A SPECIALISATION PROJECT

REPORT ON

“FUNAMENTAL ANALYSIS OF PUBLIC

SECTOR BANKS IN INDIA” (SBI)

A project Submitted to

University of Mumbai for partial completion of the

degree of

Master of Management Studies

Under the Faculty of Commerce

SUBMITTED BY:

MAYURI RAJARAM GADE

Roll No.19028

Under the Guidance of

Prof.: RAHUL SHAH

SWAYAM SIDDHI COLLEGE OF MANAGEMENT AND RESEARCH,

BHIWANDI
April 2021
BATCH: 2019-2021

1
 DECLARATION BY THE LEARNER

I the undersigned Miss. Mayuri Rajaram Gade hereby declare

that the work embodied in the project work titled
“FUNDAMENTAL ANALYSIS OF PUBLIC SECTOR
BANKS IN INDIA (SBI)” form my own contribution to the
research work carried out under the guidance of Prof. Rahul Shah
is a result of my own research work and has not been previously
submitted to any other University for any other Degree/ Diploma
to this or any other University.

Whenever reference has been made to previous work of others, it

has been clearly indicated as such and included in the
bibliography.

I, here by further declare that all information of this document has

been obtained and presented in accordance with academic rule and
ethical conduct.

Name and Signature Of the learner

Certifies by

Name and signature of guiding teacher

2
 CERTIFICATE

This is to certify that Ms. Mayuri Rajaram Gade has worked

and duly completed her project Work for the degree of Master of
Management Studies in the subject and her project is entitled
“Fundamental analysis of public sector bank in India” (SBI) under
my supervision.

I further certify that the entire work has been done by the learner
under my guidance and that no part of it has been submitted
previously for any Degree or Diploma of any University.

It is her own work and facts reported by her personal findings and
investigations

Name and Signature

Of Guidance teacher

Date of submission:

3
 ACKNOWLEDGEMENT

To list who all have helped me is difficult because they are so

numerous and the depth is so enormous.
I would like to acknowledge the following as being idealistic channels
and fresh dimensions in the completion of this project.
I take this opportunity to thank the University of Mumbai for giving me
chance to do this project.
I would like to thank my Director Dr.ArlOph johnvieira for
providing the necessary facilities required for completion of this
project.
I would like to express my sincere gratitude towards my project guide
Prof. Rahul Shah whose guidance and care made the project
successful.
I would like to thank my College Library, for having provided various
reference books and magazines related to my project.
Lastly, I would like to thank each and every person who directly or
indirectly helped me in the completion of the project especially my
Parents and Peers who supported me throughout my project.

4
 INDEX
Sr.no. CONTENT Page No.

1. EXECUTIVE SUMMARY 7
2. CHAPTER:1 INTRODUCTION 8
1.1: banking sector in India 9
1.2:current scenario of banking sector in India 9
1.3:Indian banks future challenge in global competition 10
1.4:about state bank of India 11
1.5:Need of the study 11
1.6:scope of the study 11
1.7:Limitations of the study 12
1.8:Importance of public sector banks 12

3. COMPANY PROFILE 14

4. HISTORY OF SBI 21

5. CHAPTER:2 REVIEW OF LITERATURE 23

6. CHAPTER:3 OBJECTIVE OF THE STUDY 26

7. CHAPTER:4 DATA COLLECTION 28

4.1:Fundamenatal analysis 29
4.2:fundamental analysis of the state bank of India-three level analysis 30
4.3:How does fundamental analysis work 35
4.4:Steps of fundamental analysis 35
4.5:Two approaches to fundamental analysis 35
4.6: Benefits of fundamental analysis 36
4.7:Fundamental analysis: drawbacks 36
4.8:strengths of fundamental analysis 36
4.9: weaknesses of fundamental analysis 37
4.10: Types of fundamental analysis 38
4.11:Fundamental analysis tools 41
4.12:Ratio comparison between the SBI 42
4.13:Investment valuation Ratio 42
4.14:Profitability Analysis of SBI 45
4.15:Efficiency analysis of SBI 47
4.16:Liquidity Ratio 49
4.17:Liqudity and credit analysis of SBI 52
4.18:Valuation analysis of SBI 54
8. CHAPTER:5 RESEARCH METHODOLOGY 56

5
 5.1:Research methodology 57
5.2:Sources of Data 57
5.3: Methods use for deciding the sampling plan 57
5.4: Sampling plan 57
5.5: Validation of Tools 57
5.6: Data collection instruments 57
5.7: Rating scale 57
5.8: Data processing and analysing plan 57
9. CHAPTER:6 DATA ANALYSIS AND OBSERVATION 58

10. CHAPTER:7 FINDINGS 70

11. CHAPTER:8 CONCLUSION AND RECOMMANDATION 74

12. ANNEXTURE 77

13. BIBLIOGRAPHY 80

EXCUTIVE SUMMARY
6
The study represents the brief insight into the Indian banking sector and the fundamental
analysis of public sector banks. Fundamental analysis helps analyze the strength of the
foundations of the Indian banking sector. It is a stock valuation process that helps
measure its intrinsic value of the State Bank of India through its economic review.
Financial and other qualitative and quantitative factors. The main feature of fundamental
analysis is the knowledge that is useful for making a good investment decision.
Banks in India can be classified into unregistered banks and registered banks. Listed
banks consist of commercial banks and cooperative banks. There are approximately
67,000 registered bank branches across India. During the first phase of the financial
reforms, in 1969 there was a nationalization of 14 large banks.
Industrialization is necessary for rapid economic growth that implies a long-term increase
in the nation's per capita. It requires a large possible investment if the savings are solid
and the investors are willing to take a common market risk.
The main focus of the report is to understand and interpret the factors influencing the
banking sector in India.

7
 CHAPTER: 1

INTRODUCTION

1.1 BANKING SECTOR IN INDIA

8
 A bank is a financial institution and financial intermediary that accepts deposits and
channels those deposits into lending activities, either directly or through the capital
markets.

The Indian banking sector has reached new heights in the last few decades. Fundamental
analysis is as an evaluation of the company internal and external forces of the company to
predict the profit and loss of earnings in relation to the movement of the company's stock
price. It is one of the most common tools to analyze whether to invest in stocks or not.
When fundamental analysis is a technique that attempts to determine the value of the
company, focusing on the factors that influence the current business of the company and
is characteristic of prospects.

1.2 Current scenario of banking sector in India

The current Indian banking structure is the result of a prudent process of expansion,
reorganization and consolidation. In the early banking phase, economic considerations
govern the growth of the nationalization of banks, but with the growing economy more
emphasis has been placed on social objectives which translate into the expansion of the
branch network that penetrates deeply throughout the region. By achieving this social
goal, the Indian banking system has emerged as one of the largest in the world today.

Currently with a wider range in the bakery sector, India's social sector banks are quite
mature in terms of supply, product range and urban reach. But rural penetration remains a
challenge, especially for the competing private sector and for foreign banks. In general,
the Indian mass has a deep confidence in the social sector banks and the private sector in
terms of asset quality and capital adequacy. To protect this faith, the Reserve Bank of
India, as a standalone entity, is responsible for managing the volatility of the rupee
without any fixed exchange rate and is responsible for all financial decisions with
minimal pressure from the government.

1.3 Indian Banks Future Challenge in Global Competition

9
With overall economic growth and efficient structural reforms, Indian banks are
emerging global competitors and are proving to be an important source of income for the
financial sector. With effective structural social reforms, financial services penetration in
India remains healthy, but not at the desired pace. It turns out that only 40% of the Indian
population has bank accounts and many of these accounts are extinct. The banks have
also opened simple Rs 5.06 million accounts which are more or less elephantine for the
banks. Of the six lakhs of homes in India, only about 30,000 (5%) have commercial bank
branches and fewer than three bank branches per 100 km2 of floor space, which is much
lower than global bank branches. While maintaining economic objectivity to increase the
flow of credit into economic activity, the RBI aims to establish bank branches in all
households with 20,000 populations by 2012, a tall order for banks. The additional
deposits mobilized in 2009 in rural bank branches represented only 9% of the total
deposit and the share of total bank credit was 7%. The percentage of the mass that has
some kind of insurance coverage is only 10% and that of the non-life insurance is only
0.6%. It is clear that, in general, banks have valuation flaws that become the cause of
NPAs such as (borrower profitability, lender profitability, unique identity (UID) and
coverage).

