Project report on working capital management

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Project report on working capital management

  1. 1. SUMMER TRAINING REPORT SUBMITTED TOWARDS THE PARTIAL FULFILLMENT OF POST GRADUATE DEGREE IN INTERNATIONAL BUSINESS WORKING CAPITAL MANAGEMENT On Kotak Mahindra GroupINDUSTRY GUIDE FACULTY GUIDEAMITY INTERNATIONAL BUSINESS SCHOOL, NOIDAAMITY UNIVERSITY – UTTAR PRADESHAMITY INTERNATIONAL BUSINESS SCHOOL 1
  2. 2. TABLE OF CONTENTSChapter No. Subject Page No.Ch No.1 Executive Summary…………………. 6Ch No.2 Research Methodology……………… 7 2.1 Primary Objective(s)…………. 2.2 Hypothesis…………………… 2.3 Research Design……………… 2.4 Sample Design……………….. 2.5 Scope of the Study……………. 2.6 Limitations…………………….Ch No.3 Critical Review of Literature……….. 9Ch No.4 Company Profile ……………………. 18Ch No.5 Industry Profile……………….. 21Ch No.6 SWOT Analysis…………………. 45Ch No.7 Data………………………………….. 46 7.1 Collection……………………… 7.2 Primary Data…………………… 7.3 Secondary Data….……………..Ch No.8 Working Capital- Overall View……… 53Ch No.9 Findings & Analysis…………………. 100Ch No.10 Recommendations…………………… 112Ch No.11 Bibliography…………………………. 114Ch No.12 Annexure…………………………….. 115 12.1 Tables…………………………. 12.2 Graphs…………………………Ch No.13 Case Study...…..................................... 117Ch No.14 Synopsis of the Project………………. 122AMITY INTERNATIONAL BUSINESS SCHOOL 2
  3. 3. CH NO.1: EXECUTIVE SUMMARYThe Indian Life Insurance Company has seen a remarkable shift since the time ofestablishment of the first company, Oriental Life Insurance Company in 1823. At thetime of Independence and thereafter, there were more than 200 companies operating in Indiaand not all of them on sound ethical principles. Many factors combined together to promptthe then Government to nationalize the life insurance industry in 1956 to form the LifeInsurance Corporation of India.Insurance sector was once a monopoly, with LIC as the only company, a public sectorenterprise. But nowadays the market opened up and there are many private playerscompeting in the market. There are thirteen private life insurance companies who hasentered the industry.The study in the first part gives detail information on the on-job training provided thecompetitive analysis of product of Kotak Mahindra Old Mutual Life Insurance Ltd. withICICI Prudential Life Insurance. Also, analysis of financial statements.In the second part, is a project on “How does the Indian mutual fund industry compare vis -a - vis global standards and what should be our future expectations from it?”The paper begins by analyzing the current scenario in the industry characterized byproblems with distribution, low investor awareness and concentration of corporateinvestors. In the next section, a comparison of the Mutual Fund Industry with globalstandards reveals that the industry still compares unfavorably with developed countries interms of penetration, investor awareness and diversity of products and the extent of use ofrisk management techniques. Further comparison reveals that the attitude of regulatortowards investor protection and the governance of mutual funds are at par with globalstandards. The paper then analysis the future expectations from the mutual fund industryin terms of increased investor awareness, product diversity and improvement inpenetration and distribution. In the end I recommend certain steps that SEBI and AMCsshould take in order to build investor confidence and trust.AMITY INTERNATIONAL BUSINESS SCHOOL 3
  4. 4. CH NO. 2: RESEARCH METHODOLOGYPrimary Objective(s)The Basic objective of cash management is two fold: • To meet the cash disbursement needs (payment schedule); • To minimize funds committed to cash balances. These are conflicting and mutually contradictory and the task of cash management is to reconcile them.Hypothesis: 1. Customers have basis of preference in selection of the final Kotak Mahindra Old Mutual Life Insurance 2. The choice of the Kotak Mahindra Old Mutual Life Insurance might have an effect either of the personal preference or the country of origin 3. The final decision is based on prior experienceSample Size:The size of the sample was around 70 people considering the time constraint.Research Design:Data Collection: Data has been collected through both primary and secondary approach.Data SourcesThe research involved gathering Secondary data as well as Primary data. For the purposetwo types of survey was conducted by me to collect the data -• Customer survey and• Consumer surveyPrimary DataConsumer survey was done to know their purchasing behaviour because they are the onewho constitute the market and are the target of the business . In Insurance Industry untilland unless we have the knowledge of the consumer behaviour and factor which influencethem to buy a paticular brand ,companies cannot focus upon the target market. Hence aconsumer survey was done to know their wants, purchasing power, and buying habits inAMITY INTERNATIONAL BUSINESS SCHOOL 4
  5. 5. order to segment the market , and based on this consumer profile was identified.Secondary DataSecondary data regarding sales figures, promotional expenses and other related expenseswas collected from the company’s own record to analyse the impact on sales due to therunning schemes and make cost benefit analysis.Scope of the StudyBoth primary and Secondary data has been be used for the study. Primary data wascollected through direct interaction with the company’s finance and accounts department.If needed schedule/questionnaires would be devised to get the information on all therelevant areas of the study such as receivable management, inventory management,management of cash etc.And I collected the data from the secondary sources comprising Annual Reports of thefirm, other journals and peridocials.Apart from the conducting this research work on the basis of these informations, varioustechniques of financial management e.g., comparative statement, trend analysis and ratioanalysis etc. were used in the present study. To present a broad view so far the purpose ofthe analysis and to make it easy to understand the problem/concept of a few graphs andtables shall also be presented. In each chapter, the analysis has been compared withactual management practices of the company under study.Limitation of the Study The present study is limited to one Co., i.e. Kotak Mahindra Life Insurance Ltd., and covers a period from 2005 and 2006 due to limitation of time and accessibility to data base. The authenticity of the suggestions and recommendations depend upon the rationality of the data provided to me. Have to rely upon the data supplied. Executives are not ready to part with the information beyond a limit.AMITY INTERNATIONAL BUSINESS SCHOOL 5
  6. 6. CH NO. 3: CRITICAL REVIEW OF LITERATUREWORKING CAPITAL - OVERALL VIEWWorking Capital management is the management of assets that are current in nature.Current assets, by accounting definition are the assets normally converted in to cash in aperiod of one year. Hence working capital management can be considered as themanagement of cash, market securities receivable, inventories and current liabilities. Infact, the management of current assets is similar to that of fixed assets the sense that isboth in cases the firm analyses their effect on its profitability and risk factors, hence theydiffer on three major aspects:1. In managing fixed assets, time is an important factor discounting and compounding aspects of time play an important role in capital budgeting and a minor part in the management of current assets.2. The large holdings of current assets, especially cash, may strengthen the firm’s liquidity position, but is bound to reduce profitability of the firm as ideal car yield nothing.3. The level of fixed assets as well as current assets depends upon the expected sales, but it is only current assets that add fluctuation in the short run to a business.To understand working capital better we should have basic knowledge about the variousaspects of working capital. To start with, there are two concepts of working capital:  Gross Working Capital  Net working CapitalGross Working Capital: Gross working capital, which is also simply known as workingcapital, refers to the firm’s investment in current assets: Another aspect of gross workingcapital points out the need of arranging funds to finance the current assets. The grossworking capital concept focuses attention on two aspects of current assets management,firstly optimum investment in current assets and secondly in financing the current assets.These two aspects will help in remaining away from the two danger points of excessiveor inadequate investment in current assets. Whenever a need of working capital fundsarises due to increase in level of business activity or for any other reason the arrangementshould be made quickly, and similarly if some surpluses are available, they should not beallowed to lie ideal but should be put to some effective use.AMITY INTERNATIONAL BUSINESS SCHOOL 6
  7. 7. Net Working Capital: The term net working capital refers to the difference between thecurrent assets and current liabilities. Net working capital can be positive as well asnegative. Positive working capital refers to the situation where current assets exceedcurrent liabilities and negative working capital refers to the situation where currentliabilities exceed current assets. The net working capital helps in comparing the liquidityof the same firm over time. For purposes of the working capital management, thereforeWorking Capital can be said to measure the liquidity of the firm. In other words, the goalof working capital management is to manage the current assets and liabilities in such away that a acceptable level of net working capital is maintained.Importance of working capital management:Management of working capital is very much important for the success of the business. Ithas been emphasized that a business should maintain sound working capital position andalso that there should not be an excessive level of investment in the working capitalcomponents. As pointed out by Ralph Kennedy and Stewart MC Muller, “the inadequacyor mis-management of working capital is one of a few leading causes of business failure.Current assets, in fact, account for a very large portion of the total investment of the firm.Table showing Current assets as percentage of Total assets Year Percentage 2004 31% 2005 26% 2006 35% 40 35 30 25 20 15 10 5 0 2004 2005 2006AMITY INTERNATIONAL BUSINESS SCHOOL 7
