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Synopsis of

Final Research Project

On

FUNDAMENTAL ANALYSIS OF ICICI BANK

Submitted In Partial Fulfillment of the Requirement

Of Masters of Business Administration

Under the supervision of: Submitted By:

Ms. APARNA MISHRA SUDHIR YADAV

PROJECT GUIDE 03161203909

Submitted To:

Banarsidas Chandiwala Institute of Professional Studies, Dwarka, New Delhi

(Affiliated to Guru Gobind Singh Indraprastha University)


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INTRODUCTION

The stock market is the most volatile market and is difficult to understand asthe 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, its 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--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.


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Meaning of fundamental analysis: A method of evaluating a security that

entails attempting to measure its intrinsic value by examining related economic,

financial and other qualitative and quantitative factors. Fundamental analysts attempt

to study everything that can affect the security's value, including macroeconomic

factors (like the overall economy and industry conditions) and company-specific

factors (like financial condition and management).

The end goal of performing fundamental analysis is to produce a value that an

investor can compare with the security's current price, with the aim of figuring out

what sort of position to take with that security (under priced = buy, overpriced = sell

or short).

Fundamental analysis is about using real data to evaluate a security's value.

Although most analysts use fundamental analysis to value stocks, this method ofvaluation can be used for just about any type of security.

For example, an investor can perform fundamental analysis on a bond's value

by looking at economic factors, such as interest rates and the overall state of the

economy, and information about the bond issuer, such as potential changes in credit

ratings. For assessing stocks, this method uses revenues, earnings, future growth,

return on equity, profit margins and other data to determine a company's underlying

value and potential for future growth. In terms of stocks, fundamental

analysis focuses on the financial statements of the company being evaluated.

Fundamental analysis includes:

1. Economic analysis

2. Industry analysis

3. Company analysis

Economic analysis: the economic analysis aims at determining if the economic

climate is conclusive and is capable of encouraging the growth of business sector

especially the capital market. When the economy expands most industry groups and

companies are expected to get benefit out of it. When the economy declines most

sectors and companies usually face survival problems. It is important to predict the

direction of the national economy because economic activity affects corporate


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profits,not necessarily through tax policies, but also through foreign policies and

administrative procedures.

Industry analysis: A form of fundamental analysis involving the process of making

investment decisions based on the different stages an industry is at during a given

point in time. The type of position taken will depend on firm specific characteristics,

as well as where the industry is at in its life cycle.

Under the production and market introduction phases, revenues and earnings are

likely to be very low, which makes investments during these phases more

speculative in nature. Revenues and earnings are likely to be low because there is

little demand for the product, or the product is not completed. Expenses are likely to

be very large during these phases as a company or industry spends a lot on

marketing and research.

Through the growth phase, revenues and margins are likely to be on the rise due to

an increase in demand for a product and the pricing power the firm has due to a

small number of competitors. Stock prices are likely to rise during this phase.

During the maturity and stability phase, revenues and margins are likely to declinedue to lower sales demand and more competition. Stock prices are likely to decline

during these phases.

Company analysis: Investors conduct company analysis to evaluate securities,

gathering information about the company's profile, products or services and

profitability. A company analysis includes basic information about the company

such as the mission statement and vision as well as the values and goals. During a

company analysis, an investor also looks at the history of the company, focusing on

events that have shaped the company. A company analysis looks into what goods or

services the company sells. If the company is a manufacturing company, an analysis

studies what products the company makes, and analyzes the quality and the demand

of these products. If it's a service business the investor studies the services offered.


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OBJECTIVE OF THE STUDY

Primary objective: to DO FUNDAMENTAL ANALYSIS OF THE ICICI BANK.

Secondary objectives:

y To study the concepts and techniques of fundamental analysis.

y To study the growth trend in banking sector and in particularly of ICICI bank.

y To evaluate the performance of ICICI bank in Indian stock market with

respect to its financial performance.


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LITERATURE REVIEW

Consumer behavior from the marketing world and financial economics has broughttogether to the surface an exciting area for study and research: behavioral finance.

The realization that this is a serious subject is, however, barely dawning. Analystsseem to treat financial markets as an aggregate of statistical observations, technicaland fundamental analysis A rich view of research waits this sophisticatedunderstanding of how financial markets are also affected by the 'financial behavior'of investors. With the reforms of industrial policy, public sector, financial sector andthe many developments in the Indian money market and capital market, MutualFunds which has become an important portal for the small investors, is alsoinfluenced by their financial behavior. Hence, this study has made an attempt toexamine the related aspects of the fund selection behavior of individual investorstowards Mutual funds, in the city of Mumbai. From the researchers andacademicians point of view, such a study will help in developing and expanding

knowledge in this field. (Kavitha Rang Nathan ,2006)While the fundamental and technical analysis literatures invest considerable effort inassessing their respective ability to explain share prices, they invariably do sowithout reference to each other. In this context, we propose an equity valuationmodel integrating both fundamental and technical analysis and, in doing so,recognize their potential as complements rather than as substitutes. Testing confirmsthe complementary nature of fundamental and technical analysis by showing that,while each performs well in isolation, models integrating both have superiorexplanatory power. While our findings relate to the valuation of shares, they alsohave implications for other valuation exercises. (Jenni L. Bettman ,Stephen Sault,Emma Welch , 2006)

