IMT Nagpur

PGDM 2009-2011
Financial Accounting for Management
End-term project I

Submitted by- (Section: A)

Achintya Sarkar 2009004
Ajay Saxena 2009005
Ankita Mittal 2009007
Antony Palathingal 2009010
Abhinav Bhargava 2009017
Aparna Bagla 2009026
Mayank Dwivedi 2009034
Abhishek Nigam 2009039
Anas ul Haq 2009044
Anupriya Pandit 2009051

Date:10-09-09

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 Table of Contents
1. SWOT analysis of Indian Banking Sector 3

2. SWOT analysis of SBI 6

3. SWOT analysis of ICICI 7

4. Director’s report- SBI 11

5. Report of the auditors- SBI 12

6. Analysis of Profit & Loss Account- SBI 13

7. Analysis of Balance Sheet- SBI 15

8. Analysis of Cash flow statement- SBI 17

9. Director’s report- ICICI 18

10. Report of the auditors- ICICI 19

11. Analysis of Profit & Loss Account- ICICI 21

12. Analysis of Balance Sheet- ICICI 23

13. Analysis of Cash flow statement- ICICI 25

14. Key Performance Ratios 26

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 SBI & ICICI Financial Performance

SWOT ANALYSIS- INDIAN BANKING SECTOR

The rise of retail lending in emerging economies like India has been of recent origin. Asia
Pacific’s vast population, combined with high savings rates, explosive economic growth, and
underdeveloped retail banking services, provide the most significant growth opportunities for
banks. Banks will have to serve the retail banking segment effectively in order to utilize the
growth opportunity.

Banking strategies are presently undergoing various transformations, as the overall scenario
has changed over the last couple of years. Till the recent past, most of the banks had adopted
fierce cost-cutting measures to sustain their competitiveness. This strategy however has
become obsolete in the new light of immense growth opportunities for banking industry.
Most bankers are now confident about their high performance in terms of organic growth and
in realising high returns. Nowadays, the growth strategies of banks revolve around customer
satisfaction.

Improved customer relationship management can only lead to fulfilment of long-term, as well
as, short-term objectives of the bankers. This requires, efficient and accurate customer
database management and development of well-trained sales force to develop and sustain
long-term profitable customer relationship.

The banking system in India is significantly different from that of the other Asian nations,
because of the country’s unique geographic, social, and economic characteristics. Though the
sector opened up quite late in India compared to other developed nations, like the US and the
UK, the profitability of Indian banking sector is at par with that of the developed countries
and at times even better on some parameters. For instance, return on equity and assets of the
Indian banks are on par with Asian banks, and higher when compared to that of the US and
the UK.

Banks in India are mainly classified into Scheduled Banks and Non-Scheduled Banks.
Scheduled Banks are the ones, which are included in the second schedule of the RBI Act
1934 and they comply with the minimum statutory requirements. Non-Scheduled Banks are
joint stock banks, which are not included in the second Schedule of the RBI Act 134, on
account of the failure to comply with the minimum requirements for being scheduled.

STRENGTHS

1. Indian banks have compared favourably on growth, asset quality and profitability with
other regional banks over the last few years. The banking index has grown at a compounded
annual rate of over 51 per cent since April 2001 as compared to a 27 per cent growth in the
market index for the same period.

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2. Policy makers have made some notable changes in policy and regulation to help strengthen
the sector. These changes include strengthening prudential norms, enhancing the payments
system and integrating regulations between commercial and co-operative banks.

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

4. Extensive reach: the vast networking & growing number of branches & ATMs. Indian
banking system has reached even to the remote corners of the country.

5. The government's regular policy for Indian bank since 1969 has paid rich dividends with
the nationalisation of 14 major private banks of India.

6. In terms of quality of assets and capital adequacy, Indian banks are considered to have
clean, strong and transparent balance sheets relative to other banks in comparable economies
in its region.

7. India has 88 scheduled commercial banks (SCBs) - 27 public sector banks (i.e. with the
Government of India holding a stake)after merger of New Bank of India in Punjab National
Bank in 1993, 29 private banks (these do not have government stake; they may be publicly
listed and traded on stock exchanges) and 31 foreign banks. They have a combined network
of over 53,000 branches and 17,000 ATMs. According to a report by ICRA Limited, a rating
agency, the public sector banks hold over 75 percent of total assets of the banking industry,
with the private and foreign banks holding 18.2% and 6.5% respectively.

