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8/11/2019 Equity Growth Fund of IDBI
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CHAPTER1
PROFILE OF THE COMPANY
1.1 IDBI Federal Life Insurance Co Ltd.
IDBI Federal Life Insurance Co. Ltd. is a joint venture between three financial companies
Development and Commercial Bank, IDBI Bank, Indias private sector Bank, Federal
Bank and European insurer Ageas (formerly Fortis). In this venture, IDBI Bank owns
48% equity while Federal Bank and Ageas own 26% equity each. The Headquarter is
located in Mumbai, India. IDBI Federal started its operations in March 2008 and is
amongst the most successful start-ups in the Indian Life Insurance market.
Name of the Firm IDBI Federal Life Insurance Co. Ltd.
Industry Life Insurance
Address IDBI Federal Life Insurance Co Ltd
903,9th Floor, Aggarwal Corporate Heights,
Plot no.- A-7, District Centre ,
Netaji subash Place,
New Delhi-110034, India
Telephone 1800 22 1120 (Toll Free)
Email [email protected]
Website http://www.idbifederal.com
Type National, Joint Venture
Registered Address IDBI Federal Life Insurance Co Ltd.Trade View Oasis Complex, Kamala City,
P.B Marg Lowe Parel (West),
Mumbai-400013,India
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Key People R.K Bansal (Chairman) , G V Nageswara
Rao, (MD & CEO)
Table No-1.1: Profile of IDBI Federal Life Insurance Co. Ltd
1.2 Nature of the Organization
1.21 Industry Profile - Insurance and Banking
Wherever there is uncertainty there is risk. We do not have any control over uncertainties
which involves financial losses. The risks may be certain events like death, pension,
retirement or uncertain events like theft, fire, accident, etc. Insurance may be described as
a social device to reduce or eliminate risk of loss to life and property. Under the plan of
insurance, a large number of people associate themselves by sharing risks attached to
individuals. The risks, which can be insured against, include fire, the perils of sea, death
and accidents and burglary. Any risk contingent upon these may be insured against at a
premium commensurate with the risk involved. Thus collective bearing of risk is
insurance
Insurance and Banking is coexisting financial institution while complementing and
supplementing each other. The Insurance Regulatory and Development Authority Act,
1999 have created more opportunities for expansion of the markets. Industry serves the
society in a very effective manner.
Banking Institutions have got the opportunities to enter in insurance business while
insurance institutions have already under the autonomy of start banking business. Many
non-banking institutions have been opened, acquired funds and dissolved with public
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money at their stakes. Since they were totally in the hands of private persons, the
Government control became ineffective. Banking institutions in India are mainly under
the control of Reserve Bank of India. People need insurance but they prefer investment
over risk coverage although latter is more important.
Indian mentality for insurance is very bleak people do not feel need of insurance although
they have dire-necessity for that. Insurance institutions in India have not considered
forced insurance. The voluntary-purchasing of insurance policies is rare phenomena.
They prefer to go to bank offices rather than going to insurance offices for getting risk
coverage. The insurance institutions procure the business through their agents who are
the main link between people and the company.
a) Brief History of Insurance
The business of insurance started with marine business. Traders, who used to gather in
the Lloyds coffee house in London, agreed to share the losses to their goods while being
carried by ships. The losses used to occur because of pirates who robbed on the high seas
or because of bad weather spoiling the goods or sinking the ship. The first insurance
policy was issued in 1583 in England. In India insurance began in 1818 with life
insurance being transacted by an English company, the Oriental Life Insurance co. Ltd.
The first Indian insurance company was the Bombay Mutual Assurance Society Ltd,
formed in 1870. This was followed by the Bharat Insurance Co. in 1896 in Delhi, the
Empire of India in 1897 in Mumbai.
Later, the Hindustan Cooperative was formed in Calcutta, the United India in Madras, the
Bombay Life in Bombay, the National in Calcutta, the New India in Bombay, and the
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Jupiter in Bombay and the Lakshmi in New Delhi. These were all Indian companies,
started as a result of the Swadeshi Movement in the early 1900s. By the year 1956,
when the life insurance business was nationalized and the Life Insurance Corporation of
India (LIC) was formed on 1st September 1956, there were 170 companies and 75
provident fund societies transacting life insurance business in India. After the
amendments to the relevant laws in 1999, the L.I.C. did not have the exclusive privilege
of doing life insurance business in India. By 31.8.2007, sixteen new life insurers had been
registered and were transacting life insurance business in India.
b)
Present Scenario of an Insurance Industry
The Government of India liberalized the insurance sector in March 2000 with the passage
of the Insurance Regulatory and Development Authority (IRDA) Bill, lifting all entry
restrictions for private players and allowing foreign players to enter the market with some
limits on direct foreign ownership. Under the current guidelines, there is a 26 percent
equity cap for foreign partners in an insurance company. There is a proposal to increase
this limit to 49 percent. The opening up of the sector is likely to lead to greater spread
and deepening of insurance in India and this may also include restructuring and
revitalizing of the public sector companies. In the private sector 12 life insurance and 8
general insurance companies have been registered.
c)
Insurance Regulatory And Development Authority
Reforms in the Insurance sector were initiated with the passes of the IRDA Bill in
Parliament in December 1999. The IRDA since its incorporation as a statutory body in
April 2000 has fastidiously such to its schedule of framing regulations and registering the
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private sector insurance companies. The other decision taken simultaneously to provide
the supporting systems to the insurance sector and in particular the life insurance
companies was the launch of the IRDA online service for issue and renewal of licenses to
agents.
1.22 IDBI Federal Life Insurance Co Ltd.
It is a joint-venture of IDBI Bank, Indias premier development and commercial bank,
Federal Bank, one of Indias leading private sector banks and Ageas, a multinational
insurance giant based out of Europe. In this venture, IDBI Bank owns 48% equity while
Federal Bank and Ageas own 26% equity each. It started in March 2008, in just five
months of inception; IDBI Federal became one of the fastest growing new insurance
companies to garner Rs.100 Crore in premiums. Through a continuous process of
innovation in product and service delivery IDBI Federal aims to deliver world-class
wealth management, protection and retirement solutions that provide value and
convenience to the Indian customer. The company offers its services through a vast
nationwide network of 2,186 partner bank branches of IDBI Bank and Federal Bank in
addition to a sizeable network of advisors and partners. As on 31stMarch 2013, the
company has issued over Rs.4.99 lakhs policies with a sum assured of over Rs.28,580
Crore.
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Figure No-1.1: Equity Share of IDBI, Federal and Ageas
a) About Their Heritage
i. IDBI Bank
IDBI Bank Ltd., since its inception, Indias premier industrial development bank. It came
into being as on July 01, 1964 (under the Companies Act, 1956) to support Indias
industrial backbone. Today, it is amongst Indias foremost commercial banks, with a
wide range of innovative products and services, serving retail and corporate customers in
all corners of the country from 1082 branches and 1715 ATMs. The Bank offers its
customers an extensive range of diversified services including project financing, term
lending, working capital facilities, lease finance, venture capital, loan syndication,
corporate advisory services and legal and technical advisory services to its corporate
clients as well as mortgages and personal loans to its retail clients. As part of its
development activities, IDBI Bank has been instrumental in sponsoring the development
of key institutions involved in Indias financial sector National Stock Exchange of India
48%
26%
26%
EQUITY
IDBI BANK
FEDERAL BANK
AGEAS
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Limited (NSE) and National Securities Depository Ltd, Stock Holding Corporation of
India Ltd (SHCIL), Credit Analysis and Research Ltd (CARL).
ii. Federal Bank
Federal Bankis one of Indias leading private sector banks, with a dominant presence in
the state of Kerala. It has a strong network of over 1104 branches and 1195 ATMs spread
across India. The bank provides over four million retail customers with a wide variety of
financial products. Federal Bank is one of the first large Indian banks to have an entirely
automated and interconnected branch network. In addition to interconnected branches
and ATMs, the Bank has a wide range of services like Internet Banking, Mobile Banking,
Tele Banking, Any Where Banking, debit cards, online bill payment and call centre
facilities to offer round the clock banking convenience to its customers. The Bank has
been a pioneer in providing innovative technological solutions to its customers and the
Bank has won several awards and recommendations.
iii. Ageas
Ageasis an international insurance group with a heritage spanning more than 180 years.