All profitability indicators, including asset return, return on equity and net interest
income and spread, have decreased. The increase in NPA increases to 2.39% in FY10, the
decreasing return as (RoA) in FY10 decreased to 1.05%, the return on funds to 9.29%,
increased by 0.10% , net profit at 8.3%, operating profit at 10.4%, in case of
securitization / Reconstruction company, in the future (liquidity management), buyback
rate emerged as the reference rate, increase in 'inflation, credit recovery, general credit
weakening due to the progressive withdrawal of liquidity support provided by the central
bank, divestiture of SCB's credit stake to the capital market, real estate and commodities
are a matter of great concern the future and will hamper the projected economic growth
of 9% in India.

1.4 ABOUT STATE BANK OF INDIA

10
The State Bank of India (SBI) is an Indian multinational, a legal body for banking and
financial services of the public sector. It is a statutory body of a government company
headquarters in Mumbai, Maharashtra. SBI is ranked 235th on the 2019 Fortune
Global500 list of the world's largest company, India's largest bank with a 25% market
share in assets as well as a quarter of the total market share Of loans, Deposits.
The State Bank of India had 8 member banks in 1959, but now 5 member banks. All 5
SBI member banks use the logo of the State Bank of India, which is the blue circle.
These associated banks also use the initial name i.e. 'State Bank of India' followed by the
name of the regional headquarters.

1.5 NEED OF THE STUDY

The investors doesn't make much analysis before investing in a particular stock, when
compared to other nations, Indian investors have a 90% loss, and only 10% make a profit
because they don't analyze a stock. This study mainly helps investors to fundamentally
analyze stocks, which offers the opportunity to know the position of stocks over shorter
or longer time periods. Therefore, stock analysis basically provides a profit opportunity
over others who don't analyze them.

1.6 SCOPE OF THE STUDY

The project entitled ―Fundamental analysis of the public sector in India will allow the
investor to refer to the performance of the Banks, their relative growth and then decide
whether to buy or sell that particular share. The project is limited to the fundamental
analysis of the selected banks for a given period, other analyzes and banks not present in
this list are not taken into consideration.

1.7 LIMITATIONS OF THE STUDY

The scope of the study was limited due to some constraints given below: -

11
1. Analysis is only a means, not an end. The analysis was done on the basis of my own
interpretations and as far as I know, but each analyst has their own interpretations and
suggestions.
2. It does not take into account the time required to completion of the work.
3. The Non-monetary factors are not taken into consideration for the analysis.
4. Not having personal contact with the stakeholders of the companies is also a limitation
for the analysis of the project.
5. Error due to oversight or misinterpretation.

1.8 IMPORTANCE OF PUBLIC SECTOR BANKS

The sectorial organization of companies can be divided into two groups, the private
sector organization and the public sector organization; public sector banks play an
important role in the economic development of India. The role and importance of the
public sector can be briefly explained below.
1. Employment: The public sector provides jobs for a large number of people in the
country, for example, Indian Railways provide jobs for around 15.5 people in Laca,
possibly the largest employer in the world.
2. Rural development: Public sector units facilitate rural development. Development of
both economic and social infrastructures. Location of projects in rural areas such as
Bokhara steel plant, Raurkela steel plant, etc.
3. National Income: Public sector units contribute to the country's national income. The
public sector has grown over the years in size both in number of units and in production.
4. Capital formation: The public sector contributes to capital formation by mobilizing
savings through public sector banks. Financial institutions across India such as IDBI,
ICICI, etc. They have played an important role in industrial investment and capital
formation by providing medium and long-term funds to industry and the service sector.
5. Foreign Exchange Earnings: Public sector companies contributed to the country's
export earnings. Public sector units export a range of products such as engineering goods,
chemicals, minerals, metals, etc. And they also offer export services.

12
6. Social order: Public sector units contribute to social order by providing jobs to large
numbers of people in the country. Job creation reduces the possibility of antisocial
activities.
7. Government Revenue: Public sector units contribute revenue to the government.
Income is in the form of direct taxes, indirect taxes and additional benefits. 8.
Infrastructure Development: Public sector units play an important role in the
development of nations' infrastructure. The public sector has developed roads, railways,
airways, energy, etc.

13
COMPANY PROFILE

14
COMPANY OVERVIEW:-

State Bank of India (SBI) is a multinational banking and financial services

company headquartered in India. It is a government-owned company based in
Mumbai, Maharashtra. As of December 2013, it had assets of $ 388 billion and
17,000 branches, including 190 overseas offices, making it India's largest banking
and financial services company by assets. The State Bank of India is one of the
four big banks in India, along with ICICI Bank, Punjab National Bank and Bank
of Baroda. The bank has its origins in British India, through the Imperial Bank of
India, until the founding of the Bank of Calcutta in 1806, making it the oldest
commercial bank in the Indian subcontinent. The Bank of Madras merged with
the banks of the other two presidencies, Bank of Calcutta and Bank of Bombay, to
form the Imperial Bank of India, which in turn became the State Bank of India.
The Indian government owned the Imperial Bank of India in 1955, with the
Reserve Bank of India taking a 60% stake and renaming it the State Bank of
India. In 2008, the government took over the stake from the Reserve Bank of
India.
COMPETITIVE POSITION
SBI is the oldest and largest public sector bank in India. With market
capitalization of Rs. 106,671.68 Interest income of Rs.cr 119,657.10 and net
profit of Rs.cr 14,104.98. Some of SBI's main competitors in the banking sector
are ICICI Bank, HDFC Bank, Axis Bank, Bank of India, Punjab National Bank
and Bank of Baroda Canara Bank. However, in terms of average market share,
SBI is by far the largest player in the market.

BOARD OF DIRECTORS
Chairman Mrs Arundhati Bhattacharya
Shri Hemant G
Managing Director Shri Diwakar Gupta
Shri A. Krishna Kumar
Shri S. Vishvanathan

15
STRATEGIC EVOLUTION OFSBI
The strategy can be defined as the periodic changes that a company must introduce in its
structure and operations to ensure continuity in the face of environmental changes.
Therefore, the strategic evolution of a company can be understood in terms of the main
social institutions such as the State, the market, the community or civil society and their
interrelationships that can influence its functioning and, therefore, the achievement of the
main objectives. of its constitution. Historians recognize moments of profound change as
the balance of power or influence shifts between these institutions. SBI is a dynamic
organization and has continuously changed shape to adapt to its environment. Here are
your three key environmental factors:
 Ownership and governance
 Business processes
 Structures and systems

STATEMENT OF THEVISION
Creating value for all through a responsible, reliable and resourceful partnership.

STATEMENT OF THE MISSION

Make the company your preferred financial partner. We seek to satisfy customers
through our innovative product offering and world-class service standards,
enabling them to make informed decisions using state-of-the-art execution
capabilities that provide a reliable marketplace.

MARKET CAPITALIZATION
SBI is India’s Number one bank on the basis of market capitalization, Amounted
to Rs.117, 978.50 Crore in 2020.

Listings and shareholding:

16
As on 31 March 2020, Government of India held around 61.23% equity shares in SBI.
Life Insurance Corporation of India is the largest non-promoter shareholder in the
company with 8.82% shareholding.
Shareholders Shareholding
Promoters: Government of India 61.23%
FIIs/GDRs/OCBs/NRIs 11.17%
Banks & Insurance Companies 10.00%
Mutual Funds & UTI 8.29%
Others 9.31%
Total 100.0%
The equity shares of SBI are listed on the Bombay Stock Exchange, where it is a
constituent of the BSE SENSEX index, and the National Stock Exchange of India, where
it is a constituent of the CNX Nifty. Its Global Depository Receipts (GDRs) are listed on
the London Stock Exchange.

PRODUCTS AND SERVICES

1. Debit Cards: State Bank's debit card spending exceeded Rs 15 billion for fiscal
year 2012-13, accounting for more than 20% of total debit card spending in the
industry.
2. Prepaid Cards: The bank's product range includes popular rupee prepaid cards
such as gift card, generic prepaid card such as eZ-Pay card and overseas travel
card which meet customers' different payment needs .
3. Foreign Travel Cards: Foreign travel card which provides security and comfort
to foreign travelers. Now available in eight major currencies: US dollar (USD),
British pound (GBP), euro, Canadian dollar (CAD), Australian dollar (AUD),
Japanese yan (JPY), Saudi riyal (SAR) and Singapore dollar (SGD).
4. EZ-Pay Cards: eZ-Pay cards are aligned with most of the social schemes of
state and central governments.
5. Gift Vouchers - Gift vouchers remain the preferred choice for customers to give
"freedom of choice" to their loved ones.

