project on kotak mahindra

CHAPTER-1

Introduction

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(1.1)Topic

Ratio Analysis

(1.1.1) Definition of ratio analysis:

Ratio analysis is a widely used tool of financial analysis. It is defined as the systematic use of ratio to interpret the financial statements so that the strength and weaknesses of a firm as well as its historical performance and current financial condition can be determined. The term ratio refers to the numerical or quantitative relationship between two variables.

(1.1.2) Significance or Importance of ratio analysis:

Helps in evaluating the firms performance:

With the help of ratio analysis conclusion can be drawn regarding several aspects such as financial health, profitability and operational efficiency of the undertaking. Ratio points out the operating efficiency of the firm i.e. whether the management has utilized the firm’s assets correctly, to increase the investor’s wealth. It ensures a fair return to its owners and secures optimum utilization of firms assets

Helps in inter-firm comparison:

Ratio analysis helps in inter-firm comparison by providing necessary data. An interfirm comparison indicates relative position.It provides the relevant data for the comparison of the performance of different departments. If comparison shows avariance, the possible reasons of variations may be identified and if results are negative, the action may be intiated immediately to bring them in line.

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Simplifies financial statement:

The information given in the basic financial statements serves no useful Purpose unless it s interrupted and analyzed in some comparable terms. The ratio analysis is one of the tools in the hands of those who want to know something more from the financial statements in the simplified manner.

Helps in determining the financial position of the concern:

Ratio analysis facilitates the management to know whether the firms financial position is improving or deteriorating or is constant over the years by setting a trend with the help of ratios The analysis with the help of ratio analysis can know the direction of the trend of strategic ratio may help the management in the task of planning, forecasting and controlling.

Helpful in budgeting and forecasting:

Accounting ratios provide a reliable data, which can be compared, studied and analyzed. These ratios provide sound footing for future prospectus. The ratios can also serve as a basis for preparing budgeting future line of action.

Liquidity position:

With help of ratio analysis conclusions can be drawn regarding the Liquidity position of a firm. The liquidity positon of a firm would be satisfactory if it is able to meet its current obligation when they become due. The ability to met short term liabilities is reflected in the liquidity ratio of a firm.

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Long term solvency:

Ratio analysis is equally for assessing the long term financial ability of the Firm. The long term solvency s measured by the leverage or capital structure and profitability ratio which shows the earning power and operating efficiency, Solvency ratio shows relationship between total liability and total assets.

Operating efficiency:

Yet another dimension of usefulness or ratio analysis, relevant from the View point of management is that it throws light on the degree efficiency in the various activity ratios measures this kind of operational efficiency.

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(1.2) Trend and Industry Analysis

That’s where trend (time-series) and industry (cross-sectional) analysis come

in. You can compare your firm’s ratios to trend data, which is data from other time periods for

your firm, to see how your firm is doing over a series of time periods.

You can also compare your firm’s ratios to industry data. You can gather data from

similar firms in the same industry, calculate their financial ratios, and see how your firm is doing

compared to the industry at large. Ideally, to get a good picture of the financial picture of your

firm, you should do both.

STANDARDS OF COMPARISION:

The ratio analysis involves comparison for a useful interpretation of the financial

statements.  A single ratio is itself does not indicate favourable or unfavourable condition.  It

should be compared with some standard.  It consists of:

PAST RATIOS: Rations calculated from past financial statements of the same

firm.

COMPETITORS RATIOS: Ratios of some selected firms, especially most

progressive and successful competitor, at the same point of time.

INDUSTRY RATIOS: Ratios of industry to which the firm belongs.

PROJECTED RATIOS: Ratios developed using the projected or proforma,

financial statements of the same firm.

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(1.3) Classification Of Ratios

The parties interested in financial analysis are short and long term creditors, owners and

management.  Short term creditors main interest is I the liquidity position or short term solvency

of the firm.  Long term creditors on the other hand are more interested in the long term solvency

and profitability of the firm.  Similarly, owners concentrate on the firm's profitability and

financial condition.  Management is interested in evaluating every aspect of the firm's

performance.  They are classified into 4 categories:

Liquidity ratios

Liverage ratios

Activity ratios

Profitability ratios

Liquidity Ratios:

Liquidity ratios measure the firms ability to meet current obligations.  It is extremely

essential for a firm to be able to meet its obligations as they become due liquidity ratio's

measure.  The ability of the firm to meet its current obligations.  In fact analysis is of liquidity

needs in the preparation of cash budgets and cash and funds flow statements, but liquidity ratios

by establishing a relationship between cash and other current assets to current obligations

provide a quick measure of liquidity.

A firm should ensure that it does  not suffer from lack of liquidity and also that it does not

have excess liquidity.  The failure of the company to meet its obligations due to the lack of

sufficient liquidity will result in a poor credit worthiness, loss of creditors confidence or even in

legal tangles resulting in the closure of company.  A very high degree of liquidity is also bad,

idle assets earn nothing.  The firm's funds will be unnecessarily tied up to current assets. 

Therefore, it is necessary to strike a proper balance between high liquidity and lack of liquidity.

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1. Current ratio

2. Quick ratio

3. Interval measure

4. Net working capital ratio

1. Current Ratio:

Current ratio is calculated by dividing current assets by current liabilities:  Current assets

include cash and those assets which can be converted into cash with in a year, such as

marketable securities, debtors and inventories.  Current liabilities include creditors, bills

payable, accrued expenses, short term back loan, income tax liability and long term debt

maturing in current year.  The current ratio is a measure of firm's short term solvency.

As a conventional rule a current ratio of 2:1 or more is considered satisfactory.  The

current ratio represents margin of safety for creditors

CURRENT RATIO = CURRENTS ASSETS

CURRENT LIABILITIES

2. Quick Ratio:

Quick ratio establishes a relationship between quick or liquid, assets and current

liabilities.  Cash is the most liquid asset, other assets which are considered to be relatively liquid

and included in quick assets are debtors and bills receivables and marketable securities. 

