A

PROJECT REPORT ON

CAPITAL STRUCTURE of IDBI FEDERAL LIFE INSURANCE Co. Ltd.

A Report submitted in partial fulfilment of the requirement of MBA Program (2018-2020).

SUBMITTED BY,

C.Shiva Bhaskaren

Hall Ticket No.: 142018672097

VIVEK VARDHINI SCHOOL OF BUSINESS MANAGEMENT

(Affiliated to Osmania University)

JAMBAGH, HYDERABAD-500095

COMPANY CERTIFICATE

COLLEGE CERTIFICATE
DECLARATION

I C.ShivaBhaskaren , do hereby declare that the project report on – “Capital Structure

of IDBI FEDERAL LIFE INSURANCE Co. Ltd.” entitled to “IDBI FEDERAL LIFE
INSURANCE COMPANY LTD. Being submitted to “Vivek Vardhini College of
Business Management” is my own piece of work and it has not been submitted to any
other institute or published at any time before.

C.ShivaBhaskaren
Enrollment No.: 142018672097
Vivek Vardhini College of Business Management
ACKNOWLEDGEMENT

It gives me immense pleasure to present the project - “Capital Structure of IDBI

FEDERAL LIFE INSURANCE Co. Ltd.” for which I would like to extend my
gratitude to Vivek Vardhini College of Business Management for prescribing and
giving me the opportunity to work on this project as it is an integral part of the
academic requirement for the Masters of Business Administration (MBA) program.

I express my sincere thankfulness to my Company Guide Miss. Piyushi Verma,

Manager Distributor of IDBI Federal Life Insurance Co. Ltd. for her co-operation
during the project course.

I would like to appreciate and acknowledge the efforts of our Principal- Mr P N

Reddy & Faculty Guide Asst. Prof. Gayatri. B. Joshi of Vivek Vardhini College of
Business Management, for her co-operation and valuable guidance in completing
this Project Report.
TABLE OF CONTENTS

CHAPTER – I INTRODUCTION
➢ Need of the study
➢ Objectives of the study
➢ Scope
➢ Methodology
➢ Limitations

CHAPTER – II LITERATURE REVIEW

CHAPTER – III INDUSTRY&COMPANY

PROFILE

CHAPTER – IV DATA ANALYSIS &

INTERPRETATION

CHAPTER – V FINDINGS
SUGGESTIONS
CONCULSIONS
BIBILOGRAPHY
Chapter 1
Definition of Capital Structure:

Capital structure is the mix of the long-term sources of funds used by a firm. It is
made up of debt and equity securities and refers to permanent financing of a firm. Its
composed of long-term debt, prefer­ence share capital and shareholders’ funds.

To design capital structure, we should consider the following two propositions:

1> Wealth maximization is attained

2> Best approximation to the optimal capital structure.

What is capital Structure?

• The term capital structure refers to the percentage of capital (money) at work
in a business.
• Broadly speaking, there are two forms of capital: equity capital and debt
capital.
• The capital structure concerns the proportion of capital that is obtained
through debt and equity. There are tradeoffs involved: using debt capital
increases the risk associated with the firm's earnings, which tends to decrease
the firm's stock prices.
• At the same time, however, debt can lead to a higher expected rate of return,
which tends to increase a firm's stock price.
"The optimal capital structure is the one that strikes a balance between
risk and return and thereby maximizes the price of the stock and
simultaneously minimizes the cost of capital."
- Brigham

Capital structure Returns to Investor

Equity share capital Equity dividend
Preference share capital Preference dividend
Debenture/bonds or loans Interest
Reserves and surplus Equity Dividend
Factors determining capital structure:

1> Minimization of Risk: a> capital structure must be consistent with business risk
b> It should result in a certain level of financial risk.
2> Control: It should reflect the management’s philosophy of control over the firm.
3> Flexibility: It refers to the ability of the firm to meet the requirement of the
changing situation.
4> Profitability: It should be profitable from the equity shareholders point of view.
5> Solvency: The use of excessive debt may thereafter the solvency of the company

Process of capital structure decisions:

 Objectives of the project:
▪ To know how to attain the Economic objectives:

a) Minimum Costs –
• One of the major objectives of a business enterprise is to raise funds at the
lowest possible cost in a given set of circumstances in terms of interest,
dividend and the relationship of earnings to the prices of shares.
• The management should aim at keeping the cost of issue at a minimum to
maximum the returns to equity shareholders.
b) Minimum Risks – Various risks are involved in business operations which have
direct bearings on the capital structure of the company such as business risk,
management risks, tax risk, trade cycle risks, purchasing power risks, interest rate risk
etc. These risks should be minimized by making suitable adjustments in the
components of capital structure.
c) Maximum Return – On of the objectives of balanced capital structure is to provide
for the maximum return to the real owners (equity shareholders) of the company. It
may be achieved by minimizing the cost of issue and the cost of financing.
d) Preservation of Control of Equity Shareholders –
• Generally, equity shareholders have the control over the affairs of the
company. Preference shareholders and the debenture holders have limited
voting rights in matters affecting their interests. The capital structure
should be designed as to preserve the control of equity shareholders and to
prevent the erosion of control from their hands.
• It requires proper balance between voting right and non -voting right
capital.
e) Proper Liquidity – Liquidity is necessary for the solvency of the company. A proper
balance between fixed assets and the liquid assets should be maintained. Nature and
size of the business decide the ideal ratio of fixed and liquid assets.
f) Fuller Utilization – There must be proper co-ordination between the quantum of
capital and the financial requirements of the business so that full utilization of
available capital may be made at minimum cost. Full utilization of capital requires a
fair capitalization.
 ▪ To attain Other Objectives: -

1. Simplicity – The capital structure should be as simple and conservative as possible.

In the beginning a company should raise only the ownership capital i.e., equity share
capital that will enhance the credit of the company. A preference issue may be made
if, warranted by the circumstances.
2. Flexibility – The management should design the capital structure in order to make
necessary changes in it whenever required. Management should enjoy the maximum
freedom of action to manage the income and capital of the firm.
3. The main objective is to achieving the maximization of shareholders wealth.
4. Retained earnings are reported as a summary of all of the valuation methods used to
measure income
5. To know the efficiency of utilizing Funds by investors to get maximum returns.
Need of the study:

1. To study how a company acquires financial capital and converts their capital
into assets.
2. It engages these assets to earn economic return by fulfilling customer needs
3. To study how to minimize WACC (weighted average cost of capital)
4. To determine if the proportion of debt to equity enables an entity to create
wealth without unduly jeopardizing the firm.
5. To study on how to maximize the Value of the Firm and maximize the stock
price.
6. To know how to provide more returns, loyalty and satisfaction to invest more
to investors and stake holders.
7. To study on how to reduce risk, minimize cost and maximize returns.

