A

SYNOPSIS REPORT
ON
A STUDY ON PROFITABILITY AND OPERATIONAL
EFFICIENCY OF PUBLIC SECTOR BANK
AT
HDFC BANK LTD
Submitted
By
V.V.B L SRI DHARI
H.T.NO: 1325-20-672-266
PROJECT SUBMITTED IN PARTIAL FULFILLMENT FOR THE AWARD OF DEGREE OF

MASTER OF BUSINESS ADMINISTRATION

Department of Business Administration

AURORA’S PG COLLEGE
RAMANTHAPUR
(Affiliated to Osmania University)
2020-2022
 Aurora’s PG College (MBA), Ramanthapur
Department of Management

SYNOPSIS

Title of the Project : A STUDY ON PROFITABILITY AND

OPERATIONAL EFFICIENCY OF PUBLIC SECTOR BANK

Student Name : V.V.B L SRI DHARI

Hall Ticket Number : 1325-20-672-266

Signature of the Student :

Signature of the Guide :

 INDEX

S. No. CONTENTS Page No

1 INTRODUCTION 4-5

2 NEED FOR THE STUDY 6

3 OBJECTIVES OF THE STUDY 7

4 SCOPE OF THE STUDY 8

5 RESEARCH METHODOLOGY 9

6 REVIEW OF LITERATURE 10-14

7 INDUSTRY PROFILE 15-16

8 COMPANY PROFILE 17-18

9 PROPOSED OUTCOMES 19

10 LIMITATIONS OF THE STUDY 20

11 CHAPTERISATION 21

BIBLIOGRAPHY

INTRODUCTION
Operational efficiency is primarily a metric that measures the efficiency of profit earned as a
function of operating costs. The greater the operational efficiency, the more profitable a firm
or investment is. This is because the entity is able to generate greater income or returns for the
same or lower cost than an alternative.

In financial markets, operational efficiency occurs when transaction costs and fees are
reduced. An operationally efficient market may also be known as an "internally efficient
market."

Operational efficiency in the investment markets is typically centered around transaction

costs associated with investments. Operational efficiency in the investment markets can be
compared to general business practices for operational efficiency in production. Operationally
efficient transactions are those that are exchanged with the highest margin, meaning an
investor pays the lowest fee to earn the highest profit.

Similarly, companies seek to earn the highest gross margin profit from their products by
manufacturing goods at the lowest cost. In nearly all cases, operational efficiency can be
improved by economies of scale. In the investment markets, this can mean buying more
shares of an investment at a fixed trading cost to reduce the fee per share.

A market is reported to be operationally efficient when conditions exist allowing participants

to execute transactions and receive services at a price that equates fairly to the actual costs
required to provide them.

Common examples of profitability ratios include return on sales, return on investment, return
on equity, return on capital employed (ROCE), cash return om capital invested (CROCI),
gross profit margin and net profit margin. All of these ratios indicate how well a company is
performing at generating profits or revenues relative to a certain metric.

Different profitability ratios provide different useful insights into the financial health and
performance of a company. For example, gross profit and net profit ratios tell how well the
company is managing its expenses. Return on capital employed (ROCE) tells how well a
company is using capital employed to generate returns. Return on investment tells whether the
company is ignoring enough profits for its shareholders.
For most of these ratio, a higher value is desirable. A higher value means that the company is
 doing well and it is good at generating profits, revenues and cash flows. Profitability ratios are
of little value in isolaton. They give meaningful information only when they are analyzed in
comparison to competitors or compared to the ratios in previous periods. Therefore, trend
analysis and industry analysis is required to draw meaningful conclusions about the
profitability of a company.

Some background knowledge of the nature of business of a company is necessary when

analyzing profitability ratios. For example sales of some businesses are seasonal and they
experience seasonality in their operations. The retail industry is example of such businesses.
The revenues of retail industry are usually very high in the fourth quarter due to Christmas.
Therefore, it will not be useful to compare the profitability ratios of this quarter with the
profitability ratios of earlier quarter should be compared to the profitability ratios of similar
quarter in the previous years.

Financial statements are prepared primarily for decision-making. They play a prominent role
in setting the framework of managerial decisions. But the information provided in the
financial statements is not an end in itself as no meaningful conclusions can be drawn from
these statements alone. However, the information

provided in financial statements is of immense use in making decisions through analysis and
interpretation of financial statements.

Profitability is the primary goal of all business ventures. Without profitability the business
will not survive in the long run. So measuring current and past profitability and projecting
future profitability is very important.

Profitability is measured with income and expenses. Income is money generated from the
activities of the business. For example, if crops and livestock are produced and sold, income is
generated. However, money coming into the business from activities like borrowing money
do not create income. This is simply a cash transaction between the business and the lender to
generate cash for operating the business or buying assets.