Inventories are considered to be less liquid.

Generally a quick ratio of 1:1 is considered to represent a satisfactory current financial condition

QUICK RATIO: CURRENT   - INVENTORIES

                     CURRENT LIABILITIES

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3. Interval Measure:

The ratio which assesses a firm's ability to meet its regular cash expenses is the interval

measure.  Interval measure relates the liquid assets to average daily operating cash outflows. 

The daily operating expenses will be equal to cost of goods sold plus selling, administrative and

general expenses  less depreciation divided by number of days in the year.

INTERVAL MEASURE: CURRENTASSETS–INVENTORY

AVERAGE DAILY OPERATING EXPENSES

4. Net Working Capital Ratio:

The difference between current assets and current liabilities excluding short term bank

borrowing is called net working capital or net current assets.  Net working capital is some times

used as measure of firm's liquidity.

NET W.C RATIO: NETWORKING CAPITAL

NET ASSETS

Liverage Ratios:

The short term creditors, like bankers and suppliers of raw material are more concerned

with the firms current debt paying ability.  On the other hand, long term creditors like debenture

holders, financial institutions etc. are more concerned with firms long term financial strength.  In

fact a firm should have short as well as long term financial position.  To judge the long term

financial position of the firm, financial leverage or capital structure, ratios are calculated.  These

ratios indicate mix of funds provided by owners and lenders.  As a general rule, there should be

an appropriate mix of debt and owners equity in financing the firm's assets.

1. Debt Ratio

2. Debt Equity Ratio

3. Capital employed to net worth ratio

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4. Other Debt Ratios

1. Debt Ratio:

Several debt ratios may be used to analyse the long term solvency of the firm.  It may

therefore compute debt ratio by dividing total debt by capital employed or net assets.

Net assets consist of net fixed assets and net current assets:

DEBT RATIO: TOTAL DEBT

NET ASSETS

2. Debt Equity Ratio:

It is computed by dividing long term  borrowed capital or total debt by Share holders fund or net

worth.

DEBT EQUITY RATIO: TOTAL DEBT

NET WORTH

DEBT EQUITY RATIO: LONG TERM   BORROWED CAPITAL

SHARE HOLDERS FUND

3. Capital Employed To Net Worth Ratio:

There is an another alternative way of expressing the basic relationship between debt and

equity.  It helps in knowing, how much funds are being contributed together by lenders and

owners for each rupee of owner's contribution.  This can be found out by calculating the ratio of

capital employed or net assets to net worth

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NET WORTH RATIO:       CAPITAL EMPLOYED

NET WORTH

4. Other Debt Ratios:

To assess the proportion of total funds – Short and Long term provided by outsiders to

finance total assets, the following ratio may be calculated TL to TA RATIO:

Other debt ratio: TOTAL LIABILITIES

TOTAL ASSETS

Activity Ratios:

Funds of creditors and owners are invested in various assets to generate sales and profits. 

The better the management of assets, the larger is an amount of sales.  Activity ratios are

employed to evaluate the efficiency with which the firm manages and utilizes its assets these

ratios are also called turnover ratios because they indicate the speed with which assets are being

converted or turned over into sales.  Activity ratios, thus, involve a relationship between sales

and assets.  A proper balance between sales and assets generally reflects that assets are managed

well.

1. Inventory turnover ratio

2. Debtors turnover ratio

3. Collection period

4. Net assets turnover ratio

5. Working Capital turnover ratio

1. Inventory Turnover Ratio:

Inventory turnover ratio indicates the efficiency of the firm in producing and selling its

product.  It is calculated by dividing cost of goods sold by average inventory.  Average

inventory consists of opening stock plus closing stock divided by 2.

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INVENTORY TURNOVER RATIO: COST OF GOODS SOLD

AVERAGE INVENTORY

2. Debtors Turnover Ratio:

Debtors turnover ratio is found out by dividing credit sales by average debtors.  Debtors

turnover indicates the number of times debtors turnover each year.  Generally the higher the

value of debtors turnover, the more efficient is the management of credit

DEBTORS TURNOVER RATIO = CREDIT SALES

AVERAGE DEBTORS

3. Collection Period:

The average number of days for which debtors remain outstanding is called the average

collection period.

AVERAGE COLLECTION PERIOD= NO. OF DAYS IN A YEAR

DEBTORS TURNOVER

4. Net Assets Turnover Ratio:

A firm should manage its assets efficiently to maximise sales.  The relationship between

sales and assets is called net assets turnover ratio.  Net assets include net fixed assets and net

current assets

NET ASSETS TURNOVER RATIO= SALES

NET ASSETS

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5. Working Capital Turnover Ratio:

A firm may also like to relate net current assets to sales.  It may thus compute net

working capital turnover by dividing sales by net working capital

WORKING CAPITAL TURNOVER RATIO= SALES

NET CURRENT ASSETS

Profitability Ratios:

A company should earn profits to survive and grow over a long period of time.  Profits

are essential but it would be wrong to assume that every action initiated by management of a

company should be aimed at maximizing profits, irrespective of social consequences.

Profit is the difference between revenues and expenses over a period of time.  Profit is the

ultimate output of a company and it will have no future if it fails to make sufficient profits. 

Therefore, the financial manager should continuously evaluate the efficiency of the company in

terms of profits.  The profitability ratios are calculated to measure the operating efficiency of the

company.

Generally, there are two types of profitability ratios

1. Profitability in relation to sales

2. Profitability in relation to investment

a. Gross profit margin ratio

b. Net profit margin ratio

c. Operating expenses ratio

d. Return on Investment

e. Return on equity

f. Earning per share

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g. Dividends per share

h. Dividend pay out ratio

i. Price earning ratio

a. Gross Profit Ratio:

It is calculated by dividing gross profit by sales.  The gross profit margin reflects the

efficiency with which management produces each unit of product.  This ratio indicates the

average spread between the cost of goods sold and the sales revenue.