Ranked among the top 20 insurance companies in Europe, Ageas has chosen to
concentrate its business activities in Europe and Asia, which together make up the largest
share of the global insurance market. These are grouped around four segments: Belgium,
United Kingdom, Continental Europe and Asia and served through a combination of
wholly owned subsidiaries and partnerships with strong financial institutions and key
distributors around the world. Ageas operates successful partnerships in Belgium, UK,
Luxembourg, Italy, Portugal, Turkey, China, Malaysia, India and Thailand and has
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subsidiaries in France, Hong Kong and UK. Ageas is the market leader in Belgium for
individual life and employee benefits, as well as a leading non-life player through AG
Insurance. In the UK, Ageas has a strong presence as the fourth largest player in private
car insurance and the over 50s market. Ageas employs more than 13,000 people and has
annual inflows of more than EUR 21 billion.
b) Milestones
2006 IDBI Bank, Federal Bank and Belgian-Dutch insurance major Fortis InsuranceInternational NV signed a MoU to start a life insurance company
2008 IDBI Fortis Life Insurance Co. Ltd., which started its operations in March 2008
2008 IDBI Federal becomes one of the fastest growing new life insurers to collectpremiums worth Rs.100 crores
2009 IDBI Fortis announces Rs.250crores capital infusion
2009 Nimbus ropes in IDBI Fortis as title sponsor of IndiaSri Lanka series
2009 'IDBI Fortis' Boss-Ka-Boss receives PRCI Award
2009 IDBI Fortis receives bronze Dragon at PMAA 2009
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2010 IDBI Fortis now renamed as IDBI Federal Life Insurance Company
2011 IDBI Federal launches Retiresurance Guaranteed Pension Plan
2012 IDBI Federal makes its online debut
2013 IDBI Federal in association with Phoenix Foundation organizes a trek for thephysically challenged
2013 IDBI Federal breaks-even in Five years; posts maiden profit of Rs.9.24 crore
Table No-1.2: Milestones of IDBI Federal
1.3 Vision & Mission of IDBI Federal
1.31 Vision
To be the leading provider of wealth management, protection and retirement solutions
that meets the needs of our customers and adds value to their lives.
1.32 Mission
a) To continually strive to enhance customer experience through innovative product
offerings, dedicated relationship management and superior service delivery while
striving to interact with our customers in the most convenient and cost effective
manner.
b) To be transparent in the way we deal with our customers and to act with integrity.
c) To invest in and build quality human capital in order to achieve our mission.
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1.33 Values
a) Transparency :Crystal Clear communication to our partners and stakeholders.
b) Value to Customers :A product and service offering in which customers perceive
value.
c) Rock Solid and Delivery on Promise : This translates into being financially
strong, operationally robust and having clarity in claims.
d) Customer-friendly :Advice and support in working with customers and partners.
e) Profit to Stakeholders:Balance the interests of customers, partners, employees,
shareholders and the community at large.
1.4 Products of IDBI Federal Life Insurance Co Ltd.
IDBI Federal is providing various insurance policies for the commonwealth of the people
and its customer in particular. The various insurance policies provided by the company
are:
a) Incomesurance
IDBI Federal Incomesurance Endowment and Money Back Plan is loaded with lots of
benefits which ensure that policyholder get Guaranteed Annual Payout along with
insurance protection which will help policyholder to reach their goals with full
confidence. Incomesurance Plan is very flexible and allows policyholder to customise
their Plan as per your individual and familys future requirements. Moreover it also
allows policyholder to choose Premium Payment Period, Payout Period, Payout Options
and more.
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b) Wealthsurance
The Wealthsurance Milestone Plan is a unique Insured Wealth Plan designed to help
cross different milestones in ones life. It enables customers to save and build wealth
under the protection of insurance to meet their financial goals. The Wealthsurance
Milestone Plan offers a wide range of Investment options, Insurance options and
unmatched flexibility that allows customers to customize a plan suited to their needs.
This Plan comes with a wide range of 13 investment options and 7 insurance benefits - all
packaged with a low charge structure and unmatched flexibility.
c) Termsurance
IDBI Federal Termsurance Protection Plan (Termsurance) comes with three cover
options which policyholder can select on the basis their requirement. Termsurance is
designed with a host of benefits and options aimed at satisfying their every need. It not
only allows policyholder to customise their plan as per their individual and familys
needs, it also comes with a host of benefits like convenient insurance cover options,
flexible premium payment terms, choice of policy term and lots more flexible options.
d) Homesurance
IDBI Federal Homesurance Plan is a mortgage reducing term assurance plan MRTA,
which offers protection to their home from their home loan. The Plan provides a cover
equal to the outstanding balance of their home loan against any unfortunate events that
may occur to policyholder. This plan gives people the option of a Single Premium.
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e) Childsurance
Whetherpolicyholderschild wants to be a doctor, an engineer, an MBA, a sportsman, a
performing artist, or dreams of being an entrepreneur, the IDBI Federal Childsurance
Dream builder Insurance Plan will keep you future-ready against both, changing dreams
and lifes twists. It allows policyholder to create build and manage wealth by providing
several choices and great flexibility so thatpolicyholdersplan meets their specific needs.
Childsurance allows policyholder to protect their child plan with triple insurance benefits
so that their wealth-building efforts remain unaffected by unforeseen events and their
childs future goals can be achieved without any hindrance.
f) Bondsurance
The IDBI Federal Bondsurance Advantage Plan is a single premium plan where
policyholder needs to make just a one-time investment. At the end of the chosen period,
policyholder will receive a guaranteed maturity amount. In case of death of the insured
person before the Maturity Date, a guaranteed Death Benefit will be paid.
g) Group Microsurance
IDBI Federal Group Microsurance Plan provides affordable life insurance cover to
groups. This plan is extremely useful to Micro Finance Institutions, Self Help Groups and
NGOs to insure the lives of their group members and thus provide security to the group
members families. The plan can also be used for providing loan protection to the group
members families.
h) Retiresurance
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A retirement plan designed to accumulate money to aid a comfortable retirement. The
plan provides a guaranteed return on investment and grows steadily over the years to
ensure that policyholder have a corpus on their retirement date, guaranteed.
i) Loansurance
Loansurance is a cost-effective way to ensure that the outstanding debt is settled in the
unfortunate event of death of the insured member. This term assurance plan provides
cover to a policyholder directly liable for loan repayment (and the partners, in case of a
partnership), as per the benefit schedule.
1.5 Size of the Organization
In terms of man power and turnover -
Year of Establishment 2008
Nature of Business Life Insurance
Number of Employees 10,000 employees (Approx in 2012-13)
Turnover Rs. 500 crore (Approx in 2012-13)
Table No-1.3: Size of the Organization
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IDBI Federal Life Insurance currently has over 10,000 on roll employees all over the
country and over 2,00,000 licensed agents working towards the success. The company
has reported a maiden profit of Rs 9.24 crore in 2012-13, thus making it one of the fastest
to break-even in the Life Insurance industry. In an industry challenged by falling
margins, shrinking new business volumes, high cost ratios and low profitability, this is a
significant achievement.
1.6Organization Structure of the IDBI Federal
IDBI Federal has line structure as its Organizational structure. Authority flows from
the top level to lower levels through various managerial positions. There is verticalflow of authority and responsibility. Every person is accountable to his immediate
boss. There is limit on subordinates under one manager. A manager has control only
over the subordinates of his department.
Chairman
CEO/CFO/COO
HOD
Zonal Manager
Regional Manager
Branch Manager
Senior Manager
Relationship Manager
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Figure No-1.2: Organization Structure of the IDBI Federal
1.7 Market Share & Position of the Company
1.71 Market Share of IDBI Federal
Figure No-1.3: Market Share of All Life Insurance Companies
IDBI Federal Life Insurance has achieved break even in 2012-13, its fifth year of
operations and its market share is 0.42% in the industry for the year ended march13.