In the study it was found that the fundamental signals provide information aboutfuture returns that is associated with future earnings news. Moreover, a significant portion of the abnormal returns is generated around subsequent earningsannouncements. These findings are consistent with the underlying focus offundamental analysis on the prediction of earnings. Significant abnormal returns tothe fundamental strategy are not earned after the end of one year of returnaccumulation, indicating little support for the idea that the signals captureinformation about multiple-year-ahead earnings not immediately impounded in priceor about long-term shifts in firm risk. Additional analysis on a holdout samplesuggests that the strategy continues to generate abnormal returns in a periodsubsequent to the introduction of the fundamental signals in the literature, andcontextual analyses indicate that the strategy performs better for certain types offirms (e.g. firms with prior bad news).( Jeffery S. Abarbanell, Brian J. BusheeAugust 1997)


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This paper investigates investors intersection between value- glamour investing andfundamental analysis .they propose and find evidence in line with a model ofinvestors asymmetric reaction to good and bad news due to confirmation bias,typical pessimistic value investors could under react to recent good information butthey process bad news quite rationally or even over confidentially .glamour investors

on the other hand ,are often too optimistic to update recent bad news timely but theycould fairly price or even over react to good information, they empirically validatemost of the prediction made by this model.

(chau duon,gioia pescettio,Danielsantamaria,may 2010.)

We summarize and extend recent research demonstrating that investor recognition is

of similar importance to fundamentals in driving stock price movements. Stock

returns are strongly positively related to changes in investor recognition, while

expected returns are strongly negatively related to the level of investor recognition.

Moreover, firms time their financing and investing decisions to exploit changes in

investor recognition. Investor recognition dominates stock price movements over

short horizons (e.g., one quarter), while fundamentals dominate over longer horizons

(e.g., five years). (Scott A. Richardson, Richard G. Sloan, Haifeng You, February

16, 2011)


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RESEARCH METHODOLGY

In order to fulfill the above objectives, the information collected will not be firsthand information. The secondary data will be used.

Secondary Sources:

Secondary data is already collected by someone else. This data is not

collected for solving present problem. This information is relevant and can be used

for our purpose. The information was drawn from published journals by Reserve

Bank of India, in house magazines of the bank, capital market magazine.

Information was also gathered from news papers and related magazines. Besides

data was also collected from the internet.

Analysis and Interpretation Techniques:

The various techniques such as the graphical method, other quantitative techniques

will be used. Further the various financial analyses will be done to interpret the

balance sheet of ICICI bank and then it will be compared with all over economic

development and banking sector performance in India. According to the

requirements, other methods may be used for the purpose of analysis andinterpretation


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PLAN OF ACTION

S.NO. Contents Page

No.

1. Executive Summary

2. Chapter 1

1.1 Introduction

1.2 Objective of the Study

1.3 Literature Review

1.4 Research Methodology

3. Chapter 2

2.1 Analysis and Interpretation

4. Chapter 3

3.1 Findings and conclusion

3.2 Recommendation and Suggestions

3.3 Limitations of the Study5.

References

Annexure


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ANALYSIS OF INDIAN ECONOMY

1. Indian economy overview

GDP OF INIDA: The performance of the Indian economy in 2009/10 greatlyexceeded expectations. The farm sector which was expected to contract showed

resilience,growing by 0.2 per cent despite the weak South West monsoon. The non

farmsector also did well. It is the assessment of the Council that the Indian economy

would grow at 8.5 per cent in 2010/11 and 9.0 per cent in 2011/12. In the current

fiscal year, agriculture will grow at 4.5 per cent, industry at 9.7 per cent andservices

at 8.9 per cent.

Real GDP in India increased by 8.9 per cent during the first half of 2010-11,

reflecting strong domestic demand, especially private consumption and investment,

and improving external demand. Although on a cumulative basis, the IIP grew by 9.5

per cent during April-November 2010, it has been volatile in the current financial

year with growth rates ranging between 2.7 per cent and 16.6 per cent. Overall,

robust corporate sales, large indirect tax collections, advance tax payments and

leading indicators of service sector activity suggest persistence of the growth

momentum.

According to the data published in 2010 the shares of the banking sector addedvalue in GDP has increased to 77% from 2.5 % last financial year. and forecasters

have assigned highest 29.6 percent chance to banking sector contribution to Indian

GDP.the RBI has stated that it had seen an annual growth of 8.5% steadily. The main

priority of RBI is to curb the ongoing inflation which peaked around 11%in recent

months which has been controlled to a large extent now in Feb. 2011 inflation rate

was recored at 8.82%.interest rates have been increased by the banks to contain the

inflation but It could slow down the growth of the Indian economy. But even though

there has been a rise in the interest rates there hasnt been much change in the

distribution of loans, the Indian customer is hardly affected with the increased

interest rates.


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SECTOR WISE COMPOSITION OF GDP IN %

SECTOR 2005 2006 2007 2008 2009 2010

AGRI 20 20 17 17 17 15.80

INDUSTRY 26 26 29 29 28.20 25.80

SERVICES 54 54 54 54 54.90 58.40

Almost every sector of the economy is poised to grow faster and a 9 per cent

growth in 2010-11 is not difficult if domestic policies and external factors do not come in

the way. Expert expects that India s economy to grow by 8.1% in 2010 based on a steep

gain in industrial

Output and resurgent private consumption investment and exports. Were these scenarios to

continue growth would lift further to 8.3% in 2011 said Chief Economist. They also

expect the Reserve Bank of India (RBI) to continue gradually raising

interest rates and to keep a tight leash on liquidity to tame inflation.

Recently RBI changed the repo rate from 5.75% to 6% and reverse repo

rate 4.5% to 5%.CRR rates they keeping unchanged.


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GRAPH SHOWING INDIAN GDP TREND

GRAPH SHOWING S&P CNX NIFTY TURNOVER TREN

From the above graphs we find that GDP of India and S&P CNX nifty

Index moves in same direction, they have a strong positive correlation

between them.