GROSS PROFIT RATIO= GROSS PROFIT

SALES

b. Net Profit Ratio:

Net profit is obtained when operating expenses, interest and taxes are subtracted from the

gross profit.  The net profit margin is measured by dividing profit after tax or  net profit by sales.

NET PROFIT RATIO= NET PROFIT

SALES

c. Operating Expense Ratio:

Operating expense ratio explains the changes in the profit margin ratio.  This ratio is

computed by dividing operating expenses like cost of goods sold plus selling expenses, general

expenses and administrative expenses by sales.

OPERATING EXPENSE RATIO= OPERATING EXPENSES

SALES

The higher operating expenses ratio is unfavorable since it will leave operating income to

meet interest dividends etc.

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d. Return On Investment:

The term investment may refer to total assets or net assets.  The conventional approach of

calculating return on investment is to divide profit after tax by investment.  Investment

represents pool of funds supplied by shareholders and lenders.  While PAT represent residue

income of shareholders

RETURN ON INVESTMENT= PROFIT AFTER TAX

INVESTMENT

e. Return On Equity:

Ordinary share holders are entitled to the residual profits.  A return on shareholders

equity is calculated to see the profitability of owners investment.  Return on equity indicates

how well the firm has used the resources of owners.  The earning of a satisfactory return is the

most desirable objective of business.

RETURN ON EDQUITY= PROFIT AFTER TAX

NET WORTH

f. Earnings Per Share:

The measure is to calculate the earning per share.  The earning per share is calculated by

dividing profit after tax by total number of outstanding.  EPS simply shows the profitability of

the firm on a per share basis, it does not reflect how much is paid as dividend and how much is

retained in business.

EARNINGS PER SHARE= PROFIT AFTER TAX

NO. OF SHARES OUTSTANDING

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g. Dividends Per Share:

The net profits after  taxes belong to shareholders.  But the income which they really

receive is the amount of earnings distributed as cash dividends.  Therefore, a larger number of

present and potential investors may be interested in DPS rather than EPS.  DPS is the earnings

distributed to ordinary shareholders divided by the number of ordinary shares outstanding.

DPS= EARNINGS PAID TO SHARE HOLDERS

NUMBER OF SHARES OUTSTANDING

h. Dividend Pay Out Ratio:

The dividend pay out ratio is simply the dividend per share divided by Earnings Per

Share.

DIVIDEND PAY OUT RATIO= DIVIDEND PER SHARE

EARNINGS PER SHARE

i. Price Earning Ratio:

The reciprocal of the earnings yield is called price earning ratio.  The price earning ratio

is widely used by security analysts to value the firm's performance as expected by investors. 

Price earning ratio reflects investors expectations about the growth of firm's earnings.  Industries

differ in their growth prospects.  Accordingly, the P/E ratios for industries very widely.

PRICE EARNING RATIO= MARKET VALUE PER SHARE

EARNING PER SH

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CHAPTER – 2

Organization Profile

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(2.1) About The Company

The Kotak Mahindra Group

Kotak Mahindra is one of India's leading financial organizations, offering a wide range of

financial services that encompass every sphere of life. From commercial banking, to stock

broking, to mutual funds, to life insurance, to investment banking, the group caters to the diverse

financial needs of individuals and corporates.

The group has a net worth of over Rs. 6,523 crore and has a distribution network of

branches, franchisees, representative offices and satellite offices across cities and towns in India

and offices in New York, London, San Francisco, Dubai, Mauritius and Singapore. The Group

services around 6.2 million customer accounts.

Group Management

Mr. Uday Kotak      Executive Vice Chairman & Managing Director

Mr. C. Jayaram

Mr. Dipak Gupta

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(2.2) Formation Of The Company

The Kotak Mahindra Group was born in 1985 as Kotak Capital Management Finance

Limited. This company was promoted by Uday Kotak, Sidney A. A. Pinto and Kotak &

Company. Industrialists Harish Mahindra and Anand Mahindra took a stake in 1986, and that's

when the company changed its name to Kotak Mahindra Finance Limited.

Since then it's been a steady and confident journey to growth and success.

1986 Kotak Mahindra Finance Limited starts the activity of Bill Discounting

1987 Kotak Mahindra Finance Limited enters the Lease and Hire Purchase market

1990 The Auto Finance division is started

1991The Investment Banking Division is started. Takes over FICOM, one of India's largest

financial retail marketing networks

1992 Enters the Funds Syndication sector

1995

Brokerage and Distribution businesses incorporated into a separate company - Kotak

Securities. Investment Banking division incorporated into a separate company - Kotak

Mahindra Capital Company

1996

The Auto Finance Business is hived off into a separate company - Kotak Mahindra

Prime Limited (formerly known as Kotak Mahindra Primus Limited). Kotak Mahindra

takes a significant stake in Ford Credit Kotak Mahindra Limited, for financing Ford

vehicles. The launch of Matrix Information Services Limited marks the Group's entry

into information distribution.

1998Enters the mutual fund market with the launch of Kotak Mahindra Asset Management

Company.

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2000

Kotak Mahindra ties up with Old Mutual plc. for the Life Insurance business.

Kotak Securities launches its on-line broking site (now www.kotaksecurities.com).

Commencement of private equity activity through setting up of Kotak Mahindra

Venture Capital Fund.

2001 Matrix sold to Friday Corporation Launches Insurance Services

2003Kotak Mahindra Finance Ltd. converts to a commercial bank - the first Indian

company to do so.

