Fund Flow Statement - Kotak Mahindra
Fund Flow Statement - Kotak Mahindra
Fund Flow Statement - Kotak Mahindra
PROJECT REPORT
ON
AT
SUBMITED BY
D.R.RAGHUVEER
1
Vivek Vardhini Education Society’s
VIVEK VARDHINI
CERTIFICATION
2
Vivek Vardhini Education Society’s
VIVEK VARDHINI
DECLARATION
DHAIPULE.
I also declare that this project is the result of my own efforts and
it has not been submitted to another University for the award of any
Degree or Diploma.
Date : D.R.RAGHUVEER
Place : Hyderabad. Roll No.142017672054
3
4
ACKNOWLEDGEMENT
report.
This report has been prepared with the able guidance and kind
co-operation of the faculty of Principle Prof. P.N. Reddy Sir “Vivek
Vardhini School of Business Management”
D.R.RAGHUVEER
5
ABSTRACT
Motivation is one of the most vital factors of human resource development. In this
present context corporate companies show predominant concern for the motivation of their
employees, but the public sector lacks behind.
They occur when the person motives themselves(after external motivation needs are
met) an employer or leader that needs the needs on the “Hewlett Hierarchy” will see
motivated employees and see productivity increases. Understanding the definition of
motivation and then applying it, is one of the most prevalent challenges facing employers and
supervisors. Companies often spend thousands of dollars each year hiring outside firms just
to give motivation seminars.
6
CONTENT
Introduction
Bibliography 72
7
CHAPTER-I
INTRODUCTION
8
FUNDS FLOW STATEMENT
INTRODUCTION
The basic financial statements i.e., the Balance Sheet and Profit & Loss A/c or
Income Statement of business reveals the net effect of various transactions on operational and
financial position of the company. The balance sheet gives a summary of the assets &
liabilities of an undertaking at a particular point of time.
There are many transactions that take place in an undertaking and which do not
operate Profit & Loss A/c. Thus another statement has to be prepared to show the change in
Assets & Liabilities from the end of one period of time to the end of another period of time.
The statement is called a statement of changes in financial position or a Funds Flow
Statement.
The Funds Flow Statement is a statement which shown the movement of funds and is
a report of financial operations of business undertaking. In simple words it is a statement of
source and application of funds.
The term “Fund” has been defined and interpreted differing by different experts.
Broadly the term fund refers to all the financial resource of the company on the other extreme
fund has been understood as cash only. The most acceptance meaning of the “fund” is
“working capital”.
Working Capital is excess of current assents over current liability. The term fund has a
variety of meaning.
In a narrow sense, funds mean only cash. ‘Cash flow statement portrays net effect of
various business transactions cash into account receipts & disbursement of cash.
9
The concept of preparing funds from statement is not accepted, as there are many
such transactions that do not affect cash but represent the flow of fund.
For Ex:
Purchase of furniture on credit does not affect cash but there is flow of fund.
Here funds means all financial resources used in business, whether in the form of
men, money, material, machine & others.
Networking capital means differences between current assets & liabilities. A fund
generally refers to cash or cash equipment or to working capital.
In any business we cannot under estimate the flow of funds from two operations. The
business runs with funds but the organization knows how to flow of funds.
“Funds from Operations” statement shows how much funds from operations.
10
NEED AND IMPORTENCE OF STUDY
Many business owners disregard the importance of Funds flow statements because they
unwittingly believe that their current financial standing can be construed from other financial
reports and projections. Unfortunately, however, a Funds flow statement is necessary to
adequately assess the incoming and outgoing flow of Funds and other resources in a business.
Not only will a business owner with a Funds flow system be more aware of his or her
financial standing, but it will also help investors to make educated decisions on future
investments. A business with regular and reliable Funds flow statements shows more
economic solvency, and is more attractive to investors.
A Funds flow statement documents the incoming and outgoing Funds in plain terms. Future
sales and sales made for credit (unless they have been paid off) are not included in the Funds
flow statement, and most of the data will come from core operations. Payables and
receivables should be expressly defined, as should depreciation of product value and
inventory that has not yet been moved.
This will allow a business owner to compare past periods with the current financial standing
and determine whether your receivables have increased or decreased.
This can also help to track your investments next to your receivables and payables. Are your
investments increasing or decreasing in value? And has your inventory moved at a steady
pace? New or expanding businesses can expect to see a decrease in Funds flow, but this
doesn’t mean that the business is going under. More stables businesses should see a steadily
increase in Funds flow over a period of several months or years.
There are typically five different sections in a Funds flow statement, though large businesses
might have more complex Funds flow systems as required.
11
OBJECTIVES OF THE STUDY
To show the manner in which the operations have been financed , and how the
financial resources have been used.
To analyze the movement of funds between the dates of two balance sheets in period
of study.
To identify the changes in the working capital in between above mentioned year.
To improve the financial performance of the company.
12
SOURCES OF DATA
SECONDARY DATA
The secondary data was collected form already published sources such as annual
reports, returns and internal records.
Tools of Analysis
Various statistical tools such as percentages averages were used to process the date, of
effectiveness of funds flow in organization & management in KOTAK MAHINDRA
LTDLTD (KOTAK).
13
SCOPE OF THE STUDY:
Financial analysis consists of ratio analysis and funds flow analysis. To know funds
flow from one to one, as the time available is very limited and the subjects are very vast, the
study is continued to overall financial condition of a firm. This study is to know working
capital increase or decrease funds from operation, sources and application of funds of M/S
KOTAK MAHINDRA LTD.
Financial analysis consists of funds flow analysis. To know funds flow from one to
one, as the time available is very limited and study is continued to overall financial condition
of a firm. The study to know working capital increase or decrease, funds from operation,
source and application of funds
14
CHAPTER-II
REVIEW OF LITERATURE
15
REVIEW OF LITERATURE
Ever since the evolution of the concept of working capital, several authors have
attempted to analyze the concept by defining it so that the components of working
capital are properly identified. In doing so, quantitative and qualitative characteristics of
working capital are also identified to make working capital analysis for meeting specific
needs. These efforts have offered further scope to the authors to approach this topic in
the context of management of components of working capital in many ways. Such
approaches have also facilitated evolution of techniques to manage working capital.
Each of these approaches has their own basis and justification. Views expressed by
various authors suggest further need to analyze working capital management issues.
Review of some of the studies carried out and suggestions offered by eminent authors
on the subject have helped in formulating the theme meaningfully and to carry out the
study in line with the objective and scope.
A sincere effort has been made for comprehensive review of literature on working
capital management in general and small enterprises in particular, reveal the following:
16
Quantitative Definition of Working Capital
Mead Edward Field KennethBaker and Mallot have suggested for the quantitative
approach to define working capital. They have suggested that the whole of the current
assets help to earn profits and prudent financial management calls for efficient
utilization of total current assets and their contribution of fixed assets to device desired
profits. They have suggested that working capital should be considered as current assets only
because,
a. Both fixed assets and current assets help an enterprise make profits. While fixed
assets are means to produce, current assets are means to operate these fixed assets and
thus generate profits. While theoretically fixed assets are termed as fixed capital
investment, current assets therefore should be termed as working capital, and
b. The management is generally concerned with the total amount of finds available in
terms of current assets for meeting the operational requirements. The sources of funds
for such current assets are treated as a different aspect.
Adam Smith has supported this view. According to him "the goods of a merchant yield
him no revenue of profit till he sells them for money and the money yield him a little till it is
again exchanged for good. His capital is continuously going from him in one shape and
returning to him in another, and it is only by means of such circulation or successive
exchanges, that can yield him any profit. Such capital, therefore, may very
appropriately be called circulating capital (current assets)".4
William H. Husband and James C. Dockery have also supported the quantitative
definition of working capital on the grounds that "Despite the uncertainty of
quantitative concept of working capital, it provides more objective basis of determining the
type and the amount of financing".5
17
J. I. Bogen has considered that working capital is the total of current assets of an
enterprise which circulates from one form to another, for instance, from cash to
inventories, from inventories to receivables and from receivables to back into cash.