  8. 8. It can be visualized from the table that in the first year of our study i.e. 2004 it was 31%which was reduced to 26% in the next year and in 2006 it is 35% shows fluctuating trend.Determinants of Working Capital:There is no specific method to determine working capital requirement for a business.There are a number of factors affecting the working capital requirement. These factorshave different importance in different businesses and at different times. So a thoroughanalysis of all these factors should be made before trying to estimate the amount ofworking capital needed. Some of the different factors are mentioned here below:- 1. Nature of business: Nature of business is an important factor in determining the working capital requirements. There are some businesses which require a very nominal amount to be invested in fixed assets but a large chunk of the total investment is in the form of working capital. There businesses, for example, are of the trading and financing type. There are businesses which require large investment in fixed assets and normal investment in the form of working capital. 2. Size of business: It is another important factor in determining the working capital requirements of a business. Size is usually measured in terms of scale of operating cycle. The amount of working capital needed is directly proportional to the scale of operating cycle i.e. the larger the scale of operating cycle the large will be the amount working capital and vice versa. 3. Business Fluctuations: Most business experience cyclical and seasonal fluctuations in demand for their goods and services. These fluctuations affect the business with respect to working capital because during the time of boom, due to an increase in business activity the amount of working capital requirement increases and the reverse is true in the case of recession. Financial arrangement for seasonal working capital requirements are to be made in advance. 4. Production Policy: As stated above, every business has to cope with different types of fluctuations. Hence it is but obvious that production policy has to be planned well in advance with respect to fluctuation. No two companies can have similar production policy in all respects because it depends upon the circumstances of an individual company.AMITY INTERNATIONAL BUSINESS SCHOOL 8
  9. 9. 5. Firm’s Credit Policy: The credit policy of a firm affects working capital by influencing the level of book debts. The credit term is fairly constant in an industry but individuals also have their role in framing their credit policy. A liberal credit policy will lead to more amount being committed to working capital requirements whereas a stern credit policy may decrease the amount of working capital requirement appreciably but the repercussions of the two are not simple. Hence a firm should always frame a rational credit policy based on the credit worthiness of the customer. 6. Availability of Credit: The terms on which a company is able to avail credit from its suppliers of goods and devices credit/also affects the working capital requirement. If a company in a position to get credit on liberal terms and in a short span of time then it will be in a position to work with less amount of working capital. Hence the amount of working capital needed will depend upon the terms a firm is granted credit by its creditors. 7. Growth and Expansion activities: The working capital needs of a firm increases as it grows in term of sale or fixed assets. There is no precise way to determine the relation between the amount of sales and working capital requirement but one thing is sure that an increase in sales never precedes the increase in working capital but it is always the other way round. So in case of growth or expansion the aspect of working capital needs to be planned in advance. 8. Price Level Changes: Generally increase in price level makes the commodities dearer. Hence with increase in price level the working capital requirements also increases. The companies which are in a position to alter the price of these commodities in accordance with the price level changes will face fewer problems as compared to others. The changes in price level may not affect all the firms in same way. The reactions of all firms with regards to price level changes will be different from one other.AMITY INTERNATIONAL BUSINESS SCHOOL 9
  10. 10. CIRCULATION SYSTEM OF WORKING CAPITALIn the beginning the funds are obtained by issuing shares, often supplemented by longterm borrowings. Much of these collected funds are used in purchasing fixed assets andremaining funds are used for day to day operation as pay for raw material, wagesoverhead expenses. After this finished goods are ready for sale and by selling the finishedgoods either account receivable are created and cash is received. In this process profit isearned. This account of profit is used for paying taxes, dividend and the balance isploughed in the business.Working capital is considered to efficiently circulate when it turns over quickly. Ascirculation increases, the investment in current assets will decrease. Current assetsturnover ratio speaks about the efficiency of Kotak Mahindra in the utilisation of currentassets. Fast turnover current assets results in a better rate on investment.Table showing Current Assets Turnover Ratio Year Ratio (in times) 2004 1.78 2005 2.98 2006 1.98Average: 2.24 3 2.5 2 1.5 1 0.5 0 2004 2005 2006AMITY INTERNATIONAL BUSINESS SCHOOL 10
  11. 11. The ratio average is 2.24 times in the study period of 3 years. In 2005 current assetsturnover ratio is highest one i.e. 2.98 during the 3 year study. Reasons being during thisyear company has achieved sales growth 44.36% over the previous year and additionalactivity needs more funds.KOTAK MAHINDRA LIFE INSURANCE LTD.Ratios useful to analyze working capital management(A) Efficiency Ratios 2004 2005 2006 Ideal Ratio1. Working Capital Turnover (times) 4.84 10.23 5.71 -2. Current Assets Turnover (times) 1.78 2.98 1.97 -3. Inventory turnover (times) 9.49 9.20 7.88 -(B) Liquidity Ratio1. Current Ratio 2.12 1.80 2.41 2.02.AcidTestRatio 1.15 0.98 1.03 1.03. Cash Ratio 0.57 0.08 0.05 0.5AMITY INTERNATIONAL BUSINESS SCHOOL 11
  12. 12. (C) Structural Health of Working CapitalRatio/Year 2004 2005 20061. CA 0.31 0.26 0.352. CL 0.15 0.14 0.143. Cash to CA 0.27 .04 0.024. Receivables to CA 0.27 0.50 0.405. Loans and Advances to CA 0.15 0.19 0.156. Inventory to CA 0.42 0.38 0.507. RM to Inventory 0.44 0.46 0.308. Stock spares to inventory 0.12 0.14 0.119. WIP to inventory 0.06 0.08 0.0310. Finished Goods to Inventory 0.38 0.32 0.56Interpretation (Ratio Analysis)  The utilization rate of net working capital as depicted by working capital turnover ratio is fluctuating during the period. It shows that working capital has not been effectively used over the period of years except in the year 2005.  As shown by current assets turnover ratio, the utilisation of current assets in terms of sales has shown a decreasing trend which shows that current assets has been effectively used to achieve sales.  Again if we look at the efficiency with which individual elements of working capital have been utilized, the picture of inventory turnover is not very bright.  Receivables turnover also shows a declining trend. Generally such a situation does not suit the company.  As we look at the extent of liquidity of working capital, we notice that the ratio shows an increasing trend. This indicates improvement on the liquidity front.  If we analyze the structural health of working capital, the proportion of current assets to total assets has been appropriate during this period. Such a higher proportion of current asset in the assets portfolio of Kotak Mahindra Life Insurance Ltd. is quite acceptable.AMITY INTERNATIONAL BUSINESS SCHOOL 12
  13. 13. Our analysis above indicates the areas of concern to management in making best possibleuse of resources. Decreasing efficiency in the use of current assets hints of the possibilityof problems in working capital management.On further analysis, inventory constitutes a major proportion of total current assets.Among its various components, raw materials, stocks, spared and finished goods inparticular need further analysis as here stand out to the problem areas.Cash Flow Statement (2005-06) Sources Amount A Application Amount B ( in Lacs) (in Lacs)Proceeds from 162.37 Loss from operation 185.27borrowingsSale of assets 27.34 Change in cash 5.01Total 190.28 190.28Summary of Cash Flow Analysisa) Cash from operation to total cash available = 185.31/190.28 = 97.38%b) Cash from long term sources to total cash available = 162.37/190.28 = 85.33%c) Proceeds from sale of non-current assets to total cash = 17 14/19028 = 0.90%Schedule of Changes in Working Capital Particulars Amount Changes in Working (in lacs) Capital Dec’2005 Dec’2006 Increase Decrease (Debit) (Credit)Current AssetsInventories 93.87 146.36 52.48 -Sundry Debtors 123.22 114.71 - 8.51AMITY INTERNATIONAL BUSINESS SCHOOL 13