47784.95071959946.13

72157.32

83403.58

95133.93

124242.62121599.28

137726.47

0

20000

40000

60000

80000

100000

120000

140000

160000

2001 2002 2003 2004 2005 2006 2007 2008 2009

GDPof india IN CRORES

GDPof india IN CRORES

1396.921410.371679.9

3731.2

2041.23

4934.324960.86

7722.67

15181.23

0

2000

4000

6000

8000

10000

12000

14000

16000

S&P CNX NIFTY INDEX turnover in

crores

S&P CNX NIFTY INDEXturnover in crores


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INFLATION

Inflation is a rise in the general level of prices of goods and services in an economy

over a period of time. When the general price level rises, each unit of currency buys

fewer goods and services. Consequently, inflation also reflects erosion in the

purchasing power of money a loss of real value in the internal medium of

exchange and unit of account in the economy. A chief measure of price inflation is

the inflation rate, the annualized percentage change in a general price index

(normally the Consumer Price Index) over time.

The inflation rate in India was last reported at 8.82 percent in February of

2011. 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 lowof -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,

YEAR INFLATION RATE

2001 3.394

2002 4.158

2003 4.412

2004 3.018

2005 3.32

2006 7.269

2007 5.691

2008 7.692

2009 9.286

2010 13.725


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Graph showing inflation trend in Indian economy

From the above graphs it is clear that inflation and nifty are moving in same

direction and they are moderately correlated.

0

2

4

6

8

10

12

14

16

inflation in indian economy

inflation in indianeconomy


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INDIAN BANKING INDUSTRY ANALYSIS

Structure of Indian banking system

The Indian Banking sector comprises of 88 scheduled commercial banks of which

28 are public sector banks, 18 old private sector banks, 11 new private sector banks

and 31 foreign banks as on March 31, 2007. In addition, there are 102 regional ruralbanks and 1,864 urban Co-operative Banks. They have a combined network of over

53,000 branches and 17,000 ATMs. According to a report by ICRA Limited, a

rating agency, the public sector banks hold over 75% of assets of the banking

industry, with the private and foreign banks holding 18.2% and 6.5% respectively.

STRENGTH OF INDIAN BANKING SYSTEM: According to a stress test done

by the Reserve Bank of India, The Indian banking system is financially stable and

resistant to the stocks that may arise due to higher nonperforming assets (NPAs) and

global economic crisis.


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The globalization and liberalization of the Indian economy and the inerest of foreign

banks to expand their presence in India through inorganic growth route have fulled

the growth of Indian banking industry.

Source: Report on trend and progress of banking in India 200910, RBI

website, www.rbi.org.in,

NPA Non-performing assets

The banking penetration calculated on the basis of total number of credit amounts to

total population was 95.4 per thousand in 2007-08.

Source: Report on trend and progress of banking in India 200910, RBI

website, www.rbi.org.in,


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The banking system in India is dominated by Scheduled Commercial Banks (SCBs) with apan-India presence. As of March 2009, SCBs controlled most of the assets, with the rest beingcontrolled by a large number of small co-operative credit institutions with a very limited

geographic reach. Within SCBs, public sector banks accounted for 71.9 per cent of theassets and the rest was held by foreign banks and private sector banks.

Growth of Indian banking industry

Increasing emphasis by banks on fee based services to boost income growth. Favorabledemographics and rising income levels rising literacy rate, especially in rural India, hasincreased the need for banking. Between 2006 and 2026, the working population (2560years) is expected to increase from 675.8 million to 795.5 million giving rise to a favorablemarket for banks. Projected per capita GDP is expected to increase from US$ 380.8 in

200001 to US$ 2,097.5 in 2026, reflecting higher disposable income.

Working population assessment and GDP per capital till 2026

Source insurance industry amidst interesting time and the way forward EY CBK

September 2009.via RAD


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Significant latent demand for retail banking services, given a low penetration level

of approximately 59 percent.

Key factors deriving the growth of retail banking are:

y Any where, any time banking

y Improved processes and bundled product offerings

y Faster service

y Customer-specific products or offerings on a regular basis

y Bank customer has replaced Branch customer

y Focus on understanding customer needs or preferences

y Segmentation or differentiation of customers

y Customer-driven strategies

Adoption of best practices from other countries

y With an increasingly global footprint, the Indian banking industry has

adopted certain global best practices such as International Financial

Reporting Standards (IFRS) and Basel II. These not only position India at

an international level, but also provide confidence to foreign playersplanning to establish businesses in India.

y As of March 31, 2009, all commercial banks in India, excluding RRBs and

local area banks, have become Basel II compliant.


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SWOT ANALYSIS OF INDIAN BANKING INDUSTRY

STRENGTH :

(1)Indian banks have compared favorably on growth, asset quality and profitability withother Regional banks over the last few years. The banking index has grown at a

compounded annual rate of over 51 per cent since April 2001 as compared to a 27 per cent

growth in the market index for the same period.

(2)Policy makers have made some notable changes in policy regulation to help strengthen

the sector. These changes include strengthening prudential norms, enhancing the payments

system and integrating regulations between commercial and co-operative banks.

(3)Bank lending has been a significant driver of GDP growth and employment

(4) Extensive reach: the vast networking & growing of branches & ATMs,Indian banking

system has reached even to the remote corners of the country.

(5) The government's regular policy for Indian bank since 1969 has paid rich dividends

with the nationalization of 14 major private banks of India.

