A Project on Equity Analysis - IIFL.doc

8/9/2019 A Project on Equity Analysis - IIFL.doc

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CONTENTS

Chapter No. Name of the concept Page No.

I

Introduction 1

Need of the study 2

Objectives of the study 3

Scope of the study 4

Methodology of the study 5

Liit!tions of the study "

II #evie$ of Liter!ture %&22

III Industry 'rofile 23&42

I( )op!ny 'rofile 43&52

( *!t! !n!lysis !nd interpret!tion 53&%3

(I +indings, Suggestions !nd )onclusion %4&-.

(II /ibliogr!phy -1

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CHAPTER I - INTRODUCTION

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INTRODUCTION

Indi! is ! developing country0 No$!d!ys !ny people !re interested to invest in fin!nci!l

!rets especi!lly on euities to get high returns, !nd to s!ve t! in honest $!y0 uities

!re pl!ying ! !jor role in contribution of c!pit!l to the business fro the beginning0

Since the introduction of sh!res concept, l!rge nubers of investors !re sho$ing interest

to invest in stoc !ret0

In !n industry pl!gued $ith septicis !nd ! stoc !ret incre!singly difficult to predict

!nd contend $ith, if one loos h!rd enough there !y still be ! genuine !id for the *!y

r!der !nd Short er Investor0

he price of ! security represents ! consensus0 It is the price !t $hich one person !grees

to buy !nd !nother !grees to sell0 he price !t $hich !n investor is $illing to buy or sell

depends pri!rily on his epect!tions0 If he epects the security6s price to rise, he $ill

buy it7 if the investor epects the price to f!ll, he $ill sell it0 hese siple st!teents !re

the c!use of ! !jor ch!llenge in forec!sting security prices, bec!use they refer to hu!n

epect!tions0 8s $e !ll no$ firsth!nd, hu!ns epect!tions !re neither e!sily

u!ntifi!ble nor predict!ble0 If prices !re b!sed on investor epect!tions, then no$ing

$h!t ! security should sell for 9i0e0, fund!ent!l !n!lysis: becoes less iport!nt th!nno$ing $h!t other investors epect it to sell for0 h!t6s not to s!y th!t no$ing $h!t !

security should sell for isn6t iport!nt&&it is0 /ut there is usu!lly ! f!irly strong consensus

of ! stoc6s future e!rnings th!t the !ver!ge investor c!nnot disprove

+und!ent!l !n!lysis !nd technic!l !n!lysis c!n co&eist in pe!ce !nd copleent e!ch

other0 Since !ll the investors in the stoc !ret $!nt to !e the !iu profits

possible, they just c!nnot !fford to ignore either fund!ent!l or technic!l !n!lysis0

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NEED OF THE STUDY

o st!rt !ny business c!pit!l pl!ys !jor role0 )!pit!l c!n be !cuired in t$o $!ys by

issuing sh!res or by t!ing debt fro fin!nci!l institutions or borro$ing oney frofin!nci!l institutions0 he o$ners of the cop!ny h!ve to p!y regul!r interest !nd

princip!l !ount !t the end0

Stoc is o$nership in ! cop!ny, $ith e!ch sh!re of stoc representing ! tiny piece of

o$nership0 he ore sh!res you o$n, the ore of the cop!ny you o$n0 he ore

sh!res you o$n, the ore dividends you e!rn $hen the cop!ny !es ! profit0 In the

fin!nci!l $orld, o$nership is c!lled E!"t#$.

8dv!nt!ges of selling stoc;

8 cop!ny c!n r!ise ore c!pit!l th!n it could borro$0

8 cop!ny does not h!ve to !e periodic interest p!yents to creditors0

8 cop!ny does not h!ve to !e princip!l p!yents

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O%&ECTI'ES OF THE STUDY

he objective of this project is to deeply !n!ly=e our Indi!n 8utoobile Industry for

investent purpose by onitoring the gro$th r!te !nd perfor!nce on the b!sis of

historic!l d!t!0

he !in objectives of the 'roject study !re;

*et!iled !n!lysis of 8utoobile industry $hich is ge!ring to$!rds

intern!tion!l st!nd!rds

8n!ly=e the ip!ct of u!lit!tive f!ctors on industry>s !nd cop!ny>s

prospects

)op!r!tive !n!lysis of three tough copetitors 88 Motors, M!ruti Su=ui

!nd M!hindr! !nd M!hindr! through fund!ent!l !n!lysis0

Suggesting !s to $hich cop!ny>s sh!res $ould be best for !n investor to

invest0

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SCOPE OF THE STUDY

he scope of the study is identified !fter !nd during the study is conducted0 he

project is b!sed on tools lie fund!ent!l !n!lysis !nd r!tio !n!lysis0 +urther, the

study is b!sed on infor!tion of l!st five ye!rs0

he !n!lysis is !de by t!ing into consider!tion five cop!nies i0e0 88

Motors, M!ruti Su=ui !nd M!hindr! !nd M!hindr!0

he scope of the study is liited for ! period of five ye!rs0

he scope is liited to only the fund!ent!l !n!lysis of the chosen stocs0

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(ETHODO)O*Y

#ese!rch design or rese!rch ethodology is the procedure of collecting, !n!ly=ing

!nd interpreting the d!t! to di!gnose the proble !nd re!ct to the opportunity in such

! $!y $here the costs c!n be inii=ed !nd the desired level of !ccur!cy c!n be

!chieved to !rrive !t ! p!rticul!r conclusion0

he ethodology used in the study for the copletion of the project !nd the

fulfillent of the project objectives0

he s!ple of the stocs for the purpose of collecting second!ry d!t! h!s been

selected on the b!sis of #!ndo S!pling0 he stocs !re chosen in !n unbi!sed

!nner !nd e!ch stoc is chosen independent of the other stocs chosen0 he stocs

!re chosen fro the !utoobile sector0

he s!ple si=e for the nuber of stocs is t!en !s 3 for fund!ent!l !n!lysis of

stocs !s fund!ent!l !n!lysis is very eh!ustive !nd reuires det!iled study0

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)I(ITATIONS

his study h!s been conducted purely to underst!nd uity !n!lysis for investors0

he study is restricted to three cop!nies b!sed on +und!ent!l !n!lysis0

he study is liited to the cop!nies h!ving euities0

*et!iled study of the topic $!s not possible due to liited si=e of the project0

here $!s ! constr!int $ith reg!rd to tie !lloc!tion for the rese!rch study i0e0 for

! period of 45 d!ys0

Suggestions !nd conclusions !re b!sed on the liited d!t! of five ye!rs0

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CHAPTER II - RE'IE+ OF )ITERATURE

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SECURITY ANA)YSIS

Investent success is pretty uch ! !tter of c!reful selection !nd tiing of stoc

purch!ses coupled $ith perfect !tching to !n individu!ls ris toler!nce0 In order to c!rry

out selection, tiing !nd !tching !ctions !n investor ust conduct deep security

!n!lysis0

Investors purch!se euity sh!res $ith t$o b!sic objectives7

10 o !e c!pit!l profits by selling sh!res !t higher prices0

20 o e!rn dividend incoe0

hese t$o f!ctors !re !ffected by ! host of f!ctors0 8n investor h!s to c!refully

underst!nd !nd !n!ly=e !ll these f!ctors0 here !re b!sic!lly t$o !ppro!ches to study

security prices !nd v!lu!tion i0e0 fund!ent!l !n!lysis !nd technic!l !n!lysis

he v!lue of coon stoc is deterined in l!rge e!sure by the perfor!nce of the

fir th!t issued the stoc0 If the cop!ny is he!lthy !nd c!n deonstr!te strength !nd

gro$th, the v!lue of the stoc $ill incre!se0 ?hen v!lues incre!se then prices follo$ !nd

returns on !n investent $ill incre!se0 @o$ever, just to eep the s!vvy investor on their

toes, the i is coplic!ted by the ris f!ctors involved0 +und!ent!l !n!lysis e!ines

!ll the diensions of ris eposure !nd the prob!bilities of return, !nd erges the $ith

bro!der econoic !n!lysis !nd gre!ter industry !n!lysis to forul!te the v!lu!tion of !

stoc0

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FUNDA(ENTA) ANA)YSIS

+und!ent!l !n!lysis is ! ethod of forec!sting the future price oveents of !

fin!nci!l instruent b!sed on econoic, politic!l, environent!l !nd other relev!nt

f!ctors !nd st!tistics th!t $ill !ffect the b!sic supply !nd de!nd of $h!tever underlies

the fin!nci!l instruent0 It is the study of econoic, industry !nd cop!ny conditions

in !n effort to deterine the v!lue of ! cop!ny>s stoc0 +und!ent!l !n!lysis typic!lly

focuses on ey st!tistics in cop!ny>s fin!nci!l st!teents to deterine if the stoc

price is correctly v!lued0 he ter siply refers to the !n!lysis of the econoic $ell&

being of ! fin!nci!l entity !s opposed to only its price oveents0

+und!ent!l !n!lysisis the cornerstone of investing0 he b!sic philosophy underlying

the fund!ent!l !n!lysis is th!t if !n investor invests re01 in buying ! sh!re of !

cop!ny, ho$ uch epected returns fro this investent he h!s0

he fund!ent!l !n!lysis is to !ppr!ise the intrinsic v!lue of ! security0 It insists th!t no

one should purch!se or sell ! sh!re on the b!sis of tips !nd ruors0 he fund!ent!l

!ppro!ch c!lls upon the investors to !e his buy or sell decision on the b!sis of !

det!iled !n!lysis of the infor!tion !bout the cop!ny, !bout the industry, !nd the

econoy0 It is !lso no$n !s Atop&do$n !ppro!chB0 his !ppro!ch !ttepts to study the

econoic scen!rio, industry position !nd the cop!ny epect!tions !nd is !lso no$n

!s econom"c-"n,!tr#-compan# approach EIC approach/$0

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hus the EIC approachinvolves three steps;

10 conoic !n!lysis

20 Industry !n!lysis

30 )op!ny !n!lysis

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10 ECONO(IC ANA)YSIS

he level of econoic !ctivity h!s !n ip!ct on investent in !ny $!ys0 If the

econoy gro$s r!pidly, the industry c!n !lso be epected to sho$ r!pid gro$th !nd

vice vers!0 ?hen the level of econoic !ctivity is lo$, stoc prices !re lo$, !nd $hen

the level of econoic !ctivity is high, stoc prices !re high reflecting the prosperous

outloo for s!les !nd profits of the firs0 he !n!lysis of !cro econoic environent

is essenti!l to underst!nd the beh!vior of the stoc prices0

he coonly !n!ly=ed !cro econoic f!ctors !re !s follo$s;

