Cost-Search in Axis Bank Annual Report

XAVIER INSTITUTE OF MANAGEMENT
BHUBANESWAR
ACCOUNTING FOR DECISION

MAKING
Assignment on:
COST-SEARCH IN AXIS BANK ANNUAL
REPORT-2014
Submitted To:
Ms. Vijaya Batth
Xavier Institute of Management,
Bhubaneswar
Submitted By:
Neetesh Singh
UM14326
Xavier Institute of Management,
Bhubaneswar
COST-SEARCH
UM14326
NEETESH SINGH
Introduction
Axis Bank Limited (formerly UTI Bank) is the third largest private sector bank in India. It offers financial
services to customer segments covering Large and Mid-Corporates, MSME, Agriculture and Retail Businesses.
Axis Bank began its operations in 1994, after the Government of India allowed new private banks to be
established. The Bank was promoted in 1993 jointly by the Administrator of the Unit Trust of India (UTII), Life Insurance Corporation of India (LIC), General Insurance Corporation Ltd., National Insurance Company
Ltd., The New India Assurance Company, The Oriental Insurance Corporation and United India Insurance
Company.
Operations
Indian Business: As on 31-Mar-2014, the Bank had a network of 2402 branches and extension
counters and 12922 ATMs. Axis Bank has the largest ATM network among private banks in India.
International Business: The Bank has seven international offices with branches at Singapore, Hong
Kong, Dubai (at the DIFC), Shanghai and Colombo and representative offices at Dubai and Abu Dhabi,
which focus on corporate lending, trade finance, syndication, investment banking and liability
businesses.
Services
Treasury operations: The Banks treasury operation services include investments in sovereign and
corporate debt, equity and mutual funds, trading operations, derivative trading and foreign exchange
operations on the account, and for customers and central funding.
Retail banking: In the retail banking category, the bank offers services such as lending to
individuals/small businesses subject to the orientation, product and granularity criterion, along with
liability products, card services, Internet banking, automated teller machines (ATM) services,
depository, financial advisory services, and Non-resident Indian (NRI) services.
Corporate/wholesale banking: The Bank offers to corporate and other organizations, services
including corporate relationship not included under retail banking, corporate advisory services,
placements and syndication, management of public issues, project appraisals, capital market related
services and cash management services.
NRI services: Products and services for NRIs that facilitate investments in India.
Business banking: The Bank accepts income and other direct taxes through its 214 authorized
branches at 137 locations and central excise and service taxes (including e-Payments) through 56
authorized branches at 14 locations.
Investment banking: Banks Investment Banking business comprises activities related to Equity
Capital Markets, Mergers and Acquisitions and Private Equity Advisory. The bank is a SEBI-registered
COST-SEARCH
UM14326
NEETESH SINGH
Category I Merchant Banker and has been active in advising Indian companies in raising equity
through IPOs, QIPs, and Rights issues etc.
Lending to small and medium enterprises: Axis Bank SME business is segmented in three groups:
Small Enterprises, Medium Enterprises and Supply Chain Finance. Under the Small Business Group a
subgroup for financing micro enterprises is also set up.
Agriculture banking: 759 branches of the Bank provide banking services, including agricultural loans,
to farmers. As on 31 March 2013, the Banks outstanding loans in the agricultural sector was INR 148
billion, constituting 7.5% of its total advances.
Advisory Services have been developed to advise public and private sector clients on capital
structuring and funding options with a view to help the clients to help them reduce the cost of funds.
The Group has also been active in advising the central and various state governments or their agencies
in privatization and bid process management.
Cost-Search
Page No
3
Where Reported
MD and CEOs letter to
the shareholders
What is Reported
Cost management
Directors report : 20132014
Reduction in the cost

of funds, cost of term
deposits, cost of
CASA deposits
Reduction in
transaction costs
Decrease in the Cost

to Income ratio
Relevance
Organization has strived towards
system and process refinements
to improve the overall operating
efficiency and manage costs.
Lower cost will generate better
returns when the funds are
deployed in the form of shortterm and long-term loans to
borrowers. The spread between
the cost of funds and the interest
rate charged to borrowers
represents one of the main
sources of profit for most
financial institutions
Operating expenses of the bank
increased marginally due to its
focus on business process reengineering in order to reduce
transaction costs.
Cost-to-income ratio is an
important factor in determining
the profitability of a bank. The
lower the ratio, the more
profitable the bank. It is
calculated by dividing the
operating expenses by the
operating income generated i.e.
2
COST-SEARCH
UM14326
15
Annexure
Intrinsic cost
17
Annexure
Increase in Employee
compensation cost
43
Significant accounting
policies for the year
ended 31 March, 2014
Historical cost
44
Acquisition cost
45
Carrying costs
48
Fixed assets and

depreciation/impairment
Weighted Average
Cost of Capital
(WACC)
NEETESH SINGH
net interest income plus the other

income
It is the actual value of a
company or an asset based on an
underlying perception of its true
value, including all aspects of the
business, in terms of both
tangible and intangible factors.
This value may or may not be the
same as the current market value.
ECC measures the average cost to
employers for wages and salaries
and benefits per employee hour
worked. Increase in ECC is due
to variation in work activities and
occupational structures.
Historical cost is the value of a
resource given up or a liability
incurred to acquire an
asset/service at the time when the
resource was given up or the
liability incurred. This is done
because market values change so
often that allowing reporting of
assets and liabilities at current
values would distort the whole
fabric of accounting, impair
comparability and makes
accounting information
unreliable.
Cost recognized for property or
equipment after adjusting for
discounts, incentives, closing
costs and other necessary
expenditures, but before sales
taxes. It is charged to the Profit
and Loss account
Discounted instruments are
valued according to their carrying
costs, which include the
opportunity costs as well.
Firm's cost of capital in which
each category of capital is
proportionately weighted. All
capital sources - common stock,
preferred stock, bonds and any
other long-term debt - are
included in a WACC
calculation. Businesses discount
cash flows at WACC to
3
COST-SEARCH
UM14326
78
Segmental reporting
Personnel costs
78
Segmental reporting
Operating expenses
are allocated to
segments based on
activity-based costing
methodology
89
Employee Benefits
Service cost
89
Employee Benefits
Interest cost
NEETESH SINGH
determine the Net Present Value

(NPV) of a project
Personnel costs are the total
remuneration, in cash or in kind,
payable by an employer to an
employee in return for work done
by the latter during the reference
period. Personnel costs also
include taxes and employees
social security contributions
retained by the unit as well as the
employers compulsory and
voluntary social contributions.
Activity-based costing (ABC) is a
costing methodology that
identifies activities in an
organization and assigns the cost
of each activity with resources to
all products and services
according to the actual
consumption by each. This model
assigns more indirect costs
(overhead) into direct costs
compared to conventional
costing.
The expense associated with
having another person perform a
valuable task for which
specialized expertise may be
required. When the service cost
to a business of employing
independent contractors to
perform necessary tasks reaches a
certain critical level, it may
become more economical to hire
full time employees to do the
work.
Interest cost is one of the
measures of loan economics. It is
the cumulative sum of the amount
of interest paid on a loan by a
borrower.

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XAVIER INSTITUTE OF MANAGEMENT

ACCOUNTING FOR DECISION

Directors report : 20132014

Reduction in the cost

Directors report : 20132014

Directors report : 20132014

Decrease in the Cost

Fixed assets and

net interest income plus the other

determine the Net Present Value

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