1 | P a g eINTRODUCTION:Insurance or assurance, device for indemnifying or guaranteeing an i n d i v i d u a la g a i n s t l o s s . R e i m b u r s e m e n t i s m a d e f r o m a f u n d t o w h i c h m a n yindividuals exposed to the same risk have contributed certain specified amounts,called premiums. Payment for an individual loss, divided among many, does not fallheavily upon the actual loser. The essence of the contract of insurance, called a p o l i c y , i sm u t u a l i t y . T h e m a j o r o p e r a t i o n s o f a n i n s u r a n c e c o m p a n ya r e underwriting, the determination of which risks the insurer can take on; andratemaking, the decisions regarding necessary prices for such risks. The underwriter isresponsible for guarding against adverse selection, wherein there isexcessive c o v e r a g e o f h i g h r i s k c a n d i d a t e s i n p r o p o r t i o n t o t h ec o v e r a g e o f l o w r i s k candidates. In preventing adverse selection, the underwriter mustconsider physical, psychological, and moral hazards in relation to applicants. Physical hazardsinclude those dangers which surround the individual or property, jeopardizing thewell- being of the insured. The amount of the premium is determined by the operation of the lawof averages as calculated by actuaries. By investing premium payments in a wide range ofrevenue-producing projects, insurance companies have b ecome majorsuppliers of capital, and they rank among the nations largest institutional investors.In simple terms, insurance allows someone who suffers a loss or accident to be compensatedfor the effects of their misfortune. It lets you protect yourself against everyday risks toyour health, home and financial situation.
2 | P a g eNew York Life is a Fortune 100 company and Max India Limited is one of Indias leadingmulti-business corporations. The company has positioned itself on the qualityplatform. It has developed a governance model based on the core values ofexcellence, honesty, knowledge, caring, integrity and teamwork. The strategy is toestablish itself as a trusted life insurance specialist through a qualityapproach to business. In line with its values of financial responsibility, Max N e w Y o r kL i f e h a s a d o p t e d p r u d e n t f i n a n c i a l p r a c t i c e s t o e n s u r e s a f e t y o fpolicyholders funds. The Companys paid up capital is Rs. 657 crore,which is m o r e t h a n t h e n o r m l a i d d o w n b y I R D A . M a x N e w Y o r kL i f e h a s i d e n t i f i e d individual agents as its primary channel of distribution.MDRT is an exclusive congregation of the world’s top selling insurance Agents and isinternationally recognized as the standard of excellence in the Life insurance business.Having set a best in class agency distribution model in place, the company isspearheading a major thrust into additional distribution channels to furthergrow its business. The company is using a five-pronged strategy to pursue alternative channels ofdistribution. These include the franchisee model, rural business, direct sales forceinvolving group insurance and telemarketing opportunities and corporate alliances.Max New York Life offers a suite of flexible products. It now has 26 life insurance products and8 riders that can be customized to have more than 400 products.Max Life Insurance Company Ltd (formerly: Max New York Life Insurance Company Ltd.) is ajoint venture between Max India Ltd., one of India’s multi-business corporations and M S GroupJapan, a Fortune 100 company. Incorporated in 2012, Max New York Life started commercial
3 | P a g eoperation in 2001 and today is one of India’s leading private life insurance companies. Thecompany offers individual and group life insurance products and is present across the countrythrough a wide distribution network of multi channel distribution.Max India is a leading Indian multi-business corporate, while Mitsui Sumitomo Insurance is amember of MS&AD Insurance Group, which is amongst the top general insurers in the world.Max Life Insurance offers comprehensive life insurance and retirement solutions for long-termsavings and protection. A financially stable company with sound investment expertise, Max LifeInsurance has a strong customer-centric approach focused on advice-based sales and qualityservice.In the financial year 2011-12, Max Life Insurance had a market share of 8.6%. The Company hasbeen one of the fastest growing life insurers, with total revenue of Rs. 6,391 crore and enterpriseprofit of Rs. 733 crore for the Financial Year 2011-12. The Companys capital base of Rs. 2,127crore, with a solvency margin of 534% is testimony of its financial strength and stability. As on31st March 2012, Max Life Insurance had assets under management of Rs. 17,215 crore.The New York Life Insurance Company (NYLIC) is one of the largest mutual life-insurancecompanies in the United States, and one of the largest life insurers in the world, with about $287billion in total assets under management, and more than $15 billion in surplus and AVR. Thecompany ranks 71 on the 2011 Fortune 100 list, making it the highest privately held insurancecompany on that list. In 2007, NYLIC achieved the best possible ratings by the four independentrating companies (Standard & Poors, AM Best, Moodys and Fitch). In June 2009, the same fourrating companies reaffirmed New York Lifes superior financial strength, which became a sellingpoint in national TV ad campaigns that same year. The company is now one of only three life
4 | P a g einsurers to hold the highest ratings currently awarded to any life insurer by all four ratingagencies (Moodys: Aaa, A.M. Best: A++. Standards & Poors: AA+, Fitch: AAA. All of theseare for financial strength.). Other New York Life affiliates provide an array of securities productsand services, as well as institutional and retail mutual funds.VisionTo become the most admired life Insurance Company in India.MissionTo become one of the top quartile life Insurance companies in India. Be a national player. Be thebrand of the first Choice. Be the Employer of the Choice. Become principal of choice for agents.