*ro Domet"c Pro,!ct *DP/0 C*' indic!tes the r!te of gro$th of the econoy0 It

represents the !ggreg!te v!lue of the goods !nd services produced in the econoy0 It

consists of person!l consuption ependiture, gross priv!te doestic investent !nd

governent ependiture on goods !nd services !nd net eports of goods !nd services0

he gro$th r!te of econoy points out the prospects for the industri!l sector !nd the

return investors c!n epect fro investent in sh!res0 he higher gro$th r!te is ore

f!vor!ble to the stoc !ret0

Sa1"ng an, "n1etment0 It is obvious th!t gro$th reuires investent $hich in turn

reuires subst!nti!l !ount of doestic s!vings0 Stoc !ret is ! ch!nnel through

$hich the s!vings !re !de !v!il!ble to the corpor!te bodies0 S!vings !re distributed

over v!rious !ssets lie euity sh!res, deposits, utu!l funds, re!l est!te !nd bullion0

he s!vings !nd investent p!tterns of the public !ffectthe stoc to ! gre!t etent0

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Inf2at"on0 8long $ith the gro$th of C*', if the infl!tion r!te !lso incre!ses, then the

re!l gro$th $ould be very little0 he effects of infl!tion on c!pit!l !rets !re

nuerous0 8n incre!se in the epected r!te of infl!tion is epected to c!use ! noin!l

rise in interest r!tes0 8lso, it incre!ses uncert!inty of future business !nd investent

decisions0 8s infl!tion incre!ses, it results in etr! costs to businesses, thereby

suee=ing their profit !rgins !nd le!ding to re!l declines in profit!bility0

Interet rate0 he interest r!te !ffects the cost of fin!ncing to the firs0 8 decre!se in

interest r!te iplies lo$er cost of fin!nce for firs !nd ore profit!bility0 More oney

is !v!il!ble !t ! lo$er interest r!te for the broers $ho !re doing business $ith

borro$ed oney0 8v!il!bility of che!p funds encour!ges specul!tion !nd rise in the

price of sh!res0

Ta3 tr!ct!re0 very ye!r in M!rch, the business counity e!gerly !$!its the

Covernent>s !nnounceent reg!rding the t! policy0 )oncessions !nd incentives

given to ! cert!in industry encour!ge investent in th!t p!rticul!r industry0 ! relief>s

given to s!vings encour!ge s!vings0 he type of t! eeption h!s ip!ct on the

profit!bility of the industries0

Infratr!ct!re fac"2"t"e0 Infr!structure f!cilities !re essenti!l for the gro$th of

industri!l !nd !gricultur!l sector0 8 $ide net$or of counic!tion syste is ! ust

for the gro$th of the econoy0 #egul!r supply of po$er $ithout !ny po$er cut $ould

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boost the production0 /!ning !nd fin!nci!l sectors !lso should be sound enough to

provide !deu!te support to the industry0 Cood infr!structure f!cilities !ffect the stoc

!ret f!vor!bly0

4.INDUSTRY ANA)YSIS

8n industry is ! group of firs th!t h!ve siil!r technologic!l structure of production

!nd produce siil!r products !nd Industry !n!lysis is ! type of business rese!rch th!t

focuses on the st!tus of !n industry or !n industri!l sector 9! bro!d industry

cl!ssific!tion, lie D!nuf!cturingD:0 Irrespective of specific econoic situ!tions, soe

industries ight be epected to perfor better, !nd sh!re prices in these industries !y

not decline !s uch !s in other industries0 his identific!tion of econoic !nd industry

specific f!ctors influencing sh!re prices $ill help investors to identify the sh!res th!t fit

individu!l epect!tions

In,!tr# )"fe C#c2e0 he industry life cycle theory is gener!lly !ttributed to Eulius

Crodensy0 he life cycle of the industry is sep!r!ted into four $ell defined st!ges0

Pioneering stage: he prospective de!nd for the product is proising in this

st!ge !nd the technology of the product is lo$0 he de!nd for the product

!ttr!cts !ny producers to produce the p!rticul!r product0 here $ould be

severe copetition !nd only fittest cop!nies survive this st!ge0 he producers

try to develop br!nd n!e, differenti!te the product !nd cre!te ! product i!ge0

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In this situ!tion, it is difficult to select cop!nies for investent bec!use the

surviv!l r!te is unno$n0

Rapid growth stage: his st!ge st!rts $ith the !ppe!r!nce of surviving firs

fro the pioneering st!ge0 he cop!nies th!t h!ve $ithstood the copetition

gro$ strongly in !ret sh!re !nd fin!nci!l perfor!nce0 he technology of the

production $ould h!ve iproved resulting in lo$ cost of production !nd good

u!lity products0 he cop!nies h!ve st!ble gro$th r!te in this st!ge !nd they

decl!re dividend to the sh!reholders0 It is !dvis!ble to invest in the sh!res of

these cop!nies0

Maturity and stabilization stage: the gro$th r!te tends to oder!te !nd the r!te

of gro$th $ould be ore or less eu!l to the industri!l gro$th r!te or the gross

doestic product gro$th r!te0 Syptos of obsolescence !y !ppe!r in the

technology0 o eep going, technologic!l innov!tions in the production process

!nd products should be introduced0 he investors h!ve to closely onitor the

events th!t t!e pl!ce in the !turity st!ge of the industry0

Decline stage: de!nd for the p!rticul!r product !nd the e!rnings of the

cop!nies in the industry decline0 It is better to !void investing in the sh!res of

the lo$ gro$th industry even in the boo period0 Investent in the sh!res of

these types of cop!nies le!ds to erosion of c!pit!l0

*ro5th of the "n,!tr#0 he historic!l perfor!nce of the industry in ters of gro$th

!nd profit!bility should be !n!ly=ed0 he p!st v!ri!bility in return !nd gro$th in

re!ction to !cro econoic f!ctors provide !n insight into the future0

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Nat!re of compet"t"on0N!ture of copetition is !n essenti!l f!ctor th!t deterines the

de!nd for the p!rticul!r product, its profit!bility !nd the price of the concerned

cop!ny scrips0 he cop!nies6 !bility to $ithst!nd the loc!l !s $ell !s the

ultin!tion!l copetition counts uch0 If too !ny firs !re present in the org!ni=ed

sector, the copetition $ould be severe0 he copetition $ould le!d to ! decline in the

price of the product0 he investor before investing in the scrip of ! cop!ny should

!n!ly=e the !ret sh!re of the p!rticul!r cop!ny6s product !nd should cop!re it

$ith the top five cop!nies0

S+OT ana2#"0 S?O !n!lysis represents the strength, $e!ness, opportunity !nd

thre!t for !n industry0 very investor should c!rry out ! S?O !n!lysis for the chosen

industry0 !e for inst!nce, incre!se in de!nd for the industry>s product becoes its

strength, presence of nuerous pl!yers in the !ret, i0e0 copetition becoes the

thre!t to ! p!rticul!r cop!ny0 he progress in # F * in th!t industry is !n opportunity

!nd entry of ultin!tion!ls in the industry is ! thre!t0 In this $!y the f!ctors !re to be

!rr!nged !nd !n!ly=ed0

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30 CO(PANY ANA)YSIS

In the cop!ny !n!lysis the investor !ssiil!tes the sever!l bits of infor!tion rel!ted

to the cop!ny !nd ev!lu!tes the present !nd future v!lues of the stoc0 he ris !nd

return !ssoci!ted $ith the purch!se of the stoc is !n!ly=ed to t!e better investent

decisions0 he present !nd future v!lues !re !ffected by ! nuber of f!ctors0

Compet"t"1e e,ge of the compan#0 M!jor industries in Indi! !re coposed of

hundreds of individu!l cop!nies0 hough the nuber of cop!nies is l!rge, only fe$

cop!nies control the !jor !ret sh!re0 he copetitiveness of the cop!ny c!n be

studied $ith the help of the follo$ing7

Market share: he !ret sh!re of the !nnu!l s!les helps to deterine !

cop!ny>s rel!tive copetitive position $ithin the industry0 If the !ret sh!re

is high, the cop!ny $ould be !ble to eet the copetition successfully0 he

cop!nies in the !ret should be cop!red $ith lie product groups

other$ise, the results $ill be isle!ding0

Growth of sales:he r!pid gro$th in s!les $ould eep the sh!reholder in !

better position th!n one $ith st!gn!nt gro$th r!te0 Investors gener!lly prefer

si=e !nd gro$th in s!les bec!use the l!rger si=e cop!nies !y be !ble to

$ithst!nd the business cycle r!ther th!n the cop!ny of s!ller si=e0

Stability of sales:If ! fir h!s st!ble s!les revenue, it $ill h!ve ore st!ble

e!rnings0 he f!ll in the !ret sh!re indic!tes the declining trend of cop!ny,

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even if the s!les !re st!ble0 @ence the st!bility of s!les should be cop!red $ith

its !ret sh!re !nd the copetitor>s !ret sh!re0

Earn"ng of the compan#0 S!les !lone do not incre!se the e!rnings but the costs !nd

epenses of the cop!ny !lso influence the e!rnings0 +urther, e!rnings do not !l$!ys

incre!se $ith incre!se in s!les0 he cop!ny>s s!les ight h!ve incre!sed but its

e!rnings per sh!re !y decline due to rise in costs0 @ence, the investor should not only

depend on the s!les, but should !n!ly=e the e!rnings of the cop!ny0

F"nanc"a2 ana2#"0 he best source of fin!nci!l infor!tion !bout ! cop!ny is its

o$n fin!nci!l st!teents0 his is ! pri!ry source of infor!tion for ev!lu!ting the

investent prospects in the p!rticul!r cop!ny>s stoc0 +in!nci!l st!teent !n!lysis is

the study of ! cop!ny>s fin!nci!l st!teent fro v!rious vie$points0 he st!teent

gives the historic!l !nd current infor!tion !bout the cop!ny>s oper!tions0 @istoric!l

fin!nci!l st!teent helps to predict the future !nd the current infor!tion !ids to

!n!ly=e the present st!tus of the cop!ny0 he t$o !in st!teents used in the !n!lysis

!re /!l!nce sheet !nd 'rofit !nd Loss 8ccount0

he b!l!nce sheet is one of the fin!nci!l st!teents th!t cop!nies prep!re every ye!r

for their sh!reholders0 It is lie ! fin!nci!l sn!pshot, the cop!ny6s fin!nci!l situ!tion !t

! oent in tie0 It is prep!red !t the ye!r end, listing the cop!ny6s current !ssets !nd

li!bilities0 It helps to study the c!pit!l structure of the cop!ny0 It is better for the

investor to !void ! cop!ny $ith ecessive debt coponent in its c!pit!l structure0

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+ro the b!l!nce sheet, liuidity position of the cop!ny c!n !lso be !ssessed $ith the

infor!tion on current !ssets !nd current li!bilities0

Rat"o ana2#"0 #!tio is ! rel!tionship bet$een t$o figures epressed !the!tic!lly0

+in!nci!l r!tios provide nueric!l rel!tionship bet$een t$o relev!nt fin!nci!l d!t!0

+in!nci!l r!tios !re c!lcul!ted fro the b!l!nce sheet !nd profit !nd loss !ccount0 he

rel!tionship c!n be either epressed !s ! percent or !s ! uotient0 #!tios su!ri=e the

d!t! for e!sy underst!nding, cop!rison !nd interpret!tions0

#!tios for investent purposes c!n be cl!ssified into profit!bility r!tios, turnover r!tios,

!nd lever!ge r!tios0 'rofit!bility r!tios !re the ost popul!r r!tios since investors prefer

to e!sure the present profit perfor!nce !nd use this infor!tion to forec!st the future

strength of the cop!ny0 he ost often used profit!bility r!tios !re return on !ssets,

price e!rnings ultiplier, price to boo v!lue, price to c!sh flo$, !nd price to s!les,

dividend yield, return on euity, present v!lue of c!sh flo$s, !nd profit !rgins0

a/ Ret!rn on Aet ROA/

#O8 is coputed !s the product of the net profit !rgin !nd the tot!l !sset turnover

r!tios0

ROA 6 Net Prof"t7Tota2 "ncome/ 3 Tota2 "ncome7Tota2 Aet/

his r!tio indic!tes the fir6s str!tegic success0 )op!nies c!n h!ve one of t$o

str!tegies; cost le!dership, or product differenti!tion0 #O8 should be rising or eeping

p!ce $ith the cop!ny6s copetitors if the cop!ny is successfully pursuing either of

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these str!tegies, but ho$ #O8 rises $ill depend on the cop!ny6s str!tegy0 #O8 should

rise $ith ! successful cost le!dership str!tegy bec!use the cop!ny>s incre!sing

oper!ting efficiency0 8n e!ple is !n incre!sing, tot!l !sset, turnover r!tio !s the

cop!ny ep!nds into ne$ !rets, incre!sing its !ret sh!re0 he cop!ny !y

!chieve le!dership by using its !ssets ore efficiently0 ?ith ! successful product

differenti!tion str!tegy, #O8 $ill rise bec!use of ! rising profit !rgin0

8/ Ret!rn on In1etment ROI/

#OI is the return on c!pit!l invested in business, i0e0, if !n investent #s 1 crore in

en, !chines, l!nd !nd !teri!l is !de to gener!te #s0 25 l!hs of net profit, then

the #OI is 25G0 he coput!tion of return on investent is !s follo$s;

