8.74 4.68 5.31 6.41 7.19EV/CE(x) 0.55 0.34 0.38 0.37 0.36M Cap / Sales 4.13 1.19 2.78 3.49 3.66High PE 28.45 25.19 42.13 29.50 22.76Low PE 10.35 7.03 20.61 15.96 13.24

ICICI BANK LTD CASH FLOW RATIO

DESCRIPTION Mar-10 Mar-09 Mar-08 Mar-07 Mar-06Cash Flow Per share 16.77 -127.46 -104.54 256.45 52.29Price to Cash Flow Ratio 56.82 -2.61 -7.37 3.33 11.27Free Cash Flow perShare 102.15 241.13 198.79 -160.91 30.12Price to Free Cash Flow 9.33 1.38 3.87 -5.30 19.56Free Cash Flow Yield 0.11 0.72 0.26 -0.19 0.05Sales to cash flow ratios 13.75 -2.19 -2.65 0.95 3.07

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Intrinsic value of ICICI Bank

Year EPS P/E2006 36.10 26.392007 33.76 9.852008 37.37 20.612009 34.59 24.672010 28.55 20.64

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

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

3) Current EPS is 40.95 compounding of the EPS is 40.95+(40.95*.101)=45.085 4) Now, based on the past 5 year P/E take the average of P/E value which is 20.432 5) Now multiply the step 3 & 4 and we will get the estimated share price. 6) Estimated share price is 921.176 and current share price is 1033 which is higher than

the estimated its means that share price is overvalued and investor should sell the shares for short term.

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Expected Growth of ICICI in 2011 by Unicon Investment research report

“ICICI Bank registered a good financial performance in Q4FY11 with standalone PAT up by44% to INR 14.52 Bn from INR 10.06 Bn in Q4FY10. The growth, being the highest in last 7 years, was aided by increase in interest and non interest income. The QoQ increase in Net Interest Income was better than expected (a rise of 23.3% from INR 20.35 bn in Q4FY10 to INR 25.10 Bn to Q4FY11). Net interest margin increased QoQ & YoY by 10 bps to 2.7% respectively, on account of lower cost of funds, lower delinquencies and growing CASA deposits.”

“CASA ratio increased from 41.7% in Q4FY10 to 45.1% in Q4FY11. The total deposits increased by 11.7% YoY (INR 668.7 Bn on March 31,2011 as compared to INR 532.18 Bn in March 31,2010). Non interest income decreased by 13.2% QoQ and 11.1% YoY, this was primarily because of MTM loss in treasury income (Q4FY11 value stood at INR 1.96 Bn) and reduction in other income by 73.6% (QoQ). However, fee income increased by 17.8% to INR 17.91 Bn on QoQ basis. Advances increased YoY by only 19% which was lower than the industry level of 21%, advances to domestic 71orporate increased by 42.6% YoY. The retail advances like vehicle loan and home loan are expected to grow in the near future. The NetNPA‟s improved from 1.87% in Q4FY10 to 0.94% of net advances in Q4FY11. Loan loss coverage ratio also increased to 76% on March 31,2011 from 59.5% in March 31,2010, much above the RBI regulation of 70%. Operating expenses rose YoY by 14.1% to INR 17.89 Bn in Q4FY11 from INR 14.58 Bn in Q4FY10. Credit to deposit ratio from domestic business stood at 75%, Cost to income ratio was 42% due to healthy operating income growth. This was on account of expanding network of the bank with 2529 branches and 6104 ATMs.”

“ICICI Bank‟s growth in the past has been mainly retail-driven, the bank is now looking to grow its large corporate and SME segment loan book as well. Progress on the „4C‟ strategy (CASA, capital conservation, cost control and credit charges) has been good. At the CMP ICICI is trading at 2x of its FY12E P/BV (standalone basis). We have Accumulate rating on the stock for a target price of INR 1306,” says Unicon Investment research report

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FINDINGS

(Chapter-7)

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

1) In the Economic Analysis we can see that economic is booming after 2009 and current position shows that this is the good time to invest after the recession because GDP growth rate is increasing. And overall economy is growing.

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

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

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LIMITATIONS

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Fundamental analysis has some limitation involved in it. This limitation can be explained as

under:

Time Constrain:

Fundamental analysis may offer excellent insights, but it can be extraordinarily time-

consuming. Time-consuming models often produce valuations that are contradictory to the

current price prevailing on the exchange.

Company Specific:

Valuation techniques vary depending on the industry group and specifics of each

company. For this reason, a different technique and model is required for different industries and

different companies. This can be quite time-consuming process, which can limit the amount of

research that can be performed.

The sales and inventory ratio may be very important for the cement sector company but

these ratios are not very useful for the banking sector.

Inadequacies of Data:

While making analysis one has to often wrestle with inadequate data. While deliberate

falsification of data may be rare, subtle misrepresentation and concealment are common.

Future Uncertainties:

Future changes are largely unpredictable; more so when the economic and business

environment is buffeted by frequent winds of change. In an environment characterized by

discontinuities, the past record is a poor guide to future performance.

Irrational Market Behavior:

The market itself presents a major obstacle while making analysis on account of neglect

or prejudice, undervaluation may persist for extended periods; likewise, overvaluations arising

from unsatisfied optimism and misplaced enthusiasm may endure for unreasonable lengths of

time.

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CONCLUSION

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Fundamental analysis holds that no investment decision should be without processing and

analyzing all relevant information. Its strength lies in the fact that the information analyzed is

real as opposed to hunches or assumptions. On the other hand, while fundamental analysis deals

with tangible facts, it does not tend to ignore the fact that human beings do not always act

rationally. Market prices do sometimes deviate from fundamentals. Prices rise or fall due to

insider trading, speculation, rumor, and a host of other factors.

Fundamental analysis is based on the analysis of the economic, industry as well as the company

and in this research we can see that the economic indicators have an effect on the bank growth

and assets.

The above report says that our economic is growing after the recession and it is the good time for

the one who want to invest. and according to the industry analysis investor can invest in the

banks but he/she should be careful for the investment. But according to financial analysis of

ICICI bank its performance in the private industry is good and expected to grow further in the

near future which is a good sign for investment. EPS and dividend both are increasing yoy and

it‟s on the top in terms of profit and net interest income if we compared it with the other banks in

the same industry but we can‟t ignore the intrinsic value of the company which is lower than the

current value which shows then investor should sell the share of the company if he/she is

investing for short term and for long term it is good for investor to invest in the company.

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SUGGESTION

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The analysis carried out at on the ICICI Bank, their profit and loss account, balance sheet and

ratios. I shall suggest the investors to invest in ICICI Bank than the other banks as a value

investment.

Reasons:

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

Strong increase in profit year-on-year basis.

Increasing EPS indicate good earnings.

Increase in sharing profit with shareholders in form of dividend.

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

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BIBLIOGRAPHY

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Books:

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

ACE EQUITY data base

Websites:

www.google.comwww.icicibank.comwww.rbi.org.inwww.moneycontrol.comwww.equitymaster.commwww.nseindia.com http://www.business-standard.com/india/index2.php

http://economictimes.indiatimes.com/

http://en.wikipedia.org/wiki/Magnetic_ink_character_recognition

http://finance.indiabizclub.com/info/indian_banking_industry

http://finance.indiamart.com/investment_in_india/banking_in_india.html

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