Scope of the study:

• Balancing the risk that may arise on the account of project
• Determining right and proper combination on mix of capital structure that
definitely increases overall returns.
• Optimum allocation of resources, checking for the problems or issues before
they cause serious damage.
• Projects are in accordance with organization goals.
• Project easily receives the support, Guidance and also the oversight need to
complete successfully.
• Monitoring time to time performance of portfolio by incorporating latest
market conditions.
• Identification of investor’s objectives, Constraints and preferences.

Project Methodology:

Primary: explicit use of ms-excel. (Quantitative tools)

Secondary: company annual reports.

CHAPTER 2
Literature review:
Capital structure is defined as the specific mix of debt and equity a firm uses to
finance its operations. Four important theories are used to explain the capital structure
decisions. These are based on asymmetric information, tax benefits associated with
debt use, bankruptcy cost and agency cost. The first is rooted in the pecking order
framework, while the other three are described in terms of the static trade-off choice.
These theories are discussed in turn.

The concept of optimal capital structure is expressed by Myers (1984) and Myers and
Majluf (1984) based on the notion of asymmetric information. The existence of
information asymmetries between the firm and likely finance providers causes the
relative costs of finance to vary among different sources of finance. For example, an
internal source of finance where the funds provider is the firm will have more
information about the firm than new equity holders, thus these new equity holders
will expect a higher rate of return on their investments. This means it will cost the
firm more to issue fresh equity shares than to use internal fun ds. Similarly, this
argument could be provided between internal finance and new debt -holders. The
conclusion drawn from the asymmetric information theories is that there is a certain
pecking order or hierarchy of firm preferences with respect to the financing of their
investments (Myers and Majluf, 1984). This “pecking order” theory suggests that
firms will initially rely on internally generated funds, i.e., undistributed earnings,
where there is no existence of information asymmetry; they will then turn to debt if
additional funds are needed, and finally they will issue equity to cover any remaining
capital requirements. The order of preferences reflects the relative costs of various
financing options. Clearly, firms would prefer internal sources to costly external
finance (Myers and Majluf, 1984). Thus, according to the pecking order hypothesis,
firms that are profitable and therefore generate high earnings are expected to use less
debt capital than those that do not generate high earnings.

Capital structure of the firm can also be explained in terms of the tax benefits
associated with the use of debt. Green, Murinde and Suppakitjarak (2002) observe
that tax policy has an important effect on the capital structure decisions of firms.
Corporate taxes allow firms to deduct interest on debt in computing taxable profits.
This suggests that tax advantages derived from debt would lead firms to be
completely financed through debt. This benefit is created, as the interest payments
associated with debt are tax deductible, while payments associated with equity, such
as dividends, are not tax deductible. Therefore, this tax effect encourages debt use by
the firm, as more debt increases the after tax proceeds to the owners (Modigliani and
Miller, 1963; Miller, 1977). It is important to note that while there is corporate tax
advantage resulting from the deductibility of interest payment on debt, investors
receive these interest payments as income. The interest income received by the
investors is also taxable on their personal account, and the personal income tax effect
is negative. Miller (1977) and Myers (2001) argue that as the supply of debt from all
corporations expands, investors with higher and higher tax brackets have to be enticed
to hold corporate debt and to receive more of their income in the form of interest
rather than capital gains. Interest rates rise as more and more debt is issued, so
corporations face rising costs of debt relative to their costs of equity. The tax benefits
arising from the issue of more corporate debt may be offset by a high tax on interest
income. It is the trade-off that ultimately determines the net effect of taxes on debt
usage (Miller, 1977; Myers, 2001).

Bankruptcy costs are the costs incurred when the perceived probability that the firm
will default on financing is greater than zero. The potential costs of bankruptcy may
be both direct and indirect. Examples of direct bankruptcy costs are the legal and
administrative costs in the bankruptcy process. Haugen and Senbet (1978) argue that
bankruptcy costs must be trivial or nonexistent if one assumes that capital market
prices are competitively determined by rational investors. Examples of indirect
bankruptcy costs are the loss in profits incurred by the firm as a result of the
unwillingness of stakeholders to do business with them. Customer dependency on a
firm’s goods and services and the high probability of bankruptcy affect the solvency
of firms (Titman, 1984). If a business is perceived to be close to bankruptcy,
customers may be less willing to buy its goods and services because of the risk that
the firm may not be able to meet its warranty obligations. Also, employees might be
less inclined to work for the business or suppliers less likely to extend trade credit.

These behaviours by the stakeholders effectively reduce the value of the firm.
Therefore, firms that have high distress cost would have incentives to decrease
outside financing so as to lower these costs. Warner (1977) maintains that such
bankruptcy costs increase with debt, thus reducing the value of the firm. According to
Modigliani and Miller (1963), it is optimal for a firm to be financed by debt in order
to benefit from the tax deductibility of debt. The value of the firm can be increased by
the use of debt since interest payments can be deducted from taxable corporate
income. But increasing debt results in an increased probability of bankruptcy. Hence,
the optimal capital structure represents a level of leverage that balances bankruptcy
costs and benefits of debt finance. The greater the probability of bankruptcy a firm
faces as the result of increases in the cost of debt, the less debt they use in the
issuance of new capital (Pettit and Singer, 1985).

The use of debt in the capital structure of the firm also leads to agency costs. Agency
costs arise as a result of the relationships between shareholders and managers, and
those between debt-holders and shareholders (Jensen and Meckling, 1976). The
relationships can be characterized as principal-agent relationships. While the firm’s
management is the agent, both the debt-holders and the shareholders are the
principals. The agent may choose not to maximize the principals’ wealth. The conflict
between shareholders and managers arises because managers hold less than 100% of
the residual claim (Harris and Raviv, 1990). Consequently, they do not capture the
entire gain from their profit-enhancing activities but they do bear the entire cost of
these activities. Separation of ownership and control may result in managers exerting
insufficient work, indulging in perquisites, and choosing inputs and outputs that suit
their own preferences. Managers may invest in projects that reduce the value of the
firm but enhance their control over its resources. For example, although it may be
optimal for the investors to liquidate the firm, managers may choose to continue
operations to enhance their position. Harris and Raviv (1990) confirm that managers
have an incentive to continue a firm’s current operations even if shareholders prefer
liquidation.

On the other hand, the conflict between debt-holders (creditors) and shareholders is
due to moral hazard. Agency theory suggests that information asymmetry and moral
hazard will be greater for smaller firms (Chittenden et al., 1996). Conflicts between
shareholders and creditors may arise because they have different claims on the firm.
Equity contracts do not require firms to pay fixed returns to investors but offer a
residual claim on a firm’s cash flow. However, debt contracts typically offer holders a
fixed claim over a borrowing firm’s cash flow. When a firm finances a project
through debt, the creditors charge an interest rate that they believe is adequate
compensation for the risk they bear. Because their claim is fixed, creditors are
concerned about the extent to which firms invest in excessively risky projects. For
example, after raising funds from debt-holders, the firm may shift investment from a
lower-risk to a higher-risk project.

