MINOR PROJECT REPORT

Submitted in partial fulfillment of the requirements

for the award of the degree of

Submitted by

RITESH GOYAL

(0211931806)

Submitted to

Mrs. MADHU ARORA

September 2007

(Affiliated to GGSIP University, Delhi)

Narela, Delhi 110 040

ACKNOWLEDGEMENT

The present report is based on A Financial Analysis OF HDFC Standard Life Insurance

It gives me immense pleasure to express my heart felt gratitude and sincere appreciation to acknowledge all those who helped me, in making this report a real success. I would like to thank my project guide Mrs. Madhu Arora, lecturer in Kasturi Ram College Of Higher Education, Delhi without whom this project report would not be possible.

I am also very thankful to my parents, all my colleagues, and staff member of HDFC Bank who provide me their much needed support and inspiration in preparing this project report.

RITESH GOYAL

0211931806

BBA (B&I), KRCHE

CERTIFICATE

This is to certify that Mr. Ritesh Goyal has accomplished the project title A Financial Analysis Of HDFC Standard Life Insurance under my supervision and guidance.

He has submitted his project in the partial fulfillment of requirement for the reward of degree of BBA (B&I) from Guru Gobind Singh Indraprastha University.

This work has not submitted anywhere else for the award of degree. All sources of information have been duly mentioned.

PROJECT GUIDE

Mrs. Madhu Arora

Faculty Member, KRCHE

CONTENTS

PAGE NO

1. INTRODUCTION

5-7

1.1. Introduction of Study

6

1.2. Objective of Study

7

2. INTRODUCTION OF HDFC STANDARD LIFE INSURANCE 8-19

2.1. History of HDFC Ltd

9

2.2. History of Standard life

12

2.3. The Joint Venture

12

2.3.1. Board of Directors

13

2.3.2. Subsidiary Company

14

2.4. Key Strengths

15

2.5. Products of HDFC Standard Life Insurance

16

2.6. Life Stage in HDFC insurance plan

16

3. FINANCIAL STATEMENT (01.04.2006-31.07.2007)

20-33

3.1. MEANING OF FINANCIAL STATEMENT

21

3.2. BALANCE SHEET

26

3.3. PROFIT & LOSS ACCOUNT

27

3.4. REVENUE ACCOUNT

28

3.5. CASH FLOW STATEMENT

29

3.6. SCHEDULES OF ACCOUNTS

30

4. ANALYSIS OF FINANCIAL STATEMENT

34-52

4.1. Meaning of Financial Statement Analysis

35

4.2. Study of Balance-sheet

36

4.3. Study of Profit & Loss Account

41

4.4. Meaning of Ratio Analysis

42

4.5. Calculation of Ratios

46

4.6. Study of Ratios

48

4.7. Study of Cash flow Statement

50

4.8. Graphs

51

5. CONCLUSION

53-54

BIBLOGRAPHY

55-56

1.1 Introduction Of Study

Nothing is permanent but change. How true these words are, especially when we look at the market world which full of changes. Marketing scenario is how very much different from the 10 years ago. Now the patterns have been change for marketing and new things and techniques are introduced continuously and that is the reason, this survey is conducted & report has been made for knowing the current scenario of marketing which is adapted by few top ranking banks in the banking sector.

This report is based on the marketing strategies of one of the top ranked banks (HDFC Banks) in banking sector to know the current market scenario. While writing this report, I have tried my level best to keep its language simple and explanatory for the user that can understand easily.

This report contains the following:

Profile

Annual Report

Financial analysis

Conclusion

This report is made to help the user in enhancing the overview of todays market scenario of banking sector, which is fastest growing sector in the market. No report can ever be complete on any topic. Therefore I look forward to all the constructive feedback and suggestions for the improvement.

1.2 Objective Of Study

To study about HDFC standard life insurance and its related aspects like its product & services, organizational structure, subsidiary companies etc.

To learn about Balance Sheet, different types of assets & liabilities.

Depiction of financial position of HDFC standard life insurance with the help of Balance Sheet.

The purpose is to portray the financial position of HDFC standard life insurance

To evaluate the financial soundness of HDFC standard life insurance.

To evaluate stability of HDFC standard life insurance.

To evaluate liquidity of HDFC standard life insurance.

2.1. HDFCThe Housing Development Finance Corporation Limited (HDFC Bank) was incorporated in 1977 with a share capital of Rs. 10 crores and the primary objective of meeting a social need that of promoting home ownership by providing long-term finance to households for their housing needs; HDFC has since emerged as the largest residential mortgage finance institution in the country. The Bank commenced operations as a Scheduled Commercial Bank in January 1995. HDFC was amongst the first to receive an 'in principle' approval from the Reserve Bank of India (RBI) to set up a bank in the private sector, as part of the RBI's liberalization of the Indian Banking Industry in 1994. The corporation has had a series of share issues raising its capital to Rs. 119 crores. The net worth of the corporation as on March 31, 2000 stood at Rs. 2,096 crores.

HDFC operates through 75 locations throughout the country with its Corporate Headquarters in Mumbai, India. HDFC also has an international office in Dubai, U.A.E., with service associates in Kuwait, Oman and Qatar.