  14. 14. Cash and Bank 10.64 5.63 - 5.01balancesOther current assets 20.14 21.66 1.52 - 247.87 288.36Current Liabilities 137.02 116.07 20.95 -Working capital (CA-CL) 110.85 172.29Increase in Working Capital 61.44 - 61.44 172.29 172.29 74.96 74.96Fund Flow Statement (2005-06) Sources Amount A Application Amount B (in lacs) (in Lacs)Increase in loan 162.37 Increase in working capital 61.44Sale of asset 22.94 Loss from operation 123.87Total 185.31 185.31Summary of Fund Flow Analysis1. Increase in net working capital — 61.442. Funds from operations to finance permanent address (123.87)3. Ratio of fund flow from operations to total funds in the business (-) 123.87/85.31 = (66.85)Interpretation (Fund Flow Statement)1. Networking capital has been increased over the years, which has increased liquidityAMITY INTERNATIONAL BUSINESS SCHOOL 14
  15. 15. 2. Company should take corrective actions to covert loss from operation to funds from operation.AMITY INTERNATIONAL BUSINESS SCHOOL 15
  16. 16. CH NO. 4: COMPANY PROFILECREATING BANKING HISTORYEstablished in 1985, The Kotak Mahindra group has long been one of Indias mostreputed financial organizations. In February 2006, Kotak Mahindra Finance Ltd, thegroups flagship company was given the license to carry on banking business by theReserve Bank of India (RBI). This approval creates banking history since KotakMahindra Finance Ltd. is the first company in India to convert to a bank.The Complete BankAt Kotak Mahindra Bank, we address the entire spectrum of financial needs forindividuals and corporates. We have the products, the experience, the infrastructure andmost importantly the commitment to deliver pragmatic, end-to-end solutions that reallywork.* A license authorizing the bank to carry on banking business has been obtained from theReserve Bank of India in terms of Section 22 if the Banking Regulation Act, 1949. Itmust be distinctly understood, however, that in issuing the license, the Reserve Bank ofIndia does not undertake any responsibility for the financial soundness of the bank or thecorrectness of any of the statements made or opinion expressed in this connection.The Kotak Mahindra GroupKotak Mahindra is one of Indias leading financial conglomerates, offering completefinancial solutions that encompass every sphere of life. From commercial banking, tostock broking, to mutual funds, to life insurance, to investment banking, the group catersto the financial needs of individuals and corporates.The group has a net worth of over Rs. 3,200 crore, employs around 10,800 people in itsvarious businesses and has a distribution network of branches, franchisees, representativeoffices and satellite offices across 300 cities and towns in India and offices in New York,London, Dubai, Mauritius and Singapore. The Group services around 2.6 millioncustomer accounts.AMITY INTERNATIONAL BUSINESS SCHOOL 16
  17. 17. Our StoryThe Kotak Mahindra Group was born in 1985 as Kotak Capital Management FinanceLimited. This company was promoted by Uday Kotak, Sidney A. A. Pinto and Kotak &Company. Industrialists Harish Mahindra and Anand Mahindra took a stake in 1986, andthats when the company changed its name to Kotak Mahindra Finance Limited.Since then its been a steady and confident journey to growth and success.1986 Kotak Mahindra Finance Limited starts the activity of Bill Discounting1987 Kotak Mahindra Finance Limited enters the Lease and Hire Purchase market1990 The Auto Finance division is started The Investment Banking Division is started. Takes over FICOM, one of Indias1991 largest financial retail marketing networks1992 Enters the Funds Syndication sector Brokerage and Distribution businesses incorporated into a separate company -1995 Kotak Securities. Investment Banking division incorporated into a separate company - Kotak Mahindra Capital Company The Auto Finance Business is hived off into a separate company - Kotak Mahindra Prime Limited (formerly known as Kotak Mahindra Primus Limited).1996 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 Groups entry into information distribution. Enters the mutual fund market with the launch of Kotak Mahindra Asset1998 Management Company. Kotak Mahindra ties up with Old Mutual plc. for the Life Insurance business. Kotak Securities launches its on-line broking site (now2000 www.kotaksecurities.com). Commencement of private equity activity through setting up of Kotak Mahindra Venture Capital Fund.2004 Matrix sold to Friday Corporation Launches Insurance Services. Kotak Mahindra Finance Ltd. converts to a commercial bank - the first Indian2006 company to do so.AMITY INTERNATIONAL BUSINESS SCHOOL 17
  18. 18. 2004 Launches India Growth Fund, a private equity fund. Kotak Group realigns joint venture in Ford Credit; Buys Kotak Mahindra Prime (formerly known as Kotak Mahindra Primus Limited) and sells Ford credit2005 Kotak Mahindra. Launches a real estate fund Bought the 25% stake held by Goldman Sachs in Kotak Mahindra Capital2006 Company and Kotak SecuritiesAMITY INTERNATIONAL BUSINESS SCHOOL 18
  19. 19. CH NO. 5: INDUSTRY PROFILEOur Corporate IdentityKotak Mahindra BankAt Kotak Mahindra Bank, we address the entire spectrum of financial needs forindividuals and corporates. We have the products, the experience, the infrastructure andmost importantly the commitment to deliver pragmatic, end-to-end solutions that reallywork.Kotak Mahindra Old Mutual Life Insurance Ltd.Kotak Mahindra Old Mutual Life Insurance is a 76:24 joint venture between KotakMahindra Bank Ltd. and Old Mutual plc. Kotak Mahindra Old Mutual Life Insurance isone of the fastest growing insurance companies in India and has shown remarkablegrowth since its inception in 2004.Old Mutual, a company with 160 years experience in life insurance, is an internationalfinancial services group listed on the London Stock Exchange and included in the FTSE100 list of companies, with assets under management worth $ 400 Billion as on 30thJune, 2006. For customers, this joint venture translates into a company that combinesinternational expertise with the understanding of the local market. Every child is different. Each has their own set of dreams and aspirations. As a parentyou would like to provide your child with all the building blocks that could develop hisor her potential to the fullest. This could mean extra coaching or tuition for talentedchildren, special training or equipment for natural athletes or professional training forborn singers.AMITY INTERNATIONAL BUSINESS SCHOOL 19
  20. 20.  HEADSTART CHILD PLANS A specially tailored, cost-effective plan, aims to give your children the financial meansto pursue his or her dreams and live them.The Headstart Advantage: • Choice of 2 plan variants o Future Protect o Assure Wealth • Maximizes wealth while providing protection • Joint life option • Save for 2 children with one plan • Additional bonus units • Flexible WithdrawalLife is unpredictable, but the earlier you start planning for your future, the more likelyare you and your family to reap the rewards.  SUKHI JEEVAN It is a long-term savings and protection plan that keeps pace with your changing needs atevery step of life - be it saving for your kids’ future, or your retirement. This plan helpsyou prepare for important milestones in your life. And, most importantly, it ensures yourfamily is secure when life dishes up harsh misfortunes.Benefits • Fulfill your children’s dreams or plan your retirement • Small savings to meet your varying needs • Regular bonuses • Easy application: o Simple documentation o No medical tests* o Hassle–free sign-up • Premium payment options: yearly, half-yearly or monthly (through ECS only)AMITY INTERNATIONAL BUSINESS SCHOOL 20
  21. 21.  KOTAK PRIVILEGED ASSURANCE PLAN“In this policy, the investment risk in the investment portfolio is borne by thepolicyholder.” Kotak Privileged Assurance Plan is exclusively crafted to ensure that while your moneyis protected, it multiplies. Concocting the best mix of steady and stable growth withdynamic and flexible management of your funds, the plan strives to give you that extrabit of return, protection and flexibility, in a single plan made specially for discerningcustomers like you. The plan offers you access to two# funds to provide you avenue forgrowth while offering you Capital Guarantee. Please note that in this policy, the investment risk in the investment portfolio is to beborne by the policyholder. However, Kotak Life Insurance offers you a capital guaranteeon this plan to safeguard against the downside risk of falling markets. "Why should you invest in the Kotak Privileged Assurance Plan?" This plan is ideal if you want • Low cost structure on an investment plus insurance package • A short investment horizon • Flexibility of investment amounts • Protection of your hard earned money • Aggressive growth with calculated risks • Smart protection for your family  KOTAK TERM PLAN Kotak Term Plan is a pure risk product that aims to cover your life at a nominal cost.You may want to take this plan to cover your outstanding debts like a mortgage, a homeloan etc. Since this is a pure risk cover product, there is no maturity benefits payable onsurvival. This is a non-participating plan."Who can avail of this plan?" • HOW OLD DO YOU HAVE TO BE TO AVAIL OF THIS PLAN? Minimum age - 18 years Maximum age - 60 years • FOR WHAT TERM CAN I AVAIL OF THIS PLAN? 10 - 30 years for regular premium 5 - 30 years for single premiumAMITY INTERNATIONAL BUSINESS SCHOOL 21
  22. 22. • WHAT IS THE MINIMUM PREMIUM THAT I NEED TO PAY AND AT WHAT INTERVALS CAN I PAY THEM? Quarterly Rs.540 Half Yearly Rs.1055 Annually Rs.2000 Single Premium Rs.10000 • WHAT IS THE MAXIMUM AGE THAT THE PLAN CAN COVER YOU TILL? 70 years"What are the advantages of this plan?" 1. It is a low-cost insurance plan. 2 You can choose between a regular premium payment option or a single premium payment option. 3 In case you opt for the regular premium payment option, you may pay your premiums either annually, or in half yearly or quarterly installments. 4 Your Kotak Term Plan can be converted into any other plan offered by Kotak Life Insurance (except for another Term plan) provided there are at least 5 years before cover ceases*. 5 In case you forget to pay your premium by the due date, you are entitled to a grace period of 30 days from the date of unpaid premiums. 6 In case of a financial emergency, you have the option to surrender the policy provided you have taken the single premium payment option*. "What value-adds can you opt for?" You may avail of the following non-participating value-adds for a nominal premium atthe time of taking your policy, subject to aggregate premium on all value-adds (exceptCritical Illness Benefit) not exceeding 30% of the basic Kotak Term Plan premium.  Accidental Death Benefit: This benefit provides an additional amount (over and above the basic sum assured) to the beneficiary in the event of the accidental death of the life insured. The maximum cover available under this rider is equal to the basic sum assured (subject to a maximum of Rs.10 lakhs).AMITY INTERNATIONAL BUSINESS SCHOOL 22