63.475.88
5.66
4.40
3.14
2.73
.46
2.30
1.27 1.271.05
1.02
0.99
0.99
0.58
0.53
0.42
0.41 0.41
0.39
0.33
0.200.09
MARKET SHARE FOR FY'12~FY'13
(IN %)
Life Insurance Corporation of India
ICICI Prudential Life Insurance Co. Ltd
HDFC Standard Life Insurance Co. Ltd
SBI Life Insurance Co. Ltd
Max Life Insurance Co. Ltd
Bajaj Allianz Life Insurance Co Ltd
Birla Sun life Insurance Co. Ltd
Reliance Life Insurance Co. Ltd
Tata AIG Life Insurance Co. Ltd
ING Vysya Life Insurance Co. Ltd
MetLife Life Insurance Co Ltd
Aviva Life Insurance Co Ltd
Canara HSBC OBC Life Insurance Co Ltd
Kotak Life Insurance Co Ltd
Star Union Dai-Ichi Life Insurance Co. Ltd
Future Generali Life Insurance Co Ltd
IDBI Federal Life Insurance Co. Ltd
India First Life Insurance Co. Ltd
Bharti Axa Life Insurance Co. Ltd
Aegon Religare Life Insurance Co. Ltd
Shriram Life Insurance Co. Ltd
DLF Pramerica Life Insurance Co. Ltd
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IDBI Federals New Business Premium grows by 23%, compared to industrys negative
growth of -15%. Achieves 44% increase in the number of new business policies sold.
1.72 Market Position of IDBI Federal
Market Position Life Insurance Companies
1 Life Insurance Corporation Of India
2 ICICI Prudential Life Insurance Co. Ltd
3 HDFC Standard Life Insurance Co. Ltd
4 SBI Life Insurance Co. Ltd
5 Max Life Insurance Co. Ltd
6 Bajaj Allianz Life Insurance Co Ltd
7 Birla Sun life Insurance Co.Ltd8 Reliance Life Insurance Co. Ltd
9 Tata AIG Life Insurance Co. Ltd
10 ING Vysya Life Insurance Co. Ltd
11 MetLife Life Insurance Co Ltd
12 Aviva Life Insurance Co Ltd
13 Canara HSBC OBC Life Insurance Co Ltd
14 Kotak Life Insurance Co Ltd
15 Star Union Dai-Ichi Life Insurance Co. Ltd
16 Future Generali Life Insurance Co Ltd17 IDBI Federal Life Insurance Co. Ltd
18 India First Life Insurance Co. Ltd
19 Bharti Axa Life Insurance Co. Ltd
20 Aegon Religare Life Insurance Co. Ltd
Table No-1.4: Market Position of All Life Insurance Companies
For the calendar year 2012, IDBI Federal Ranked 17thand its Equity Fund ranked No. 1
among 72 ULIP funds bearing testimony to the companys fund management expertise.
IDBI Federal Life Insurance has achieved break even in 2012-13, its fifth year of
operations. The company has reported a maiden profit of Rs 9.24 crore in 2012-13, thus
making it one of the fastest to break-even in the Life Insurance industry. One of the major
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reasons behind the growth of IDBI Federal Life Insurance has been its employees. In an
industry challenged by falling margins, shrinking new business volumes, high cost ratios
and low profitability, this is a significant achievement.
1.8 Leadership of IDBI Federal and their Levels
Figure No-1.4: Current Leadership
During the tenure of the training researcher interacted with various people. Among them
few guided him and helped him in better understanding of the functioning of different
departments of the organization. Mr. Lokesh Sapra, Regional Manager (sales)guided
the researcher with the functioning of the branch and how employees coordinate and are
accolade based on their performances.
Regional ManagerMr. Lokesh Sapra
Branch HeadMr. Manas Das
Sr. ManagerMr. Ezad Ahmed
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Mr. Manas Das (Branch Head) and Mr. Ezad Ahmed (Sr. Manager) helped
researcher throughout by their guidance and support, during researchers tenure with
IDBI Federal.
1.9 Sources of Data Collection
Data Collection is an important aspect of any type of research study. It is a term used to
describe a process of preparing and collecting data from all sources and observation. Data
was collected from various primary and secondary sources. These two methods of data
collection are discussed below:
a) Primary Data for this project has been collected through unstructured interview
conducted with management trainee from head office and various employees who
provided valuable information regarding the organization and its working.
b) Secondary Dataare those which have already been collected by some other person
for their purpose and published. Secondary data are usually in the shape of finished
products.
Two types of secondary data were collected for the project.
i. Internal Data : It was generated from companys brochures, pamphlets, manuals
and annual report have given valuable information for the present study.
ii. External Data :It was generated from research articles, newspaper articles, books
and internet.
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CHAPTER2
SWOT ANALYSIS OF THE COMPANY
SWOT analysis is a structured planning method used to evaluate the Strengths,
Weaknesses, Opportunities, and Threats involved in a business venture. SWOT Analysis
provide information that helps in synchronizing the firms resources and capabilities with
the competitive environment in which the firm operates.
Figure No-2.1: SWOT Analysis of IDBI Federal
STRENTHS
SKILLED MANPOWER WITH DEPTH KNOWLEDGE.
INNOVATIVE PRODUCTS TO CATER NEEDS OFCUSTOMER.
DOMESTIC IMAGE OF IDBI SUPPORTED BY FEDERALIMAGE.
STRONG CAPITAL AND SURPLUS RESERVE.
LOW MANAGEMENT EXPENSES ANDADMINISTRATIVE COSTS.
WEAKNESS
CUSTOMER SERVICE STAFF NEED TRAINING.
POOR RETENTION PERCENTAGE OF TIED UPAGENTS.
LOW CUSTOMER CONFIDENCE ON THE PRIVATEPLAYERS.
OPPORTUNITIES
DEMAND FOR INNOVATIVE PRODUCTS OFFERINGA RIGHT MIX OF FLEXIBILITY/ RISK/ RETURN.
INTERNATIONAL COMPANIES WILL HELP INBUILDING WORLD CLASS EXPERTISE IN LOCALMARKET BY INTRODUCING THE BEST GLOBALPRACTICES.
THERE WILL BE INFLOW OF MANAGERIAL ANDFINANCIAL EXPERTISE FROM THE WORLDS
LEADING INSURANCE MARKETS
THREATS
THER PRIVATE INSURANCE COMPANIES ALSOVYING FOR THE SAME UNINSURED POPULATION.
LEGISLATION COULD IMPACT AND GREAT RISKINVOLVED.
VERY HIGH COMPETITION PREVAILING IN THEINDUSTRY.
OTHER PRIVATE INSURANCE COMPANIES ALSOVYING FOR THE SAME UNINSURED POPULATION.
SWOT
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2.1 Strengths and Weaknesses of the Company
2.11 Strengths
a)
Large pool of technically skilled manpower with in depth knowledge and
understanding of the market.
b) The company also provides innovative products to cater to different needs of
different customers.
c) Dedicated workforce aiming at making a long-term career in the field.
d)
Low management expenses and administrative costs.
e) IDBI Federal Life Insurance Company leverages on the strong distribution network
of its promoters and advisors.
f) Finance department helps the organization to keep a track on the administration cost
and all the other expenses
2.12 Weaknesses
a) Customer service staff needs training due to changing human behavior.
b) Product awareness is low in the market.
c) Low customer confidence on the private players.
d) Centralization in the organization, management decisions are taken by top authority
which leads to significant delays in decisions.
e) A centralized administrative system gives way to inequity through the instigation of
excessive regulations or strict conformity to official norms which is redundant or
bureaucratic and that hinders decision-making and delays work.
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2.2 Opportunities and Threats of the Company
2.21 Opportunities
a) Insurable population : According to IRDA only 10% of the population is insured
which represent around 30% of the insurable population. This suggests more than
300m people, with the potential to buy insurance, remain uninsured.
b) International companies will help in building world class expertise in local market by
introducing the best global practice.
c)
Fast-track career development opportunities on an industry-wide basis.
d) An applied research centre to create opportunities for developing techniques to
provide added-value services.
e) There will be inflow of managerial and financial expertise from the worlds leading
insurance markets. Further the burden of educating consumers will also be shared
among many players.