5 | P a g eHISTORY:The company was founded in 1845 as the Nautilus (Capt. Nemo) Insurance Company in NewYork City, with assets of just $17,000. It was renamed the New York Life Insurance Company in1849. Its first headquarters were at 112-114 Broadway; the first president was James De PeysterOgden. The current New York Life headquarters was designed by noted architect Cass Gilbertand completed in 1928. The New York Life building, at 51 Madison Avenue, was constructedduring the presidency of Darwin P. Kingsley. He expanded the company’s operations anddeveloped new types of insurance. As with other early insurance companies in the U.S., in itsearly years the company insured the lives of slaves for their owners. In response to bills passed inCalifornia in 2001 and in Illinois in 2003, the company reported that Nautilus sold 485slaveholder life insurance policies during a two-year period in the 1840s; they added that theirtrustees voted to end the sale of such policies 15 years before the Emancipation Proclamation.The company became known for innovative business practices. In 1860, well before state lawsrequired it, New York Life developed the non-forfeiture option, the predecessor to theguaranteed cash values of modern policies, under which a policy remains in force even if apremium payment is missed. It was also the first American life insurance company to pay a cashdividend to policyholders, and the first U.S. company to issue policies to women at the samerates as men. Susan B. Anthony was one of their first female policy holders, and her fatherworked for NYLIC. In 1896, New York Life became the first company to insure people withdisabilities and the first to issue a policy with a disability benefit that presumes total disability tobe permanent after a predetermined period.
6 | P a g eIn the late 1990s New York Life was one of several large mutual life insurers to back a bill thatwould allow demutualization into a structure known as a mutual holding company (MHC). CEOSy Sternberg himself argued strongly in favor of the bill, which was ultimately defeated. TheNYLIC board of directors subsequently reversed course, with the company strongly and publiclyembracing their mutual nature in a series of advertisements.According to their Report to Policyholders 2007, in early 2007 the companys managers becameconcerned about the state of credit markets, so in February 2007 based on our belief that themarkets were acting irrationally New York Life decided to move much of its cash flow into saferinvestments such as US Treasury bonds. By August 2007, the credit market problems we hadfeared were front page news, the Report notes.In November 2008, the company announced it will not participate in the Troubled Asset ReliefProgram. The company can meet all of its strategic objectives without government capital, itsbusinesses are strong and profitable, and it is committed to remaining a mutual companyoperating for the sole benefit of its policyholders, states a company press release.Theodore Ted Mathas, president and CEO in 2008, said at the time of the financial crisis thatNew York Life is built for times like these. This phrase became the title for the 2008 report topolicyholders. Ted Mathas becomes the company chairman on June 1, 2009.New York Life maintains superior financial ratings from A.M. Best, Fitch Ratings, Moodys andStandard and Poors, all of which have reaffirmed the ratings during the financial crisis ofautumn 2008. Max Life Insurance Company Limited provides life insurance products in India.The company offers a range of participating, non-participating, and linked products covering life
7 | P a g einsurance, pension, and health benefits. The company provides individual and group lifeinsurance products consisting of protection, child, retirement, growth, savings, health, and groupplans Max Life Insurance Company Limited distributes its products primarily through individualagents, corporate agents, banks, and brokers. The company was formerly known as Max NewYork Life Insurance Company Limited and changed its name to Max Life Insurance CompanyLimited in July 2012. The company was incorporated in 2000 and is based in New Delhi, India.Max New York Life Insurance Company Limited is a subsidiary of Max India Limited.