According to Jensen and Meckling (1976), the conflict between d ebt-holders and
equity-holders arises because debt contract gives equity-holders an incentive to invest
sub optimally. More specifically, in the event of an investment yielding large returns,
equity-holders receive the majority of the benefits. However, in the case of the
investment failing, because of limited liability, debt-holders bear the majority of the
consequences. In other words, if the project is successful, the creditors will be paid a
fixed amount and the firm’s shareholders will benefit from its improved profitability.
If the project fails, the firm will default on its debt, and shareholders will invoke their
limited liability status. In addition to the asset substitution problem between
shareholders and creditors, shareholders may choose not to invest in profitable
projects (under invest) if they believe they would have to share the returns with
creditors.

The agency costs of debt can be resolved by the entire structure of the financial claim.
Barnea et al. (1980) argue that the agency problems associated with information
asymmetry, managerial (stockholder) risk incentives and forgone growth
opportunities can be resolved by means of the maturity structure and call provision of
the debt. For example, shortening the maturity structure of the debt and the ability to
call the bond before the expiration date can help reduce the agency costs of
underinvestment and risk-shifting. Barnea et al. (1980) also demonstrate that both
features of the corporate debt serve as identical purposes in solving agency problems.
Chapter 3
Industry & Company profile:
IDBI Bank Ltd. continues to be, since its inception, India’s premier industrial
development bank created in 1956 to support India’s industrial backbone, IDBI Bank
has since evolved into a powerhouse of industrial and retail finance.
Today, it is amongst India’s foremost commercial banks, with a wide range of
innovative products and services, serving retail and corporate customers in all corners
of the country from 783 branches and 1328 ATMs.
The Bank offers its customers an extensive range of diversified services including
project financing, term lending, working capital facilities, lease finance, venture
capital, loan syndication, corporate advisory services and legal and technical advisory
services to its corporate clients as well as mortgages and personal loans to its retail
clients. As part of its development activities, IDBI Bank has been instrumental in
sponsoring the development of key institutions involved in India’s financial sector -
National Stock Exchange of India Limited (NSE) and National Securities Depository
Ltd, SHCIL (Stock Holding Corporation of ltd), CARE (Credit Analysis and
Research Ltd)
Federal Bank is one of India’s leading private sector banks, with a dominant
presence in the state of Kerala. It has a strong network of over 739 branches and 797
ATMs spread across India. The bank provides over four million retail customers with
a wide variety of financial products.
Federal Bank is one of the first large Indian banks to have an entirely automated and
interconnected branch network. In addition to interconnected branches and ATMs, the
Bank has a wide range of services like Internet Banking, Mobile Banking, Tele
Banking, anywhere banking, debit cards, online bill payment and call centre facilities
to offer round the clock banking convenience to its customers.
Ageas is an international insurance company with a heritage spanning more than 180
years. Ranked among the top 20 insurance companies in Europe, Ageas has chosen to
concentrate its business activities in Europe and Asia, which together make up the
largest share of the global insurance market. They are grouped around four segments:
Belgium, United Kingdom, Continental Europe and Asia.
It is an undisputed leader in the Belgian market for individual life and employe e
benefits, as well as a leading non-life player, through AG Insurance. Internationally
Ageas has a strong presence in the UK, where it is the second largest player in private
car insurance. The company also has subsidiaries in France, Germany and Hong
Kong.
Ageas has a track record in developing partnerships with strong financial institutions
and key distributors in different markets around the world and successfully
operates partnerships in Luxembourg, Italy, Portugal, China, Malaysia, India and
Thailand. Ageas employs more than 13,000 people and has annual inflows of almost
EUR 18 billion.

About IDBI Federal Life Insurance:

IDBI Federal Life Insurance Co Ltd is a joint-venture of IDBI Bank, India’s premier
development and commercial bank, Federal Bank, one of India’s leading private
sector banks and Ageas, a multinational insurance giant based out of Europe.
In this venture, IDBI Bank owns 48% equity while Federal Bank and Ageas own 26%
equity each.
At IDBI Federal, we endeavour to deliver products that provide value and
convenience to the customer. Through a continuous process of innovation in
product and service delivery we intend to deliver world-class wealth management,
protection and retirement solutions to Indian customers.
Having started in March 2008, in just five months of inception it became one of the
fastest growing new insurance companies to garner Rs 100 Cr in premiums.
The company offers its services through a vast nationwide network across the branches
of IDBI Bank and Federal Bank in addition to a sizeable network of advisors and
partners.
As on January 31st 2017, the company has issued over 7.68 lakh policies with over Rs
44,230 Cr in Sum Assured.
Yogesh Agarwal- Chairman, G V Nageswara Rao, MD & CEO of company
And it’s currently having 2800 on-roll employees and 11,500 agents.

Vision Mission & Values of IDBI Federal Life Insurance Company Ltd.

Vision
To be the leading provider of wealth management, protection and retirement solutions
that meets the needs of our customers and adds value to their lives.

Mission
To continually strive to enhance customer experience through i nnovative product
offerings, dedicated relationship management and superior service delivery while
striving to interact with our customers in the most convenient and cost effective
manner. To be transparent in the way we deal with our customers and to act with
integrity.
Values
• Transparency: Crystal Clear communication to our partners and stakeholders
• Value to Customers: A product and service offering in which customers perceive value
• Rock Solid and Delivery on Promise: This translates into being financially strong,
operationally robust and having clarity in claims
• Customer-friendly: Advice and support in working with customers and partners
• Profit to Stakeholders: Balance the interests of customers, partners, employees,
shareholders and the community at large

Distribution Network:
IDBI Federal Life Insurance Company leverages on the strong distribution network of
its promoters and advisors.

Financial Information:
The total premium earned for the half year ended September 30, 2010 was Rs 3,427
million. The profit after tax for the same period is Rs 513 million. There have been
132 death claims reported during the period out of which 43 claims were settled and
19 claims were rejected. As on January 31st 2017, the company
has issued over 7.68 lakh policies with over Rs44,230 Cr in Sum Assured.
Marketing Campaigns:
IDBI Federal Life recently launched television commercials focusing on its frontline
products- Wealthsurance, Incomesurance.

