CIA 3 Financial Management

REPORT

Team members –
Kowsheka Baskar
Sanch E Anand
Jissnu Sarvesh

Class – 3 BBA DS
Submitted to – Prof. Boopathy Srihari
Date of Submission – 18/11/2021
INDEX

SL.NO TITLE PG.NO

1 KOTAK MAHINDRA BANK 3

2 AXIS BANK 10

3 ICICI BANK 20

4 BIBLIOGRAPHY 28
INTRODUCTION
Mumbai serves as the corporate headquarters for the Indian banking and financial services firm Kotak Mahindra
Bank Limited. It provides banking products and financial services in the fields of personal finance, investment
banking, life insurance, and wealth management for corporate and retail consumers. As of November 2021, it was
the third-largest private sector bank in India. The bank had 1600 locations as of February 2021 and 2519 ATMs.
The Group offers a wide range of financial services that encompass every sphere of life. From commercial
banking to stock broking, mutual funds, life insurance, and investment banking, the Group caters to the diverse
financial needs of individuals and the corporate sector. The Group has a wide distribution network through
branches and franchisees across India, and international offices in London, New York, California, Dubai, Abu
Dhabi, Bahrain, Mauritius, and Singapore.
CAPITALIZATION
As of November 2022 HDFC Bank has a market cap of $126.15 Billion. This makes HDFC Bank the
world's 93th most valuable company by market cap. The market capitalization, commonly called market cap, is
the total market value of a publicly traded company's outstanding shares and is commonly used to measure how
much a company is worth.

Particulars 2019-2020 2020-2021 2021-2022

Net earnings available to 75480.62 88608.93 110614.41

equity shareholders (In ₹
Cr)
Average rate of return 8.7 9.5 9.2
(%)
Total Capitalization (In ₹ 867593.31 932725.55 120232.77
Cr)

Total Capitalization= Net earnings available to equity shareholders/ Average rate of return

Particulars 2019-20 2020-21 2021-22

Total Assets (In ₹ Cr) 1463116.86 1674268.37 1984127. 59
Current liabilities (In 67394.4 72602.15 84407.46
₹ Cr)
Capital Employed (In 1395722.46 1601666.22 1899720.13
₹ Cr)

Capital Employed= Total Assets/ Current Liabilities

Cost of Capital
Cost of Debt: Assumptions: CTR is 30%

Cost of Equity: Assumptions: Market Price taken as of the last date of the respective accounting year

Cost of debt =
[K(d)] = I(I-T)
Where I = Interest on loan
T = Tax Rate
Cost of Equity = [K(e)] = (EPS/MP) * 100
Where EPS = Earnings Per Share
MP = Market Price
Weighted Average Cost of Capital (WACC):
2019-2020:
LEVERAGE
Leverage is the amount of
debt a company has in its
mix of debt and equity (its
capital structure). A
company with more debt
than average for its industry
is said to be highly
leveraged. HDFC
Bank debt/equity
for the three
months ending
September 30,
2022 was 0.96.
Dividend refers to a reward, cash or otherwise, that a company gives to its shareholders. Kotak Mahindra
Bank has announced an equity dividend of 1550.00%, or Rs 15.5 per share, for the fiscal year ending March
2022. This provides a dividend of 0.95% at the current share price of Rs 1632.90. The business has a solid track
record of dividend declarations during the past five years.
FINDINGS:
 The amount of equity capital has increased steadily over the past three financial accounting years. The
Bank's equity capital increased as a result of the stock options offered to its employees.The execution of
stock options and subsequent allocation of equity shares can be another likely explanation for the increase
in capital.
 Over the course of three successive financial accounting years, the Bank's debt pattern changes. In the
years 2019–20 to 2020–21, there was a decrease in the volume of borrowings. The Covid-19 pandemic's
impacts could be to blame for this. However, after a few months of the epidemic, there may be an
enormous increase in borrowing during the era of recovery. It may be done to pay for its specific costs.
 Financial assets have been increasing steadily over time. This suggests that the bank is making more
investments, that its fixed and current financial assets are growing, and that its cash and bank balances
with the RBI are also increasing. In other words, the main driver of asset value growth is a continual
increase in the amount of money coming in and loans being extended to borrowers; hence, it can be said
that the Bank's income is increasing as well.