8 | P a g eMax Life Insurance Company Limited Key DevelopmentsMax Life Insurance Company Limited Announces Audited Earnings Results for the SixMonths of 2013Max Life, the company recorded the net profit before tax of INR 3,980 million, as compared toINR 3, Insurance Company Limited announced audited earnings results for the six months of2013. For the period 750 million in the same period last year, recording a growth of 6%. Thisrise in net profit was a result of steady revenue coupled with better productivity and costefficiency.Max Life Insurance Company Limited Declares Maiden Interim DividendMax Life Insurance Company Limited announced its maiden interim dividend of 5.1% for itsshareholders. The decision was taken at a board meeting. The company has decided to distributeINR 1,150 million based on the performance of the company during the first half of the financialyear 2012-13.Max India Mulls Max Life Insurance Stake Sale, Chairman Denies Sale PlansMax India Limited is looking to sell nearly 5% stake in Max Life Insurance Company Limited tolong-term foreign financial investors. Max India owns Max Life Insurance along with MitsuiSumitomo Primary Life Insurance Co., Ltd. The sale is being considered following the recentdecision by the Indian Cabinet to approve the proposal to raise foreign direct investment (FDI) inthe insurance sector to 49% from 26%. Max India and Max Life Insurance’s Chairman, AnaljitSingh told Times of India, Max India is under no obligation to divest additional stake to theexisting joint venture partner. If we were to divest any stake, it would purely be a commercialdecision to unlock the valuation from our life insurance business.
9 | P a g eNew York Life exists insurance venture with max India groupCoimbatore, June 27:Japanese insurance company, Mitsui Sumitomo Insurance Company Ltd, has replaced New YorkLife International Holdings Ltd as the overseas partner of Max India Group in its insurance jointventure in the country — Max New York Life Insurance Company Ltd.Mitsui Sumitomo Insurance has acquired 26 per cent stake in the Indian insurance outfit — 16.63per cent stake from the US company and 9.37 per cent from Max India Ltd.Max India Group had itself acquired 9.37 per cent stake in the insurance joint venture from itsformer partner Max New York Life Insurance Company, which had a 26 per cent stake, bypaying an aggregate consideration of Rs 180.84 crore.The amount was close to par value of the shares to ensure that the non-resident holding inMNYL was within the sectoral cap of 26 per cent.But Max India Group received an aggregate consideration of Rs 984.44 crore from MitsuiSumitomo Insurance for the sale of 9.37 per cent in MNYL, which was being renamed as MaxLife Insurance Company Ltd, subject to regulatory approvals.Max India said that its board of directors approved the purchase of 4 per cent equity stake heldby Axis Bank in MNYL, in tranches not exceeding one per cent of equity stake every year beforeOctober 2020 for an estimated Rs 414 crore.Of this purchase, maximum of one per cent stake was due to be bought in the near future, MaxIndia Group said in a statement to the stock exchanges.
10 | P a g eCOMPARATIVE ANALYSISComparative analysis of Revenue A/C[with respect to Participating Policies (Non-Linked)]Particulars 09-10(Rs in lacs)10-11(Rs in lacs)AbsoluteIncrease/(Decrease)(In Rs)PercentageIncrease/(Decrease)(In %)Premiums earned-(Net)PremiumsLess: Reinsurance CededAdd: Reinsurance AcceptedIncome from Investmentsa)Interest, Dividends & Rent-Grossb)Profit on sale/ redemption ofinvestmentsc)(Loss) on sale/ redemptionof investmentsd)Transfer/ Gain onrevaluation/change in fairvaluee)Amortization of discount/(premium)f)Appropriation/ExpropriationAdjustment accountOther IncomeContribution from theShareholders accountMiscellaneous incomeTotal (A)CommissionOperating Expenses related toInsurance businessProvision for doubtful debtsBad debts written offProvision for TaxProvision (other than taxation)a)For diminution in the valueof investments (Net)53649.64219.08NIL53430.566465.18124.86NILNIL(34.97)NILNIL27.0060012.639971.0222919.9234.481NILNIL64754.61363.73NIL64390.889155.60492.36(1.76)NIL116.76NILNIL188.0074341.848911.9021989.0556.04NILNILNIL11104.97144.65NIL10960.322690.42367.5(1.76)NIL151.73NILNIL161.0014329.21(1059.12)(930.87)21.56(1)NILNIL20.7066.03NIL20.5141.61294.33NILNIL433.89NILNIL596.3023.88(10.62)(4.06)62.53(100)NILNIL