Ret!rn on In1etment ROI/ 6 Net prof"t7E!"t# "n1etment/ 3 9::

8s this r!tio reve!ls ho$ $ell the resources of ! fir !re being used, higher the r!tio,

better !re the results0 he return on sh!reholder>s investent should be cop!red $ith

the return of other siil!r firs in the s!e industry0 he inert&fir cop!rison of this

r!tio deterines $hether the investents in the fir !re !ttr!ctive or not !s the

investors $ould lie to invest only $here the return is higher0

c/ Ret!rn on E!"t#

#eturn on euity e!sures ho$ uch !n euity sh!reholder6s investent is !ctu!lly

e!rning0 he return on euity tells the investor ho$ uch the invested rupee is e!rning

Equity Analysis


22/90

fro the cop!ny0 he higher the nuber, the better is the perfor!nce of the

cop!ny !nd suggests the usefulness of the projects the cop!ny h!s invested in0

he coput!tion of return on euity is !s follo$s;

Ret!rn on e!"t# 6 Net prof"t to o5ner71a2!e of the pec"f"c o5ner;

Contr"8!t"on to the 8!"ne/ 3 9::

he r!tio is ore e!ningful to the euity sh!reholders $ho !re invested to no$

profits e!rned by the cop!ny !nd those profits $hich c!n be !de !v!il!ble to p!y

dividend to the0

,/ Earn"ng per Share EPS:

his r!tio deterines $h!t the cop!ny is e!rning for every sh!re0 +or !ny investors,

e!rnings !re the ost iport!nt tool0 'S is c!lcul!ted by dividing the e!rnings 9net

profit: by the tot!l nuber of euity sh!res0

he coput!tion of 'S is !s follo$s;

Earn"ng per hare 6 Net prof"t7N!m8er of hare o!ttan,"ng

he 'S is ! good e!sure of profit!bility !nd $hen cop!red $ith 'S of siil!r

other cop!nies, it gives ! vie$ of the cop!r!tive e!rnings or e!rnings po$er of !

fir0 'S c!lcul!ted for ! nuber of ye!rs indic!tes $hether or not e!rning po$er of

the cop!ny h!s incre!sed0

Equity Analysis


23/90

e/ D"1",en, per Share DPS/

he etent of p!yent of dividend to the sh!reholders is e!sured in the for of

dividend per sh!re0 he dividend per sh!re gives the !ount of c!sh flo$ fro the

cop!ny to the o$ners !nd is c!lcul!ted !s follo$s;

D"1",en, per hare 6 Tota2 ,"1",en, pa#ment 7 N!m8er of hare o!ttan,"ng

he p!yent of dividend c!n h!ve sever!l interpret!tions to the sh!reholder0 he

distribution of dividend could be thought of !s the distribution of ecess

profits

interpreted !s l!c of investent opportunities0 In !ll, dividend p!yout gives the etent

of inflo$s to the sh!reholders fro the cop!ny0

f/ D"1",en, Pa#o!t Rat"o

+ro the profits of e!ch cop!ny ! c!sh flo$ c!lled dividend is distributed !ong its

sh!reholders0 his is the continuous stre! of c!sh flo$ to the o$ners of sh!res, !p!rt

fro the price differenti!ls 9c!pit!l g!ins: in the !ret0 he return to the sh!reholders,

in the for of dividend, out of the cop!ny6s profit is e!sured through the p!yout

r!tio0 he p!yout r!tio is coputed !s follo$s;

Pa#o!t Rat"o 6 D"1",en, per hare 7 Earn"ng per hare/ < 9::

he percent!ge of p!yout r!tio c!n !lso be used to copute the percent!ge of ret!ined

e!rnings0 he profits !v!il!ble for distribution !re either p!id !s dividends or ret!ined

Equity Analysis


24/90


25/90

h/ Pr"ce7Earn"ng Rat"o P7E/

he 's !ssets0

De8t-to-e!"t# rat"o 6 O!t",er F!n, 7 Shareho2,er F!n,

he debt&euity r!tio is c!lcul!ted to e!sure the etent to $hich debt fin!ncing h!s

been used in ! business0 It indic!tes the proportion!te cl!is of o$ners !nd the

outsiders !g!inst the fir>s !ssets0 he purpose is to get !n ide! of the cushion !v!il!ble

to outsiders on the liuid!tion of the fir0

Equity Analysis


26/90

CHAPTER III - INDUSTRY PROFI)E

Equity Analysis


27/90

FINANCIA) (AR>ETS

+in!nce is the pre&reuisite for odern business !nd fin!nci!l institutions pl!y ! vit!l

role in the econoic syste0 It is through fin!nci!l !rets !nd institutions th!t the

fin!nci!l syste of !n econoy $ors0 +in!nci!l !rets refer to the institution!l

!rr!ngeents for de!ling in fin!nci!l !ssets !nd credit instruents of different types

such !s currency, cheues, b!n deposits, bills, bonds, euities, etc0

+in!nci!l !ret is ! bro!d ter describing !ny !retpl!ce $here buyers !nd sellers

p!rticip!te in the tr!de of !ssets such !s euities, bonds, currencies !nd deriv!tives0

hey !re typic!lly defined by h!ving tr!nsp!rent pricing, b!sic regul!tions on tr!ding,

costs !nd fees !nd !ret forces deterining the prices of securities th!t tr!de0

Cener!lly, there is no specific pl!ce or loc!tion to indic!te ! fin!nci!l !ret0 ?herever

! fin!nci!l tr!ns!ction t!es pl!ce, it is deeed to h!ve t!en pl!ce in the fin!nci!l

!ret0 @ence fin!nci!l !rets !re perv!sive in n!ture since fin!nci!l tr!ns!ctions !re

theselves very perv!sive throughout the econoic syste0 +or inst!nce, issue of

euity sh!res, gr!nting of lo!n by ter lending institutions, deposit of oney into !

b!n, purch!se of debentures, s!le of sh!res !nd so on0

In ! nutshell, fin!nci!l !rets !re the credit !rets c!tering to the v!rious needs of

the individu!ls, firs !nd institutions by f!cilit!ting buying !nd selling of fin!nci!l

!ssets, cl!is !nd services0

Equity Analysis


28/90

C)ASSIFICATION OF FINANCIA) (AR>ETS

Equity Analysis

F"nanc"a2 mar=et

Organ"?e, mar=et Unorgan"?e, mar=et

Cap"ta2 (ar=et (one# (ar=et

In,!tr"a2 Sec!r"t"e

(ar=et

*o1ernment

Sec!r"t"e (ar=et

)ong-term 2oan

mar=et

Pr"mar# (ar=et

Secon,ar# mar=et

Ca22 (one# (ar=et

Commerc"a2 %"22

(ar=et

Trea!r# %"22 (ar=et

(one# )en,er@

In,"gen!o %an=er


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30/90

Secondary market: Second!ry !ret is ! !ret $here eisting securities !re tr!ded0

In other $ords, securities $hich h!ve !lre!dy p!ssed through ne$ issue !ret !re

tr!ded in this !ret0 Cener!lly, such securities !re uoted in the stoc ech!nge !nd it

provides ! continuous !nd regul!r !ret for buying !nd selling of securities0 his

!ret consists of !ll stoc ech!nges recogni=ed by the governent of Indi!0

(one# (ar=et

Money !rets !re the !rets for short&ter@highly liuid debt securities0 Money

!ret securities !re gener!lly very s!fe investents $hich return rel!tively lo$

interest r!te th!t is ost !ppropri!te for tepor!ry c!sh stor!ge or short ter tie

needs0 It consists of ! nuber of sub&!rets $hich collectively constitute the oney

!ret n!ely c!ll oney !ret, coerci!l bills !ret, !ccept!nce !ret, !nd

re!sury bill !ret0

Der"1at"1e (ar=et

he deriv!tives !ret is the fin!nci!l !retfor deriv!tives,fin!nci!l instruentslie

futures contr!cts or options, $hich !re derived fro other fors of !ssets0 8 deriv!tive

is ! security $hose price is dependent upon or derived fro one or ore underlying

!ssets0 he deriv!tive itself is erely ! contr!ct bet$een t$o or ore p!rties0 Its v!lue

is deterined by fluctu!tions in the underlying !sset0 he ost coon underlying

!ssets include stocs, bonds, coodities, currencies, interest r!tes !nd !ret

indees0 he iport!nt fin!nci!l deriv!tives !re the follo$ing;

Equity Analysis
http://en.wikipedia.org/wiki/Financial_markethttp://en.wikipedia.org/wiki/Derivative_(finance)http://en.wikipedia.org/wiki/Financial_instrumenthttp://en.wikipedia.org/wiki/Underlying_assethttp://en.wikipedia.org/wiki/Financial_markethttp://en.wikipedia.org/wiki/Derivative_(finance)http://en.wikipedia.org/wiki/Financial_instrumenthttp://en.wikipedia.org/wiki/Underlying_asset


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Fore"gn E3change (ar=et

It is ! !ret in $hich p!rticip!nts !re !ble to buy, sell, ech!nge !nd specul!te on

currencies0 +oreign ech!nge !rets !re !de up of b!ns, coerci!l cop!nies,

centr!l b!ns, investent !n!geent firs, hedge funds, !nd ret!il fore broers !nd

investors0 he fore !ret is considered to be the l!rgest fin!nci!l !ret in the $orld0

It is ! $orld$ide decentr!li=ed over&the&counter fin!nci!l !ret for the tr!ding of

currencies0 /ec!use the currency !rets !re l!rge !nd liuid, they !re believed to be

the ost efficient fin!nci!l !rets0 It is iport!nt to re!li=e th!t the foreign ech!nge

!ret is not ! single ech!nge, but is constructed of ! glob!l net$or of coputers

th!t connects p!rticip!nts fro !ll p!rts of the $orld0

Commo,"t"e (ar=et

It is ! physic!l or virtu!l !retpl!ce for buying, selling !nd tr!ding r!$ or pri!ry

products0 +or investors6 purposes there !re currently !bout 5. !jor coodity

!rets $orld$ide th!t f!cilit!te investent tr!de in ne!rly 1.. pri!ry

coodities0 )oodities !re split into t$o types; h!rd !nd soft coodities0 @!rd

coodities !re typic!lly n!tur!l resources th!t ust be ined or etr!cted 9gold,

rubber, oil, etc0:, $here!s soft coodities !re !gricultur!l products or livestoc 9corn,

$he!t, coffee, sug!r, soybe!ns, por, etc0:

Equity Analysis
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INDIAN FINANCIA) (AR>ETS

Indi! +in!nci!l !ret is one of the oldest in the $orld !nd is considered to be the

f!stest gro$ing !nd best !ong !ll the !rets of the eerging econoies0

he history of Indi!n c!pit!l !rets d!tes b!c 2.. ye!rs to$!rd the end of the

1-th century $hen Indi! $!s under the rule of the !st Indi! )op!ny0 he

developent of the c!pit!l !ret in Indi! concentr!ted !round Mub!i $here

no less th!n 2.. to 25. securities broers $ere !ctive during the second h!lf of

the 1th century0

he fin!nci!l !ret in Indi! tod!y is ore developed th!n !ny other sectors bec!use

it $!s org!ni=ed long before $ith the securities ech!nges of Mub!i,

8h!d!b!d !nd Jol!t! $ere est!blished !s e!rly !s the 1th century0

/y the e!rly 1".s the tot!l nuber of securities ech!nges in Indi! rose to eight,

including Mub!i, 8h!d!b!d !nd Jol!t! !p!rt fro M!dr!s, J!npur, *elhi,

/!ng!lore !nd 'une0 od!y there !re 21 region!l securities ech!nges in Indi!

