A STUDY ON FINANCIAL ANALYSIS OF SMALL FINANCE BANK

(WITH SPECIAL REFERENCE TO AU BANK AND UJJIVAN BANK).

Research Project Submitted in Partial Fulfillment of the Requirements for the

Degree of

BCOM HONOURS

By

RESHMA MANOJ

To the

DEPARTMENT OF COMMERCE

BHOPAL SCHOOL OF SOCIAL SCIENCES

April, 2021

Submitted by Guided by

RESHMA MANOJ VINOD KUMAR ADWANI

Assistant Professor

(i)

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 CERTIFICATE

It is certified that the work contained in the project report titled “A Study on financial analysis of
small finance bank (WITH SPECIAL REFERENCE TO AU BANK AND Ujjivan BANK.),” by
“RESHMA MANOJ,” has been carried out under my/our supervision and that this work has not
been submitted elsewhere for a degree*

Signature of Supervisor: ………..

Name: Vinod Kumar Advani, Assistant Professor

Department: Commerce

Bhopal School of Social Sciences

April, 2021

(ii)

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 DECLARATION

I hereby declare that this project report entitled “A Study on financial analysis of small finance
banks (With Special Reference To AU BANK AND UJJIVAN BANK.)’’Was carried out by me
for the degree of BCOM HONOURS under the guidance and supervision of Vinod Kumar
Advani, Assistant Professor of Department of Commerce, BSSS College. The interpretations put
forth are based on my reading and understanding of the original texts and they are not published
anywhere in any form. The other books, articles and websites, which I have made use of are
acknowledged at the respective place in the text. This research report is not submitted for any
other degree or diploma in any other University.

Place: Bhopal

Name: Reshma Manoj

Class & Section: B.Com (Honours), Final Year

Date: 15, April, 2021

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 ACKNOWLEDGEMENT

I would like to thank our Principal Dr. Fr. John P.J. and Vice Principal Dr. Sr. Sonia Kurien for
their immense support and blessings. I thank our HOD Dr. Amit Kumar Nag for his support. I
would like to express my special thanks of gratitude to my research guide Vinod Kumar Advani,
Assistant Professor of Department of Commerce for his valuable suggestions and guidance and
for giving me the golden opportunity to do this wonderful research project on the topic:A Study
on financial analysis of small finance banks (With Special Reference To AU BANK AND
UJJIVAN BANK.) Without his help it would have been difficult for me to have reached this
state of completion of my project report. Also, I would like to thank my parents and friends who
helped me a lot in the preparation of this project.

I wish to acknowledge the help of all those who have provided me information, guidance and
other help during my research period.

(iv)

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 TABLE OF CONTENTS PAGE NO.

CHAPTER 1 – INTRODUCTION…………………………………………………………….. 7 -17

1.1 RATIONAL OF STUDY---------------------------------------------------------------------------- 8

1.2 INTRODUCTION TO THE INDUSTRY--------------------------------------------------------- 9-12
1.2.1 HISTORY OF SMALL FINANCE BANK------------------------------------------------ 9 - 10
1.2.2 REGULATIONS------------------------------------------------------------------------------- 10
1.2.3 ELIGIBILITY CRITERIA-------------------------------------------------------------------- 10
1.2.4 SCOPE OF ACTIVITIES OF SMALL FINANCE BANK------------------------------- 11
1.2.5 NORMS------------------------------------------------------------------------------------------ 11-12
1.2.6 CAPITAL REQUIREMENT------------------------------------------------------------------ 12
1.2.7 FOREIGN SHAREHOLDING---------------------------------------------------------------- 12
1.2.8 TRANSITION PATH--------------------------------------------------------------------------- 12

1.3 INTRODUCTION TO THE COMPANY----------------------------------------------------------- 13-16

1.3.1 AU BANK---------------------------------------------------------------------------------------- 13-16
1.3.2 UJJIVAN BANK--------------------------------------------------------------------------------- 16-17

1.4 JUSTIFICATION OF STUDY-------------------------------------------------------------------------17

CHAPTER 2- REVIEW OF LITERATURE--------------------------------------------------------- 18-22

2.1 INTERNATIONAL REVIEW--------------------------------------------------------------------- 19-20
2.2 NATIONAL REVIEW------------------------------------------------------------------------------ 21-22

CHAPTER 3 – RESEARCH METHODOLOGY----------------------------------------------------- 23-25

3.1 OBJECTIVES OF THE STUDY-------------------------------------------------------------------- 24
3.2 RESEARCH HYPOTHESIS------------------------------------------------------------------------- 24
3.3 SCOPE OF STUDY----------------------------------------------------------------------------------- 24
3.4 LIMITATION OF STUDY--------------------------------------------------------------------------- 25

CHAPTER 4 – DATA REPRESENTATION AND ANALYSIS----------------------------------- 26-48

1.1 CURRENT RATIO---------------------------------------------------------------------------------- 27-28
1.2 TOTAL DEBT TO EQUITY------------------------------------------------------------------------29-30
1.3 NET PROFIT MARGIN-----------------------------------------------------------------------------31-32
1.4 OPERATING PROFIT MARGIN-------------------------------------------------------------------33-34
1.5 RETURN ON ASSETS------------------------------------------------------------------------------- 35-36
1.6 RETURN ON EQUITY--------------------------------------------------------------------------------37-38
1.7 NET INTEREST MARGIN---------------------------------------------------------------------------39-40
1.8 EARNING PER MARGIN-----------------------------------------------------------------------------41-42
1.9 NON PERFORMING ASSETS RATIO--------------------------------------------------------------43-44
1.10 PROPRIETOR’S RATIO-------------------------------------------------------------------------------45-46
4.2 HYPOTHESIS TESTING--------------------------------------------------------------------------------47-48

CHAPTER 5- RESULTS AND DISCUSSION------------------------------------------------------------49-59

5.1 MAJOR FINDING-----------------------------------------------------------------------------------------

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5.1 MAJOR FINDINGS---------------------------------------------------------------------------------------- 50

5.2 DISCUSSIONS AND SUGGESTIONS ----------------------------------------------------------------- 51

5.3 CONCLUSION---------------------------------------------------------------------------------------------- 52

5.4 REFERENCE------------------------------------------------------------------------------------------------ 53-54

5.5 ANNEXTURE----------------------------------------------------------------------------------------------- 54-59

5.5.1 BALANCE SHEET OF AU BANK--------------------------------------------------------------------- 54-56

5.5.2 BALANCE SHEET OF UJJIVAN BANK-------------------------------------------------------------- 56-59

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 CHAPTER -1

INTRODUCTION

1.1 –RATIONALE OF STUDY

1.2 INTRODUCTION TO THE INDUSTRY

1.2.1 – HISTORY OF SMALL FINANCE BANK

1.2.2 – REGULATION FOR SMALL FINANCE BANKS

1.2.3 – ELIGIBILITY CRITERIA

1.2.4 – SCOPE OF ACTIVITIES OF SMALL FINANCE

BANK

1.2.5 – NORMS

1.2.6 – CAPITAL REQUIREMENT

1.2.7 – FOREIGN SHAREHOLDING

1.2.8 – TRANSITION PATH

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 CHAPTER -1

INTRODUCTION

1.1 RATIONALE OF STUDY

Financial analysis is a part of the general business money work that includes looking at
chronicled information to acquire data about the current and future financial strength of an
organization. Financial analysis can be applied in a wide assortment of circumstances to give
business directors the data they need to settle on basic choices. The capacity to comprehend
financial information is fundamental for any business supervisor. Business objectives and
destinations are set in financial terms and their results are estimated in financial terms. Among
the abilities needed to comprehend and deal with a business is familiarity with the language of
account—the capacity to peruse and comprehend financial information just as present data as
financial reports.

The finance function in business includes assessing monetary patterns, setting monetary
arrangement, and making long-range plans for business exercises. It likewise includes applying
an arrangement of inside controls for the treatment of cash, the acknowledgment of sales, the
payment of expenses, the valuation of inventory, and the endorsement of capital expenditures.
Moreover, the finance function writes about these inside control frameworks through the
arrangement of financial statements, such as income statements, balance sheet, and cash flow
statements.

In corporate finance, the examination is led internally by the accounting department and
imparted to the executives to improve business dynamic. This sort of internal analysis may
incorporate ratios like net present value (NPV) and internal rate of return (IRR) to discover
projects worth executing.Many companies stretch out credit to their clients. Therefore, the cash
receipt from sales may be delayed for a while. For companies with large receivable balances, it is
valuable to track days sales outstanding (DSO), which assists the company with recognizing the
period of time it takes to turn a credit sale into cash. The average assortment period is an
important aspect in a company's overall cash conversion cycle.A vital territory of corporate
financial analysis includes extrapolating an organization's previous exhibition, such as, net
earnings or profit margin, into a gauge of the organization's future presentation. This kind of
authentic pattern analysis is valuable to distinguish occasional patterns.