HDFC Bank has a network of over 531 branches spread over 228 cities across India. All branches are linked on an online real-time basis. HDFC Banks Customers are serviced through Telephone Banking in over 120 locations. The Bank also has a network of about over 1054-networked ATMs across these cities. HDFC Bank's ATM network can be accessed by all domestic and international

Visa

MasterCard

Visa Electron

Maestro

Plus

Cirrus and American Express Credit

Charge cardholders.

HDFC Bank has won many awards for its excellent service. Major among them are "Best Bank in India" by Hong Kong-based Finance Asia magazine in 2005 and "Company of the Year" Award for Corporate Excellence 2004-2005.

The primary objective of HDFC is to enhance residential housing stock in the country through the provision of housing finance in a systematic and professional manner, and to promote home ownership. Another objective is to increase the flow of resources to the housing sector by integrating the housing finance sector with the overall domestic financial markets.

HDFCs main goals are to

Develop close relationships with individual households,

Maintain its position as the premier housing finance institution in the country,

Transform ideas into viable and creative solutions,

Provide consistently high returns to shareholders,

To grow through diversification by leveraging off the existing client base.

HDFC has always been market-oriented and dynamic with respect to resource mobilization as well as its lending programmed. This renders it more than capable to meet the new challenges that have emerged. Over the years, HDFC has developed a vast client base of borrowers, depositors, shareholders and agents, and it hopes to capitalize on this loyal and satisfied client base for future growth. Internal systems have been developed to be robust and agile, to take into account changes in the volatile external environment.

HDFC has developed a network of institutions through partnerships with some of the best institutions in the world, for providing specialized financial services. Each institution is being fine-tuned for a specific market, while offering the entire HDFC customer base the highest standards of quality in product design, facilities and service.

2.2. Standard Life

Standard Life is Europe's largest mutual life assurance company. Standard Life, which has been in the life insurance business for the past 175 years, is a modern company surviving quite a few changes since selling its first policy in 1825. The company expanded in the 19th century from its original Edinburgh premises, opening offices in other towns and acquiring other similar businesses.

Standard Life currently has assets exceeding over 70 billion under its management and has the distinction of being accorded "AAA" rating consequently for the past six years by Standard & Poor.

2.3. The Joint Venture

HDFC Standard Life Insurance Company Limited was one of the first companies to be granted license by the IRDA to operate in life insurance sector. Each of the JV player is highly rated and been conferred with many awards. HDFC is rated 'AAA' by both CRISIL and ICRA. Similarly, Standard Life is rated 'AAA' both by Moody's and Standard and Poors. These reflect the efficiency with which HDFC and Standard Life manage their asset base of Rs. 15,000 Crores and Rs. 600,000 Crores respectively.

HDFC Standard Life Insurance Company Ltd was incorporated on 14th August 2000. HDFC is the majority stakeholder in the insurance JV with 81.4 % stake and Standard Life has a stake of 18.6%. Mr. Deepak Satwalekar is the MD and CEO of the venture.

HDFC Standard Life Insurance Company Ltd. is one of India's leading private insurance companies, which offers a range of individual and group insurance solutions. It is a joint venture between Housing Development Finance Corporation Limited (HDFC Ltd.), India's leading housing finance institution and a Group Company of the Standard Life, UK. HDFC as on March 31, 2007 holds 81.9 per cent of equity in the joint venture

2.3.1 Board Of Directors

Following are the board of directors of HDFC Standard Life Insurance LTD.

Mr. Deepak S. Parekh (CHAIRMAN)

Mr. K. M. Mistry

Ms. Renu Sud Karnad

Mr. A. M. Crombie

Ms. Marcia D. Campbell

Mr. Norman Keith Skeoch

Mr. G. R. Divan

Mr. Ranjan Pant

Mr. Ravi Narain

Mr. Gerald Edgar Grimstone

Mr. D. M. Satwalekar (MANAGING DIRECTOR & C.E.O)

2.3.2 Subsidiary Companies

Following are the some subsidiary companies of HDFC Standard Life Insurance LTD.

HDFC Limited (Holding Company)

Standard Life Assurance Company (Investing Party)

HDFC Asset Management Company Limited (Fellow Subsidiary)

HDFC Developers Limited (Fellow Subsidiary)

HDFC Holdings Limited (Fellow Subsidiary)

HDFC Trustee Company Limited (Fellow Subsidiary)

HDFC Realty Limited (Fellow Subsidiary)

HDFC Investment Limited (Fellow Subsidiary)

HDFC Chubb General Insurance Company Limited (Fellow Subsidiary)

GRUH Finance Limited (Fellow Subsidiary)

Home Loan Service India Private Limited (Fellow Subsidiary)

HDFC Venture Capital Limited (Fellow Subsidiary)

HDFC Venture Trustee Company Limited (Fellow Subsidiary)

HDFC Property Ventures Limited (Fellow Subsidiary)

2.4. Our Key Strengths

Financial ExpertiseAs a joint venture of leading financial services groups, HDFC Standard Life has the financial expertise required to manage our long-term investments safely and efficiently.