Thus, the capital that circulates, equal the total current assets of an enterprise. Hence,
working capital and current assets are interchangeable terms.6 C. W. Gesten Berg has
further supported the views of Professor Bogen and considered working capital as the
total of current assets of an enterprise which circulates from one from to another.7 Some
others, however, have used the net working capital concept indicating that
working capital comprises the sum of current assets and correspondingly, resources of
the enterprise for investment in such current assets will have to be necessarily
considered while assessing working capital in an enterprise.
18
7 Gestern Berg C.W., "Financial Organization and Management", New York, Prentice Hall,
1959, p.282.
8 American Institute of Accountants, "Committee on Accounting Procedure", New York,
Restatement and
9 Revision Accounting Research Bulletin No.43, 1952.
10 Lincoln E.E., "Applied Business Finance", New York, McGraw Hill.
11 Saliers E.A., "Hand Book of Corpration Management and Procedure",
13 Stevens W.M., "Financial Organization and Administration", New York, McGraw Hill,
1934, p.84.
13 Park C. and Gladson J.W., "Working Capital", New York, The Macmillan, 1963.
14 National Council of Applied Economic Reseach, "Structure of Working Cpital", New
Delhi, 1966.
According to Harry G. Guthman and Herbert E. Dougall, "working capital is the excess of
current assets over current liabilities".14William H. Husband and James. Dockery have
suggested that, "working capital comprises the sum of current assets, and it takes into
consideration all the current
resources of the enterprise, and their application to the current and future activities".15
Some authors have, however, clarified that only that part of the long term source
of an enterprise which has been utilized for investment in current assets should be
termed as working capital. In the absence of any universally accepted concept of
working capital, earlier research studies were based on both these concepts. The gross
working capital concept was considered for studies on management of working capital
in an enterprise while the net working capital concept was considered for studies on
financial position of an enterprise with specific reference to liquidity.A sincere review of
theoretical concepts and research studies on working capital
management has helped to adopt the "Gross Working Capital Concept".
Review of Earlier Studies in Working Capital Management in Enterprises
Considerable numbers of studies have been done in the area of working capital
management in enterprises. The studies have considered overall management of
working capital as also the management of individual component of working capital.This
chapter highlights the review of previous literature and tries to provide
necessaryinformation about what is already known and what is unknown, also describe
19
shortcoming and strengths and in where they are agreed/disagreed. This study
emphasizes that prior to the initiation of this study other researchers in this areas have
been developed but this study will try to find out the new answers for the new
developed questions that have been described under the problem under the study.
Working Capital Management
Research studies on working capital management pertaining to small scale undertakings are
found to be very limited which pinpoints the very cant attention paid to this particular
area of financial management.Sagan's theory of working capital management has
advocated that working capital management should be linked with the objectives of
liquidity and profitability of the enterprise. He also has suggested that working capital
management should aim at stability and growth of the enterprise.However, Sagan's
theory has put emphasis on cash management, on the assumption that in an enterprise,
it is cash which is more liquid and difficult to manage than other components of working
capital i.e., inventories
and receivables. Sagan's theory also further stated that a high level of sales in an
enterprise calls for large cash balances.16 ABDE. L. Motall has observed that the largest
portion of a financial manager's time is utilized in the management of working capital.
He also has noticed that shortage of working capital so often advocated as the main
cause of failure of an enterprise, is nothing but the evidence of mismanagement of
working capital, which is so common.17 Earnest W. Walker in his study of nine
enterprises has indicated that the level of working capital and rate of return are not
directly related. It was more a change in working capital than its level that caused a
gain or loss to an enterprise. The study also has revealed that a decrease in working
capital resulted in an increase in the rate of return while an increase in working
capital generally has resulted in a decrease in the rate of return.18 Chadda (1964)
assessed inventory management practices of Indian companies. The application of
modern inventory control techniques like operations research has been suggested for the
advantage of companies. As far back as in 1966, the first and foremost study on working
capital management inrelation to Indian industry was compiled and published under the
caption —Structure of Working Capital“ by the National Council of Applied Economic
Research (NCAER,1966).The study was confined to the analysis of the composition of
working capital,19with special reference to three types of industries viz., Fertilizers,
Cement and Sugar.The principal objective of this study was to examine as to what
extent these three
20
industries controlled and utilized working capital components. The study has revealed
that there had been excessive working capital funds locked up in most of these
industries. It finally concluded that the need of the hour was to establish good
accounting and costing systems, including new techniques of inventory management in
each company of these three key industries.
16 John Sagan, "Towards a Theory of Working Capital Management", The Journal on
Finance, 1955, pp.134-139.
17 ABD E.L. Motall M.H.B., "Working Capital:its role in the short run liquidity policy of
industrial
concern, Accounting Research", Vol. IX, 1958.
18 Walker E.W., "Towards the theory of working capital, The Engineering Economist",
1964, pp.21-35.
19 National Council of Applied Economic Research, Structure of Working Capital, NCAER,
New Delhi,1966.
Jerome B. Cohen and Sydney M. Robbins have suggested that to assess an ideal level,20
Operating cycle method has been considered as an effective tool, through which the
flow of cash invested is identified throughout, from the stage of procurement of raw
material to finished goods and flow of cash back to business through cash sales or
collections from debtors. In practice, however, there may be subsidiary flows and
circuits existing alongside the mainstream of enterprise flows. Van Horne, in his study on
working capital during 1969, has observed that if the level of liquid assets in an
enterprise is reduced, its ability to meet the current obligations would also reduce.
Based on this, his study was an examination of liquid assets and the current obligations of
an enterprise as separate issues. The liquid assets considered forthe study were only cash
and marketable securities, for the purposes of ascertaining the liquidity. On this basis
Van Horne emphasized that the risk of an enterprise in meeting the current obligations
increases, when the liquid asset's position decreased.21 The welter study on the other
hand has focused more on the profitability goal of working capital management. A
unique feature of this study was to identify 'delay centers' located throughout the
production and marketing function, and work out thepossibility of reducing delays
occurring in various delay centers. Reduction in delays would eventually reduce working
capital investment by the firm.22
21
Appavadhanulu in his study of working capital and choice of techniques has stated
that the period of production in an enterprise depends on technical factors. In view of
this, the techniques of production either increase or decrease the length of production, which
in turn, change the amount of working capital.23
20 Jerome B. Cohen and Syndney M. Robbins, "The Financial Manager", Harper and Row,
New York,
1968, p.307.
21 James C. Van Horne, "A risk-return analysis of a firm's working capital position, The
Engineering
Economist", 1969, pp.71-88.
22 Paul Welter, "How to calculate taxing possible through reduction of working capital,
Financial
Executive", 1970, pp.50-58.
23 Appavadhanulu, "Working Capital and choice of techniques, The Indian Economic
Journal", July- September,pp.34-41.
The study carried out by Chakraborthy has pointed out two issues, ViZ., the
relationship of return on capital employed to excessive or insufficient working capital
and estimation of working capital through relating operating cycle and operating expenses.24
Mishra‘s (1975) work was based on the case studies of working capital management in six
central public sector enterprises in India for the period 1960-61 to 1967-68. His study
has identified inventory, receivables, cash and working finance as the four
problem areas of working capital confronting public enterprises. The study has also
included large-scale units, promoted by the Central Government such as Fertilizer
Corporation of India Limited (FCI), Hindustan Steel Limited (HSL), Heavy Electrical
India Limited (HEI), National Coal Development Corporation Limited (NCDC) and
Instrumentation Limited (INS). After a thorough probe into the problems of working
capital management in these enterprises, he has pointed out the need for efficient and
effective utilization of working capital, as it was a neglected area hitherto affecting the
profitability.