2004 Launches India Growth Fund, a private equity fund.

2005

Kotak Group realigns joint venture in Ford Credit; Buys Kotak Mahindra Prime

(formerly known as Kotak Mahindra Primus Limited) and sells Ford credit Kotak

Mahindra. Launches a real estate fund

2006Bought the 25% stake held by Goldman Sachs in Kotak Mahindra Capital Company

and Kotak Securities

(2.3) About Company’s Important Persons

DIRECTORS

Mr. K. M. Gherda retired as a Director of the Bank at the Twenty Third Annual General

Meeting of the Bank held on 28th July 2008. At the same meeting, Mr. Asim Ghosh who was

appointed as an Additional Director of the Bank with effect from 9th May 2008, was appointed

as a Director of the Bank. Mr. Pradeep Kotak, Director of the Bank retires by rotation at

theTwenty Fourth Annual General Meeting. Mr. Kotak has expressed hisdesire not to seek re-

appointment.

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The Board of Directors of the Bank, at its meeting held on 12th May 2009, has re-

appointed Dr. Shankar Acharya as part-time Chairman of the Bank, for a period of three years,

with effect from 20th July 2009 subject to the approval of the shareholders and of the Reserve

Bank of India. The approval of the shareholders in this regard is being sought at the ensuing

Annual General Meeting of the Bank.

Mr. Shishir Bajaj was appointed as an Additional Director of the Bank with effect from 12th

May 2009 and, pursuant to the proviso to Section 260 of the Companies Act, 1956, holds office

as a Director up to the date of this Annual General Meeting but is eligible to be appointed as a

Director. In terms of Section 257 of the Companies Act, 1956 the Bank has received notice in

writing from a member along with a requisite deposit of Rs. 500/- proposing the candidature of

Mr. Shishir Bajaj for his appointment as a Director.

Mr. Shishir Bajaj is an MBA from the Stern School of Business, New York University

majoring in Finance. Mr. Bajaj is presently the Chairman and Managing Director of Bajaj

Hindusthan Ltd. (BHL), the largest sugar and ethanol manufacturing company in India. He has

been looking after the affairs of BHL since 1974 shouldering its overall responsibility and was

made the Managing Director of BHL in 1988. He has over 35 years of extensive experience in

the Indian Sugar Sector

AUDITORS

Messrs S. R. Batliboi & Co., Chartered Accountants, auditors of your Bank, retire on the

conclusion of Twenty Fourth Annual General Meeting and are eligible for re-appointment. You

are requested to appoint auditors for the current financial year and to fix their remuneration.

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STATUTORY INFORMATION

The Companies (Disclosure of Particulars in the Report of Board of Directors) Rules,

1998, are not applicable to Kotak Mahindra .

EMPLOYEES

The employee strength of Kotak Mahindra along with its subsidiaries as of 31st March

2009 was around 18000, as compared to around 21000 employees a year ago.

The Bank standalone had around 8400 employees as of 31st March 2009. 179 employees

employed throughout the year and 88 employees employed for part of the year were in receipt of

remuneration of Rs. 24 lacs or more per annum.

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(2.4) Corporate Identity

Kotak Mahindra Asset Management Company Limited (KMAMC)

Kotak Mahindra Asset Management Company Limited (KMAMC), a wholly owned

subsidiary of KMBL, is the Asset Manager for Kotak Mahindra Mutual Fund (KMMF).

KMAMC started operations in December 1998 and has over 4 Lac investors in various schemes.

KMMF offers schemes catering to investors with varying risk - return profiles and was the first

fund house in the country to launch a dedicated gilt scheme investing only in government

securities.

They are sponsored by Kotak Mahindra Bank Limited, one of India's fastest growing

banks, with a pedigree of over twenty years in the Indian Financial Markets. Kotak Mahindra

Asset Management Co. Ltd., a wholly owned subsidiary of the bank, is our Investment Manager.

They made a humble beginning in the Mutual Fund space with the launch of our first

scheme in December, 1998. Today we offer a complete bouquet of products and services suiting

the diverse and varying needs and risk-return profiles of our investors.

We are committed to offering innovative investment solutions and world-class services and

conveniences to facilitate wealth creation for our investors.

Different people have different investment needs. The ability to take risks while investing in

financial products varies accordingly. In this section we present our wide range of Mutual Fund

schemes, which span across the risk-reward spectrum

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(2.5) Company’s Product Or Services

Kotak 30 Kotak Midcap Kotak Opportunities

Kotak Lifestyle Kotak Contra Kotak Tax Saver

Kotak Equity Arbitrage

Fund

Kotak Emerging

Equity Scheme

Kotak Global

Emerging Market

Kotak Indo World

Infrastructure Fund

(2.5.1)

Management of one's finances to attain a defined goal calls for a lot of discipline, many a

times self-imposed. Our Systematic Investment Plan is a tool, which can help you, inject this

discipline in your financial management efforts.

Our Systematic Investment Plan (SIP) provides you the facility to periodically invest a

fixed sum over any defined period of time (6 months or more) in a disciplined manner.

SIPs help in arresting uncertainties associated with trying to time the market and thus, in

the long term tends to iron out market fluctuations.

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It also brings in the much needed investment discipline as you allocate a defined sum to

your investments for a defined frequency, thus making investments a mandatory component

while you allocate your resources.

It brings down your average cost of acquisition of units. As you would allocate a fixed

sum every month, you would buy more units when the prices of our units are lower than when

they are higher. We call this Rupee Cost Averaging.

Finally, through this arrangement, your funds otherwise lying idle (and if you know it, on

account of inflation, depleting in real value) in your bank account get channelised into future

wealth creating investments.

And of course, you stand to gain in terms of a more favourable entry load on your

systematic investments.

(2.5.2)

Want to receive a regular stream of payouts in a defined frequency ? Want to book profits

periodically ?

Our Systematic Withdrawal Plan (SWP) is designed keeping in mind these requirements

of yours. Through our SWP you can redeem defined sums at a pre-defined frequency by giving a

one-time instruction to us. You may choose to regularly withdraw either a fixed sum or just the

appreciation on your investments.