IDBI FEDERAL ANNUAL REPORT SUMMARY

HERALDING CHANGE:

➢ IDBI federal sought to herald a meaningful change in the Indian life insurance
industry.
➢ Company has achieved break even in just 5 years of operation and declared
maiden profit of 9.24crore.
➢ This achievement is possible only because of commitment of the management
and the employees.
➢ We offer a fresh way of looking at life insurance i.e.
“A VALUABLE WAY.AN INSPIRED WAY.THE IDBI FEDERAL
WAY.”
MAKING CHANGE A CONSTANT:

➢ IDBI Federal Life Insurance is a joint-venture of IDBI Bank, Federal Bank

and Ageas.
➢ IDBI Bank is India’s premier development and commercial bank.
➢ Federal Bank is one of India’s leading private sector banks.
➢ Ageas is a multinational insurance giant based out of Europe.
➢ In this joint venture IDBI bank owns 48% equity while federal bank and
Ageas own 26% of equity.
➢ IDBI federal life insurance company having commenced operation in march
2008.
➢ In just five months of inception company became one of the fastest growing
life insurance companies to garner of 100 crore in premiums.
Through continuous process of innovation in product and service delivery IDBI
federal aim is to offer
➢ world-class protection,
➢ wealth management and
➢ retirement solutions
That provides value and convenience to the Indian customer.
➢ Company is offering services through a nationwide network of 2,186 bank
branches of IDBI Bank and Federal Bank in addition to a sizeable network of
advisors.
➢ As on 31 March, 2015, IDBI Federal Life Insurance issued over 5 lakh
policies with a sum assured of more than 28,500 crore.
Board of directors:
Mr. R .M. MALLA (Non-Executive Director)
Mr. Bart De Smet (Non-Executive Director)
Mr. Filip A. L. Coremans Non-Executive Director
Mr. S. Santhanakrishnan Independent (Non-Executive) Director
Mr. R. K. Thapliyal Independent (Non-Executive) Director
Mr. Suresh Kumar (Non-Executive Director)
Mr. R. K. Bansal Non-Executive Director
Mr. Gary Lee Crist* Alternate Director to Mr. Bart De Smet
Mr. Davinder Rajpal Independent (Non-Executive) Director
Mr. P. C. Cyriac* Non-Executive Director
Mr. G. V. Nageswara Rao Managing Director and Chief Executive Officer
Senior Management Committee:
Mr. G. V. Nageswara Rao Managing Director and Chief Executive Officer
Mr. Ajay Oberoi Chief People Officer & Head – Administration
Mr. Aneesh Srivastava Chief Investment Officer
Mr. George John Corporate Controller
Mr.Hans Van Wuijckhuijse* Chief Operating Officer
Mr. Rajesh Ajgaonkar Head – Legal, Compliance & Company Secretary
Mr. Aneesh Khanna Head – Marketing & Product Management
Mr. Ashley Kennedy National Head – Agency & Alliances
Mr. Hans Loozekoot* Chief Financial Officer
Mr. Nick Taket* Chief – Actuary
Mr. Vignesh Shahane President – Bancassurance
Making innovation a standard:
IDBI federal with their focus on innovation they have been able to overcome those
challenges and have registered profits and growth during toughest times.

OUR STRENTHS:
Product leadership:
Home purchase
Pure protection
(Health + life)
Wealth creation for long-term
Children’s higher studies
Mortgage insurance
Health care
Retirement planning
Savings for wealth creation
Mortgage insurance
Children’s education
Savings for child’s marriage
Retirement provision
Post retirement expenses
Medical expenses

INNOVATIVE PRODUCT SUITE:

Bondsurance: offers life cover and guaranteed return against a onetime payment.
Childsurance: Childsurance offers solutions to ensure funding the life insured’s
child’s future needs like higher education, marriage, vocational training.
Healthsurance: Healthsurance ensures that the life insured never lacks the funds to
obtain quality treatment in case of medical emergencies.
 Homesurance: Homesurance provides insurance cover equal to the outstanding
balance of the life insured’s home loan, thus ensuring that the life insured’s family
always enjoys living in their dream home.
Incomesurance: Incomesurance provides guaranteed regular income along with a life
cover.
Lifesurance: Lifesurance offers an array of participating endowment plans, designed
to provide long-term savings along with life cover.
Loansurance: Loansurance is a cost-effective insurance plan that covers the life
insured’s outstanding debt.
Microsurance: Microsurance has been designed to provide effective insurance for
low-income groups and promote financial inclusion for the community.
Retiresurance: Retiresurance offers plans that help the life insured build a corpus
that lasts throughout his retired life to make them the best yearsof his life.
Termsurance: Termsurance offers financial protection to the family of the life
insured in case of the unfortunate event of the death of the life insured.
Wealthsurance: Wealthsurance enables the life insured to build wealth while
providing the protection of life cover.

IDBI FEDERAL ANNUAL REPORT: -

INVESTMENT EXPERTISE:
• IDBI FEDERAL endeavour to build a quality investment portfolio which
offers both liquidity and long-term wealth creation opportunity.
• IDBI FEDERAL strength is its ability to provide strong investment performance in
both good and bad market conditions.
• Assets under Management of IDBI FEDERAL grew from 161 crores in FY 2008 to
2964 corers in FY 2016.
KEY MILESTONES:
On November 2006:
• IDBI FEDERAL started a joint venture between IDBI Bank, Federal Bank and Ageas.

• IDBI Bank is India’s premier development and commercial bank Federal Bank is one
of India’s leading private sector banks; Ageas is a multinational insurance giant based
out of Europe.
• In this venture, IDBI Bank owns 48% equity while Federal Bank and Ageas own 26%
equity each.

On December 2007:
• IDBI FEDERAL received license from IRDA.
On March 2008:

• IDBI FEDERAL sold its 1 st policy.

On August 2008:
• IDBI FEDERAL collected its fasted100 crore premium.
On February 2009:

• IDBI FEDERAL breaks mould with Wealthsurance (Srilanka) annual report.

On March 2010:

• IDBI FEDERAL assets under management (AUM) which is basically the market value
of assets that an investment company manages on behalf of investors crossed 1000
crore.

On August 2013:

• IDBI Fortis Life becomes IDBI Federal Life.

On November 2015:

• IDBI FEDERAL Achieves ‘Master Brand’ status.

On March 2016:

• IDBI FEDERAL declared its Break-even & maiden profit.

AWARDS:

• IDBI Federal Life Insurance was recognised as the ‘Best Insurance Company
in the Private Sector’ at the IPE Banking Financial Services and Insurance
Awards 2014-2015.
 • IDBI Federal Life Insurance was recognised as the ‘Master Brand 2012-2013’
by the CMO Council USA and CMO Asia at the World Brand Congress.

• IDBI Federal Life Insurance was conferred with ‘Golden Award for Corporate
Advertising Campaign’ by PR Council of India (PRCI) at the 7 Global
Communication Conclaves 2015.

• IDBI Federal Life was awarded ‘Golden Award for Corporate Website’ by PR
Council of India (PRCI) at the 7 Global Communication Conclaves 2016.

• IDBI Federal Life Insurance was conferred with the ‘Organisation of the year’
award by the PR Council of India (PRCI).

PERFORMANCE HIGHLIGHTS:

• IDBI FEDERAL premium income increased from 12 crores to 805 crores for
the FY 2014 to 2017 respectively.