8. Foreign banks will have the opportunity to own up to 74 per cent of Indian private sector
banks and 20 per cent of government owned banks.

WEAKNESSES

1. PSBs need to fundamentally strengthen institutional skill levels especially in sales and
marketing, service operations, risk management and the overall organisational performance
ethic & strengthen human capital.

2. Old private sector banks also have the need to fundamentally strengthen skill levels. The
cost of intermediation remains high and bank penetration is limited to only a few customer
segments and geographies.

3. Structural weaknesses such as a fragmented industry structure, restrictions on capital

availability and deployment, lack of institutional support infrastructure, restrictive labour
laws, weak corporate governance and ineffective regulations beyond Scheduled Commercial
Banks (SCBs), unless industry utilities and service bureaus.

4. Refusal to dilute stake in PSU banks: The government has refused to dilute its stake in
PSU banks below 51% thus choking the headroom available to these banks for raining equity
capital.

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5. Impediments in sectoral reforms: Opposition from Left and resultant cautious approach
from the North Block in terms of approving merger of PSU banks may hamper their growth
prospects in the medium term.

OPPORTUNITIES

1. The market is seeing discontinuous growth driven by new products and services that
include opportunities in credit cards, consumer finance and wealth management on the retail
side, and in fee-based income and investment banking on the wholesale banking side. These
require new skills in sales & marketing, credit and operations.

2. Banks will no longer enjoy windfall treasury gains that the decade-long secular decline in
interest rates provided. This will expose the weaker banks.

3. With increased interest in India, competition from foreign banks will only intensify.

4. Given the demographic shifts resulting from changes in age profile and household income,
consumers will increasingly demand enhanced institutional capabilities and service levels
from banks.

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

6. Foreign banks committed to making a play in India will need to adopt alternative
approaches to win the “race for the customer” and build a value-creating customer franchise
in advance of regulations potentially opening up post 2009. At the same time, they should
stay in the game for potential acquisition opportunities as and when they appear in the near
term. Maintaining a fundamentally long-term value-creation mindset.

7. Reach in rural India for the private sector and foreign banks.

8. With the growth in the Indian economy expected to be strong for quite some time,
especially in its services sector-the demand for banking services, especially retail banking,
mortgages and investment services are expected to be strong.

9. The Reserve Bank of India (RBI) has approved a proposal from the government to amend
the Banking Regulation Act to permit banks to trade in commodities and commodity
derivatives.

10. Liberalisation of ECB norms: The government also liberalised the ECB norms to permit
financial sector entities engaged in infrastructure funding to raise ECBs. This enabled banks
and financial institutions, which were earlier not permitted to raise such funds, explore this
route for raising cheaper funds in the overseas markets.

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11. Hybrid capital: In an attempt to relieve banks of their capital crunch, the RBI has allowed
them to raise perpetual bonds and other hybrid capital securities to shore up their capital. If
the new instruments find takers, it would help PSU banks, left with little headroom for raising
equity. Significantly, FII and NRI investment limits in these securities have been fixed at
49%, compared to 20% foreign equity holding allowed in PSU banks.

THREATS

1. Threat of stability of the system: failure of some weak banks has often threatened the
stability of the system.

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

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

SWOT ANALYSIS- SBI

STRENGTHS

1. Brand name: SBI Bank has earned a reputation in the market over the period of time
(Being the oldest bank in India tracing history back to 1806)

2. Market Leader: SBI is ranked at 380 in 2008 Fortune Global 500 list, and ranked 219 in
2008 Forbes Global 2000. With an asset base of $126 billion and its reach, it is a regional
banking behemoth.

3. Wide Distribution Network: Excellent penetration in the country with more than 10000
core branches and more than 5100 branches of associate banks (subsidiaries).

4. Diversified Portfolio: SBI Bank has all the products under its belt, which help it to extend
the relationship with existing customer.SBI Bank has umbrella of products to offer their
customers, if once customer has relationship with the bank. Some Products, which SBI Bank
is offering are: Retail Banking Business Banking Merchant Establishment Services (EDC
Machine) Personal loans & Car loans Insurance Housing Loans

5. Government Owned: Government owns 60% stake in SBI. This gives SBI an edge over
private banks in terms of customer security.