17
6. Green Referral Card (GRC) - The cardholder can swipe the card at the Green
Channel counter or cash deposit machines and send money to the beneficiary
whose account number is assigned to the card. Once the transaction is completed,
both the sender and the payee get confirmation via SMS on their mobile phone.
7. Working Capital Financing: SBI offers working capital financing to meet the
full range of short term financing requirements that arise in a company's daily
operating cycle.SBI working capital loans can help your business finance
inventory, manage internal cash flows, support supply chains, finance
manufacturing and marketing operations, provide cash support for business
expansion, and carry business currents. SBI's operational finance products
encompass a range of funded and unfunded services ranging from cash credit to
structured loans, to meet the diverse needs of all segments of industry, commerce
and the service sector. Financed facilities include cash credit, sight loan and
invoice discount. Sight loans are also considered under the FCNR (B) scheme.
Unfunded instruments include letters of credit (domestic and foreign), as well as
bank guarantees (performance and financial) to cover advances, tender bonds,
etc.
8. Project Financing: SBI has set up a Strategic Project Financing Business Unit
to evaluate credit proposals and extend term loans for large industrial and
infrastructure projects. In addition to this, term loans for medium-sized projects
and small clients are provided through the CDO and NBG. Generally, the project
funding covers Greenfield industrial projects, capacity expansion in existing
production units, construction projects or other infrastructure projects. The
expansion and diversification of capital-intensive activities, as well as the
replacement of equipment, can be financed through project term loans. Project
financing is often channeled through special vehicles and organized according to
the future cash flows arising from the project. Loans are approved based on a
solid internal assessment of the cost and profitability of the companies, as well as
the credit standing of the promoters.
9. Mobile banking

18
BUSINESS OF SBI:
The activity of banks was initially limited to discounting bills of exchange or other
negotiable private securities, maintaining cash accounts and receiving deposits, and
issuing and circulating banknotes. Loans were limited to Rs. 1Lakh and the
accommodation period is limited to only three months. The collateral for these loans
consisted of government bonds, commonly referred to as corporate cards, bullion,
treasure, plates, jewelry or "non-perishable" goods, and no interest beyond 12% could be
charged. Loans were also made for goods such as opium, indigo, salty wool, cotton,
cotton items, mule twists, and silk items, but this cash credit financing did not gain
momentum until the third decade of the 19th century.

Operations: - SBI provides a range of banking products through its branch network in
India and abroad, including products targeting non-resident Indians (NRIs). SBI has 14
regional centers and 57 zonal offices which are located in major cities throughout India.

Domestic presence: - SBI had 14,816 branches in India as on 31st March 2013, of which
9,851 (66%) in rural and semi-urban areas. In the 2012-13 financial years, its revenue
was INR 200,560 Crores ($ 36.9 billion), out of which domestic operations contributed
95.35% of the revenue. Likewise, domestic operations contributed 88.37% to total profits
for the same financial year.

International presence: - As of 28th June, 2013, the bank had 180 offices abroad in 34
countries. It has branches in Moscow, Colombo, Dhaka, Frankfurt, Hong Kong, Tehran,
Johannesburg, London, Los Angeles and Male in the Maldives, Muscat, Dubai, New
York, Osaka, Sydney and Tokyo. It has offshore banking units in the Bahamas, Bahrain
and Singapore and representative offices in Bhutan and Cape Town. He also has an ADB
in Boston, USA.
The Canadian subsidiary State Bank of India (Canada) also dates back to 1982. It has
seven branches, four in the Toronto area and three in the Vancouver area.

19
SBI manages several foreign subsidiaries or affiliates. In 1990 he founded an offshore
bank: State Bank of India (Mauritius). SBI (Mauritius) has 15 branches in the main
cities / towns of the country, including Rodrigues.
In 1982, the bank established a branch, State Bank of India (California), which now has
ten branches: nine branches in the state of California and one in Washington, D.C. The
tenth branch opened in Fremont, California on the 28th. March 2011. The other eight
California branches are located in Los Angeles, Artesia, San Jose, Canoga Park, Fresno,
San Diego, Tustin and Bakersfield.
In Nigeria, SBI operates as INMB Bank. This bank started out in 1981 as an Indo-
Nigerian merchant bank and received permission to start retail banking in 2002. It now
has five branches in Nigeria.
In Nepal, SBI owns 55% of Nepal SBI Bank, which has branches across the country. In
Moscow, SBI owns 60% of the Commercial Bank of India and Canara Bank owns the
rest. In Indonesia, it owns 76% of PT Bank Indo Monex.
The State Bank of India already has a branch in Shanghai and plans to open one in
Tianjin
In Kenya, the State Bank of India owns 76% of Giro Commercial Bank, acquired for us$
8 million in October 2005.

HISTORY OF SBI
The roots of the State Bank of India date back to the first decade of the 19th century,
when the Bank of Calcutta was founded on June 2, 1806, later renamed the Bank of
Bengal. The Bank of Bengal was one of the three Presidential banks, the other two being
the Bank of Bombay (incorporated on April 15, 1840) and the Bank of Madras
(incorporated on July 1, 1843). The three Presidential banks were formed as joint

20
ventures and were the result of real cards. These three banks received the exclusive right
to issue paper money until 1861 when, with the Paper Money Law, the Indian
government assumed the right. The Presidential banks were merged on January 27, 1921,
and the reorganized bank was renamed Imperial Bank of India. The Imperial Bank of
India remained a public limited company but without government participation.

Under the provisions of the State Bank of India Act 1955, the Reserve Bank of India,
which is the central bank of India, has acquired a majority stake in the Imperial Bank of
India. On July 1, 1955, the Imperial Bank of India became the State Bank of India. In
2008, the Indian government acquired the Reserve Bank of India's stake in SBI to
eliminate any conflict of interest because the RBI is the country's banking regulatory
authority. In 1959, the government passed the State Bank of India (Subsidiary Banks)
Act, which assigned eight state banks to the SBI. A consolidation process began on
September 13, 2008, when the State Bank of Saurashtra merged with SBI.

SBI has acquired local banks in bailouts. The first was the Bank of Behar (founded in
1911), which SBI acquired in 1969, along with its 28 branches. The next year, the SBI
acquired the National Bank of Lahore (1942 estimate), which had 24 branches. Five
years later, in 1975, SBI acquired the Krishna ram Baldeo Bank, founded in 1916 in the
state of Gwalior, under the patronage of Maharaja Madho Rao Scindia. The bank had
been Dukan Pichadi, a small moneylender, owned by the Maharaja. The first manager of

21
the new bank was Jall N. Broacha, a Parsis. In 1985, SBI acquired the Bank of Cochin in
Kerala, which had 120 branches. SBI was the acquire as its subsidiary, State Bank of
Travancore, already had an extensive network in Kerala.
The State Bank of India and all of its associated banks are identified by the same blue
keyhole logo. The State Bank of India word mark usually has a standard typeface, but
uses other typefaces as well.
On October 7, 2013, Arundhati Bhattacharya became the first woman to be appointed
chairperson of a bank.

22
 CHAPTER: 2

REVIEW OF LITERATURE

[GejalakshamiSandanam& et.al (2012)] , Concluded that the public sector banks

performed remarkably well during the period than that of the overall regression analysis
show that the financial performance of the banking industries strongly . The public sector
banks are as not profitable as other sectors are. It means that efficiency and profitability
are inter related.

23
[Samir &KamraDeepa (2013)] Concluded that this analysis the position of NPAs in
selected banks State bank of India. It also highlights the policies pursued by the banks to
tackle the NPAs and suggest a multi-pronged strategy for speedy recovery of NPAs in
banking sector.

[SelvamPaneer& et.al. (2013)] Concluded that-The Present study was aimed to analyze
the financial assistance of nationalized bank in India .To identify the relative performance
of the operational variables the linear and compound growth rates have been calculated .
The performance of nationalized banks followed by public sector banks is found to be
higher when compared to State bank of India and its associates and Foreign Banks.

[V. Naseer Abdul (2014)] studied that – Study compares the financial performance and
employee efficiency of Indian banks during 2007-2013. Both the financial performance
and employee efficiency of foreign banks working in India are better than domestic banks
and private sector banks performance are better than the public sector banks. It is noted
that the public sector bank performance are more stable when compared to the private
sector banks.

[Gaur Arti&Arora Nancy (2014)] Concluded that it study about the causes and
consequences of the various component of the financial statement in relation to the
profitability of the bank. We analyzed the financial stability and overall performance of
State bank of India and study profitability of State bank of India (SBI).