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1.2 INTRODUCTION TO THE INDUSTRY

1.2.1 - HISTORY OF SMALL FINANCE BANKS.

Small finance banks have encouraged the major financial services in provincial and unserved
area of the economy. A small bank should have least settled up capital of 100 crores is needed to
qualify as above. According to organizations act 2013 banks get their permit under area 22 of
banking guideline act 1934. They can additionally apply das a planned business bank whenever
discovered reasonable according to area 42 (6) (a) of the reserve bank of India act,1934, Small
finance banks assumes a significant part in legitimate channelizing of saving in a proficient and
powerful way in provincial and semi – metropolitan territories of India, which giving positive
indications in generally advancement.

The populace which is out of the range of other business banks fills in as an objective populace
for small banks. People, Corporate, Trusts or Societies helps in advancing these banks. As
indicated by the rules gave by Reserve bank of India small banks can loan up to 25 lakhs. The
tasks of the bank ought to be completely organized through innovation. RBI took measures for
viable financial consideration and as of late conceded 'on a fundamental level' licenses for 10
small finance banks with a 18-month cutoff time to begin tasks.

Out of ten elements, eight are miniature finance institutions. Among them just Equitas Small
Finance Bank has begun working up until now. As indicated by the RBI rules gave in November
2014, the target of a small finance bank is to help financial incorporation by offering credit to
small specialty units, miniature and medium endeavors. The rules express that 75% of their
credit portfolio should loan to the need area. These banks can possibly work practically like a
typical business bank, yet at a lot smaller Operating expense. It can offer essential banking
services, acknowledge stores and loan to potential and immaculate area by connecting them to
formal banking area. They help in the branch extension mission of the Indian Banking
framework.

Branch development in the rustic zone is decidedly corresponded to the financial improvement
of the nation. It additionally prompts neediness decrease in these territories. These banks will
assume a critical part in the achievement of financial consideration in India. Small Banks are
actual banks whose point is to give fundamental banking such as deposits and supply of credit,
however in a restricted region of activity. Small banks are relied upon to meet credit and
settlement needs of small organizations, ranchers, micro and small industries, chaotic area, low
pay families and traveler work power through high innovation minimal effort activities.

Small Finance Banks (SFBs) presented in the Indian Banking Structure in the year 2015 to cook
the particular necessity of specialty clients. These banks plan to reinforce Financial Inclusion and
broadening fundamental banking administrations in the country. Small Finance Bank are those

9
banks give monetary consideration to burdened area like micro, small and medium business
undertakings, and other disorderly areas who are not been taken consideration by different banks
and monetary establishment. The idea of Small Finance banks isn't totally new as these kinds of
establishments have effectively existed in many created nations. In the year 2015, RBI offers
license to 10 candidates to set up Small finance Banks in India. In the year 2015, RBI has started
a monetary consideration strategy by setting up an alternate kind of bank in our country. RBI has
given a temporary license for ten organizations on September 17, 2015 to work as small finance
bank in India. Capital Finance Bank is the principal bank that began as a small finance bank in
the country. They started activities with 47 branches on April 24, 2016.

1.2.2 REGULATIONS:

The small finance banks are governed on the basis of these provisions:

1. Banking Regulation Act, 1949

2. Reserve Bank of India Act, 1934
3. Foreign Exchange Management Act, 1999
4. Payment and Settlement Systems Act, 2007
5. Credit Information Companies (Regulation) Act, 2005
6. Deposit Insurance and Credit Guarantee Corporation Act, 1961

1.2.3 ELIGIBILITY CRITERIA:

▪ Resident people/experts, separately or jointly, each having at any rate 10 years of

involvement with banking and finance at a senior level and Companies and Societies in
the private sector, that are possessed and constrained by residents and having an effective
history of maintaining their organizations for at any rate a time of five years, will be
qualified as advertisers to set up little finance banks.

▪ Existing Non-Banking Finance Companies (NBFCs), Micro Finance Institutions (MFIs),

and Local Area Banks (LABs) in the private sector, that are constrained by residents and
having a fruitful history of maintaining their organizations for in any event a time of five
years, can likewise choose transformation into little finance banks. Joint ventures by
various advertiser bunches to set up little finance banks are not allowed.

▪ Primary (Urban) Co-usable Banks (UCBs): These are envious of willfully converting
into small finance banks, may intentionally change from Urban Co-usable Bank into a
Small Finance Bank. The base total assets of such small finance banks will be Rs. 100
crore from the date of commencement of business. Nonetheless, they should expand their
base total assets to Rs 200 crores within a long time from the date of commencement of
business.

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1.2.4 SCOPE OF ACTIVITIES OF SMALL FINANCE BANKS
The small finance bank will principally embrace fundamental banking exercises of
acknowledgment of stores and loaning to unserved and underserved segments including
small specialty units, small and negligible ranchers, micro and small industries, and
sloppy area elements. It can likewise embrace other non-hazard sharing basic monetary
administration exercises, not needing any responsibility of own funds, like the circulation
of mutual fund units, insurance items, pension items, and so forth.

With the earlier endorsement the RBI and subsequent to the following necessities of the
sectoral controller for such items. Following a long time from the date of the beginning
of tasks of the bank, the prerequisite for earlier endorsement from the Reserve Bank will
at this point don't matter and the bank will be represented by the surviving standards as
relevant to booked business banks.

The small finance bank can likewise turn into an Authorized Dealer in the unfamiliar
trade business for its customers' prerequisites.

▪ Open banking outlets: Small finance banks will have general consent to open
banking outlets from the date of the beginning of the business subject to the
condition that the prerequisite of opening in any event 25% of its banking outlets
in unbanked provincial focus.

▪ Limitation in the space of activities: There won't be any limitation in the space of
tasks of small finance banks; in any case, the inclination will be given to those
candidates who, in the underlying stage, set up the bank in a bunch of under-
banked States/locale, for example, in the North-East, East and Central areas of
the country. These candidates won't have any obstacle to growing to different
districts at the appointed time.

It is normal that the small finance bank ought to essentially be receptive to nearby
necessities. After the underlying adjustment time of five years, and after an audit, RBI
may change the extent of exercises of the small finance banks. The other financial and
non-financial administration exercises of the advertisers, assuming any, ought to be kept
unmistakably ring-fenced and not mixed together with the banking business.

1.2.5 NORMS

▪ The rundown of small finance banks in India will be dependent upon all
prudential norms and guidelines of RBI as appropriate to existing business banks
including the necessity of support of Cash Reserve Ratio (CRR) and Statutory
Liquidity Ratio (SLR). No avoidance would be given for agreeing on the
statutory arrangements.

▪ The small finance banks will be needed to expand 75% of their Adjusted Net
Bank Credit (ANBC) to the areas qualified for grouping as need area loaning

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 (PSL) by the Reserve Bank. At any rate, 50% of its credit portfolio ought to
comprise advances and advances of up to Rs. 25 lakh.

1.2.6CAPITAL REQUIREMENT:

▪ The base settled up casting a voting equity capital for little account banks will be
Rs.200 crore, with the exception of such little money banks which are changed
over from UCBs.

▪ Taking into account the innate risk of a little money bank, it will be needed to
keep a base capital sufficiency proportion of 15% of its risk-weighted assets
(RWA) consistently, subject to any higher rate as might be endorsed by RBI
every once in a while.

1.2.7FOREIGN SHAREHOLDING:

The foreign shareholding in SFBs would be according to the Foreign Direct Investment
(FDI) strategy for private area banks as corrected every once in a while. Right now, the
total FDI in a private area bank from all sources will be permitted up to a limit of 74% of
the settled up capital of the bank.

On account of Foreign Institutional Investors (FIIs)/Foreign Portfolio Investors (FPIs),

individual FII/FPI holding is confined to beneath 10% of the absolute settled up capital.
As far as possible for all FIIs/FPIs/Qualified Foreign Investors (QFIs) can't surpass 24%
of the absolute settled up capital. This can be raised to 49% of the all-out settled up
capital by the bank worried through a goal by its Board of Directors followed by an
uncommon goal with that impact by its General Body.

1.2.8 TRANSITION PATH:

On the off chance that the rundown of small finance banks in India tries to travel into a
universal bank, such change won't be programmed however would be dependent upon it
applying to RBI for such transformation and satisfying least settled up capital/total assets
necessity as appropriate to universal banks. Its agreeable exhibition as a small finance
bank for a base time of five years and the result of RBI's expected steadiness work out.
On progress into a universal bank, it will be exposed to every one of the standards
including NOFHC structure as pertinent to universal banks.