6. Low Transition Costs: SBI offers very low transition costs which attracts small customers.

WEAKNESSES

1. The existing hierarchical management structure of the bank, although strength in some
respects, is a barrier to change.

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2. Though SBI cards are the 2nd largest player in the credit card industry, it has the highest
non performing assets (NPAs) in the industry, which stand out to be at 16.28 % (Dec 2007).

3. Modernisation: SBI lags with respect to private players in terms of modernisation of its
processes, infrastructure, centralisation, etc.

OPPORTUNITIES

1. Merger of associate banks with SBI: Merger of all the associate banks (like SBH, SBM,
etc) into SBI will create a mega bank which streamlines operations and unlocks value.

2. Planning to add 2000 branches and 3000 ATMs in 2008-2009. This will further increase its
reach.

3. Increasing trade and business relations and a large number of expatriate populations offers
a great opportunity to expand on foreign soil.

THREATS

1. Advent of MNC banks: Large numbers of MNC banks are mushrooming in the Indian
market due to the friendly policies adopted by the government. This can increase the level of
competition and prove a potential threat for the market share of SBI bank.

2. Consumer expectations have increased many folds in last few years and the bank has not
been responsive enough to meet them on time.

3. Private banks have started venturing into the rural and semi-urban sector, which used to be
the bastion of the State Bank and other PSU banks

4. Employee Strike: There was an employee strike in the year 2006 which disrupted SBI’s
activities. This can be repeated in the future.

SWOT ANALYSIS- ICICI

STRENGTHS

1. Brand name: ICICI Bank has earned a reputation in the market for extending quality
services to the market vis-a -vis its competitors. It has earned a strong Brand name in banking
in a very short span of time.

2. Market share: ICICI Bank has the largest market share of 34% in the IT & ITES industry
in Hyderabad according to our survey (within the limitation of the sample size.)

3. Huge network: ICICI Bank has the highest number of linked branches in the country. The

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bank operates through a network of 450 BRANCHES AND over 1800 ATMs across India,
thus enabling them to serve customer in better way.

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

Retail Banking
Business Banking
Merchant Establishment Services (EDC Machine)
Personal loans & Car loans
Demat Services with E-Broking
Mutual Fund (ICICI Bank is the Distributor of all Mutual Fund)
Insurance
Housing Loans

5. Salary account: One very interesting thing that we have observed in our survey is that
ICICI is having an edge over other banks in case of Salary Account. Most of the companies
are having their Salary Account with ICICI even if their Current Account is with any other
Bank. This is mainly because of the huge network of ATMs and branches of ICICI.

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

7. Treasury Department: ICICI is the only bank which is having its treasury department
especially for Hyderabad Customers. So customers can get the best rates for foreign
exchange.

8. Aggressive marketing: ICICI Bank is known for its aggressive marketing of its products.
Recent Endorsement of its product by AMITABH BAHCHAN proves the same. This gives
ICICI an edge over other banks.

9. Technology: From its inception, ICICI Bank has adopted a policy of selecting
internationally proven and specialized Packaged Systems for its technology. ICICI bank™
technology platform has been acknowledged globally as one of the best in terms of
robustness, flexibility and cost efficiency. ICICI Bank is in a position to leverage this
platform to further build cost and service advantage.

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WEAKNESSES

1. Transaction cost: ICICI Bank charges high cost for its transactions. Through our data
analysis we have find out that most of the small companies prefer nationalized banks only
because of this cost factor. Also the group has found out that there are companies which are
going for multi bank system i.e. they are using only those facilities of ICICI Bank which are
provided at cheaper rates (read Salary Account) and for other services they are going to
nationalize banks and MNCs (read Forex). So there exists a huge potential for ICICI Bank if
they are ready to make their transaction cost flexible.

2. Focus only on High end customers: The bank targets only the top bracket of clients and
does not cater to the needs of small customers. Due to this reason the bank may sometimes
loose good clients.

3. Defensive approach in lending: ICICI Bank has a defensive approach in lending. Mainly to
IT & ITES companies Bank do not provide loan as these companies are not having collaterals
so bank hesitate in giving loans to them. Because of this policy companies prefer nationalized
banks and ICICI Bank in turn sometimes loose potential customers.

4. Little presence outside India: ICICI Bank is having little presence Outside India, because
of which companies prefer MNC Bank, mainly Citibank. So if ICICI Bank tries to emerge
outside India then it has a huge potential of customers.