22
Smith has observed that working capital management is concerned with the
problems that arise in attempting to manage the current assets, the current liabilities and
the inter- relationship that exists between them.25
a basic study by Misra on problem of working capital in selected enterprises has
indicated that,
a. They have not been able to manage working capital efficiently,
b. Inventory constituted a major component in the current assets,
c. Inventory management and receivables management were inefficient, and
d. There were disproportionately high levels of cash due to improper planning
andcontrol.26
Weston and Brigham have stated that there are many aspects of working
capital management, which make it an important function of the financial manager.27 Gitman
has suggested that the goal of working capital management is to manage each of the firm's
current assets and current liabilities in such a way that an acceptable level of net
working capital is maintained.28
Salient Feature
1. The earlier studies on working capital management in small enterprises have not
been addressed to specific present issues but were related to small enterprises in
general.The present study has considered surveying the extent of inventory level
maintained by the sample units. The research has also included the study of various
inventory control technique used by samples units. All these and other allied questions
such as impact of
23
under-utilization of the available resources, unpredictable environmental situations, lack of
regular supply of materials, and lack of control on investment in inventories form the
subject matter of this study.
2. Working capital management in an enterprise depends upon a number of variables
like operating cycle, storage period of inventories, cash holding, credit period to
customers, credit period from suppliers etc. Only a few studies with particular reference to
small enterprises have highlighted such dependency by working capital on the
variables cited. Even those studies neither consider all the dependent variables of
working capital, nor the impact of dependency by working capital on such variables
analyzed in depth. The present study highlights the requirement by making quantitative
analysis of dependency of working capital on selected variables. Some variables are
considered for such analysis to focus the finding on more prominent variables.
Accordingly, the following variables are identified for statistical analysis:
• Application of the managerial skills for holding cash,
• Creation of the motivating behavior in manpower,
• Application of the economic order quantity,
• Use of the coordination on operations,
• Application of the credit policy,
• Effect on the business cycle,
• Effect on the assigned planning,
• Effect on the current decision making,
• Effect on the improper flows of operations,
• Attempt to reduce uncertainty,
• Delay in the product delivery,
• Irregular flows of the work,
• Reduction in the volume of output,
• Effect on the opportunity cost,
• Effect in the direct-indirect costs,
• Effect on the activities of sales, operating and financial, and
24
CHAPTER-III
INDUSTRY PROFILE
&
COMPANY PROFILE
25
The Indian stock market turned out to be among the world's best performers in 2015-16 with
the Bombay Stock Exchange (BSE) Sensex rising 29% from 21,140 on January 1 to 27,312
on December 19. Most market players believe this stellar run will continue in 2015 on the
back of reforms, strong foreign fund inflows, revival of manufacturing, improvement in the
macro-economic situation and rise in corporate earnings growth.
Attractive Valuations
Despite the sharp rise, the valuation of the Indian stock market is still attractive. On
December 12, the Sensex was trading at a price-to-earnings (PE) ratio of 18.5, marginally
lower than the five-year average of 18.77.. One reason is that the return on equity of BSE 200
companies is bottoming out. "Revival of growth of Indian companies, which were facing
tough times for the past five years, is still at a nascent stage. Nifty 50 companies can see 16-
17% earnings growth in the next one year. Stocks that respond to interest rate moves, coupled
with select debt schemes, are likely to be the winners in 2015, with the Reserve Bank of India
expected to start easing its monetary policy Fund managers said economic prospects have
improved, but the New Year may be tougher for equity investors to make money as
valuations of many stocks are rich after the broad-based rally in 2014. Concern over interest
rate hike in the US and weak global crude oil prices may also keep investors on. India is
among the top-performing emerging markets in 2014. So far in 2014, the Sensex has gained
34%. Smaller companies have fared even better, with the BSE Mid Cap index surging 56%
and the BSE Small Cap Index jumping 75%.
Though the falling crude prices have improved the prospects of the Indian economy, India
may not be spared if there is an emerging market sell-off. "On the global front, oil exporting
nations could face problems, and there could be a global risk aversion.
Market participants consider probable interest rate cuts by the Reserve Bank of India (RBI) as
the biggest trigger for the economy and the markets. The extent of monetary policy easing
would determine the strength of rally in shares of the so-called interest rate-sensitive sectors
such as banks, auto, real estate and bonds.
26
Fund managers said debt funds could offer good returns in the coming year as a fall in
interest rates could lead to an appreciation in bond prices. With wholesale price inflation
coming at nil for November, expectations of interest rate cuts as early as in the March quarter
are high. "Shortterm rates can fall more than long-term rates. We expect consumer inflation
to be in the range of 5-5.5%, and expect RBI to cut interest rates by 50 basis points in 2015,"
said Dhawal Dalal, executive V-P and head (fixed income), DSP BlackRock Mutual Fund. If
interest rates fall by 50 basis points, investors could see a 5% capital appreciation on their
long-term gilt fund portfolio.
Measured by BSE Sensex, stock market has generated a positive return of about 9 per cent
for investors in 2013, while gold prices fell by about three per cent and its poorer cousin
silver plummeted close to 24 per cent.
After outperforming stock market for more than a decade, gold has been on back foot for two
consecutive years now vis-a-vis equities, shows an analysis of their price movements.
"Gold's under-performance was mainly due to prices falling in dollar terms amid anticipated
tapering over last several months combined with FII investment in Indian stocks.
"This movement has been equally true for global markets as 2013 saw gold losing its shine
and markets coming back with a bang," said Jayant Manglik, President Retail Distribution,
Religare Securities.
"As always, gold and stock prices follow opposite trends and this year was no different
except that both changed direction," he said.
Improvement in the world economy has brought the risk appetite back amongst retail
investors and this has drenched the liquidity from safe havens such as gold leading to its
under-performance, an expert said.
In 2012, the Sensex had gained over 25 per cent, which was nearly double the gain of about
12.95 per cent in gold. The appreciation in silver was at about 12.84 per last year.
According to Hiren Dhakan, Associate Fund Manager, Bonanza Portfolio, "Markets have
particularly shown great strength post July-August 2013 when RBI took some strong
measures to control the steeply depreciating rupee."
"When the US Fed gave indications that it might taper its stimulus programme given the
economy shows improvement, a knee-jerk correction was seen in most risky assets, including
stocks in Indian markets. However, assurance by the Fed about planned and staggered
tapering in stimulus once again proved to be a catalyst for the markets."
27
"External factors affecting Indian stocks seem to be negative for the first half of 2014 due to
continued strength of the US dollar and benign in the second half. By that time, elections too
would have taken place. A combination of domestic and international factors point to a
bumper closing of Indian markets in 2014 with double-digit percentage growth," he said.
Stock market segment mid-cap and small-cap indices have fallen by about 10 per cent and 16
per cent, respectively, in 2013.
Foreign Institutional Investors have bought shares worth over Rs 1.1 lakh crore (nearly USD
20 billion) till December 19. In 2012, they had pumped in Rs 1.28 lakh crore (USD 24.37
billion).
Evolution
Indian Stock Markets are one of the oldest in Asia. Its history dates back to nearly 200 years
ago. The earliest records of security dealings in India are meager and obscure. The East India
Company was the dominant institution in those days and business in its loan securities used
to be transacted towards the close of the eighteenth century.
By 1830's business on corporate stocks and shares in Bank and Cotton presses took place in
Bombay. Though the trading list was broader in 1839, there were only half a dozen brokers
recognized by banks and merchants during 1840 and 1850.
The 1850's witnessed a rapid development of commercial enterprise and brokerage business
attracted many men into the field and by 1860 the number of brokers increased into 60.