2.22 Threats
a) Big public sector insurance companies like Life Insurance Corporation (LIC) of
India, National Insurance Company Limited, New India Assurance Company
Limited and United India Insurance Company Limited. People trust and go to them
more.
b) Legislation could impact and Great risk involved.
c) Very high competition prevailing in the industry.
d) Lack of infrastructure in rural areas could constrain investment
e)
People prefer short term investments rather than insurance.
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2.3 USPS of IDBI Federal
IDBI Federal Life Insurance derives its maximum business or profits through Sales and
Marketing department, thus the key USP is the Marketing activity and rest all are the
practices adopted by the company which is explained below :
2.31 Sales and Marketing
a) Marketing at IDBI Federal is considered to be the backbone since different channels
of marketing which are acting as individual entities in the organization with the aim
of adding value to the organization contribute to the USP.
b) Thus, channels like direct marketing, agency selling and bancassurance uses the
USPS like advertisements, promotional events, internet medium etc to promote the
brand & in bancassurance, the USP is that bank uses the databases of IDBI and
Federal Banks customer and sells its product to them via. Telecommunication and
finally, one to one meeting with the customers.
c)
IDBI Federal Life Insurance Company leverages on the strong distribution network of
its promoters and advisors.
d) Operates through 1082 branches of IDBI Bank & 1104 branches of Federal bank.
Other than the marketing department, there are other departments which work hand in
hand with marketing department and other departments of the organization. A brief of
practices followed in these departments has been explained as under :
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2.32 Finance
a) Finance department helps the organization to keep a track on the administration cost
and all the other expenses. It helps in cost-cutting thus lowering the cost.
b) Finance department analysis and invests in risk free, stable, does secure investments
such as in incomesurance product, it invests in government bonds which is risk free
for a customer.
2.33 Human Resource
HR includes the following practices:-
a)E-Recruitment- IDBI Federal follow online recruitments i.e. practice of using Web-
based technology resources for tasks involved with finding, attracting, assessing,
interviewing and hiring new personnel.
b)The purpose of E-recruitment is to make the processes involved more efficient and
effective, as well as less expensive.
c)Different programmes like Reward & Recognition to motivate as well as to retain the
employees.
2.34 Operations
a) Operations act as a link between different departments to ensure smooth functioning
in the organizations.
b) Thus, the main USP of operations is to timely interact among different departments,
coordination and meeting the deadlines through internet, telecommunication and
other communication channels like video conferences etc.
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2.4 Deviations in Practices Followed by the IDBI Federal
The deviations measured during training with IDBI Federal Life Insurance Co. Ltd in its
practices in comparison with the theoretical concept are as under :
2.41 Training
The training as given to the service advisors or the employees lacked the following-
a) Quality: The quality of training lacked the skills, knowledge and communication
skills that a trainer should possess. There should be a quality trainer which should
possess good skills and in depth knowledge to impart knowledge and information to
employees. In the company, Managers itself to some level are dealing or working as
trainers.
b) In-Depth Knowledge: The managers working as part time trainers, lack in-depth
knowledge about the products & thus there is lack of understanding of the product to
the employees.
c) Training Rooms:The training rooms are compact and not much space is available
for more than 10 persons to accommodate. It gets uneasy at times and noisy too.
2.42 Employee Charter
There is no immediate employee charter to deal with employees problems. The place
lacked proper training rooms, washrooms, lunch rooms etc. Everything is governed by
head office of the company which gets difficult for the employees as they have to wait for
long days to get solution to their problems.
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2.43 Inadequate Manpower
Due to small structure of employees in the agency, the work pressure is more which
decreases the productivity of the firm. Example- In case of absence of a trainer from the
organization, there is no one to complete the tasks in her/his absence, as a result of which
the work suffers and gets delayed.
2.44 Stock Management
There are various methods to manage the inventory in an organization for example, re-
order level etc is not adhered for forms, brochures, pamphlets etc. The main reason for
this is, there is no proper tracking on the inventory of brochures, forms, pamphlets etc on
regular basis and thus, re-order is only given, once there quantity is finished and an
application is mail to the head office, Mumbai regarding the shortage of the inventory,
later order gets dispatch from the head office which involves a long procedure which
leads to delay in the operation of the company. Thus, customers have to wait to get the
same.
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CHAPTER3
DATA COLLECTION AND DATA PRESENTATION
Data has been collected from different functional areas of IDBI Federal Life Insurance
Co. Ltd like Marketing, Human Resource, Finance, I.T etc and each department have its
own role and responsibility which aims to achieve the organisational objectives. The data
has been presented about the equity growth fund of IDBI Federal Life Insurance Co. Ltd
i.e. its portfolio for the month of June13 And July13.
A. Data Collection
3.1 Marketing
The Marketing function at IDBI Federal Life Insurance covers an array of activities -
brand and media management, channel support, direct marketing and corporate
communications. The company focuses on the formulation of an ideal mix for their
organization. The marketing mix is the combination of different marketing activities that
helps in meeting the needs of the target market. IDBI Federal Life Insurance Co Ltd deals
in services for which 5Ps of marketing has been focused on i.e. the product, its price,
place, promotion and people in the following manner:
3.11 ProductPlanning Process
IDBI Federal is an insurance company which sells services and therefore services are
their product. When a person buys an insurance policy from the company, customer not
only buys a policy, but along with it the assistance and advice of the agent, the prestige of
the insurance company and the facilities of claims and compensation. It is natural that the
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users expect a reasonable return for their investment and the insurance companies want
to maximize their profitability. Hence, while deciding the product portfolio or
the product-mix, the services or the schemes should be motivational. The Role of the
Product management department is to develop product and market them. The department
uses different strategies to maximize sales revenues, market share, and profit margin. The
product department deals in following activities:
a) Develop new product ideas and move them through the Product Development Life
Cycle (PDLC) keeping product sponsors updated.
b)
Lead research and analysis of new product ideas and interprets results. Works with
management to evaluate the cost/benefit of market opportunities and new initiatives.
c) Serve as a key contact for developing and implementing new products or
administrative practices specific to the product line.
d) Provide direction and strategic perspective on product initiatives.
e) Monitor competition to ensure viability of existing product line.
f) Provide prioritization on product related issues to internal areas to include
technology, legal and state-filing units.
g) Act as a product line expert and maintain a thorough knowledge of company product
features and benefits as well as industry product trends.
h) Once the product has been analyzed from every perspective, then it is filed in
Insurance Regulatory and Development Authority (IRDA) i.e. is an autonomous apex
statutory body which regulates and develops the insurance industry in India.
i) After receiving approval from Insurance Regulatory and Development Authority
(IRDA), the product can be launch in the industry.
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IDBI Federal Life Insurance Co. Ltd provides many products which cater to the needs of
the Indian customers. IDBI Federal has 11 innovative products and each one of them is
crafted considering the needs of people. `Wealthsurance Milestone Plan` product is a
unique combination that aims to help people reach their important goals in life with full
confidence. It offers a wide range of investment options, insurance options and
unmatched flexibility that allows customers to customize a plan suited to their needs.
IDBI Federalsproducts are:
i. Wealthsurance
ii. Incomesurance
iii. Bondsurance
iv. Termsurance
v.
Healthsurance
vi. Retiresurance
vii. Group Microsurance
viii. Homesurance
ix. Loansurance
x. Childsurance
3.12 Pricing Strategies
The pricing in insurance is in the form of premium rates. Premiums are the amount of
money the insurer needs to collect from the policyholder in order to cover the expected
losses, expenses, and a provision for profit. Every product has its own premium rate
according to the customer requirements. The pricing of the products are decided
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according to the need and standard of the customers and the products requirements. With
a view of influencing the target market or prospects the formulation of pricing strategy
becomes significant. The strategies may be high or low pricing keeping in view the level
or standard of customers or the policyholders.
An actuary is a business professional who deals with the financial impact of risk and
uncertainty. Actuaries provide expert assessments of financial security systems, with a
focus on their complexity, their mathematics, and their mechanisms. Actuary decides the
premiums and profitability.