Comparison of the Capitalization Position:

The total of a company's debt and equity, or its book value, is referred to as capitalization.
 Market capitalization, which is derived by multiplying the current market price by the total number of
existing shares, represents the monetary value of a company's outstanding shares.
 overcapitalization occurs when earnings are insufficient to justify the reasonable return on the amount of
share capital that the company has issued.
 Undercapitalization occurs when the capital that is owned by the business is significantly less than the
borrowed capital.
 Overcapitalization occurs when a firm's actual profits are insufficient to pay interest to its creditors, as
opposed to undercapitalization, which occurs when a company has excessive profits relative to its
industry.
 While undercapitalization depicts the rate of return as increasing, overcapitalization depicts the rate of
return as a diminishing entity.
 All three banks—ICICI Bank, Axis Bank, and Kotak Mahindra Bank—are overcapitalized, as shown by
the data gathered. It may be due to factors like high advertising costs, the purchase of assets at exorbitant
prices, insufficient depreciation, a generous dividend policy, etc.
AXIS BANK

INTRODUCTION:

Mumbai, Maharashtra-based Axis Bank Limited, formerly known as UTI Bank (1993–2007), is an Indian
banking and financial services organization. It offers financial services to big and small corporations, SMEs, and
retail outlets. The company Axis Asset Management Ltd. The third-largest private sector bank in India, Axis
Bank, provides a full range of financial services to a variety of clientele, including large and mid-sized
corporations, micro, small, and medium-sized enterprises (MSME), agricultural businesses, and retail
establishments.
CAPITALISATION POSITION OF AXIS BANK:

The total worth of all a company's stock shares is referred to as market cap, also known as market capitalization.
It is computed by dividing the stock's price by the total number of shares that are currently outstanding. A
corporation with 20 million shares trading at $50 each, for instance, would have a $1 billion market valuation.
Capitalization is a term used in finance to describe the entire debt and equity of an organization, or its book value.
Market capitalization, which is derived by multiplying the current market price by the total number of existing
shares, represents the monetary value of a company's outstanding shares. When comparing the capitalization of
AXIS Bank over the last three years, we can see that in 2019–2020, it was 564.3 crores, in 2020–21, it was 612.7
crores, showing a rise in capitals, and in 2021–2022, it is 613.9 crores, showing only a slight increase over the
previous year but the highest capital compared to the previous two years. Comparing AXIS Bank's capitalization
position to that of its competitors, ICICI Bank and HDFC Bank, ICICI Bank's position has been relatively high
for the past three years, totaling 1000 crores, whereas HDFC Bank's position has been low compared to both
ICICI Bank and AXIS Bank, totaling only 100 crores.

FINANCIAL STATEMENTS:
FY 2022, FY 2021 AND FY 2020
The amount of capital has increased significantly during the past three financial accounting years. There has been
an increase in equity capital of about 20% (approximately) from the financial year 2019–20 to the financial year
2020–21. However, there hasn't been a considerable rise in the amount of capital from 2020–2021 to 2021–2022.
Given that the debt was lowered during this period, it is possible that this was done as a COVID-19 precaution to
lessen the danger that debt would carry. If the debt component is changed, it can be seen that for the Financial
Year 2020–21, the debt dropped by a few percentage points compared to the Financial Year 2019–20, but a very
unusual behavior is seen in the following year. Compared to FY 19-20 to FY 20-21, the increase from FY 20-21
to FY 21-22 is greater.

SOME OF THE TRENDS FOR THE LAST THREE YEARS:

 Output indicators: The goal is to primarily monitor supply-side performance in a few key industries. The
selection of the indicators depends in large part on the accessibility of the data. A demand signal is also
integrated into several indicators, such as base and peak load demand limitations in electricity.
 Flow of funds: Financial closure, even with VGF, is a sign of the project's economic feasibility. In order
to account for the various risks involved with each, fund flows have been divided into stock and debt
components:
 Market signals for stocks: Strong equity market performance is a sign of the sector's desirability and is
thus likely to be followed by increasing equity market fund flows to the sector. The CNX Infrastructure
Index has also been used to gauge the performance of equities stocks in the infrastructure sector.

DIVIDEND POLICY:

Axis Bank has declared a 50.00% equity dividend, or Rs 1 per share, for the fiscal year ending March 2022. This
yields a dividend of 0.12% at the current share price of Rs 859.20. The business has a solid track record of
dividend declarations during the past five years.