• IDBI FEDERAL operating expenses ratio that is a ratio between the

properties’ operating expense to its gross operating income reduced from 84%
to 24% for the FY 2013 to 2015 respectively.

• IDBI FEDERAL net profit gradually grew to 9crores for the FY 2016 which
was initially 26 crores of rupees cash outflow for the

• IDBI FEDERAL Assets under Management grew from 161 crores in FY 2014
to 2964 corers in FY 2018.

FINANCIAL REPORT: -

DIRECTOR’S REPORT FOR THE YEAR ENDED 31 ST MARCH, 2017:

FINANCIAL HIGHLIGHTS:

• The Financial Year 2012-13 was the fifth year of full operations of the
Company. Company has made a maiden profit of 9.24 crore . Thus becoming
one among the very few life insurance companies to make profit within the
first 5 years of commencement of operations.

• IDBI FEDERAL is one among the few life insurance companies that showed
positive growth in new business in the year 2014-15.
 • In total new business, Annualised Premium Equivalent (APE) of the Company
achieved a growth of 22.8% as compared to -3.8% recorded by the private life
companies and -21.3% recorded by LIC.

• In new business of individual life segment (APE), Company achieved a

growth of 19.4% as compared to 1.9% recorded by the private life companies
and -4.1% recorded by LIC. In both forms of (APE) IDBI FEDERAL’S
growth rate was the highest among the top 15 companies.

• IDBI FEDERAL has achieved a growth of 43% in the number of new business
policies sold as compared to the previous year.

• +The market share of the Company among private players in individual life
new business (APE) improved to 1.38% as compared to 1.17% in the previous
year.

• IDBI FEDERAL registered a growth of 8% in renewal premium over the

previous year. And also 13th month persistency improved from 72% to 75%
and has one of the best persistency rates in the industry.

• IDBI FEDERAL is among the top 5 in 13th month persistency rate and among
the top 3 in 25th, 37th and 49th month persistency rates.

• Company’s expense ratio is also at the lower end among companies in the
private sector, arising from better sales productivities and better operational
efficiency.

Financial performance with respect to Operational performance

PREMIUM INCOME AND PRODUCT MIX:

• Compared to the previous year, the gross booked premium witnessed a growth
of 9% to reach 804.68 crore. Company also registered a growth of 11% to
reach 345.13 crore on account of new business premium.

• Sales of regular premium products increased by 25% with consistent efforts

made by the Company to increase sales of long-term products.

• The renewal premium collected on growing book of business improved by 8%

to reach 459.55 crore.

• The new business product mix saw a significant shift from Linked products to
Non-Linked products. The contribution of non-unit linked products in new
 business premium has sharply increased to 83% as compared to 67% in the
previous year.

• In the past 3 years, Company has shown a significant shift in the product mix
consequent to changes in regulations introduced by IRDA.

• During the year, under the non-unit linked segment, company’s flagship
traditional product “Incomesurance” contributed nearly 57% of the total new
business premium.

SEGMENT PERFORMANCE:

• The non-participating life group business generated a net surplus of 10.90

crore as compared to net surplus of 6.33 crore in the previous year.
• The unit linked business generated a net surplus of 70.71 crore as compared to
a net surplus of 20.50 crore in the previous year.
• The non-participating life individual business generated a net deficit of 96.23
crore as compared to net deficit of 120.28 Crore in the previous year.

CUSTOMER RETENTION AND PERSISTENCY:

• The overall 13th month persistency ratio improved from 72% to 75% based on
premium. While we have one of the best persistency rates in the industry, the
Company continues to focus on improving the persistency ratio to a higher
level.
• The conservation ratio of 72% as compared 68% in the last year reflects the
Company’s focus on customer retention initiatives.
• During the year under review, the Company implemented “pre -issuance
calling” process, which improved the customer contractibility for servicing.
This initiative is expected to improve our persistency ratio further dur ing the
coming years.

OPERATING COST RATIO:

• Company has consistently focused on high sales productivity in order to
achieve a low operating cost ratio.

• Since inception, members have also enforced strict cost discipline throughout
the Company, as they believe that a low-cost ratio is crucial to achieve early
break-even.
• The Operating cost to total premium ratio reduced to 24% from 26% last year.
relating to customers’ and employees rolled out during the year, the operating
expenses of the Company remained within control.

INDUSTRY DEVELOPMENT AND OUTLOOK:

 • Household financial savings as a percentage of GDP came down from 12.2%
in 2011-13 to 7.8% in 2014-15.
• Life insurance industry has been witnessing decline in new business for 3
years in a row. While a large number of players showed sharp decline in new
business premium collected, your Company is one of the few who showed
increase.
• The favourable demographic disposition of India coupled with the growing
GDP and growing per capita income are likely to increase the life insurance
business in India in the long term.

IDBI FEDERAL’S PERFORMANCE AND OUTLOOK:

➢ Multi-channel distribution has been established to ensure multi-point contact

with customers.
➢ Types of channels:
1. Banca channel
2. Agency channel
3. Direct marketing channel
4. Online channel (recently introduced)
➢ Each of these channels caters to the different sets of customers.

Graph-1: Channel-wise distribution of New Business Premium

2014-15

Bancassurance Agency Direct Marketing

Analysis of the graph:

 ➢ In 2014-15, the Bancassurance channel represented 75% of the new business
against 22% sold through the Agency channel and 3% via our Direct Channel.
➢ At the end of March 2015, our agency network spans 59 branches across the
country out of which 811 agency managers support the activities of 8,531
agents.

Bancassurance Channel:
➢ Compared to the previous year, the new business commission earnings of the
distributor Banks increased by 57% from 30.96 crore to 48.63 crore, excluding
the business of IDBI Bank Retail Asset Centres.
➢ A well-chartered shift in the product mix enabled the Distributor Banks to sell
more policies and increase the commission they received profitability of the
Company.
➢ Incomesurance, the flagship traditional product of the Company, which
accounted for 44% of the Bancassurance sales in 2015-16 increased to 56%
during 2017-18.
➢ The number of policies sold through the Bancassurance Channel (excluding
RACs of IDBI Bank) increased by 73% year-on-year

Agency Channel:
➢ The recruitment of quality advisors and their retention is the major challenge
coming in the wake of lower commissions coupled with the change in the
syllabus and the examination pattern.
➢ Our drive for profitability of the channel helped IDBI Federal to r educe the
expense gap of the channel further.
➢ The CWRP, the measure for efficiency of the channel, showed an
improvement of 7% during the year (this was achieved through the change of
product mix).
➢ The expense gap of the channel reduced by 9%.

PRODUCTS & MARKETING:

➢ IDBI Federal is recognized for its product innovation.
➢ Its innovative product suite combines financial protection and wealth creation
into distinctive product offerings that suit the varying financial and investment
needs at different stages of life.
➢ Company has received various prestigious awards such as the “Promotion
Marketing Awards of Asia”.