This facility caters to two segments of investor needs :

1) Investors wanting defined, regular funds inflow from their investments.

2) Investors interested in booking gains at a regular interval.

If you require an exact amount regularly then the Fixed Option is suitable for you. If you

do not want this withdrawal to disturb your capital contribution and would like only to reap the

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appreciation generated in the investment, you should opt for the appreciation option. Ideally

SWP should be opted from the growth options of our schemes.

(2.5.3)

Want a phased entry into the Equity markets rather than putting in all your money at one

tranch? Want to book profits from your equity holdings and want your profits to continue

earning for you ?

Try our Systematic Transfer Plan (STP). Our Systematic Transfer Plan (SWP) caters to

your above needs.

Through our STP you can choose to switch your investments from one Kotak Mutual

scheme to another at a predefined frequency by giving a one-time instruction to us. You also

have a choice between switching a fixed sum or only the appreciation on your investments.

This facility caters to two segments of investor needs :

1) Investors wanting to time their exposure in the equity markets over a period of time

instead of a point in time. Such investors can invest in our Debt Schemes and choose a periodic

transfer of investments into our equity schemes.

2) Investors who are already invested in equity wanting to book profits regularly and

allowing the profits to earn returns in any of our Debt schemes.

You can choose to transfer either a fixed sum every defined period or only the

appreciation on your investments over that period from one scheme to another. The later is

helpful, where you do not want the transfer to disturb your capital contribution.

Ideally STP should be opted from the growth options of our schemes.

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(2.5.4)

Want to receive your dividend entitlement and redemption payouts faster and straight into

your bank account.

Our Direct Credit Facility comes automatically to you (unless you choose otherwise) if you hold

an account with any of the 14 banks listed below :

ABN AMRO Bank Deutsche Bank Indusind Bank

AXIS Bank HDFC Bank Kotak Mahindra Bank

Centurion Bank of Punjab HSBC Standard Chartered Bank

Citibank ICICI Bank Yes Bank

Corporation Bank IDBI Bank  

Direct Credit is safer, faster and convenient compared to the conventional cheque payout

mechanism.  

(2.5.5)

Tired of running to the bank for banking your dividend cheques and then waiting for it to

clear. Leave your worries to us. Opt in for ECS of Dividends.

ECS (Electronic Clearing Service) is a Reserve Bank of India offering to facilitate, among

others, faster and seamless payout of dividends directly into your bank account.

ECS as a mechanism for payout of Dividends is faster, convenient, cost-effective and hassle-

free. Besides, you don't run the risk of loss of dividend instruments in transit and the associated

delays in obtaining a duplicate instrument.

This facility is currently offered across all banks in over 71 locations.

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(2.5.6)

  This is a one stop shop for you to transact online.  

  You can now do the following transaction online.  

Your first investment should be through your distributor / directly.

To transact online you need to be an existing investor

You can purchase or redeem Kotak Mutual Fund Units sitting at the comfort of your

house or office at your convenient time.

No need to do paper work or travel to ISC’s to transact.

Financial Transaction

Purchase.

Switch - in and Switch - out.

Redemption.

  Non Financial Transaction

View your transaction status.

View and print your account statement.

Know latest unit balance.

Know latest market value.

Change your PIN number.

(2.5.6)

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The essence of professional selling today is building and maintaining of high quality

relationships, based on establishing a high level of trust and credibility with the customer. Your

job is to create and keep a customer indefinitely. You keep your customer by continually

investing in maintaining the quality of your relationships. You should approach your clients as

consultants and not as vendors and help them achieve their financial goals.

¤   Selling Models  ¤  

 ¤   The Selling Process  ¤  

   Page 28 of 65

Before you start selling Mutual funds you need to understand the scheme you are selling.

You should not only focus on the specific features of the scheme but focus also on the specific

financial goals of the prospect and show how the scheme enables him to get what he really

wants. You should keep yourself updated on the track record of the scheme as well as the overall

performance of the mutual fund.

Thus before recommending an investment you should know:

  The strength of the Asset Management Company and sponsors of Mutual Fund.

 The various choices/plans available and their advantages

 The nature of the scheme

 The potential of returns and the risk associated with it

 Tax benefits

 Operational Details

Knowing your client is a strategic step. Clients may vary. Their financial needs and

choice of investment differs depending on their age, earning capacity, family commitments and

ability to take risk. Some of the categories are given below

Young and Accumulating: These clients are typically under 40, seeking capital appreciation.

They are willing to take high risks for high returns.

Middle aged with family commitments: Ideally between 40-60 and looking at stable investments

and lower risks

Retired: They are above 60 years seeking income to meet their regular expenses. Safety

of their principal is their prime concern Institutions and high net worth individuals: These

include corporates, banks, trusts and wealthy investors who seek an appropriate combination of

tax efficient growth and income depending upon their return expectation.

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There are three types of prospects - Receptive, potential and independent minded. The

earlier you identify which of these you are talking to the more productive will be your selling

efforts.

Receptive: They are clients who will work in close association with you to develop a

financial plan. They have the discipline to invest regularly and believe in the merits of

professional financial advisors.

Potential: They are the people who have neither the discipline nor the patience to invest

but do have the desire to become a successful investor. Working closely with them could make

them Receptive clients.

Independent minded clients: These are clients who prefer investing directly and do not use

financial advisors. They can be cultivated over time.

(2.6) Quality Policy& Objectives

Before you recommend a financial plan you must understand the needs and priorities of

your client. You should help him see synergies between his financial goals and your financial

plan objectives. For this you need to understand your clients

 Investment objectives

 Risk tolerance

 Return Expectation

 Cash flow requirement

 Tax benefits

(2.7) Organization Plans

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Help them choose their investments

After having understood your client's needs, priorities and financial goals you have to

advice him on where to invest. Your relationship depends a lot on the advice you give to your

client. You should be honest and straightforward. Be completely focused on helping your client

to make a good buying decision. Here are some of the alternatives that can be presented to your

client.