In 1860-61 the American Civil War broke out and cotton supply from United States of
Europe was stopped; thus, the 'Share Mania' in India begun. The number of brokers increased
to about 200 to 250. However, at the end of the American Civil War, in 1865, a disastrous
slump began (for example, Bank of Bombay Share which had touched Rs 2850 could only be
sold at Rs. 87).
28
At the end of the American Civil War, the brokers who thrived out of Civil War in 1874,
found a place in a street (now appropriately called as Dalal Street) where they would
conveniently assemble and transact business. In 1887, they formally established in Bombay,
the "Native Share and Stock Brokers' Association" (which is alternatively known as " The
Stock Exchange "). In 1895, the Stock Exchange acquired a premise in the same street and it
was inaugurated in 1899. Thus, the Stock Exchange at Bombay was consolidated.
Ahmadabad gained importance next to Bombay with respect to cotton textile industry. After
1880, many mills originated from Ahmadabad and rapidly forged ahead. As new mills were
floated, the need for a Stock Exchange at Ahmadabad was realized and in 1894 the brokers
formed "The Ahmadabad Share and Stock Brokers' Association".
What the cotton textile industry was to Bombay and Ahmadabad, the jute industry was to
Calcutta. Also tea and coal industries were the other major industrial groups in Calcutta.
After the Share Mania in 1861-65, in the 1870's there was a sharp boom in jute shares, which
was followed by a boom in tea shares in the 1880's and 1890's; and a coal boom between
1904 and 1908. On June 1908, some leading brokers formed "The Calcutta Stock Exchange
Association".
In the beginning of the twentieth century, the industrial revolution was on the way in India
with the Swadeshi Movement; and with the inauguration of the Tata Iron and Steel Company
Limited in 1907, an important stage in industrial advancement under Indian enterprise was
reached.
Indian cotton and jute textiles, steel, sugar, paper and flour mills and all companies generally
enjoyed phenomenal prosperity, due to the First World War.
In 1920, the then demure city of Madras had the maiden thrill of a stock exchange
functioning in its midst, under the name and style of "The Madras Stock Exchange" with 100
members. However, when boom faded, the number of members stood reduced from 100 to 3,
by 1923, and so it went out of existence.
29
In 1935, the stock market activity improved, especially in South India where there was a
rapid increase in the number of textile mills and many plantation companies were floated. In
1937, a stock exchange was once again organized in Madras - Madras Stock Exchange
Association (Pvt) Limited. (In 1957 the name was changed to Madras Stock Exchange
Limited).
Lahore Stock Exchange was formed in 1934 and it had a brief life. It was merged with the
Punjab Stock Exchange Limited, which was incorporated in 1936.
The Second World War broke out in 1939. It gave a sharp boom which was followed by a
slump. But, in 1943, the situation changed radically, when India was fully mobilized as a
supply base.
On account of the restrictive controls on cotton, bullion, seeds and other commodities, those
dealing in them found in the stock market as the only outlet for their activities. They were
anxious to join the trade and their number was swelled by numerous others. Many new
associations were constituted for the purpose and Stock Exchanges in all parts of the country
were floated.
The Uttar Pradesh Stock Exchange Limited (1940), Nagpur Stock Exchange Limited (1940)
and Hyderabad Stock Exchange Limited (1944) were incorporated.
In Delhi two stock exchanges - Delhi Stock and Share Brokers' Association Limited and the
Delhi Stocks and Shares Exchange Limited - were floated and later in June 1947,
amalgamated into the Delhi Stock Exchnage Association Limited.
Post-independence Scenario
Most of the exchanges suffered almost a total eclipse during depression. Lahore Exchange
was closed during partition of the country and later migrated to Delhi and merged with Delhi
Stock Exchange.
Bangalore Stock Exchange Limited was registered in 1957 and recognized in 1963.
30
Most of the other exchanges languished till 1957 when they applied to the Central
Government for recognition under the Securities Contracts (Regulation) Act, 1956. Only
Bombay, Calcutta, Madras, Ahmadabad, Delhi, Hyderabad and Indore, the well established
exchanges, were recognized under the Act. Some of the members of the other Associations
were required to be admitted by the recognized stock exchanges on a concessional basis, but
acting on the principle of unitary control, all these pseudo stock exchanges were refused
recognition by the Government of India and they thereupon ceased to function.
Thus, during early sixties there were eight recognized stock exchanges in India (mentioned
above). The number virtually remained unchanged, for nearly two decades. During eighties,
however, many stock exchanges were established: Cochin Stock Exchange (1980), Uttar
Pradesh Stock Exchange Association Limited (at Kanpur, 1982), and Pune Stock Exchange
Limited (1982), Ludhiana Stock Exchange Association Limited (1983), Gauhati Stock
Exchange Limited (1984), Kanara Stock Exchange Limited (at Mangalore, 1985), Magadh
Stock Exchange Association (at Patna, 1986), Jaipur Stock Exchange Limited (1989),
Bhubaneswar Stock Exchange Association Limited (1989), Saurashtra Kutch Stock Exchange
Limited (at Rajkot, 1989), Vadodara Stock Exchange Limited (at Baroda, 1990) and recently
established exchanges - Coimbatore and Meerut. Thus, at present, there are totally twenty one
recognized stock exchanges in India excluding the Over The Counter Exchange of India
Limited (OTCEI) and the National Stock Exchange of India Limited (NSEIL).
The Table given below portrays the overall growth pattern of Indian stock markets since
independence. It is quite evident from the Table that Indian stock markets have not only
grown just in number of exchanges, but also in number of listed companies and in capital of
listed companies. The remarkable growth after 1985 can be clearly seen from the Table, and
this was due to the favouring government policies towards security market industry.
Trading in Indian stock exchanges are limited to listed securities of public limited companies.
They are broadly divided into two categories, namely, specified securities (forward list) and
non-specified securities (cash list). Equity shares of dividend paying, growth-oriented
companies with a paid-up capital of atleast Rs.50 million and a market capitalization of
atleast Rs.100 million and having more than 20,000 shareholders are, normally, put in the
specified group and the balance in non-specified group.
31
Two types of transactions can be carried out on the Indian stock exchanges: (a) spot delivery
transactions "for delivery and payment within the time or on the date stipulated when
entering into the contract which shall not be more than 14 days following the date of the
contract" : and (b) forward transactions "delivery and payment can be extended by further
period of 14 days each so that the overall period does not exceed 90 days from the date of the
contract". The latter is permitted only in the case of specified shares. The brokers who carry
over the outstandings pay carry over charges (cantango or backwardation) which are usually
determined by the rates of interest prevailing.
A member broker in an Indian stock exchange can act as an agent, buy and sell securities for
his clients on a commission basis and also can act as a trader or dealer as a principal, buy and
sell securities on his own account and risk, in contrast with the practice prevailing on New
York and London Stock Exchanges, where a member can act as a jobber or a broker only.
The nature of trading on Indian Stock Exchanges are that of age old conventional style of
face-to-face trading with bids and offers being made by open outcry. However, there is a
great amount of effort to modernize the Indian stock exchanges in the very recent times.
The traditional trading mechanism prevailed in the Indian stock markets gave way to many
functional inefficiencies, such as, absence of liquidity, lack of transparency, unduly long
settlement periods and benami transactions, which affected the small investors to a great
extent. To provide improved services to investors, the country's first ringless, scripless,
electronic stock exchange - OTCEI - was created in 1992 by country's premier financial
institutions - Unit Trust of India, Industrial Credit and Investment Corporation of India,
Industrial Development Bank of India, SBI Capital Markets, Industrial Finance Corporation
of India, General Insurance Corporation and its subsidiaries and CanBank Financial Services.
