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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

By
Rosbin Pappu
Reg no. MCM140309
Under the Guidance of
Prof. Manjunath
Department of commerce
ST. PHILOMENA'S COLLEGE (Autonomous)
MYSURU

Introduction
In 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 reserve bank of India (RBI) to set up a bank in the
private sector, as part of RBI 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 Topic
MEANING OF FINANCIAL STATEMENTS:
Financial statements refer to such statements, which contains financial information about an
enterprise. They report profitability and the financial position 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 Sheet
2. Profit and Loss Account
They provide some extremely useful information to the extent that balance Sheet mirrors the
financial position on a particular date in terms of the 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 of time in terms of the revenues obtained and the cost incurred during
the year. Thus, the financial statement provides a summarized view of financial positions 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 Study


The 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 Study


This 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 TECHNIQUE

Sampling is necessary because it is almost impossible to examine the entire parent 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 of data, 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 the project. Various statistical tools are applied depending on the research problem.
In this study ratio analysis, comparative financial statements analysis, common size
statements and Trend Analysis has been used for analyzing 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/hdfcba
nk/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 FRAMEWORK

Several 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 DESIGN

This 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.

VARIABLES

The 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 RESEARCH

There are four steps to complete this study. There are given below according to their
sequence:
a.
b.
c.
d.

Select: select the process or job to be studied.


Record: observe and record all the relevant facts related to the work process.
Examine: examine each recorded fact critically
Develop: develop the most efficient work process.

DATA COLLECTION

This 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 Observation
b. Stopwatch Time Study
c. Process Chart

SYSTEMATIC OBSERVATION

Systematic 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 STUDY

Stopwatch 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 CHART

Process 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 ANALYSIS

After 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.

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