[ThakarshibhaiChiragLoryia (2014)] Concluded that it attempt to analyze profitability of

selected public sector banks in India. This study which looks into three key factors which
affect the profitability analysis of Indian banking sector using mean, standard deviation,
and ANOVA model.

[Praveen & Sameera, 2016] has conducted analysis of public sector banks i.e. State bank
of India and using ratio analysis. The author has said that the public sector banks are
financially sound and good in their performance However the stock price of the is
overpriced as compare to the earnings of the bank whereas they are attractive in their
Stock valuation and good for investment. In addition, the author has urged investors

24
to lay emphasis on the current market conditions and nonmonetary factors while
taking their investment decisions.
[Sodhi & Waraich, 2016] has stated that the fundamental Analysis studies the various
financial economic and industrial parameters that influence the risk-return of the
securities and helps in investment decision making. The Public sector bank is selected
by the author for the purpose of analysis. Variables like Net Profit Margin, Return on
Equity, Earnings per share, P/E Ratio and dividend payout ratio are used for analysis of
the state bank of India. The Study has found out that the private sector banks are
performing more better than the public sector banks whereas the public sector
banks are facing problems of NPA’S.
[Undavia, 2016] has stated that the Indian banking system is unique in the world and has
evolved a lot in the last five decades. Indian Banking system has a vast growth potential
but also facing from some of the formidable challenges like increased level of
competition and increase in the level of nonperforming assets. The author has used
various financial parameters like net profit margin, operating profit margin, earning
per share and return on equity for analyzing the selected banks. The author has
concluded by suggesting State Bank of India as the best stock from selected public
sectors banks.
[Jeevitha & Sravani, 2018] has conducted fundamental analysis for public sector banks.
The study was conducted with the objective to help in Investment decision making. The
author has conducted their analysis i.e. economic, industry and company analysis
for the selected public sector banks i.e. State bank of India. The author has used
various ratios for identifying the financial position of these banks. The author has stated
that no investment decision should be taken without processing of all relevant and
available information.

25
 CHAPTER: 3

OBJECTIVE OF THE STUDY

The main objectives of study are as follows:

 To study the concept of project is to do fundamental analysis of public sector

banking of companies.
 To do the comparative study the present banking system in India.

26
 To study about ratio analysis for the selected companies and make necessary
comments on it so as to provide complete idea and core ideology of the
company.so those investors can easily get idea about the fundamental analysis of
banking companies.
 To analysis fundamental performance of state bank of India.
 To analysis the information collected on fundamental performance i.e.
Profit&Loss statement and balance sheet etc...

27
 CHAPTER: 4

DATA COLLECTION

International Journal of Research, Science, Technology & Management

e-ISSN: 2455-2240, Volume 13 Issue 1 January 2020

2
has stated that no investment decisions should be taken without processing of all relevant
and available information.
International Journal of Research, Science, Technology & Management
e-ISSN: 2455-2240, Volume 13 Issue 1 January 2020

2
has stated that no investment decisions should be taken without processing of all relevant
and available information CHAPTER: 4
RESEARCH METHODOLOGY

28
4.1 Fundamental analysis
Fundamental analysis is defined as an assessment of the internal and external forces of
the company to predict the profits, gains and losses relative to the trend of the company's
share price. It is one of the most common tools for analyzing whether to invest in a stock
or not. It is made to depend on the financial situation of a company. Also known as
quantitative analysis.
Fundamental analysis involves examining the economic. Financial and other qualitative
and quantitative factors related to a security in order to determine its intrinsic value.
Fundamental analysis, also known as quantitative analysis, involves treating a company's
balance sheet, such as profit and loss account, balance sheet to study various financial
indicators, such as income, profit, liabilities, expenses and assets.
Fundamental analysis is the examination of the underlying forces that affect the well-
being of the economy, industrial groups and businesses. As with most analytics, the goal
is to get a forecast and profit from future price movements. At the company level,
fundamental analysis can involve examining financial data, management, business
concept, and competition. At the industry level, there may be an examination of the
forces of supply and demand for the products being offered. For the national economy,
fundamental analysis could focus on economic data to assess the present and future
growth of the economy. To predict future stock prices, fundamental analysis combines
economic, industry and business analysis to derive a stock's current fair value and
predicted future value. If the fair value is not equal to the current price of the shares,
fundamental analysts believe that the shares are overvalued or undervalued and the
market price will eventually gravitate towards fair value. Fundamentalists do not heed the
advice of casual walkers and believe that markets are weak and efficient. Believing that
prices do not accurately reflect all available information, fundamental analysts seek to

29
capitalize on perceived price discrepancies.

4.2 FUNDAMENTAL ANALYSIS OF THE STATE BANK OF INDIA - Three-level

analysis
This study uses a three-tier analysis from State Bank India as part of the fundamental
analysis,
 Economic analysis
 Industry analysis
 Business analysis

1. Economic analysis:

30
The Indian economy is in "gradual recovery mode", report by the State Bank of India
(January 2018). According to the S BI Eco wrap report, the 8.4% industrial production
growth rate in November "is probably not a flash in the pan and a 6% growth in
December cannot be ruled out according to the SBI index". As of January 2018, the IIP
may continue to grow above 4%, indicating marginal moderation from month to month.
This news bodes well for the state of the Indian economy. Public sector banks play an
important role in the economic activity of the economy.

ECONOMIC ANALYSIS TOOLS

The most used tools to perform economic analyzes are:
1. Gross domestic product: - GDP is a measure of economic activity. This is the total
amount of goods and services produced in a country in a year. It is calculated by
summing the market values of all final goods and services produced in a year.
 It is a gross measure because it includes the total quantity of goods and services
produced, some of which simply replace goods that have depreciated or worn out.
 It is national production because it includes only goods and services produced
within the country.
2. Inflation Inflation: - can be defined as an upward trend in prices caused by demand
greater than supply. Over time, even a small annual price increase, say 1%, will tend to
affect the nation's purchasing power. In other words, if prices rise steadily, after several
years, consumers will be able to buy fewer goods and a service just assuming the level of
income does not change with inflation.

31
3. Interest rate: - The interest rate is the price of the credit. It is the percentage rate that
a person or organization receives or pays when lending and borrowing money. In general,
increases in interest rates, caused by inflation, government policy, rising risk premiums
or other factors, will lead to a reduction in debt and an economic slowdown.
4. International influences: - The rapid growth of the foreign market can generate
spikes in export demand, leading to the growth of export-sensitive sectors and overall
GDP. Conversely, the erection of trade barriers, quotas and foreign exchange restrictions
can hinder the free flow of foreign exchange, goods and services and damage an
economy's export sector.
5. Fiscal Policy: - The government's fiscal policy provides for the collection and
expenditure of revenue. In particular, fiscal policy refers to the government's efforts to
stimulate the economy directly, through spending.

State Bank of India (SBI) is an Indian multinational public sector banking and financial
services company. It is a government-owned company based in Mumbai, Maharashtra.
On 1stApril 2017, the State Bank of India, which was the largest bank in India, merged
with five of its partner banks, namely State Bank of Bikaner & Jaipur, State Bank of
Hyderabad, State Bank of Mysore, State Bank of Patiala and State Bank of Travancore,
and with BharatiyaManila Bank. This was the first large-scale consolidation in the Indian
banking sector. With the merger, SBI became one of the 50 largest banks in the world
(balance sheet size of Rs 33 trillion, 278,000 employees, 420 million customers and over
24,000 branches and 59,000 ATMs). SBI's market share is expected to increase from
17% to 22%. It has 198 offices in 37 countries; 301 correspondents in 72 countries. The
company is ranked 232 on the Fortune Global 500 list of the largest companies in the
world as of 2016. The bank is descended from the Bank of Calcutta, founded in 1806,
through the Imperial Bank of India, making it India's oldest commercial bank
subcontinent. . The Bank of Madras merged with the other two "presidential banks" of
British India, the Bank of Calcutta and the Bank of Bombay, to form the Imperial Bank
of India. 553 this page in turn became the State Bank of India in 1955. The Indian
government owned the Imperial Bank of India in 1955, and the Reserve Bank of India
(the Central Bank of India) took a 60% stake and renamed it State Bank of India. . In

32
2008, the government took over the stake from the Reserve Bank of India. The State
Bank of India has a 20% market share of deposits and loans among Indian commercial
banks.
Import Export: Export of petroleum products, precious stones, machinery, iron and
steel, chemicals, vehicles, imported clothing products, crude oil, precious stones,
machinery, fertilizers, iron and steel, chemicals. Main export partners: USA, United Arab
Emirates, China and Hong Kong. Import partner China, United Arab Emirates, Saudi
Arabia, USA, and Australia

2. INDUSTRY ANALYSIS:

An industry analysis helps inform business managers about the feasibility of their current
strategy and where to focus a company among its competitors in an industry. The
analysis examines factors such as competition and external business environment,
substitute products, management preferences, buyers and suppliers. Sector analysis
involves reviewing the economic, political and market factors that influence how the
sector develops. The main factors may include the power of suppliers and buyers, the
condition of competitors. And the likelihood of new market entrants.