in !ddition to the centr!li=ed NS 9N!tion!l Stoc ch!nge: !nd O)I 9Over

the )ounter ch!nge of Indi!:0

@o$ever the stoc !rets in Indi! re!ined st!gn!nt due to stringent controls on the

!ret econoy th!t !llo$ed only ! h!ndful of onopolies to doin!te their

respective sectors0 he corpor!te sector $!sn6t !llo$ed into !ny industry segents,

$hich $ere doin!ted by the st!te controlled public sector resulting in st!gn!tion of

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35/90

Indi! due to the country>s $orld cl!ss I industry0 his h!s pushed up the oper!tion!l

efficiency of the Indi!n stoc !ret to glob!l st!nd!rds !nd !s ! result the country h!s

been !ble to c!pit!li=e on its high gro$th !nd !ttr!ct foreign c!pit!l lie never before0

he regul!ting !uthority for c!pit!l !rets in Indi! is the S/I 9Securities !nd

ch!nge /o!rd of Indi!:0 S/I c!e into proinence in the 1.s !fter the c!pit!l

!rets eperienced soe turbulence0 It h!d to t!e dr!stic e!sures to plug !ny

loopholes th!t $ere eploited by cert!in !ret forces to !dv!nce their vested interests0

8fter this initi!l ph!se of struggle S/I h!s gro$n in strength !s the regul!tor of Indi!>s

c!pit!l !rets !nd !s one of the country>s ost iport!nt institutions0

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FINANCIA) (AR>ET RE*U)ATIONS

#egul!tions !re !n !bsolute necessity in the f!ce of the gro$ing iport!nce of c!pit!l

!rets throughout the $orld0 he developent of ! !ret econoy is dependent on

the developent of the c!pit!l !ret0 he regul!tion of ! c!pit!l !ret involves the

regul!tion of securities7 these rules en!ble the c!pit!l !ret to function ore

efficiently !nd ip!rti!lly0

8 $ell regul!ted !ret h!s the potenti!l to encour!ge !ddition!l investors to p!rt!e,

!nd contribute in, furthering the developent of the econoy0 he chief c!pit!l !ret

regul!tory !uthority is Securities !nd ch!nge /o!rd of Indi! 9S/I:0

SE%Iis the regul!torfor the securities !ret in Indi!0 It is the !pe body to develop

!nd regul!te the stoc !ret in Indi! It $!s fored offici!lly by the Covernent of

Indi!in 12 $ith S/I 8ct 12being p!ssed by the Indi!n '!rli!ent0 )h!ired by )

/ /h!ve, S/I is he!du!rtered in the popul!r business district of /!ndr!&Jurl!

cople in Mub!i, !nd h!s Northern, !stern, Southern !nd ?estern region!l offices

in Ne$ *elhi, Jol!t!, )henn!i!nd 8hed!b!d0 In pl!ce of Covernent )ontrol, !

st!tutory !nd !utonoous regul!tory bo!rd $ith defined responsibilities, to cover both

developent F regul!tion of the !ret, !nd independent po$ers h!s been set up0

The 8a"c o8ect"1e of the %oar, 5ere ",ent"f"e, a0

to protect the interests of investors in securities7

to proote the developent of Securities M!ret7

to regul!te the securities !ret !nd

Equity Analysis
http://en.wikipedia.org/wiki/Regulatorhttp://en.wikipedia.org/wiki/Government_of_Indiahttp://en.wikipedia.org/wiki/Government_of_Indiahttp://en.wikipedia.org/wiki/SEBI_Act_1992http://en.wikipedia.org/wiki/Chandrasekhar_Bhaskar_Bhavehttp://en.wikipedia.org/wiki/Chandrasekhar_Bhaskar_Bhavehttp://en.wikipedia.org/wiki/Bandra-Kurla_complexhttp://en.wikipedia.org/wiki/Bandra-Kurla_complexhttp://en.wikipedia.org/wiki/Mumbaihttp://en.wikipedia.org/wiki/New_Delhihttp://en.wikipedia.org/wiki/Kolkatahttp://en.wikipedia.org/wiki/Chennaihttp://en.wikipedia.org/wiki/Ahmedabadhttp://en.wikipedia.org/wiki/Regulatorhttp://en.wikipedia.org/wiki/Government_of_Indiahttp://en.wikipedia.org/wiki/Government_of_Indiahttp://en.wikipedia.org/wiki/SEBI_Act_1992http://en.wikipedia.org/wiki/Chandrasekhar_Bhaskar_Bhavehttp://en.wikipedia.org/wiki/Chandrasekhar_Bhaskar_Bhavehttp://en.wikipedia.org/wiki/Bandra-Kurla_complexhttp://en.wikipedia.org/wiki/Bandra-Kurla_complexhttp://en.wikipedia.org/wiki/Mumbaihttp://en.wikipedia.org/wiki/New_Delhihttp://en.wikipedia.org/wiki/Kolkatahttp://en.wikipedia.org/wiki/Chennaihttp://en.wikipedia.org/wiki/Ahmedabad


37/90

+or !tters connected there$ith or incident!l thereto0

Since its inception S/I h!s been $oring t!rgeting the securities !nd is !ttending to

the fulfillent of its objectives $ith coend!ble =e!l !nd deterity0 he

iproveents in the securities !rets lie c!pit!li=!tion reuireents, !rgining,

est!blishent of cle!ring corpor!tions etc0 reduced the ris of credit !nd !lso reduced

the !ret0

S/I h!s introduced the coprehensive regul!tory e!sures, prescribed registr!tion

nors, the eligibility criteri!, the code of oblig!tions !nd the code of conduct for

different interedi!ries lie, b!ners to issue, erch!nt b!ners, broers !nd sub&

broers, registr!rs, portfolio !n!gers, credit r!ting !gencies, under$riters !nd others0

It h!s fr!ed bye&l!$s, ris identific!tion !nd ris !n!geent systes for )le!ring

houses of stoc ech!nges, surveill!nce syste etc0 $hich h!s !de de!ling in

securities both s!fe !nd tr!nsp!rent to the end investor0

8nother signific!nt event is the !pprov!l of tr!ding in stoc indices 9lie SF' )N

Nifty F Sense: in 2...0 8 !ret Indeis ! convenient !nd effective product bec!use

of the follo$ing re!sons;

It !cts !s ! b!roeter for !ret beh!vior7

It is used to bench!r portfolio perfor!nce7

It is used in deriv!tive instruents lie inde futures !nd inde options7

It c!n be used for p!ssivefund !n!geent!s in c!se of Inde +unds0

Equity Analysis
http://finance.indiamart.com/india_business_information/sebi_introduction.html#%23http://finance.indiamart.com/india_business_information/sebi_introduction.html#%23http://finance.indiamart.com/india_business_information/sebi_introduction.html#%23http://finance.indiamart.com/india_business_information/sebi_introduction.html#%23http://finance.indiamart.com/india_business_information/sebi_introduction.html#%23


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$o bro!d !ppro!ches of S/I is to integr!te the securities !ret !t the n!tion!l level,

!nd !lso to diversify the tr!ding products, so th!t there is !n incre!se in nuber of

tr!ders including b!ns, fin!nci!l institutions, insur!nce cop!nies, utu!l funds,

pri!ry de!lers etc0 to tr!ns!ct through the ch!nges0 In this contet the introduction

of deriv!tives tr!ding through Indi!n Stoc ch!nges peritted by S/I in 2... 8*

is ! re!l l!nd!r0

S/I h!s enjoyed success !s ! regul!tor by pushing systeic refors !ggressively !nd

successively 9e0g0 the uic oveent to$!rds !ing the !rets electronic !nd

p!perless rolling settleent on 2 b!ses:0 S/I h!s been !ctive in setting up the

regul!tions !s reuired under l!$0

STOC> EBCHAN*ES IN INDIA

Stoc ch!nges !re !n org!ni=ed !retpl!ce, either corpor!tion or utu!l

org!ni=!tion, $here ebers of the org!ni=!tion g!ther to tr!de cop!ny stocs or

other securities0 he ebers !y !ct either !s !gents for their custoers, or !s

princip!ls for their o$n !ccounts0

8s per the Securities )ontr!cts #egul!tion 8ct, 15" ! stoc ech!nge is !n

!ssoci!tion, org!ni=!tion or body of individu!ls $hether incorpor!ted or not,

est!blished for the purpose of !ssisting, regul!ting !nd controlling business in buying,

selling !nd de!ling in securities0

Equity Analysis
http://finance.indiamart.com/india_business_information/sebi_introduction.html#%23http://finance.indiamart.com/india_business_information/sebi_introduction.html#%23


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40/90

%O(%AY STOC> EBCHAN*E

8 very coon n!e for !ll tr!ders in the stoc !ret, /S, st!nds for /ob!y

Stoc ch!nge0 It is the oldest !ret not only in the country, but !lso in 8si!0 In the

e!rly d!ys, /S $!s no$n !s Dhe N!tive Sh!re F Stoc /roers 8ssoci!tion0D It

$!s est!blished in the ye!r 1-%5 !nd bec!e the first stoc ech!nge in the country

to be recogni=ed by the governent0 In 15", /S obt!ined ! per!nent recognition

fro the Covernent of Indi! under the Securities )ontr!cts 9#egul!tion: 8ct, 15"0

In the p!st !nd even no$, it pl!ys ! pivot!l role in the developent of the country6s

c!pit!l !ret0 his is recogni=ed $orld$ide !nd its inde, SNS, is !lso tr!ced

$orld$ide0 !rlier it $!s !n 8ssoci!tion of 'ersons 98O':, but no$ it is !

deutu!lised !nd corpor!tised entity incorpor!ted under the provisions of the

)op!nies 8ct, 15", pursu!nt to the /S 9)orpor!tis!tion !nd *eutu!li=!tion:

Schee, 2..5 notified by the Securities !nd ch!nge /o!rd of Indi! 9S/I:0

%SE '""on

he vision of the /ob!y Stoc ch!nge is to Derge !s the preier Indi!n stoc

ech!nge by est!blishing glob!l bench!rs0D


41/90

%SE (anagement

/ob!y Stoc ch!nge is !n!ged profession!lly by /o!rd of *irectors0 It

coprises of einent profession!ls, represent!tives of r!ding Mebers !nd the

M!n!ging *irector0 he /o!rd is !n inclusive one !nd is sh!ped to benefit fro the

!ret interedi!ries p!rticip!tion0

he /o!rd eercises coplete control !nd forul!tes l!rger policy issues0 he d!y&

to&d!y oper!tions of /S !re !n!ged by the M!n!ging *irector !nd its school of

profession!l !s ! !n!geent te!0

%SE Net5or=

he ch!nge re!ches physic!lly to 41% cities !nd to$ns in the country0 he

fr!e$or of it h!s been designed to s!fegu!rd !ret integrity !nd to oper!te $ith

tr!nsp!rency0 It provides !n efficient !ret for the tr!ding in euity, debt instruents

!nd deriv!tives0 Its online tr!ding syste, popul!rly no$n !s /OL, is ! propriet!ry

syste !nd it is /S %%&2&2..2 certified0 he /OL net$or $!s ep!nded,

n!tion$ide, in 1%0 he surveill!nce !nd cle!ring F settleent functions of the

ch!nge !re ISO ..1;2... certified0


42/90

%SE Fact

/S !s ! br!nd is synonyous $ith c!pit!l !rets in Indi!0 he /S SNS is

the bench!r euity inde th!t reflects the robustness of the econoy !nd fin!nce0 It