(6) in terms of quality of assets and capital adequacy, Indian banks are considered to have

clean strong and transparent balance sheets relative to other banks in comparable

economies in its region.

(7) India has 88 scheduled commercial banks (SCBs) - 27 public sector banks (that is with

the Government of India holding a stake) after merger of New Bank of India in Punjab

National Bank in 1993, 29 private banks (these do not have government stake; they may be

publicly listed and traded on stock exchanges) and 31 foreign banks. They have a

combined network of over 53,000 branches and 17,000 ATMs. According to a report

by ICRA Limited, a rating agency, the public sector banks hold over 75% of total


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assets of banking industry with the private and foreign banks holding 18.2% and

6.5% respectively.

(8) Foreign banks will have the opportunity to own up to 74 per cent of Indian private

sector Banks and 20 per cent of government owned banks.

WEAKNESSES:

(1)PSBs need to fundamentally strengthen institutional skill levels especially in salesAnd marketing, service operations, risk management and the overall organizational

performance Ethic & strengthen human capital.(2) Old private sector banks also have the need to fundamentally strengthen skilllevels.

(3) The cost of intermediation remains high and bank penetration is limited to only afew customer segment and geographies.

(4) Structural weaknesses such as a fragmented industry structure, restrictions onCapital availability and deployment, lack of institutional support infrastructure,restrictive labor laws, weak corporate governance and ineffective regulations beyondScheduled Commercial Banks (SCBs).

(5) Refusal to dilute stake in PSU banks: The government has refused to dilute itsstake in PSU banks below 51% thus restricting these banks to avail raining equitycapital.

(6) Impediments in sectoral reforms: Opposition from Left and resultant cautiousapproach from the North Block in terms of approving merger of PSU banks mayhamper their growth prospects in the medium term.


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OPPORTUNITY :

(1)The market is seeing discontinuous growth driven by new products and servicesthat include Opportunities in credit cards, consumer finance and wealth managementon the retail side, and in fee-based income and investment banking on the wholesale

banking side. This requires new skills in sales and marketing, credit and operations.

(2)With increased interest in India, competition from foreign banks will onlyintensify.

(3)Given the demographic shifts resulting from changes in age profile and householdincome, consumers will increasingly demand enhanced institutional capabilities andservice levels from banks.

(4) New private banks could reach the next level of their growth in the Indianbanking sector by continuing to innovate and develop differentiated business modelsto profitably serve segments like the rural/low income and affluent/HNI segments;actively adopting acquisitions as a means to grow and reaching the next level of performance in their service platforms. Attracting, developing and retaining moreleadership capacity

(5)Foreign banks committed to making a play in India will need to adopt alternativeapproaches to win the race for the customer and build a value-creating customerfranchise in advance of regulations potentially opening up post 2009. At the sametime, they should stay in the game for potential acquisition opportunities as andwhen they appear in the near term. Maintaining a fundamentally long-term value-creation mindset.

(6)Reach in rural India for the private sector and foreign banks.

(7) With the growth in the Indian economy expected to be strong for quite some timeespecially in its services sector-the demand for banking services, especially retailbanking, mortgages and investment services are expected to be strong.

(8) Reserve Bank of India (RBI) has approved a proposal from the government toamend the Banking Regulation Act to permit banks to trade in commodities andcommodity derivatives.

(9) Hybrid capital: In an attempt to relieve banks of their capital crunch, the RBI hasallowed them to raise perpetual bonds and other hybrid capital securities to shore uptheir capital. If the new instruments find takers, it would help PSU banks, left withlittle headroom for raising equity.


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THREATS:

(1)Threat of stability of the system: failure of some weak banks has oftenThreatened the stability of the system.

(2) Rise in inflation figures which would lead to increase in interest rates.

(3) Increase in the number of foreign players would pose a threat to the PSB as wellAs the private players.


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PORTERS FIVE FORCES MODEL OF INDIAN BANKING INDUSTRY

Potential entry of new entrants :

Reserve Bank of India has laid out a stagnant rules and regulation for new entrant inBanking Industry. We expect merger and acquisition in the banking industry in near future.

Hence, the industry is less porn of new competitor. Barriers to an entry in banking industry

no longer exist. So lots of private and foreign banks are entering in the market.

Competitors can come from an industry to disinter mediate bank product

differentiation is very difficult for banks and exit is difficult. So every bank strives to

survive in highly competitive market so we see intense competitive can mergers and

acquisitions. Government policies are supportive to start new bank. There is less statutory

requirement needed to start a new venture. Every bank to tries to achieve economies of

scale through use of technology and selecting and training manpower. There are public

sector banks, private sector and foreign banks along with non-banking finance companies

competing in similar business system.

Rivalry among competing firms :

Rivalry among competitors is very fierce in Indian Banking Industry. The services banksoffer is more of homogeneous which makes the Company to offer the same service at alower rate and eat their competitor market share. Market Players use all sortsof aggressive selling strategies and activities from intensive advertisement campaignsto promotional stuff. Even consumer switch from one bank to another, if there is a widespread in the interest.

Hence the intensity of rivalry is very high. The no of factors has contributed to increaserivalry those are.

1 . A large no of banks: There is so many banks and non financial institution fightingfor same pie, which has intensified competition

2. High market growth rate: India is seen as one of the biggest market place andgrowth rate in Indian banking industry is also very high. This has ignited the competition.

3. Homogeneous product and services: The services banks offer is more ofhomogeneous which makes the company to offer the same service at a lower rate andeat their competitors share.


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4. Low switching cost: Costumers switching cost is very low, they can easily switchfrom one bank to another bank and very little loyalty exist.