Range of Solutions They have a range of individual and group solutions, which can be easily customized to specific needs. There group solutions have been designed to offer us complete flexibility combined with a low charging structure.

Track Record so farThere gross premium income, for the year ending March 31, 2007 stood at Rs. 2, 856 crores and new business premium income at Rs. 1,624 crores.

The company has covered over 8,77,000 lives year ending March 31, 2007

2.5. Products Of HDFC Standard Life Insurance

HDFC Standard Life Insurance has offered the following products: -

Money Back

Endowment

Term Assurance Plan

Flexible Bond

Development Insurance Plan

Group Term Plan

Loan Cover Term Assurance

Childrens Plan

2.6. Life Stages In HDFC Insurance Plan

Insurance need will change as our life does, from starting to work to enjoying our golden years and all the stages in between. Each one of these stages may pose a different insurance need/cover for us. There are basic life stages, which help us to analyze various insurance needs accordingly.

Stage 1

Young and SingleAn important stage where one lays down the foundation of a successful life ahead. Take advantage of the time and power of compounding to ensure that you build up your dreams. Start saving early.

Our needs

Save for a home and wedding

Tax planning

Save for golden years

Stage 2

Just marriedMarriage brings about a significant change. New dreams and new opportunities also bring in additional responsibilities. While both of us look forward to a happy and secure life, it is equally important to ensure that eventualities dont come in the way of shaping your dreams.

Our needs

Planning for home / securing your home loan liability

Save for vacation

Save for your first child

Stage 3

Proud Parents

Once we have children, our need for life insurance is even more. We need to protect our family from an untoward incident. Ensure our protection umbrella takes into account the future cost of securing our childs dream. We will want life to go on for your loved ones, and having enough life insurance is a way to help ensure that.

Our needs

Provide for childrens education

Safeguarding family against loan liabilities

Savings for post-retirement

Stage 4

Planning for Retirement

While we are busy climbing the ladder of success today, it is important for us to take time and plan for our life after retirement. Having an early start for retirement planning can make a significant difference to our savings. Think about our golden years even before we have reached them. The key is to think ahead and plan well using your time and money.

Our needs

Provide for regular income post retirement

Immediate Tax benefits

Lead a secure, independent and comfortable life style in your retirement years

3.1 Meaning Of Financial Statement

Financial statement are the summarized statements of accounting data produced at the end of the accounting process by an enterprise through which it communicates the accounting information to the internal (management) and external users. The external users can be investors, lenders, suppliers and trade creditors, customers, government and their agencies and employees. According to American Institute Of Certified Public Accountants (AICPA), Financial statements are prepared for the purpose of presenting a periodical review or report on progress made by the management and deal with the status of investment in the business and the result achieved during the period under review. A set of financial statement includes: -

Balance Sheet

It is a statement of assets and liabilities, i.e., financial position of an enterprise at a given date it is also known as Position Statement

Profit and Loss Accounts

It shows the net result of business operation during an accounting period. It is also known as Income Statement

Schedules and Notes to Accounts

The Balance Sheet and Profit and Loss Account are supported by the Schedules having details of items in the Balance Sheet and Profit and Loss Account, while the notes to accounts are the statement of accounting policies and explanation to material items.

Characteristics of financial statement

The characteristics of financial statements are: -

Financial statements relate to past period and thus, are historical documents

The statements are expressed in monetary terms

The financial statement shows financial position through Balance Sheet and profitability through Profit and Loss Accounts.

Nature of financial statement

The information and data included in the financial statement are the result of the combination of: -

Recorded Facts

The term Recorded Facts means recording of transactions based on evidences in the accounting books i.e., figures related to cash in hand, cash at bank, debtors, sales, purchase, creditors etc. The financial statement being statements prepared on the basis of recorded facts, they do not depict the unrecorded facts.

Conventions

Certain accounting conventions are followed while preparing financial statement, for example, on account of convention of conservatism provision is made of expected losses but expected profit are ignored. This means that the real financial position of the business may be better than what has been shown by financial statements. The convention of materiality is followed in dealing with small items like pen, pencils, postage stamps, etc. These items are considered as expenditure in the year in which they are purchased even though they are assets in nature. The use of accounting conventions makes financial statements simple, comparable and realistic.

Accounting Concept

While preparing financial statement the accountants make a number of assumptions known as Accounting Concept such as going concern concept, money measurement concept, realization concept, etc. According to going concern concept it is assumed that business of the concern shall be continued indefinitely. The assets are shown in the Balance Sheet at their book value rather than their market value. Money measurement concept assumes that the value of money will remain same in different periods. The realization concept requires that revenue is earned in the year in which the sales was undertaken even though sale price may be received in a number of years.

Personal Judgment

Personal judgments also have an important bearing on a financial statement. For example, the choice of selecting a method of depreciation (fixed installment or written down value) lies on the accountant. Similarly, selection of the inventory valuation method also depends on the personal judgment of the accountant.