  23. 23.  Permanent Disability Benefit: This benefit can be added to your basic life insurance policy to provide financial support in case of disability due to an accident. The amount payable under this benefit would be paid out as an annuity. The maximum permanent disability benefit that you can avail of is equal to the basic sum assured (subject to a maximum of Rs.10 lakhs).  Critical Illness Benefit: This benefit can be added to your basic life insurance policy to provide financial support in the event of a medical emergency. On the first occurrence of critical illness during the term of the policy, you would receive a portion of the sum assured to reduce your financial burden in this emergency."What do you receive on maturity of the policy?"Since this is a pure risk cover plan, there are no maturity benefits."What happens in the event of death of the life insured?"In the event of death during the term of the policy, the beneficiary would receive the sumassured. "Are there any Tax Benefits?" Section 80C, 10(10D) of Income Tax Act would apply. Premiums paid for CriticalIllness Benefit qualify for benefits under Section 80D. These benefits are as per thecurrently prevailing tax regulations and you are advised to consult your tax advisor fordetails. "How does this plan work?" To explain, how his plan works…. Mr. Sanjay Gupta, a 30-year-old male, decides to buy the Kotak Term Plan for a sumassured of Rs.10, 00,000 for a 10 year term. The annual premium that Mr.Gupta pays isRs.3, 747 annually. In the event of his unfortunate death during the next ten years, hisfamily would receive Rs.10, 00,000. In the illustration, some benefits are guaranteed and some are variable. GuaranteedReturns are marked "guaranteed" in the illustration. Variable returns are shown at twodifferent rates of assumed future returns. These assumed rates of return are notguaranteed and they are not the upper or lower limits of what you might get back .Theactual return may be different depending on a number of factors including futureinvestment performance.AMITY INTERNATIONAL BUSINESS SCHOOL 23
  24. 24. "What do you do next?"To find out more about this plan, you can call us at any Kotak Life Insurance BranchOffices or send us an e-mail at lifeexpert@kotak.com. "Exclusions"In case the life insured commits suicide within 1 (one) year of the plan, no benefitsoutlined in the plan would be payable.Exclusions for Accidental Death Benefit, Permanent Disability Benefit & CriticalIllness Benefit:he Accidental Death Benefit, Permanent Disability Benefit & Critical Illness Benefitwould not be paid out in the following circumstances:a) Self inflicted injuries, suicide, insanity, immorality, committing any breach of law or being under the influence of drugs, liquor etc.b) When the life insured is engaged in aviation or aeronautics other than as a passenger on a licensed commercial aircraft operating on a scheduled route.c) Due to injuries from war (whether war is declared or not), invasion, hunting, other dangerous hobbies or activities, or having been on duty in military, para-military, security or police organization.Additional Exclusions for Critical Illness:a) Unreasonable failure to seek or follow medical advice.b) Any pre-existing medical conditions not disclosed at inception.c) Infection with Human Immunodeficiency Virus (HIV) or conditions due to acquired Immune Deficiency Syndrome (AIDS).In addition, no benefit would be paid in respect of the exclusions specific to each criticalillness."Prohibition of Rebates"Section 41 of the Insurance Act, 1938 states: - (1) No person shall allow or offer to allow, either directly or indirectly, as an inducement to any person to take out or renew or continue an insurance in respect of any kind of risk relating to lives or property in India, any rebate of the whole or part of the commission payable or any rebate of the premiumAMITY INTERNATIONAL BUSINESS SCHOOL 24
  25. 25. shown on the policy, nor shall any person taking out or renewing or continuing a policy accept any rebate, except such rebate as may be allowed in accordance with the published prospectuses or tables of the insurer. (2) Any person making default in complying with the provision of this section shall be punishable with fine, which may extend to five hundred rupees. The product leaflet gives only the salient features of the plan. The policy document is the conclusive document, and provides in detail all the conditions relating to the Kotak Term Plan.  KOTAK PREFFERED TERM PLAN The Kotak Preferred Term Plan is designed to provide you with reduced premium ratesfor a sum assured of Rs.10 lakhs and above."Who is eligible for Kotak Preferred Term Plan?"1) Males over the age of 18 years, who do not use tobacco in any form.2) Females over the age of 18 years."What are the advantages of this plan?" • It is a low-cost insurance plan. • You can choose between a regular premium payment option or a single premium payment option. In case you opt for the regular premium payment option, you may pay your premiums either annually, or in half yearly or quarterly installments. • Your Kotak Term Plan can be converted into any other plan offered by Kotak Life Insurance (except for another Term plan) provided there are at least 5 years before cover ceases*. • In case you forget to pay your premium by the due date, you are entitled to a grace period of 30 days from the date of unpaid premiums. • In case of a financial emergency, you have the option to surrender the policy provided you have taken the single premium payment option*. "What value-adds can you opt for?" You may avail of the following non-participating value-adds for a nominal premium atthe time of taking your policy, subject to aggregate premium on all value-adds (exceptCritical Illness Benefit) not exceeding 30% of the basic Kotak Term Plan premium.AMITY INTERNATIONAL BUSINESS SCHOOL 25
  26. 26.  Accidental Death Benefit: This benefit provides an additional amount (over and above the basic sum assured) to the beneficiary in the event of the accidental death of the life insured. The maximum cover available under this rider is equal to the basic sum assured (subject to a maximum of Rs.10 lakhs).  Permanent Disability Benefit: This benefit can be added to your basic life insurance policy to provide financial support in case of disability due to an accident. The amount payable under this benefit would be paid out as an annuity. The maximum permanent disability benefit that you can avail of is equal to the basic sum assured (subject to a maximum of Rs.10 lakhs). Permanent disability is defined as permanent and immediate inability to work or permanent loss of use of two limbs or total and permanent loss of sight.  Critical Illness Benefit: This benefit can be added to your basic life insurance policy to provide financial support in the event of a medical emergency. On the first occurrence of critical illness during the term of the policy, you would receive a portion of the sum assured to reduce your financial burden in this emergency."What do you receive on maturity of the policy?"Since this is a pure risk cover plan, there are no maturity benefits."What happens in the event of death of the life insured?"In the event of death during the term of the policy, the beneficiary would receive the sumassured. "Are there any Tax Benefits?" Section 80C, 10(10D) of Income Tax Act would apply. Premiums paid for CriticalIllness Benefit qualify for benefits under Section 80D. These benefits are as per thecurrently prevailing tax regulations and you are advised to consult your tax advisor fordetails.* Please consult your tax advisor for details "How does this plan work?" Mr.Rajiv Sharma, 30 years old, is eligible for the Kotak Preferred Term Plan. He decidesto take up this policy for a sum assured of Rs.10, 00,000 for a term of 10 years. Hisannual premium would be Rs.2, 645. In case of Mr. Sharma’s unfortunate death duringAMITY INTERNATIONAL BUSINESS SCHOOL 26
  27. 27. the next ten years, his family would receive Rs.10, 00,000. In the illustration, some benefits are guaranteed and some are variable. GuaranteedReturns are marked "guaranteed" in the illustration. Variable returns are shown at twodifferent rates of assumed future returns. These assumed rates of return are notguaranteed and they are not the upper or lower limits of what you might get back .Theactual return may be different depending on a number of factors including futureinvestment performance. "What do you do next?" To find out more about this plan, you can call us at any Kotak Life Insurance BranchOffices or send us an e-mail at lifeexpert@kotak.com. "Exclusions"In case the life insured commits suicide within 1 (one) year of the plan, no benefitsoutlined in the plan would be payable. Exclusions for Accidental Death Benefit, Permanent Disability Benefit & CriticalIllness Benefit: The Accidental Death Benefit, Permanent Disability Benefit & Critical Illness Benefitwould not be paid out in the following circumstances: a) Self inflicted injuries, suicide, insanity, immortality, committing any breach of law or being under the influence of drugs, liquor etc. b) When the life insured is engaged in aviation or aeronautics other than as a passenger on a licensed commercial aircraft operating on a scheduled route. c) Due to injuries from war (whether war is declared or not), invasion, hunting, other dangerous hobbies or activities, or having been on duty in military, para-military, security or police organization.Additional Exclusions for Critical Illness: a) Unreasonable failure to seek or follow medical advice. b) Any pre-existing medical conditions not disclosed at inception. c) Infection with Human Immunodeficiency Virus (HIV) or conditions due to acquired Immune Deficiency Syndrome (AIDS).In addition, no benefit would be paid in respect of the exclusions specific to each criticalillness.AMITY INTERNATIONAL BUSINESS SCHOOL 27