11 | P a g eb)OthersTotal (B)Benefits Paid (Net)Interim Bonuses PaidChange in valuation ofliability against life policies inforce:a)Grossb)Amount ceded inReinsurancec)Amount accepted inReinsuranceTotal (C)SURPLUS/(DEFICIT)(D)=(A)-(B)-(C)NIL32925.437963.23NIL14818.80152.75NIL22934.784152.42NIL30956.9911312.39NIL27435.3060.84NIL38808.534576.32NIL(1968.44)3349.16NIL12616.50(91.91)NIL15873.75423.9NIL(5.98)42.06NIL85.14(60.17)NIL69.2110.21
12 | P a g eComparative analysis of Revenue A/C[with respect to Non-Participating Policies (Non-Linked)]Particulars 09-10(Rs in lacs)10-11(Rs in lacs)AbsoluteIncrease/(Decrease)(In Rs)PercentageIncrease/(Decrease)(In %)Premiums earned-(Net)PremiumsLess: Reinsurance CededAdd: Reinsurance AcceptedIncome from Investmentsa)Interest, Dividends & Rent-Grossb)Profit on sale/ redemption ofinvestmentsc)(Loss) on sale/ redemptionof investmentsd)Transfer/ Gain onrevaluation/change in fairvaluee)Amortization of discount/(premium)f)Appropriation/ExpropriationAdjustment accountOther IncomeContribution from theShareholders accountMiscellaneous incomeTotal (A)CommissionOperating Expenses related toInsurance businessProvision for doubtful debtsBad debts written offProvision for TaxProvision (other than taxation)a)For diminution in the valueof investments (Net)b)OthersTotal (B)2154.47150.22NIL2004.25406.2316.00NILNIL(3.12)NILNIL0.022407.54199.13203.790.18NILNILNILNIL403.104020.14126.55NIL3893.59548.80NILNILNIL(2.08)NILNIL2.034442.34630.051523.153.56NILNILNILNIL2156.761865.67(23.67)NIL1889.34142.57(16)NILNIL1.04NILNIL2.012034.80430.921319.363.38NILNILNILNIL1753.6686.60(15.76)NIL94.2735.10(100)NILNIL33.33NILNIL1005084.52216.40647.411877.78NILNILNILNIL435.04
13 | P a g eBenefits Paid (Net)Interim Bonuses PaidChange in valuation of liabilityagainst life policies in force:a)Grossb)Amount ceded inReinsurancec)Amount accepted inReinsuranceTotal (C)SURPLUS/(DEFICIT)(D)=(A)-(B)-(C)362.67NIL513.7446.46NIL922.871081.57592.19NIL1443.4221.86NIL2057.47228.11229.52NIL929.68(24.6)NIL1134.60(853.46)63.29NIL180.96(52.95)NIL122.94(78.91)
14 | P a g eComparative analysis of Revenue A/C[with respect to Linked Policies]Particulars 09-10(Rs in lacs)10-11(Rs in lacs)AbsoluteIncrease/(Decrease)(In Rs)PercentageIncrease/(Decrease)(In %)Premiums earned-(Net)PremiumsLess: Reinsurance CededAdd: Reinsurance AcceptedIncome from Investmentsa)Interest, Dividends & Rent-Grossb)Profit on sale/ redemption ofinvestmentsc)(Loss) on sale/ redemptionof investmentsd)Transfer/ Gain onrevaluation/change in fairvaluee)Amortization of discount/(premium)f)Appropriation/ExpropriationAdjustment accountOther IncomeContribution from theShareholders accountMiscellaneous incomeTotal (A)CommissionOperating Expenses related toInsurance businessProvision for doubtful debtsBad debts written offProvision for TaxProvision (other than taxation)a)For diminution in the valueof investments (Net)b)OthersTotal (B)69030.31548.50NIL68481.817046.4616907.20(2704.80)(20417.05)(2.93)57.12NILNIL69367.812001.946535.959.41NILNILNILNIL8547.3054693.99390.56NIL54303.439443.5216681.54(19940.94)(8901.05)18.09NILNIL15.2151619.801321.374342.9444.95NILNILNILNIL5709.26(14336.32)(157.94)NIL(14178.38)2397.06(225.66)(17236.14)11516.0021.02(57.12)NIL15.21(17748.01)(680.57)(2193.01)35.54NILNILNILNIL(2838.04)(20.77)(28.79)NIL(20.70)34.02(1.33)(637.24)56.40717.41(100.00)NILNIL(25.59)(34.00)(33.56)377.68NILNILNILNIL(33.20)
15 | P a g eBenefits Paid (Net)Interim Bonuses PaidChange in valuation ofliability against life policies inforce:a)Grossb)Amount ceded inReinsurancec)Amount accepted inReinsuranceTotal (C)SURPLUS/(DEFICIT)(D)=(A)-(B)-(C)25229.00NIL25752.45NILNIL50981.459839.0637591.43NIL(391.54)NILNIL37199.898710.6512362.43NIL(26143.99)NILNIL(13781.56)(1128.41)49.00NIL(101.52)NILNIL(27.03)(11.47)
16 | P a g eComparative analysis of Profit & Loss A/CParticulars 09-10(Rs in lacs)10-11(Rs in lacs)AbsoluteIncrease/(Decrease)(In Rs)PercentageIncrease/(Decrease)(In %)INCOMETurnover (Gross)Less: Sales returnDiscountExcise dutyTurnover (Net)Income from InvestmentactivitiesOther IncomeEXPENDITUREManufacturing and otherExpenses(Increase/Decrease ofInventories)Personnel ExpensesAdministration and otherExpensesFinancial ExpensesDepreciation/AmortizationProfit/Loss before TaxProvision for TaxCurrent TaxDeferred tax chargeTotal tax expenseLoss after taxBalance brought forward fromPrevious yearProfit carried forward to theBalance sheet36268.88(237.18)(383.09)(2334.45)33314.162186.02369.8935870.0725602.54110.893386.113798.591455.581259.8835613.59256.4846.21269.04315.25(58.77)68716.95468658.18045601.35(341.15)(454.30)(3104.86)41701.044594.132305.2248600.3932986.76(439.98)6004.685343.936721.551464.0352080.97(3480.58)NIL728.94728.94(4209.52)68658.1864448.669332.47(103.97)(71.21)(770.41)8386.882408.111935.3312729.697384.22(550.87)2618.571545.345265.97204.1516467.38(3737.06)(46.21)459.9413.69(4150.75)(58.774)(4209.52)2.574(43.84)(18.59)(33.00)25.18110.16523.2235.49288.16(496.77)77.3340.68361.7916.2046.24(14.58)(100.00)170.94131.23(7062.70)(0.09)(6.13)