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1.3 INTRODUCTION TO THE COMPANIES

INTRODUCTION OF AU SMALL FINANCE BANK AND UJJIVAN FINANCE

BANK.

❖ AU SMALL FINANCE BANK

AU was established by Mr. Sanjay Agarwal (managing director and CEO of AU Small Finance
Bank) as a private restricted organization. AU started its excursion in 1996 as AU lenders and
under RBI rules, worked for more than multi decade as retail engaged client driven, deliberately
significant resource financing non banking monetary organization. It turned out to be Small
account Bank in 19 April, 2017. In the a long time since AU turned into a bank they added
almost 1,000,000 new clients and offering to 27 items and spotlight on arrangements across key
verticals of financing stores, protection, exchange banking, shared assets, business banking and
computerized banking.

The initial step of AU is to engage individuals is to make occupations and work likewise center
to change over consumer loyalty to client enchant. The essential goal of AU represents
comprehensiveness, progress for all, straightforwardness, activity and desperation. These goals
are columns on which AU SFB would serve their clients. AU is serving low and center pay
people, miniature and little endeavors that have restricted admittance to banking and money
channels. AU is assuming a critical part in Indian Economy. AU SFB positioned 479 in the
rundown of Fortune India 500 organizations with yearly capitalization of Rs. 17,000 Crores. On
its first day of exchanging, the supply of this bank rose 51%. Because of its set of experiences as
a vehicles account organization, as of walk 2018 practically every one of the credits made by AU
SFB was gotten. So AU bank has developed its stores by having very lower cost.

It is a small finance bank with tasks across its 500+ touch focuses including 306 bank offices 106
resource communities 23 workplaces 291 ATMs across 11 territories of North West and Central
India and a group of 10000+ representatives. AU Small Finance Bank Limited was initially
joined as L.N. Finco Gems Private Limited on 10 January 1996 as a private restricted
organization under the Companies Act 1956 with the RoC. In year 2000 the organization got
authentication of enlistment under segment 45 I An of RBI Act from the RBI to carry on the
matter of non-banking monetary establishment without tolerating public deposits. Pursuant to the
difference in name of the organization to Au Financiers (India) Private Limited to mirror the

13
enhanced money business a new declaration of consolidation was given by the RoC on May 24
2005. In 2005 the organization got business partner of HDFC Bank for carrying on the matter of
financing business vehicles. In 2006 the organization extended its activities into Maharashtra. In
2008 the organization got speculation of Rs 20 crore from India Business Excellence Fund and
India Business Excellence Fund-1.

In 2009 the organization forayed into Gujarat. In 2010 the organization got new declaration of
enrollment under area 45 IA of RBI Act from the RBI compliant with which RBI arranged the
organization as NBFC-ND-AFC. During the year the organization got speculation of Rs 35 crore
Rs 6 crore and Rs 14 crore from IFC IBE Fund and IBE Fund-I individually. Additionally during
the year the organization achieved the situation with 'Fundamentally Important Non-Deposit
Taking Asset Finance Company’.

In 2011 AuHFL was set up as an auxiliary of the organization to give lodging money
administrations. In 2012 the organization acquired venture of Rs 150 crore and Rs 33.04 crore
from Redwood and IFC separately. During the year the organization got redesign of FICO
assessment from CRISIL BBB+/Stable to CRISIL A/Stable for long haul bank offices by
CRISIL Ratings. During the year Au Insurance Broking Services Private Limited was set up as
an auxiliary of the organization to give protection and broking services. The organization was
changed over into a public restricted organization via a unique goal passed by Shareholders at
the EGM hung on January 10 2013 and the name of the organization was changed to Au
Financiers (India) Limited'. A new declaration of joining ensuing upon transformation to a public
restricted organization was given by the RoC on 11 January 2013. The organization was
conceded the on a fundamental level endorsement to set up a Small Finance Bank (SFB) by the
RBI according to its letter dated 7 October 2015.

During the year 2015 the organization got redesign of credit score to CARE A+ for long haul
banking offices via CARE Ratings. During the year 2016 the organization got overhaul in long
haul rating of CRISIL A/Watch Positive by CRISIL Ratings. As per RBI endorsement dated
April 6 2016 the organization stripped its shareholding in AuHFL which was past auxiliary
organization. According to RBI endorsement dated May 18 2016 the organization stripped its
whole shareholding in IML. Compliant with RBI endorsement dated September 6 2016 the
organization stripped 29.53% of the all out shareholding of M Power Micro Finance Private
Limited. The organization stripped its whole shareholding in Au Insurance Broking Services
Private Limited (AuIBSPL) past partner organization. The RBI allowed the last endorsement to
the organization to set up a SFB by its letter dated 20 December 2016.

14
The name of organization was changed to AU Small Finance Bank Limited' and a new testament
of consolidation was given by the RoC on 13 April 2017. The organization started tasks as a
Small Finance Bank in April 2017.AU Bank's IPO got a mind-boggling reaction in June 2017
with an oversubscription of around 54 times. On 4 October 2017 AU Small Finance Bank
reported that it went into concurrence with Aditya Birla Health Insurance Company (ABHICL)
for Health Insurance Products as Corporate Agent. On 28 October 2017 AU Small Finance Bank
declared that it has marked a Memorandum of Understanding (MOU) with Small Industries
Development Bank of India (SIDBI) to give a stimulus to subsidizing MSMEs.

Under AU SIDBI Joint Financing Program' both the monetary foundations have chosen to
cooperate in the regions of joint financing of undertakings identifying with MSMEs in
assembling and administration areas. They will embrace a typical methodology towards project
distinguishing proof evaluation observing development and customer adjusting. The examination
of the proposition will be done together by AU Bank and SIDBI. Both the monetary
organizations would reserve a corpus of Rs 100 crore for loaning under this MOU for FY 2018.
The corpus for the ensuing years would be chosen after common meeting and seeing the
improvement made during FY 2018. The long term long arrangement will zero in on ideal and
satisfactory credit accessibility to Medium Scale Enterprise (MSEs) units and endeavors will be
made for augmenting credit stream to MSE.AU Small Finance Bank got Scheduled Commercial
bank status from the Reserve Bank of India (RBI) in November 2017.

On 3 November 2017 AU Small Finance Bank declared that the Reserve Bank of India has
conceded endorsement to SBI Mutual Fund to gain shareholding of upto 10% through its
different plans in AU Small Finance Bank. On 28 November 2017 AU Small Finance Bank
reported that it has initiated offering common asset dissemination for its clients. The bank has
banded together with 11 rumored shared asset houses (AMC) for beginning this item portion. On
19 December 2017 AU Small Finance Bank reported that it has gone into the Business
Correspondent Agreement with M/S Sahaj E-Village Limited for giving bank and monetary
administrations using Business Correspondent model.

On 12 January 2018 AU Small Finance Bank reported the launch of home advance item for its
clients. AU Small Finance Bank opened 71 new unbanked provincial financial outlets in March
2018.On 6 March 2018 AU Small Finance Bank declared that the bank has tied up with
Aurionpro Solutions to improve its computerized banking offering corporate web banking and
money Management stage for SME MSMEs and corporate customers. On 3 April 2018 AU

15
Small Finance Bank reported that it has gone into concurrence with Future Generali India Life
Insurance Company Limited (FGLI) to go about as corporate specialist for life coverage
business. This tie up will be commonly gainful for the bank and FGLI as far as business market
infiltration and reach. The Board of Directors of AU Small Finance Bank at its gathering hung
on 19 May 2018 affirmed issuance of 43.30 lakh completely settled up value portions of the bank
and issuance of 1.01 crore convertible warrants conveying an alternative to buy in to a
comparable number of value shares on particular premise to Camas Investments Pte Ltd. a
roundabout completely possessed auxiliary of Temasek Holdings (Private) Limited at absolute
membership measure of Rs 1000 crore. The whole thought payable for the issuance of value
shares will get payable prior to the date of designation of value shares.

A sum comparable to in any event 25% of the membership thought payable towards convertible
warrants will get payable at the very latest the date of portion of the convertible warrants and the
equilibrium 75% of the membership thought payable towards convertible warrants will be paid at
the hour of activity of the convertible warrants by Camas Investments Pte. Ltd. Under the special
apportioning the issue cost of value shares is Rs 692.77 per share and the issue cost of the
convertible warrant is Rs 692.77 per convertible warrant. Camas Investments will be qualified
for practice any or the entirety of the convertible warrants in one or numerous tranches inside
year and a half from the date of portion of convertible warrants. On 30 May 2018 AU Small
Finance Bank declared that it has been given Certificate of Registration under Securities
Exchange Board of India (Bankers to an issue) Regulations 1994 by Securities Exchange Board
of India.