5. Undifferentiated service: Almost every bank provides similar services. Every

bank tries to copy each other services and technology which increase level of competition.

6. High exit barriers: High exit barriers humiliate banks to earn profit and retaincustomers by providing world class services.

7. Low government regulations: There are low regulations exist to start a newbusiness due LPG policy adopted by India.

BARGAINING POWER OF SUPPLIERS

Banking industry is governed by Reserve Bank of India. Reserve Bank of India is theauthority to take monetary action which leads to direct impact on circulation of money inthe Economy. The rules and regulation lay down by RBI. Suppliers of banks are depositors.these are those people who have excess money and prefer regular income and safety. Inbanking industry suppliers have low bargaining power.

1. Nature of suppliers : Suppliers of banks are those people who prefer low risk andthose who need regular income and safety as well. Banks best place for them to depositstheirs surplus money.

2. RBI rules and regulations: Banks are subject to RBI rules and regulations.bank have to behave in a way that RBI wants. So RBI takes all decisions related tointerest rates. This reduces bargaining power of suppliers.

3. Suppliers not concentrated: Banking industry suppliers sure not concentrated.There are numerous with negligible portion of offer .so this reduce their bargaining power.

BARGANING POWER OF CONSUMERS

In today world, Customer is the King. Banks offers different services According to clientsneed and requirement. They offer loans at Prime Lending Rate (PLR) to their trust worthyclients and higher rate to others clients. Customers of banks are those who take loans anduses services of banks. Customers have high bargaining power. These are as follows

1. Large no of alternatives: Customers have large no of alternatives, there are somany banks, which fight for same pie. There are many non financial institutions likeICICI, HDFC, and IFCI, etc. which has also jump into these business .there are foreignbanks , private banks, co-operative banks and development banks together with specialized


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financial companies that provides finance to customers .these all increase preference forcustomers.

2. Low switching cost: Cost of switching from one bank to another is low. Banks arealso providing zero balance account and other types of facilities. They are free to select any

banks service. Switching cost are becoming lower with internet banking gainingmomentum and a result customers loyalties are harder to retain.

3. Undifferentiated service: Bank provide merely similar service there are no muchdiffracted in service provides by different banks so, bargaining power of customersincrease. They cannot be charged for differentiation.

4. Full information about the market: Customers have full information aboutthe market due to globalization and digitalization Consumers have become advance andsophisticated .they are aware with each market condition so banks have to be morecompetitive and customer friendly in order to serve them.

POTENTIAL DEVELOPMENT OF SUBTITUTE PRODUCTS

Every day there is one or the other new product in financial sector. Banks are not limited to

tradition banking which just offers deposit and lending. In addition, today banks offers

loans for all products, derivatives, For Example, Insurance, Mutual Fund, Demit account to

name a few. The wide range of choices and needs give a sufficient room for new product

development and product enhancement. Substitute products or services are those, which are

different but satisfy the same set of customers. In private banking industry following are thesubstitutes:

y NBFC: Non-banking financial Institutions play an important role in giving

financial assistance. Mobilization of financial resources outside the traditional

banking system has witnessed a tremendous growth in recent years in the India.

NBFC is a close substitute of banking in respect of raising funds. Borrower can

easily raise funds from NBFC because it requires less formal procedure for getting

funds compare to private banks.

y Post Office Products: Post office is also providing some service like fixed

deposit facility, saving account, recurring account etc. The interest rate of

saving account is higher than private banks. It is fully secured by the


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government so people who do not want to take risk for them post office

saving is good substitute.

y Government Bond: Govt. Bond also attracts savings from the general

public. It is less risky and more secured as compare to savings in private

banks.

y Mutual Funds: Mutual funds are also now proving as good substitutes for

banks. They assure for providing high return with less time in comparison of

banks. The administrative expenses are also very low as compared to banks.

Investment in Mutual funds is more flexible than investment in banks.

y Stock Market: People who are ready to bear risk and wants a high return on

their investment, stock market is a good substitute for them. Day by day

investors are moving towards stock market as interest rate in banks are

decreasing. So now stock market has proved as a big competitor for baking

sector.

y

Debentures: Debentures is also proved as a good substitute of banks fixeddeposit as return on debenture is fixed and high. There are different types ofdebentures, which attract various classes of investors.

y Other Investment Alternatives: Now common peoples attraction isshifting from banks to other various alternatives such as gold, preciousmetals, land, small savings etc. As we can see the growing trend in thesealternatives in comparison of decreasing interest rates in bank.


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PEST analysis of Indian Banking Industry

PEST analysis stands for "Political, Economic, Social, and Technological analysis" anddescribes a framework of macro-environmental factors used in the environmental scanning

component of strategic management. Some analysts added Legal and rearranged themnemonic to SLEPT inserting Environmental factors expanded it to PESTEL or PESTLE,which is popular in the UK. But for our analysis we are taking only PEST analysis standsfor Political, Economic, Social, and Technological analysis"

(1)Political analysis of Indian Banking Industry:

y Indian banking industry is totally dominated by political factors of India. From

1990 the banking industry has strong support from government.

y

But banking industry is regulated and Dominated by RBI.

(2) Economic analysis of Indian banking Industry:

y FROM LPG India is moving on a steady GDP growth and trying to touch double digit

growth.

y India also encouraging FDI and FIIs for investment in India.

y Percentage of youth in employment increased a lot in banking sector.