17 | P a g eComparative analysis of Balance SheetParticulars 09-10(Rs in lacs)10-11(Rs in lacs)AbsoluteIncrease/(Decrease)(in Rs)PercentageIncrease/(Decrease)(in %)SOURCES OF FUNDSSHAREHOLDERS FUNDSShare CapitalShare warrantsEmployee stock optionsOutstandingReserves and SurplusLOAN FUNDSSecured LoansUnsecured LoansDeferred Tax Liability (Net)APPLICATION OF FUNDSFIXED ASSETSGross BlockLess: AccumulatedDepreciation/AmortizationNet BlockCapital Work-in-ProgressIncluding capital advancesINVESTMENTSCURRENT ASSETS,LOANSAND ADVANCESInventoriesSundry DebtorsCash and Bank BalancesOther Current AssetsLoans and Advances(A)Less: CURRENTLIABILITIES ANDPROVISIONSCurrent Liabilities4647.498670.00551.21215882.74229751.448201.7552192.7560394.50269.04290414.9827125.868712.3018413.562239.6320653.19258256.152546.006120.081443.502.635433.1615545.373042.624649.698670.001896.88211858.83227075.4010216.4052192.7552409.15997.98290482.5343055.0610116.7232938.34277.2333215.57197067.024156.107524.5245768.64830.399819.2568098.907305.082.2NIL1345.67(4023.91)(2676.04)2014.65NIL(7985.35)728.9467.5515929.201404.4214524.78(1962.4)12562.38(61189.13)1610.101404.4444325.14827.764386.0952553.534262.460.05NIL244.13(1.86)(1.16)24.56NIL(13.22)270.940.0258.7216.1278.88(87.62)60.83(23.69)63.2422.953070.6731473.7680.79338.07140.09
18 | P a g eProvisions(B)NET CURRENT ASSETS(A-B)997.114039.7311505.64290414.98593.887898.9660199.94290482.53(403.23)3859.2348694.3067.55(40.44)95.53423.220.02
19 | P a g eRATIOS AND ITS ANALYSISCURRENT RATIOAn indication of a companys ability to meet short-term debt obligations; the higher the ratio, themore liquid the company is. Current ratio is equal to current assets divided by current liabilities.If the current assets of a company are more than twice the current liabilities, then that company isgenerally considered to have good short-term financial strength. If current liabilities exceedcurrent assets, then the company may have problems meeting its short-term obligationsCurrent Ratio = Current AssetsCurrent Liabilities(ideal ratio = 2:1)09-10Current ratio = 15545.374039.73= 3.85:110-11Current ratio = 68098.907898.96= 8.62:1
20 | P a g eANALYSIS:The current ratio has improved drastically in the year 10-11 because of huge increase in the cashand bank balance in that year and also due to increase in other current assets.QUICK RATIOAn indicator of a companys short-term liquidity. The quick ratio measures a companysability to meet its short-term obligations with its most liquid assets. The higher the quick ratio,the better the position of the company.The quick ratio is more conservative than the current ratio, a more well-known liquidity measure,because it excludes inventory from current assets. Inventory is excluded because somecompanies have difficulty turning their inventory into cash. In the event that short-termobligations need to be paid off immediately, there are situations in which the current ratio wouldoverestimate a companys short-term financial strength.Quick ratio = Quick assetsQuick liabilities(Ideal ratio = 1:1)Quick assets = current assets –inventories-prepaid expensesQuick liabilities = current liabilities-bank overdraft09-10Quick ratio = 15545.37-25464039.73
21 | P a g e= 12999.374039.73= 3.22:110-11Quick ratio = 68098.90-4156.107898.96= 63942.87898.96= 8.10:1ANALYSIS:The quick ratio has also improved in 10-11 mainly because of huge increase in cash and bankbalance.STOCK TO WORKING CAPITAL RATIODefined as the difference between current assets and current liabilities. There are some variationsin how working capital is calculated. Variations include the treatment of short-term debt. Inaddition, current assets may or may not include cash and cash equivalents, depending on thecompany.It is the amount of stock in comparison with the working capital amount.Stock to working capital ratio = stockWorking capital09-10Stock to working capital ratio=254611505.64