Encourage regular investment

You should ask your clients to start investing early and invest regularly. This will help

them to make more money because of the power of compounding of the rupee.

Commit them to invest

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The best investment advice and investment plans are a waste unless they are backed by

the commitment of the client to invest. Be sure that the client gives you his commitment to

invest. Go a step further and be ready with all kinds of paperwork, application forms and other

documents required for the sale. Try and help him in any way you can.

Provide personalized after- sales- service

The last and the most important part of the sales process is the augmented element. These

are the extra things that you include in your service that go beyond expectations.

It is in this area of exceeding expectations that you can set yourself apart from other

distributors.

It is by doing the things that go beyond what the client anticipates that you build high

levels of goodwill that leads to testimonials, resales and referrals to other prospective clients.

Some of the personalized services that you can provide are as follows

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 Making periodic calls to see if your clients need any help with their investments.

 Getting in touch with them when there is a lot of fluctuation in the market prices and advising

them accordingly.

 Continuously assessing any change in their personal circumstances and recommending a

change in investment plan if need be.

 Keeping your clients updated of the new schemes and products, which could be useful for

them.

 Since you represent the interest of both the investor and the mutual fund you must regularly

follow up with the mutual fund      if your clients have experienced any service related problem.

At the end of all remember the golden rule. Treat every client as a special and important

person. Be thoroughly prepared and knowledgeable. Be completely honest and straightforward.

Focus on helping them achieve their financial goals and see the results.

Page 33 of 65

CHAPTER-3

Research Objectives

& Scope

Page 34 of 65

(3.1) Objectives Of Project

Ratios are highly important profit tools in financial analysis that help financial analysts

implement plans that improve profitability, liquidity, financial structure, reordering, leverage,

and interest coverage. Although ratios report mostly on past performances, they can be

predictive too, and provide lead indications of potential problem areas.

Ratio analysis is primarily used to compare a company's financial figures over a period of

time, a method sometimes called trend analysis. Through trend analysis, you can identify trends,

good and bad, and adjust your business practices accordingly. You can also see how your ratios

stack up against other businesses, both in and out of your industry.

There are several considerations you must be aware of when comparing ratios from one

financial period to another or when comparing the financial ratios of two or more companies.

If you are making a comparative analysis of a company's financial statements over a

certain period of time, make an appropriate allowance for any changes in accounting policies

that occurred during the same time span.

When comparing your business with others in your industry, allow for any material

differences in accounting policies between your company and industry norms.

When comparing ratios from various fiscal periods or companies, inquire about the

types of accounting policies used. Different accounting methods can result in a wide variety of

reported figures.

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(3.2) Scope Of Project

Financial ratio analysis is the calculation and comparison of main indicators - ratios which are

derived from the information given in a company's financial statements(which must be from

similar points in time and preferably audited financial statements and developed in the same

manner). It involves methods of calculating and interpreting financial ratios in order to assess a

firm's performance and status. This analysis is primarily designed to meet informational needs of

investors, creditors and management. The objective of ratio analysis is the comparative

measurement of financial data to facilitate wise investment, credit and managerial decisions.

Some examples of analysis, according to the needs to be satisfied, are:

Horizontal analysis - the analysis is based on a year-to-year comparison of a firm's ratios,

Vertical analysis - the comparison of balance sheet accounts either using ratios or not, to get useful information and draw useful conclusions, and

Cross-sectional analysis - ratios are used and compared between several firms of the same industry in order to draw conclusions about an entity's profitability and financial performance. Inter-firm analysis can be categorized under cross-sectional, as the analysis is done by using some basic ratios of the industry in which the firm under analysis belongs to (and specifically, the average of all the firms of the industry) as benchmarks or the basis for our firm's overall performance evaluation.

Page 36 of 65

CHAPTER-4

Research Methodology

&Limitation

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(4.1) Meaning Of Research

Research Methology is a way to systematically solve the research problem. It may be

understood as Science of studying how research is done, Scientifically in it we study the various

steps that generally adopted by a reseacher in studying his reseach problem along with the logic

behind them. “Accuracy of the study depends on the systematic application of the method.” The

researcher has to decide the method to be used that helps him to get a desired direction in a

systematic way.

Definitions

According to Clifford Woody

“Research comprises defining and redefining problems, formulating or hypothesis or

suggested solutions collecting: organizing and evaluating data making deductions and reaching

conclusions to determine whether they fit the formulating hypothesis.”

Thus, Research Methodology is a strategy that guides a researcher in providing answers

to research questions and for this research survey is being done.

Research in common parlance refers to a search for knowledge. In fact research is an act of

scientific investigation.

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(4.2) Steps of Research process

The seven major steps

Page 39 of 65

(4.3) Sampling Design-

Sampling is the selection of some part of aggregate or totality on the basis of which a

judgement or inference about the aggregate or totality is made.

(4.2.1) Sampling Unit-

The sampling unit of my survey includes the Balance Sheet, Profit & Loss Account,

Quarterly Results etc.

(4.2.2) Sampling Method-

In my survey,I have used Observation Method.

(4.2.3) Data Collection-

Data Collection was done in two ways they were-

1. Primary data collection

2. Secondary data Collection

(4.2.4) Secondary Data Collection –

In my project I have taken secondary data for analysis it is through Website, Journals etc.

(4.2.5) Analysis And Interpretation-

Data collected was compiled up and on the basis of percentage method depicted through

bar diagrams Interpretation was done and recommendations was given. .

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(4.4) Limitations Of Ratios And Potential Impact In The Analysis

Ratios are not predictive, as they are usually based on historical information notwithstanding ratios can be used as a tool to assist financial analysis.

They help to focus attention systematically on important areas and summarise information in an understandable form and assist in identifying trends and relationships (see methods for facilitating the financial analysis above).