(3)Social analysis of Indian banking Industry:

y Recently Indian banks are entering in Micro Finance to help the lower levels of

economy.

y Some Banks are stated CSR activity in metros.

y Banks try to add value service to customers other than basic banking activity

(4) Technological analysis of Indian Banking Industry:

y Due to IT revolution, all Banks went for automation of Banks.

y

Banks started everything online with the help of technology.y Banks are one of the major source of income for IT companies in India.

y Banks even started SMS banking and internet banking.


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INDUSTRY LIFE CYCLE OF BANKING INDUSTRY

y 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 onthe projections made in the "India Vision 2020" prepared by the Planning Commissionand the Draft 10th Plan, the report forecasts that the pace of expansion in the balance-sheets of banks is likely to decelerate. The total asset of all scheduled commercial banks by end-March 2010 is 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 centduring the rest of the decade as against the growth rate of 16.7 per cent that existedbetween 1994-95 and 2002-03. It is expected that there will be large additions to thecapital base and reserves on the liability side.

y The Indian Banking Industry can be categorized into non-scheduled banks and

scheduled banks. Scheduled banks constitute of commercial banks and co-operativebanks. There are about 67,000 branches of Scheduled banks spread across India. Asfar as the present scenario is concerned the Banking Industry in India is goingthrough a transitional phase.

y The Public Sector Banks (PSBs), which are the base of the Banking sector in India

account for more. Than 78 per cent of the total banking industry assets.Unfortunately they are burdened with excessive Non-Performing assets (NPAs),massive manpower and lack of modern technology. On the other hand the PrivateSector Banks are making tremendous progress. They are leaders in Internet banking,mobile banking, phone banking, ATMs. As far as foreign banks are concerned they arelikely to succeed in the Indian Banking Industry.

Despite intense competition and high inflationary pressures, India's sector will continue

to show high growth owing to the country's strong economic expansion. Growth inIndia's banking sector will remain high, bolstered by sound economic growth prospectsand expecting credit growth of about 20 per cent in the next fiscal year. The growth inbanking would happen despite high domestic inflation and intense competition in thesector it added.So, I conclude that the Indian banking industry is in growth stage from the aboveinformation


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COMPANY ANALYSIS

About ICICI BANK :

ICICI Bank (formerly Industrial Credit and Investment Corporation of India)

is a major banking and financial services organization in India. It is the third largest bank inIndia and the largest private sector bank in India by market capitalization. ICICI Bank isIndia's second-largest bank with total assets of Rs. 3,634.00 billion (US$ 81 billion) atMarch 31, 2010 and profit after tax Rs. 40.25 billion (US$ 896 million) for the year ended

March 31, 2010. The Bank has a network of 2,044 branches and about 5,546 ATMs inIndia and presence in 18 countries.

ICICI Bank offers a wide range of banking products and financial services to corporate andretail customers through a variety of delivery channels and through its specializedsubsidiaries in the areas of investment banking, life and non-life insurance, venture capital

and asset management.

ICICI Bank's equity shares are listed in India on Bombay Stock Exchange and the NationalStock Exchange of India Limited and its American Depositary Receipts (ADRs) are listedon the New York Stock Exchange (NYSE).

The Bank is expanding in overseas markets and has the largest international balance sheetamong Indian banks. ICICI Bank now has wholly-owned subsidiaries, branches andrepresentatives offices in 19 countries, including an offshore unit in Mumbai. This includeswholly owned subsidiaries in Canada, Russia and the UK .Offshore banking units inBahrain and Singapore, an advisory branch in Dubai, branches in Belgium, Hong Kong

and Sri Lanka, and representative offices in Bangladesh, China, Malaysia, Indonesia, SouthAfrica, Thailand, the United Arab Emirates and USA. Overseas, the Bank is targeting theNRI (Non-Resident Indian) population in particular.


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SNAP SHOT OF ICIC BANK

BSE NSE

CODE 532174ISIN DEMAT INE090A01013 INE090A101352 HIGH 7173.65 1170.0052 LOW 804.40 712.00MARKET CAP 1293364.96VOLUME 172687 2198705

Incorporation year: 1994

Registered office: land mark, race course circle, alkapuri.vadodra, Gujarat -

Industry type: bank private

Chair man: K.V.Kamat

Managing director: Chanda D.Kochhar

LISTING: BSE .NSE


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SWOT ANALYSIS OF ICICI BANK LTD

STRENGTHS:

1. BRAND NAME: ICICI Bank has earned a reputation in the market for extendingquality Services to the market vis- -Vis its competitors. It has earned a strongBrand name in banking in a very short span of time.

2. Market share: ICICI bank is the second largest bank after SBI. Its market share isthe most important strength of the company.

3. HUGE NETWORK: ICICI Bank has the highest number of linked branches in thecountry. The bank operates through a network of 450 BRANCHES AND over1800 ATMs across India, thus enabling them to serve customer in better way.

4. DIVERSIFIED PORTFOLIO: ICICI Bank has all the products under its belt,which help it to extend the relationship with existing customer. ICICI Bank hasumbrella of products to offer their customers, if once customer has relationshipwith the bank. Some Products, which ICICI Bank is offering are:

y Retail Bankingy Business Bankingy Merchant Establishment Services (EDC Machine)y Personal loans & Car loans

y

Demat Services with E-Brokingy Mutual Fund (ICICI Bank is the Distributor of all Mutual Fund)y Insurancey Housing Loans

5. SALARY ACCOUNT: One very interesting thing that we have observed in ourstudy is that ICICI is having an edge over other banks in case of Salary Account.Most of the companies are having their Salary Account with ICICI even if theirCurrent Account is with any other Bank. This is mainly because of the hugenetwork of ATMs and branches of ICICI

6.