The three main factors are used by the company for determining the premium rates under
a life insurance plan are mortality, expense and interest. The premium rates are revised if
there are any significant changes in any of these factors.
a)Mortality (deaths in a particular area): When deciding upon the pricing strategy the
average rate of mortality is one of the main considerations.
b)Expenses: The cost of processing, commission to agents, reinsurance companies as
well as registration are all incorporated into the cost of installments and premium sum
and forms the integral part of the pricing strategy.
c)Interest: The rate of interest is one of the major factors which determine peoples
willingness to invest in insurance. People would not be willing to put their funds to
invest in insurance business if the interest rates provided by the banks or other
financial instruments are much greater than the perceived returns from the insurance
premiums.
There are 5 main product of IDBI Federal Life Co Ltd which has different premium rate
which are decided by the actuary department as follows:
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i.Wealthsurance:In Wealthsurance plan the minimum premium rate is 10,000 p.a. for
maximum 10 year which provide the tax benefit under section 80(c) and give the sum
assured benefit of 1.25 times of 1stpremium amount.
ii.Incomesurance:The Incomesurance product give the tax benefit under section 80(c)
and 10(10) d both .The minimum premium rate of this product is 12,000 p.a. for
maximum 15 years.
iii.Bondsurance:The Bondsurance plan is basically a guaranteed return plan at a fixed
discount rate benefit on maturity of plan .The minimum premium rate is 20,000 p.a.
for maximum 10 year.
iv.Termsurance:The Termsurance plan cover all age of people with minimum premium
amount of 20,000 p.a. with different tax benefit.
v.Homesurance: In Homesurance plan the premium rate is 2/3 of the loan amount
which is paid for maximum 15 year which provide the tax benefit under section
10(10)d.
3.13 Place
The place is the major part of 5Ps of marketing mix in which the different place are
found by the agent of the company for selling its products. The agents always target those
areas from where they can gain more business and will benefit the company. IDBI
Federal Life targets the different places for different products. If the company wants to
sell the incomsurance product then they cover the housing societies, schools, Industrial
areas from where they can earn maximum premium for the product. The major places
which are targeted by the company are corporate areas, societies, natural market like their
own family and references.
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3.14 People
Prospecting is very important part of selling of insurance product for the company.
During prospecting of people the need and want of the people is to be considered. The
prospecting are only done for those people who satisfied the need and want of the
products like young people want high rate of return on maturity of product as a retirement
plan. For the selling of insurance product IDBI Federal focuses on young people, old
people, married couples, defense officers, businessmen, and women entrepreneurs. For
the selling of product company appoint thousand of agents which create a bridge between
the customers and company. IDBI Federal believes, India being a young country with
over 50% being the youth, it is a large segment. Life insurance is an important form of
long term contractual saving that helps people save for the long term for the unexpected
occurrences they may not foresee today.
3.15 Promotional Strategies
Promotion is the method used by the company to spread the word of their product and
service to the customers. Promotion is the best way of marketing the product and aware
the customers about the benefits of product. Following are some of the ways by which
IDBI Federal life Insurance Co. Ltd promotes its products/services and creates awareness
in the market :
a) Distributors :A strong network of distributors and parent advisors also helps a lot in
promoting products/services of IDBI Federal by word of mouth. A Viral campaign is
also run on the Internet by wherein flash videos of working of products are explained
in a very humorous manner.
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b) Events :There are various events are organize by the company for the promotion of
their company like health camp in societies, competitions in schools, sponsor the
seminars etc.
c) Print Media : IDBI Federal has attained notice through many articles and
advertisements published in various national and regional newspapers in India like
the Economic Times, Times of India etc.
d) Hoardings : IDBI Federal has also tried making their potential customer aware of
their products and policies through billboards and hoardings by positioning them in
strategic locations. As of now, the total number of hoardings which are put up in
Hyderabad region counts to a good 17 number. The total expenses spent by the
company for this promotional activity is Rs.4 lakhs.
e) Online : Social network sites and emails are used has online promotional tools.
f) Commercial Ads : In Delhi metro, the commercial advertisement is done for its
product and giving the information about its product benefits by using AIDA method
(attention, interest, desire and actions).IDBI Federal Life Insurance Co. Ltd brought
out many interesting and humorous ads of their products such as Wealthsurance,
Incomesurance, Retiresurance etc which has got very good response from customers.
g) Magazines : There is no specific magazine in which advertisement is given. Its
given in magazines depending upon their sales and reputed magazines like Outlook,
Money etc. The advertisement is given every month at least once in any magazine.
h) Advertisement Strategy : Some insurance players work in the warm, emotional area,
there are some who play in the realistic, borrowed from life insight area, and some
who play more on doing stuff which brings a smile and breaks clutter. So different
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players have different objectives. In this case, IDBI Federal knew they wanted to
dramatize the product benefit, give enough importance to the nomenclature, and do it
in a clutter breaking way. IDBI Federal strategy has always been to focus on their
products. They believe their products are differentiator and they add tremendous
value to the consumer.
i) Pamphlets : Pamphlets are distributed across India at least 5 times in a month
without any cost. Its done to create maximum awareness about the products/services.
3.2 Human Resource Management
The role of the Human Resource Department is to deal with management of people
within an organization. The people strategy of IDBI Federal Life Insurance is "To build a
committed team with a culture of innovation, learning and growth. The Human
Resource Function at IDBI Federal Life Insurance drives the people strategy of the
business. With its initial focus on operational excellence to deliver benefits and services
to staff members.
The Department is responsible for hiring members of staff and ensuring that they perform
to expectation. For hiring the employees the HR Department uses different methods of
recruitment like direct method and indirect method. In direct method the employees are
recruiting from education and professional institutions by the company and the indirect
method is used to recruit the white collar employees through newspaper advertisement,
journals, technical magazine and brochures.
a)
The Department is responsible for hiring members of staff and ensuring that they
perform to expectation.
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b) They plan, develop, organize, implement, direct and evaluate the organization's
human resource function and performance.
c) The HR department organize the training session for the employees to explain them
about the product features, benefits, how to approach customers etc.
d) Translate the strategic and tactical business plans into HR strategic and operat1ional
plans.
e) Evaluate and advise on the impact of long range planning of new programs/strategies
and regulatory action as those items impact the attraction, motivation, development
and retention of the people resources of the corporation.
f) They aims to provide a conductive work environment to the employees and nurturing
them to make them feel committed and psychologically attached to the organization.
g) The HR department makes retention strategies to retain the employees of the
organization.
h) They motivate the employees to work effectively and efficiently.
i)
The HR department has the responsibility of maintaining the payroll of the
employees.
j) The HR department also looks after the development function which has three
dimensions namely - employee training, management development, and career
development.
3.21 Recruitment Process of Financial Advisor in IDBI Federal Life Insurance :
a)Human Resource Planning: The Company follows the HR planning to get the right
number of people with the right skills, experiences and competencies for the right job
at the right time at the right cost. While formulating the recruitment plan, a proper
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meeting is held between CEO, Branch manager, senior manager and head of
department regarding how to recruit the employees, what should be the criteria for
recruiting the employees and how many candidates should be appointed. Every year
1000 employees are appointed as an agent from different education institution and
agency companies.
The criteria which is decided by the company for the recruitment of the candidates :
i.He should be at least 12th passed.
ii.He should complete IRDA training.
iii.
He should be above 18 years of age.
b)Sources of Recruitment
In recruitment process the company selects 1000 agents in a year that has skills and
convincing ability. The recruitment is done by using direct source of recruitment for
which they directly approach the educational and professional institution.
The criteria which are following by the company for the recruitment of agents are:
i.He should be at least 12thpassed
ii.He should complete IRDA training
iii.He should be above 18 years of age
There are some documents which are required during the recruitment
i.8 photographs
ii.Age proof (passport, birth certificate, college leaving certificate)
iii.Address proof
iv.Education proof
v.Copy of pan card
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c) Selection Process
The financial advisors are selected after clearing the IRDA exam. If the candidate gets 23
marks out of 50 marks then he/she becomes the financial advisor of the company. In
IRDA exam there are 50 questions of 1 mark each and there is no negative marking.