RISK MANAGEMENT FRAMEWORK:

 ➢ Risk Management comprises of the development, implementation and
monitoring of financial and operational strategies for assessing, mitigating
insurance and operational risks to increase the value of IDBI Federal Life
Insurance Company Limited.
➢ It enhances capabilities to align risk appetite and strategy to link risk with
growth and return.
➢ It enables the Company to make timely risk response decisions to minimize
operational surprises and losses.
➢ Risk is not something that is to be avoided, because without it there can be no
return. Hence risk needs to be understood and managed.
➢ The Company’s risk management governance structure involves the Board of
Directors (Board), the Risk Management Committee (RMC), the Operational
Risk Management Group (ORMG), the ALCO, the BCP Crisis Management
Team and the Product Concept Committee.
RISK MANAGEMENT ORGANISATION:
➢ At the top level, there is Risk Management Committee of the Board which
reviews risk management strategies, policies, standards and risk tolerance
limits.
➢ This committee is supported by operating level committees such as Asset
Liability Management Committee (ALCO) for Financial, Insurance and Credit
Risk and Operational Risk Management Group (ORMG) for Operational Risk.
➢ The responsibility includes setting up of a risk management framework,
formulation & implementation of risk management guidelines, development of
tools & methodologies for the identification, measurement, monitoring,
control and pricing of risks.

RISK MANAGEMENT PROCESS:

➢ Financial Risk is managed by putting in place fund wise strategic asset
allocation mix and various internal limits such as in strument concentration
limits, duration limits, etc.
➢ These limits are monitored on a daily basis by Middle Office and discussed in
ALCO in its monthly meetings.
➢ In case of linked portfolios with minimum guarantees, the Company hedges
the risk through duration matching/cash flow matching within the applicable
regulatory boundaries.
➢ The risks in Capital Guaranteed funds are managed using Portfolio Insurance
Techniques.
➢ Furthermore, the Company has put in place a credit review process to review
credit risk of Corporate Bonds.
 ➢ During this year Company implemented the IRDA’s guidelines on ALM
system and Stress Testing.
➢ Asset Liability management process was enhanced for certain products with
higher level of guarantees.
➢ Key Risk Indicators are used to report important operational risks to Senior
Management and Risk Management Committee of the Board.
➢ In order to further enhance risk management framework, Risk Management
Committee of the Board has approved a road map for the implementation of
Enterprise Risk Management framework.

SHARE CAPITAL:
➢ The authorized share capital of the Company is 2,500 crores.
➢ There was no change in the share capital of the Company and the paid -up
share capital remained at 800 crores.
DIVIDEND:
➢ Though the Company has made a maiden profit during the year, the Company
still has accumulated losses. Hence, the directors are unable to recommend any
dividend.

DIRECTORS:
➢ Mr. R. K. Bansal and Mr. Bart De Smet, Directors of the Company will retire
by rotation at the ensuing Annual General Meeting, and being eligible, offered
themselves for re-appointment as directors.
➢ Resolutions seeking their re-appointment have been proposed in the notice
convening the ensuing Annual General Meeting of the Company.
AUDITORS:
➢ The Company proposes re-appointment of M/s. S. P. Chopra & Co., Chartered
Accountants, New Delhi and M/s. Khandelwal Jain &Co., Chartered
Accountants, Mumbai as Joint Statutory Auditors of the Company to hold
office from the conclusion of the forthcoming Annual General Meeting until
the conclusion of the next Annual General Meeting.
CUSTOMER GRIEVANCE REDRESSAL:
➢ The Company implemented its Integrated Grievance Management System
(IGMS), an online grievance management mechanism linked with IRDA
portal, where a policyholder/customer can lodge his/her complaint and monitor
it for a speedy resolution.
➢ Customer Service Committee comprising of senior executives of the Company
reviews the grievance redressal mechanism from time to time
WHISTLEBLOWER POLICY:
 ➢ Provides a mechanism to employees and other persons dealing with the
Company to report any instance of actual or suspected fraud; raise concerns
internally about possible irregularities, governance weakness, financial
reporting issues or other such matters; to safeguard the interest of such
Employees/persons against victimisation, who notice and report such practice.

RURAL AND SOCIAL BUSINESS:

➢ The Company has covered 1,50,660 lives under the ‘social sector’ business
and issued 23,497 policies in rural areas during the current financial year.

LICENSE:
➢ The Insurance Regulatory and Development Authority (“IRDA”) has issued its
License to IDBI Federal to start the Life Insurance Business on December 19,
2007 and renewed the Certificate of Registration of IDBI Federal to sell life
Insurance products for the financial year 2013-14.
DEPOSITS:
➢ During the year under review, the Company has not accepted any deposits
under Section 58A of the Companies Act, 1956 from the public.

PARTICULARS OF CONSERVATION OF ENERGY, TECHNOLOGY

ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO:
➢ Conservation of energy: Not applicable to the Company.
➢ Technology Absorption: Amount spent towards implementation of various
software systems to improve overall efficiency 3.50 crore
➢ Foreign Exchange Earnings and Outgo: The Company recorded Foreign
Exchange Earnings – 9.22 crore and Foreign Exchange outgo 11.68 crore .

CORPORATE GOVERNANCE REPORT:

➢ The philosophy of doing business through ethical, fair and transparent means
has been the foundation of IDBI Federal.
➢ It has been the constant endeavour of the Company to enhance the economic
value, trust and confidence of all stakeholders through good corporate
governance practices.

Board of directors:
➢ The Board of Directors comprises of a combination of executive an d non-
executive directors.
 ➢ The total strength of the Board is nine directors which includes Chief
Executive Officer & Managing Director of the Company, three independent
directors, five non-executive directors.

Roles and responsibilities of the board:

➢ Overall direction of the business of the Company, including projected capital
requirements, revenue streams, expenses and the profitability.
➢ Obligation to fully comply with the various regulations and other statutory
requirement.
➢ Addressing conflict of interests.
➢ Ensuring fair treatment of policyholders and employees.
➢ Ensuring information sharing with and disclosure to shareholders, including
investors, policyholders, employees, regulators,
➢ Consumers, financial analysts and/or rating agencies.

DISTRIBUTION OF SHARE HOLDING: The details of Shareholding Pattern of

the Company as on March 31, 2013 are as under

S.NO Names of share No. of shares %

holders held(in crores)
1 Idbi Bank Ltd 38.4 48%
2 Federal Bank Ltd 20.8 26%
3 Ageas Insurance 20.8 26%
international N.V
Total 80 100%

Means of Communication-

- Annual & Half yearly financial results of the Company were published in two
leading newspapers one in the local language and the other in a leading
English paper.
- The Company’s website displays the vital information related to the Company,
Products, distribution network, important aspects related to policy servicing,
public disclosures etc (including disclosure of Financial Reports).