22 | P a g e= 0.221:110-11Stock to working capital ratio= 4156.1060199.94= 0.069:1ANALYSIS:In the year 10-11 stock has improved but its ratio against net working capital has declined. Thismight be due to massive increase in net working capital.DEBTORS TO WORKING CAPITAL RATIODefined as the difference between current assets and current liabilities. There are some variationsin how working capital is calculated. Variations include the treatment of short-term debt. Inaddition, current assets may or may not include cash and cash equivalents, depending on thecompany.It is the amount of debtors in comparison with the working capital amount.Debtors to working capital ratio=DebtorsWorking capital09-10Debtors to working capital ratio= 6120.0811505.64= 0.532:110-11Debtors to working capital ratio= 7524.5260199.94
23 | P a g e= 0.125:1ANALYSIS:Despite of increase in debtors in the year 10-11, debtors to working capital ratio has declinedbecause net working capital has increased to almost 5.23 times as compared to year 09-10.DEBT-EQUITY RATIOA measure of a companys financial leverage calculated by dividing its total liabilities bystockholders equity. It indicates what proportion of equity and debt the company is using tofinance its assets.A high debt/equity ratio generally means that a company has been aggressive in financing itsgrowth with debt. This can result in volatile earnings as a result of the additional interestexpense. If a lot of debt is used to finance increased operations (high debt to equity), thecompany could potentially generate more earnings than it would have without this outsidefinancing. If this were to increase earnings by a greater amount than the debt cost (interest), thenthe shareholders benefit as more earnings are being spread among the same amount ofshareholders. However, the cost of this debt financing may outweigh the return that the companygenerates on the debt through investment and business activities and become too much for thecompany to handle. This can lead to bankruptcy, which would leave shareholders with nothing.The debt/equity ratio also depends on the industry in which the company operates. For example,capital-intensive industries such as auto manufacturing tend to have a debt/equity ratio above 2,while personal computer companies have a debt/equity of under 0.5.Debt-equity ratio=debtEquity
24 | P a g e(ceiling limit=2:1)Debt= secured loans + unsecured loansEquity= preference share capital + equity share capital + reserves & surplus –Miscellaneous expenditure.09-10Debt-equity ratio= 8201.75+52192.7513868.7+215882.74= 60394.5229751.44= 0.263:110-11Debt-equity ratio= 10216.40+52192.7515216.57+211858.83= 62409.15227075.40= 0.275:1ANALYSIS:The Debt-Equity ratio has increased in the year 10-11 which is a bad sign but at the same time itis a favourable aspect because every company should have trading done through debt as well andnot only through equity.PROPRIETORY RATIOProprietary ratio refers to a ratio which helps the creditors of the company in seeing that theircapital or loans which the creditors have given to the company are safe. Proprietary ratio can becalculated as follows – Proprietors funds/Total Assets.
25 | P a g eIn the above formula proprietary funds includes equity and preference share capital of thecompany and reserves and surplus of the company, while total assets of company includes bothfixed assets and current assets of the company but it excludes fictitious assets which companymay have.Proprietary ratio highlights the financial position of the company and therefore Proprietary ratiocan be interpreted as good if it is high because a higher proprietary ratio would imply thatcompany has enough capital to repay its creditors whenever any such demand is made by thecreditors. A lower proprietary ratio would imply that company is not in a position to pay all of itscreditors and therefore a low proprietary ratio is a cause of concern for the creditors of thecompany.Proprietory ratio=proprietors fundsTotal assets(also known as NET WORTH RATIO)Proprietors funds=same as equityTotal assets=fixed assets + investments + current assets09-10Proprietory ratio= 13868.7+215882.7420653.19+258256.15+15545.37= 229751.44294454.71= 0.780:1
26 | P a g e10-11Proprietory ratio= 15216.57+211858.8333215.57+197067.02+68098.90= 227075.40298381.49= 0.761:1ANALYSIS:The Proprietory Ratio has declined from 0.780:1 to 0.761:1 due to decline in proprietors funds.