However they do not reflect the future perspectives of a company, as they ignore future action by management.

They can be easily manipulated by window dressing or creative accounting and may be distorted by differences in accounting policies.

Inflation should be taken into consideration when a Ratio Analysis is being applied as it can distort comparisons and lead to inappropriate conclusions.

Comparisons with industry averages is difficult for a conglomerate firm since it operates in many different market segments.

Seasonal factors may distort ratios and thus must be taken into account when making ratios are used for financial analysis.

Not always easy to tell that a ratio is good or bad. Must be always used as an additional tool to back up or confirm other financial information gathered.

Different operating and accounting practices can distort comparisons.

Using the average of certain ratios for companies operating in a specific industry to make comparisons and draw conclusions may not necessarily be a indicator of good performance; perhaps a company should aim higher.

Page 41 of 65

CHAPTER-5

Data Interpretation &

Presentation

Page 42 of 65

(5.1) Data Interpretation

Quarterly Results

First Quarterly Results (Rs. in Millions)

March2009

[4 Quarter]

December2008

[3 Quarter]

March2008

[4 Quarter]

Sales Turnover 8030.29 8035.19 7636.70

Other Income 1150.62 1090.30 393.51

Total Income 9180.92 9125.49 8030.21

Total Expenditure 2765.97 2941.25 2610.59

Operating Profit 6414.95 6184.24 5419.62

Interest 3850.36 4209.67 3728.88

Gross Profit 2564.59 1974.58 1690.74

Depreciation 0.00 0.00 0.00

Tax 575.98 382.00 123.75

ReportedPAT 1025.73 711.30 692.08

Equity Capital 3456.69 3454.74 3446.73

Extra Ordinary Items 0.00 0.00 0.00

Adjusted Profit After Extra Ordinary Item 1025.73 711.30 692.08

Book Value 112.80 0.00 0.00

EPS 2.97 2.06 2.01

Dividend 0.00 0.00 0.00

Page 43 of 65

Balance Sheet

Kotak Mahindra Bank Ltd.

From FY 2007 – 2009 (In Millions)

Balance Sheet (Rs. in millions)

Liabilities

March- 2009

(12 Months)

March-

2008

(12

Months)

March-

2007

(12

Months)

Share Capital 3,456.69 3,446.73 3,261.56

Reserves & Surplus 35,598.58 32,490.36 13,357.69

Net Worth (1) 39,055.27 35,937.09 16,619.25

Secured Loans (2) 59,040.71 51,192.53 50,997.52

Unsecured Loans (3) 156,449.34164,236.4

6110,000.91

Total

Liabilities(1+2+3)254,545.31

251,366.0

8177,617.68

Assets

March- 2009

(12 Months)

March-

2008

(12

Months)

March-

2007

(12

Months)

Fixed Assets

Gross Block 4,606.07 3,914.21 2,735.65

(-) Acc. Depreciation 2,472.51 1,811.72 1,324.78

Net Block (A) 2,133.56 2,102.49 1,410.87

Page 44 of 65

Capital WorkinPrgs. (B) 0.00 0.00 0.00

Investments (C) 91,101.81 91,419.89 68,619.65

Current Assets, Loans & Advs.

Inventories 0.00 0.00 0.00

Sundry Debtors 0.00 0.00 0.00

Cash And Bank 11,406.70 21,494.67 12,959.66

Loans And Advances 182,476.68168,106.5

8116,164.02

(i) 193,883.37189,601.2

4129,123.67

Current Liab. & Provs.

Current Liabilities 32,270.12 31,455.10 21,269.40

Provisions 303.31 302.44 267.11

(ii) 32,573.43 31,757.54 21,536.51

Net Curr. Assets (i - ii)

(D)161,309.94

157,843.7

0107,587.16

Misc. Expenses (E) 0.00 0.00 0.00

Total Assets

(A+B+C+D+E) 254,545.31

251,366.0

8177,617.68

Page 45 of 65

PROFIT & LOSS ACCOUNT.

FROM YEAR 2007 TO 2009 (IN MILLION)

Profit & Loss Accounts (Rs. in millions)

March – 2009

(12 months)

March - 2008

(12 months)

March - 2007

(12 months)

Sales 32,626.77 28,202.98 15,920.58

Other Income 420.00 140.78 59.32

Total Income 33,046.77 28,343.76 15,979.90

Raw Material Cost 0.00 0.00 0.00

Excise 0.00 0.00 0.00

Other Expenses 28,106.48 22,579.54 13,605.54

Operating Profit 4,520.29 5,623.44 2,315.04

Interest Name 15,465.98 13,095.63 6,992.40

Gross Profit -10,945.69 -7,472.20 -4,677.36

Depreciation 695.57 508.55 347.39

Profit Bef. Tax 4,257.84 3,966.59 2,026.97

Tax 1,499.60 1,038.48 618.80

Net Profit 2,758.24 2,928.11 1,408.17

Other Non- Recurring Income 2.74 11.22 5.49

Reported Profit 2,760.97 2,939.33 1,413.65

Equity Dividend 259.55 258.70 228.61

Ratios

From Year 2007 to Year 2009Page 46 of 65

Ratios

Profitability Ratios % March- 2009

(12 months)

March- 2008

(12 months)

March- 2007

(12 months)

Operating Profit Margin 13.85 19.93 14.54

Gross Profit Margin 11.72 18.13 12.35

Net Profit Margin 8.35 10.37 8.84

Turnover Ratios

Return On Investment 2.31 2.80 1.82

Return On Networth 7.06 8.17 8.50

Dividend Yield 10.07 10.29 18.91

Page 47 of 65

(5.1.1) OPERATING MARGIN RATIO

Formula to calculate operating margin:

Operating Margin  =

(earnings before interest and taxes)

sales

Operating margin definition and explanation:

  The operating margin is also referred to as operating profit margin, or EBIT to sales ratio.