5. Poor customer care/service: With its aggressive marketing ICICI Bank is rapidly
increasing its customer base. They are not however, increasing the number of employees
accordingly. This is leading to deterioration of the standard of customer service.

OPPORTUNITIES

1. New IT & ITES companies: IT & ITES sector is on a boom in the Indian market context,
with new companies mushrooming in the market; it opens the door for ICICI bank to capture
the huge untapped market.

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

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companies have found out that there are many companies which are not satisfied with its
current bank, so ICICI with its superior service quality and long working hours can capture
those customers.

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

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

THREATS

1. Advent of MNC banks: Large numbers of MNC banks are mushrooming in the Indian
market due to the friendly policies adopted by the government. This can increase the level of
competition and prove a potential threat for the market share of ICICI bank.

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

3. Ever improving nationalized banks: With PSU banks like SBI going all out to compete
with the private banks and government giving them a free hand to do so, it can prove to be
serious threat for banks like ICICI.

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SBI Director’s report- Highlights
Net Profit
 Growth of 35.55%
 2008-Rs.6,729 crores
 2009- Rs. 9,121 crores

Operating Profits
 The Operating Profit of the Bank for 2008-09 stood at Rs. 17,915.23 crores as
compared to Rs. 13,107.55 crores in 2007-08
 Smart growth of 36.68% to Rs. 17,915 crores in FY-09
 Operating Expenses increased by 24.11% attributable to higher staff cost and other
overhead expenses

Net Interest Income

 Recorded a growth of 22.63% and
 Other Income increased by 45.96%, to Rs.12,691 crores in other income

Deposits
 Grew by 38.08% in 2008-09 against Other Scheduled Commercial Banks (OSCB)
growth of 16.55%,
 Leading to a spurt in its market share in deposits by 2.31% to 17.72% by March
2009.
 
Dividend
 Increased from Rs. 21.50 per share (215%) to Rs. 29.00 per share (290%) in the last
year.

Responsibility Statement
The Board of Directors hereby states:
i. that in the preparation of the Annual Accounts, the applicable accounting standards have
been followed along with proper explanation relating to material departures;
ii. that they have selected such accounting policies and applied them consistently and made
judgements and estimates as are reasonable and prudent, so as to give a true and fair view of
the state of affairs of the Bank as on the 31st March 2009, and of the profit and loss of the
Bank for the year ended on that date;
iii. That they have taken proper and sufficient care for the maintenance of adequate
accounting records in accordance with the provisions of the Banking Regulation Act, 1949
and State Bank of India Act, 1955 for safeguarding the assets of the Bank and preventing and
detecting frauds and other irregularities; and
iv. That they have prepared the annual accounts on a going concern basis.

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REPORT OF THE AUDITORS
1. We, the undersigned Auditors of State Bank of India, appointed under Section 41(1) of the
State Bank of India Act, 1955, do hereby report to the Central Government upon the Balance
Sheet, Profit & Loss Account and the Cash Flow Statement of the Bank.

2. We have audited the attached Balance Sheet of State Bank of India as at 31st March 2009,
the Profit & Loss Account and the Cash Flow Statement of the Bank for the year ended on
that date annexed thereto. Incorporated in the said financial statements are the accounts of:
i) The Central Office, fourteen Local Head Offices, Corporate Accounts Group (Central),
Mid-Corporate Group (Central), Stressed Assets Management Group (Central) and forty two
branches audited by us;
ii) 9255 Indian Branches audited by other auditors;
iii) 40 Foreign Branches audited by the local auditors; and
iv) 2504 other Indian Branches, the unaudited returns of which are certified by the Branch
Managers. These unaudited branches account for 0.54% of advances, 2.11% of deposits,
0.44% of interest income and 1.45% of interest expenses. These financial statements are the
responsibility of the Bank’s Management. Our responsibility is to express an opinion on these
financial statements based on our audit.

3. We conducted our audit in accordance with the auditing standards generally accepted in
India. Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting principles used and
significant estimates made by the Management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis for our opinion.

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FINANCIAL REPORT OF SBI

Analysis of Profit and Loss Account

Income

Sales:
The sales are the revenue generated by discharging of product and services to the end user or
the intermediate. In this case it is on the basis of interest earned by the bank. The sales for
year end march 31, 2009 is Rs. 63788 Cr excluded whereas sales for year 2007-08 was Rs.
48950 Cr i.e., a 30.3 % positive change over last year.

