Presented by

GROUP- 8
GAUTAMI V G 2015PGP131
NEHA AGARWAL 2015PGP221
SIMMY S TOPPO 2015PGP360
BUSINESS STRATEGY KEY MILESTONES
• Largest Private player in the Indian Banking
•Branch network – CAGR 26% Industry
Continue to build •ATM network-28% • Leveraging social network platforms
and strengthen •RETAIL DEPOSIT Fees CAGR 40%
• Enhanced ATM facility
Retail Banking •Life insurance distribution tie-up with
franchise Max New York Life Insurance • “My savings rewards” program
•Diversification of product mix • “Money2india” mobile app
• Branch network of 2402 ( largest in private
sector) 12922 ATMs across India
• Loan Portfolio CAGR 25%
• 80% OF SME advance have a
Build a full service rating of at least SME3 Mobile
offering to SME • Growing segment banking
• Nearly one third of SME
customers avail Forex products
Call centre branches
Leverage
leadership Customer
position in • Axis Academic Interface Program touch
infrastructure • ISB Women leadership program points
linked financial
services
Point of sale ATMs

• End to end Infrastructure

Capture end to • Credit
Internet
end opportunities • Syndication banking
in Payments • Investment banking
across segments • Treasury
 BALANCE SHEET ANALYSIS
Total equity
• Total equity has remained almost constant 12.00%
10.00%
from 2014 8.00%

• The long term debt of the firm has increased 6.00%

4.00%
drastically 2.00%
0.00%
• The total deposits as a percentage of assets is 2012 2013 2014 2015 2016
decreasing from year to year
Long term debt
20.00%

15.00%

10.00%

5.00%

0.00%
2012 2013 2014 2015 2016

Total deposits
80.00%
75.00%
70.00%
65.00%
60.00%
2012 2013 2014 2015 2016
 INCOME STATEMENT ANALYSIS
AXIS BANK
39.00%
Net income as a percentage of revenue
• Net income has decreased over 37.00%

the current financial year 35.00%

• There has been an increase in 33.00%

net income till 2015 and it 31.00%

suddenly dropped in 2016 29.00%

• One of the reason for the 27.00%

sudden decrease in net income can 25.00%

2012 2013 2014 2015 2016
be attributed to the increase in lost
loan during the financial year 2016 15.00%

10.00%

5.00%

0.00%
2012 2013 2014 2015 2016
Lost loan as a percentage of revenue
 PROFITABILITY ANALYSIS
ROA
4.0%
• Axis Bank ROA stands at 2.5% in
the year 2016 which is higher than 3.0%
the industry median of 1.6%.
AXIS
• Axis Bank ROA 2.5% is higher than 2.0%
ICICI Bank 1.8% but lower than ICICI
HDFC Bank at 3.7% 1.0% HDFC

0.0%
20122013201420152016

• ROE of Axis Bank stands at 25.3% ROE

in the year 2016 which is higher 40.0%
than the industry median of
15.6% 30.0%
• Axis Bank ROE is higher than that AXIS
20.0%
of ICICI Bank but lower than HDFC ICICI
10.0% HDFC
0.0%
2012 2013 2014 2015 2016
 GROSS PROFIT MARGIN
40
• CAGR is 27.36% for Axis
Bank 1.34% for ICICI and 20
25.63% for HDFC Bank AXIS
0
• Gross Profit Margin for Axis
2012 2013 2014 2015 2016 ICICI
Bank is comparatively -20
stable as compared to ICICI HDFC
Bank -40
-60

NET PROFIT MARGIN

• CAGR of Axis Bank 14.62%, 25.0%
ICICI 5.9%, HDFC 19.53%
• Net Profit margin of Axis 20.0%
Bank is stable as compared 15.0% AXIS
to ICICI and HDFC and is
higher than the industry 10.0% ICICI
median HDFC
5.0%
0.0%
2012 2013 2014 2015 2016
 ANALYSIS OF PROFITABILITY

• The efficiency ratio of axis bank is 38.5 %, industry median stands at 60.3%. A
lower percentage means low expenses and high income
• Loan growth for axis bank is 20.5% in 2016, higher than the industry median
11.6% and the Loan Growth of ICICI Bank.
• Axis Bank has a 14% CAGR in Net Income lower than 20% of HDFC but higher
than that 5.9% of ICICI Bank
• Deposit Growth has also been consistently higher for Axis Bank at 11% as
compared tot the industry median at 10%
• Compared to other Banks, Axis Banks ranks second in terms of Net Profit
Margin
 OVERALL RISK ANALYSIS:

• ICICI is holding highest risk appetite as both Gross NPA and Net NPA to Gross
Advances and Net advances respectively are highest. Whereas Axis bank is in
between ICICI and HDFC.
• Tier 1 ratio and CAR indicates the capital adequacy of the firm . Among the above
three banks, ICICI Bank has highest tier 1 and CAR ratio whereas Axis bank is in
between HDFC and ICICI.
• Market risk, operational risk, credit risk, lending to sensitive sectors are highest in
case of ICICI Bank as compared to axis and HDFC.
• Hence there is substantial risk associated with ICICI Bank however at the same
times it appears that ICICI Bank also has high CAR (Capital Adequacy Ratio). Axis
Bank is also building up its Capital Adequacy ratio and Tier I ratio.
 GROWTH AND SUSTAINABLE EARNINGS
ANALYSIS
• The 5 year growth rate of net interest income of Growth rate of Net profit after tax
Axis bank is 83% whereas its competitors ICIICI 35.00
and HDFC have growth rate of 98% and 114% 30.00

respectively. 25.00
20.00
• However 5 year growth rate of Net profit after 15.00 axis bank
10.00
tax of Axis bank is 94% whereas its competitors 5.00
hdfc

ICIICI and HDFC have growth rate of 50% and 0.00 icici
-5.00 2012 2013 2014 2015 2016
138% respectively. -10.00
• 5 year growth rate of Cash flow from operating -15.00
-20.00
activity of Axis bank is -63% whereas its
competitors ICIICI and HDFC have growth rate of
247% and 91% respectively. Cash flow from operating activity

• Hence we conclude that earnings of axis bank 300,000

are not sustainable in comparison to its 200,000

competitors. 100,000
axis bank
hdfc
• Axis bank ‘s Other expenses and non- interest 0
icici
2012 2013 2014 2015 2016
expenses are also lower in comparison to -100,000

competitors. -200,000
 QUALITY OF EARNINGS

• Axis bank assumes the useful lives in the following fixed assets
 Premises - 61 years as compared to 60 years of HDFC Bank
 Locker cabinets/cash safe room - 16 years as compared to 10 years of
HDFC Bank
• As a result the depreciation is higher and profit is undervalued by 36.9 million
 ECONOMIC VALUE ADDED
2 0 16 2 0 15 2 0 14 2 0 13 2 0 12
To t a l D e b t 9 ,9 2 ,2 6 4 7,9 7,58 3 5,0 2 ,9 0 9 4 ,3 9 ,511 3 ,71,570
To t a l Eq uit y 5,3 1,6 4 9 4 ,4 6 ,76 5 3 ,8 2 ,2 0 5 3 ,3 1,0 79 2 ,2 8 ,0 8 5
To t a l c a p it a l e mp lo y e d 15,2 3 ,9 13 12 ,4 4 ,3 4 8 8 ,8 5,114 7,70 ,59 0 5,9 9 ,6 55
w e ig ht e d a v e ra g e c o s t o f c a p it a l 0 .2 10 7 0 .2 10 7 0 .2 10 7 0 .2 10 7 0 .2 10 7
c o s t o f c a p it a l e mp lo y e d 3 2 10 8 8 .4 6 9 1 2 6 2 18 4 .12 3 6 18 6 4 9 3 .519 8 16 2 3 6 3 .3 13 12 6 3 4 7.3 0 8 5
N e t Inc o me B e f o re Ta x e s 1,2 3 ,9 3 8 1,10 ,56 8 9 3 ,4 8 6 75,53 1 6 2 ,8 8 2
To t a l Int e re s t Ex p e ns e 2 ,4 1,551 2 ,12 ,54 5 1,8 6 ,8 9 5 1,75,16 3 1,3 9 ,76 9
EB IT 3 ,6 5,4 8 9 3 ,2 3 ,113 2 ,8 0 ,3 8 1 2 ,50 ,6 9 4 2 ,0 2 ,6 51
N OP A T 2 4 4 8 77.6 3 2 16 4 8 5.71 18 78 55.2 7 16 79 6 4 .9 8 13 5776 .17
C OC E 3 2 10 8 8 .4 6 9 1 2 6 2 18 4 .12 3 6 18 6 4 9 3 .519 8 16 2 3 6 3 .3 13 12 6 3 4 7.3 0 8 5
Ec o no mic V a lue A d d e d -76 2 10 .8 3 9 1 -4 56 9 8 .4 13 6 13 6 1.750 2 56 0 1.6 6 7 9 4 2 8 .8 6 15