  The operating margin ratio determines whether the fixed costs are too high for the

production volume.

The operating margin ratio is included in the financial statement ratio analysis

spreadsheets highlighted in the left column, which provide formulas, definitions, calculation,

charts and explanations of each ratio. 

Page 48 of 65

2007

2008

2009

0 2 4 6 8 10 12 14 16 18 20

13.85

19.93

14.54

Operating Profit Margin

Page 49 of 65

(5.1.2)GROSS PROFIT MARGIN

Indicates what the company's pricing policy is and what the true mark-up margins are.

Revenue - Cost of Goods Sold

Revenue

Gross Profit Margin Analysis:

The gross margin is not an exact estimate of the company's pricing strategy but it does

give a good indication of financial health. Without an adequate gross margin, a company will be

unable to pay its operating and other expenses and build for the future.

Page 50 of 65

2007

2008

2009

0 2 4 6 8 10 12 14 16 18 20

11.72

18.13

12.35

Gross Profit Margin

Page 51 of 65

(5.1.3) NET PROFIT MARGIN

First some basic profitability equations:

Net Profit Margin =Net Profit

* 100 =Profit before Interest and Taxation

* 100Turnover Turnover

Remember:

Net Profit = Gross Profit - Expenses

Why do we have two versions of this ratio - one for net profit and the other for profit before

interest and taxation? Well, in some cases, you will find they use the term net profit and in other

cases, especially published accounts, they use profit before interest and taxation.

Page 52 of 65

2007

2008

2009

0 2 4 6 8 10 12

8.35

10.37

8.84

Net Profit Margin

Page 53 of 65

(5.1.7)RETURN ON INVESTMENT

Formula to calculate return on investment:

RETURN ON INVESTMENT RATIO =

NET PROFITS BEFORE TAX

SHAREHOLDERS EQUITY

  The return on investment ratio provides a standard return on investor's equity.

  The return on investment ratio is also referred to as return on investment or ROI. Return

on Investment is a key ratios for investors

Page 54 of 65

2007

2008

2009

0 0.5 1 1.5 2 2.5 3

2.31

2.8

1.82

Return On Investment

Page 55 of 65

(5.1.8)RETURN ON NET WORTH

Net After Tax Profit divided by Net Worth, this is the 'final measure' of profitability to

evaluate overall return. This ratio measures return relative to investment in the company. Put

another way, Return on Net Worth indicates how well a company leverages the investment in it.

May appear higher for startups and sole proprietorships due to owner compensation draws

accounted as net profit.

Return on net worth, Return on ordinary shareholders' funds measures the rate of return on the

ownership interest (shareholders' equity) of the common stock owners. It measures a firm's

efficiency at generating profits from every unit of shareholders' equity (also known as net assets

or assets minus liabilities). ROE shows how well a company uses investment funds to generate

earnings growth.

Page 56 of 65

2007

2008

2009

0 1 2 3 4 5 6 7 8 9

7.06

8.17

8.5

Return On Networth

Page 57 of 65

Page 58 of 65

2007

2008

2009

0 2 4 6 8 10 12 14 16 18 20

10.07

10.29

18.91

Dividend Yield

Page 59 of 65

(5.2) FINDINGS OF THE STUDY

After doing the analysis, i find out that the operating profit margin of a bank is low

in year 2009 as compared to last two years. Which shows that sales is low.

In this analysis the gross profit margin of a bank is also comes down from 18.13 to

11.72 in year 2009 which shows that the bank is facing a problem of having low

liquidity or cash flow to spend on marketing & investment, R&D.

The analysis also shows that net profit margin of bank is also came down by 2.02%,

it means that bank is not preforming well to recover its debts.

The return on investment ratio comes down by very less margin; it shows that the

bank is having a consistent performance in earning on its investment as compared to

last year.

The return on net worth shows that how the firm uses the shareholder’s interest or

investment fund to generate earning growth. By comparing last 3 years RONW it is

decaling every year which shows the bank is not having much profit available to

equity shareholder & it is also not preferred much by the investors.

Page 60 of 65

CHAPTER-6

CONCLUION & SUGGESTION

Page 61 of 65

(6.1) Conclusion

After overhauling the all situation that boosted a number of Pvt. Companies associated with

multinational in the Insurance Sector to give befitting competition to the established behemoth

Kotak in private sector, we come at the conclusion that :-

There are very tough competitions among the private insurance companies on the level of

new trend of advertising to lull a major part of Customers.

Kotak have to work more to increase its sale or attract customers for investing, because

the operating profit margin goes very down in 2009.

The positive point is that they are having consistent return on investment.

As a private player in the market kotak is facing problem in recovering its loans due to

which net profit of the bank came down by 2.02%.

The entry of more Pvt. Players in the Insurance Sector has expanded the product segment

to meet the different level of the requirement of the customers. It has brought about greater

choice to the customers.

Page 62 of 65

(6.2) Suggestion

The study has provided with the useful data from the respondents. There has a lot to be

recommended. Following are the recommendations:

There is a need for better promotion for the investment products & services. The bank

should advertise its products through television because it will reach to the masses.

More returns should be provided on Insurance plans.

As the bank provides the Insurance facility to its customers. It should provide this facility by tie

up with the other Insurance organizations as well. The main reason is that, the entire customers

do not want Insurance of only one company. They should have choice while selecting a suitable

Insurance plans. This will definitely add to the goodwill & profit for the bank.

Page 63 of 65

Chapter-7

Bibliography

Page 64 of 65

(7.1) Books

Money outlook, January edition 2009

Marketing management : kotler & keller

Principals of life Assurance : CI-23

Financial Management : S.M. Shukla

Corporate Accounting : Saklecha

Cost Accounting : S.M. Shukla

Income Tax : Saklecha

(7.2) Websites

www.indiainfoline.com

www.kotaklife.com

www.insuranceworld.com

www.corpbank.com

www.about.com

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