32
Trading at OTCEI is done over the centres spread across the country. Securities traded on the
OTCEI are classified into:
Listed Securities - The shares and debentures of the companies listed on the OTC can
be bought or sold at any OTC counter all over the country and they should not be
listed anywhere else
Permitted Securities - Certain shares and debentures listed on other exchanges and
units of mutual funds are allowed to be traded
Initiated debentures - Any equity holding atleast one lakh debentures of a particular
scrip can offer them for trading on the OTC.
OTC has a unique feature of trading compared to other traditional exchanges. That is,
certificates of listed securities and initiated debentures are not traded at OTC. The original
certificate will be safely with the custodian. But, a counter receipt is generated out at the
counter which substitutes the share certificate and is used for all transactions.
In the case of permitted securities, the system is similar to a traditional stock exchange. The
difference is that the delivery and payment procedure will be completed within 14 days.
Compared to the traditional Exchanges, OTC Exchange network has the following
advantages:
OTCEI has widely dispersed trading mechanism across the country which provides
greater liquidity and lesser risk of intermediary charges.
Since the exact price of the transaction is shown on the computer screen, the investor
gets to know the exact price at which s/he is trading.
33
In the case of an OTC issue (new issue), the allotment procedure is completed in a
month and trading commences after a month of the issue closure, whereas it takes a
longer period for the same with respect to other exchanges.
Thus, with the superior trading mechanism coupled with information transparency investors
are gradually becoming aware of the manifold advantages of the OTCEI.
With the liberalization of the Indian economy, it was found inevitable to lift the Indian stock
market trading system on par with the international standards. On the basis of the
recommendations of high powered Pherwani Committee, the National Stock Exchange was
incorporated in 1992 by Industrial Development Bank of India, Industrial Credit and
Investment Corporation of India, Industrial Finance Corporation of India, all Insurance
Corporations, selected commercial banks and others.
Wholesale debt market operations are similar to money market operations - institutions and
corporate bodies enter into high value transactions in financial instruments such as
government securities, treasury bills, public sector unit bonds, commercial paper, certificate
of deposit, etc.
(b) participants.
Recognized members of NSE are called trading members who trade on behalf of themselves
and their clients. Participants include trading members and large players like banks who take
direct settlement responsibility.
34
Trading at NSE takes place through a fully automated screen-based trading mechanism which
adopts the principle of an order-driven market. Trading members can stay at their offices and
execute the trading, since they are linked through a communication network. The prices at
which the buyer and seller are willing to transact will appear on the screen. When the prices
match the transaction will be completed and a confirmation slip will be printed at the office
of the trading member.
NSE has several advantages over the traditional trading exchanges. They are as follows:
NSE brings an integrated stock market trading network across the nation.
Investors can trade at the same price from anywhere in the country since inter-market
operations are streamlined coupled with the countrywide access to the securities.
Unless stock markets provide professionalized service, small investors and foreign investors
will not be interested in capital market operations. And capital market being one of the major
source of long-term finance for industrial projects, India cannot afford to damage the capital
market path. In this regard NSE gains vital importance in the Indian capital market system.
Preamble
Often, in the economic literature we find the terms ‘development’ and ‘growth’ are used
interchangeably. However, there is a difference. Economic growth refers to the sustained
increase in per capita or total income, while the term economic development implies
sustained structural change, including all the complex effects of economic growth. In other
words, growth is associated with free enterprise, where as development requires some sort of
control and regulation of the forces affecting development. Thus, economic development is a
process and growth is a phenomenon.
Economic planning is very critical for a nation, especially a developing country like India to
take the country in the path of economic development to attain economic growth.
35
Why Economic Planning for India?
One of the major objective of planning in India is to increase the rate of economic
development, implying that increasing the rate of capital formation by raising the levels of
income, saving and investment. However, increasing the rate of capital formation in India is
beset with a number of difficulties. People are poverty ridden. Their capacity to save is
extremely low due to low levels of income and high propensity to consume. Therefor, the rate
of investment is low which leads to capital deficiency and low productivity. Low productivity
means low income and the vicious circle continues. Thus, to break this vicious economic
circle, planning is inevitable for India.
The market mechanism works imperfectly in developing nations due to the ignorance and
unfamiliarity with it. Therefore, to improve and strengthen market mechanism planning is
very vital. In India, a large portion of the economy is non-monitised; the product, factors of
production, money and capital markets is not organized properly. Thus the prevailing price
mechanism fails to bring about adjustments between aggregate demand and supply of goods
and services. Thus, to improve the economy, market imperfections has to be removed;
available resources has to be mobilized and utilized efficiently; and structural rigidities has to
be overcome. These can be attained only through planning.
Further, in a country like India where agricultural dependence is very high, one cannot ignore
this segment in the process of economic development. Therefore, an economic development
model has to consider a balanced approach to link both agriculture and industry and lead for a
paralleled growth. Not to mention, both agriculture and industry cannot develop without
adequate infrastructural facilities which only the state can provide and this is possible only
through a well carved out planning strategy. The government’s role in providing
infrastructure is unavoidable due to the fact that the role of private sector in infrastructural
development of India is very minimal since these infrastructure projects are considered as
unprofitable by the private sector.
36
Further, India is a clear case of income disparity. Thus, it is the duty of the state to reduce the
prevailing income inequalities. This is possible only through planning.
The development of planning in India began prior to the first Five Year Plan of independent
India, long before independence even. The idea of central directions of resources to overcome
persistent poverty gradually, because one of the main policies advocated by nationalists early
in the century. The Congress Party worked out a program for economic advancement during
the 1920’s, and 1930’s and by the 1938 they formed a National Planning Committee under
the chairmanship of future Prime Minister Nehru. The Committee had little time to do
anything but prepare programs and reports before the Second World War which put an end to
it. But it was already more than an academic exercise remote from administration.
Provisional government had been elected in 1938, and the Congress Party leaders held
positions of responsibility. After the war, the Interim government of the pre-independence
years appointed an Advisory Planning Board. The Board produced a number of somewhat
disconnected Plans itself. But, more important in the long run, it recommended the
appointment of a Planning Commission.
The Planning Commission did not start work properly until 1950. During the first three years
of independent India, the state and economy scarcely had a stable structure at all, while
millions of refugees crossed the newly established borders of India and Pakistan, and while
ex-princely states (over 500 of them) were being merged into India or Pakistan. The Planning
Commission as it now exists, was not set up until the new India had adopted its Constitution
in January 1950.
To make an assessment of the material, capital and human resources of the country,
including technical personnel, and investigate the possibilities of augmenting such of
these resources as are found to be deficient in relation to the nation’s requirement.
To formulate a plan for the most effective and balanced use of the country’s
resources.
37
Having determined the priorities, to define the stages in which the plan should be
carried out, and propose the allocation of resources for the completion of each stage.
To indicate the factors which are tending to retard economic development, and
determine the conditions which, in view of the current social and political situation,
should be established for the successful execution of the Plan.
To determine the nature of the machinery this will be necessary for securing the
successful implementation of each stage of Plan in all its aspects.
To appraise from time to time the progress achieved in the execution of each stage of
the Plan and recommend the adjustments of policy and measures that such appraisals
may show to be necessary.
Elimination of poverty
Economic growth, as the primary objective has remained in focus in all Five Year Plans.
Approximately, economic growth has been targeted at a rate of five per cent per annum. High
priority to economic growth in Indian Plans looks very much justified in view of long period
of stagnation during the British rule
38
COMPANY PROFILE
Kotak Mahindra Bank is the fourth largest Indian private sector bank by market
capitalization, headquartered in Mumbai, Maharashtra.
Since the inception of the erstwhile Kotak Mahindra Finance Limited in 1985, it has been a
steady and confident journey leading to growth and success. The milestones of the group
growth story are listed below year wise.