Company General Information

Date of Incorporation January 22, 2007
CIN No. U66010MH2007PLC167164
IRDA Registration No. 135

Address for Correspondence

IDBI Federal Life Insurance Co Ltd,
1st Floor, Tradeview, Oasis Complex,
Kamala City, P.B. Marg, Lower Parel (W),
Mumbai – 400013, India.
Company Secretary and Compliance Officer
Name Mr. Rajesh Ajgaonkar
Address
IDBI Federal Life Insurance Co Ltd,
1st Floor, Tradeview, Oasis Complex,
Kamala City, P.B. Marg, Lower Parel (W),
Mumbai – 400013, India.
Contact Telephone 022-24908109
E-mail rajesh.ajgaonkar@idbifederal.com

Financial and Operating Ratios

Net Retention Ratio - Percentage of net income that is retained to grow the business
– higher in case growing companies (new) – net premium by gross premium.
Ratio of expenses of Management – Measure of what it costs an investment
company to operate a mutual fund.
Commission Ratio – Gross commission paid to gross premium
Ratio of policyholder’s liability to shareholders funds – policyholder’s funds include
policy liability, insurance reserves, surplus in revenue. Shareholders fund include
share capital, reserves and surplus less miscellaneous expenditure.
Solvency Margin – assets exceeding liabilities
Persistency Ratio – amount of policies that have not lapsed
CBLO – Collateralized Borrowing and Lending Obligation – RBI approved money
market instrument which can be issued for a maximum tenor of one year.
NSDL – National Securities Depository Limited – Depository for equity market in
India
Expat – A former inhabitant of your country that is now living in and/or working in
another country.
Chapter4
 Data analysis and interpretation

Interpretation
Variables showing the Financial Performance of IDBI Federal Life Insurance Co Ltd -2014-
2018 - Projections based on trend values for the years 2019, 20 & 21 (Rs in Lakhs)
To measure Financial Performance of IDBI Federal Life Insurance Co Ltd the following
approaches are being used
(1) Net income approach
(2) Net operating income approach
(3) MM approach with Tax
(4) Traditional approach

Table 1-Net income approach

Note-
MARKET MARKET MARKET VALUE
VALUE OF VALUE OF OF THE FIRM figures
Year EQUITY NI/Ke DEBT INT/Kd V=E+D WACC NOI/V indicated
2014 -11023370 2776563 -8246807 0.133668 in bold
2015 -10494500 8140157 -2354343 0.445751 represent
2016 -12178360 14000902 1822542 -0.66821 the
projection
2017 -6986160 16601532 9615372 -0.07266 s made on
2018 924320 16709694 17634014 0.005242 the basis
2019 269502 22544061 22813563 0.001181 of trend
2020 8159234 28205909 36365143 0.022437 value
2021 22003132.2 36788691 58791823 0.037425
 market value of equity
25000000
20000000
15000000
10000000
5000000
0
-5000000 2014 2015 2016 2017 2018 2019 2020 2021
-10000000
-15000000

From table 1 and figure 1 it is evident that the MARKET VALUE OF EQUITY of IDBI Federal Life
Insurance Co Ltd has recorded negative values for the period 2014 to 2018 and picked up in the year
2018. Based on the trend value of the period 2014-18, the projections for the immediate future years 2019
2020 & 2021 indicated an improvement with positive values.

market value of debt

40000000

35000000

30000000

25000000 year
20000000
MARKET VALUE OF
15000000 DEBT INT/Kd

10000000

5000000

From table 1 and figure 2 it is evident that the MARKET VALUE OF DEBT of IDBI Federal Life
Insurance Co Ltd has recorded gradual increase during the period 2014 to 2018. Based on the trend value
of the period 2014-18, the projections for the immediate future years 2019 2020 & 2021 indicated
significant improvement gradually.
 market valueof the firm
70000000
60000000
50000000
40000000
30000000 MARKET VALUE OF THE
20000000 FIRM V=E+D

10000000
0
-10000000
-20000000

While observing Table 1 figure 3 we can see that the MARKET VALUE OF THE FIRM of IDBI Federal
Life Insurance Co Ltd has recorded gradual increase during the period 2014 to 2018 i.e . it has moved
from negative to positive during those years. . Based on the trend value of the period 2014 -18, the
projections for the immediate future years 2019 2020 & 2021 indicated significant improvement year by
year.

WACC
0.6

0.4

0.2

0
WACC NOI/V
-0.2

-0.4

-0.6

-0.8

Table 1 figure 4 we can observe that WACC has increased between the years 2014-2015 and went
negative between 2016-2017 and then increased in 2018. . Based on the trend value of the period 2014 -
18, the projections for the immediate future years 2019 2020 & 2021 indicated significant in crease in
WACC.
Table 2-Net operating income approach

MARKET
VALUE OF SHARE
THE HOLDERS COST OF
Year EBIT WACC COMPANY DEBT EQUITY EARNINGS EQUITY
-
2014 1102337 0.125 -8818696 2776563 4489121 -1102337 -0.245557426
-
2015 1049450 0.125 -8395600 8140157 4492385 -1049450 -0.233606425
-
2016 1217836 0.125 -9742688 14000902 6993473 -1217836 -0.174138944
2017 -698616 0.125 -5588928 16601532 7994561 -698616 -0.087386412
2018 92432 0.125 739456 16709694 7995649 92432 0.011560287
2019 26950.2 0.125 215601.6 11645770 6393038 26950.2 0.004215555
2020 469616.6 0.125 3756932.48 13419611 6773821 469616.56 0.06932816
2021 964650.7 0.125 7717205.98 14475502 7230108 964650.748 0.13342134
Note- figures indicated in bold represent the projections made on the basis of trend value

MARKET VALUE OF THE COMPANY

10000000
8000000
6000000
4000000
2000000
0
-2000000
-4000000
-6000000
-8000000
-10000000
-12000000

From table 2 and figure 1 it is evident that the MARKET VALUE OF THE COMPANY of IDBI Federal
Life Insurance Co Ltd has recorded negative values for the period 2014 to 2017 and picked up in the year
2018. Based on the trend value of the period 2014-18 , the projections for the immediate future years
2019 2020 & 2021 indicated an improvement with positive values and it is increasing gradually.
 DEBT
18000000
16000000
14000000
12000000
10000000
8000000
6000000
4000000
2000000
0

From table 2 and figure 2 it is evident that the DEBT of IDBI Federal Life Insurance Co Ltd has recorded
gradual increase during the period 2014 to 2018. Based on the trend value of the period 2014-18 , the
projections for the immediate future years 2019 2020 & 2021 indicated significant improvement
gradually.