After clearing the IRDA exam, a training session is conducted for 5days in which they
train the agents i.e. how to pitch the customer, how to do prospecting etc.
d) Training Section
After selection of the employees, proper training is conducted for the new employees.
The duration of the training is 50 hrs in which knowledge is provided regarding
insurance sector, there rules and regulations. During the training session each and every
departments information is provided so that they are aware of each and every
departments functions. The method for the training used by the company is off job
training in which the classroom training and vestibule training is provided. In the
classroom training all theoretical knowledge is provided of insurance sector. It is also
used for orientation programmes. In the vestibule training they prepare a role play to
demonstrate how to pitch customer for selling product. The main aim of the training is to
help the employee regarding how they have to perform their job satisfactorily.
e) Performance Appraisal
In the performance appraisal the company focus on self appraisal of the employees
under 360-degree in which they check the employees performance according to their
business which is given by every employee in a month. Every employee is working for
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the rewards and recognition of their work, in IDBI Federal every year a reward and
recognition ceremony is conducted in which employees are praise by awards, cash price,
gift vouchers, hike in salary, certificates, trophies and some tours like Turkey, Hong
Kong etc.The company organizes family functions time to time which help in building
bond among employees. Thus, the working environment is very friendly and
comfortable for employees to work. This leads to a strong teamwork.
3.22Retention Strategies
Some of the initiatives taken by the HR department to retain and motivate their
employees are explained below :
a) Innovative Employment Policies : IDBI Federal always endeavored to create
employment policies that are flexible to accommodate an employees needs and special
circumstances. Its policies around sabbatical leaves, maternity leaves and part-time
employment are tailored to meet the specific needs of an employee.
b) Open Office Architecture : IDBI Federal has always encouraged an open office
architecture wherein people can interact and exchange ideas across teams. Moreover,
this ensures that the senior management is easily accessible to other employees and that
accessibility and interactive engagement is not compromised.
c) Afterhours : To make the working week a little less boring IDBI Federal launched
Afterhours to give employees more reasons to look forward to their weekend.
Afterhours are all about workshops (that have nothing to do with work) and interactive
sessions on fun & interesting topics.
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d) Page-Turners: A central knowledge repository that houses books, journals, magazines,
white papers etc across insurance & other non/fictional reading areas. Going forward,
IDBI Federal plans to leverage the initiative to make it a melting pot of ideas and do
book reviews.
e) Celebration of Festivals :Festivals and other days of significance are celebrated with
great vigor and energy. Fun activities are designed for such days that facilitate bonding
amongst employees and help build cohesive teams.
3.3 Finance Department
The Finance department is responsible for all external reporting to IDBI Federals
shareholders and regulators. The Finance department does the analysis of risk associated
with the investment to have higher profit which ultimately leads to better performance of
the company. The main purpose of the Finance department is portfolio management and
risk management. The risk management is done through comparing the performance of
the different companies where they want to do investments of their product premium and
generate high returns from the investments.
3.31 Process of Portfolio Management In IDBI Federal Life Insurance Co. Ltd
a) The starting point of this process was to determine the characteristics of the various
investments and then matching them with the customers need and preferences.
b)
While planning, a careful review was been conducted about the financial situation
and current capital market conditions.
c) The most important decision in portfolio management is selection of asset mix.
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d) It means spreading out portfolio investment into different asset classes like bonds,
stocks, mutual funds etc. In other words selection of asset mix means investing in
different kinds of assets and reduces risk and volatility and maximizes returns in
investment portfolio.
e) The strategic asset allocation policy had call for broad diversification through an
indexed holding of virtually all securities in the asset class.
f) The portfolio manager had to decide the goals before selecting the common stock.
The goal may be to achieve pure growth, growth with some income or income only.
Once the goal was been selected, the portfolio manager selects the common stocks as
per the goal.
g)
The process of portfolio management involved a logical set of steps common to any
decision, plan, implementation and monitor. Thus, the last step was portfolio revision
which leads to changing the asset allocation of a portfolio as per the market scenario.
The portfolio, which is once selected, has to be continuously reviewed over a period
of time.
3.32Tax Department
The Tax department is responsible for optimizing the tax position of IDBI Insurance. Our
main tasks are to assist management within the global regions and Business Units with
their tax issues. Where necessary, the Tax department will draft and implement policies
and procedures, such as product approval procedures and transfer pricing policies. In
addition, Tax also performs an overseeing role for the financial departments, ensuring
that all tax obligations are adequately reflected in all financial statement.
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3.33 Balance Sheet of March12 And March13
Figure No-3.2: Balance Sheet IDBI Federals March12 And March13
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According to this balance sheet the Net Current Assets has increased from Rs.5,63,436 to
Rs.8,54,322 respectively from 2012 to 2013, due to increase in the current assets from
Rs.19,37,957 to Rs. 26,36,583. As per the balance sheet the balance in Profit & Loss
Account (Shareholders' account) as on march 2013 has decrease from Rs.43,23,548 to
Rs.42,31,116 which shows a down fall in profit approx Rs.1 crore.
3.4 Information Technology (IT)
IDBI Federal Life Insurance Co. Ltd uses the IT technology for development of their
business and transparency in their working.
a)
Online complaint section is also there, customers can easily solve their problem
online which save the time of customer as well as the employees.
b) The organization made the company websitehttp://www.idbifederal.com from where
any information about the product can easily be collected, calculator and tools option
is also available from where customer can calculate the premium amount.
c) E- Payment system is used by the company to faceplate the customers so that they
can easily pay the premium of its insurance on time without any delay and problem.
Figure No-3.3: IDBI Federals Website
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B. Data Presentation
3.5 Research Methodology
Research Methodology is a very organized and systematic medium through which a
particular case or problem can be solved. The type of research is Descriptive research.
For data collection purpose the secondary source was used like Equity Growth Fund
factsheet, books, websites etc. It tends to be Quantitative in nature that is to say in the
form of numbers that can be quantified and summarized. Thus, descriptive research is
useful in research conclusions and decision making. It is analytical, descriptive and
quantitative research where the comparison between Equity Growth Fund of June and
July13 is made on the basis of risk, volatility and return.
3.51 Research Objectives
i. To evaluate investment performance of Equity Growth Fund in terms of risk and
return.
ii.
To understand the concept of portfolio management and its relation to Equity
Growth Fund.
iii. To study and compare returns of equity growth fund.
3.52 Limitations of the study
i. Time was the biggest constraint as many times it was not possible to meet senior
officials to collect much information.
ii.
There may be biases on the part of the company executive while providing the
information.
iii. The project is unable to analyze each and every aspect of Equity Growth Fund to
create the ideal portfolio.
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3.53 Scope of the Study
The Schemes were categorized and selected on evaluating their performance and
relative risk. The scope of the project is mainly concentrated on the equity growth
funds portfolio.The ideal portfolio is created by analyzing the risk pattern of the
schemes and distributing the overall risk to earn maximum returns.
3.54 Tools and Techniques Used For Analysis
Equity growth fund portfolio is analyzed by using tools such as Standard Deviation,
Beta and Sharpe Ratio. Risk refers to the possibility that the actual outcome of an
investment will differ from the expected outcome. In other words we can say that
risk refers to variability or dispersion. If any investment is said to invariable it
means that it is totally risk free. Whenever we calculate the mean returns of an
investment we also need to calculate the variability in the returns.
f)Sharpe Ratio
The Sharpe ratio is the returns generated over the risk free rate, per unit of risk.
Risk in this case is taken to be the funds standard deviation. As standard deviation
represents the total risk experienced by a fund, the Sharpe ratio reflects the returns
generated by undertaking all possible risk. Mathematically,
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While investor seeks to generate high returns the question arises, how high? Usually
one asks for returns, which are higher than those accustomed to. These are returns
from risk-less instruments like treasury bills, government securities or bank saving
deposits. So the aim of investing seems to be to generate returns in excess of the
risk free return. At the same time high returns are generally associated with a high
degree of volatility.
The investors accept this volatility only because they want higher returns. The
Sharpe ratio represents this trade-off between risk and returns. At the same time it
also factors in the desire to generate returns, which are higher than those from risk
free return.