$!s the H

+irst in Indi! to introduce uity *eriv!tives

+irst in Indi! to l!unch ! +ree +lo!t Inde

+irst in Indi! to l!unch KS version of /S Sense

+irst in Indi! to l!unch ch!nge n!bled Internet r!ding 'l!tfor

+irst in Indi! to obt!in ISO certific!tion for Surveill!nce, )le!ring F

Settleent

6/S On&Line r!ding Syste> 9/OL: h!s been !$!rded the glob!lly

recogni=ed the Infor!tion Security M!n!geent Syste st!nd!rd

/S%%&2;2..20

+irst to h!ve !n eclusive f!cility for fin!nci!l tr!ining

Moved fro Open Outcry to lectronic r!ding $ithin just 5. d!ys


43/90

!S" with its long history of capital market de#elopment is fully geared to continue

its contributions to further the growth of the securities markets of the country$ thus

helping %ndia increases its sphere of influence in international financial markets&


44/90

NATIONA) STOC> EBCHAN*E OF INDIA

)I(ITED

he N!tion!l Stoc ch!nge of Indi! Liited h!s genesis in the report of the @igh

'o$ered Study Croup on st!blishent of Ne$ Stoc ch!nges, $hich

recoended prootion of ! N!tion!l Stoc ch!nge by fin!nci!l institutions 9+I>s:

to provide !ccess to investors fro !ll !cross the country on !n eu!l footing0 /!sed

on the recoend!tions, NS $!s prooted by le!ding +in!nci!l Institutions !t the

behest of the Covernent of Indi! !nd $!s incorpor!ted in Noveber 12 !s ! t!&

p!ying cop!ny unlie other stoc ch!nge in the country0

On its recognition !s ! stoc ech!nge under the Securities )ontr!cts 9#egul!tion:

8ct, 15" in 8pril 13, NS coenced oper!tions in the ?holes!le *ebt M!ret

9?*M: segent in Eune 140 he )!pit!l M!ret 9uities: segent coenced

oper!tions in Noveber 14 !nd oper!tions in *eriv!tives segent coenced in

Eune 2...0

NSE *ROUP

Nat"ona2 Sec!r"t"e C2ear"ng Corporat"on )t,. NSCC)/

It is ! $holly o$ned subsidi!ry, $hich $!s incorpor!ted in 8ugust 15 !nd

coenced cle!ring oper!tions in 8pril 1"0 It $!s fored to build confidence in

cle!ring !nd settleent of securities, to proote !nd !int!in the short !nd consistent


45/90

settleent cycles, to provide ! counter&p!rty ris gu!r!ntee !nd to oper!te ! tight ris

cont!inent syste0

NSE.IT )t,.

It is !lso ! $holly o$ned subsidi!ry of NS !nd is its I !r0 his !r of the NS is

uniuely positioned to provide products, services !nd solutions for the securities

industry0 NS0I pri!rily focuses on in the !re! of tr!ding, broer front&end !nd

b!c&office, cle!ring !nd settleent, $eb&b!sed, insur!nce, etc0 8long $ith this, it

!lso provides consult!ncy !nd ipleent!tion services in *!t! ?!rehousing,

/usiness )ontinuity 'l!ns, Site M!inten!nce !nd /!cups, Str!tus M!infr!e

+!cility M!n!geent, #e!l ie M!ret 8n!lysis F +in!nci!l Ne$s0

In,"a In,e3 Ser1"ce Pro,!ct )t,. IIS)/

It is ! joint venture bet$een NS !nd )#ISIL Ltd0 to provide ! v!riety of indices !nd

inde rel!ted services !nd products for the Indi!n )!pit!l !rets0 It $!s set up in

M!y 1-0 IISL h!s ! consulting !nd licensing !greeent $ith the St!nd!rd !nd

'oor6s 9SF':, $orld6s le!ding provider of investible euity indices, for co&br!nding

euity indices0

Nat"ona2 Sec!r"t"e Depo"tor# )t,. NSD)/

NS joined h!nds $ith I*/I !nd KI to proote de!teri!li=!tion of securities0 his

step $!s t!en to solve probles rel!ted to tr!ding in physic!l securities0 It

coenced oper!tions in Noveber 1"0


46/90

NSE Fact

It uses s!tellite counic!tion technology to energi=e p!rticip!tion fro

!round 4.. cities in Indi!0

NS c!n h!ndle up to 1 illion tr!des per d!y0

It is one of the l!rgest inter!ctive (S8 b!sed stoc ech!nges in the $orld0

he NS& net$or is the l!rgest priv!te $ide !re! net$or in Indi! !nd the

first etended )& /!nd (S8 net$or in the $orld0

'resently ore th!n ... users !re tr!ding on the re!l tie&online NS

!pplic!tion0

od!y, NS is one of the l!rgest ech!nges in the $orld !nd still forging !he!d0 8t

NS, $e !re const!ntly $oring to$!rds cre!ting ! ore tr!nsp!rent, vibr!nt !nd

innov!tive c!pit!l !ret0

O'ER THE COUNTER EBCHAN*E OF INDIA

O)I $!s incorpor!ted in 1. !s ! section 25 cop!ny under the cop!nies 8ct

15" !nd is recogni=ed !s ! stoc ech!nge under section 4 of the securities )ontr!cts

#egul!tion 8ct, 15"0 he ech!nge $!s set up to !id enterprising prootes in r!ising

fin!nce for ne$ projects in ! cost effective !nner !nd to provide investors $ith !

tr!nsp!rent !nd efficient ode of tr!ding Modeled !long the lines of the N8S*8

!ret of KS8, O)I introduced !ny novel concepts to the Indi!n c!pit!l !rets

such !s screen&b!sed n!tion$ide tr!ding, sponsorship of cop!nies, !ret !ing


47/90

!nd scrip less tr!ding0 8s ! e!sure of success of these efforts, the ch!nge tod!y

h!s 115 listings !nd h!s !ssisted in providing c!pit!l for enterprises th!t h!ve gone on

to build successful br!nds for theselves lie (I' 8dv!nt!, Sonor! iles F /rilli!nt

iner!l $!ter, etc0

Nee, for OTCEI0

Studies by N8SS)OM, soft$!re technology p!rs of Indi!, the venture c!pit!ls funds

!nd the governent>s I t!ss +orce, !s $ell !s rising interest in I, 'h!r!ceutic!l,

/iotechnology !nd Medi! sh!res h!ve repe!tedly eph!si=ed the need for ! n!tion!l

stoc !ret for innov!tion !nd high gro$th cop!nies0

Innov!tive cop!nies !re critic!l to developing econoics lie Indi!, $hich is

undergoing ! !jor technologic!l revolution0 ?ith their !bilities to gener!te

eployent opportunities !nd contribute to the econoy, it is essenti!l th!t these

cop!nies not only ep!nd eisting oper!tions but !lso set up ne$ units0 he ey

issue for these cop!nies is r!ising tiely, cost effective !nd long ter c!pit!l to

sust!in their oper!tions !nd enh!nce gro$th0 Such cop!nies, p!rticul!rly those th!t

h!ve been in oper!tion for ! short tie, !re un!ble to r!ise funds through the

tr!dition!l fin!ncing ethods, bec!use they h!ve not yet been ev!lu!ted by the

fin!nci!l $orld0


48/90


49/90

INDIA INFO)INE )I(ITED

Indi! Infoline is ! one&stop fin!nci!l services shop, ost respected for u!lity of its

infor!tion, person!li=ed service !nd cutting&edge technology0

'""on

Our vision is to be the ost respected cop!ny in the fin!nci!l services sp!ce0

In,"a Info2"ne *ro!p

he Indi! Infoline group, coprising the holding cop!ny, Indi! Infoline Liited

!nd its $holly&o$ned subsidi!ries, include the entire fin!nci!l services sp!ce $ith

offerings r!nging fro uity rese!rch, uities !nd deriv!tives tr!ding,

)oodities tr!ding, 'ortfolio M!n!geent Services, Mutu!l +unds, Life Insur!nce,

+ied deposits, CoI bonds !nd other s!ll s!vings instruents to lo!n products !nd

Investent b!ning0

Indi! Infoline !lso o$ns !nd !n!ges the $ebsites $$$0indi!infoline0co !nd

$$$05p!is!0co0 he cop!ny h!s ! net$or of over 21.. business loc!tions

9br!nches !nd sub&broers: spre!d !cross ore th!n 45. cities !nd to$ns0 he group

c!ters to !pproi!tely ! illion custoers0

+ounded in 15 by Mr0 Nir!l E!in 9)h!ir!n !nd M!n!ging *irector: !s !n

independent business rese!rch !nd infor!tion provider, the cop!ny gr!du!lly

evolved into ! one&stop fin!nci!l services solutions provider0
http://www.5paisa.com/http://www.5paisa.com/


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51/90

In,"a Info2"ne (e,"a an, Reearch Ser1"ce )"m"te,

he services represent ! strong support th!t drives the broing, coodities, utu!l

fund !nd portfolio !n!geent services businesses0 It undert!es euities rese!rch

$hich is !cno$ledged by none other th!n +orbes !s 6/est of the ?eb6 !nd 6Q! ust

re!d for investors in 8si!60 Indi! Infoline6s rese!rch is !v!il!ble not just over the

internet but !lso on intern!tion!l $ire services lie /looberg 9)ode; IILL:,

hoson +irst )!ll !nd Internet Securities $here Indi! Infoline is !ongst the ost

re!d Indi!n broers0

In,"a Info2"ne Commo,"t"e )"m"te,.

Indi! Infoline )oodities 'vt Liited is eng!ged in the business of coodities

broing0 heir eperience in securities broing epo$ered the $ith the reuisite


52/90

sills !nd technologies to !llo$ the to offer coodities broing !s ! contr!&

cyclic!l !ltern!tive to euities broing0 It enjoys eberships $ith the M) !nd

N)*, t$o le!ding Indi!n coodities ech!nges, !nd recently !cuired

ebership of *C)0 It h!s ! ulti&ch!nnel delivery odel, !ing it !ong the

select fe$ to offer online !s $ell !s offline tr!ding f!cilities0

In,"a Info2"ne (ar=et"ng Ser1"ce

Indi! Infoline M!reting !nd Services Liited is the holding cop!ny of Indi!

Infoline Insur!nce Services Liited !nd Indi! Infoline Insur!nce /roers Liited0

Indi! Infoline Insur!nce Services Liited is ! registered )orpor!te 8gent $ith

the Insur!nce #egul!tory !nd *evelopent 8uthority 9I#*8:0 It is the l!rgest

)orpor!te 8gent for I)I)I 'rudenti!l Life Insur!nce )o Liited, $hich is

Indi!6s l!rgest priv!te Life Insur!nce )op!ny0 Indi! Infoline $!s the first

corpor!te !gent to get licensed by I#*8 in e!rly 2..10

Indi! Infoline Insur!nce /roers Liited Indi! Infoline Insur!nce /roers

Liited is ! ne$ly fored subsidi!ry $hich $ill c!rry out the business of

Insur!nce broing0

In,"a Info2"ne In1etment Ser1"ce )"m"te,

)onsolid!ted sh!reholdings of !ll the subsidi!ry cop!nies eng!ged in lo!ns !nd

fin!ncing !ctivities under one subsidi!ry0 #ecently, Orient Clob!l, ! Sing!pore&b!sed

investent institution invested KS* %"0% illion for ! 2205G st!e in Indi! Infoline

Investent Services0 his $ill help focused ep!nsion !nd c!pit!l r!ising in the s!id


53/90

subsidi!ries for v!rious lending businesses lie lo!ns !g!inst securities, SM

fin!ncing, distribution of ret!il lo!n products, consuer fin!nce business !nd housing

fin!nce business0 Indi! Infoline Investent Services 'riv!te Liited consists of the

follo$ing step&do$n subsidi!ries0

Indi! Infoline *istribution )op!ny Liited 9distribution of ret!il lo!n

products:

Moneyline )redit Liited 9consuer fin!nce:

Indi! Infoline @ousing +in!nce Liited 9housing fin!nce:

IIF) A"a/ Pr"1ate )"m"te,

II+L 98si!: 'riv!te Liited is $holly o$ned subsidi!ry $hich h!s been incorpor!ted

in Sing!pore to pursue fin!nci!l sector !ctivities in other 8si!n !rets0 +urther to

obt!ining the necess!ry regul!tory !pprov!ls, the cop!ny h!s been initi!lly

c!pit!li=ed !t 1 illion Sing!pore doll!rs0


54/90

IIF) (ANA*E(ENT

THE (ANA*E(ENT TEA(

(r. N"rma2 &a"n@ Cha"rman (anag"ng D"rector

Nir!l E!in, M/8 9IIM, 8h!d!b!d: !nd ! )h!rtered !nd )ost 8ccount!nt, founded

Indi!>s le!ding fin!nci!l services cop!ny Indi! Infoline Ltd0 in 15,

providing glob!lly !ccl!ied fin!nci!l services in euities !nd

coodities broing, life insur!nce !nd utu!l funds distribution, !ong others0

(r. R 'en=ataraman@ E3ec!t"1e D"rector

# (en!t!r!!n, co&prooter !nd ecutive *irector of Indi! Infoline

Ltd0, is ! /0 ech 9lectronics !nd lectric!l )ounic!tions

ngineering, II Jh!r!gpur: !nd !n M/8 9IIM /!ng!lore:0 @e joined

the Indi! Infoline bo!rd in Euly 10

THE %OARD OF DIRECTORS

8p!rt fro Nir!l E!in !nd # (en!t!r!!n, the /o!rd of *irectors of Indi! Infoline

Ltd0 coprises:

(r. N"2eh '"=ame#@ In,epen,ent D"rector

Mr0 (i!sey, /o!rd eber since +ebru!ry 2..5 & ! pr!cticing )h!rtered

8ccount!nt !nd p!rtner 9Jhiji Junverji F )o0, )h!rtered

8ccount!nts:, ! eber fir of @L/ Intern!tion!l, he!ded the !udit


55/90

dep!rtent till 1. !nd there!fter !lso h!ndles fin!nci!l services, consult!ncy,

investig!tions, ergers !nd !cuisitions, v!lu!tions etc

(r Sat Pa2 >hattar@ Non E3ec!t"1e D"rector

Mr S!t '!l Jh!tt!r, & /o!rd eber since 8pril 2..1 & 'residenti!l )ouncil of

Minority #ights eber, )h!ir!n of the /o!rd of rustee of

Sing!pore /usiness +eder!tion, is !lso ! life trustee of SIN*8, ! non

profit body, helping the under&privileged Indi!ns in Sing!pore0 @e joined the Indi!

Infoline bo!rd in 8pril 2..10

(r >rant" S"nha@ In,epen,ent D"rector

Mr0 Jr!nti Sinh! R /o!rd eber since E!nu!ry 2..5 R copleted

his !sters fro the 8gr! Kniversity !nd st!rted his c!reer !s ! )l!ss I

officer $ith Life Insur!nce )orpor!tion of Indi!0

(r Ar!n >. P!r1ar@ In,epen,ent D"rector

Mr0 80J0 'urv!r H /o!rd eber since M!rch 2..- H copleted his

M!sters degree in coerce fro 8ll!h!b!d Kniversity in 1"" !nd !

diplo! in /usiness 8dinistr!tion in 1"%0


56/90

PRODUCTS SER'ICES

E!"t"e

Indi! Infoline provided the prospect of rese!rched investing to its clients, $hich $!s

hitherto restricted only to the institutions0 #ese!rch for the ret!il investor did not eist

prior to Indi! Infoline0 Indi! Infoline lever!ged technology to bring the convenience

of tr!ding to the investor>s loc!tion of preference 9residence or office: through

coputeri=ed !ccess0 Indi! Infoline !de it possible for clients to vie$ tr!ns!ction

costs !nd ledger upd!tes in re!l tie0 he )op!ny is !ong the fe$ fin!nci!l

interedi!ries in Indi! to offer ! copleent of online !nd offline broing0 he

)op!nies net$or of br!nches !lso !llo$s custoers to pl!ce orders on phone or

visit our br!nches for tr!ding0

Commo,"t"e

Indi! Infoline>s etension into coodities tr!ding reconciles its str!tegic intent to

eerge !s ! one stop solutions fin!nci!l interedi!ry0 Its eperience in securities

broing h!s epo$ered it $ith reuisite sills !nd technologies0 he )op!nies

coodities business provides ! contr!&cyclic!l !ltern!tive to euities broing0 he

)op!ny $!s !ong the first to offer the f!cility of coodities tr!ding in Indi!>s

young coodities !ret 9the M) coenced oper!tions in 2..3:0 8ver!ge

onthly turnover on the coodity ech!nges incre!sed fro #s .034 bn to #s

2.0.2 bn0


57/90


58/90


59/90

CHAPTER '

DATA ANA)YSIS INTERPRETATIONS


60/90

ANA)YSIS OF AUTO(O%I)E INDUSTRY

Over ! period of ore th!n t$o dec!des the Indi!n 8utoobile industry h!s been

driving its o$n gro$th through ph!ses0 ?ith cop!r!tively higher r!te of econoic

gro$th r!te inde !g!inst th!t of gre!t glob!l po$ers, Indi! h!s becoe ! hub of

doestic !nd eports business0 he !utoobile sector h!s been contributing its sh!re

to the shining econoic perfor!nce of Indi! in the recent ye!rs0

o underst!nd this industry for the purpose of investent $e need to !n!ly=e it by the

follo$ing !ppro!ch;

F!n,amenta2 Ana2#" 90I0) 8ppro!ch:

!0 conoy !n!lysis

b0 Industry !n!lysis

c0 )op!ny !n!lysis

F!n,amenta2 Ana2#"

+und!ent!l !n!lysis is the study of econoic, industry !nd cop!ny conditions in

!n effort to deterine the v!lue of ! cop!ny s stoc0 +und!ent!l !n!lysis typic!lly

focuses on ey st!tistics in cop!ny s fin!nci!l st!teents to deterine if the stoc

price is correctly v!lued0

Most fund!ent!l infor!tion focuses on econoic, industry !nd cop!ny st!tistics0

he typic!l !ppro!ch to !n!ly=ing ! cop!ny involves three b!sic steps;


61/90

10 *eterine the condition of the gener!l econoy0

20 *eterine the condition of the industry0

30 *eterine the condition of the cop!ny0

9. ECONO(Y ANA)YSIS

conoic !n!lysis is the !n!lysis of forces oper!ting the over!ll econoy ! country0

conoic !n!lysis is ! process $hereby strengths !nd $e!nesses of !n econoy !re

!n!ly=ed0 conoic !n!lysis is iport!nt in order to underst!nd e!ct condition of !n

econoy0

*DP an, A!tomo8"2e In,!tr#

In !bsolute ters, Indi! is 1"th in the $orld in

ters of noin!l f!ctory output0 he service

sector is gro$ing r!pidly in the p!st fe$ ye!rs0

his is the pie& ch!rt sho$ing contributions of

different sectors in Indi!n econoy0


62/90

od!y, !utoobile sector in Indi! is one of the ey sectors of the econoy in ters of

the eployent0 *irectly !nd indirectly it eploys ore th!n 1. illion people !nd

if $e !dd the nuber of people eployed in the !uto&coponent !nd !uto !ncill!ry

industry then the nuber goes even higher0

8s the $orld econoy slipped into recession hitting the de!nd h!rd !nd the b!ning

sector t!es conserv!tive !ppro!ch to$!rds lending to corpor!te sector, the C*'

gro$th h!s do$ngr!ded it to %01 per cent for 2..-&. !nd it h!s incre!sed to -0"G in

2.1. by overcoing the setb!cs of recession0

Rece"on

8uto industry in Indi! h!d been hit h!rd by ongoing glob!l fin!nci!l recession0 /ut it

is in ! good sh!pe no$0 Much of this optiis resulted fro rene$ed interest being

sho$n in Indi! !uto industry by reputed overse!s c!r !ers0 Niss!n Motors $hich is

! $ell no$n E!p!nese c!r !ing cop!ny reg!rded Indi! !utoobile !ret !s !

glob!l c!r !nuf!cturing hub for future !nd invested huge !ount in our !ret0

here !re soe other !utoobile cop!nies of $orld $ho h!ve sho$n interest in

Indi! !uto !ret0 M!jor n!es !ong these !re Cener!l Motors, Sod! 8uto !nd

Mercedes&/en=0 hese cop!nies h!ve !jor pl!ns lined up for Indi! !uto industry0

hese !re fe$ signs of the revolutioni=ed !uto industry !fter recession0


63/90

Inf2at"on

he rise in infl!tion $ill h!ve !dverse ip!ct on the industry th!t $ill not only see

interest r!tes getting further h!rdened but !lso ! drop in de!nd due to the suee=e in

purch!sing po$er0 he effect of infl!tion h!s !ffected every sector $hich is rel!ted to

c!r !nuf!cturing !nd production0 he incre!se in the price of fuel !nd the steel due

to infl!tion h!s led to ! slo$er gro$th r!te of the c!r industry in Indi!0

Fore"gn D"rect In1etment

he !utoobile sector in the Indi!n industry is one of the high perforing sectors of

the Indi!n econoy0 his h!s contributed l!rgely in !ing Indi! ! prie destin!tion

for !ny intern!tion!l pl!yers in the !utoobile industry $ho $ish to set up their

businesses in Indi!0 8uto!tic !pprov!l for foreign euity investent up to 1.. per

cent of !nuf!cture of !utoobiles !nd coponent is peritted0

E3port

*espite recession, the Indi!n !utoobile !ret continues to perfor better th!n

ost of the other industries in the econoy in coing future7 ore !nd ore MN)>s

coing in Indi! to setup their ventures $hich cle!rly sho$s the scope of ep!nsion0

*uring 8pril&E!nu!ry 2.1., over!ll !utoobile eports registered ! gro$th r!te of

13024 percent0


64/90

4. INDUSTRY ANA)YSIS 98KOMO/IL:

he !utoobile industry in Indi!is the ninth l!rgest in the $orld $ith !n !nnu!l

production of over 203 illion units in 2..-0 In 2.., Indi! eerged !s 8si!6s fourth

l!rgest eporter of !utoobiles, behind E!p!n, South Jore! !nd h!il!nd0 he

8utoobile Industry is one of the f!stest gro$ing sectors in Indi!0 he incre!se in the

de!nd for c!rs, !nd other vehicles, po$ered by the incre!se in the incoe is the

pri!ry gro$th driver of the !utoobile industry in Indi!0 In 2.., esti!ted r!te of

gro$th of Indi! 8uto industry is going to be G 0he Indi!n !utoobile sector is f!r

fro being s!tur!ted, le!ving !ple opportunity for volue gro$th0

Segmentat"on of A!tomo8"2e In,!tr#

he !utoobile industry coprises of @e!vy

vehicles 9trucs, buses, tepos, tr!ctors:7

p!ssenger c!rs7 $o&$heelers7 )oerci!l

(ehicles7 !nd hree&$heelers0 +ollo$ing is the

segent!tion th!t ho$ uch e!ch sector

coprises of $hole Indi!n 8utoobile Industry0

In,!tr# 2"fe c#c2e

he industri!l life cycle is ! ter used for cl!ssifying industry life over tie0 Industry

life cycle cl!ssific!tion gener!lly groups industries into one of four st!ges; pioneer,

gro$th, !turity !nd decline0In the pioneer ph!se, the product h!s not been $idely

!ccepted or !dopted0 /usiness str!tegies !re developing, !nd there is high ris of
http://en.wikipedia.org/wiki/Indiahttp://en.wikipedia.org/wiki/India