NEED FOR THE STUDY:

 The problems, which are common to most of the public sector Bank under taking, are materials
 scarcity.
 Thus the importance of the study reveals as to how efficiently the working capital has been
used so far in the organization.
 Profitability Analysis is one of the key areas of financial decision-making. It is significant
because, the management must see that an excessive investment in current assets should
protect the company from the problems of stock-out. Current assets will also determine the
liquidity position of the firm.
 The goal of Profitability Analysis is to manage the firm current assets and current liabilities in
such a way that a satisfactory level of working capital is maintained. If the firm cannot
maintain a satisfactory level of capital, it is likely to become insolvent and may be even forced
into bankruptcy.
 OBJECTIVES OF THE STUDY:

 To study the profitability and operational Efficiency of the HDFC BANK LTD for the period
of study of 5 years.
 To analyses interpret and to suggest the Profitability efficiency of the HDFC BANK LTD . by
comparing the balance sheet of past 5 years.
 To analyze the financial performance of the HDFC BANK LTD. With the help of ratios.
 To study the capital employed by the HDFC BANK LTD.
 To study the financial performance of the company with reference to Profitability.
 SCOPE OF THE STUDY:

 The scope of the study is limited to collecting financial data published in the annual reports of
the company every year.
 The analysis is done to suggest the possible solutions.

 The study is carried out for 5 years (2017-2021).

 A study of the profitability and operational Efficiency involves an examination of long term as
well as short term sources that a company taps in order to meet its requirements of finance.
 The scope of the study is confined to the sources that HDFC BANK LTD tapped over the years
under study i.e. 2017-2021.
 RESEARCH METHODOLOGY:
This report is based on secondary data, however secondary data collection was given more importance
since it is overhearing factor in attitude studies. One of the most important users of research
methodology is that it helps in identifying the problem, collecting, analyzing the required information
data and providing an alternative solution to the problem. It also helps in collecting the vital
information that is required by the top management to assist them for the better decision making both
day to day decision and critical ones.

Data sources

The study is based on secondary data.

Secondary method:

The secondary data collection method includes:

 The lecturers delivered by the superintendents of respective departments.
 The brochures and material provided by securities limited.
 The data collected from the magazines of the NSE, economic times,etc.
 Various books relating to the investments, capital market and other related topics .
 Secondary data collected from annual reports and also existing manuals and like company
records balance sheet and necessary records.
ARTICLES
ARTICLE :1
TITLE : Customer Profitability Analysis
AUTHOR: Francies J Mulhern
SOURCE: Measurement Concentration &Reasearch Direction
YEAR: 2020
As marketing activities become more precisely targeted to consumers through direct and
interactive forms of communication, Customer profitability takes on a central role in the
development of market starategics. This paper provides a conceptual and methodological
foundation for measuring customer profitability by generalizing approaches to measuring
customer lifetime value in direct marketing for broader target marketing applications.
Particular emphasis is placed on the preceise specification of the inputs into a profitability
analysis and the measures of the degree of conceration of profits among customers. An
empirical analysis involving the profitability of customers in a business-to-business
marketing context is described, along with reaserch propostions for future work on the
determinents of customers profitability.
ARTICLE :2
TITLE : Measurement of business profitability stratergy
AUTHOR: N.Venkatranam & vasudevan Ramanujam
SOURCE: A comparison of profitability Analysis
YEAR: 2020
A two-dimensional classificatory scheme highlighting ten different approaches to the
measurement of business performance in strategy research is developed. The first dimension
concerns the use of financial versus broader operational criteria, while the second focuses on
two alternate data sources. The scheme permits the classification of an exhaustive coverage of
measurement approaches and is useful for discussing their relative merits and demerits.
Implications for operationalizing business performance in future strategy research are
discussed.
ARTICLE :3
TITLE : Production and profitability analysis
AUTHOR: Enrico Cagno
SOURCE: Industrial pollution&prevention
YEAR: 2019
The essential characteristicsof the P2 approach is the ‘reduction at spource’
principle ,derived from the idea that the generation of pollutants can be reduced or eliminated
by increasing efficiency in the use of raw materials, energy,water and the other resources.from
this point of view,it is also a means of raising operational efficiency and profitability. The
numerous success cases as well the less satisfactory results documented in the scientific and
technical literature provided the starting point for a detailed analysis of how and to what
extent industrial P2 projects have been developed and realized, particulary in terms of
profitability.
ARTICLE :4
TITLE: Efficiently Inefficient Markets for Assets and Profitability analysis
AUTHOR: Nicolae Gârleanu, & LasseHeje Pedersen
JOURNAL: The Journal of Finance
YEAR: 2019
It consider a model where investors can invest directly or search for an Profitability analysis,
information about assets is costly, and manager’s charge an endogenous fee. The efficiency of
asset prices is linked to the efficiency of the Profitability analysis: if investors can find
managers more easily, more money is allocated to active management, fees are lower, and
asset prices are more efficient. Informed managers outperform after fees, uninformed
managers underperform, while the average manager's performance depends on the number of
“noise allocators.” Small investors should remain uninformed, but large and sophisticated
investors benefit from searching for informed active managers since their search cost is low
relative to capital. Hence, managers with larger and more sophisticated investors are expected
to outperformer.
ARTICLE :5
TITLE: Profitability Analysis Of Power Plant Engineering Works.