➢ UJJIVAN FINANCE BANK

Ujjivan Small Finance Bank (USFB) Limited is among the main small finance banks in the
country. Founded by Samit Ghosh, who was the Managing Director and CEO, till 2017 until
he accepted a subsidiary equivalent role with the bank. As a mass market bank, it stays
resolved to serve the unserved and underserved portions through financial and advanced
consideration. We are presently a one-stop objective for financial services and offer
customized customer experience to our wide customer base.

With innovation as a key empowering agent, Ujjivan Small Finance Bank keeps on
extending its range and improves customer experience. The fortified computerized interfaces,
across areas and dialects has engaged our customers to look for convenient and simple
admittance to finance; consistently. This has additionally empowered the Bank to develop its
customer associate across assorted areas. As a 'Capable Bank' we stay put resources into

16
 making a manageable social effect through local area advancement and financial proficiency
activities. Ujjivan Financial Services Limited (UFSL) initiated tasks as a NBFC in 2005, with
the mission to give a full scope of financial services to the 'monetarily dynamic poor' who
were not enough served by financial organizations. On the receipt of License from RBI,
UFSL set up Ujjivan Small Finance Bank (USFB) and USFB started its Banking activities
from February 1, 2017. We are a 'planned bank' remembered for the Second Schedule to the
Reserve Bank of India Act, 1934 and a recorded Entity. Our IPO in 2019 was oversubscribed
multiple times, and it was broadly viewed as the best IPO over the most recent four years
across the banking and financial services area.

The Bank has a Pan-India presence, with over 56.6 lakh customers, 575+ banking touch
points across 244 locale, 24 states and Union Territories - as of December 31, 2020. Our
advantageous elective channels and computerized impression across web banking, versatile
application, tablet-based start and telephone banking among others, give 24x7 admittance to
full services of the bank. Currently, Nitin Chugh is the Managing director and CEO of the
bank.

1.4 JUSTIFICATION OF THE STUDY

The significance of the study rises out of the way that it tends to a significant subject that
helps banks oversee settling on significant choices at giving various kinds of advances,
since the financing and credit movement of the banks is considered of the principle
exercises, which should be founded on right data.

The research aims at obtaining the financial analysis of small finance banks of India by
using the four years financial data provided by the banks. For this various types of ratios
are used to study and to analyse the bank’s performance.

17
 CHAPTER – 2

REVIEW OF LITERATURE

2.1 - INTERNATIONAL REVIEWS

2.2 – NATIONAL REVIEWS

18
 CHAPTER- 3

REVIEW OF LITERATURE

2.1 INTERNATION REVIEWS:

(SLOVAK UNIVERSITY OF TECHNOLOGY in Bratislava, 2016)

The accomplishment of each business endeavor is straightforwardly identified with the
abilities of business the executives. The business undertaking can, thus, make varieties of
how to move toward the new mind-boggling and changing circumstances of
accomplishment on the lookout. In this way, chiefs are attempting during negative
occasions to change their administration approach, to guarantee long-term and stable
running of the business venture.

(Alamry, 2020) Financial analysis has emerged since the start of the financial capacity as
a free capacity and as different capacities in the firm and has emerged explicitly in 1900
when field examines were led utilizing the analysis in the examination of the financial
situation of the ventures. This capacity of financial analysis was in the United States of
America in 1900, when an examination was led on 981 organizations using seven
financial proportions to examine the situation with these organizations.

(McLeay, 2011) International examination of financial statement data still requires a

decent comprehension of the manner by which legal frameworks, protections laws
furthermore, proprietorship constructions can make impetuses that impact the supervisors
of firms in the manner they draw up their financial statements, and lead to contracting
and checking interest for valid bookkeeping data.

(Junkus, 1982) Financial analysis has been utilized broadly in the analysis of such
issues as the forecast of firm disappointment, bond ratings, stock rates of return, just as in
consolidation study and in beta estimating. As well as introducing an overall outline of
the meaning of financial what's more, working data in financial analysis and arranging,
the five papers in this part look at explicit uses of bookkeeping data in financial
administration.

(Calzon, 2021)Financial analysis and announcing are one of the bedrock of current
business. Financial analysis and revealing offer a degree of knowledge that assists
organizations with staying consistent while smoothing out their pay or user-driven
activities in all cases.

19
Using financial information with the assistance of online information analysis permits
one to not just offer fundamental data both inside and remotely yet in addition influence
measurements or bits of knowledge to make huge upgrades to the very territory that
permits the business to stream.

(Wen, 2017) The research occurrence King Long Motor in comprehension the
fundamental hypothesis based on monetary administration, to take a blend of hypothesis
and information analysis strategies, joined with a proportion of profitability related
pointers of King Long Engine organization's profitability do a particular analysis to
distinguish factors compelling the profitability of King long organization exists and the
inspiration to improve profitability, which made proposals to improve the profitability of
King long vehicle organization to advance the organization's future can be the better and
quicker turn of events.

(Billah, 2015) Liquidity is a significant monetary marker that actions whether the
organization has the capacity to meet its short-term liabilities (or not) without bringing
about unfortunate losses. Because of the insufficient utilization of resources, liquidity
hazard may emerge which is clearly a most difficult danger contrasted with other
monetary dangers.

(Ibrahim, 2020)Liquidity is a measure of great importance in the study of banking.

Arguably one of the most important mechanisms through which banks can repay their
debts, it is thus an important data point when assessing the financial health of financial
and banking institutions that operate within a given market.
(Feenstra, 2000)The rate of return on invested capital is a focal idea in financial
investigation. The motivation behind ascertaining the rate of return on interest overall is
to quantify the financial exhibition, to survey the attractive quality of an undertaking and
to settle on choices on the valuation of firms. Financial explanation clients utilize the
bookkeeping rate of return (ARR) instead of the economic rate of return (IRR) to survey
the exhibition of organizations and public-area ventures, to assess capital speculation
projects, and to cost financial cases like offers. Since ARR measures depend on
distributed bookkeeping explanations, there has been a long and in some cases warmed
discussion regarding whether such measures have any economic importance.

(Craig W. Hoden, 2014)The liquidity measurement writing has set up standard

proportions of liquidity that apply to general classes of market microstructure data.
Particular proportions of liquidity have been created to manage data constraints in
explicit business sectors, to give intermediaries from the data, and to survey institutional
exchanging programs. The overall liquidity writing has set up nearby cross-sectional
examples, worldwide cross-sectional examples, and time-arrangement designs.

20
2.2 - NATIONAL REVIEWS:

(pahwa, 2018)The achievement of financial inclusion profoundly relies upon financial

proficiency. The help of small finance banks can assist Government with getting sorted
out workshops to financially instruct individuals. As a financial mediator, the small bank
can bring the immaculate sector of the economy in the ambit of a formal financial
framework. It is a success - win circumstance for both the partners for banks. It sets out
new open doors to extend its activities and develop its image esteem in the unserved
sector and target specialty sector, then again, Government is additionally ready to execute
its arrangements effectively.

(N, 2018) Small finance bank assumes a fundamental part in economic development.
They should focus on building up more small monetary banks in provincial zones as it
would upgrade the exhibition of MSME sector. Individuals in rustic territories can benefit
from fundamental financial offices like advances, internet banking, stores and so on
without intricacy. Small Finance Bank plays an essential job to give help to under and
unserved group all together to upgrade their financial climate of a MSME sector.

(Jagwani, 2019) Small Finance Banks means to give essential banking and financial
services to unbanked and impeded segment of the populace. They should zero in on
setting up additional bank offices in rustic regions. In light of Small Finance Banks now
individuals in rustic territories can without much of a stretch benefit the fundamental
offices like credits, stores, and internet banking. Small Finance Bank plays a critical part
to give help to under and unserved group to upgrade their financial climate. Small
Finance Bank will have a fundamental part in financial turn of events and will give
tremendous help to the Indian financial areas.

(podile, 2020) The term Financial Analysis is made out of each investigation and mastery
of operational efficiency and money related situation of the organization. Different
strategies and methods are completed to examine the relationship between different
announcements. The Financial decrees will supply the appropriate and solid real factors
inside and external customers like dealers, owners coming about because of association,
talented chiefs, leasers and government, etc are the customers of those components who
are in some other case alluded to as friends of a forte unit.