2015
Reserve Bank of India (RBI) approves merger of ING Vysya Bank with Kotak Mahindra
Bank effective April 1, 2015.
2014
Thrust on digital and social with the launch of innovative solutions - first-of-its-kind fully
integrated social bank account - 'Jifi', and world's first bank agnostic instant funds transfer
platform using Facebook - 'KayPay'. Subsequently in Jan 2015, 'Jifi Saver' - a savings bank
account with secure and seamless transactions on popular social networks was launched.
Kotak Mahindra Bank acquires 15% equity stake in Multi Commodity Exchange of India
Limited (MCX)
Kotak Mahindra Asset Management Company Ltd. acquires schemes of Pinebridge Mutual
Fund
Kotak Mahindra Group announces its foray into General Insurance business
39
2008 Launched a Pension Fund under the New Pension System.
2006 Bought the 25% stake held by Goldman Sachs in Kotak Mahindra Capital
Company and Kotak Securities.
2005 Kotak Group realigned joint venture in Ford Credit; their stake in Kotak
Mahindra Prime was bought out (formerly known as Kotak Mahindra Primus
Ltd) and Kotak group’s stake in Ford credit Kotak Mahindra was sold.
Launched a real estate fund.
2003 Kotak Mahindra Finance Ltd. converted into a commercial bank - the first Indian
company to do so.
2000 Kotak Mahindra tied up with Old Mutual plc. for the Life Insurance business.
Kotak Securities launched its on-line broking site.
Commencement of private equity activity through setting up of Kotak
Mahindra Venture Capital Fund.
Entered the mutual fund market with the launch of Kotak Mahindra Asset
1998 Management Company.
1996 The Auto Finance Business is hived off into a separate company - Kotak
Mahindra Prime Limited (formerly known as Kotak Mahindra Primus Limited).
40
Kotak Mahindra takes a significant stake in Ford Credit Kotak
Mahindra Limited, for financing Ford vehicles. The launch of Matrix
Information Services Limited marks the Group's entry into information
distribution.
1991 The Investment Banking Division was started. Took over FICOM, one of India's
largest financial retail marketing networks
1987 Kotak Mahindra Finance Ltd entered the Lease and Hire Purchase market
1986 Kotak Mahindra Finance Ltd started the activity of Bill Discounting
Our Businesses
Kotak Mahindra is one of India's leading banking and financial services groups, offering a
wide range of financial services that encompass every sphere of life.
41
Kotak Mahindra Bank Ltd
Kotak Mahindra Bank Ltd is a one stop shop for all banking needs.
The bank offers personal finance solutions of every kind from savings accounts to
credit cards, distribution of mutual funds to life insurance products. Kotak Mahindra
Bank offers transaction banking, operates lending verticals, manages IPOs and
provides working capital loans. Kotak has one of the largest and most respected
Wealth Management teams in India, providing the widest range of solutions to high
net worth individuals, entrepreneurs, business families and employed professionals.
For more information, please visit the Kotak Mahindra Bank website
www.kotak.com/bank/personal-banking/
42
Kotak Securities operate in five main areas of business:
Our services encompass Equity & Debt Capital Markets, M&A Advisory, Private
Equity Advisory, Restructuring and Recapitalization services, Structured Finance
services and Infrastructure Advisory & Fund Mobilization.
For more information, please visit the Kotak Investment Banking website
www.kmcc.co.in
43
Kotak Mahindra Prime Ltd (KMPL)
For more information, please visit the Kotak Mahindra International Business website
www.investindia.kotak.com
For more information, please visit the Kotak Realty Fund website
www.realtyfund.kotak.com
Senior Management-2014-15
Mr. Uday Kotak, is the Executive Vice-Chairman and Managing Director of the Bank, and its
principal founder and promoter. Mr. Kotak is an alumnus of Jamnalal Bajaj Institute of
Management Studies.
45
In 1985, when he was still in his early twenties, Mr Kotak thought of setting up a bank when
private Indian banks were not even seen in the game. First Kotak Capital Management
Finance Ltd (which later became Kotak Mahindra Finance Ltd), and then with Kotak
Mahindra Finance Ltd, Kotak became the first non-banking finance company in India's
corporate history to be converted into a bank. Over the years, Kotak Mahindra Group grew
into several areas like stock broking and investment banking to car finance, life insurance and
mutual funds.
Among the many awards to Mr Kotak's credit are the CNBC TV18 Innovator of the Year
Award in 2006 and the Ernst & Young Entrepreneur of the Year Award in 2003. He was
featured as one of the Global Leaders for Tomorrow at the World Economic Forum's annual
meet at Davos in 1996. He was also featured among the Top Financial Leaders for the 21st
Century by Euromoney magazine. He was named as CNBC TV18 India Business Leader of
the Year 2008 and as the most valued CEO by businessworld in 2010.
Mr. C Jayaram
Mr. C. Jayaram, is a Joint Managing Director of the Bank and is currently in charge of the
Wealth Management Business of the Kotak Group. An alumnus of IIM Kolkata, he has been
with the Kotak Group since 1990 and member of the Kotak board in October 1999. He also
oversees the international subsidiaries and the alternate asset management business of the
group. He is the Director of the Financial Planning Standards Board, India. He has varied
experience of over 25 years in many areas of finance and business, has built numerous
businesses for the Group and was CEO of Kotak Securities Ltd. An avid player and follower
of tennis, he also has a keen interest in psephology.
46
Mr. Dipak Gupta
Joint Managing Director
An electronics engineer and an alumnus of IIM Ahmedabad, Mr. Gupta has been with the
Kotak Group since 1992 and joined the board in October 1999.
He heads commercial banking, retail asset businesses and looks after group HR function.
Early on, he headed the finance function and was instrumental in the joint venture between
Kotak Mahindra and Ford Credit International. He was the first CEO of the resulting entity,
Kotak Mahindra Primus Ltd.
Awards
Recent achievements
At Kotak Mahindra Group we take a client-centric view and constantly innovate to provide
you with the best of services and infrastructure. We have regularly received accolades that
stand testimony to our success in this endeavour. Some of our recent achievements are:
Won ‘Gold Award for Best Innovation – World’s first socially powered bank account’
and ‘Gold Award for Best App developed – World’s first banking application using
Twitter’ awards at the Indian Digital Media Awards 2014 for Kotak Jifi
Recognised as Highest Fundraising Company in Corporate Challenge category in
Standard Chartered Mumbai Marathon 2014
Kotak Mahindra Bank was ranked 292nd among India's most trusted brands according
to the Brand Trust Report 2012, a study conducted by Trust Research Advisory. In the
Brand Trust Report 2013, Kotak Mahindra Bank was ranked 861st among India's
most trusted brands and subsequently, according to the Brand Trust Report 2014,
Kotak Mahindra Bank was ranked 114th among India's most trusted brands.
Adjudged Best Bank among Emerging Banks at Outlook Money Awards 2013
47
Banking
FY2014-15
Kotak Mahindra Bank Ltd. (KMBL)
Uday Kotak - Ernst & Young World Entrepreneur Of The Year Award 2015
Uday Kotak - 'Transformational Business Leader Award' at the AIMA Managing India
Awards 2015
Uday Kotak - 'Entrepreneur of the Decade' by Bombay Management Association (BMA)
Uday Kotak - Banker of the year 2014 by Businessworld magazine
Shanti Ekambaram - Woman of the Year award in the Banking and Financial Services
category for 2013-2014 by IMC Ladies Wing
Shanti Ekambaram - Among Business Today's Most Powerful Women in Indian Business
Best Bank in 2014 by Business India
Most Imminent Bank 2014 by Outlook Money
Euromoney
Best Private Banking Services (India), 2014.
