BAJAJ ELECTRICALS LTD.INSPIRING TRUSTINTRODUCTION:Bajaj Electricals Ltd (BEL) (BSE:500031) is an Indian consumer electrical Equipments manufacturing company based in Mumbai, Maharashtra. It is a part of the 380 billion (US$6.2billion) Bajaj Group. It has diversified with interests in lighting, luminaries, appliances, fans, LPG based Generators, engineering and projects. Its main domains are lighting, consumer durables, engineering and projects .Some notable project includes lighting works at the Commonwealth Games stadium and the Bandra Worli Sea LinkIt has 19 branch offices spread in different parts of the country with a chain of about 1000 distributors, 4000 authorised dealers, over 400,000 retail outlets and over 282 Customer Care centres.HISTORY:July 1938- It was incorporated in 14 July 1938 as Radio Lamp Works Limited under the Indian Companies Act, 1913 as a Public company limitedOctober 1960- On 1 October 1960 it was renamed to Bajaj Electrical Limited1993-1994- Bajaj Electricals entered into a joint venture with Black & Decker Corporation, United States, for the manufacture and marketing of power tools, household appliances, and related accessories, through a separate company named Black & Decker Bajaj Private Limited2000-2001- The Company set-up our manufacturing facilities including a fabrication unit and a galvanizing plant at Ranjangaon, near Pune for the manufacture of high masts, lattice towers, and related products, and the said manufacturing facilities commenced commercial production with effect from April 1, 2001.November 2002-Our Company entered into a technical collaboration and brand licensing agreement with Morphy Richards, United Kingdom, for the sales and marketing of electrical appliances under the brand name of "Morphy Richards" in India.Year 2005-the year 2005 the company entered into a Distribution agreement with Trilux Lenze of Germany for high end technical lightingYear 2007-In the year 2007, the company acquired 32% of the share capital of Starlite Lighting Limited, a company engaged in the manufacture of Compact Fluorescent Lamps ("CFLs").2012-2013 -In 2012-2013, they have completely divested our stake and association with Black & Decker Corporation, USA.

PRODUCT RANGE :Its main domains are lighting, consumer durables, engineering and projects. Lighting includes lamps, tubes and luminaires. Consumer durables include appliances and fans. Engineering and projects -The Company provides engineering and projects services consisting of mast lighting, mobile light tower, flag mast; street furniture projects, including hot dip galvanized poles, cast iron ornamental lamp posts, and glass reinforces polymer composite poles; specialty projects, such as stadium lighting, rural electrification, and transmission line towers. Luminaires includes industrial lighting, roadway lighting, area lighting, urban architecture and accessories fluorescent lamps, fluorescent tube lights, LED lights; power solutions, including home UPS, inverters, and generators. Others include die casting, wind energy & solar energy

Leverage ratios :Debt/Equity ratio= (Short term debt + Long term debt)/Equity(CONSIDER ANNEXURE 2)for the year ending march 2010:=151.84/494.38=0.30for the year ending march 2011:=116.47/611.11=0.19for the year ending march 2012:=187.16/699.86=0.26for the year ending march 2013:=159.99/728.64=0.21

interpretation:Companies with less debt equity ratio are less risky than the companies having a high ratio. It is important for a share holder to look at the financial ratios in order to invest in it.company was having least debt equity ratio in the year 2011 and is trying to maintain it by having debt equity ratio as 0.21 in the year ending march 2013.

interest coverage ratio:(CONSIDER ANNEXURE 1)

interest coverage =opearting income/interest expense

for the year ending march 2010: = 240.03/38.21 = 6.28

for

the year ending march 2011:= 255.45/37.68 = 6.77

for the year ending march 2012: = 238.83/62.31 = 3.83

for the year ending march 2013:= 110.75/68.97= 1.60

interpretation:If a company borrows money in the form of debt, it most likely incurs interest charges on it. The interest coverage ratio measures a company's ability to meet its interest obligations with income earned from the firm's primary source of business. Again, higher interest coverage ratios are typically better, and interest coverage close to or less than one means the company has some serious difficulty paying its interest.

Interest coverage ratio indicates the comfort with which the company may be able to service the interest expense (i.e. finance charges) on its outstanding debt. Higher interest coverage ratio indicates that the company can easily meet the interest expense pertaining to its debt obligations. In our view, interest coverage ratio of below 1.5 should raise doubts about the companys ability to meet the expenses on its borrowings. Interest coverage ratio below 1 indicates that the company is just not generating enough to service its debt obligations.Bajajelecs average interest coverage ratio over the last 5 financial years has been 4.62 times which indicates that the Company can meet its debt obligations without any difficulty.

long term debt to equity ratio(CONSIDER ANNEXURE 2)=long term borrowings /equityfor the year ending 31 march 2010= 151.83/494.37=0.30for the year ending 31 march 2011=45.10/611.11=0.07for the year ending 31 march 2012=40.45/699.86=0.06for the year ending 31 march 2013= 34.54/728.64=0.05interpretation:Companies operating with high long term debt to equity on their balance sheets are vulnerable to economic cycles. In times of slowdown in economy, companies with high levels of debt find it increasingly difficult to service the interest on their borrowings as profit margins decline. We believe that long term debt to equity ratio higher than 0.6 - 0.8 could affect the business of a company and its results of operations.Bajajelec's average long term debt to equity ratio over the last 4 financial years has been 0.12 times which indicates that the Company operates with close to zero debt and is placed well to withstand economic slowdowns

BAJAJ ELECTRICALS SHAREHOLDINGS PATTERN.