INDUSTRY LIFE CYCLE

The profitability of the sector depends on the phase of the life cycle of the sector. Each
stage of development is unique and has different characteristics. Below are the different
stages of the industry life cycle.

33
 a) Pioneering phase: - It is the start-up phase of an industry. At this stage, very few
beginners have created the companies. The risk at this stage is very high due to
the effect of the gestation period.
b) Rapid Growth Phase: -In this phase of the industry life cycle, the demand for the
product in the industry increases rapidly and new entrants enter the industry every
day.
c) Maturity and saturation: -In this phase the demand almost stabilizes at a
particular level. Product differentiation occurs and companies begin to compete
on product features. This is also a consolidation phase and companies consolidate
their position by focusing on a particular segment.
d) Decline / Diversification: - In this phase, low-performing workers begin to
liquidate their business and this phase testifies to the survival of only the fittest.
Very strong companies survive during this phase. Some companies are embarking
on the path of diversification to overcome this phase. If the company diversifies,
it re-enters a new life cycle of the industry.

3. Company analysis:

State-owned banks were selected for the analysis of the banking companies. The
selection of these companies was based on that company's unique equity model. President
Rajneesh Kumar was founded on 2nd June 1806. More than 16,000 branches, it offers a
wide range of banking products through its extensive branch network in India and SBI's
overseas office is located in Mumbai. SBI has 14 local branches and 57 zonal offices. It
also has around 130 branches outside the country.

34
4.3 HOW DOES FUNDAMENTAL ANALYSIS WORKS
Fundamental analysis is performed with the aim of predicting the future performance of
a company. It is based on the theory that the market price of a security tends to move
towards its "real value" or "intrinsic value". Therefore, the intrinsic value of a security
exceeding the market value of the security represents a time to purchase. If the stock's
value is below its market price, investors should sell it.

4.4 STEPS OF FUNDAMENTAL ANALYSIS

1. Macroeconomic analysis, which involves the consideration of currencies, commodities
and indices.
2. Analysis of the industrial sector, which involves the analysis of companies that are part
of the sector.
3. Situational analysis of a company.
4. Financial analysis of the company.
5. Valuation The valuation of any security is carried out using the discounted cash flow
model (DCF), which takes into consideration:
1. Dividends received from investors
2. Earnings or cash flows of a company
3. Debt, which is calculated using the debt to equity ratio and the current ratio (current
assets / current liabilities.

4.5 Two approaches to fundamental analysis

35
When conducting fundamental analysis, investors can use one of the following
approaches;
1. Top-down approach: In this approach, an analyst examines national and international
economic indicators, such as GDP growth rate, energy prices, inflation and interest rates.
The search for the best security then turns into an analysis of total sales, price levels and
foreign competition in an industry to identify the best business in the industry.
2. Bottom-Up Approach: In this approach, an analyst starts researching with specific
companies, regardless of industry / region.
4.6 Benefits of fundamental analysis
Fundamental analysis helps to:
 Identify the intrinsic value of a security,
 Identify long-term investment opportunities, as this is real-time data.

4.7 Fundamental Analysis: Drawbacks

The drawbacks of fundamental analysis are:
1. Too many economic indicators and extensive macroeconomic data can confuse
novice investors.
2. The same set of information on macroeconomic indicators can have different
effects on the same currencies at different times.
3. It is only beneficial for long-term investments.

4.8 STRENGTHS OF FUNDAMENTAL ANALYSI S

Long-Term Trend
Fundamental analysis is useful for long-term investments based on long-term trends. The
Ability to identify and predict long-term economic, demographic, technological or
consumer factors. Trends can benefit patient investors who choose the right companies or
industry groups.

Value spotting

36
A solid fundamental analysis will help identify companies that represent good value. A
little bit of the most legendary investors think about value and the long term. Graham and
Dodd, Warren Buffett and John Neff is considered the champion of value investing.
Fundamental analysis can help you find out Company with valuable resources, solid
balance sheet, stable earnings and power.
Business Acumen
One of the most obvious, but least tangible, rewards of fundamental analysis is
developing
From a deep knowledge of the business. After such scrupulous research and analysis, a
The investor will be familiar with the main factors of income and profit of a company.
Profits
And earnings expectations can be powerful drivers of stock prices. Even some
technicians
Accept it. A good understanding can help investors avoid companies’ prone to Deficit
and identify those who continue to comply. In addition to understanding the business,
Fundamental analysis allows investors to develop an understanding of the key drivers of
value and Companies within an industry. The price of a share is heavily influenced by its
industrial group. Of By studying these groups, investors can better position themselves to
identify the opportunities that are High-risk (technology), low-risk (utilities), growth-
oriented (computer), value-oriented (oil), non-cyclical (Consumer staples), cyclical
(transport) or income-oriented (high yield).

4.9 WEAKNESSES OF FUNDAMENTAL ANALYSIS

Time constraints: Fundamental analysis can provide excellent information, but it can be
time-consuming. Time-consuming models often produce valuations that are inconsistent
with the current price.
Industry / Company Specific - Assessment techniques vary by industry group and
company specific characteristics. For this reason, a different technique and model are
needed for different industries and different companies. This can be time-consuming and
limit the amount of search that can be performed.

37
Subjectivity: fair value is based on assumptions. Any change in the growth or multiplier
assumptions can significantly alter the final valuation. Fundamental analysts are
generally aware of this and use sensitivity analysis to present a base case assessment, a
best case assessment, and a worst case assessment. However, even in the worst case, most
models are almost always optimistic, the only question is how much that is.
Analyst bias: Most of the information included in the analysis comes from the company
itself. Companies employ investor relations officers specifically to manage the analyst
community and disseminate information.

4.10 TYPES OF FUNDAMENTAL ANALYSIS

1: QUALITATIVE FACTORS:
Each industry differs in terms of customer base, market share between companies,
industry-wide growth, competition, regulation, and business cycles. Learning how the
industry works will give the investor a deeper understanding of a company's financial
health.
• Customers:-
Some companies only serve a handful of customers, while others serve millions. In
general, it is a red (negative) flag if a company depends on a small number of customers
for a large portion of its sales because the loss of each customer could drastically affect
revenue. For example, consider a military supplier that has 100% of its sales with the US
government. A change in government policy could cancel all of its sales.

• Market share:-
Understanding a company's current market share can reveal a lot about the company's
business. The fact that a company has an 85% market share tells you that it is by far the
biggest player in your market. Furthermore, this could also suggest that the company has
some sort of "economic moat", in other words, a competitive barrier that serves to protect
its current and future earnings, along with its market share. Market share is important due
to economies of scale. When the company is larger than the rest of its competitors, it is in
a better position to absorb the high fixed costs of a capital-intensive industry.
•Industry Growth:-

38
One way of examining a company's growth potential is to first examine whether the
number of customers in the overall market will increase. This is critical because without
new customers, a company has to steal market share to grow. In some markets, growth is
zero or negative, a factor that requires careful consideration. For example, a production
company dedicated solely to making compact audio cassettes could have been very
successful in the 1970s, 1980s and early 1990s. However, that same company would
likely struggle now due to the advent of new technologies, such as CDs and MP3s.
Today's compact audio cassette market is only a fraction of what it was at the height of its
popularity.
• Competition:-
Simply looking at the number of competitors to understand a company's competitive
landscape. Industries that have limited barriers to entry and a large number of competing
companies create a challenging operating environment for companies. One of the biggest
risks within a highly competitive industry is pricing power. This refers to a supplier's
ability to raise prices and pass those costs on to customers. Companies operating in
industries with few alternatives have the ability to pass costs on to their customers.
• Regulation:-
Some industries are heavily regulated due to the importance or severity of the sector's
products and / or services. Because some of these regulations are important to the public,
they can drastically affect a company's attractiveness for investment purposes. In other
sectors, regulation may play a less direct role in influencing the prices of the sector. For
example, the pharmaceutical industry is one of the most regulated. And for good reason,
no one wants an ineffective and fatal drug to hit the market. Investors should take these
regulatory costs into account when evaluating the potential risks and rewards of
investing.