20000
0
• The economic value added is decreasing from 2012 -20000 2012 2013 2014 2015 2016
and reached negative EVA during 2016
• Negative EVA implies that shareholder value is -40000
being destroyed
• Capital is being invested at a rate less than the cost
-60000
of capital -80000
-100000
 SENSITIVITY ANALYSIS

Value of equity
940,000
930,000 Axis Bank
With the increase in the growth 920,000
910,000
rate ,the value of the equity is 900,000
increasing as per our analysis 890,000
880,000
870,000
0% 1% 2% 3% 4% 5%

Growth rate
Growth 0% 1% 2% 3% 4% 5%
WACC 21.07% 21.07% 21.07% 21.07% 21.07% 21.07%
B.V equity 531649 531649 531649 531649 531649 531649
(2016)
Residual -76210.80 -75449 -73924 71638 -68590 -64779
earning +G
(EVA+G)/(W 361702.9 375927.7 387648 396448 401814.4 403106.3
ACC-G)

Value of 893352 907577 919297 928097 933463 934755

Equity
 RISK ANALYSIS
• Risk has been analysed on parameters like Gross NPA‟s to Gross Advances, Net NPA‟s
to Net Advances, CAR (BASEL II), Tier I Ratio, Credit Risk, Market Risk, Operational Risk
and Lending to sensitive sectors.
• Gross NPA to Gross Advances
Bank Name 2013 2012 Year on year change
Axis bank 1.20 1.06 0.14
HDFC Bank 0.97 1.02 -0.05
ICICI Bank 3.22 4.83 -1.61
• Net NPA to Net Advances

Bank Name 2013 2012 Year on year change

Axis bank 0.36 0.27 0.09
HDFC Bank 0.20 0.18 0.02
ICICI Bank 0.77 0.73 0.04
 RISK ANALYSIS

• Total CAR (Basel II)

Bank Name 2013 2012 Year on year change

Axis bank 17 13.66 3.34
HDFC Bank 16.80 16.52 0.28
ICICI Bank 18.74 18.52 0.22

• Tier 1 Capital Ratios

Bank Name 2013 2012 Year on year change

Axis bank 12.23 9.45 2.78
HDFC Bank 11.08 11.60 -0.52
ICICI Bank 12.80 12.68 0.12
 RISK ANALYSIS

• Credit Risk – Risk Weighted Assets

Bank Name 2013 2012 Year on year change

Axis bank 19785.25 17815.22 1970.03

HDFC Bank 24681.82 19760.36 4921.46

ICICI Bank 37718 33919 3799

• Market Risk – RWA (Standardised duration approach)

Bank Name 2013 2012 Year on year change

Axis bank 1841.51 1749.29 92.22
HDFC Bank 1373.29 459.56 913.73
ICICI Bank 3246.00 3196.00 50.00
 RISK ANALYSIS
• Operational Risk – RWA (Basic indicator approach)
Bank Name 2013 2012 Year on year change
Axis bank 1625.23 1289.52 335.71
HDFC Bank 2256.46 1892.68 363.71
ICICI Bank 2749.00 2619.00 130.00

• Lending to Sensitive Sectors

Bank Name 2013 2012 Year on year change

Axis bank 68385.53 57477.24 10908.29
HDFC Bank 37631.27 32327.78 5303.49
ICICI Bank 115676.72 101762.60 13914.12
 FORECASTING & VALUATION ANALYSIS
Years (INR in Millions) Actual 2016 Forecasted 2017 2018 2019 2020

Net Income 12937 122415 150890 186646 226856

Non cash item (assumed 330 330 330 330 330

same)
Working capital assumed -283986 -283986 -283986 -283986 -283986
same
CFO -159719 -161241 -132766 -97010 -56800

CAPEX -14637 19730 22098 24749 0

FCFF -174356 -141511 -110668 -72261 -56800

Projected growth in revenue 18.3 13.9 17.2 27.8 36.1

(%)
Long term growth rate after 22.66
yr 2020
WACC (%) 21.07 21.07 21.07 21.07 21.07

P.V of FCFF -116883.621 -75500.35 -40718.74 -26436.39

Terminal value 4381816.35

P.V of terminal value 2039426.237

Value of Firm (year end 1779887.132

2016)
Thank You