27 | P a g eRemuneration paid to Directors during 2010-2011The company has not paid any remuneration to its Non-Executive Directors, except for theSitting Fee for attending meetings of the Board/Committees.Details of the remuneration charged to profit and loss account in respect of Mr. Analjit Singh,Chairman & Managing Director of the Company for the year ended March 31, 2011 are asunder:Description Amount in Rs.Salary 49939240Benefits (Perquisites) 7227057Performance Incentive 39770936Retirals 3240000Service contract --Notice period 3 monthsStock options, if any (in numbers) --STOCK PRICE HISTORYMONTH BSE NSEHigh(Rs)Low(Rs)High(Rs)Low(Rs)April, 10 223.00 175.70 222.90 175.65May, 10 186.70 158.30 186.75 158.40June, 10 176.45 151.65 176.90 151.60July, 10 169.90 151.50 169.95 142.40August, 10 168.00 149.35 168.20 149.65September, 10 177.60 151.00 177.40 151.55October, 10 181.80 158.00 181.60 155.15November, 10 177.10 132.90 177.15 132.00December, 10 164.90 135.00 164.90 135.40January, 10 152.90 140.30 153.00 139.00February, 10 155.35 137.00 156.00 137.00March,10 164.60 140.10 165.00 137.40
28 | P a g eShareholding Pattern as on March 31, 2011CATEGORY No. of shares held % ofshareholdingPromoters 84980654 36.55Mutual Funds and UTI 2691844 1.16Banks, Financial Institutions 38160 0.02Insurance Companies 45750 0.02Foreign Institutional Investors 69756285 30.00Foreign Direct Investment 40149631 17.27Bodies Corporate 9925354 4.27Non-Resident Indians/ Overseas CorporateBodies 3021674 1.30Clearing Members 392271 0.17Resident Individuals 21482787 9.24Total 232484410 100.00Distribution of shareholding as on March 31, 2011No. ofShareholdersPercentage tototalShareholdings No. of shares % to total47363 97.39 01-500 13357135 5.75664 1.37 501-1000 2465990 1.06253 0.52 1001-2000 1869126 0.8087 0.18 2001-3000 1084324 0.4750 0.10 3001-4000 896867 0.3931 0.06 4001-5000 705103 0.3057 0.12 5001-10000 2076902 0.89127 0.26 10001- above 210028963 90.3448632 100.00 Total 232484410 100.00
29 | P a g eCOMMON SIZE STATEMENTCommon size Balance Sheet as on 31stMarch, 2010Particulars Rs. (in lacs) Rs. (in lacs) % %SOURCES OF FUNDSSHAREHOLDERS FUNDSShare CapitalShare warrantsEmployee stock optionsOutstandingReserves and SurplusLOAN FUNDSSecured LoansUnsecured LoansDeferred Tax Liability (Net)APPLICATION OF FUNDSFIXED ASSETSGross BlockLess: AccumulatedDepreciation/AmortizationNet BlockCapital Work-in-ProgressIncluding capital advancesINVESTMENTSCURRENT ASSETS,LOANSAND ADVANCESInventoriesSundry DebtorsCash and Bank BalancesOther Current AssetsLoans and Advances(A)Less: CURRENTLIABILITIES ANDPROVISIONSCurrent Liabilities4647.498670.00551.21215882.748201.7552192.7527125.868712.3018413.562239.632546.006120.081443.502.635433.1615545.373042.62229751.4460394.50269.04290414.9820653.19258256.151.602.990.1974.342.8217.979.343.006.340.770.882.110.500.0011.875.351.0579.1120.800.09100.007.1188.93
30 | P a g eProvisions(B)NET CURRENT ASSETS(A-B)997.114039.7311505.64290414.980.341.393.96100.00
31 | P a g eCommon size Balance Sheet as on 31stMarch, 2011Particulars Rs. (in lacs) Rs. (in lacs) % %SOURCES OF FUNDSSHAREHOLDERS FUNDSShare CapitalShare warrantsEmployee stock optionsOutstandingReserves and SurplusLOAN FUNDSSecured LoansUnsecured LoansDeferred Tax Liability (Net)APPLICATION OF FUNDSFIXED ASSETSGross BlockLess: AccumulatedDepreciation/AmortizationNet BlockCapital Work-in-ProgressIncluding capital advancesINVESTMENTSCURRENT ASSETS, LOANSAND ADVANCESInventoriesSundry DebtorsCash and Bank BalancesOther Current AssetsLoans and Advances(A)Less: CURRENTLIABILITIES ANDPROVISIONSCurrent LiabilitiesProvisions(B)4649.698670.001896.88211858.8310216.4052192.7543055.0610116.7232938.34277.234156.107524.5245768.64830.399819.2568098.907305.08593.887898.96227075.4052409.15997.98290482.5333215.57197067.021.602.980.6572.933.5217.9714.823.4811.340.101.432.5915.760.293.3823.442.510.202.7278.1718.040.34100.0011.4367.84
32 | P a g eNET CURRENT ASSETS(A-B) 60199.94290482.5320.72100.00