Other Income:
The income generated from the other operations which is not the company’s regular business.
Other income includes interest received on profit on sale of investments, commissions, profit
on sale of land, etc. i.e., 12690 Cr.

Expenditure

Manufacturing Expenses:
It includes aggregate of material costs and other directly attributable to conversion of material
to finished products. Since SBI is in the services sector, it does not incur any manufacturing
expenses.

Payment to and provision for employees:

It includes salaries, wages and other payments made to employees. In 2009 payment to and
provision for employees made increased to Rs. 9747 Cr a positive change of 25.2 %.

Office and Administrative Expenses:

The administrative expenses are the expenses which company has incurred to run the
business smoothly. Here company has incurred the expenses Rent, taxes, Insurance, lighting,
director’s fees, auditor’s fees etc. In 2008 administrative charges were Rs. 2205 Cr which has
increased to Rs.2672.99 Cr in 2009, i.e., by 21.22 %.

Selling and Distribution Expenses:

The selling expenses are the expenses which the company has incurred to make the sale of
the product. It includes advertising and publicity expenses etc. selling and distribution
expenses have increased to Rs.251 Cr i.e. an increase of 45.08 % over last year.

Depreciation:
Depreciation is the expense which is a non-cash expense. Depreciation incurred by SBI is on
bank’s property and leased assets. Depreciation for this financial year is Rs. 763 Cr. whereas
depreciation of 2008 was Rs. 679 Cr.

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APPROPRIATION OF FUNDS

Net Profit:
The net profit is the result of all the business operations. Net profit of SBI for 2009 is Rs.
9121 Cr. Interestingly it is significantly greater than that of 2008, profit for 2008 was Rs.
6729 Cr. After this, profit is ready for appropriation.

Dividend:
The proposed final dividend is Rs. 1841 Cr. Last year total dividend was Rs. 1357 Cr.

Dividend Tax:
SBI paid dividend tax of Rs. 248 Cr whereas last year Rs. 165 Cr was paid as dividend tax.

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 ANALYSIS OF BALANCE SHEET
SOURCES OF FUNDS

Shareholders’ Fund:

The share capital is the contribution of the owners of the company towards the operations of
the company. This capital is called as share capital as the members get the shares as per their
contribution. Authorized share capital is of 100,00,00,000 shares whereas only 63,15,58,654
has been subscribed for.

Reserve and Surplus:

Reserve and surplus are the funds which the company owns by the operations in the shape of
profits. In reserve and surplus, off course only profits are not there but also other items are
there but they are only the part of profits which are divided in the appropriation. Net Reserves
after adjustment of intangible asset and transfer to profit and loss account is Rs. 1267 Cr.

Secured Loans:

Secured loans are the funds arranged by the company from outside by giving some security
as guarantee to those outsiders. Secured loans for 2009 are Rs. 53713 Cr in form of bank
loans. Secured loans were at Rs. 51727 Cr in 2008.

APPLICATION OF FUNDS

Fixed Assets:

Fixed Assets are the assets which are acquired by the company for a longer period of time not
for just one year. These assets are charged depreciation for the amount lost on their usage. In
other words depreciation is the amount charged for the usage of fixed assets. Fixed assets
have increased from Rs. 3373 Cr to Rs. 3837 Cr in 2009.

Investments:

Investments are the amount invested by the company in various securities for some future
earnings as that of interest, dividend and increase in there value. Investments have increased
by 45.6 %. Investments are worth Rs. 275953 Cr whereas in 2008 investments were only for
Rs. 189501 Cr.

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Current Assets, Loans and Advances:

Current assets are the assets which are convertible to cash or equal to cash. These current
assets are the Inventories, Sundry Debtors, Cash and Bank Balances, Other current assets etc.
In Inventories, we generally includes the stock and other items helpful in production but not
for long run. Loans and advances are the amount given to person for their uses. These can be
any loan to director or any advance to any authority etc. Current assets are worth Rs. 37733
Cr, in 2008 current assets were worth Rs. 44417 Cr.

One of the possible implications of this decrease in current assets could be that collection
from debtors is good.