A higher Sharpe ratio is therefore better as it represents a higher return generated
per unit of risk. For an investor who puts in all his/her money in a single fund,
Sharpe ratio is a useful measure of risk-adjusted return. This is because standard
deviation measures total risk and this is the case with a single portfolio.
The Sharpe ratio tells us whether a portfolio's returns are due to smart investment
decisions or a result of excess risk. This measurement is very useful be ca use
although one portfolio or fund can reap higher returns than its peers, it is only a
good investment if those higher returns do not come with too much additional risk.
Thus, the Sharpe Index summarizes the risk and return of a portfolio in a single
measure that categorizes the performance of the fund on a risk adjusted basis. The
larger the value of Sharpe Index the better the portfolio has performed.
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ii) Beta
Beta describes the relationship between the stocks return and the index returns. It is
a measure of volatility, or systematic risk, of a security or portfolio in comparison
to the market as a whole. Beta measures a stock's volatility, the degree to which a
stock price fluctuates in relation to the overall market. Investment analysts use the
Greek letter beta, . It is calculated using regression analysis. Investors expecting
the market to be bullish may choose funds exhibiting high betas, which increase
investors' chances of beating the market. If an investor expects the market to be
bearish in the near future, the funds that have betas less than 1 are a good choice
because they would be expected to decline less in value than the index. Equity
funds can have beta values, which can be above one, less than one or equal to one.
By multiplying the beta value of a fund with the expected percentage movement of
an index, the expected movement in the fund can be determined. Thus if a fund has
a beta of 1.2 and the market is expected to move up by ten per cent, the fund should
move by 12 per cent Similarly if the market loses ten per cent, the fund should lose
12 per cent.
Calculating BETA
BETA () = nxy (x)( y)
nx2(x)
2
Where,
nNumber of days
xReturns of the index
yReturns of the fund
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A beta of 1 indicates that the security's price will move with the market. A beta
greater than 1 indicates that the security's price will be more volatile than the market,
and a beta less than 1 means that it will be less volatile than the market.
iii) Standard Deviation
The degree to which a single value in a group of values varies from the mean
(average) of the distribution. Standard deviation is a statistical measure that uses past
performance of an investment or portfolio to determine the potential range of future
performance and assess the probability of that performance. Standard deviations can
be calculated for an individual security or for the entire portfolio. The Standard
Deviation of an average is the amount by which the numbers that go into an average
deviate from that average. It tells us how closely an average represents the underlying
numbers.
If the individual monthly performances are very different from the average, then that
fund is risky, delivering high returns in some months and poor returns in others. If
they are mostly similar, then the fund is a low risk one, with about the same returns
month after month.
Standard deviation is a statistical measure of the range of a fund's performance. When
a fund has a high standard deviation, its range of performance has been very wide,
indicating that there is a greater potential for volatility. A high Standard Deviation
may be a measure of volatility, but it does not necessarily mean that such a fund is
worse than one with a low Standard Deviation. If the first fund is a much higher
performer than the second one, the deviation will not matter much.
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3.6Equity Growth Fund
i. Investment Objective
The investment objective of this fund is to invest in listed stocks and aim to generate
high returns by picking stocks that have growth prospects.
ii. Investment Pattern
Fixed Income Investments includes Cash and Money Market Equities and Equity
linked Instruments.
iii. Asset Allocation
An investment strategy that aims to balance risk and reward by apportioning a
portfolio's assets according to an individual's goals, risk tolerance and investment
horizon. The three main asset classes - equities, fixed-income, and cash and
equivalents - have different levels of risk and return.
iv. Portfolio AnalysisMarket Cap wise
Market capitalization is calculated by multiplying a company's shares outstanding by
the current market price of one share. Market cap (i.e.,small cap, mid cap or large
cap), it indicates the size of the companies in which the fund invests.
Large Cap: $10 billion plus and include the companies with the largest market
capitalization.
Mid Cap: $2 billion to $10 billion
Small Cap: Less than $2 billion
v. Sector Weights
Sectors help investors and investment professionals more easily compare and
understand the sector exposures of mutual funds and portfolios. Sector weight shows
the total investment in each sector by IDBI Federal.
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d) Equity Growth Fund For July2013
i. Asset Allocation
The three main asset classes - equities, fixed-income, and cash and equivalents -
have different levels of risk and return, so each will behave differently over time.
Asset allocation is an important factor in determining returns for an investment
portfolio.
Figure No-3.4: Asset Allocation For Equity Growth Fund July13
Interpretation:
The above chart shows, 98.81% of investment is done in equity, 0.63% in Net current
assets and 0.55% in Cash & Collateralized Borrowing and Lending Obligation (CBLO).
Equity
98.81%
Net CurrentAssets
0.63%
Cash &
CBLO0.55%
Asset Allocation
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ii. Portfolio AnalysisMarket Cap wise
Market capitalization is calculated by multiplying a company's shares
outstanding by the current market price of one share. Market cap (i.e.,small cap,
mid cap or large cap), it indicates the size of the companies in which the fund
invests.
Figure No-3.5: Portfolio Analysis For Equity Growth Fund July13
Interpretation:
The above chart reflects 71.20% investment on large cap companies, 11.12% investment
on mid-cap companies and 10.02% of investment on small cap companies.
Large Cap
71.20%
Mid Cap
11.12%
Small Cap
10.02%
Portfolio Analysis - Market Capwise
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iii. Sector Weights
Sectors help investors and investment professionals more easily compare and
understand the sector exposures of mutual funds and portfolios. Sector weight shows
the total investment in each sector by IDBI Federal.
Figure No-3.6: Sector Weights For Equity Growth Fund July13
Interpretation:
The above graph shows sector wise bifurcation of weights about the investment in
different sectors measured in terms of percentage. Major investment is made in Banking
Sector i.e. 19.5%, IT Sector i.e. 17% and least investment in Infrastructure i.e. 2%.
0
2
4
6
8
10
12
14
16
18
20
Sector Weights (%)
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e)Equity Growth Fund For June2013
i. Asset Allocation
Figure No-3.7: Asset Allocation For Equity Growth Fund June13
Interpretation:
The above chart shows, 99.22% of investment is done in equity, 0.66% in Net current
assets and 0.12% in Cash & Collateralized Borrowing and Lending Obligation (CBLO).
Equity
99.22%
Net Current
Assets
0.66%
Cash & CBLO
0.12%
Asset Allocation
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ii. Portfolio AnalysisMarket Cap wise
Figure No-3.8: Portfolio Analysis For Equity Growth Fund June13
Interpretation:
The above chart reflects 71.20% investment on large cap companies, 11.12% investment
on mid-cap companies and 10.02% of investment on small cap companies.
Large Cap
71.20%
Mid Cap
11.12%
Small Cap
10.02%
Portfolio Analysis - Market Capwise
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iii. Sector Weights
Figure No-3.9: Sector Weights For Equity Growth Fund June13
Interpretation:
The above graph shows, 21% of investment is made in banking sector after that 15% in
oil and gas sector, 1% investment in coal sector.
0
5
10
15
20
25
Sector Weights (%)
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CHAPTER4
FUNCTIONAL ANALYSIS OF IDBI FEDERAL
4.1 Functional Analysis
There are different functional areas in IDBI Federal Life Insurance Co. Ltd and analysis
of different departments has been explained below:
4.11 Marketing
The Marketing function at IDBI Federal Life Insurance covers an array of activities -
brand and media management, channel support, direct marketing and corporate
communications. IDBI Federal Life Insurance deals in services through 5 Ps strategy.
a) Product Planning Process
In product planning process, the company does in-depth analysis starting with generation
of the idea to produce a new product in the market for the consumers, its designing, its
pricing, promotional strategies to be used, segmentation and positioning of the new
product for the targeted consumers etc. IRDA is considered to be the regulatory body for
insurance companies. Thus, all the strategies used by insurance company have to follow
or adhere to the guidelines of the IRDA. Once the new product has been produced the
same is mandatory to be validated by IRDA and approved before moving or targeting the
customers.