SHAREHOLDING PATTERN (% OF SHARES HELD)ShareholdingMarch 2010March 2011March 2012March 2013December 2013

Promoter65.7165.2065.9866.0866.22

FIIs3.858.855.4711.5015.40

DIIs16.2711.2810.064.482.90

Others14.1714.6718.4917.9415.48

(CONSIDER ANNEXURE 1)THE OPERATING PROFIT OF BAJAJ ELECTRICALS HAS GONE DOWN FROM 255.45 IN YEAR 2011 TO 238.83 IN THE YEAR 2012 AND FINALLY 110.75 IN THE YEAR 2013. The reason for the poor show on bourses is the EPC business, which has been a drag for the company: it wiped out 53% of the total operating profit in FY13 and 66% in the first half FY14. Cost overruns and execution delays in the EPC business have resulted in the poor performance. The segment also led to a rise in working capital, which impacted the return on capital. But now the company is trying to set things in order. "We have become very selective about the projects we choose and will take the ones only with high margins. We have also set up a new ERP system and a new team for the EPC business and our focus will only be on execution. The uncertain future surrounding its Engineering & Projects division (E&P) has made investors jittery, causing the market cap to lose substantial value.Creating value for shareholders: Over the years, the company has not only strengthened its financial position but has also created a great deal of shareholder value. The same has been the result of the company's continuous improvement in product and processes, widening of product range and entering new categories and geographies. Few initiatives to name are innovative launches in fan division (Disney fans for kids), launching new models in appliances segment (consumer durables like ovens, heaters, iron, etc.), tie-ups with leading international brands like Morphy Richards, acquiring stake in Starlite Lightning Ltd - manufactures compact fluorescent lamps and technology tie ups in the lightening segment (Abacus and Trilux, Delta and Securiton). Its efforts to boost earnings, lower expenses, efficient use of assets and expanding reach through dealer distributor network led to improvement in ROIC (return on capital employed). ROIC improved from merely 1.7% in FY03 to 25% in FY11). There has been a marginal dip in ROIC in FY12. The same is on account of poor macroeconomic environment surrounding its E&P business. Economic revival and increase in infrastructure spend is likely to result in better utilization of assets and higher earnings. The changing revenue mix and lower finance cost is likely to give a further boost to profitability. Despite working capital needs remaining the same, improved earnings is expected to boost ROIC. BALANCE SHEET STRENGTH: With increase in profitability and consequently cash flows, the company's debt servicing capability has improved. The same is highlighted by consistently declining gearing ratio (debt to equity ratio- D/E) and improving interest coverage ratio. D/E ratio has come down from 2.6 times in FY03 to 0.3 in FY12. Going forward, we expect the company to further lower its debt burden and maintain the debt to equity around similar level (well below 1x). As the company's profitability improved and obligations declined, its interest coverage ratio improved from 0.4 in FY03 to 8.4 in FY11. Although interest coverage fell substantially to around 4x in FY12, we believe that this is only a temporary phenomenon and expect the coverage to go back to FY11 levels.

ANNEXURE 1:Operating Profit110.75238.83255.45240.03187.98

PBDIT152.39247.98267.30248.15188.74

Interest68.9762.3137.6838.2142.20

PBDT83.42185.67229.62209.94146.54

Depreciation14.4512.5210.769.208.55

Other Written Off0.000.000.000.000.00

Profit Before Tax68.97173.15218.86200.74137.99

Extra-ordinary items0.002.80-1.07-8.182.48

PBT (Post Extra-ord Items)68.97175.95217.79192.56140.47

Tax17.7758.0773.9975.3550.67

Reported Net Profit51.21117.88144.86117.1089.13

ANNEXURE 2:Sources Of Funds MAR13 MAR12 MAR11 MAR10

Total Share Capital19.95 19.9319.7719.51

Equity Share Capital19.95 19.9319.7719.51

Share Application Money0.00 0.000.020.00

Preference Share Capital0.00 0.000.000.00

Reserves708.69 671.11582465.52

Revaluation Reserves0.00 8.829.089.35

Networth728.64 699.86611494.38

Secured Loans51.02 76.6648.2668.39

Unsecured Loans108.97 110.5068.2183.45

Total Debt159.99 187.16116151.84

Total Liabilities888.63 887.02727646.22

9BAJAJ ELECTRICALS LTD.