65/90

f!ilure0 @o$ever, successful cop!nies c!n gro$ !t etr!ordin!ry r!tes0 he Indi!n

!utoobile sector h!s p!ssed this st!ge uite successfully0 he industry is gro$ing

r!pidly, often !t !n !cceler!ting r!te of s!les !nd e!rnings gro$th . Indi!n 8utootive

Industry is booing $ith !gro$th r!teof !round 15 G !nnu!lly0 he gro$th r!te of

the !utoobile industry in Indi! is gre!ter th!n the C*' gro$th r!te of the econoy,

so the !utoobile sector c!n be very $ell be s!id to be in the gro$th ph!se0

S5ot ana2#"0

8 sc!n of the intern!l !nd etern!l environent is !n iport!nt p!rt of the str!tegic

pl!nning process0 nvironent!l f!ctors intern!l to the fir usu!lly c!n be cl!ssified

!s strengths 9S: or $e!nesses 9?:, !nd those etern!l to the fir c!n be cl!ssified !s

opportunities 9O: or thre!ts 9:0 Such !n !n!lysis of the str!tegic environent is

referred to !s ! S?O !n!lysis0 S?O !n!lysis of the Indi!n !utoobile sector gives

the follo$ing points;

'& Strengths

L!rge doestic !ret

Sust!in!ble l!bor cost !dv!nt!ge

)opetitive !uto coponent vendor b!se

Covernent incentives for !nuf!cturing pl!nts

Strong engineering sills in design etc

(& )eaknesses

Lo$ l!bor productivity


66/90

@igh interest costs !nd high overhe!ds !e the production uncopetitive

(!rious fors of t!es push up the cost of production

Lo$ investent in #ese!rch !nd *evelopent

Infr!structure bottlenec

*& pportunities

Incre!sing ch!llenges in consuer de!nds, technology developent, !nd

glob!li=!tion0

@e!vy thrust on ining !nd construction !ctivity

Incre!se in the incoe level

)ut in ecise duties

40 Threat

Ignor!nce of #ese!rch F developent

#ising interest r!tes

)ut thro!t copetition

. CO(PANY ANA)YSIS

he cop!ny !n!lysis sho$s the long&ter strenght of the cop!ny th!t $h!t is the

fin!nci!l position of the cop!ny in the !ret, $here it st!nds !ong its

copetitors !nd $ho !re the ey drivers of the cop!ny, $h!t !re the future pl!ns of


67/90

the cop!ny, $h!t !re the policies of governent to$!rds the cop!ny !nd ho$ the

st!e of the cop!ny divested !ong different groups of people0

@ere, I h!ve t!en three cop!nies n!ely 88 Motors, M!ruti Su=ui !nd

M!hindr! !nd M!hindr! for the purpose of fund!ent!l !n!lysis0

!t! Motors Liited is Indi!6s l!rgest !utoobile cop!ny, $ith consolid!ted

revenues of #s0 2,51 crores 9KS* 2. billion: in 2..&1.0 It is the le!der in

coerci!l vehicles in e!ch segent, !nd !ong the top three in p!ssenger vehicles

$ith $inning products in the cop!ct, idsi=e c!r !nd utility vehicle segents0 he

cop!ny is the $orld6s fourth l!rgest truc !nuf!cturer, !nd the $orld6s second

l!rgest bus !nuf!cturer0

M!ruti Su=ui is ! subsidi!ry of Su=ui Motor )orpor!tion E!p!n0 More th!n h!lf the

nubers of c!rs sold in Indi! $e!r M!ruti Su=ui b!dge0 hey offer ! full r!nge of

c!rs H fro entry level M!ruti -.. F 8lto to stylish h!tchb!c #it=, 8 st!r, S$ift,

?!gon #, stillo !nd sed!ns *=ire, S4 !nd Sports Ktility (ehicle Cr!nd (it!r!0

Since inception, it h!s produced !nd sold over %05 illion vehicles in Indi! !nd

eported over 5..,... units to urope !nd other countries0 Its turnover for the fisc!l

2..-&. stood !t #s0 2.3,5-3 Million F 'rofit !fter ! !t #s0 12,1-% Million0


68/90

he M!hindr! Croup>s 8utootive Sector is in the business of !nuf!cturing !nd

!reting utility vehicles !nd light coerci!l vehicles, including three&$heelers0 It

is the !ret le!der in utility vehicles in Indi! since inception, !nd currently !ccounts

for !bout h!lf of Indi!>s !ret for utility vehicles0 he 8utootive Sector continues

to be ! le!der in the utility vehicle segent $ith ! diverse portfolio th!t includes !ss

tr!nsport !s $ell !s ne$ gener!tion vehicles lie Scorpio, /olero !nd the recently

l!unched ylo0


69/90

TATA (OTORS - %a2ance heet

%a2ance Sheet of Tata

(otor Mar '05 Mar '06 Mar '07 Mar '08 Mar '09

Sources of funds

Total Share Capital 361.79 382.87 385.41 385.54 514.05

Equity Share Capital 361.79 382.87 385.41 385.54 514.05

Share Applicatio !oey 0.00 0.00 0.00 0.00 0.00

"e#er$e# 3%749.60 5%127.81 6%458.39 7%428.45 11%855.15

"e$aluatio "e#er$e# 0.00 26.39 25.95 25.51 25.07

Networth 4,111.39 5,537.07 6,869.75 7,839.50 12,394.27

Secure& 'oa# 489.81 822.76 2%022.04 2%461.99 5%251.65

(#ecure& 'oa# 2%005.61 2%114.08 1%987.10 3%818.53 7%913.91

Tota !e"t 2,495.42 2,936.84 4,009.14 6,280.52 13,165.56

Tota #$a"$$t$es 6,606.81 8,473.91 10,878.89 14,120.02 25,559.83

%&&$cat$on of funds

)ro## *loc+ 6%611.95 7%971.55 8%775.80 10%830.83 13%905.17

'e##: Accu,. -epreciatio 3%454.28 4%401.51 4%894.54 5%443.52 6%259.90

Net oc( 3,157.67 3,570.04 3,881.26 5,387.31 7,645.27

Capital or+ i /rore## 538.84 951.19 2%513.32 5%064.96 6%954.04

)n*est+ents 2,912.06 2,015.15 2,477.00 4,910.27 12,968.13

$etorie# 1%601.36 2%012.24 2%500.95 2%421.83 2%229.81

Su&ry -etor# 811.32 715.78 782.18 1%130.73 1%555.20

Ca#h a& *a+ *alace 345.26 327.66 535.78 750.14 638.17

Total Curret A##et# 2%757.94 3%055.68 3%818.91 4%302.70 4%423.18

'oa# a& A&$ace# 2%831.16 5%964.61 6%208.53 4%831.36 5%909.75

ie& -epo#it# 1%659.78 791.77 290.98 1%647.17 503.65

Total CA% 'oa# A&$ace# 7%248.88 9%812.06 10%318.42 10%781.23 10%836.58

-eere& Cre&it 0.00 0.00 0.00 0.00 0.00

Curret 'iailitie# 6%142.74 6%673.61 6%956.88 10%040.37 10%968.95

/ro$i#io# 1%126.06 1%215.04 1%364.32 1%989.43 1%877.26Total C' /ro$i#io# 7%268.80 7%888.65 8%321.20 12%029.80 12%846.21

Net urrent %ssets -19.92 1,923.41 1,997.22 -1,248.57 -2,009.63

Tota %ssets 6,606.81 8,473.91 10,878.89 14,120.02 25,559.83

Cotiet 'iailitie# 1%450.32 2%185.63 5%196.07 5%590.83 5%433.07

*oo+ alue "# 113.65 143.94 177.59 202.70 240.64


70/90

TATA (OTORS Prof"t )o acco!nt

Prof"t )o acco!nt of Tata

(otor Mar '05 Mar '06 Mar '07 Mar '08 Mar '09

)nco+e

Sale# Turo$er 20%262.61 23%490.55 31%089.69 33%123.54 28%538.20

Eci#e -uty 3%063.44 3%401.92 4%425.44 4%355.63 2%877.53

et Sale# 17%199.17 20%088.63 26%664.25 28%767.91 25%660.67

Other Income 403.98 852.41 1%114.38 734.17 921.29

Stoc+ A&;u#t,et# 144.00 256.91 349.68


71/90

(ARUTI SUU>I %a2ance Sheet

%a2ance Sheet of (ar!t"

S!?!=" In,"a Mar '05 Mar '06 Mar '07 Mar '08 Mar '09

Sources f unds

Total Share Capital 144.50 144.50 144.50 144.50 144.50



"e#er$e# 4%234.30 5%308.10 6%709.40 8%270.90 9%200.40

"e$aluatio "e#er$e# 0.00 0.00 0.00 0.00 0.00

Networth 4,378.80 5,452.60 6,853.90 8,415.40 9,344.90

Secure& 'oa# 307.60 71.70 63.50 0.10 0.10

(#ecure& 'oa# 0.00 0.00 567.30 900.10 698.80

Tota !e"t 307.60 71.70 630.80 900.20 698.90

Tota #$a"$$t$es 4,686.40 5,524.30 7,484.70 9,315.60 10,043.80

%&&$cat$on f unds

)ro## *loc+ 5%053.10 4%954.60 6%146.80 7%285.30 8%720.60


Net oc( 1,873.70 1,695.20 2,659.70 3,296.50 4,070.80

Capital or+ i /rore## 42.10 92.00 238.90 736.30 861.30

)n*est+ents 1,516.60 2,051.20 3,409.20 5,180.70 3,173.30

$etorie# 666.60 881.20 713.20 1%038.00 902.30

Su&ry -etor# 599.50 654.80 747.40 655.50 918.90

Ca#h a& *a+ *alace 79.40 51.60 114.80 324.00 239.00

Total Curret A##et# 1%345.50 1%587.60 1%575.40 2%017.50 2%060.20

'oa# a& A&$ace# 801.90 933.10 1%072.60 1%173.00 1%809.80ie& -epo#it# 950.00 1%350.00 1%308.00 0.00 1%700.00

Total CA% 'oa# A&$ace# 3%097.40 3%870.70 3%956.00 3%190.50 5%570.00

-eere& Cre&it 0.00 0.00 0.00 0.00 0.00

Curret 'iailitie# 1%454.20 1%704.80 2%288.60 2%718.90 3%250.90

/ro$i#io# 389.20 480.00 490.50 369.50 380.70

Total C' /ro$i#io# 1%843.40 2%184.80 2%779.10 3%088.40 3%631.60

Net urrent %ssets 1,254.00 1,685.90 1,176.90 102.10 1,938.40

!i#cellaeou# Epe#e# 0.00 0.00 0.00 0.00 0.00

Tota %ssets 4,686.40 5,524.30 7,484.70 9,315.60 10,043.80

Cotiet 'iailitie# 893.60 1%289.70 2%094.60 2%734.20 1%901.70

*oo+ alue "# 151.56 188.73 237.23 291.28 323.45


72/90

(ARUTI SUU>I Prof"t )o acco!nt

Prof"t )o acco!nt of

(ar!t" S!?!=" Mar '05 Mar '06 Mar '07 Mar '08 Mar '09

)nco+e Sale# Turo$er 13%458.20 14%898.80 17%358.40 21%200.40 23%381.50

Eci#e -uty 2%411.90 2%700.90 2%552.00 3%133.60 2%652.10

et Sale# 11%046.30 12%197.90 14%806.40 18%066.80 20%729.40Other Income 187.50 184.40 338.10 494.00 491.70