Objectives of financial statement The institute of Charted Accountant of India has stated that the objective of the financial statements is to provide, Information about the financial position, performance and cash flow of an enterprise that is useful to a wide range of users in making economic decisions. The objectives of financial statement are: -

To provide financial data on economic resources and obligations of an enterprise

To reveal implication of operating profit on the financial position of an enterprise

To provide sufficient and reliable information to various parties interested in financial statements

To present true and fair view of the business

To serve as the basis of future operations.

3.2 BALANCE SHEET

AS ON 31 MARCH, 07 LIABILITY2006-07

(Rs. 000)2005-06

(Rs. 000) ASSETS2006-07

(Rs. 000)2005-06

(Rs. 000)

SOURCES OF FUND:APPLICATION OF FUNDS

SHAREHOLDERS FUND:INVESTMENTS

Share capital 8,007,148 6,192,718Shareholders 1,529,743 1,380,910

Share application money 287,391 -----Policyholders17,782,86611,695,010

Reserve & Surplus 65,902 65,902Assets to cover linked liability28,516,76311,936,090

Credit\(debit) fair value change ---- 73,105Loans 12,638 29,356

Fixed Assets 736,054 601,345

BORROWINGS

POLICYHOLDERS FUNDS:CURRENT ASSETS

Credit \(Debit) fair value change 91,247 209,569Cash & Bank Balance 3,363,556 2,879,622

Policy Liabilities17,391,53111,487,996Advances & Other Assets 1,961,980 990,106

Insurance Reserves ----- -------

Linked Liabilities25,934,264 9,732,781SHAREHOLDERS ACCOUNT 4,421,364 3,165,753

Add: fair value change 2,582,499 2,203,309

Future appropriation- provision 59,485 25,516

CURRENT LIABILTY 3,874,652 2,658,567

PROVISION 30,845 28,729

TOTAL58,324,96432,678,192 TOTAL58,324,96432,678,192

3.3 PROFIT & LOSS ACCOUNT

AS ON MARCH 31, 2007

SHAREHOLDERs ACCOUNT (NON-TECHNICAL ACCOUNT)

PARTICULARS2006-07

(Rs. 000)2005-06

(Rs. 000)

INCOME FROM INVESTMENTS

(a) Interest, Dividend & Rent Gross 126,836138,496

(b) Profit on sale \ Redemption of investments 114,192 7,989

(c) Loss on sale \ Redemption of investment (12,470) (6,933)

(d) Transfer \ gain on revaluation \ change in fair value (23,909) (6,594)

(e) Amortisation (charge) \ credit (2,375) (8,926)

Other Income 764 3,650

TOTAL (A)203,038127,682

Expenses Other Than Those Directly Related To The Insurance Business 8,252 18,251

Bad Debts Written Off ------ -----

Contribution to the policyholders fund1,450,3971,397,003

TOTAL (B)1,458,6491,415,254

PROFIT \ LOSS BEFORE TAX [(A)-(B)](1,255,611)(1,287,572)

PROVISION FOR TAX ------- ------

PROFIT \ LOSS AFTER TAX(1,255,611)(1,287,572)

ADD: BALANCE AT THE BEGINNING OF THE PERIOD(3,165,753)(1,878,181)

PROFIT \ LOSS CARRIED FORWARD TO THE BALANCE SHEET (4,421,364)(3,165,753)

3.4 REVENUE ACCOUNT

AS ON MARCH 31, 2007

POLICYHOLDERs ACCOUNT (TECHNICAL ACCOUNT)

PARTICULARS2006-07

(Rs. 000)2005-06

(Rs. 000)

PREMIUM EARNED (NET)

(a) Premium28,558,65615,699,126

(b) Reinsurance Ceded (332,408) (229,625)

INCOME FROM INVESTMENT

(a) Interest, Dividend & Rent Gross 1,589,497 689,655

(b) Profit on sale \ redemption of investments 1,043,415 944,930

(c) Loss on sale \ redemption of investments (411,914) (14,974)

(d) Transfer \ gain on revaluation \ change in fair value 101,405 2,158,993

(e) Amortisation charge (65,762) (60,160)

OTHER INCOME

(a) Contribution from the Shareholders Account 1,450,397 1,397,003

(b) Other income 232,997 232,709

TOTAL (A)32,166,283 20,817,657

Commission 2,099,268 1,203,252

Operating Expenses Related To Insurance Business 5,767,403 3,984,948

Fringe Benefit Tax 35,784 26,791

TOTAL (B) 7,902,455 5,214,991

Benefits Paid (Net) 1,745,350 448,337

Interim Bonuses Paid 300 417

Change in valuation of liability against life policies in force

(a) Gross22,625,262 15,247,633

(b) Amount Ceded in reinsurance (141,054) (119,237)

TOTAL (C)24,229,858 15,577,150

SURPLUS \ (DEFICIT) BEFORE BONUS ALLOCATION [(A)-(B)-(C)] 33,970 25,516

APPROPRIATION

Funds for future appropriation provision for lapsed policies unlikely to be revived 33,970 25,516

3.5 CASH FLOW STATEMENT PARTICULARS2006-07

(DETAIL)2006-07

(Rs.000)2005-06

(DETAIL)2005-06

(Rs.000)