WORKING HOURS: ICICI is the only bank which is having its working hoursfrom 8 to 8 which is one of the major strength of ICICI Bank with respect to IT &ITES Industry. As most of the IT & ITES companies are global players and theirParent company is in US, so they have to work according to their office time. Thussome have their Office time in the morning and some have it in the evening so ifthe working hour of the bank is 8 to 8 it is very convenient for them.


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7. TREASURY DEPARTMENT: ICICI is the first private bank to have a treasurydepartment. So customers can get the best rates for foreign exchange.

8. AGGRESSIVE MARKETING: ICICI Bank is known for its aggressive marketingof itsproducts. Recent ads like celebrating birthdays of the customer in the banks;this gives ICICI an edge over other banks.

Weakness:

1. TRANSACTION COST: ICICI Bank charges high cost for its transactions.Through our data analysis we have find out that most of the small companies prefernationalized banks only because of this cost factor. Also the group has found outthat there are companies which are going for multi bank system i.e. they are usingonly those facilities of ICICI Bank which are provided at cheaper rates (read Salary

Account) and for other services they are going to nationalize banks and MNCs(read Forex). So there exists a huge potential for ICICI Bank if they are ready tomake their transaction cost flexible.

2. FOCUS ONLY ON HIGH END CUSTOMERS: The bank targets only the topbracket of clients and does not cater to the needs of small customers. Due to thisreason the bank may sometimes loose good clients.

3. DEFENSIVE APPROACH IN LENDING: ICICI Bank has a defensive approachin lending. Mainly to IT & ITES companies Bank do not provide loan as thesecompanies are not having collaterals so bank hesitate in giving loans to them.Because of this policy companies prefer nationalized banks and ICICI Bank in turnsometimes loose potential customers.

4. LITTLE PRESENCE OUTSIDE INDIA: ICICI Bank is having little presenceOutside India, because of which companies prefer MNC Bank, mainly Citibank.So if ICICI Bank tries to emerge outside India then it has a huge potential ofcustomers.

5. POOR CUSTOMER CARE/SERVICE: With its aggressive marketing ICICIBank is rapidly increasing its customer base. They are not however, increasing thenumber of employees accordingly. This is leading to deterioration of the standardof customer service


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Opportunities:

1. Rural segment: ICICI bank as lot of untapped market in rural areas. This is one of themostimportant opportunities for the bank

2.

Dissatisfied Customers of Other Banks: The group from its survey and analysis of IT

3. Remittances: From the analysis group has also found out that ICICI bank has very little presence as far as the EEFC account is concerned. Companies prefer to bank withMNCs (which have greater presence in the foreign countries) and nationalized banks(which according to the companies provide lower transaction rates) to get their inwardremittances in spite of ICICI being providing one of the most competitive rates. So thebank can promote its EEFC account better and get the key to the door of huge potentialmarket.

4.

Business advising for smaller Players: The analysis has also indicated that the conceptof business advising though very popular with the higher end players is virtuallynonexistent in the lower end of the market. ICICI should take this opportunity toprovide business advising to the smaller companies at competitive rates and try to takethe first mover advantage.

Threat:

(1) Advent of MNC banks: Large numbers of MNC banks are mushrooming in theIndian market due to the friendly policies adopted by the government. This can

increase the level of competition and prove a potential threat for the market share ofICICI bank.

2) Dissatisfied Customers: The analysis indicated that though most of the companiesare satisfied with the products offered by ICICI bank but the poor customersupport/ service is creating a lot of dissatisfaction among the customers, this can prove to be a serious problem as far as the market reputation of the bank isconcerned and cane be a major threat in future business acquisition.

3) Ever improving nationalized banks: With PSU banks like SBI going all out tocompete with the private banks and government giving them a free hand to do so; itcan prove to be serious threat for banks like ICICI

RATIO ANALYSIS OF ICICI BANK


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1.CURRENT RATIO OF ICICI BANK

Graph showing current ratios of icici bank from 2006 to 2010

A. Current Ratio

A very popular ratio, current ratio is defined as:

Current assets includes cash, current investments, debtors, inventories (stocks) ,loans and advances, and pre-paid expenses. Current liabilities represent liabilities

that are expected to mature in the next twelve months. These comprise (i)installments of loans, secured and unsecured, that are due in the next twelve monthsand (ii) current liabilities and provisions.

0.430.4

0.46 0.47

0.6

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

2006 2007 2008 2009 2010

Current Ratio of icici bank

Current Ratio of icici bank


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(2) QUICK RATIO OF ICICI BANK.

Graph showing quick ratio of icici bank from 2006 to 2010

(b) QUICK RATIO

A measure of a company's liquidity and ability to meet its obligations. Quick ratio,often referred to as acid-test ratio, is obtained by subtracting inventories from currentassets and then dividing by current liabilities. Quick ratio is viewed as a sign ofcompany's financial strength or weakness (higher number means stronger, lowernumber means weaker).

3. DEBT EQUITY RATIO OF ICICI BANK:

23.33 22.24

26.86

42.66

46.66

0

5

10

15

20

25

30

35

40

45

50

2006 2007 2008 2009 2010

QUICK RATIO OF ICICI BANK

QUICK RATIO OF ICICI

BANK


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Graph showing debt equity ratio of icici bank from 2006 to 2010

(C).Debt Equity Ratio

The numerator of this ratio consists of all debt, short-term as well as long-term, andthe denominator consists of net worth plus preference capital. A measure of acompany's financial leverage. Debt/equity ratio is equal to long-term debt divided bycommon shareholders' equity. Typically the data from the prior fiscal year is used inthe calculation. Investing in a company with a higher debt/equity ratio may beriskier, especially in times of rising interest rates, due to the additional interest thathas to be paid out for the debt.