FUTURE PLANS:

The strategic direction of "One Axis" will serve as a cornerstone to support brand synergy throughout the Bank
and all of its subsidiaries as we set out to accomplish the objectives outlined in our 2022 vision. Delivering a
consistent brand identity across all of our digital touchpoints, branches, and subsidiaries will be our first step.
At 2022-11-18, the AXIS Bank Ltd. quotation is equivalent to 857.500 INR. The "Axis Bank Ltd" stock price
prediction for 2027-11-12 is 1052.995 INR based on our projections; a long-term growth is anticipated. The
projected revenue after a 5-year investment is roughly +22.8%. Your $100 investment today might be worth up to
$122.8 in 2027.

CAPITALIZATION:
 Particulars 2019-2020 2020-2021 2021-2022

Net earnings available to equity shareholders (in ₹ Cr) 24322.99 26190.45 29985.28

Average rate of return (%) 8.7 9.5 9.2

Total Capitalization (in ₹ Cr) 279574.66 275688.99 325926.97

Total Capitalization= Net earnings available to equity shareholders/ Average rate of return

Particulars 2019-2020 2020-2021 2021-2022

Total Assets (In ₹ Cr) 873006.91 951782.25 1122028.85

Current liabilities (In ₹ Cr) 42157.9 44336.17 53149.28

Capital Employed (In ₹ Cr) 830849.01 907446.08 1068879.57

Capital Employed= Total Assets/ Current Liabilities

It is evident from the above table that the Bank has used more money over the course of three consecutive years
than it has used to generate actual profits, or total capitalization.
The Bank is 551274.00 crores overcapitalized for the years 19 and 20. The bank is 631757.09 crores
overcapitalized for the years 20 to 21. The Bank is 742952.6 crores overcapitalized for the years 21 and 22. So,
we might say that the Bank has excess capital.

COST OF CAPITAL:

Assumptions: CTR is 30%

Particulars 2019-2020 2020-2021 2021-2022

Interest rate on loan (%) 7.5 7.6 7.5

Tax rate (%) 30 30 30

Cost of Debt[K(d)] 5.25 5.32 5.25

Cost of Equity: Assumptions: Market Price taken as of the last date of the respective accounting year.

Particulars 2019-2020 2020-2021 2021-2022

Earnings per share (In ₹) 5.99 22.15 42.48

Market Price (In ₹) 379 697.45 761.15

Cost of Equity [K(e)] 1.58047493 3.1758549 5.58102871

Cost of debt = [K(d)] = I(I-T)

Where I = Interest on loan
T = Tax Rate
Cost of Equity = [K(e)] = (EPS/MP) * 100
Where EPS = Earnings Per Share
MP = Market Price.

WEIGHTED AVG COST OF CAPITAL:

2019-2020

Source Book Value (in ₹ Cr) Weights After-Tax Cost WACC

Equity Share Capital 564.33 0.00323993 5.57 0.0180464

Retained Earnings 25661.35 0.14732678 5.57 0.82061015

Borrowings 147954.13 0.8494333 5.67 4.81628678

Total 174179.81 5.65494333

2020-2021

Source Book Value (in ₹ Cr) Weights After -Tax cost WACC

Equity share capital 612.74 0.00347625 3.79 0.01317497

Retained earnings 32778.96 0.18596424 3.79 0.70480445

Borrowings 142873.16 0.81055952 5.77 4.67692842

Total 176264.86 5.39490785

2021-2022

Source Book Value (in ₹ Cr) Weights After -Tax cost WACC

Equity share capital 613.94 0.00268379 4.54 0.0180464

Retained earnings 43010.76 0.188018714 4.54 0.82061015

Borrowings 185133.86 0.80929807 5.82 4.71011474

Total 228758.56 5.57590152

RATIOS:
CAPITAL STRUCTURE RATIO:

Particulars 2019-2020 2020-2021 2021-2022

Share Capital 564.34 612.75 762.55

Reserves and Surplus 84383.51 100990.26 114411.51

Secured loan 147954.13 142873.16 185133.86

Unsecured loan 640104.94 707306.08 821720.91

Total assets 873006.91 951782.25 1122028.83

Capital employed 830849.01 907446.08 1068879.57

Equity ratio 0.060862996 0.06343582 0.060626857

Debt ratio 0.564624481 0.530809247 0.530001632

Debt to assets ratio 0.902695112 0.893249732 0.89735196

Debt to equity ratio 9.28 8.37 8.75

LEVERAGE RATIO:

Particulars 2018-2019 2019-2020 2020-2021 2021-2022

EBIT 52282.7 60867.09 60108.35 58986.62

Change in EBIT 0.164191788 -0.012465521 -0.0186618

EBT 6974.09 4904.23 8805.85 17382.56

Change in EBT -0.296792843 0.795562198 0.973978662

EPS 18.38 5.99 22.15 42.48

Change in EPS -0.674102285 2.697829716 0.917832957

Sales 54985.77 62635.16 63645.29 67376.83

Change in sales 0.139115811 0.016127204 0.058630262

Particulars 19-20 20-21 21-22

Financial leverage 12.41114099 6.825956608 3.39343687

Degree of financial leverage -0.553220173 -0.01566882 -0.019160379

Degree of operating leverage -2.133422798 49.33044814 16.61221758

Degree of combined leverage -4.845619481 167.2844049 15.65459428

DIVIDEND POLICY RATIO:

Dividend per share 1

 Dividend payout ratio net profit

Dividend payout ratio cash profit

Axis Bank has declared a 50.00% equity dividend, or Rs 1 per share, for the fiscal year ending March 2022. This
yields a dividend at the current share price of Rs. 855.40 of 0.12%. The business has a solid track record of
dividend declarations during the past five years.
ICICI bank

The Industrial Credit and Investment Corporation of India (ICICI) Bank Limited is a global banking and financial

services corporation based in India. It was founded on January 5, 1994, and has its corporate office in Mumbai,

Maharashtra. In India, the banks have 5275 branches and 15,589 ATMs. It has a global brand presence in 17

countries. It has subsidiaries in the United Kingdom and Canada, as well as branches in the United States,

Bahrain, Singapore, Qatar, Hong Kong, Oman, the Dubai International Finance Centre, China, and South Africa.

ICICI Bank also has branches in the United Arab Emirates, Malaysia, Indonesia, and Bangladesh. Its subsidiary

in the United Kingdom has offices in Germany and Belgium. ICICI Bank introduced internet banking services in

1998, and in 1999 it became the first Indian corporation and the first bank to be listed on the New York Stock

Exchange. ICICI Bank also assisted in the establishment of the Credit Information Bureau of India Limited

(CIBIL).

Capitalization

Particulars 2019-2020 2020-2021 2021-2022

Net earnings 25810.38 37520.15 54348.56

available to equity

shareholders (In ₹

Cr)
 Average rate of 8.7 9.5 9.2

return (%)

Total Capitalization 296671.07 394948.97 590745.18

(In ₹

Crores)

Total Capitalization= Net earnings available to equity shareholders/ Average rate of return

Particulars 19-20 20-21 21-22

Total Assets (In ₹ 1053485.03 1174755.89 1053485.03

Crores)

Current liabilities 47994.99 58770.37 68982.79

(In ₹ Crores)

Capital Employed 1005490.04 1115985.52 984502.24

(In ₹ Crores)

Capital Employed= Total Assets/ Current Liabilities

ICICI Bank is overcapitalized, according to our analysis. The overissue of capital is the cause of its

overcapitalization. This indicates that the Bank has issued an excessive number of shares or debentures. This has

put a persistent strain on the bank's earnings.

The accompanying table plainly shows that the bank has more capital utilised than capital for real profit for three

consecutive years, i.e. total capitalization.

The bank is overcapitalized by 708818.97 crores in 2019-2020. The bank is overcapitalized by 721036.55 crores

in 2020-2021. The bank is overcapitalized by 393757.06 crores in 2021-2022. As a result, we might say that the

bank is overcapitalized.

Cost of Capital

Cost of Debt: Assumptions: CTR is 30%

 Particulars 2019-2020 2020-2021 2021-2022

Interest rate on 7.7 7.87 7.65

loan

Tax rate 30 30 30

Cost of 5.39 5.51 5.36

Debt[K(d)]

Cost of Equity: Assumptions: Market Price taken as of the last date of the respective accounting year

Particulars 2019-2020 2020-2021 2021-2022

Earnings per share 12.28 24.01 33.66

Market Price 323.75 582.1 730.3

Cost of Equity 3.79305019 4.12472084 4.60906477

[K(e)]

Cost of debt = [K(d)] = I(I-T)

Where I = Interest on loan

T = Tax Rate

Cost of Equity = [K(e)] = (EPS/MP) * 100

Where EPS = Earnings Per Share

MP = Market Price

Weighted Average Cost of Capital (WACC):

2019-20:
 Source Book Value (in Weights After-Tax Cost WACC

₹Cr)

Equity Share 1294.76 0.00681446 3.79 0.0258268

Capital

Retained 25810.38 0.13584275 3.79 0.51484404

Earnings

Borrowings 162896.75 0.85734279 5.39 4.62107762

Total 19001.89 - - 5.16174846

2020-21:

Source Book Value (in Weights After-Tax Cost WACC

₹ Cr)

Equity Share 1383.4 0.01059796 4.12 0.04366361

Capital

Retained 37520.15 0.28743474 4.12 1.18423113

Earnings

Borrowings 91630.95 0.7019673 5.51 3.8678398

Total 130534.5 - - 5.09573454

2021-22:

Source Book Value (in ₹ Weights After-Tax Cost WACC

Cr)

Equity Share 1389.96 0.00860206 4.61 0.03965548

Capital

Retained 52963.32 0.32777449 4.61 1.51104041

Earnings
 Borrowings 107231.35 0.66362345 5.36 3.5570217

Total 161584.63 - - 5.10771759

Ratios

Capital Structure Ratio:

Particulars 19-20 20-21 21-22

Share Capital 1298.25 1386.51 1656.38

Reserves & Surplus 112091.29 143029.08 165659.93

Secured Loan 162896.76 91630.96 107231.36

Unsecured Loan 770968.99 932522.16 1064571.61

Total Assets 1053485.03 1174755.89 1345510.61

Capital Employed 1005490.04 1115985.52 984502.24

Equity Ratio 0.112770426 0.12940633 0.169950157

Debt Ratio 0.928766783 0.917711836 1.190249166

Debt to Assets 0.886453745 0.871800796 0.87089835

Ratio

Debt to Equity 8.24 7.09 7.01

Ratio

Equity Ratio= Total Share Capital/ Total Assets

Debt to Assets Ratio= Total Debt/ Total Assets

Debt to Equity Ratio= Total Debt/ Total Equity

Leverage Ratio:

Particulars 18-19 19-20 20-21 21-22

EBIT 59824.29 69632.53 76525.96 78158.76

Change in EBIT 0.163950797 0.098997265 0.02133655

 EBT 3776.76 14048.04 20182.72 30608.89

Change in EBT 2.719600928 0.436692948 0.516588943

EPS 5.23 12.28 24.01 33.66

Change in EPS 1.347992352 0.955211726 0.401915868

Sales 63401.19 74798.32 79118.27 86374.55

Change in Sales 0.179762083 0.057754639 0.091714341

19-20 20-21 21-22

Financial 4.956743432 3.791657418 2.553466003

Leverage

Degree of 0.060284873 0.226697649 0.041302762

Financial

Leverage

Degree of 15.12889079 7.561175213 5.632586326

Operating

Leverage

Degree of 7.498757952 16.53913411 4.382257602

Combined

Leverage

Financial Leverage= EBIT/EBT

Degree of Financial Leverage= Percentage change in EBIT/ Percentage change in EBT

Degree of Operating Leverage= Percentage change in EBT/ Percentage change in Sales

Degree of Combined Leverage= Percentage change in EPS/ Percentage change in Sales

Dividend Policy Ratio:

Dividend Per Nil 2 5

Share

Dividend Nil Nil 5.93

Payout Ratio

Net

Profit

Dividend Nil Nil 5.65

Payout Ratio

Cash Profit

For the year ending March 2022, ICICI Bank has declared an equity dividend of

250.00% amounting to Rs 5 per share. At the current share price of Rs 913.60, this results

in a dividend yield of 0.55%. The company has a good dividend track report and has

consistently declared dividends for the last 5 years.

Balance Sheet as of 31-03-2020:

Balance Sheet as of 31-03-2021:
Balance Sheet as of 31-03-2022:
Findings and insights:

 The quantity of capital has steadily increased over the last three successive financial

accounting years. One possible explanation is that the bank is expanding, implying

that it is increasing. A business cannot develop without growth capital, which is

usually the result of bad financial planning, which may be extremely destructive to the

organisation.

 The amount of debt borrowed by the bank has increased dramatically (Borrowings).

This can have both good and bad implications for the bank since continual increase in

borrowings indicates that the bank is permitted to leverage a little amount of money

into a much greater sum and repay it over time. This enables it to fund expansion
 projects more quickly than would otherwise be possible, increasing profits at a faster

rate, but it is also negative because it implies a lower growth rate, most likely due to

the expected high level of taxes, which may reduce consumption and savings.

 Even in terms of financial assets, there has been consistent increase. This suggests

that the Bank's investments are expanding, as are the quantity of financial assets, both

fixed and current, and cash and bank balances with the RBI. In other words, the

continual increase in the inflow of cash and loans granted to borrowers is the major

reason for the value of assets to rise, and because of the consistent increase in the

number of loans given, it can be argued that the Bank's revenue is growing as well.