CASH FLOW FROM OPERATING ACTIVITIES

Amount received from policy holders28,492,87315,642,471

Amount paid to policy holders (1,708,312) (435,195)

Amount received \ (paid) to reinsurer (217,789) (265,037)

Amount paid to distribution partners (2,064,017) (1,172,248)

Cash payment to employee and suppliers (6,467,443) (2,742,762)

Deposit with Reserve Bank Of India (4) (73,570)

Investment income 1,541,366 673,038

Other income 384,782 417,966

Net cash from operating activities19,961,45612,044,663

CASH FLOW FROM INVESTING ACTIVITIES

Purchase of fixed assets (372,874) (496,658)

Sale of fixed assets ------ 996

Proceeds from Sale or Maturity of Investment 65,891,941 22,244,811

Purchase of Investment(87,096,589) (34,647,719)

Net cash flow from investing activities(21,577,522)(12,898,570)

CASH FLOW FROM FINANCING ACTIVITIES

Issue of Share During the Year 1,812,609 3,000,000

Share application money received pending allotment 287,391

Net Cash From Financing Activities 2,100,000 3,000,000

Net Increase in cash & cash equivalents 483,934 2,146,093

Cash & Cash Equivalents as at the beginning of the year 2,879,622 733,529

CASH & CASH EQUIVALENTS IN THE END OF THE YEAR 3,363,556 2,879,622

AS ON MARCH 31, 2007

3.6 SCHEDULES OF ACCOUNT

PARTICULARS2006-07

(Rs. 000)2005-06

(Rs. 000)

SCHEDULE 1

PREMIUM

First year premium13,164,385 8,254,735

Renewal premium12,070,128 5,272,607

Single premium 3,324,143 2,171,784

Total premium28,558,65615,699,126

SHEDULE 2

COMMISSION EXPENSES

Agents 970,774 689,408

Brokers 16,371 6,206

Corporate Agency 1,111,327 506,785

Referral 796 853

Total 2,099,268 1,203,252

SCHEDULE 3

OPERATING EXP RELATED TO BUSINESS

Employees remuneration & welfare benefits 1,905,428 1,117,923

Travel, conveyance & vehicle running expenses 160,255 105,088

Training expenses 430,282 218,630

Rent, rate & taxes 234,800 168,525

Repairs 37,807 25,005

Printing & stationery 121,130 95,130

Communication expenses 193,752 143,743

Legal & professional charges 290,842 150,038

Medical Fees 39,587 32,634

Auditors fees, expenses 1,102 1,121

Advertisement & Publicity 924,383 866,042

Interest & Bank charges 11,391 4,962

Others 1,261,487 943,009

Service tax 155,157 113,098

Total 5,767,403 3,984,948

SHEDULE 4

BENEFITS PAID [NET]

Claims by death 107,788 80,140

Money back payment 122,414 4,934

Annuities \ Pensions in payment 8,610 9,019

Vesting of pension policy 8,820 ------

Surrenders 881,684 2,39,305

Critical illness 172 14

Permanent & partial disability 65 ------

Withdrawals 615,797 112,102

Others -------- 2,823

Total 1,745,350 448,337

SHEDULE 5

SHARE CAPITAL

Authorized capital (equity share of Rs.10 each)15,000,00015,000,000

Issued capital (equity share of Rs.10 each) 8,300,000 6,200,000

Subscribed capital (equity share of Rs.10 each) 8,012,609 6,200,000

Preliminary expenses (including commission) (5,461) (7,282)