(Palamalai Srinivasan, 2017)The study shows that the financial performance of private
sector banks is moderately better compared to the public area banks all through the study
period. Additionally, the study inspects the effect of liquidity, solvency, and proficiency

21
on the benefit of the chose Indian business banks by utilizing the board information
assessments, viz. the Fixed Effect and Random Effect mode.

(P.VOHRA, 2015) Banking sector's financial performance shows generally speaking

construction of financial arrangement of any economy and it put an effect on the
performance of the economy. Normally the development of banks fundamentally relies
upon its ordinary business administrations like stores and advances. If there should arise
an occurrence of similar examination consistently factors like development, benefit and
level of non-performing assets (NPAs) are utilized to look at the performance of the
banks.

(Singh, 2015) Profitability is the capacity of a business to procure profit for its
proprietors. The target of this investigation was generally speaking profitability analysis
of various private area banks in India dependent on the exhibition of profitability
proportion like revenue spread, net profit margin, return on long term funds, return on net
worth, return on resources, and changed money margin. Profitability is an action of
productivity and controls it shows the proficiency or adequacy with which the activities
of the business are conveyed on. Profitability proportions give distinctive valuable bits of
knowledge into the monetary wellbeing and execution of an organization.

(Balaji, 2015) The examination of the financial performance of the organization has
uncovered the financial strength, what's more, the shortcoming of the organization. The
examination shows that the benefit is diminished somewhat recently due to increments of
the costs and the organization should take viable choices at the opportune time in order to
correct the shortcoming and it will prompt the effective working of the business.

(Dr.P.Ganapathi) A financial statement examination that recognizes leverage that

emerges in financing exercises from the leverage that emerges in tasks. The examination
yields two utilizing conditions, one for acquiring to account activities and one for
acquiring in the course of activities.

(Khan, 2018) Small Finance Banks is a kind of specialty bank in India that can give
fundamental financial help of acknowledgment of deposits and lending. The point behind
setting up such banks is to give monetary consideration to segments of the general public
not being served by the conventional banks, like small specialty units, small furthermore,
minor ranchers, miniature and small enterprises, and sloppy areas.

22
 CHAPTER – 3

RESEARCH METHODOLOGY

3.1 OBJECTIVES OF THE STUDY

3.2 SCOPE OF STUDY

3.3 LIMITATION OF STUDY

23
 CHAPTER – 3

RESEARCH METHODOLOGY

3.1 OBJECTIVES OF STUDY

1. To study and analyse the financial performance of AU &Ujjivan Small Finance Banks.

2. To compare and interpret the financial performance of AU &Ujjivan Small Finance

Bank.

3.2 RESEARCH HYPOTHESIS

H01 = There is no difference between the financial analysis of Au bank and Ujjivan bank.

3.3 SCOPE OF STUDY

`

The study entitled “Financial analysis of small finance banks with respect to AU and UJJIVAN
small finance bank” is to analyse the financial performance of Au and Ujjivan bank on the basis
of their last 2 years data. The study is based on liquidity analysis and profitability
analysis.Financial Analysis suggests unequivocally even to the amateurs in the contributing
space about the current position of the association with respect to their capacity to pay short term
debts and liabilities in the organization and the current ratios and Quick Ratios can effectively
exhibit this by breaking down the past patterns in their resources and liabilities.

The reason for financial proclamation analysis is to assess the past, current, and future execution
and financial position of the organization to make the venture, credit, and other monetary
choices.

The main objective of the study is to analyse the financial performance of Au and Ujjivan banks.
The research design is a quantitative and descriptive research design. For this, secondary data is
mainly collected from various websites, articles, and journals. The author has collected the four
year data i.e. from 2016 -17 to 2019-2020 to study the financial analysis of the banks.

24
 3.4 LIMITATION OF THE STUDY

1. This study does not contemplate the price level changes.

2. The whole study is done on the basis of secondary data.

3. The given data has been taken into account from the various journals articles and
company’s balance and may fluctuate depending upon the article or journal.

4. Every company has their own strategy for analyzing their financial performance. In this
study it is assumed that both the companies use the same tool to analyse their financial
performance.

5. The various strategies for calculation additionally impact the utility of accounting ratios.
The various ideas utilized for deciding numerator and denominator in a specific
accounting proportion won't help in making dependable inferences even in
indistinguishable circumstances.

25
 CHAPTER -4

DATA INTERPRETATION AND ANALYSIS

4.1 CURRENT RATIO

4.2 TOTAL DEBT TO EQUITY

4.3 NET PROFIT MARGIN

4.4 OPERATING PROFIT MARGIN

4.5 RETURN ON ASSETS

4.6 RETURNS ON EQUITY

4.7 NET INTEREST MARGIN

4.8 EARNING PER SHARE RATIO

4.9 NON PERFORMING ASSETS RATIO

4.10 PROPRIETOR’S RATIO

26
 CHAPTER -4

DATA INTERPRETATION AND ANALYSIS

This study has been conducted with the help for four years of data of Au and Ujjivan small
finance bank. To represent the data, the author has used various ratios under liquidity, leverage,
profitability and market value.

1. CURRENT RATIO

The current ratio is a liquidity ratio that measures an organization's capacity to pay transient
commitments or those due within one year. It tells financial backers and investigators how an
organization can augment the current resources on its accounting report to fulfill its current debt
and different payables.

FORMULA = CURRENT ASSETS

CURRENT LIABILITIES

YEAR AU BANK UJJIVAN BANK

2017 0.00 0.75
2018 0.00 1.05
2019 0.39 0.75
2020 0.37 0.66
TABLE- 1.1

27
 CURRENT RATIO

100%
90%
80%
70%
60% UJJIVAN
50% AU
40%
30%
20%
10%
0%
2017 2018 2019 2020

FIG- 1.1

INTERPRETATION:

Current ratio explains the relationship between current assets and current liability. The
mean of AU bank stood at 0.19 while Ujjivan bank’s stood at 0.78. Standard deviation of
AU bank is 0.22 and Ujjivan bank’s stood at 0.19. Coefficient of variance of AU bank
was 1.15 whereas, Ujjivan bank was 0.23.

A higher ratio current ratio is considered more favorable than lower ratio. The ideal ratio
is considered between1.2 to 2. From the table 1.1, we can see that the percentage increase
and decrease of various years starting from 2017 to 2020 of Au and Ujjivan bank’s
respectively. Au bank fails to maintain the ideal ratio, whereas in 2018 Ujjivan bank
maintained the ratio but failed in the next two years.

Therefore, Ujjivan bank was able to make easy payments for their current debt for the
year ending on 31st march 2018 than Au bank. Figure 1.1 depicts the clear representation
of both the banks with respect to their current ratio.

28
2. TOTAL DEBT TO EQUITY

The debt-equity ratio is a proportion of the overall commitment of the leasers and
investors or proprietors in the capital utilized in business. Basically expressed, ratio of the
absolute long term debt and equity capital in the business is known as the debt-equity
ratio.

FORMULA:
TOTAL LIABILITIES
TOTAL SHAREHOLDERS EQUITY

YEAR AU UJJIVAN
2017 0.00 4.51
2018 0.00 5.27
2019 0.06 7.13
2020 0.04 4.97

TABLE 1.2

29
 TOTAL DEBT TO EQUITY RATIO
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
2017 2018 2019 2020

AU UJJIVAN

FIG 1.2

INTERPRETATION:

Lower total debt to equity ratio is considered as favorable for the company as it indicates less
risk for the company and it the ideal ratio is less than 1. The 0.025 while Ujjivan bank’s stood at
5.47. The standard deviation for Au bank was 0.03 whereas Ujjivan bank’s was 1.15. Coefficient
of variance of Au bank was1.2 and Ujjivan bank’s was 0.21.

The table 1.2 demonstrates that Au holds a great ideal ratio than Ujjivan bank as it relies less on
the external liabilities whereas, Ujjivan bank is more reliable on external lenders. In 2019 it
shows the maximum increase in the ratio as compared to other three years.

Therefore AU bank has less risk in dealing with debts. Figure 1.2 depicts the clear
representation of both the banks with respect to their total debt to equity ratio.

30
3. NET PROFIT MARGIN

The net profit margin, or just net margin, gauges how much net pay or profit is created as
a level of revenue. It is the proportion of net profits to revenues for an organization or
business section.

Net profit margin is ordinarily communicated as a rate yet can likewise be addressed in
decimal structure. The net profit margin outlines the amount of every dollar in revenue
gathered by an organization converts into profit.

FORMULA:
NET PROFIT * 100
REVENUE

YEAR AU UJJIVAN
2017 64.21 0.01
2018 16.52 0.46
2019 12.94 10.87
2020 15.74 12.94

TABLE 1.3

31
 NET PROFIT MARGIN
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
2017 2018 2019 2020

AU UJJIVAN

FIG -1.3

INTERPRETATION:

A high net profit margin is always considered good for the company. It means that the company
can effectively control its costs and provide goods and services at a price that is actually higher
than its costs.

