A Comprehensive Study of the Financial Analysis of HDFC Bank

Dissertation synopsis submitted in partial fulfilment of the requirement of for the award of degree of Master of commerce Of St. Philomenas College

ByRosbin Pappu Reg no. MCM140309Under the Guidance ofProf. ManjunathDepartment of commerce ST. PHILOMENA'S COLLEGE (Autonomous)MYSURUIntroductionIn nonprofessional terms, a bank is any financial institution that deals with money and provides financial services. The primary form of banking present in the modern industrial world is commercial banking & central banking. The housing development finance corporation limited (HDFC) was amongst the first to receive an "in-principle" approval from the reservebank of India (RBI) to set up a bank in the private sector, as part ofRBI liberalization of Indian banking industry in 1994. The bank was in corporate in Aug. 1994 in the name of HDFC Bank Ltd. With its registered office in Mumbai, India, HDFC Bank commenced operations as scheduled commercial bank in January 1995.

Introduction to TopicMEANING OF FINANCIAL STATEMENTS:

Financial statements refer to such statements, which contains financial information about an enterprise. They report profitability and the financialposition of the business at the end of accounting period. The team financial statement includes at least two statements that the accountant prepares at the end of an accounting period. The two statements are -1. The Balance Sheet2. Profit and Loss AccountThey provide some extremely useful information to the extent thatbalance Sheet mirrors the financial position on a particular date in terms ofthe structure of assets, liabilities and owners equity, and so on and the Profit And Loss account shows the results of operations during a certain period oftime in terms of the revenues obtained and the cost incurred during the year. Thus, the financial statement provides a summarized view of financialpositions and operations of a firm.

MEANING OF FINANCIAL ANALYSIS

The first task of financial analysis is to select the information relevant to the decision under consideration to the total information contained in the financial statement. The second step is to arrange the information in a way to highlight significant relationship. The final step is interpretation and drawing of inference and conclusions. Financial statement is the process of selection, relation and evaluation.

Objectives of the StudyThe primary objective of the present study is to assess financial condition of the bank by using ratios. The following are the other objectives of the study. 1. To know about HDFC bank and its operations with a specific reference to Sahakarnagar Branch.2. To understand the technological services provided by HDFC bank Sahakarnagar Branch.

Scope of the StudyThis study will be a descriptive one exploring Financial Analysis concepts of banking industry only. This study will explore the financial analysis of HDFC bank Sahakarnagar branch.Review of Literature:

Anil Kumar Soni & Harjinder Pal Singh Saluja (2013) used financial ratios to evaluate the performance of the District Central Cooperative Bank plays a vital role in the agriculture and rural development of the Rajnandgaon. The study revealed that financial position of this bank analyzed by ratio analysis techniques. It is found that the position solvency, liquidity and profitability are satisfactory. The efficiency ratios indicated a medium level of the expenditure over the gross income. Profitability of the bank was very low due to the heavy over dues and low rate of recovery.

Hosamani (1995) used various ratios to evaluate the performance of Malaprabha Grameena Bank in Karnataka. Profitability ratios were negative (-43%) due to higher burden ratio (3.11%) compared to spread (2.96%).

Pathania and Sharma (1997) studied the working of Himachal Pradesh State Cooperative Agricultural and Rural Development Bank, which lends money on a long-term basis for a variety of end users. The financial durability of the bank was measured and data were presented on the long term financial strength, debt to equity ratio, fixed assets to net worth ratio, the short- term financial performance, and the current ratio. It was concluded that the financial position of the bank was not sound, with liabilities exceeding equity.Patil (2000) used various financial ratios to evaluate the performance of Primary Cooperative Agricultural and Rural Development Banks in Dharwad district of Karnataka. The study revealed that the current ratio was more than unity and acid test ratio was less than unity, while the net worth and profitability ratios were negative for all the banks in all the periods except for PCARDB, Dharwad.

SAMPLING TECHNIQUESampling is necessary because it is almost impossible to examine the entireparent population (i.e. the entire universe) various factors such as time available cost, purpose of study etc. make it necessary for the researchers to choose a sample. It should be neither too small nor too big. It should be manageable. The sample size of past 5 years is taken for present study due to time limitation.

DATA COLLECTIONS

The process of data collection begins after a research problem has been defined and research design has been chalked out. There are two types ofdata, Primary and Secondary.

Primary Data: It is first hand data, which is collected by researcher itself. Primary data is collected by various approaches to get a precise, accurate, realistic and relevant data. The main tool in gathering primary data was investigation and observation. It was achieved by a direct approach and observation from the officials of the company.

Secondary Data: It is the data, which is already collected by someone else. Researcher has to analyze the data and interprets the results. It has always been important for the completion of any report. It provides reliable, suitable, adequate and specific knowledge took data comprise annual reports and post records. The secondary data for the purpose of the analysis represents the annual reports of years 2008-09 until 2013-2014. The valuable cooperation extended by staff members contributed a lot to fulfill the requirements in the collection of data in order to complete theproject. Various statistical tools are applied depending on the researchproblem. In this study ratio analysis, comparative financial statements analysis, common size statements and Trend Analysis has been used foranalyzing and interpreting the result.

The present study has been carried with the help of following research methodology to achieve above stated objectives.

DATA

The present study was done by using the secondary data.