Total 8,007,148 6,192,718

SHEDULE 6

LOANS

Secured

a) On mortgage property 2,314 4,017

b) Loans against policies 8,426 24,894

c) Others (vehicles) 229 -----

Unsecured 1,669 445

Total 12,638 29,356

SHEDULE 7

FIXED ASSETS

Intangible assets (computer software) 26,341 46,009

Building 13,648 13,895

Furniture & Fittings 252,769 192,714

Informational technology equipment 209,559 174,962

Office equipment 225,191 167,471

Total 727,508 595,051

Capital work in progress 8,546 6,294

Grand total 736,054 601,345

SHEDULE 8

CASH & BANK BALANCE

Cash (including cheques in hand, draft, stamps) 765,833 514,618

Bank Balance Current Account 1,182,280 1,753,404

Monet at call & Short Notice with Banks 1,415,443 611,600

Total 3,363,556 2,879,622

SHEDULE 9

ADVANCES & OTHER ASSETS

ADVANCES

1) Prepayments 91,504 30,108

2) Advance tax paid and taxes deducted at source 5,952 114

3) Others

a) Advances for fixed Assets 6,758 3,169

b) Security Deposits 290,658 146,239

c) Advances to employees 411 10

d) Other advances 31,022 10,063

OTHER ASSETS

1) Income accrued on investments 414,464 239,497

2) Outstanding premiums 761,825 404,259

3) Agents Balances 21,386 512

4) Due from other entities 44,966 16,906

5) Due from Subsidiary/holding Company 12 ----

6) Deposit with Reserve Bank Of India 100,004 100,000

7) Others

a) Sundry Debtors 1,463 1,629

b) Due from investing company 18,304 23,000

c) Service tax unutilized credits 173,251 14,600

Total 1,961,980 990,106

SHEDULE 10

CURRENT LIABILITIES

Agents Balance 162,083 105,958

Balance due to other insurance company 197,545 54,866

Premium received in advance 451,850 83,447

Unallocated premium 432,471 509,091

Sundry creditors 1,324,021 900,441

Claims outstanding 55,562 18,223

Others

a) Tax deducted to be remitted 168,121 58,874

b) Service tax liability ---- 41

b) Security deposits 21,441 21,441

c) Investment purchased- to be settled 1,061,558 906,185

Total 3,874,652 2,658,567

SHEDULE 11

PROVISIONS

Wealth tax 125 127

Gratuity 5,660 4,794

Leave encashment 24,328 21,494

Fringe benefit tax 715 2,314

Standard loans 17 ----

Total 30,845 28,729

4.1 Meaning of Financial Statement AnalysisAnalysis of financial statement is a systematic process of the critical examination of the financial information contained in the financial statements in order to understand and make decisions regarding the operations of the firm. The Analysis of Financial statements is a study of relationship among various financial facts and figures as set out in the financial statements, i.e., Balance Sheet and Profit and Loss Account. The complex data given in these financial statements is divided/broken into simple and valuable elements and relationships are established between the elements of the same statement or different financial statements. This process of division, establishing relationship and interpretation thereof to understand the working and financial position of a business is known as analysis of Financial Statements. According to Myer, Financial statement analysis is largely a study of relationships among the various financial factors in a business, as disclosed by a single set of statements, and a study of trends of these factors, as shown in a series of statements. According to Kennedy and Muller, The analysis and interpretation of financial statements are an attempt to determine the significance and meaning of financial statement data so that the forecast may be made of the prospects for future earnings, ability to pay interest and debt maturities (both current and long-term) and profitability and dividend policy.

4.2 Study Of Balance SheetA Balance sheet is a snap shot of a business financial condition at a specific in a time, usually at the close of an accounting period. A Balance sheet has the record of companies Assets, Liabilities & owner/shareholders equity. Assets & liability are divided into Short & Long-term obligation including cash account such as checking, money market or government securities. At any given time assets equal to liability plus owners equity (Assets = Liability + owners equity). As in this Balance sheet (chapter-3.1) we got to know the financial position of the company HDFC standard life insurance ltd. And we also able to know the growth of the company from last year (2005-06) to current year (2006-07). After studying the Balance sheet of HDFC standard life insurance we get to know the financial position of the company by knowing the values of various assets and liability like Fixed assets- Rs.736,054,000; Cash & Bank balance- Rs.3,363,556,000; Current liabilities- Rs.3,874,652,000; Share capital- Rs.8,007,148,000; Reserves and Surplus- Rs.65,902,000. After seeing above values we got to know that company has increased every thing like fixed assets share capital but the Reserve and Surplus account has no change that mean company doesnt make any reserves this year

Need of Balance sheet

A Balance Sheet helps a small business owner quickly get a handle on the financial strength and capabilities of the business. Is the business in a position to expand? Can the business easily handle the normal financial ebbs and flows of revenue and expenses, or should the business take immediate steps to bolster cash reserves.

Balance sheets can identify and analyze trends, particularly in the areas of receivables and payables. Is the receivables cycle lengthening? Can receivables be collected more aggressively? Is some dept uncollectable? Has the business being slowing down payables to forestall an inevitable cash shortage?

Balance sheets, along with income statements, are the most basic elements providing financial reporting to potential lenders such as banks, investors, vendors who are considering how much credit to grant the firm.

A Balance sheet contains two sides. And these sides are Assets and Liabilities and owners equity

Assets

An asset is anything the business own has monetary value. Assets are sub divided into current & fixed assets to reflect the ease of liquidity of each asset. Cash & Bank Balance, for obvious reason is considered the most liquid of all assets. Fixed assets, such as real estate or machinery are less likely to sell overnight or have the capability to being quickly converted into a current asset such as Cash & Bank.

1. Current AssetsCurrent Assets are any assets that can be easily converted into cash within one calendar. Examples of current assets would be checking or money market accounts, a receivables & notes receivables that area due within one-year time.

Cash

Money available immediately, such as in checking accounts, is the most liquid in all short-term assets.

Accounts receivables

This money owed to the business for purchases made by customers, suppliers & other vendors.

Notes receivables

Notes receivables are due within one year are assets. Notes that cannot be collected on within one year should be considered long term assets.

2. Fixed Assets

Fixed assets include land, buildings, machinery, & vehicles that are used in connections with the business.

Land

Land is considered a fixed asset but unlike other fixed assets is not depreciated, because land is considered as an asset that never wears out.

Buildings

Buildings are categorized as fixed assets & are depreciated over time.

Office equipment

This includes office equipments such as copiers; fax machines; printers & computers used in your business.

Machinery

This figure represents machines & equipments used in firms plant to produce product. Examples of machinery might include lathes, conveyor belts, or a printing press.

Vehicles

This would include all vehicles used in business.