Mean for the net profit margin of Au bank stood at 27.35 while Ujjivan bank’s stood at 6.07. The
standard deviation of Au bank was 24.61and Ujjivan bank’s was 6.79. Coefficient of variance for
Au bank was 89.94, while Ujjivan bank had 111.18.

Table 1.2 demonstrates the various net profit margin of both the banks. It clearly says that Au
holds a high ratio more than 20% in its first year and maintains average for the next three years.
Ujjivan bank holds a lower percentage in 2017 and 2018 but maintains an average in next two
years.

Therefore Au bank could easily have efficient management and low costs with strong pricing
strategies for the year 2017 and less in next three years but Ujjivan bank can fail to have a
effective cost structure with poor pricing strategies for the first two years and would have
covered up in next two years. Figure 1.2 represents the data of both the bank and their percentage
with respect to their net profit margin.

32
4. OPERATING PROFIT MARGIN

Operating profit estimates how much profit an organization earns anything of deals
subsequent to paying for variable costs of production, like wages and crude materials,
however prior to making good on premium or assessment. It is determined by partitioning
an organization's operating income by its net deals. Higher proportions are by and large
better; outlining the organization is productive in its tasks and is acceptable at
transforming deals into profits.

FORMULA:
OPERATING INCOME *100
REVENUE

YEAR AU UJJIVAN
2017 0.93 -6.28
2018 -5.43 -7.12
2019 -2.71 -0.36
2020 -0.73 1.02
TABLE 1.4

33
 OPERATING PROFIT MARGIN
100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%
2017 2018 2019 2020

AU UJJIVAN

FIG -1.4

INTERPRETATION:

The mean of operating profit margin ratio for Au bank stood at -1.98 whereas Ujjivan bank’s
stood at -3.18.The standard deviation of Au bank was 2.73 and Ujjivan bank was 4.11.
Coefficient of variance were stood at -1.37 (Au) and -1.29 (Ujjivan) respectively.

A less in operating margin shows the increasing cost with respect to the profit. This shows that
the bank is not able to achieve a good amount of profit due to their high costs. The table 1.4
depicts that in the year 2017, Au bank had the highest of operating margin profit as compared to
Ujjivan bank, and had an uneven fall on the preceding three years. Whereas Ujjivan bank had an
increasing margin till 2020.

Therefore, Au bank was able to have a huge profit in 2017 but failed to continue for the next
three years. Ujjivan bank was able to maintain their cost and increase their profit on 31st march
2020.The figure 1.4 shows the representation of operating profit from 2017 to 2020 of Au and
Ujjivan bank respectively.

34
 5. RETURN ON ASSETS

Return on assets (ROA) is an indicator of how profitable an organization is comparative

with its complete assets. ROA gives a chief, investor, or examiner a thought concerning
how productive an organization's administration is at utilizing its assets to create income.
ROA is shown as a rate; the higher the ROA the better.

FORMULA:

NET INCOME

TOTAL ASSETS

YEAR AU UJJIVAN
2017 8.40 0.00
2018 1.55 0.07
2019 1.17 1.44
2020 1.60 1.90

TABLE 1.5

35
 RETURN ON ASSETS
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
2017 2018 2019 2020

AU UJJIVAN

FIG -1.5

INTERPRETATION:

The mean for the returns on asset ratio of Au bank stood at 3.18 and Ujjivan bank’s stood
at 0.85. The standard deviation foe Au bank was 3.48 whereas for Ujjivan bank was 0.96.
The coefficient of variance for au bank was 1.09 and Ujjivan bank’s was 1.12.

It is said that the ratio above 5% is generally considered as the good and over 20% as
excellent. The table 1.5 depicts that in 2017 Au bank had the most increasing percentage
of returns on asset. For the next three years the ratios were subsequently low as compared
to 2017. There was an unusual fall and rise in the ratio. Ujjivan bank did not have any
increase in their returns on asset for the first two years. Later on there was a subsequent
increase in their preceding two years.

Therefore Au bank was able to have a higher ROA, which results in more asset efficiency
in 2017 whereas Ujjivan bank was unable to have any efficiency over their assets for first
two year and has an average for next preceding years. Figure 1.5 explains the ratios of
various years of the banks.

36
6. RETURN ON EQUITY

Return on equity (ROE) is a proportion of financial performance determined by isolating

overall gain by investors' equity. Since investors' equity is equivalent to an organization's
resources less its debt, ROE is considered the return on net resources. ROE is considered
a proportion of the productivity of a corporation in relation to investors' equity.

FORMULA:
NET INCOME
AVERAGE SHAREHOLDERS EQUITY

YEAR AU UJJIVAN
2017 41.35 0.00
2018 12.80 0.47
2019 12.07 12.30
2020 15.41 11.71

TABLE 1.6

37
 RETURN ON EQUITY
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
2017 2018 2019 2020

AU UJJIVAN

FIG-1.6

INTERPRETATION:

The mean for the returns on equity ratio of Au bank stood 20.4 while Ujjivan bank’s stood at
6.12. The standard deviation of Au bank stands at 14.03 while, Ujjivan bank’s stands at 6.80
with respect to rate of equity. The coefficient of variance stood at 0.68 (Au) and 1.11 (Ujjivan)
respectively. The percentages in between 15 to 20 are considered as a good return on equity.

From the table 1.6, it is clear that Au bank have the highest ratio in 2017 while, Ujjivan bank
fails to have any ratio. From 2018 to 19 there was a subsequent decline in the percentage of Au
whereas there was some incline in the percentage of Ujjivan bank. In the year 2020 Au bank was
able to maintain more than 15% but Ujjivan bank was facing a decline.

Therefore, Au bank was able to have higher ROE in the year 2017 and 2020 whereas, Ujjivan
bank was having only average ROE which results in less profit generating capacity of the bank
and may result in adding to more capital. Figure 1.6 shows the representation of both the banks
with respect to their return on equity.

38
 7. NET INTEREST MARGIN

Net interest margin (NIM) is an estimation looking at the net interest payments of a financial
firm creates from credit items like advances and home loans, with the active interest it pays
holders of savings accounts and certificates of deposits (CDs).

FORMULA= IR – IE

AVERAGE EARNING ASSETS

WHERE, IR = INVESTMENT RETURN, IE = INTEREST EXPENSES

YEAR AU UJJIVAN
2017 8.01 1.22
2018 4.99 9.08
2019 4.11 8.05
2020 4.52 8.87
TABLE 1.7

39
 NET INTEREST MARGIN
16

14

12

10

0
2017 2018 2019 2020

AU UJJIVAN

FIG 1.7

INTERPRETATION:

The mean for the net interest margin of Au bank stood at 5.40 whereas Ujjivan bank’s stood at
6.80.The standard deviation of Au bank was 1.77 and Ujjivan bank was 3.74. Coefficient of
variance of Au bank stood at 0.32 and Ujjivan bank’s stood at 0.55.

A negative net interest margin shows the inefficiency investment whereas a positive margin
shows the increasing efficiency of banks profitability. The table 1.7 depicts the ratios of various
years. In 2017 Au bank had the highest ratio of 8.01 while Ujjivan had 9.08 in the year 2018.
There was a subsequent fluctuation from 2018 to 2020 in case of Au bank. While Ujjivan has a
low ratio in 2017, 19 and 20.

Therefore, both the banks have a positive net interest margin and hence they can increase their
profitability. Figure 1.7 demonstrates the graphical representation of Au bank and Ujjivan bank
with respect to their net interest margin.

40
8. EARNING PER SHARE RATIO

Earnings per share (EPS) are determined as an organization's benefit separated by the
outstanding shares of its basic stock. The subsequent number fills in as a pointer of an
organization's profitability. It is regular for an organization to report EPS that is adapted
to phenomenal things and potential share weakening.

FORMULA: TOTAL EARNINGS

OUTSTANDING EARNINGS

YEAR AU UJJIVAN
2017 30.18 17.75
2018 10.26 0.08
2019 13.26 1.78
2020 22.78 0.73

TABLE 1.8

41
 EARNING PER SHARE
60

50

40

30

20

10

0
2017 2018 2019 2020

AU UJJIVAN

FIG 1.8

INTERPRETATION:

The higher earnings per share shows that the bank is more likely to be profitable. The
mean for the EPS of Au bank stood at 19.09 while Ujjivan banks stood at 5.08. The
standard deviation of Au bank was 9.12, while Ujjivan bank’s was 8.47. The coefficient
of variance for Au bank stood at 0.47 and Ujjivan bank stood at 1.66.