  28. 28. "Prohibition of Rebates"Section 41 of the Insurance Act, 1938 states: - (1) No person shall allow or offer to allow, either directly or indirectly, as an inducement to any person to take out or renew or continue an insurance in respect of any kind of risk relating to lives or property in India, any rebate of the whole or part of the commission payable or any rebate of the premium shown on the policy, nor shall any person taking out or renewing or continuing a policy accept any rebate, except such rebate as may be allowed in accordance with the published prospectuses or tables of the insurer. (2) Any person making default in complying with the provision of this section shall be punishable with fine, which may extend to five hundred rupees.How to live for today and plan for an independent tomorrow.  KOTAK MONEY BACK PLAN The Kotak Money Back Plan not only covers your life, it also assures you a certainpercent of the sum assured as cash payment at regular intervals of every 5 years. It is asavings plan with the added advantage of life cover and regular cash inflow. This plan isideal for planning special moments like a wedding, your childs education or purchase ofan asset etc. This is a participating plan (with profits)."Who can avail of this Plan?" • HOW OLD DO YOU HAVE TO BE TO AVAIL OF THIS PLAN? Minimum age- 18 years Maximum age- 60 years • FOR WHAT TERM CAN I AVAIL OF THIS PLAN? 15, 20 & 25 years • WHAT IS THE MAXIMUM AGE THAT THE PLAN CAN COVER YOU TILL? 75 yearsAMITY INTERNATIONAL BUSINESS SCHOOL 28
  29. 29. "What are the advantages of this plan?" 1. The plan not only covers your life but also provides you with a survival benefit payout every 5 years. 2. In the unfortunate event of death of life insured, the beneficiary would receive the death benefit. The death benefit keeps increases by 7% of the sum assured every year. 3. On maturity, you would receive the sum of the Survival Benefit, Bonus addition* and Guaranteed addition**. *Bonus addition is the amount in the Accumulation Account, in excess of the sum assured. Accumulation Account is your personal account in which the premiums that you pay are deposited, the return declared every year is added and the survival benefit payouts, risk and expense charges are deducted. Guaranteed addition is the guaranteed amount payable on maturity, over and above the Survival Benefit. 4. The amount available in the Accumulation Account is invested in various financial instruments (as per IRDA regulations) so your money works hard for you. 5. The Automatic Cover Maintenance facility ensures the policy remains in force even if you miss premium payments. This facility is available after the first three years of the term. 6. You have the benefit of a 15-day free look period. 7. You have the option of paying premiums quarterly, half yearly or yearly."What value-adds can you opt for?" You may avail of the following value-adds for a nominal premium at the time of takingthe plan, subject to the aggregate premium on all value-adds not exceeding 30% of thebasic Kotak Money Back Plan premium.AMITY INTERNATIONAL BUSINESS SCHOOL 29
  30. 30.  Term Benefit/ Preferred Term Benefit: In the event of death during the term of this benefit, the beneficiary would receive an additional death benefit amount, which is over and above the sum assured. The maximum Term Benefit you can avail of is equal to the basic sum assured. Where the term benefit cover applied for is more than Rs 10 lakhs, better rates may apply, subject to meeting eligibility requirements.  Accidental Death Benefit: This benefit provides an additional amount (over and above the sum assured) to the beneficiary in the event accidental death of the life insured. The maximum cover available under this benefit is equal to the basic sum assured (subject to a maximum of Rs.10 lakhs).  Permanent Disability Benefit: This benefit can be added to the basic life insurance plan to provide financial support in case of permanent disability due to an accident. The amount payable under this benefit would be paid out as an annuity. The maximum permanent disability benefit that you can avail of is equal to the basic sum assured (subject to a maximum of Rs.10 lakhs). Permanent disability is defined as permanent and immediate inability to work or permanent loss of use of two limbs or total and permanent loss of sight.  Critical Illness Benefit: This benefit can be added to the basic life insurance plan to provide financial support in the event of medical emergencies. On the first occurrence of critical illness during the term of the policy, you would receive a portion of the sum assured to reduce your financial burden in this emergency. *Please contact our Life Advisor for the list of critical illnesses  Life Guardian Benefit: This benefit can be availed of, only in case where the life insured and the proposer are two different individuals. In case of the unfortunate death of the proposer, this benefit keeps the policy alive by waiving all future premiums on the policy.  Accidental Disability Guardian Benefit: In case the proposer is permanently disabled as a result of an accident, this benefit keeps the policy alive by waiving all future premiums on the policy."What do you receive on maturity of this plan?"On maturity, you would receive the sum of the Survival benefit, Guaranteed addition andAMITY INTERNATIONAL BUSINESS SCHOOL 30
  31. 31. Bonus addition. The table below illustrates the survival benefit pay out for every Rs.1000of sum assured.Survival BenefitPayout for every Rs. 1000 Sum AssuredPayouts (in Rs.)5th year 10th year 15th year 20th year 25th year 15-YEAR PLANSurvival Benefit250 250 500Guaranteed Addition- - 200* 20-YEAR PLANSurvival Benefit200 200 200 400Guaranteed Addition- - - 300* 25-YEAR PLANSurvival benefit150 150 150 150 400Guaranteed Addition- - - - 400**The Bonus Addition, if any, is payable over and above these benefits. "What happens in the event of death of the life insured?" In the unfortunate event of the death during the term of the plan, the beneficiary wouldreceive the death benefit. The death benefit increases by 7% of the sum assured eachyear. This increasing amount has been designed keeping in mind the rising inflation.Death Benefit payout for every Rs. 1000 Sum AssuredPayouts (in Rs.)Term1st 2nd 3rd 5th 7th 10th 15th 20th 25th 15year year year year year year year year year YEARS1000 1070 1140 1280 1420 1630 1980 20 1000 1070 YEARS1140 1280 1420 1630 1980 2330 25 1000 1070 1140 YEARSAMITY INTERNATIONAL BUSINESS SCHOOL 31
  32. 32. 1280 1420 1630 1980 2330 2380"Are there any Tax Benefits?" Section 80C, 10(10D) of Income Tax Act would apply. Premiums paid for CriticalIllness Benefit qualify for benefits under Section 80D. These benefits are as per thecurrently prevailing tax regulations and you are advised to consult your tax advisor fordetails. * Please consult your tax advisor for details."How does this plan work?"Mr. Sanjay Gupta, 30 years old, decides to buy a Kotak Money Back Plan for a sumassured of Rs.5,00,000 and for a term of 20 years.His annual premium and the payouts are outlined below.Annual PremiumRs.34,124Survival Benefit:After 5 yearsRs.100,000After 10 yearsRs.100,000After 15 yearsRs.100,000At the end of the 20 yearsBalance sum assuredRs.200,000Guaranteed additionRs.150,000Bonus additionVariableAMITY INTERNATIONAL BUSINESS SCHOOL 32
  33. 33. i) What would Mr.Gupta receive on maturity of the plans?Mr.Gupta would get cash flows in year 5, 10 and 15 as mentioned above. Assuming thatthe Accumulation Account grows at a rate of 6%, the payout on maturity would beRs.510,900. At a growth rate of 10%, the maturity amount payable would be Rs.872,600.The table below shows the details of the payout.@6%@10%BALANCE SUM ASSUREDRs.200,000Rs.200,000GUARANTEED ADDITIONRs.150,000Rs.150,000BONUS ADDITIONRs.160,900Rs.522,000Final payout at the end of 20 yearsRs.510,900Rs.872,600 ii) What would Mr.Gupta receive on death of Mr.Gupta at the end of 11 th year?On Mr.Gupta’s death, his family would receive a sum of Rs.850,000In the past, Mr.Gupta has already received 2 installments of Rs.100,000 each as survivalbenefit payouts in the 5th and 10 year. In the illustration, some benefits are guaranteed and some are variable. GuaranteedReturns are marked "guaranteed" in the illustration. Variable returns are shown at twodifferent rates of assumed future returns. These assumed rates of return are notguaranteed and they are not the upper or lower limits of what you might get back .Theactual return may be different depending on a number of factors including futureinvestment performance.AMITY INTERNATIONAL BUSINESS SCHOOL 33