AUTHOR: VENKATESWARARAO.PODILE
JOURNAL: A journal on the causes of making of poor Profitability analysis
cited by 4 related articles.

YEAR: (2018)
Profitability Analysis of Power Plant Engineering Works. It was found that most of the studies
dealt with Profitability analysis of different large Enterprises and of sectors in India and
abroad. Some of the studies dealt with MSME policies. Some other studies though dealt with
MSMEs, they were confined to working capital management and capital structure analysis.
Few studies dealt with profitability analysis. There was no study on Profitability analysis of a
small Enterprise which is a manufacturer and repairer of Electrical Transformers. Hence, this
study is taken up.
 INDUSTRY PROFILE
A bank is a financial institution that accepts deposits and channels those deposits into lending

activities. Banks primarily provide financial services to customers while enriching investors.

Government restrictions on financial activities by banks vary over time and location. Banks are

important players in financial markets and offer services such as investment funds and loans.

In some countries such as Germany, banks have historically owned major stakes in industrial

corporations while in other countries such as the United States banks are prohibited from

owning non-financial companies. In Japan, banks are usually the nexus of a cross-share

holding entity known as the keiretsu. In France, bancassurance is prevalent, as most banks

offer insurance services (and now real estate services) to their clients.

Introduction

India’s banking sector is constantly growing. Since the turn of the century, there has been a

noticeable upsurge in transactions through ATMs, and also internet and mobile banking.

Following the passing of the Banking Laws (Amendment) Bill by the Indian Parliament in

2012, the landscape of the banking industry began to change. The bill allows the Reserve Bank

of India (RBI) to make final guidelines on issuing new licenses, which could lead to a bigger

number of banks in the country. Some banks have already received licences from the

government, and the RBI's new norms will provide incentives to banks to spot bad loans and

take requisite action to keep rogue borrowers in check.

Over the next decade, the banking sector is projected to create up to two million new jobs,

driven by the efforts of the RBI and the Government of India to integrate financial services into

rural areas. Also, the traditional way of operations will slowly give way to modern technology.

Market size

Total banking assets in India touched US$ 1.8 trillion in FY13 and are anticipated to cross US$

28.5 trillion in FY25.

Bank deposits have grown at a compound annual growth rate (CAGR) of 21.2 per cent over

FY06–13. Total deposits in FY13 were US$ 1,274.3 billion.

Total banking sector credit is anticipated to grow at a CAGR of 20.1 per cent (in terms of INR)

to reach US$ 2.4 trillion by 2020.

 COMPANY PROFILE
HDFC Bank is India's largest private sector bank with total assets of Rs. 5,946.42 billion (US$
99 billion) at March 31, 2016 and profit after tax Rs. 98.10 billion (US$ 1,637 million) for the
year ended March 31, 2016.HDFC Bank currently has a network of 3,839 Branches and 11,943
ATM's across India.
History
2016
The Housing Development Finance Corporation Limited (HDFC) incorporated at the initiative
of the World Bank, the Government of India and representatives of Indian industry, with the
objective of creating a development financial institution for providing medium-term and long-
term project financing to Indian businesses. Mr.A.Ramaswami Mudaliar elected as the first
Chairman of HDFC Limited.
HDFC emerges as the major source of foreign currency loans to Indian industry. Besides
funding from the World Bank and other multi-lateral agencies, HDFC was also among the first
Indian companies to raise funds from international markets.
HDFC Bank was originally promoted in 2094 by HDFC Limited, an Indian financial
institution, and was its wholly-owned subsidiary. HDFC's shareholding in HDFC Bank was
reduced to 46% through a public offering of shares in India in fiscal 2098, an equity offering in
the form of ADRs listed on the NYSE in fiscal 2000, HDFC Bank's acquisition of Bank of
Madura Limited in an all-stock amalgamation in fiscal 2001, and secondary market sales by
HDFC to institutional investors in fiscal 2001 and fiscal 2002. HDFC was formed in 2055 at
the initiative of the World Bank, the Government of India and representatives of Indian
industry. The principal objective was to create a development financial institution for
providing medium-term and long-term project financing to Indian businesses.
 