2: QUANTITATIVE FACTORS
• The Balance Sheet:-
The balance sheet represents a record of a company's assets, liabilities and equity at a
given time. The balance sheet gets its name from the fact that a company's financial
structure is balanced as follows:

39
 Assets = Liabilities +Shareholders Equity

Assets represent the assets that the company owns or controls at any given time. This
includes items like cash, inventory, machinery, and buildings. The other side of the
equation represents the total value of the loan the company used to acquire those assets.
The loan comes from liabilities or equity. Liabilities represent debt (which, of course,
must be repaid), while equity represents the total value of the money the owners
contributed to the asset, including retained earnings, which are gains made in previous
years.

• The income statement:-

While financial statements take an instant approach when looking at a business, the
income statement measures a company's performance over a specified period of time.
Technically, you may have a balance sheet for a month or even a day, but you will only
see quarterly and annual reports from public companies. The income statement presents
information on revenues, costs and profits that were generated as a result of company
operations for that period.
Income as an Investor Signal Income, also known as sales, is often the simplest part of
the income statement. The best way for a company to improve profitability is to increase
sales revenue.
• Operating profit margin and non-operating margin:-
If the company's income increases relative to its normal business, a company's
fundamentals are sound if the company has shown income growth from a business that is
not a normal business then it is not good for a business. Company. For example, the
appreciation of the company's investment in real estate is not part of the company's core
business, but is part of the company's non-operating profit.

• What are the expenses?

There are many types of expenses, but the two most common are cost of sales (COGS)
and selling, general and administrative (SG&A) expenses. The cost of goods sold is the

40
expense most directly involved in creating income. It represents the costs of producing or
purchasing goods or services sold by the company. For example, if Wal-Mart pays a
salesperson $ 4 for a box of soap, which he sells to customers for $ 5. Once sold, the cost
of the products Wal-Mart sells for the soap box would be $ 4. Next, the costs involved in
the management of the activity are the selling, general and administrative expenses. This
category includes marketing, salaries, utility bills, technology expenses, and other
overhead costs associated with running a business. Selling, general and administrative
expenses also include depreciation.

Profits = Revenue – Expenses Profit

Simply put, it equals your total income minus your total expenses. However, there are
several commonly used earnings sub-categories that inform investors about the
company's performance. Gross profit is calculated as revenue minus the cost of goods
sold. Companies with high gross margins will have a lot of money to spend on other
business operations, such as research and development or marketing. So keep an eye out
for downward trends in the gross margin rate over time. This is a telltale sign of future
problems facing profits. When the cost of goods sold increases rapidly, they are likely to
reduce gross profit margins, unless, of course, the company can pass these costs on to
customers in the form of higher prices. Operating profit is equal to revenues less selling
and selling costs, general and administrative expenses. High operating margins can mean
that the company has effective cost control or that sales increase faster than operating
costs. Operating profit measures the amount of money the company throws and is
considered by some to be a more reliable measure of profitability, as it is more difficult to
manipulate with accounting tricks than net profit.

4.11 Fundamental analysis tools

There are the most popular fundamental analysis tools.
i. Earnings per share-EPS
ii. ii. Price to earnings-P / E ratio
iii. Price to book-P / B

41
 iv. Dividend Payout Ratio
v. Accounting/Book value
vi. Return on equity

4.12 RATIO COMPARISON BETWEEN THE "STATE BANK OF

INDIA"
RATIO ANALYSIS
The relationship between accounting data, expressed mathematically, is known as a
financial ratio (or simply as a ratio). Ratio helps summarize large amounts of financial
data and make qualitative judgments about the company's financial performance. Report
Analysis is the most powerful financial analysis tool. Many different groups of people are
interested in analyzing financial information to indicate financial and operational
efficiency and growth of the business firm.
Ratio analysis plays an important role in the business world. It is a widely used financial
analysis tool. Ratio analysis is relevant for evaluating a company's performance with
respect to liquidity position, long-term solvency, operational efficiency, overall
profitability, inter-firm comparison and trend analysis.
With the help of the report analysis, it is possible to determine:
• The company's ability to fulfill its current obligations;
• The extent to which the company has used its long-term solvency by transferring funds;
• The efficiency with which the company uses its assets to generate sales revenues;
• The operational efficiency and overall performance of the company;

4.13 INVESTMENT VALUATION RATIO:

Investors can use investment valuation reports to estimate the attractiveness of a potential
or existing investment and get an idea of its valuation. Investment valuation report
Operating Profit per share Earnings per share Dividend per share.

42
DIVIDEND PER SHARE:
The sum of the dividends declared for each ordinary share issued. Dividend per share
(DPS) is the total dividends paid for a full year (including interim dividends but
excluding special dividends) divided by the number of outstanding common shares
issued. The equation for calculating the dividend per share ratio is:

DIVIDEND PER SHARE = Dividend /Number of share

Dividends per share 2016 2017 2018 2019 2020

SBI 36.00 43.51 40.00 4.52 3.62

Debt Equity Ratio

The debt-equity ratio is determined to ascertain the soundness of the long-term financial
policies of the company. The ratio indicates the extent to which the firm depends upon
outsiders for its existence. It may be calculated as follows:

The Debt Equity Ratio of position of SBI bank is summarized in and discussed below.

Debt Equity Ratio of SBI

Year SBI
2016 15.7488
2017 15.2478
2018 13.7478
2019 13.9150

43
Fixed Assets Turnover Ratio

This ratio indicates the extent to which the investments in fixed assets contribute towards
sales. If compared with a previous period, it indicates whether the investment in fixed
assets has been judicious or not. This ratio is calculated using the following equation and
expressed in terms of times:

The Fixed Assets Turnover Ratio position of SBI bank is summarized in and discussed
below.

Fixed Assets Turnover Ratio of SBI Bank

Year SBI
2016 5.1645
2017 4.8464
2018 4.8209
2019 4.8984
2020 5.4459

44
4.14 Profitability Analysis Of SBI

Consolidated
(%)
Particulars FY 2015 FY 2016 FY 2017 FY FY 2019
2018
Net Profit Margin Ratio 9.14 6.38 6.81 4.67  (0.15)

Cost to Net Income Ratio 56.35 60.08 59.50 58.78  60.38

Other Income to Net Income 38.76 37.92 41.73 40.30  50.61

Ratio

100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
1 2 3

Particulars FY 2015 FY 2016 FY 2017 FY 2018 FY 2019

Net profit margin is obtained by dividing the after-tax profit by the total income
generated (that is, the accrued interest plus other income) and shows what is left to
shareholders as a percentage of the total income.
Cost to net income ratio is particularly important in the valuation of banks. It is obtained
by dividing operating costs by the net income generated (i.e. net interest income plus
other income). The index highlights the efficiency with which the bank is managed: the
lower it is, the more profitable the bank will be. If this ratio increases from period to
period, it means that costs are increasing at a faster rate than income. Together, these
reports help understand the bank's profit and cost structure and analyze business
inefficiencies.

45
Other income largely constitutes commission income, such as client-based trading and
brokerage fees and commissions in commercial currency, account maintenance fees,
banking transactions (including cash management services), syndication and placement
fees, loan processing fees and non-commercial transaction fees. Funded products (such as
letters of credit and bank guarantees), etc. Banks in developed countries derive nearly
50% of their income from these unfunded sources. A high other income to net income
ratio is good for the bottom line (i.e. net income) as the income from this flow is
obtained without significant mobilization of deposits and therefore the cost associated
with this income. It is relatively less than interest income.
Operating and Net Profit Margin Ratio is measured in percentage terms, the profit that
is generated for every rupee of sales the company makes. The operating profit margin
ratio measures the return that the company generates solely from its operations. It is the
percentage of income that remains after paying the cost of running a business, such as the
cost of labor (wages and salaries), raw materials, administrative and sales expenses, etc.
the Operating profit generated by the company together with its subsidiaries.
Accordingly, the denominator will represent the total revenue generated from the
operations of "all the components" of the company, including minorities.

Analysis on investment valuation ratios:

• Ratios that can be used by investors to estimate the attractiveness of a potential or
existing investment and get an idea of its valuation.
• The earnings per share of is State Bank of India is much higher.
• The dividend per share for showing the increasing trend over the last five years. As
compare to State Bank of India.