33 | P a g eCASH FLOW STATEMENTCash flow statement for the year ended 31stMarch, 2010 & 2011Particulars 10-11Rs. (in lacs)09-10Rs. (in lacs)A] CASH FLOW FROM OPERATING ACTIVITIES:NET PROFIT/(LOSS) BEFORE TAXATIONAdjustments for:Depreciation/AmortizationEmployee Stock Option ExpenseWealth TaxNet Loss on sale of fixed assetsNet Profit on sale of InvestmentsFixed assets and Spares written offProvision for Doubtful debts and advancesDiminution in value of Investments and doubtful advancesto subsidiaryInterest expenseInterest incomeDividend Income from current non trade investmentsLiability/Provision no longer requited written backUnrealized Foreign Exchange (Gain)/ LossOPERATING PROFIT BEFORE WORKINGCAPITAL CHANGESMOVEMENT IN WORKING CAPITAL:Decrease/ (Increase) in sundry debtorsDecrease/ (Increase) in inventoriesDecrease/ (Increase) in loans and advancesDecrease/ (Increase) in trade payablesDecrease/ (Increase) in provisionsCash generated from OperationsIncome Tax Refunded/(Paid)CASH GENERATED FROM/(USED IN) OPERATINGACTIVITIES (A)B] CASH FLOW FROM INVESTING ACTIVITIESPurchase of investments in subsidiariesPurchase of investments in mutual fundsProceeds from sale of investments in mutual fundsDeposits with initial maturity of more than three monthsPurchase of fixed assetsProceeds from sale of fixed assetsInterest ReceivedDividend income from current non trade investments(3480.58)1464.031531.281.9417.44(1969.43)NIL5.9434.416579.99(1878.61)NIL(14.68)18.742310.47(1404.44)(1610.10)(3814.51)2698.12(152.68)(1973.14)(687.93)(2661.07)(14811.17)(176358.23)254327.97(36000.00)(12504.90)9.43874.36NIL256.481259.88557.631.7024.14(1760.85)0.890.428.531357.13(251.14)(47.76)(174.44)(75.94)1156.67(830.34)258.31330.01(113.25)160.29961.69(18.47)943.22(25082.48)(606304.44)544722.08NIL(2080.61)15.05267.9547.76
34 | P a g eCASH GENERATED FROM/(USED IN) INVESTINGACTIVITIES (B)C] CASH FLOW FROM FINANCING ACTIVITIESProceeds from preferential issue of sharesProceeds from issue of warrantsShares issue expensesProceeds from exercise of employee stock optionsInterest paidProceeds from issue of Compulsorily ConvertibleDebenturesProceeds from Long term BorrowingRepayment of Long Term LoansProceeds/(Repayment) of Short Term BorrowingsCASH GENERATED FROM/(USED IN) FINANCINGACTIVITIES (C)NET INCREASE/(DECREASE) IN CASH AND CASHEQUIVALENTS (A+B+C)CASH AND CASH EQUIVALENTS AT THEBEGINNING OF THE YEARCASH AND CASH EQUIVALENTS AT THE END OFTHE YEAR15537.46NILNILNIL2.20(6568.10)NIL10155.02(5237.62)(2902.75)(4551.25)8325.141443.509768.64(88414.69)15000.008670.00(593.13)0.36(1048.60)52192.7553.85(2066.03)72.5772281.77(15189.70)16633.201443.50
35 | P a g eCONCLUSION:As stipulated by the securities and exchange board of India, a qualified practicing companysecretary carries ort the secretarial audit, on a quarterly basis, to reconcile the total admittedcapital with National Securities Depository Ltd (NSDL) and Central Depository Services (India)Ltd (CDSL) with the total listed and paid-up capital. The audit, interlaid, confirms that the totallisted and paid-up capital of the company is in agreement with the aggregate of the total numberof shares in dematerialized form and total number of shares in physical form.Shareholders holding shares in dematerialized mode are requested to intimate all changes withrespect to bank details, mandate, nomination, power of attorney, change of address, change ofname etc. to their depository participant (DP). These changes will be reflected in the company’srecords on the down loading of information from Depositories, which will help the companyprovide better service to its shareholders.In respect of shares up to 1000 per folio, transfers are affected on a weekly basis. For others, thetransfers are affected within limits prescribed by law. The average turnaround time forprocessing registration of transfers is 15 days from the date of receipt of requests. The processingactivities with respect to requests received for dematerialization are completed within 7-10 days.
36 | P a g eBIBLIOGRAPHY www.maxlifeinsurance.com www.maxindia.com en.wikipedia.org investing.businessweek.com www.thehindubusinessline.com