ICAI Award
Excellence in Financial Reporting under Category 1 - Banking Sector for the year
ending 31st March, 2012
Asiamoney
Best Local Cash Management Bank 2012
IDG India
Kotak won the CIO 100 'The Agile 100' award 2011
IDRBT
Banking Technology Excellence Awards Best Bank Award in IT Framework and
Governance Among Other Banks' - 2010
Banking Technology Award for IT Governance and Value Delivery, 2008
IR Global Rankings
Best Corporate Governance Practices - Ranked among the top 5 companies in Asia
Pacific, 2009
FinanceAsia
Best Private Bank in India, for Wealth Management business, 2009
Kotak Royal Signature Credit Card
Was chosen "Product of the Year" in a survey conducted by Nielsen in 2009
48
IBA Banking Technology Awards
Best Customer Relationship Achievement - Winner 2008 & 2009
Best overall winner, 2007
Best IT Team of the Year, 4 years in a row from 2006 to 2009
Best IT Security Policies & Practices, 2007
Euromoney
Best Private Banking Services (overall), 2009
Emerson Uptime Champion Awards
Technology Senate Emerson Uptime Championship Award in the BFSI category,
2008
Miscellaneous
49
The Great Places to Work Institute, India
Best Workplaces in India, 2008
Hewitt
10th Best Employer in India, 2007, 2008 & 2009
Financial Insights Innovation Award
Best Innovation in Enterprise Security Management in the Asia Pacific Region, 2009
Frost & Sullivan
Best Passenger Vehicle Finance Company in India, 2006
CNBC TV 18
Indian Business Leader of the Year, 2008 awarded to Uday Kotak, Executive Vice
Chairman & Managing Director
Banking information
The Bank publishes the standalone and consolidated results on a quarterly basis. The
standalone results is subjected to "Limited Review" by the auditors of the Bank. The same are
also reviewed by the Audit Committee before submission to the Board. Along with the
quarterly results, an earnings update is also prepared and posted on the website of the Bank.
Every quarter, the Executive Vice-Chairman and Managing Director and the Executive
Director(s) participate on a call with the analysts / shareholders, the transcripts of which are
posted on the website of the Bank. The Bank also has dedicated personnel to respond to
queries from investors.
Financial Calendar:For each calendar quarter, the financial results are reviewed and taken
on record by the Board during the last week of the month subsequent to the quarter ending.
The audited annual accounts as at 31st March are approved by the Board, after a review
thereof by the Audit Committee. The Annual General Meeting to consider such annual
accounts is held in the second quarter of the financial year.
50
Stock Exchanges on which listed:
Share Transfer System: Applications for transfers, transmission and transposition are
received by the Bank at its Registered Office or at the office(s) of its Registrars & Share
Transfer Agents. As the shares of the Bank are in dematerialised form, the transfers are duly
processed by NSDL/CDSL in electronic form through the respective depository participants.
Shares which are in physical form are processed by the Registrars & Share Transfer Agents,
Karvy Computershare Private Limited, on a regular basis and the certificates despatched
directly to the investors.
Investor Helpdesk:Share transfers, dividend payments and all other investor related
activities are attended to and processed at the office of our Registrars & Share Transfer
Agents. For lodgement of Transfer Deeds and any other documents or for any
grievances/complaints, kindly contact Karvy Computershare Private Limited, contact details
of which are provided elsewhere in the Report.
51
For the convenience of the investors, transfers and complaints from the investors are accepted
at the Registered Office between 9:30 a.m. to 5:30 p.m. from Monday to Friday except on
bank holidays:
Corporate Responsibility
Sustainability
An integral part of all Kotak Mahindra Group activities is to be consistently
responsible to shareholders, clients, employees, society and the environment.
Economic Development
By helping people achieve their financial goals, Kotak strengthens the fabric of
communities and helps them overcome unemployment and poverty to help them
shape their future.
Doing My Bit
A growing number of employees are committed to civic leadership and responsibility
with the support and encouragement of the Kotak Group. A number of employees
have been involved in strengthening communities through voluntary work, payroll
giving and management inputs.
Group CSR
Kotak Mahindra Bank Ltd
Tel. Board +91 22 6720 6720
Email: cr@kotak.com
52
CHAPTER-IV
DATA ANALYSIS
AND
INTERPRETATION
53
Composition of current Assets
(All the amounts are in Cr)
6000
5000
2013-14
4000
2014-15
3000 2015-16
2016-17
2000 2017-18
Avg.
1000
0
Inventory
Sundry Debtors Cash and
Loans
Bank
&
Other
Advances
current Assets
Total
54
The income statement is also called as income statement, it is considered to be the most
useful of all financial statements. It prepared by a business concern in order to know the
profit earned and loss sustained during a specified period. It explains what has happened to a
business as a result of operations between two balance sheet dates. For this purpose it
matches the revenues and cost incurred in the process of earning revenues and shows the net
The nature of Income which is a focus of the income statement can be well understood if
business is taken as an organization that uses “Input” to produce “Output”. The output of the
goods and services that the business provides to its customers. The values of these outputs are
the goods and services that the business provides to its customers. The values of these outputs
art the amounts paid by the customers for them. These amounts are called “revenues” in the
accounting. The inputs are the economic resources used by the business in providing these
55
STATEMENT OF CHANGES IN WORKING CAPITAL
Rs in Crors
56
10000
8000
6000
4000
2000 Series3
0 Series2
Cash and Bank…
Working capital…
Working capital…
Increase\decrease in…
Sundry Debtors
Current Liabilities
Total
Inventories
Provisions
Total
Other Current Assets
-4000
Interpretation:
The networking capital of KOTAK MAHINDRA LTDhas been decreased to 238.02 Cr the
financial position i.e. the performance of KOTAK MAHINDRA LTDhas decreased and the
current assets defects its current liability.
Note: financial position may depend on long term liabilities and also fixes assets.
57
STATEMENT OF SOURCES AND APPILICATION OF FUNDS FOR THE PERIOD (2016-17)
Rs in cr
1500
1000
500 Source
Rs.
0
1 2 3 4 5 6 7 Application
-500 Rs.
-1000
-1500
-2000
Analysis:
From the table it is observed that the working capital of company shows decreased trend. The
current Asset of the company has increased Rs 3742.35 in 2017-2018. But the item cash balance
showing increasing trend. The current liabilities of company are decreased in 2017-2018.In the
net working capital of company stood -238.02 It is decreased in 2017-18. The decreasing net
working capital.
Regarding the application of funds 45.27 % used for investment in fixed assets and
funds used for working capital purpose. Constitute 35.57 % respectively.
INTERPRETATION
It is concluded that during the period 2017-18 Increasing gross block and net Decreasing in
working capital.
58
STATEMENT OF CHANGES IN WORKING CAPITAL
Rs in Crors
59
10000
8000
6000
4000
2000 Series3
0 Series2
Cash and Bank…
Working capital…
Working capital…
Increase\decrease in…
Sundry Debtors
Current Liabilities
Total
Inventories
Provisions
Total
Other Current Assets
-4000
Interpretation:
The networking capital of KOTAK MAHINDRA LTDhas been decreased to 137.76 Cr the
financial position i.e. the performance of KOTAK MAHINDRA LTDhas decreased and the
current assets defects its current liability.
Note: financial position may depend on long term liabilities and also fixes assets.
60
STATEMENT OF SOURCES AND APPILICATION OF FUNDS FOR THE PERIOD (2015-16)
Rs in cr
1552.10 1552.10
TABLE-2
100%
80%
60%
40% Rs.
20% Application
0% Rs.
1 2 3 4 5 6 7
-20% Source
-40%
-60%
-80%
-100%
61
Analysis:
From the table it is observed that the working capital of company shows decreased trend. The
current Asset of the company has decreased Rs 137.76 in 2013-2014. But the item cash balance
showing increasing trend. The current liabilities of company are decreased in 2013-2014.In the
net working capital of company stood -137.76 It is decreased in 2016-17. The decreasing net
working capital.