Total Fixed Assets

This is the total value of all fixed assets in business, less any accumulated depreciation.

Liabilities and owners equity

This includes all debts and obligations owed by the business to outside creditors, vendors, or banks that are payable within one year, plus the owners equity often this side of the balance sheet is simply referred to as Liabilities.

Accounts payable

This is comprises of all short-term obligations owed by business to creditors, suppliers, and other vendors. Accounts payable can include suppliers and materials acquired on credit.

Notes payable

This represents money owed on a short-term collection cycle of one year or less. It may include bank notes, mortgage obligations, or vehicle payments.

Accrued payroll and withholding

This includes any earned wages or withholdings that are owed to or for employees but not yet have been paid.

Total current liabilities

This is the sum total of all current liabilities owed to creditors that must be paid within one year time frame.

Long term liabilities

These are any debts or obligations owed by the business that are due more than one year out from the current date.

Mortgage note payable

This is the Balance of mortgage that extends out beyond the current year. For example: you may have paid off three year of a 15years mortgage note, of which the remaining 11years not counting the current year, are considered long term.

Owners equity

Sometimes this is referred to as stockholders equity. Owners equity is made up of the initial investment in the business as well as any retained earnings that are reinvesting in the business.

Common stock

This is stock issued as part of the initial or later stage investment in the business.

Retained earnings

These are earnings reinvested in the business after the deduction of any distributions to shareholders such as dividend payments.4.3 Study of Profit and Loss Account

A Profit and Loss Account is an account, which shows the net profit or net loss earned by the company during a particular period (mainly one year). The companies Act, 1956 has not prescribed any form in which the profit and loss account is to be prepared. However, the particulars and information to be given in profit and loss account are laid in schedule VI, part II of the companies Act, 1956. As a result, in practice, profit and loss account is prepared in different forms based on the requirements of the business and types of industry. Whatever form of Profit and Loss Account may be, items of income and expenditure of the business should be under the most convenient heads of account. The Profit and Loss Account must exhibit a true and fair view of the profit and loss of the company during the year under reference. As the profit and loss account of HDFC standard life insurance limited shows the profit of Rs.4,421,364,000 (about four hundred fourty two crores). It shows the financial position of the company, which is very good. It also shows the amount expended on various activities and income received by various activities. The profit of the company is increased from last year which is Rs.3,165,753,000 which shows increase of Rs.1,255,611,000 which shows growth of 39.66% which is very good achievement in business.

4.4 Meaning Of Ratio Analysis

Meaning of a Ratio

A Ratio is an arithmetical expression of relationship between two related or inter dependent items. Ratios when, calculated on the basis of accounting information, are called Accounting Ratio. Accounting Ratio is thus, an arithmetical relationship between two accounting variables. But they assume significance if these variables have cause and effect relationship. In brief accounting ratios provide a quantitative relationship, which the analyst may use to make a qualitative judgment about various aspects of financial position and performance of an enterprise. According to J. Betty, The term accounting ratio is used to describe significant relationships which exist between figures shown in a Balance Sheet, in a Profit and Loss Account, in a budgetary control system or in any part of the accounting organization.

Expression of Ratio

Accounting Ratios express the relationship between two financial variables of the financial statements. They are expressed in anyone of the following forms: -

Pure

It is expressed as a quotient. For example Current Ratio, which expresses the relationship between current asset and current liabilities. This type of relationship shows in pure form (say 1:2)

Percentage

It is expressed in percentage. For example, gross profit ratio, which relates gross profit to net sales. This type of relationship is shows as percentage (say 25%)

Times

It is expressed in a number of times a particular figure is compared to another figure. For example, stock turnover ratio, which studies relationship between costs of goods sold and average stock is (say) 4 times

Fraction

It is expressed in fraction. For example, ratio of fixed assets to share capital is (say) (0.75).

Days

Ratio, sometimes, may be expressed in terms of days also. For example, the average collection period is (say) 73days.

Types of Ratios

Ratios can be classified from various points of view. In reality, the classification depends on the objectives and available data. Ratios may be based on amounts in the Balance Sheet, in profit and loss account or in both. Thus, they may be worked out on the basis of figures contained in the financial statements and, therefore, may be classified as follows:

Income statement ratios

This ratio is calculated on the basis of the amounts of income statement (profit and loss account) only.

Position statement ratio

This ratio is calculated on the basis of the amounts of position statement (Balance Sheet) only.

Inter-statement ratios or composite ratios

This ratio is based on amounts of income statement as well as position statement.

The above classification is rather crude and unsuitable because analysis of balance sheet and profit and loss account cannot be carried out in isolation. Therefore the ratios may also be classified as:

Liquidity Ratios

Solvency Ratios

Activity Ratios

Profitability Ratios

Meaning of Ratio Analysis

According to Myers, Ratio analysis is a study of relationship among various financial factors in a business.

Ratio analysis is a technique of analyzing financial statements by computating ratios. In other words, ratio analysis is a process of determining and interpreting relationship between the items of financial statements to provide a meaningful understanding of the performance and financial position of an enterprise. Ratio analysis is an accounting tool to present accounting variables in a simple, concise, intelligible and understandable form.