46
 4.15 Efficiency Analysis of SBI
Particulars FY 2016 FY 2017 FY 2018 FY 2019 FY 2020

Advances / Loan Funds Ratio 73.99% 76.05% 76.52% 73.65% 74.45% 

ROE / RONW 14.44% 14.33% 9.62% 10.18% 6.54% 

Advances to Loans funds Ratio: This ratio indicates the efficiency with which the bank
can use the funds it mobilizes and is obtained by dividing the bank's total advances by its
total deposits (i.e. deposits + loans). A high advance-to-loan ratio indicates that the bank
may not have sufficient liquidity to meet unexpected fund requirements; if the ratio is too
low, banks may not earn as much as they should.
Return on Equity (ROE) or Return on Net worth (RONW): measures the amount of
profit that the company generates on the money invested by shareholders (i.e., share
capital + reserves and surplus). In short, ROE draws attention to the return generated by
shareholders on their investment in the business. ROE is widely used to compare the
profitability of the company with other companies in the same industry.
Return on capital employed (ROCE) and return on equity (ROE) or return on
equity (RONW) are used to measure a company's profitability based on the funds with
which the company conducts its business. Although each index is a metric for measuring
returns, ROCE measures overall performance and ROE measures the return attributable
only to shareholders.

ROCE measures a company's profitability solely from its operations by calculating the
return generated on the total capital invested in the business (i.e., equity + debt). In the
calculation of the ROCE on a consolidated basis, the numerator is the OPERATING

47
INCOME generated by the company together with its subsidiaries. Consequently, the
denominator will be the sum of equity (i.e., share capital + reserves and surplus),
minority interests and long-term debt.

ROE or RONW indicates the amount of profit that the company generates on the capital
invested by the shareholders. When calculating the ROE on a consolidated basis, the
numerator is the profit after tax and after the minority interests and the participation of
the associated companies. The denominator is equity (i.e., Share capital + reserves and
surplus). This is because the equity in the denominator represents the capital employed
"only by the shareholders" of the company.

ROCE measures the overall profitability of the company's operations, while ROE draws
attention to the return generated by the owners (i.e. shareholders) on their investment in
the business. A company may operate with a very healthy ROCE, but it may not add
much value to a shareholder if most of the income generated is used to service the
company's debt (for example, interest expense).

4.16 LIQUIDITY RATIO:

48
Liquidity ratios measure the company's ability to meet its current obligations. It is
extremely essential for a company to be able to meet its obligations as they become the
measure of the liquidity ratio due. The company's ability to meet its current obligations.
Indeed, the analysis is of liquidity needs in preparing cash budgets and cash flow
statements and funds, but liquidity ratios in establishing a relationship between cash and
other current assets and current liabilities provide a quick measure of liquidity. The main
types of liquidity ratios are:

Liquidity ratios Current ratio Quick ratio.

LIQUIDITY
RATIO

CURRENT
RATIO

QUICK
RATIO

CURRENT RATIO:

49
The ratio is calculated by dividing the current assets of the company by the current
liabilities. Current ratios indicate the relationship between current assets and current
liabilities. Current liabilities represent the company's immediate financial commitments.
Current assets are the sources of repayment of current liabilities. Therefore, the index
measures the company's ability to meet financial obligations as they arise.
The equation for calculating the dividend payout ratio is:

CURRENT RATIO = CURRENT ASSEST /CURRENT

LIABILITY

CURRENT RATIO 2017 2018 2019 2020

SBI 0.52 0.48 0.50 0.97

QUICK RATIO / ACID TEST RATIO:

Fast assets represent current assets excluding inventory and prepaid expenses. The
warehouse is excluded because it is not immediately available in cash. Prepaid expenses
are excluded because they cannot be made in cash. One of the shortcomings of the
current report is that it does not accurately measure to meet financial commitments as
they arise. This is because current assets also include items that are not easily realizable,
such as inventories. The acid test index is a refinement of the current index and is
calculated to measure the company's ability to meet liquidity requirements in the near
future. There is a minimum of 1: 1, indicating that the company can fully meet its
financial obligations. This is also called liquid relationship or quick relationship.

𝑄𝑈𝐼𝐶𝐾 𝑅𝐴𝑇𝐼𝑂 = (𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝑎𝑠𝑠𝑒𝑡 − 𝐼𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑖𝑒𝑠) /𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝑙𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑦

QUICK RATIO 2017 2018 2019 2020

50
SBI 12.18 13.89 10.79 10.87

Analysis of Liquidity Ratios:

• The current ratio is a liquidity ratio that measures the company's ability to pay its
debt over the next 12 months or its business cycle.
• Acceptable values in the current report vary from sector to sector. In general, a
current ratio of 2: 1 is considered acceptable. The higher the current ratio, the greater
the company's ability to pay its obligations.
• Quick Ratio is an indicator of the company's short-term liquidity. It measures the
ability to use fast resources (cash and equivalents, negotiable securities and credits)
to pay current liabilities.
• Quick ratio specifies whether the assets that can be quickly converted into cash are
sufficient to cover current liabilities. Ideally, the quick ratio should be 1:1.

4.17 Liquidity and Credit Analysis of SBI

51
Particulars FY 2016 FY 2017 FY 2018 FY 2019 FY 2020

Net Interest Margin Ratio (“NIM”) 3.34 3.18 3.17 2.98 2.86

Capital Adequacy Ratio 13.53 13.50 13.00 14.12 14.13

Net NPAs 3.10 3.57 3.12 4.81 4.71

16

14

12

10 Net Interest Margin Ratio

(“NIM”)
8
Capital Adequacy Ratio
6
Net NPAs
4

0
FY 2016 FY 2017 FY 2018 FY 2019 FY 2020

NIM: Banks focus on lending or advancing money at a higher rate than they accept
deposits. Net interest margin is calculated by dividing the difference between accrued
interest (on advances) and interest spent (on deposits) by the amount of assets invested
(average). If this index increases from period to period, it indicates that the bank can use
its funds more efficiently, which translates into greater profitability.

Capital Adequacy Ratio (CAR): or Capital to Risk Weighted Assets Ratio (CRAR) is a
measure of a bank's capital (shares plus subordinated debt) expressed as a percentage of a
bank's risk-weighted credit exposures (loans).
Measuring credit exposures requires adjusting the amount of assets shown in a bank's
balance sheet. This is done by weighing the loans granted by a bank according to their
degree of risk, eg. For example, loans to governments are given a weight of 0%, while

52
loans to individuals are given a weight of 100%. Similarly, off-balance sheet items, such
as collateral and foreign exchange contracts, are also weighted according to their risk.
On-balance-sheet and off-balance sheet credit exposures are aggregated to obtain risk-
weighted total credit exposures.

NPA: Non performing Asset or NPA is a classification used by financial institutions that
refer to loans at risk of default. After the borrower has paid no interest or principal for 90
days, the loan is considered a non-performing asset. Any increase in the default rate
results in a sharp decline in overall profitability.

4.18 Valuation Analysis of SBI

53
Particulars FY 2016 FY 2017 FY 2018 FY2019 FY2020

Net Interest Income Rs. 61,160.23 67,583.39 74,795.70 78,807.48  81,332.82 

Growth (%) 5.67 % 10.50 % 10.67 % 5.36 %  3.20 % 

PAT (Rs. Cr.) 18,322.99 14,489.47 17,517.37 12,743.28  (390.67) 

Growth (%) 14.71 % (20.92 %) 20.90 % (27.25%)  -

Earnings Per Share – Basic (Rs.) 26.68 20.40 22.76 15.95  0.31 

Earnings Per Share – Dilute (Rs.) 26.68 20.40 22.76 15.95  0.31 

Price to Earnings 7.77 12.75 11.70 12.18  -

Price Earnings Ratio (P/E Ratio) is the most used method to evaluate companies. It is
obtained by dividing the current market price of the share by its EPS.

The P / E ratio can be calculated by dividing the current share price by the earnings per
share for the last 12 months, which is the earnings per share reported for the last 4
quarters. A high P / E ratio indicates that investors expect earnings (and consequently the
company's stock price) to grow at a faster rate and vice versa.

Earnings per share (EPS): EPS is a measure of the earnings available to shareholders
from the capital per share. It is calculated by dividing the profit / (loss) after tax by the
number of shares in understanding.
A high EPS indicates high profitability. If profitability decreases, so does EPS. On the
other hand, if the number of outstanding shares increases, it has a negative impact on EPS
unless profitability increases proportionally. For this reason, companies carefully plan the
issuance of new shares.

54
Basic EPS vs. Diluted: in the calculation of the basic EPS, the denominator is the total
number of shares actually issued by a company. To calculate diluted EPS, the
denominator is made up of the total number of equity shares that would be outstanding
considering all instruments convertible into equity shares, such as convertible debt
instruments, employee stock option plans (ESOPs), etc. .