Regarding the application of funds 39.97 % used for investment in fixed assets and
funds used for working capital purpose. Constitute 28.04 % respectively
INTERPRETATION
It is concluded that during the period 2016-17 Increasing gross block and net Decreasing in
working capital.
62
STATEMENT OF CHANGES IN WORKING CAPITAL
Rs in Crors
63
10000
8000
6000
4000
2000 Series3
0 Series2
Working capital…
Working capital…
Increase\decrease in…
Loans and Advances
Sundry Debtors
Inventories
Total
Provisions
Total
Current Liabilities
Total current Assets
Interpretation:
The networking capital of KOTAK MAHINDRA LTDhas been decreased to 1310.54 Cr the
financial position i.e. the performance of KOTAK MAHINDRA LTDhas increased and the
current assets defects its current liability.
64
STATEMENT OF SOURCES AND APPILICATION OF FUNDS FOR THE PERIOD (2015-16)
Rs in cr
3000.17 3000.17
TABLE-2
7000
6000
5000
4000 Rs.
3000 Application
2000 Rs.
1000 Source
0
1 2 3 4 5 6 7
-1000
-2000
-3000
65
Analysis:
From the table it is observed that the working capital of company shows decreased trend. The
current Asset of the company has decreased Rs 1310.54 in 2013-2013. But the item cash balance
showing increasing trend. The current liabilities of company are decreased in 2011 2013.In the
net working capital of company stood -2324.34 It is decreased in 2018-16. The decreasing net
working capital.
Regarding the application of funds 49.61 % used for investment in fixed assets and
funds used for working capital purpose. Constitute 38.67 % respectively
INTERPRETATION
It is concluded that during the period 2018-16 Increasing gross block and net Decreasing in
working capital.
66
STATEMENT OF CHANGES IN WORKING CAPITAL
Rs in Crors
6000
4000
2000 Series1
0 Series2
Working capital…
Working capital…
Increase\decrease in…
Loans and Advances
Sundry Debtors
Total
Total
Inventories
Provisions
Current Liabilities
Total Current Liabilities
Total current Assets
Series3
-2000
-4000
-6000
67
Interpretation:
The networking capital of KOTAK MAHINDRA LTDhas been decreased to 2659.04 Cr the
financial position i.e. the performance of KOTAK MAHINDRA LTDhas increased and the
current assets defects its current liability.
Rs in cr
2479.45 2479.45
TABLE-2
6000
5000
4000
3000
Rs.
2000 Application
1000 Rs.
Source
0
1 2 3 4 5 6 7
-1000
-2000
-3000
68
Analysis:
From the table it is observed that the working capital of company shows decreased trend. The
current Asset of the company has decreased Rs 2659.04 in 2013-2014is 1951.69. But the item
cash balance showing increasing trend. The current liabilities of company are decreased in 2011
2013.In the net working capital of company stood -1981.17 It is decreased in 2017-18. The
decreasing net working capital .
Regarding the application of funds 41.21 % used for investment in fixed assets and
funds used for working capital purpose. Constitute 34.59 % respectively
INTERPRETATION
It is concluded that during the period 2017-18 Increasing gross block and net Decreasing in
working capital.
69
STATEMENT OF CHANGES IN WORKING CAPITAL
Rs in Crors
100%
80%
60%
40%
20% Series3
0% Series2
Working capital…
Working capital…
Increase\decrease in…
Loans and Advances
Sundry Debtors
Total
Total
Inventories
Provisions
Current Liabilities
Total Current Liabilities
Total current Assets
-20% Series1
-40%
-60%
-80%
-100%
70
Interpretation:
The networking capital of KOTAK MAHINDRA LTDhas been decreased to 2691 Cr the
financial position i.e. the performance of KOTAK MAHINDRA LTDhas increased and the
current assets defects its current liability.
71
STATEMENT OF SOURCES AND APPILICATION OF FUNDS FOR THE PERIOD (2013-14)
Rs in cr
2934.89 2934.89
TABLE-2
0
1 2 3 4 5 6 7
-500
-1000
Year
Increase/Decrease
-1500
Amount
-2000
-2500
-3000
72
Analysis:
From the table it is observed that the working capital of company shows decreased trend. The
current Asset of the company has decreased Rs 2882.58 in 2010-2011 is 1504.54. But the item
cash balance showing increasing trend. The current liabilities of company are decreased in 2011
2011.In the net working capital of company stood -2691.38. It is decreased in 2013-14. The
decreasing net working capital is Rs 2691.38
Regarding the application of funds 33.71% used for investment in fixed assets and
funds used for working capital purpose. Constitute 30.77% respectively
INTERPRETATION
It is concluded that during the period 2017-18 Increasing gross block and net Decreasing in
working capital.
73
NET DECREASE IN WORKING CAPITAL
Rs in Lakhs
Year Increase/Decrease Amount
2013-14 Decrease -2691.38
2014-15 Decrease -1981.17
2015-16 Decrease -1310.54
2016-17 Decrease -137.76
2017-18 Decresase -238.02
Amount
0
Decrease Decrease Decrease Decrease Decresase
-500
2013-14 2014-15 2015-16 2016-17 2017-18
-1000
-1500 Amount
-2000
-2500
-3000
TABLE 7
INTERPRETATION
The above table we observed that 2014-15 would be decreased. In the year 2013-14
the working capital is Rs. 2691.38. In 2017-18 Rs.1981.17 has decreased the working capital.
In the year 2016-17 it was 137.76. current year it is -238.02.
74
CHAPTER-V
FINDINGS
CONCLUSION
SUGGESTIONS
BIBLIOGRAPHY
75
FINDINGS
1. The KOTAK MAHINDRA LTDnet working capital is satisfactory between the years
2017-2018 since it shows decreasing trend ; but after that it is in declining position.
2. The current ratio of KOTAK MAHINDRA LTDis satisfactory during the period of
3. The average quick ratio of KOTAK MAHINDRA LTDis not good though the quick
ratio is showing maximum value of 6.01 in the year 2017-18 and then it is declining
to be deal.
without any fit falls up to 2017-18 But in the year 2017-18 it is declined, and again it
has increased in the year 2017-18. Good inventory management is good sign for
efficient management
6. Total Assets turnover ratio of KOTAK MAHINDRA LTDis not satisfactory because
it is always below one, except in the year 2017-18 having a value of 1.03
7. Return on investment is not satisfactory. This indicates that the company’s funds are
76
CONCLUSION
The KOTAK MAHINDRA LTDnet working capital is satisfactory between the years since it
shows increasing trend; but after that it is in declining position Profit Margin of KOTAK
MAHINDRA LTDis decreasing and showing negative profit because there is increase in the
price of copper The KOTAK MAHINDRA LTDNet Working Capital Ratio is satisfactory.
The Operating Ratio of KOTAK MAHINDRA LTDisn’t satisfactory. Due to increase in cost
of production, this ratio is decreasing. So the has to reduce its office administration expenses
Improve position funds should be utilized properly. Better Awareness to increase the sales is
suggested. Cost cut down mechanics can be employed. Better production technique can be
employed.
77
SUGGESTIONS
Net working capital is very low; it is suggested to maintain sufficient net working
capital.
Effective inventory management is needed in the company
The firm should increase investment in current assets to create sufficient securities for
the current liabilities
For the improving the financial performance of the company the following
suggestions are made.
In order to reduce the outside borrowings in the company has to acquire. The capital
from equity sources. Keeping in view the debt equity the proportion as normal.
The liquidity of the company should be improved by maintaining the optimum current
assets and liquid assets according to standard norms.
To improve the financial health of the company and maximizing the time between the
source mobilization and utilization the management must introduce the new cost
saving techniques.
78
BIBLIOGRAPHY
79