Stoc+ A&;u#t,et# 141.70 199.70


73/90

(AHINDRA (AHINDRA %a2ance Sheet

%a2ance Sheet of

(ah"n,ra an, (ah"n,ra Mar '05 Mar '06 Mar '07 Mar '08 Mar '09

Sources f undsTotal Share Capital 116.01 233.40 238.03 239.07 272.62



/reerece Share Capital 0.00 0.00 0.00 0.00 0.00

"e#er$e# 1%881.93 2%662.14 3%302.01 4%098.53 4%959.26

"e$aluatio "e#er$e# 14.32 13.33 12.86 12.47 12.09

Networth 2,012.26 2,908.87 3,552.90 4,350.07 5,243.97

Secure& 'oa# 336.82 216.68 106.65 617.26 981.00

(#ecure& 'oa# 715.80 666.71 1%529.35 1%969.80 3%071.76

Tota !e"t 1,052.62 883.39 1,636.00 2,587.06 4,052.76

Tota #$a"$$t$es 3,064.88 3,792.26 5,188.90 6,937.13 9,296.73%&&$cat$on f unds

)ro## *loc+ 2%676.51 2%859.25 3%180.57 3%552.64 4%893.89


Net oc( 1,340.95 1,348.98 1,541.45 1,710.96 2,567.60

Capital or+ i /rore## 133.93 205.46 329.72 649.94 646.73

)n*est+ents 1,189.79 1,669.09 2,237.46 4,215.06 5,786.41

$etorie# 759.83 878.74 878.48 1%084.11 1%060.67

Su&ry -etor# 511.53 637.97 700.89 1%004.88 1%043.65

Ca#h a& *a+ *alace 198.07 258.39 415.89 310.58 635.61

Total Curret A##et# 1%469.43 1%775.10 1%995.26 2%399.57 2%739.93'oa# a& A&$ace# 461.07 558.02 1%011.50 866.19 1%402.45

ie& -epo#it# 425.91 471.92 910.18 550.65 938.82

Total CA% 'oa# A&$ace# 2%356.41 2%805.04 3%916.94 3%816.41 5%081.20

-eere& Cre&it 0.00 0.00 0.00 0.00 0.00

Curret 'iailitie# 1%480.87 1%711.23 2%138.77 2%525.31 3%520.20

/ro$i#io# 499.71 543.14 715.43 943.46 1%277.56

Total C' /ro$i#io# 1%980.58 2%254.37 2%854.20 3%468.77 4%797.76

Net urrent %ssets 375.83 550.67 1,062.74 347.64 283.44

!i#cellaeou# Epe#e# 24.38 18.05 17.55 13.53 12.55

Tota %ssets 3,064.88 3,792.25 5,188.92 6,937.13 9,296.73

Cotiet 'iailitie# 758.14 946.36 1 %008.27 985.35 1%220.39

*oo+ alue "# 178.95 124.06 148.72 181.43 191.91


74/90


75/90

RATIO ANA)YSIS OF TATA (OTORS@ (ARUTI SUU>I AND

(AHINDRA (AHINDRA

EARNIN*S PER SHARE

%N)NS S%

:%S Mar'05 Mar'06 Mar'07 Mar'08 Mar'09

TATA 34.19 39.94 49.65 52.63 19.48

!A"(T 29.55 41.16 54.07 59.91 42.18

!A-"A 45.92 36.72 44.88 46.15 30.69

Interpretat"on

'S e!sures the profit !v!il!ble to the euity sh!reholders per sh!re, th!t is, the

!ount th!t they c!n get on every sh!re held0 ill 2..- 88 !nd M!ruti h!d ! rising

'S but in 2.. both of the f!ll !nd the effect is ore on !t! otors bec!use of

the slup in doestic !nd intern!tion!l !rets !nd sh!rp f!ll in s!les !nd net profits

$hich resulted in lo$ 'S0 M!hindr! is not uch !ffected !s its s!les h!ve incre!sed

fro the previous ye!r0 /ut !s trend sho$s M!hindr! otors h!s potenti!l so !

sh!reholder c!n epect better in future0


76/90


77/90

DI'IDEND PER SHARE

!);)!N! S%

BEA"S !ar05 !ar06 !ar07 !ar08 !ar09

TATA 12.5 13 15 15 6

!A"(T 2 3.5 4.5 5 3.5

!A-"A 13 10 11.5 11.5 10

Interpretat"on

!t! otors !nd M!ruti Su=ui both the cop!nies sho$ed ! positive trend in p!ying

dividends till 2..-, but the scen!rio ch!nged in 2.. !s both the cop!ny>s dividend

per sh!re fell0 8ccording to gr!ph !t!>s dividend h!s f!llen dr!stic!lly $hile M!ruti

stic to belo$ 5 per sh!re0 M!hindr! h!s !de ! slight reduction fro rs01105 per

sh!re in 2..- to rs01. per sh!re this ye!r0 herefore M!hindr! $ould be the best

option for !n investor0


78/90

RETURN ON IN'EST(ENT ROI/

eturn on )n*est+ent


TATA 30.09 27.74 27.96 25.98 8.09

!A"(T 19.49 21.81 22.79 20.56 13.04

!A-"A 25.66 29.6 30.18 25.51 16.03

Interpretat"on

#OI is one of the ost iport!nt r!tios used for e!suring the over!ll efficiency of !

fir !nd deterines $hether the investents in the firs !re !ttr!ctive or not0

8ccording the gr!ph, #OI of 88 h!s declined to ! l!rge etent in 2.., !ing it !

uite risy investent0 M!ruti>s #OI h!s !lso declined but M!hindr!>s #OI is

sho$ing ! higher r!te cop!red to 88 !nd M!ruti in 2..0 8s the investors $ould

lie to invest only $here the return is higher, M!hindr! $ould be !ttr!ctive for

investent0


79/90

DI'IDEND PAYOUT RATIO

!);)!N! %:


80/90

PRICE-EARNIN*S RATIO P7E RATIO/

)-%N)NS %T)


TATA 19.09 22.5 14.9 3.02 40.6

!A"(T 21.5 22.5 18.3 8.6 36.9

!A-"A 11.1 24.6 19.1 5.9 35.2

Interpretat"on

his r!tio is $idely used by investors to decide $hether or not to buy sh!res in !

p!rticul!r cop!ny08s per the gr!ph, in 2..-, the '


81/90

CHAPTER 'I

FINDIN*S@ SU**ESTIONS CONC)USION


82/90

FINDIN*S

+ro the d!t! !n!lysis !nd interpret!tions of the r!tios of three cop!nies> vi=0 !t!

Motors, M!ruti Su=ui !nd M!hindr! !nd M!hindr!, the follo$ing findings h!ve been

given;

he three cop!nies $ere perforing $ell till 2..- $ith ! positive trend in

the e!rnings per sh!re0 /ut there $!s ! do$n$!rd trend in 2..0 speci!lly,

88 h!s $itnessed ! steep f!ll in the ye!r 2..0

he s!les trend h!s been up$!rd !nd positive in c!se of !ll the three

cop!nies0 he s!les gro$th loos positive but in the ye!r 2.., 88>s s!les

h!ve declined $here!s M!ruti !nd M!hindr! h!ve !int!ined the s!e

up$!rd positive trend0

In c!se of dividend per sh!re, there $ere fluctu!tions during the period 2..5&

2..0 *ue to recession, the dividends per sh!re h!ve declined in !ll the three

cop!nies0 !t!>s dividend h!s f!llen dr!stic!lly $hile M!ruti stic to belo$ 5

per sh!re0 M!hindr! h!s !de ! slight reduction fro rs01105 per sh!re in

2..- to rs01. per sh!re this ye!r0

he return on investent h!s been fluctu!ting since 2..5 !nd the ye!r 2..

$itnessed lo$ returns in c!se of !ll the cop!nies !ongst $hich 88 h!s

the le!st r!te of return0 )op!red to the three cop!nies, M!hindr! h!s the

highest #OI in 2..0


83/90

M!ruti h!d ! st!ble dividend p!yout r!tio since 2..50 88 !nd M!hindr!

h!ve incre!sed their p!yout r!tio in $hich M!hindr! sho$s ! higher p!yout

r!tio0

he three cop!nies h!ve $itnessed ! lo$ price e!rnings r!tio in 2..-

cop!red to the previous ye!rs0 /ut the r!tio incre!sed in 2.. in three

cop!nies0 88 h!s the highest 's '


84/90


85/90


86/90

%a2ance Sheet; he investor ust focus on its ey fin!nci!l r!tios such !s

e!rnings per sh!re, price&e!rning r!tio7 debt&euity r!tio, dividends per sh!re

etc !nd he ust !lso chec $hether the cop!ny is gener!ting c!sh flo$s0

%arga"n"ng; his is the ost iport!nt f!ctor $hich sho$s the true $orth of

the cop!ny0 8n investor needs to choose v!lu!tion p!r!eters $hich suit its

business0

In1etment r!2e

Invest for long ter in euity !rets

8lign your thought process $ith the business cycle of the cop!ny0

Set the purpose for investent0

Long ter go!ls should be the objective of euity investent0

*isciplined investent during !ret vol!tility helps !tt!ins profits0

'l!nning, Jno$ledge !nd *iscipline !re very cruci!l for investent0


87/90

CONC)USION

he 8utoobile industry in Indi!is the seventh l!rgest in the $orld$ith !n !nnu!l

production of over 20" illion units in 2..0 In 2.., Indi! eerged !s 8si!6s fourth

l!rgest eporter of !utoobiles, behind E!p!n, South Jore! !nd h!il!nd0

he coll!pse in !ret pl!ce $itnessed unprecedented turbulence in the $!e of

glob!l fin!nci!l eltdo$n0 8 run!$!y infl!tion touching ! high point of 12G e!rly in

the ye!r, the tight onet!ry policies follo$ed by the !uthorities for ost of the ye!r

to control infl!tion $ith the conseuent high interest r!tes !nd $e! consuer

de!nd, h!ve collectively h!d ! dev!st!ting effect on the !utootive sector0

M!ruti Su=ui Indi! L*0 cop!ny h!s ! trend of gro$th fro till 2..-0*uring the

fin!nci!l ye!r 2..-&. the there is do$nf!ll in the gro$th of the cop!ny0 he !in

re!son behind this do$nf!ll is bec!use of the glob!l recession0 he do$nf!ll of net

profit during the fin!nci!l ye!r 2..-&. is 20"G over the fin!nci!l ye!r 2..%&2..-0

88 Motors, $hich $!s trying to consolid!te its le!dership position in the !ret,

!lso h!d to f!ce the ip!ct of glob!l eltdo$n0 8id the crippling econoic crisis,

!t! purch!sed /rit!in>s E!gu!r L!nd #over 9EL#: fro +ord Motor )op!ny0

8cuiring EL# s!ddled !t! $ith soe tough losses0 *ividends !nd e!rnings re!in

lo$0
http://en.wikipedia.org/wiki/Indiahttp://en.wikipedia.org/wiki/Automotive_industryhttp://en.wikipedia.org/wiki/Asiahttp://en.wikipedia.org/wiki/Indiahttp://en.wikipedia.org/wiki/Automotive_industryhttp://en.wikipedia.org/wiki/Asia


88/90

Inspite of it being ! tough ye!r for !ll the cop!nies !cross the globe !nd in Indi!,

M!hindr! h!s given ! s!tisf!ctory perfor!nce0 8t present its sh!res !re underv!lued

giving it ! potenti!l for gro$th0

Clob!l recession h!d ! d!pener effect on the gro$th of !utoobile industry but it

$!s ! short ter phenoenon0 he industry is bouncing b!c0 One f!ctor f!voring

this point is th!t Indi! h!s becoe ! hot destin!tion for cop!nies of diverse n!ture to

invest in0 )ut thro!t copetition !ong top cop!nies, lots of ne$ c!r !nd vehicle

odel l!unches !t regul!r interv!ls eeps the Indi!n !uto sector oving0

8 continuous effort !t cost cutting !nd iproving productivity $ill help the

cop!nies in !ing re!son!ble profits despite the ip!ct of higher coodity

prices !nd $e!er rupee0

+he analysis gi#es an optimistic #iew about the industry and its growth which

recommends the in#estors to keep a good watch on the ma,or players to benefit in

terms of returns on their in#estments&

8/9/201

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