4 . EARNING PER SHARE:

0.05

0.08

0.12

0.08

0.04

0

0.02

0.04

0.06

0.08

0.1

0.12

0.14

2006 2007 2008 2009 2010

DEBT EQUITY RATIO OF ICICI BANK

DEBT EQUITY RATIO OFICICI BANK


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GRAPH SHOWING EARNING PER SHARE OF ICICI BANK FROM 2006 TO 2010

(d) EARNING PER SHARE:

EPS. Total earnings divided by the number of shares outstanding. Companies often

use a weighted average of shares outstanding over the reporting term. EPS can becalculated for the previous year ("trailing EPS"), for the current year ("currentEPS"), or for the coming year ("forward EPS"). Note that last year's EPS would beactual, while current year and forward year EPS would be estimates.

5. DIVIDEND PER SHARE

28.55

34.5937.37

33.7636.1

0

5

10

15

20

25

30

35

40

2006 2007 2008 2009 2010

earning per share OF ICICI BANK

(RS)

earning per share OF ICICI BANK (RS)


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GRAPH SHOWING DIVIDEND PER SHARE OF ICICI BANK FROM 2006 TO 2010

(e) DIVIDEND PER SHARE:

Where, D= DIVIDENDSD= SPECIAL DIVIDEND DISTRIBUTEDS= OUTSTANDING SHARES

DPS. The amount of dividend that a stockholder will receive for each share of

stock held. It can be calculated by taking the total amount of dividends paid and

dividing it by the total outstanding. 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.

8.5

1011 11

12

0

2

4

6

8

10

12

14

2006 2007 2008 2009 2010

DIVIDEND PER SHARE OF ICICI

BANK (RS)

DIVIDEND PER SHARE

OF ICICI BANK (RS)


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6.NET PROFIT GROWTH RATIO:

(F). PRICE EARNING RATIO:

graph showing P/E ratio of icici bank from 2006 to 2010

(F). PRICE EARNING RATIO:

P/E Ratio indicates the price currently being paid in the market for each rupee of

EPS. It measures the expectation of the investors. A high P/E Ratio may indicate the

possibility of increase in EPS. 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.

20.64

24.67

20.61

9.85

26.39

0

5

10

15

20

25

30

2006 2007 2008 2009 2010

P/E RATIO OF ICICI BANK

P/E RATIO OF ICICIBANK


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7. RETURN ON EQUITY :

GRAPH SHOWING RETURN ON EQUITY OF ICICI BANK FROM 2006 TO 2010

(g). Return on Equity:

The return on equity measures the profitability of equity funds invested in the

firm. It is regarded as a very important measure it reflects the productivity of

the ownership (or risk) capital employed in the firm.

14.62

13.37

11.75

7.83 7.96

0

2

4

6

8

10

12

14

16

2006 2007 2008 2009 2010

ROE OF ICICI BANK

ROE OF ICICI BANK


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INTRA INDUSTRY COMPARISON

1.EPS :

YEAR 2010 2009 2008 2007 2006SBI 114.31 113.67 106.56 86.29 83.73

PNB 123.86 98.03 61.98 48.81 45.65

ICICI 36.10 33.76 37.37 34.59 28.55

ALLAHABAD

BANK

27.01 17.21 21.82 16.79 15.81

GRAPH SHOWING EPS OF SBI,PNB,ICICI,& ALLAHABAD BANK FROM 2006 TO 2010

We can see that the EPS of icici is not higher in its peer group. but EPSshould not be the only one parameter to measure the performance of the bank

Because different banks have different outstanding number of shares. But it

is one of the important ratio to judge the performance.

0

20

40

60

80

100

120

140

2006 2007 2008 2009 2010

SBI

PNB

ICICI

A.B


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2.Dividend Payout ratios:

year 2010 2009 2008 2007 2006

SBI 20.78 20.19 20.18 16.22 15.20

PNB 17.76 20.40 20.01 28.48 26.29ICICI 33.24 32.58 29.44 28.91 27.30

ALLAHBAD

BANK

20.36 20.34 11.46 17.87 15.31

GRAPH SHOWING PAYOUT RATIOS OF SBI,PNB,ICICI,&ALLAHABAD BANK FORM 2006TO 2010

Payout ratio is a ratio which shows as% of DPS from EPS. Payout ratio is ratiowhere all Investors are most concern. In the Peer group, ICICI payout ratio outperformance the other Banks.

0

5

10

15

20

25

30

35

2006 2007 2008 2009 2010

SBI

PNB

ICICI

A.B


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P/E RATIO:

YEAR 2010 2009 2008 2007 2006

SBI 14.4 7.12 15 10.86 10.91

PNB 8.18 14.19 7.82 9.66 10.32

ICICI 26.39 9.85 20.61 21.67 20.64

ALLAHABAD

BANK

5.28 2.26 3.51 4.33 4.99

GRAPH SHOWING P/E RATIOS OF SBI, PNB, ICICI & ALLAHABAD BANK FROM 2006 TO 2010.

The PE ratio reflects the price currently being paid by the market for each rupee ofcurrently reported EPS. In other words, the PE rat io measures investorsexpectations and the market appraisal of the performance of the firm. P/E ratio isfluctuate time to time because market price on of the reason. P/E ratio of ICICI BANK isthe highest compared with its Peer group. The main reason for higher P/E ratio is highershare price and low EPS.

0

5

10

15

20

25

30

2006 2007 2008 2009 2010

SBI

PNB

ICICI

A.B


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