In the 1990s, HDFC transformed its business from a development financial institution offering
only project finance to a diversified financial services group offering a wide variety of products
and services, both directly and through a number of subsidiaries and affiliates like HDFC
Bank. In 1999, HDFC become the first Indian company and the first bank or financial
institution from non-Japan Asia to be listed on the NYSE.
 After consideration of various corporate structuring alternatives in the context of the emerging
competitive scenario in the Indian banking industry, and the move towards universal banking,
the managements of HDFC and HDFC Bank formed the view that the merger of HDFC with
HDFC Bank would be the optimal strategic alternative for both entities, and would create the
optimal legal structure for the HDFC group's universal banking strategy. The merger would
enhance value for HDFC shareholders through the merged entity's access to low-cost deposits,
greater opportunities for earning fee-based income and the ability to participate in the
payments system and provide transaction-banking services. The merger would enhance value
for HDFC Bank shareholders through a large capital base and scale of operations, seamless
access to HDFC's strong corporate relationships built up over five decades, entry into new
business segments, higher market share in various business segments, particularly fee-based
services, and access to the vast talent pool of HDFC and its subsidiaries.
 PROPOSED OUT COMES
 Whether you are recording profitability for the past period or projecting profitability for
the coming period, measuring profitability is the most important measure of the success
of the business.
 A business that is not profitable cannot survive. Conversely, a business that is highly
profitable has the ability to reward its owners with a large return on their investment.
 Increasing profitability is one of the most important tasks of the business managers.
Managers constantly look for ways to change the business to improve profitability.
 These potential changes can be analyzed with a pro forma income statement or a
Partial Budget. Partial budgeting allows you to assess the impact on profitability of a
small or incremental change in the business before it is implemented.
 A variety of Profitability Ratios (Decision Tool) can be used to assess the financial
health of a business. These ratios, created from the income statement, can be compared
with industry benchmarks.
 Also, Income Statement Trends (Decision Tool) can be tracked over a period of years
to identify emerging problems.
 LIMITATIONS OF THE STUDY :

1. The analyst or the user must have comprehensive knowledge and experience about the concern
whose statements have been used for calculating these ratios only the dependable conclusions
may drawn thus ratios are signified tools only in the hands of experts in the hands of quacks
for whom they may prove dangerous tools.
2. Ratios are not an end in themselves but they are a means to achieve a particular end.
Hence it totally depends upon user or analyst as what conclusions is drawn on the basis of
ratios calculated.
3. A single ratio in itself is not imported or as limited value because trends are more significant in
the analysis.
4. Another limitation is that of standard ratio with which the actual ratios may be compared
generally there is no such ratio, which may be treated as standard for the purpose of
comparison because conditions of one concern differ significantly from those of another
concern.
5. The accuracy and correctness of ratios are totally dependent upon the reliability of the data
contained in financial statements on the basis of which ratios are calculated.
 CHAPTERISATION

CHAPTER -1 - INTRODUCTION

This chapter includes the introduction of the topic, need, scope, objectives of the study, Project
limitations and methodology of the study.

CHAPTER - 2 REVIEW OF LITERATURE

This chapter includes the theoretical background and articles written by different authors and
brief explanation of the topic.

CHAPTER - 3 - INDUSTRY PROFILE & COMPANY PROFILE

CHAPTER - 4 - DATA ANALYSIS AND INTERPRETATION

This chapter includes the comparative analysis of the financial statements of the five years data
and it also includes the interpretation based on the study.

CHAPTER - 5 – SUMMARY AND CONCLUSION

This chapter includes the overall summary of the project and the conclusion based on the study
during the period.
 BIBLIOGRAPHY
BOOKS REFFERED
 Customer Profitability Analysis Written By Francies J Mulhern.
 Measurement of business profitability stratergy Written By N.Venkatranam
 & vasudevan Ramanujam.
 Production and profitability analysis Written By Enrico Cagno.
 Efficiently Inefficient Markets for Assets and Profitability analysis Written
By Nicolae Gârleanu, & LasseHeje Pedersen.
JOURNALS
 ENRICO-Journal of financial Economics,2090-Elesvier
 R.UMA RANI D.NITHYA-Journal of Financial Management,2003-Wiley
 E Walster, E Berscheld, GW Walster-Journal of portfolios Mangement
 Francies J Mulhern- Measurement Conceration &Reasearch Direction
 N.Venkatranam & vasudevan Ramanujam- A comparison of profitability
Analysis
 Pedro piers, Pedro Matos, Miguel A. Ferreira- The Journal of Finance
WEBSITES
https://www.ultratechcement.com https://www.damordaram.com
https://nseindia.com
http://www.investopedia.com/terms/w/workingcapitalmanagement.asp
http://www.studyfinance.com/lessons/workcap/
http://www.efinancemanagement.com/working-capital-finacing/importance-

NEWSPAPERS
 Times of India –times group
 The economic times
 The Hindhu