Objectives of Ratio Analysis

The objective of ratio analysis is to judge the earning capacity, financial soundness and operating efficiency of a business organization. The use of ratios in accounting and financial management analysis helps the management to know the profitability, financial position (liquidity and solvency) and operating efficiency of an enterprise.

Uses of Ratio Analysis

Useful in analysis of financial statement

Useful in simplifying accounting figures

Useful in judging the operating efficiency of business

Useful in forecasting

Useful in locating the weak spot

Useful in inter firm and intra firm comparisons

4.5 Calculation Of Ratio

1. Current Ratio

Current ratio= current assets\current liability

=5325536\3874652

Current Ratio= 1.37:1

2. Debt-equity Ratio

Debt-equity ratio=debt \ equity

=17482778 \ 8360441

Debt-equity ratio=2.09:1

3. Total Assets to Debt Ratio

Total Assets to Debt Ratio=Total assets \ Long term debts

= 58324964 \ 17482778

Total Assets to Debt Ratio= 3.37:1

4. Proprietary Ratio

Proprietary Ratio=(Shareholders Fund\ Total Assets) * 100

=(8360441\ 58324964) * 100

=0.1433 * 100

Proprietary Ratio=14.33%

4.6 Study Of Ratios

Current ratios

Current ratio is a relationship of current assets to current liabilities. Current ratio is generally accepted that current assets should be 2 times the current liabilities, and then only will realization from current assets be sufficient to pay the current liabilities on time and enable the firm to meet other Day-to-day expenses. But the company has only 1.37 times the current assets to current liabilities, which is not good for the company. The company needs to improve the ratio for which they have to increase the current assets or decrease the current liabilities.

Debt-equity ratio

The debt-equity ratio is computed to ascertain soundness of the long-term financial policies of the firm. This ratio expresses a relationship between debt (external equities) and the equity (internal equities). Debt-equity ratio indicates the proportion between shareholders funds and the long term borrowed funds. A higher ratio indicates the risky financial position while lower the ratio indicates safer financial position. It is generally accepted as 2:1 but the company has 2.09:1 that is almost equal to the acceptable ratio, so the company needs not to worry much about the ratio. But for much safer financial position company needs to decrease the debt or increase the equity of the company.

Total Assets to Debt Ratio

Total assets to debt ratio establish a relationship between total assets and total long-term debts. It measures the safety margin available to the providers of long-term debts. A higher the ratio represents higher security to lenders for extending long-term loans to the business while lower the ratio represents the risky financial position. The company has 3.37:1 debt equity ratio, which is acceptable by the lenders and the company.

Proprietary Ratio

The objective of computing the proprietary ratio is to establish the relationship between the proprietors fund and the total assets. Proprietary ratio highlights the general financial position of the enterprise. Higher the ratio better it is for all concerned. A ratio below 50% may be the alarming for the creditors since they may have to lose heavily in the event of companys liquidation on account of heavy losses. Company has only 14.33% proprietary ratio, which is not good for the creditors and the company as the creditors are in heavy risk to have losses as well as the company has a lot of problem. 4.7 Study of Cash Flow StatementCash Flow is a statement that shows the net cash from various activities like operating activities, investing activities, etc.

From the cash flows statement of HDFC Standard life insurance Ltd. We came to know that its net cash from operating activities was increased from Rs.1, 2 04.47 crores to Rs.1, 996.15 crores that was an increment of Rs.791.68 crores which are an increment of 65.73%, which is a fabulous achievement by the company.

The net cash from investing activities was increased from Rs.-1289.86 crores to Rs.- 2157.75 crores which is a increment of Rs.-867.89 crores which is a increment of 67.29% which is again a fabulous achievement by the company.

The net cash from financing activities was decreased by Rs.90 crores, which is again good for the company so the overall conclusion from the cash flow statement was that the company is growing faster and superbly in the market, which may be the sign of bright future of the company.

4.8 Graphs1. Graph to show profit or loss made by the company in previous year amount in (Rs.000)2. Graph to show the rate of share (100 shares) year by year

As we analyses the financial statement of HDFC Standard life insurance Ltd we came to know that the company is having a fabulous growth in this year in comparison to last year. But the overall conclusion is that the company is not in sound financial position because the company had large amount of losses in last year even the company has loss in this year too. But it is less than the last year loss. Which result in the decrease in the rate of shares of HDFC standard life insurance Ltd. (as shown in the graph). Which shows that investors are less willing to invest in the company even they want to sell there shares in the market as soon as possible. There is continuous decrease in the rate of share of the company from last five years except the last year (2005-06).

Suggestions

The overall suggestion for the company is that they must launch various new products and provide best services to the customer to make customer more satisfy and then they can create goodwill in the market. And later on they can earn huge profit for a long run. Afterwards the market share value will be increased as the company can able to pay dividend to the shareholders.

MAGAZINES

1. Headlines Today

2. Economics Times

3. Business Today

WEBSITES

1. www.hdfcinsurance.com2. www.hdfcbank.com3. www.hdfc.com4. www.hdfcfund.com EMBED MSGraph.Chart.8 \s

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