From the table 1.8, it is clear that Au bank was having the maximum EPS ratio as
compared to Ujjivan. In 2017, Au bank had the maximum rate of EPS as compared to the
preceding three years. On the same year Ujjivan bank had their highest EPS ratio as
compared to the preceding years.

Therefore Au bank is more likely to have profits and is capable to generate dividend for
their investors as compared to Ujjivan bank. The figure 1.8 shows the graphical
representation of EPS of both the banks with respect to the four years.

42
9. NON PERFORMING ASSET RATIO

A nonperforming asset (NPA) alludes to an arrangement for advances or advances in

default or unpaid debts. An advance is falling behind financially when the head or
interest installments are late or missed. Credit is in default when the moneylender
believes the advance consent to be broken and the debtor can't meet his obligations.

FORMULA = GROSS NPAS - PROVISIONS

YEAR AU UJJIVAN
2017 1.2 0.0
2018 1.3 0.7
2019 1.3 0.3
2020 0.81 0.2
TABLE 1.9

43
 NON PERFORMING ASSET RATIO
2.5

1.5

0.5

0
2017 2018 2019 2020

AU UJJIVAN

FIG 1.9

INTERPRETATION:

A less NPA ratio is considered to be favorable for the bank. The mean of the NPA ratio
of Au bank stood at 1.15 and Ujjivan bank’s stood at 0.4. The standard deviation of Au
bank was 0.23 while Ujjivan bank’s was 0.26. The coefficient of variance of Au bank
stood at 0.20 and Ujjivan bank’s stood at 0.66.

From the table 1.9 we can see that Ujjivan bank has got the less NPA ratio as compared
to Au bank. Therefore Ujjivan Au bank have loans and can become non functional if it
got increased or they may result to not rendering any interest income to the bank. The
figure 1.9 shows the graphical representation of four years data on NPA with respect to
both the banks.

44
10. PROPRIETOR’S RATIO

The proprietor's ratio is utilized to assess the adequacy of the capital structure of an
organization. It is registered by isolating the investors' value by total assets.

FORMULA = PROPRIETORS FUND

TOTAL ASSETS

YEAR AU UJJIVAN
2017 100.00 77.98
2018 22.22 26.69
2019 13.16 17.60
2020 14.18 21.26
TABLE 1.10

45
 PROPRIETOR'S RATIO
200
180
160
140
120
100
80
60
40
20
0
2017 2018 2019 2020

AU UJJIVAN

FIG – 1.10

INTERPRETATION:

The ideal proprietary ratio is 0.5:1. Higher the proprietor’s ratio better will be its long
term position of the banks. The mean for the proprietor’s ratio of Au bank stood at 37.39
while Ujjivan bank’s stood at 35.88. The standard deviation of Au bank was at 41.93 and
Ujjivan bank’s was at 28.31. The coefficient of variance for Au bank was 1.12 and
Ujjivan bank was 0.78.

Table 1.10 depicts the ratios from 2017 to 2020. In the year 2017 Au bank and Ujjivan
bank had the highest ratio from all preceding years. In 2019 both had an average ratio as
compared to other years.

Therefore both the banks have got a better long term solvency position. Figure 1.10
shows the graphical representation of proprietary ratio of both the banks with respect to
the four years of their data.

46
4.2 HYPOTHESIS TESTING

In order to test the significant different in the ratios of two banks the following null
hypothesis were framed by using t-test at 5% level of significance.

H0= There is no significant difference between the financial analysis of Au bank and
Ujjivan bank. Analysis include ratios such as current ratio, total debt to equity ratio, net
profit margin, operating profit margin, return on assets, return on equity, net interest
margin, earning per share ratio, non performance assets ratio, proprietor’s ratio.

TABLE -2: FINANCIAL ANALYSIS OF AU BANK AND UJJIVAN BANK

CATEGORY VARIABLES DF ‘t’VALUE ‘p’VALUE RESULT
LIQUIDITY CURRENT 6 -4.8973098 0.00271826 SIGNIFICANT
AND RATIO
SOLVENCY
RATIOS
NON 6 4.54021406 0.00393236 SIGNIFICANT
PERFORMING
ASSETS RATIO
PROPRIETOR’S 5 0.14791654 0.88818863 NOT
RATIO SIGNIFICANT
PROFITABILTY NET PROFIT 3 1.6666242 0.19417976 NOT
RATIOS MARGIN SIGNIFICANT
OPERATING 5 0.48589301 0.64758783 NOT
PROFIT SIGNIFICANT
MARGIN
RETURN ON 3 1.28738483 0.28828851 NOT
ASSETS SIGNIFICANT
RETURN ON 4 1.83212144 0.14088026 NOT
EQUITY SIGNIFICANT
NET INTEREST 4 -0.6739306 0.53729477 NOT
MARGIN SIGNIFICANT
LEVERAGE TOTAL DEBT 3 -9.4667024 0.00249861 SIGNIFICANT
RATIO TO EQUITY
RATIO
MARKET PER EARNING PER 6 2.25042892 0.06540264 NOT
SHARE VALUE SHARE RATIO SIGNIFICANT
RATIO
*Significant at 5% level.

47
INTERPRETATION

The following test was on the basis of ten ratios collected from the banks statements. The table 2
indicates that the probability value is less than 0.05. Therefore the null hypothesis is accepted
and it is concluded that there is no significant difference in the proprietor’s ratio, net interest
margin ratio, operating profit margin ratio, net profit margin ratio, return on assets, return on
equity and earning per share ratio.

Further it also adds the probability value is less than 0.01 in current ratio, total debt to equity
ratio and non performing assets ratio. Hence the hypothesis is rejected and it is concluded that
there is a significant difference.

48
 CHAPTER – 5

RESULTS AND DISCUSSSION

1.1 MAJOR FINDING

1.2 DISCUSSIONS AND SUGGESTIONS

1.3 CONCLUTION

1.4 REFERENCE

1.5 ANNEXURE

49
 CHAPTER -5

RESULTS AND DISCUSSIONS

1 MAJOR FINDINGS

The study was conducted on the basis of ratio analysis of Au bank and Ujjivan bank. Various
ratios were used to study the difference between the financial performances of both the banks.
The following were the observations from the analysis.

▪ Au bank and Ujjivan bank has got a average current ratio in the past four years. Therefore
it would be difficult to make easy payouts for their current debts.

▪ Ujjivan bank relies more upon their external lenders to carry out their activities. There is
an unfavorable match in the bank’s leverage ratio.

▪ Both the bank are having a strong long term solvency position as they are more inclined
to have owners fund rather than debt. The banks hold the strong capacity to maintain their
liquidity ratio for the four years.

▪ Au bank has a strong profitability position as compared to Ujjivan. The bank is has an
efficient method of control costs and increasing their lending capacity.

▪ Both the banks have got an average market per share value. Their dividend generating
capacity fluctuates with respect to the years but can maintain an average amount for their
investors.

▪ Au bank has an efficient management with respect to their non performing assets. They
have a limited form of external liabilities with respect to their NPA’s.

50
2 DISCUSSIONS AND SUGGESTIONS.

▪ Both the banks can have a proper check on their short term adequacy. This would
always help them to pay off their debts easily.

▪ An investor should always analyse and study the banks financial statements
before investing.

▪ When compared to other small finance banks of the country, Au bank and Ujjivan
bank are more favorable to invest.

▪ Small finance banks can increase their EPS by lowering their marginal costs.
Issuing more new shares can cause a negative impact on their market value of
share.

▪ Small finance banks can earn more profit if they have an adequate planning on
their pricing strategies. A low pricing strategy can affect their net profit margin
which leads to inefficient management.

▪ An investor can easily choose to invest in Au and Ujjivan bank as compared to

other small finance banks.

51
3 CONCLUSION

There is tremendous neglected potential interest lying in the provincial territories and
other unbanked focuses which should be tapped. To tap this neglected interest for
financial services, it is felt that it merits investigating new kinds of foundations for
financial consideration. Nonetheless, in a nation like India where there exist separated
business sectors and buyer gatherings, the idea may be contextualized as indicated by the
requirements of the clients.

With respect to the strength of the separated banks, there is a requirement for making
harmony between long-haul maintainability and the financial incorporation objectives. It
is turning out to be progressively obvious that tending to financial prohibition will require
a comprehensive methodology with respect to the banks in making mindfulness about
financial items, instruction, and exhortation on cash the executives, obligation advising,
investment funds, and reasonable credit.