The advances increased from Rs. 416768 Cr in 2008 to Rs. 542503 Cr in 2009.

Current Liabilities and Provisions:

Current liabilities and provisions are the liabilities which a company has to pay within one
year of time. These current liabilities are in the shape of Sundry Debtors, unpaid dividend,
bank overdraft, advances and security from customers and interest accrued but not due etc.
Current liabilities have increased by Rs. 27335 Cr. Liabilities for the year is of Rs. 110697
Cr.

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 ANALYSIS OF CASHFLOW STATEMENT
Cash Flow from Operating Activities:
The cash flow from operating activities takes into account cash generated by the company on
the basis of its day to day business activities such as buying, selling receiving payments from
clients and clearing dues to suppliers. It is important to note that in case of SBI the cash
generated from operating activities has increased from Rs. (856) Cr in 2008 to Rs. 29479 Cr.
This says that SBI has had tremendous inflow of cash from operating activities.

Cash Flow from Investing Activities:

The funds which the business receives utilizes both by buying goods and assets. Here we
basically consider those activities which include buying assets and other investment options
and profit generated from them if any. In Case of SBI it is essential to note that both in 2008
and 2009 we see a cash outflow but it has decreased by Rs. 1147 Cr which would be a relief
for the management.

Cash Flow from Financing Activities:

Every company needs funds for its projects, regular working and carrying out its daily
activities. A company may use any method for generating funds, be it issue of shares and
debentures, acquiring loans from banks, etc. The activities mentioned above are known as
financing activities. SBI had an outflow of Rs. 5097 Cr in 2009 as compared to an inflow of
Rs. 19371 Cr in 2008.

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ICICI- Director’s reports highlights
Net Interest Income and Other income
 Decrease of 0.9% to Rs 15970 Cr from Rs 16115 Cr.

Operating Profit
 Increase of 12.1% to Rs 8950 Cr from Rs 7961 Cr.

Provisions and Contingencies

 Increase of 31.1 % to Rs 3808 Cr from Rs 2905 Cr

Consolidated Profit
 Increase of 5.3% to Rs 3577 Cr from Rs 3398 Cr.

Business Performance FY-09

 Net worth of about Rs. 50000 Cr,
 Assets of about Rs. 380000 Cr
 Profits of Rs. 3758 Cr.

DIRECTORS’ RESPONSIBILITY STATEMENT

The Directors confirm:
1. That in the preparation of the annual accounts, the applicable accounting standards have
been followed, along with proper explanation relating to material departures;

2. That they have selected such accounting policies and applied them consistently and made
judgements and estimates that are reasonable and prudent, so as to give a true and fair view of
the state of affairs of the Bank at the end of the financial year and of the profit or loss of the
Bank for that period;

3. That they have taken proper and sufficient care for the maintenance of adequate accounting
records, in accordance with the provisions of the Banking Regulation Act, 1949 and the
Companies Act, 1956 for safeguarding the assets of the Bank and for preventing and
detecting fraud and other irregularities; and

4. That they have prepared the annual accounts on a going concern basis.

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AUDITOR’S REPORT
1. We have audited the attached Balance Sheet of ICICI Bank Limited (‘the Bank’) as at
March 31, 2009 and also the Profit and Loss Account and the Cash Flow Statement for the
year then ended, both annexed thereto. These financial statements are the responsibility of the
Bank’s management. Our responsibility is to express an opinion on these financial statements
based on our audit. Incorporated in the said financial statements are the returns of the
Singapore, Bahrain and Hong Kong branches of the Bank, audited by other auditors.

2. We conducted our audit in accordance with auditing standards generally accepted in India.
Those standards require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatements. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and significant
estimates made by the management, as well as evaluating the overall financial statements
presentation. We believe that our audit provides a reasonable basis for our opinion.

3. We did not audit the financial statements of the Singapore, Bahrain and Hong Kong
branches of the Bank, whose financial statements reflect total assets of Rs 812,373.4 million
as at March 31, 2009, total revenues of Rs 46,276.6 million and cash flows of Rs (4,607.5)
million for the year then ended. These financial statements have been audited by other
auditors, duly qualified to act as auditors in the country of incorporation of the said branches,
whose reports have been furnished to us, and which were relied upon by us for our opinion on
the financial statements of the Bank.