EQUITY
9000000
8000000
7000000
6000000
5000000
4000000
3000000
2000000
1000000
0

While observing Table 2 figure 3 we can see that the EQUITY of IDBI Federal Lif e Insurance Co Ltd
constant in the year 2014 and 2015, it has increased in 2016-2017 and in the years 2017 and 2018 it has
remained constant. Based on the trend value of the period 2014-18, the projections for the immediate
future years 2019 2020 & 2021 indicated significant improvement year by year.
 SHARE HOLDERS EARNINGS
1500000

1000000

500000

-500000

-1000000

-1500000

Table 2 figures 4 we can observe that SHARE HOLDERS EARNINGS is showing negative values
between the years 2014-2017 and then increased in 2018. . Based on the trend value of the period 2014-
18, the projections for the immediate future years 2019 2020 & 2021 indicated significant increase in
SHARE HOLDERS EARNINGS.

Table 3 MM approach with tax

Div TO INT TO TAX

SHARE DEBT ADVANTAGE
YEARS DEBT EBIT INT EBT TAX PAT HOLDERS HOLDERS DEBT
2014 2776563 -1102337 0 -1102337 -551169 -551169 -551169 2776563 2225395
2015 8140157 -1049450 0 -1049450 -524725 -524725 -524725 8140157 7615432
2016 14000902 -1217836 0 -1217836 -608918 -608918 -608918 14000902 13391984
2017 16601532 -698616 0 -698616 -349308 -349308 -349308 16601532 16252224
2018 16709694 92432 0 92432 46216 46216 46216 16709694 16755910
2019 22544061 26950.2 0 26950.2 13475.1 13475.1 13475.1 22544061 22557536
2020 25054249 469617 0 469617 234808 234808 234808 25054249 25289057
2021 27396854 964651 0 964651 482325 482325 482325 27396854 27879180

Note- figures indicated in bold represent the projections made on the basis of trend value
 DIVIDENDS TO SHAREHOLDERS
600000

400000

200000

-200000

-400000

-600000

-800000

Table 3 figures 1 we can observe that SHARE HOLDERS EARNINGS is showing negative values
between the years 2014-2017 and then increased in 2018. . Based on the trend value of the period
2014-18 , the projections for the immediate future years 2019 2020 & 2021 indicated significant increase
in SHARE HOLDERS EARNINGS.

TAX ADVANTAGE OF DEBT

27879179.69
25289057.24
22557535.8

16252224 16755910
13391984

7615432

2225394.5

Table 3 figures 2 TAX ADVANTAGE OF DEBT is increased from 2014-2018. Based on the
trend value of the period 2014- 18, the projections for the immediate future years 2019 2020 &
2021 significant increase.
 INT TO DEBT HOLDERS
30000000

25000000

20000000

15000000

10000000

5000000

Table 3 figures 3 INTEREST TO THE DEBT HOLDERS is increased from 2014-2018.

Based on the trend value of the period 2014-18, the projections for the immediate future
years indicated years 2019 2020 & 2021 consistent increase.
Chapter 5
Findings & Conclusion
The Capital Structure decision of the firm can be characterized as a choice of that
combination of debt and equity, which maximizes the market value of the firm. And
according to Modigliani and Miller’s proposition 1 the firm’s market value is not
affected by capital structure; that is, any combination of debt and equity is as good as
any other. Firms borrow by offering investors various types of securities, in MM’s
world of perfect capital market, because of same borrowing and lending rates for all
investors and no taxes, investors can borrow at their own.

Recommendations/suggestions:
• The company must concentrate on increasing its awareness among the customers
epically in advertising.

• The company must reduce debt in their capital structure as its aggressive and if
this goes on the company may lose their shareholders

• The company must concentrate to bring awareness on child insurance products

• WACC is increasing; company must restructure its capital structure to minimize

it.

Limitations of the study:

1. Time Duration:
Duration of the project is 6 weeks. Within this short time, completion of the
project is a challenge.
2. Dynamic Market conditions:
None of the industry operates under perfect market conditions.
But the project which undergoes based on the theories which are applicable to
perfect market condition.
3. Dynamic Risk – Return trade off:
Determining the changing risk appetite of the company is highly unpredictable
which in turn makes calculation of risk – return trade-offs of the company accurately.
With changes in market conditions returns with respect to the given risk also
changes with time.
BIBILOGRAPHY

A. Website Referred
• http://www.idbifederal.com
• http://www.irda.gov.in
• http://www.investopedia.com/terms/l/liquidity.asp
• http://www.irdaindia.org
• http://www.scribd.com
• http://www.docstoc.com

B. Books Referred
• I.M. Pandey, Financial Management ,10th Edition
Analysis of Capital Structure :-

Working Capital = Current Assets - Current Liabilities

Year 2018 2017 2016 2015 2014 2013

Parameter
Current 2636583 1937957 1937966 1930392 1149184 401451
Assets
Current 1747056 1358602 1870864 1912272 1104263 222620
liabilities
Working 889527 579355 67102 18120 44921 178831
Capital

Current Ratio = Current Assets - Current Liabilities

Year 2018 2017 2016 2015 2014 2013

Parameter
Current 2636583 1937957 1937966 1930392 1149184 401451
Assets
Current 1747056 1358602 1870864 1912272 1104263 222620
liabilities
Current Ratio 1.509157692 1.426434673 1.035866851 1.009475639 1.040679621 1.80330159

Quick Ratio = (Cash and Bank Balances + Account receivables)/Current Liabilities

Year 2018 2017 2016 2015 2014 2013
Parameter
Cash and 999287 975318 780962 1085278 618042 234268
Balance
Account 969 237 13543 661 2849 710
Receivables
Current 1747056 1358602 1870864 1912272 1104263 222620
liabilities
Quick Ratio 0.572538029 0.718057974 0.424672771 0.567878941 0.562267322 1.055511634
7 3 5 9 2

Cash flow to Debt ratio = Current Asset/Debt

Year 2018 2017 2016 2015 2014 2013

Parameter
Current 2636583 1937957 1937966 1930392 1149184 401451
Assets
Debt 33985344 29680974 23568277 13611116 7515464 2104778
Cash flow to 0.077580000 0.065292904 0.082227733 0.141824667 0.152909254 0.190733179
Debt Ratio 37 47 49 4 8 5
Debt to Equity Ratio = Debt/Owners Equity

Year 2018 2017 2016 2015 2014 2013

Parameter
Debt 33985344 29680974 23568277 13611116 7515464 2104778
Equity 7995649 7994561 6993473 4492385 4489121 1989121
Owners
Debt to 4.25064 3.71264589 3.370039035 3.029819572 0.67415046 1.05814478
Equity Ratio

Return on Equity = PAT/Shareholders Equity

Year 2018 2017 2016 2015 2014 2013

Parameter
PAT 92432 698616 1217836 1049456 1102337 255303
Share Holder 7995649 7994561 6993473 4492385 4489121 1989121
Equity
RoE 0.01156 0.08738641 0.174138944 0.233607761 0.2455574 0.1283497