55
 CHAPTER: 5

RESEARCH METHODOLOGY

5.1 RESEARCH METHODOLOGY

56
The research decides to do survey of Fundamental analysis of public sector bank of India
(State bank of India) the researcher use survey method for present.

5.2 Sources of Data:

Primary data and secondary data were collected for present study:
a) Primary Data: The researcher collected information in the primary data is based
on questionnaire and survey method by using the statistical analysis
b) Secondary Data: The secondary data was collected through various ways which
is by Internet, Journals, newspaper, reference book and Textbooks.

5.3 Method use for deciding the sampling plan:

The researcher used random sampling method to collect data.

5.4 Sampling Plan:

The sample size constituted of 78 respondents in family, friends, junior, seniors and diva
area.

5.5 Validation of tools:

The question in questionnaire was discussed with guides’ in the college to ascertain their
accuracy. The questionnaire was then finalized after discussion with experts.

5.6 Data collection instrument:

The type of instrument used for data collection for surveying was Questionnaire.

5.7 Rating Scale:

Likes scale was used in the questionnaire.

5.8 Data processing and analysis plan:

The data was processed and analyzed with the help of percentages using excel sheet.

57
 CHAPTER: 6
DATA ANALYSIS AND OBSERVATION

TABLE SHOWING DISTRIBUTION OF AGE

18-25 82.1%
58
26-30 14.1%

31&above 3.8%
 90.00%

80.00%

70.00%

60.00%

50.00%

40.00%

30.00%

20.00%

10.00%

0.00%
18-25 26-30 31&above

Observation: From the above diagram it is quite clear that the age of 18-25 (80%) of the
person all of them understanding the fundamental analysis of public sector banks.

Income category
1, 80,000-5, 00,000 88.5%

5,00,000-8,00,000 5.1%

8,00,000 &above 6.4%

59
100.00%
90.00%
80.00%
70.00%
60.00%
50.00%
40.00%
30.00%
20.00%
10.00%
0.00%

Q.1. Which Analysis do you do, before investing in stock market?

Fundamental Analysis 29.05%

Technical Analysis 11.5%

Both 59%

60
 29%

Fundamental Analysis
Technical Analysis
59% Both

12%

Observation: From the above diagram it is quite clear that 59% both of the investors are
analysis do before investing in the stock market.

Q.2. which banks would you prefer to invest?

Private sector banks 42.3%

Public sector bank 57.7%

61
 42%
Private sector banks
Public sector bank
58%

Observation: From the above diagram it is quite clear those 58% investors are prefer to
invest public sector bank.

Q.3. Do you invest regularly in the stock markets?

Yes 33.3%

No 66.7%

62
 33%

Yes
No

67%

Observation: From the above diagram it is quite clear that 67% investor do not invest
regularly in the stock markets.

Q.4. what sectors do you prefer to invest in &why?

Banking 67.9%

Infrastructure 14.1%

FMCG 17.9%

63
 18%

14%
Banking
Infrastructure
FMCG

68%

Observation: From the above diagram it is quite clear those 68% investors are prefer to
invest in banking sector.

Q.5. rate the following public sector bank according to your preference for investment?

State bank of India 82.1%

Bank of India 17.9%

Punjab National bank -

64
 State bank of India
Bank of India
Punjab National bank

Observation: From the above diagram it is quite clear that the rate of following public
sector bank according to 83% investor are prefer to investment in state bank of India.

Q.6. In reference to question no.5 state the basis for your investment?

Management Team 47.4%

Market leader/Follower 28.2%

Ratio analysis 24.4%

65
 24%

Management Team
47%
Market leader/Follower
Ratio analysis

28%

Observation: From the above diagram it is quite clear that 48% investors state the basic
for your investment in management team.

Q.7. Do you save for your secured future?

66
 Yes 91%

No 9%

9%

Yes
No

91%

Observation: From the above diagram it is quite clear that 91% customers are saving for
in your secured bank in future.

67
 Financial 87%

Non-Financial 13.3%
Q.8. what
type of
investment
do you prefer?

13%

Financial
Non-Financial

87%

Observation: From the above diagram it is quite clear that 87% investors are prefer to
type of invest in financial investment.

68
 Private 34.6%

Public 24.4%

Both 41%

Q.9. If yes, then in which bank you have account?

35%
41%

Private
Public
Both

24%

Observation: From the above diagram it is quite clear that 41% both of the investor’s
investment having different bank account.

69
 Equities 19.2%

Mutual Fund 34.6%

Both 46.2%
Q.10.
give
your ratings the following investments? & state the reason for your preferences?

19%

46%
Equities
Mutual Fund
Both

35%

Observation: From the above diagram it is quite clear that 46% both of the investor’s
investment for the preferences.

70
CHAPTER: 7

FINDINGS

71
Table: 1

Majority of the people understand the fundamental analysis of public sector bank.

Table: 2

Majority of the people income in state bank of India.

Table: 3

Majority of the people are analysis do you before investing in the stock market in
fundamental and technical analysis and both are the people investing in stock.

Table: 4

Majority of the investors are preferred to invest in public and private sector banks.

Table: 5

Majority of the investors are regularly invested in the stock market.

Table: 6

Majority of the investors do you prefer to invest in banking sector, infrastructure and fast
moving consumer sectors (FMCG).

Table: 7

72
Majority of the people prefer to investment in public sector banks e.g. state bank of India,
bank of India, Punjab national bank.

Table: 8

Majority of the investors are references to the basic of investment in management team,
market follower/leader and the analysis for the ratio.

Table: 9

Majority of the investors are saving for the investment in secured future.

Table: 10

Majority of the investors are investment in prefer to financial and Non-financial sector.

Table: 11

Majority of the customers are investment in public sector bank and private sector bank in
account to the invest.

Table: 12

Majority of the investors are investment state the reason for preferences in mutual fund,
equities and both are invest to the stock markets.

73
 CHAPTER: 8
CONCLUSION AND RECOMMENDATION

74
 CONCLUSION

Fundamental analysis has argued that no investment decision should be made without
processing and analyzing all relevant information. The analysis is based on both industry
and bank. They are selected for bench analysis. Indicates that investments are not feasible
and Indian state banks are good for investors; among these state banks of India, the P / E
ratio and intrinsic value are higher and it would be profitable for investors to invest in the
state bank of India

The banking sector is very important for the economic development of a country. The
SBI is one of the leading banks of Public sector Bank in India. The market position of
SBI is better. The analysis reveals that there is no significant difference between
Deposits, Investment, Advances, Borrowing, Net Profit etc., there is growing evidence of
concern by the SBI group on the declining profitability of the banking system due to
unsecured loans and advances. It has becomes extremely over and finds remedial
measures to reduce the profitability in the value of new banking philosophy. Hence, in
the present paper of the study an attempt has been made to Fundamental analysis of SBI.

75
 RECOMMENDATION

• Based on RBI sourcing recommendations from NPA, PSB shares have declined and
will continue to do so in the next quarter.

• Therefore, if an investor is looking for a long-term horizon, it is advisable that they

probably keep it for a chance to switch.

• In the short term, the stock looks weak at Rs 185, which is expected to rise to 235 over
the longer term.

76
 ANEXTURE

SWAYAM SIDDHI COLLEGE OF MANAGEMENT AND RESEARCH

NAME
AGE:
GENDER:
MOBILE NO:

Income category
o 1, 80,000-5, 00,000
o 5, 00,000-8, 00,000
o 8, 00,000&above

Q.1. Which Analysis do you do, before investing in stock market?

o fundamental analysis
o Technical analysis
o Both

77
Q.2. which banks would you prefer to invest?
o private sector banks
o public sector banks

Q.3. Do you invest regularly in the stock markets?

o Yes
o No

Q.4. what sectors do you prefer to invest in &why?

o Banking
o Infrastructure
o FMCG

Q.5. rate the following public sector bank according to your preference for investment?

o State bank of India

o Bank of India
o Punjab National Bank

Q.6. In reference to question no.5 state the basis for your investment?
o Management team
o Market leader/Follower
o Ratio Analysis

Q.7. Do you save for your secured future?

o Yes

78
 o No

Q.8. what type of investment do you prefer?

o Financial
o Non-Financial

Q.9. If yes, then in which bank you have account?

o Private
o Public
o Both

Q.10. give your ratings the following investments? & state the reason for your
preferences?
o Equities
o Mutual Fund
o Both

NPA’s.

79
 BIBILOGRPHY
 Www. rbi.org.in
 Www.google.com
 Fundamental analysis and position trading: evaluation of trader
 https://www.sbindia.in/
 Reference books/ journals
 https://www.investopedia.com/

80
81