  34. 34. "What do you do next?"To find out more about our plans, you can call us at any of our branch offices or e-mailus at lifeexpert@kotak.com."General exclusion"In case the life insured commits suicide within 1 (one) year of the plan, no benefitsoutlined in the plan would be payable.Exclusions for Accidental Death Benefit, Permanent Disability Benefit & CriticalIllness Benefit:The Accidental Death Benefit, Permanent Disability Benefit & Critical illness Benefitwould not be paid out in the following circumstances: a. Self inflicted injuries, suicide, insanity, immorality, committing any breach of law or being under the influence of drugs, liquor etc. b. When the life insured is engaged in aviation or aeronautics other than as a passenger on a licensed commercial aircraft operating on a scheduled route. c. Due to injuries from war (whether war is declared or not), invasion, hunting, other dangerous hobbies or activities, or having been on duty in military, para- military, security or police organization. Additional Exclusions for Critical Illness: a. Unreasonable failure to seek or follow medical advice. b. Any pre-existing medical conditions not disclosed at inception. c. Infection with Human Immunodeficiency Virus (HIV) or conditions due to acquired Immune Deficiency Syndrome (AIDS). In addition, no benefit would be paid in respect of the exclusions specific to each criticalillness. No claim under the Kotak Life Guardian Benefit would be admitted if, within one yearof the date of issue of this policy, the premium payer commits suicide, whether beingsane or insane at the time of committing suicide. No claim under the Kotak Accidental Disability Guardian Benefit would be admissiblein the following circumstances:AMITY INTERNATIONAL BUSINESS SCHOOL 34
  35. 35. a. The premium payer suffers from self-inflicted injuries, suicide, insanity, immorality, committing any breach of law or being under the influence of drugs, liquor etc. b. Where the premium payer is engaged in aviation or aeronautics other than as a passenger on a licensed commercial aircraft operating on a scheduled route. c. The premium payer suffers injuries from war (whether war is declared or not), invasion, hunting, mountaineering, motor racing of any kind, other dangerous hobbies or activities, or having been on duty in military, para-military, security or police organization."Prohibition of Rebates"Section 41 of the Insurance Act, 1938 states: - (1) No person shall allow or offer to allow, either directly or indirectly, as an inducement to any person to take out or renew or continue an insurance in respect of any kind of risk relating to lives or property in India, any rebate of the whole or part of the commission payable or any rebate of the premium shown on the policy, nor shall any person taking out or renewing or continuing a policy accept any rebate, except such rebate as may be allowed in accordance with the published prospectuses or tables of the insurer. (2) Any person making default in complying with the provision of this section shall be punishable with fine, which may extend to five hundred rupees.  KOTAK CHILD ADVNTAGE PLAN The Kotak Child Advantage Plan is an investment plan designed to meet your childsfuture financial needs. Its a plan that gives your child the "azaadi" to realize his dreams.The plan is a participating plan with a 15-day free look period."Who can avail of this plan?" • HOW OLD DOES THE CHILD HAVE TO BE TO AVAIL OF THIS PLAN? Minimum age - 0 years Maximum age -17 yearsAMITY INTERNATIONAL BUSINESS SCHOOL 35
  36. 36. • FOR WHAT TERM CAN I AVAIL OF THIS PLAN? 10 - 30 years • WHAT IS THE MAXIMUM SUM ASSURED ALLOWED UNDER THIS PLAN? Rs.25,00,000"What are the advantages of this plan?" 1. On Maturity, you would receive the sum assured plus the bonus addition. Bonus addition is the amount in the Accumulation Account*, in excess of the sum assured. 2. The balance available in the Accumulation Account is invested in various financial instruments (as per IRDA regulations) so your money works hard to earn more for your child. 3. The Automatic Cover Maintenance facility ensures the policy remains in force even if you miss premium payments. This facility is available after the first three years of the Term. 4. You can take a loan against this plan, after the policy has been in force for at least three years. 5. You have the option of paying premiums quarterly, half yearly or yearly. *Accumulation Account is your personal account in which the premiums that you pay are deposited, the return declared every year is added and risk and expense charges are deducted. 6. You have the benefit of a 15 day free look period."What value-adds can you opt for?"You may avail of these value adds for a nominal premium at the time of taking the plan.The aggregate premium of the value-adds should not exceed 30% of the basic policypremium.  Life Guardian Benefit: In case of the unfortunate death of the premium payer, this benefit keeps the policy alive by waiving all future premiums on the policy.  Accidental Disability Guardian Benefit: In case the premium payer is permanently disabled as a result of accident, this benefit keeps the policy alive byAMITY INTERNATIONAL BUSINESS SCHOOL 36
  37. 37. waiving all future premiums on the policy. "Are there any Tax Benefits?"Section 80C, 10(10D) of Income Tax Act, 1961 would apply. You are advised to consultyour tax advisor for details.Please consult your tax advisor for details"How does this plan work?"Mr.Sanjay Gupta is a 30-year-old professional and has a 6-year-old son. To secure hischilds future, Mr.Gupta decides to buy the Kotak Child Advantage Plan. He wants tobuy a plan with a sum assured of 5 lakh, term of 15 years, so that when the child is 21years old, he has at least Rs.5 lakh to invest in his education/ career etc.Mr. Gupta buys the Kotak Child Advantage Plan along with both the value-adds offeredwith the basic plan.DescriptionPremiumKotak child advantage plan premiumRs.31,857/-Life guardian benefit premiumRs.1,225/-Accidental disability guardian benefit premiumRs.155/-Total Annual Premium PaidRs.33,237/-i) What would be the payout on maturity of the plan?Assuming that the Accumulation Account grows at 6%p.a., the maturity amount wouldbe Rs.6, 34,800/- at the end of 15 years. At a growth rate of 10%, the maturity amountpayable would be Rs. 8, 82,100/-. ii) In the unfortunate event of the death/ disability of the parent (premium payer),what would the beneficiary receive? Mr.Gupta has taken the benefit of waiver of premium by paying a minimal additionalamount of Rs.1, 380/- per year. In the event of Mr.Gupta’s death or accidental disability,future premiums payable on his son’s policy will be waived and the policy will continueAMITY INTERNATIONAL BUSINESS SCHOOL 37
  38. 38. to be in force. On maturity the beneficiary would get the sum assured of Rs.5,00,000along with bonuses accrued during the term of the policy (as discussed in (i) above). In the illustration, some benefits are guaranteed and some are variable. GuaranteedReturns are marked "guaranteed" in the illustration. Variable returns are shown at twodifferent rates of assumed future returns. These assumed rates of return are notguaranteed and they are not the upper or lower limits of what you might get back .Theactual return may be different depending on a number of factors including futureinvestment performance."What happens in the event of death of the life insured?" In the event of the unfortunate death of the insured during the term of the plan, thefollowing would become payable: • If the policy has been in force for five years or if the life insured is at least 18 years old, the beneficiary will receive either the Sum Assured or Accumulation Account whichever is higher, as on the date of death. • If the death occurs within five years from commencement of policy and if the insured is less than 18 years old, the death benefit would be either the total of all premiums paid so far or the surrender value at that time, whichever is higher. •"What do you do next?"To find out more about this plan, you can call us at any Kotak Life Insurance BranchOffices or send us an e-mail at lifeexpert@kotak.com "General exclusion" In case the life insured commits suicide within 1 (one) year of the plan, no benefitsoutlined in the plan would be payable. No claim under the Kotak Life Guardian Benefit would be admitted if, within one yearof the date of issue of this policy, the premium payer commits suicide, whether beingsane or insane at the time of committing suicide. No claim under the Kotak Accidental Disability Guardian Benefit would be admissiblein the following circumstances:(1) The premium payer suffers from self-inflicted injuries, attempt to suicide, insanity, immorality, committing any breach of law or being under the influence of drugs, liquor etc.(2) Where the premium payer is engaged in aviation or aeronautics other than as aAMITY INTERNATIONAL BUSINESS SCHOOL 38
  39. 39. passenger on a licensed commercial aircraft operating on a scheduled route.(3) The premium payer suffers injuries from war (whether war is declared or not), invasion, hunting, mountaineering, motor racing of any kind, other dangerous hobbies or activities, or having been on duty in military, para-military, security or police organization."Prohibition of Rebates"Section 41 of the Insurance Act, 1938 states: - (1) No person shall allow or offer to allow, either directly or indirectly, as an inducement to any person to take out or renew or continue an insurance in respect of any kind of risk relating to lives or property in India, any rebate of the whole or part of the commission payable or any rebate of the premium shown on the policy, nor shall any person taking out or renewing or continuing a policy accept any rebate, except such rebate as may be allowed in accordance with the published prospectuses or tables of the insurer. (2) Any person making default in complying with the provision of this section shall be punishable with fine, which may extend to five hundred rupees.  KOTAK ENDOWMENT PLAN Kotak Endowment Plan is a protection plan that covers your life and at the same timeensures that your money does not lie idle. It invests a portion of your premium infinancial instruments and ensures a considerable growth in savings. This is a participatingplan (with profits)."Who can avail of this plan?"How old do you have to be to avail of this Minimum age - 18 yearsplan? Maximum age - 65 yearsFor what term can i avail of this plan? 10-30 yearsWhat is the maximum age that the plan can 75 yearscover you till?"What are the advantages of this plan?" 1. On maturity, you would receive the sum assured plus the bonus addition. Bonus addition is the amount in the Accumulation Account*, in excess of the sum assured. Accumulation Account is your personal account, in which the premiums that you pay are deposited, the return declared every year is added and risk andAMITY INTERNATIONAL BUSINESS SCHOOL 39