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b) Pricing Strategy
Premiums are the amount of money the insurer needs to collect from the policyholder in
order to cover the expected losses, expenses, and a provision for profit. The pricing in
insurance is in the form of premium rates. Every product has its own premium which is
designed as per the customer needs and wants. A product with high premium caters high
income group whereas a product with low premium is to cater low income and middle
income groups. People would not be willing to put their funds to invest in insurance
business if the interest rates provided by the banks or other financial instruments are
much greater than the perceived returns from the insurance premiums.
c) Place
Place is one of the important part of marketing mix wherein different places are targeted
and product is sold. The major places which are targeted by the company are corporate
areas, societies, natural market like their own family and references. The product are sold
in areas depending upon the income group like for a product like incomesurance, the
product is targeted to places from rural areas to urban area.
d) People
Prospecting is an important term used in insurance when people are to be considered. For
selling its services company focuses on people i.e. young people, old people, married
couples, defense officers, businessman and women entrepreneurs through different
products as per needs of people and agents or service providers act as a linking pin
between the company and the people.
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e) Promotion
Promotion of products is one of the important strategies used by IDBI Federal. It helps
the company to spread the word of their product and services to the customers. It helps to
spread awareness among people about the products of the company. The various
promotional strategies used by IDBI Federal are:-
i.Events -The company organizes various events like Health Camp for people an d
aware them about their health. At the same time, they gather details related to the
people interested in camp and accordingly manage to arrange a meeting with agents
so that they can sell their products to these people according to their needs and wants.
ii.Pamphlets - The company promotes its product by distributing the pamphlets of the
products among the targeted people. These pamphlets contain all the necessary
information about the product. Customer can read these pamphlets and if they have
any queries related to the product, they can ask the respective agent.
iii.Online media -Social networking websites like Facebook, twitter and email etc are
used as one of the easiest mode of promotions.
4.12 Human Resource Department
Human Resource Management is considered to be the backbone of IDBI Federal Life
Insurance Co. Ltd. The company employs 1000 agents every year through both direct and
indirect method of recruitment. As the no. of agents is increasing every year, its difficult
for HR Department to maintain and update the database on the daily basis. HR is not able
to keep the track on the agents performance. The underperforming agents are been
ignored in company instead of that HR should motivate and encourage them to perform
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better and special training sections should be given to the underperforming agents to
improve their performance.
a)
Selection process
The minimum criteria to pass IRDA exam is 33%, thus as a result a lot of agents are
recruited every year out of them. Many of the agents become inactive and stop
performing. Thus criteria should be stringent and there should be inter-competition
among the agents.
b)
Rewards and recognition
IDBI Federal believes the strength of the organization is their employees and they should
be motivated to work effectively and efficiently. The motivation function is perhaps the
most important for the retention of people in todays organizations. The aim of the
company is to provide a conducive work environment to the employees and nurturing
them to make them feel committed and psychologically attached to the organization.
Thus, the performing employees are accolade rewards and recognition in the form of
incentives, gifts vouchers etc.
c)Human Relation
Every organization needs a good human relation in their organization so that they can
work without conflicts. IDBI Federal maintains good human relation through organizing
meetings every month between all the employees in which they have open
communication and involve the employee participation in the discussions. The employees
have the freedom to put their points and interact with other employees. The company
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organizes family functions time to time which help in building bond among employees.
Thus, the working environment is very friendly and comfortable for employees to work.
This leads to a strong teamwork.
4.13 Finance Department
The Finance department does the analysis of risk associated with the investment to have
higher profit which ultimately leads to better performance of the company. The main
purpose of the Finance department is portfolio management and risk management.This
department deals with management of all the risk to the Company and thus needs to
outperform in every sense to generate maximum returns for the investors and IDBI
Federal both. This department performs there all functions very well because unlike other
companies, IDBI Federal achieved its break even in just 5th year of its operations.
a) Portfolio Management
The portfolio management team is able to give higher returns to the customers as they
deeply analyze the risk associated with the investment to have higher profit which
ultimately leads to better performance of the company. The company should invest more
in government bonds and securities which generates fair returns and are risk free as
compared to equity market. The risk management is done through comparing the
performance of the different companies where they want to do investments of their
product premium and generate returns from the investments. One can only secure its
investment by getting good knowledge in funds available with them. Anyone can invest
in the market funds and gain higher returns. Practical knowledge of funds plays
significant role and thus one must invest in guaranteed funds and then move towards
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market fund. Portfolio of IDBI Federal varies from month to month and become less
trustful for investors who want higher return because higher flexibility leads to lower
returns.
b) Analysis of Balance Sheet
According to this balance sheet the Net Current Assets has increased from Rs.5,63,436 to
Rs.8,54,322 respectively from 2012 to 2013, due to increase in the current assets from
Rs.19,37,957 to Rs.26,36,583. As per the balance sheet the balance in Profit & Loss
Account (Shareholders' account) as on march 2013 has decrease from Rs.43,23,548 to
Rs.42,31,116 which shows a down fall in profit approx Rs.1 crore.
4.14 IT Department
IT works as the support activity to its primary functions. Information Technologies in
todays scenario, plays a major role in the smooth functioning of the processes and
operations of any organization. Nevertheless, it has significantly operated in the same
manner for IDBI Federal as well like all the attendance by each employee is centralized,
all the employees have their own id and password to operate and thus give them only
limited information to the extent of their designation. There is a website made by the
organization which provides all information regarding the products, premium, tax
calculator etc. The customers can complaint and pay premium online which reduces the
cost of administration. Thus, IDBI Federal are able to response the customers more
effectively and efficiently which leads to customer satisfaction.
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4.2 Analysis of Equity Growth Fund
The investment objective of this fund is to invest in listed stocks and aim to generate
high returns by picking stocks that have growth prospects. It aims to diversify risk by
investing in Large-cap as well as Mid-cap stocks and across multiple sectors.
4.21 Analysis of Asset Allocation
The assets allocation for the month of July13 and June13 has been classified mainly
into equities, net current assets, and cash and equivalents which has different levels
of risk and return, so each behaves differently over time. There has been a negligible
change in month of July13 in assets allocation as compared to June13 wherein equity
reduced to 0.41%. The maximum investment is done in equity market and part of the
investment is done in Net Current Assets and Cash CBLO. Thus here risk and return is
high.
4.22 Analysis of Portfolio Market Cap Wise
Portfolio analysis for the month of June13 and July13 signifies theinvestment in the
companies as per the size of the organization. In Portfolio analysis (Market capwise),
the major investment is done in large cap for the month of July13 i.e. 71.20% and
10.02% & 11.12% for small cap and mid cap respectively.
4.23 Analysis of Sector Weights
The amount invested by the portfolio manager in market on behalf of IDBI Federal
Life Insurance as per Sector wise. Sector weights are the weights or percentage, in
which this amount is invested in different sectors of the market in June13 and July13.
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Thus the analysis clearly state that sectors like Auto, IT and NBFC which were
showing higher attractiveness and were expected to give higher returns are given more
priority and more investment is made in these sectors and on the other hand sectors
like chemical, coal, power and banking are either completely dropped from the
portfolio or less investment is made in these sectors. Following are some of the
investment and disinvestment made into sectors like
1) Auto sector 3.8% to 7.8%
2) I.T sector 11.8% to 17%
3)
Banking sector 21% to 19%
4) Power sector 7% to 3.8%.
The investment is the major part of the company which directly decrease the value of the
premium from which more and more customers are taking policy and help in increase
the financial position of the company.
4.24Analysis through Quantitative Indicators
Quantitative
Indicators
June13 July13
Sharpe Ratio (0.36) (0.70)
Beta 0.99 0.98
Standard Deviation 10.53 % 11.41 %
Table No-4.1: Quantitative Indicator of June and July13
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As per analysis of quantitative indicators, during portfolio revision stage there were
some fluctuations in the market scenario due to which portfolio was reviewed again
and some changes were made which resulted into better performance of the equity
growth fund.
a) As standard deviation increases from 10.53% to 11.14%, which shows higher Equity
Fund risk for the month of July.
b) As there has been no significant change in the beta i.e. 0.98 in July 13 which is less
than 1 indicates that the security's price will be less volatile than the market