The banks would need to develop explicit techniques to extend the effort of their services
to advance financial consideration. Still, the Reserve Bank of India and the Government
of India needs to more fixate on to degree the financial services to country regions and to
require the support of mindfulness program towards guaranteeing admittance to financial
services and ideal and sufficient credit where required by weak gatherings like more
vulnerable segments and low pay bunches at a reasonable expense.

The small finance banks are intended to advance financial incorporation in India. These
banks are performing significantly well and they have great possible all over India as
financially prohibited individuals are on the loose in India. Small Finance banks
essentially advance financial consideration in India by building up practically 95% of
their branches in rural and semi-urban areas of the country and by serving all sorts of
individuals including poor also, low pay individuals of those areas. Small Finance banks
need to embrace inventive advances in their retail banking business and during the time
spent offering financial types of assistance to their clients which will fortify their
manageability.

52
 4 REFERENCES

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Balaji, D. C. (2015). A Study on Financial Performance Analysis at Neycer India Ltd.,. A Study on Financial
Performance Analysis at Neycer India Ltd., , 4.

Billah, N. M. (2015). Liquidity Analysis of Selected Public-Listed Companies. 21.

Calzon, B. (2021, march 17). The Importance Of Financial Reporting And Analysis: Your Essential Guide.

Craig W. Hoden, A. s. (2014). The Empirical Analysis of Liquidity. The Empirical Analysis of Liquidity , 102.

Dr.P.Ganapathi, M. P. (n.d.). A STUDY ON FINANCIAL STATEMENT ANALYSIS OF. A STUDY ON FINANCIAL

STATEMENT ANALYSIS OF , 7.

Feenstra, D. W. (2000). Economic and accounting rates of return. Economic and accounting rates of
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Ibrahim, M. (2020). Liquidity Analysis of UAE Banks. 6.

Jagwani, D. J. (2019). THE ROLE OF SMALL FINANCE BANK IN INDIAN ECONOMY. THE ROLE OF SMALL
FINANCE BANK IN INDIAN ECONOMY , 5.

Junkus, C.-F. L. (1982). finanancial analysis anf planing : an overview. 78.

Khan, A. A. (2018). Small Finance Banks – Challenges and. Small Finance Banks – Challenges and , 6.

McLeay, S. (2011). International financial analysis. 24.

N, A. S. (2018). AN EMPIRICAL STUDY ON SELECTED SMALL. AN EMPIRICAL STUDY ON SELECTED SMALL ,

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P.VOHRA. (2015). A Study of Financial Performance Analysis of Indian Banking Sector. A Study of
Financial Performance Analysis of Indian Banking Sector .

pahwa, B. A. (2018). Study on Role of Small Finance Banks for Achieving Financial Inclusion in India.
Study on Role of Small Finance Banks for Achieving Financial Inclusion in India , 4.

Palamalai Srinivasan, J. B. (2017). Analysis of Financial Performance of Selected. Analysis of Financial

Performance of Selected , 18.

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SLOVAK UNIVERSITY OF TECHNOLOGY in Bratislava, F. O. (2016). FINANCIAL ANALYSIS OF A SELECTED
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Wen, M. Z. (2017). Profitability analysis of KINGLONG nearly 5 years. Profitability analysis of KINGLONG
nearly 5 years , 7.

5 ANNEXTURE

BALANCE SHEET OF AU BANK WITH REFERENCE OF FOUR YEARS

DATA.

BALANCE SHEET OF AU MAR 20 MAR 19 MAR 18 MAR 17

SMALL FINANCE BANK (in
Rs. Cr.)

12 12 12 mths 12 mths
months months

EQUITIES AND LIABILITIES

SHAREHOLDER'S FUNDS

Equity Share Capital 304.12 292.36 285.70 284.25

TOTAL SHARE CAPITAL 304.12 292.36 285.70 284.25

Revaluation Reserve 0.00 0.00 0.00 0.00

Reserves and Surplus 4,020.56 2,652.59 1,977.98 1,697.19

54
Total Reserves and Surplus 4,020.56 2,652.59 1,977.98 1,697.19

TOTAL SHAREHOLDERS 4,376.81 3,162.89 2,281.18 1,987.59

FUNDS

Deposits 26,163.93 19,422.44 7,923.32 0.00

Borrowings 10,335.32 8,613.36 7,638.86 7,119.89

Other Liabilities and 1,267.01 1,424.11 989.41 673.75

Provisions

TOTAL CAPITAL AND 42,143.07 32,622.80 18,832.77 9,781.22

LIABILITIES

ASSETS

Cash and Balances with 1,049.64 811.14 492.12 13.43

Reserve Bank of India

Balances with Banks Money at 2,320.04 929.05 1,269.10 611.53

Call and Short Notice

Investments 10,668.22 7,161.67 3,050.59 2,150.31

Advances 26,992.42 22,818.73 13,312.13 6,550.94

Fixed Assets 448.00 447.03 386.09 275.84

Other Assets 664.76 455.17 322.74 179.17

TOTAL ASSETS 42,143.07 32,622.80 18,832.77 9,781.22

OTHER ADDITIONAL
INFORMATION

55
Number of Branches 406.00 322.00 306.00 284.00

Number of Employees 17,112.00 12,623.00 11,151.00 8,515.00

Capital Adequacy Ratios (%) 21.99 19.31 19.31 23.04

KEY PERFORMANCE
INDICATORS

Tier 1 (%) 18.36 15.96 18.42 21.46

Tier 2 (%) 3.63 3.35 0.89 1.58

ASSETS QUALITY

Gross NPA 457.78 470.14 269.73 124.51

Gross NPA (%) 2.00 2.00 2.00 2.00

Net NPA 217.30 294.50 169.33 80.46

Net NPA (%) 0.81 1.29 1.27 1.22

Net NPA To Advances (%) 1.00 1.00 1.00 1.00

CONTINGENT LIABILITIES,
COMMITMENTS

Bills for Collection 0.00 0.00 0.00 0.00

Contingent Liabilities 1,360.05 502.14 0.00 0.00

56
BALANCE SHEET OF UJJIVAN BANK WITH REFERENCE TO THE FOURS YEARS
DATA.

BALANCE SHEET OF UJJIVAN MAR 20 MAR 19 MAR 18 MAR 17

SMALL FINANCE BANK (in Rs.
Cr.)

12months 12 months 12 months 9 months

EQUITIES AND LIABILITIES

SHAREHOLDER'S FUNDS

Equity Share Capital 1,728.22 1,440.04 1,440.04 1,440.04

TOTAL SHARE CAPITAL 1,928.22 1,640.04 1,640.04 1,640.04

Revaluation Reserve 0.00 0.00 0.00 0.00

Reserves and Surplus 1,238.08 179.59 6.90 0.04

Total Reserves and Surplus 1,238.08 179.59 6.90 0.04

TOTAL SHAREHOLDERS 3,187.73 1,819.63 1,646.93 1,640.07

FUNDS

Deposits 10,780.48 7,379.44 3,772.52 206.41

Borrowings 3,953.27 4,166.09 3,852.85 6,291.40

Other Liabilities and Provisions 489.76 377.05 200.88 297.71

TOTAL CAPITAL AND 18,411.23 13,742.21 9,473.18 8,435.60

LIABILITIES

ASSETS

57
Cash and Balances with Reserve 1,224.87 446.46 249.63 260.93
Bank of India

Balances with Banks Money at 118.42 648.00 245.20 501.89

Call and Short Notice

Investments 2,396.14 1,526.62 1,232.48 1,446.68

Advances 14,043.64 10,552.45 7,336.21 5,861.04

Fixed Assets 300.48 284.45 198.34 139.77

Other Assets 327.68 284.23 211.31 225.29

TOTAL ASSETS 18,411.23 13,742.21 9,473.18 8,435.60

OTHER ADDITIONAL
INFORMATION

Number of Branches 575.00 474.00 187.00 457.00

Number of Employees 17,841.00 14,752.00 11,242.00 10,167.00

Capital Adequacy Ratios (%) 28.81 18.94 23.00 18.00

KEY PERFORMANCE
INDICATORS

Tier 1 (%) 28.01 18.39 22.00 17.00

Tier 2 (%) 0.80 0.55 1.00 1.00

ASSETS QUALITY

Gross NPA 137.14 97.85 275.92 16.40

Gross NPA (%) 1.00 1.00 4.00 0.00

58
Net NPA 27.49 27.55 224.99 14.60

Net NPA (%) 0.20 0.26 0.00 0.00

Net NPA To Advances (%) 0.00 0.00 1.00 0.00

CONTINGENT LIABILITIES,
COMMITMENTS

Bills for Collection 0.00 0.00 0.00 0.00

Contingent Liabilities 20.73 30.90 19.51 28.34

59