  40. 40. expense charges are deducted. 2. The amount available in the Accumulation Account is invested in various financial instruments (as per IRDA regulations) so your money works harder for you. 3. The Automatic Cover Maintenance facility ensures the policy remains in force even if you miss premium payments. This facility is available after the first three years of the term. 4. You can take a loan against your policy, after the policy has been in force for at least three years. 5. You have the option of paying premiums quarterly, half yearly or yearly. You also have the flexibility to pay premiums through the full term of the policy or pay it for a fixed term of 3, 5, 7, 10 or 15 years. 6. You have the benefit of a 15-day free look period."What value-adds can you opt for?" You may avail of the following value-adDs for a nominal premium at the time of takingthe plan, subject to the aggregate premium on all value-adds not exceeding 30% of thebasic plan premium.  Term Benefit / Preferred Term Benefit: In the event of death during the term of this benefit, the beneficiary would receive an additional death benefit amount, which is over and above the sum assured. The maximum term benefit you can avail of is equal to the basic sum assured. Where the Term Benefit cover applied for is more than Rs.10 lakhs, better rates may apply, subject to meeting eligibility requirements.  Accidental Death Benefit: This benefit provides an additional amount (over and above the basic sum assured) to the beneficiary in the event of the accidental death of the life insured. The maximum cover available under this benefit is equal to the basic sum assured (subject to a maximum of Rs.10 lakhs).  Permanent Disability Benefit: This benefit provides financial support in case of your permanent disability due to an accident. The amount payable is over and above the basic sum assured and would be paid out as an annuity. The maximum Permanent Disability Benefit that you can avail of is equal to the basic sum assured (subject to a maximum of Rs.10 lakhs). Permanent disability is defined as a permanent and immediate inability to work, the permanent loss of use of two limbs or a total and permanent loss ofAMITY INTERNATIONAL BUSINESS SCHOOL 40
  41. 41. sight.  Critical Illness Benefit: This benefit can be taken with the basic life insurance policy to provide financial support in the event of medical emergencies. On the first occurrence of critical illness during the term of the policy, you would receive a portion of the sum assured to reduce your financial burden in this emergency. The maximum Critical Illness Benefit that you can avail of is equal to half the basic sum assured subject to maximum of Rs. 20 lakhs.  Life Guardian Benefit: This benefit can be availed of, only in a case where the life insured and the proposer are two different individuals. In case of the unfortunate death of the proposer, this benefit keeps the policy alive by waiving all future premiums on the policy.  Accidental Disability Guardian Benefit: In case the proposer is permanently disabled as a result of an accident, this benefit keeps the policy alive by waiving all future premiums on the policy. This benefit is available also where the life insured is the proposer. "What happens in the event of death of the life insured?" In the event of death of the life insured during the term of the plan, the beneficiary wouldreceive the sum assured or the amount in the Accumulation Account, whichever ishigher."Are there any Tax Benefits?" Section 80C, 10(10D) of Income Tax Act would apply. Premiums paid for CriticalIllness Benefit qualify for benefits under Section 80D. These benefits are as per thecurrently prevailing tax regulations and you are advised to consult your tax advisor fordetails."How does this plan work?"Mr. Sanjay Gupta, who is 30 years old, decides to buy a Kotak Endowment Plan for asum assured of Rs. 5,00,000 for a 20-year term for his wife, who is aged 28. Mr. Guptadecides to take the Life Guardian Benefit as a rider to the plan. He does this to provideenhanced security and protection to his wife.AMITY INTERNATIONAL BUSINESS SCHOOL 41
  42. 42. The annual premiums paid by Mr. Gupta are as follows Amount (Rs.)KOTAK ENDOWMENT PLAN PREMIUM 22,552LIFE GUARDIAN BENEFIT PREMIUM 1,106TOTAL ANNUAL PREMIUM PAID 23,658i) What would be the payout maturity? On maturity Sanjay Gupta would receive the sum assured or Accumulation Account,whichever is higher. Assuming that the Accumulation Account grows at a rate of 6%, the payout on maturitywould be Rs. 6,93,800. At a growth rate of 10%, the maturity amount payable would beRs. 10,97,700.ii) What would happen in the event of Mr.Gupta’s unfortunate death at the end of10th year? Since Mr. Gupta is the proposer on Mrs. Gupta’s policy and has availed of the LifeGuardian Benefit, all future premiums on Mrs. Gupta’s policy would be waived.Thereafter the policy will continue as if the premiums are being paid regularly. Onmaturity of her policy Mrs. Gupta would receive amounts as discussed above.** Assuming that the Accumulation Account grows at 6% and 10% respectively p.a. In the illustration, some benefits are guaranteed and some are variable. GuaranteedReturns are marked "guaranteed" in the illustration. Variable returns are shown at twodifferent rates of assumed future returns. These assumed rates of return are notguaranteed and they are not the upper or lower limits of what you might get back .Theactual return may be different depending on a number of factors including futureinvestment performance.AMITY INTERNATIONAL BUSINESS SCHOOL 42
  43. 43. CH NO. 6: SWOT ANALYSISSTRENGTHS • Market position is strong • Aggressive foreign bank • Shareholders return has grown more than 7 times • Maintains a position as a leading Asian Cash Management provider • Brand – Kotak Bank modern and dynamic look appeals to the growing middle income earners • Improved product proposition • Better geographic balancesWEAKNESS • HDFC, IDBI, ABN-AMBRO, Citibank and ICICI Bank are dominant players • Has disadvantage due to last entry • Fewer locations as compared to other MNC banks • Service delivery perception is weakOPPORTUNITIES • Branch expansion for rapid growth • Increase focus on value creation in whole banking • Improve shareholders return • Build market share in consumer banking as consumer banking continues to offer highest potential for growth • Broadening of the demographic base • Tie ups with master card networks • Integrated sales and service approach • Can offer a complete corporate package under proposed corporate relationship •THREATS • ICICI is pitching in quite aggressively • Citibank is expanding in new markets • Competitive products and offers from IDBI and HDFC • Proposed networking of all branches in next 6 monthsAMITY INTERNATIONAL BUSINESS SCHOOL 43
  44. 44. CH NO. 7: DATA COLLECTIONA semi-structured kind of questionnaire was designed which contain both open- endedand multiple choice questions.The questionnaire designed was to provide dual information sharing type, it is seriouslyundertaken that anyone who in undergoing the process, should find his interest or else hemight show disinterest towards the programme. Actually, I have been dressing myproject as the awareness programme. This awareness programme provided all thosefilling up of the questionnaire with enough information about the services of the KotakMahindra Old Mutual Life Insurance. Thus the questionnaire was equally important bothways to the customers as well as to the bank to draw out its prospects.The questionnaire designed to know the potential of the customer and help as asuccessful programme visiting the offices and small business enterprises without pre-appointment also provided me with information about that they demand from a new bankwhere they would prefer to open an account.For those already holding a relationship with the Kotak Mahindra Old Mutual LifeInsurance, shared with me their opinion about the back and its services as well assuggestions were also obtained from them of how to attract more potentiality for thebank. SAMPLING PLANI have been assigned to visit the offices and small business firms in Delhi. I was free tochoose my area. Hence I choose areas near the Bank or places where I could feel greaterprospects, such a places where small shopping malls or new business firms have comeout and over the industrial belts where several offices could be found out.The sample areas I choose was the following: • Noida • Punjabi Bagh • Lawrence Road • GurgaonI was advised not to visit the bigger companies because they were not our targetcustomers.AMITY INTERNATIONAL BUSINESS SCHOOL 44
  45. 45. FIELD WORK PLANThe field work was carried according the sampling plan formed. I visited the offices andsmall business enterprises /firms under my own limitations and time constraint at thefollowing places. (a) Noida (b) Punjabi Bagh (c) Lawrence Road (d) GurgaonAt some of the offices appointment were already made while at many places I visited,without pre-appointments.The main motive for these visits was to identify the potential customers or the potentialmarket. A two-way discussion was done through which the customers were made awareof the services of Kotak Mahindra. The questionnaires are either directly filled up orindirectly filled up by the people through this as well as the prospect of the areas as suchwere these campaigns were put up.AMITY INTERNATIONAL BUSINESS SCHOOL 45