4. The Balance Sheet and the Profit and Loss Account have been drawn up in accordance
with the provisions of Section 29 of the Banking Regulation Act, 1949 read with Section
211(1), (2) and (3C) of the Companies Act, 1956.

5. We report that:
i) we have obtained all the information and explanations which, to the best of our knowledge
and belief, were necessary for the purpose of our audit and have found them to be
satisfactory;
ii) the transactions of the Bank, which have come to our notice, have been within the powers
of the Bank;
iii) the returns received from the offices and branches of the Bank have been found adequate
for the purposes of our audit.

6. In our opinion, the Balance Sheet, the Profit and Loss Account and the Cash Flow
Statement dealt with by this report comply with the accounting principles generally accepted
in India including Accounting Standards referred to in subsection (3C) of section 211 of the
Companies Act, 1956, to the extent they are not inconsistent with the accounting policies
prescribed by the Reserve Bank of India.

7. We further report that:

i) the Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this
report are in agreement with the books of account and the returns;
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ii) in our opinion, proper books of account as required by law have been kept by the Bank so
far as appears from our examination of those books;
iii) the reports on the financial statements of the Singapore, Bahrain and Hong Kong branches
audited by other auditors have been dealt with in preparing our report in the manner
considered appropriate by us;
iv) as per information and explanation given to us the Central Government has, till date, not
prescribed any cess payable under Section 441A of the Companies Act, 1956.
v) on the basis of written representations received from the directors, as on March 31, 2009,
and taken on record by the Board of Directors, we report that none of the directors is
disqualified as on March 31, 2009 from being appointed as a director in terms of clause (g) of
sub-section (1) of Section 274 of the Companies Act, 1956;

8. In our opinion and to the best of our information and according to the explanations given to
us and on consideration of reports submitted by the Singapore, Bahrain and Hong Kong
branch auditors, the said financial statements together with the notes thereon give the
information required by the Banking Regulation Act, 1949 as well as the Companies Act,
1956, in the manner so required for banking companies and give a true and fair view in
conformity with accounting principles generally accepted in India:
i) in the case of the Balance Sheet, of the state of affairs of the Bank as at March 31, 2009;
ii) in the case of the Profit and Loss Account, of the profit of the Bank for the year ended on
that date; and
iii) in the case of the Cash Flow Statement, of the cash flows of the Bank for the year ended
on that date.

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FINANCIAL REPORT OF ICICI

Analysis of Profit and Loss Account

Income

Sales:
The sales are the revenue generated by discharging of product and services to the end user or
the intermediate. In this case it is on the basis of interest earned by the bank. The sales for
year end march 31, 2009 is Rs. 31092 Cr excluded whereas sales for year 2007-08 was Rs.
30788 Cr i.e., a 3.6 % positive change over last year.

Other Income:
The income generated from the other operations which is not the company’s regular business.
Other income includes interest received on profit on sale of investments, commissions, profit
on sale of land, etc. i.e., 7603 Cr.

Expenditure

Manufacturing Expenses:
It includes aggregate of material costs and other directly attributable to conversion of material
to finished products. Since ICICI is in the services sector, it does not incur any manufacturing
expenses.

Payment to and provision for employees:

It includes salaries, wages and other payments made to employees. In 2009 payment to and
provision for employees made increased to Rs. 1971 Cr a negative change of 5.4 %.

Office and Administrative Expenses:

The administrative expenses are the expenses which company has incurred to run the
business smoothly. Here company has incurred the expenses Rent, taxes, Insurance, lighting,
director’s fees, auditor’s fees etc. In 2008 administrative charges were Rs. 1710 Cr which has
increased to Rs. 1809.3 Cr in 2009, i.e., by 5.8 %.

Selling and Distribution Expenses:

The selling expenses are the expenses which the company has incurred to make the sale of
the product. It includes advertising and publicity expenses etc. selling and distribution
expenses have increased to Rs. 668 Cr i.e. a decrease of 1.61 % over last year.

Depreciation:
Depreciation is the expense which is a non-cash expense. Depreciation incurred by ICICI is
on bank’s property and leased assets. Depreciation for this financial year is Rs. 678 Cr.
whereas depreciation of 2008 was Rs. 578 Cr.

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APPROPRIATION OF FUNDS

Net Profit:
The net profit is the result of all the business operations. Net profit of ICICI for 2009 is Rs.
6194 Cr. Interestingly it is significantly greater than that of 2008, profit for 2008 was Rs.
5156 Cr. After this, profit is ready for appropriation.