DATA SOURCES

Secondary data has been collected from company web sites, records http://www.hdfcbank.com/aboutus/cg/annual_reports.htm http://www.moneycontrol.com/india/stockpricequote/banksprivatesector/hdfcbank/HDF01 International Journal of Accounting and Financial Management Research (IJAFMR)

DATA PERIOD

This study has been carried with five years of data. The data period is from the financial years 2008-2009 to 2013-2014

TOOLS USED

Ratio analysis is used to evaluate relationships among financial statement items. The ratios are used to identify trends over time for one company or to compare two or more companies at one point in time. Financial statement ratio analysis focuses on three key aspects of a business: liquidity, profitability, and solvency.

DuPont Analysis: is used to compute the Return on Investment by considering the various measures like Net Profit Ratio and Capital Turnover Ratio.

Forecasting Financial Statements is the process of estimating future business performance (sales, costs, earnings).Corporations use forecasting to do financial planning, which includes assessment of their future financial needs.RESEARCH METHODOLOGY FOR TIME MOTION STUDIES

METHODOLOGY FRAMEWORKSeveral methods will be used to achieve research objectives. After the literature review, observation and collecting data is needed. The complete field data collection will be tested before it will be used for data analysis.

The problems and nonproductive in the work process can be identified based on the data collection and their analysis. Then, the result from the data testing will be determined whether the result can be used or not and if there are any incomplete data, the data collection will be executed again until it fulfills the objective requirement. After all the data and analysis are complete, proposal and opinion may be given to the organization.

RESEARCH DESIGNThis research was conducted through field study. Field study is all the methods of research are made from direct observations towards the live study situations. Researcher collected data by observing and recorded the research subject during the observation. According to Tunnell, 1977, the event from the field study is a matter of real situation in the live condition continuously. The matter is not invent, on design or pause for the research purpose.

VARIABLESThe variables in this study can be classified into two types, which are independent (time and motion technique and dependent variable (the work process under consideration). This research used time and motion technique to study on improving the work process. Meaning, the increasing of work process efficiency is depending on the time and motion technique.

BASIC PROCEDURE FOR RESEARCHThere are four steps to complete this study. There are given below according to their sequence:a. Select: select the process or job to be studied.b. Record: observe and record all the relevant facts related to the work process.c. Examine: examine each recorded fact criticallyd. Develop: develop the most efficient work process.

DATA COLLECTIONThis research requires to collect data that are related to the time during the work process occurs, the movement or distance for each process and number of products that they can produces in specific time, which was collect based on several methods:a. Systematic Observationb. Stopwatch Time Studyc. Process Chart

SYSTEMATIC OBSERVATIONSystematic observation means researcher are required to observe the whole work process in that industry, then select and focusing on which process or job that want to study. Based on the observation, is needs to record everything happens in each process from the start to finish the work process.

STOPWATCH TIME STUDYStopwatch time study is the work measurement to determine the baseline for future improvement. It is also used to analyze a specific process by qualified workers in an effort to find the most efficient ways in terms of time. Moreover, this method measures the time necessary for a work process to be completed using the best ways. The time was measured using snapback stopwatch equipment because it is easier and faster in data recording. Moreover, this type of stopwatch is suitable for this research because it can develop accurate data. This allows the element times to be entered directly on the time study sheet without the need for subtractions.

PROCESS CHARTProcess chart is used to show facts as handling, inspection, operations, storage and delays that occur in the work process, where it was happened when the process moves from one process to another process until it finished. Each fact can be represented by symbols, where it is used to describe the process steps.

DATA ANALYSISAfter all data is collected, the next step is analyzing the data thoroughly for each work process. Analyzing data based on systematic observation and the process chart, which recorded all the relevant facts about the work process. Thus identifying the sections of the work force are non productive and take a long time in the work process.

SWOT ANALYSIS OF HDFC BANK

Every organization big or small has to conduct a SWOT (Strengths, Weaknesses, Opportunities and Threats) analysis so that it may be able to direct its strategies and efforts in converting its weaknesses into strengths and threats into opportunities. Strength of HDFC Bank Weakness of HDFC Bank Opportunities of HDFC Bank Threats of HDFC Bank. RECOMMENDATIONS AND CONCLUSIONS:

The bank has been growing good from the last five years indicating the positive sign to the shareholders and the stakeholders. Banks capital adequacy ratio is good and it is maintaining more than the BASEL-III requirements Amalgamation of centurion bank of Punjab in 2008 has some impact in its functions and assets but it takes less time for the bank to regain its profits The bank has been expanding its branches with less costs and expenses by managing its human power and assets efficiently Profitability and solvency ratios are indicating good soundness of the bank. Efficiency ratios like management ,operating, operating and gross ratios are indicating that the bank is effectively managing the employee costs and other administrative costs Current Ratios shows some negative indications regarding the maintenance of current assets for current liabilities but actually banks maintain the capital to risk free assets known as capital adequacy ratio for fulfilling the obligations which was good for the bank.

The overall performance of the bank was good showing a positive sign to the stakeholders.

LIMITATIONS OF STUDY

The study considers financial ratio analysis Altman Z-score other factors like CAGR, Altman Z-score and benchmarking to industry are ignored. Findings are not confined to individual branch. Although basic patterns of the Footfall studies and Time Motion studies have been identified, they are however, subject to the various aspects such as deposit and withdrawal patterns of month beginnings, weather, re-opening of schools and colleges, etc.

Chapter Scheme: Chapter one deals with introduction of banking Chapter two deals with profile of the organization and introduction of topic Chapter three deals with review of literature and research design. Chapter four deals with data analysis and interpretation. Chapter five talks about finding, recommendation and conclusion. Chapter six talks about limitations of study.