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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

    mailto:[email protected]://www.idbifederal.com/http://www.idbifederal.com/mailto:[email protected]
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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

    http://www.idbifederal.com/Press/Pages/IDBI-Federal-in-the-News.aspxhttp://www.idbifederal.com/Press/Pages/IDBI-Federal-in-the-News.aspx
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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.

    http://www.investopedia.com/articles/basics/03/031703.asphttp://www.investopedia.com/articles/basics/03/031703.asphttp://www.investopedia.com/articles/basics/03/031703.asphttp://www.investopedia.com/articles/basics/03/031703.asp
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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

    http://www.investopedia.com/articles/basics/03/031703.asphttp://www.investopedia.com/articles/basics/03/031703.asphttp://www.investopedia.com/articles/basics/03/031703.asphttp://www.investopedia.com/articles/basics/03/031703.asp
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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