Dividend:
The proposed final dividend is Rs. 1224 Cr. Last year total dividend was Rs. 1223 Cr.

Dividend Tax:
SBI paid dividend tax of Rs. 151 Cr whereas last year Rs. 149 Cr was paid as dividend tax.

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 ANALYSIS OF BALANCE SHEET

SOURCES OF FUNDS

Shareholders’ Fund:

The share capital is the contribution of the owners of the company towards the operations of
the company. This capital is called as share capital as the members get the shares as per their
contribution. Authorized share capital is of 1,275,000,000 shares whereas only 1,112,687,495
have been subscribed for.

Reserve and Surplus:

Reserve and surplus are the funds which the company owns by the operations in the shape of
profits. In reserve and surplus, off course only profits are not there but also other items are
there but they are only the part of profits which are divided in the appropriation. Net Reserves
after adjustment of intangible asset and transfer to profit and loss account is Rs. 48419 Cr.

Secured Loans:

Secured loans are the funds arranged by the company from outside by giving some security
as guarantee to those outsiders. Secured loans for 2009 are Rs. 67323 Cr in form of bank
loans. Secured loans were at Rs. 65648 Cr in 2008.

APPLICATION OF FUNDS

Fixed Assets:

Fixed Assets are the assets which are acquired by the company for a longer period of time not
for just one year. These assets are charged depreciation for the amount lost on their usage. In
other words depreciation is the amount charged for the usage of fixed assets. Fixed assets
have decreased from Rs. 4108 Cr to Rs. 3801 Cr in 2009.

Investments:

Investments are the amount invested by the company in various securities for some future
earnings as that of interest, dividend and increase in their value. Investments have decreased
by 7.5 %. Investments are worth Rs. 103058 Cr whereas in 2008 investments were for Rs.
111454 Cr.

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Current Assets, Loans and Advances:

Current assets are the assets which are convertible to cash or equal to cash. These current
assets are the Inventories, Sundry Debtors, Cash and Bank Balances, Other current assets etc.
In Inventories, we generally includes the stock and other items helpful in production but not
for long run. Loans and advances are the amount given to person for their uses. These can be
any loan to director or any advance to any authority etc. Current assets are worth Rs. 24163
Cr, in 2008 current assets were worth Rs. 20574 Cr.

One of the possible implications of this decrease in current assets could be that collection
from debtors is good.

The advances decreased from Rs. 225616 Cr in 2008 to Rs. 218310 Cr in 2009.

Current Liabilities and Provisions:

Current liabilities and provisions are the liabilities which a company has to pay within one
year of time. These current liabilities are in the shape of Sundry Debtors, unpaid dividend,
bank overdraft, advances and security from customers and interest accrued but not due etc.
Current liabilities have increased by Rs. 851 Cr. Liabilities for the year is of Rs. 43746 Cr.

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 ANALYSIS OF CASHFLOW STATEMENT
Cash Flow from Operating Activities:
The cash flow from operating activities takes into account cash generated by the company on
the basis of its day to day business activities such as buying, selling receiving payments from
clients and clearing dues to suppliers. It is important to note that in case of ICICI the cash
generated from operating activities has increased from Rs. (11631) Cr in 2008 to Rs. (14188)
Cr. This says that ICICI has had an outflow of cash from operating activities.

Cash Flow from Investing Activities:

The funds which the business receives utilizes both by buying goods and assets. Here we
basically consider those activities which include buying assets and other investment options
and profit generated from them if any. In Case of ICICI it is essential to note that we see a
tremendous cash inflow i.e an increase of Rs. 21418 Cr which would be a huge boost for the
management.

Cash Flow from Financing Activities:

Every company needs funds for its projects, regular working and carrying out its daily
activities. A company may use any method for generating funds, be it issue of shares and
debentures, acquiring loans from banks, etc. The activities mentioned above are known as
financing activities. ICICI had an outflow of Rs. 1625 Cr in 2009 as compared to an inflow of
Rs. 29964 Cr in 2008.

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Key Performance ratios
 Ratio analysis is a study of relationship among various financial factors in a business.

 Key performance ratios help shareholders, managers and lenders in making informed
decisions.

 The ratios used in the banking industry to judge performance are however, slightly different.

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