  46. 46. FINANCIAL STATEMENTSKotak Mahindra Life Insurance Ltd...Profit & Loss Account for the year ended 31St Dec, 2005 Current Year Previous Year 31st Dec. 05 31st Dec 04 (in lakhs) (in lakhs)IncomeSales 1,134.22 785.65Other Income 25.32 21.33 1159.54 806.98ExpenditureMaterials consumed 738.73 526.15Personnel Expenses 87.3 70.36Depreciation 30.01 29.93Financial Charges 26.72 55.68Excise duty 130.87 101.14Misc. Expenditure 18.33 19.87 1198.26 953.49Loss for the year before extra ordinary (38.72) (146.51)items and prior period adjustmentsExtra-ordinary items- Expenses on abandoned projects - (2.15)Assets woff (6.64)Pension liability (5.14) -Prior period adjustments (0.30) (1.50)Expenses of extraordinary items 44.16 156.80Loss bought forward from previous years (324.23) (167.43)Balance carried to the B/S (368.39) (324.23)AMITY INTERNATIONAL BUSINESS SCHOOL 46
  47. 47. Balance Sheet as at 31 Dec 2005 As on 31st Dec 05 As on 31st Dec 04 (In Lacs) (In Lacs)Source of FundsShareholders fundsShare capital 734.20 834.20Reserve and surplus 21.00 755.20 855.20Loan FundsSecured loans 198.09 217.96Unsecured loans 0.04 2.95 198.13 220.91 953.33 976.11Application of fundsFixed AssetGross block 520.94 493.93Less: Depreciation 125.09 95.21 395.85 398.72Capital W.I.P. 1.58 2.69Net book value 397.43 401.41Investments 0.10 -Current Assets, Loans and AdvancesInventories 93.87 129.57Sundry Debtors 123.22 82.75Cash& Bank Balances 10.64 82.20Other current Assets 20.14 11.42Loans and advances 47.06 45.68 294.93 351.62AMITY INTERNATIONAL BUSINESS SCHOOL 47
  48. 48. As at Dec 31 2005 As at Dec 31.2004Less: Current Liabilities ProvisionsCurrent Liabilities 137.02 143.68Provisions 15.73 8.56 152.75 152.24Net current assets 142.18 199.38Miscellaneous Expenditure (Total extent 45.23 51.09not written off adjusted)Profit and loss 368.39 324.23 953.33 1076.11Profit & Loss Account for the year ended 31st Dec, 2006 Current Year 31 Previous Year 31 Dec 06 Dec 05 (In Lacs) (In Lacs)IncomeSales 903.92 1134.22Other Income 34.09 25.32 987.04 1159.54ExpenditureMaterials Consumed 621.23 738.73Personnel Expenses 104.58 87.33Mfg Other expenses 172.48 166.27Dep / Amortisation 34.38 30.01Financial Charges 30.57 26.72Excise duty 120.04 130.87Mis Expenditure W/off 20.28 18.33 1224.32 1198.26Loss for the year before extra ordinary (116.88) (38.72)items and prior period adjustmentsExtra ordinary items:Expenses on abandoned project W/off -- --Assets W/off -- --Pension liability -- 5.14AMITY INTERNATIONAL BUSINESS SCHOOL 48
  49. 49. Prior period adjustments -- 0.30Loss after prior pd. Exp. & extra-ord. (116.88) (44.16)Items.Loss b/f from early years (368.39) (324.23)Less: Amt. Adjusted against Cap. (68.39) ---Reduction300Loss: c/f to B/S (185.27) (368.39)Balance Sheet as at 31 Dec 2006Sources Of Funds 31 Dec 06 (Lacs) 31 Dec 05 (Lacs)Shareholders FundCapital 434.20 734.20Reserves & Surplus 21.00 21.00 455.20 755.20Loan FundsSecured loans 360.46 198.09Unsecured loans -- 0.04Application of FundsFixed AssetsGross Block 530.59 520.94Less: Dep. 153.55 125.09Net Block 377.04 395.85Capital work in progress inc. capital 3.25 1.58advances. 380.29 397.43Investments 0.10 0.10Current assets, Loans & AdvancesInventories 146.36 93.87Sundry Debtors 114.71 123.22Cash & Bank Balances 5.63 10.64Other current Assets. 21.66 20.14Loans & Advances 44.39 47.06Less: Current liabilities & ProvisionsAMITY INTERNATIONAL BUSINESS SCHOOL 49
  50. 50. Liabilities 116.07 137.02Provisions 14.11 15.73Net Current Assets 130.18 152.75Misc. Expenditure 47.43 45.23(To the extent not w/off)Profit & Loss A/c 185.27 368.39Total: 815.66 953.33AMITY INTERNATIONAL BUSINESS SCHOOL 50
  51. 51. CH NO. 8: WORKING CAPITAL- OVERALL VIEW CASH MANAGEMENTCash is the important current asset for the operations of the business. Cash is the basicinput needed to keep the business running on a continuous basis It is also the ultimateoutput expected to be realised by selling the service or product manufactured by the firm.The firm should keep sufficient cash, neither more nor less. Cash shortage will disruptthe firm’s operations while excessive cash will simply remain idle, without contributinganything towards the firm’s profitability. Thus a major function of the Financial Manageris to maintain a sound cash position.Cash is the money which a firm can disburse immediately without any restriction Theterm cash includes currency and cheques held by the firm and balances in its bankaccounts. Sometimes near cash items, such as marketable securities or bank time depositsare also included in cash. The basic characteristics of near cash assets are that they canreadily be converted into cash. Cash management is concerned with managing of:i) Cash flows in and out of the firmii) Cash flows within the firmiii) Cash balances held by the firm at a point of time by financing deficit or inverting surplus cash.Sales generate cash which has to be disbursed out. The surplus cash has to be investedwhile deficit cash has to be borrowed. Cash management seeks to accomplish this cycleat a minimum cost. At the same time it also seeks to achieve liquidity and control.Therefore the aim of Cash Management is to maintain adequate control over cashposition to keep firm sufficiently liquid and to use excess cash in some profitable way.The Cash Management is also important because it is difficult to predict cash flowsaccurately. Particularly the inflows and that there is no perfect coincidence between theinflows and outflows of the cash. During some periods cash outflows will exceed cashinflows because payment for taxes, dividends or seasonal inventory build up etc. On theother hand cash inflows will be more than cash payment because there may be large cashsales and more debtors’ realization at any point of time. Cash Management is alsoimportant because cash constitutes the smallest portion of the current assets, yetmanagement’s considerable time is devoted in managing it. An obvious aim of the firmnow-a-days is to manage its cash affairs in such a way as to keep cash balance at aAMITY INTERNATIONAL BUSINESS SCHOOL 51
  52. 52. minimum level and to invest the surplus cash funds in profitable opportunities. In orderto resolve the uncertainty about cash flow prediction and lack of synchronizationbetween cash receipts and payments, the firm should develop appropriate strategiesregarding the following four facets of cash management.1. Cash Planning: - Cash inflows and cash outflows should be planned to project cash surplus or deficit for each period of the planning period. Cash budget should prepared for this purpose.2. Managing the cash flows: - The flow of cash should be properly managed. The cash inflows should be accelerated while, as far as possible decelerating the cash outflows.3. Optimum cash level: - The firm should decide about the appropriate level of cash balances. The cost of excess cash and danger of cash deficiency should be matched to determine the optimum level of cash balances.4. Investing surplus cash: - The surplus cash balance should be properly invested to earn profits. The firm should decide about the division of such cash balance between bank deposits, marketable securities and inter corporate lending.The ideal Cash Management system will depend on the firm’s products, organisationstructure, competition, culture and options available. The task is complex and decisiontaken can effect important areas of the firm.Functions of Cash Management:Cash Management functions are intimately, interrelated and intertwined Linkage amongdifferent Cash Management functions have led to the adoption of the following methodsfor efficient Cash Management:  Use of techniques of cash mobilization to reduce operating requirement of cash  Major efforts to increase the precision and reliability of cash forecasting.  Maximum effort to define and quantify the liquidity reserve needs of the firm.  Development of explicit alternative sources of liquidity  Aggressive search for relatively more productive uses for surplus money assets.AMITY INTERNATIONAL BUSINESS SCHOOL 52
  53. 53. The above approaches involve the following actions which a finance manager has toperform.1. To forecast cash inflows and outflows2. To plan cash requirements3. To determine the safety level for cash.4. To monitor safety level for cash5. To locate the needed funds6. To regulate cash inflows7. To regulate cash outflows8. To determine criteria for investment of excess cash9. To avail banking facilities and maintain good relations with bankersMotives for holding cash:There are four primary motives for maintaining cash balances:1. Transaction motive2 .Precautionary motive3. Speculative motive4. Compensating motive1. Transaction motive: - The transaction motive refers to the holding of cash to meet anticipated obligations whose timing is not perfectly synchronised with cash receipts. If the receipts of cash and its disbursements could exactly coincide in the normal course of operations, a firm would not need cash for transaction purposes. Although a major part of transaction balances are held in cash, a part may also be in such marketable securities whose maturity conforms to the timing of the anticipated payments.2. Precautionary motive: - Precautionary motive of holding cash implies the need to hold cash to meet unpredictable obligations and the cash balance held in reserve for such random and unforeseen fluctuations in cash flows are called as precautionary balances. Thus, precautionary cash balance serves to provide a cushion to meet unexpected contingencies. The unexpected cash needs at short notice may be the result of various reasons as : unexpected slowdown in collection of accounts receivable, cancellations of some purchase orders, sharp increase in cost of raw materials etc. The more unpredictable the cash flows, theAMITY INTERNATIONAL BUSINESS SCHOOL 53

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