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CASE STUDY
ANALYSIS
SHARE PRICE
MOVEMENTS & BETA
VALUES
AVERAGE SHARE PRICE MOVEMENT OF 20 BANKING FIRMS IN INDIA DATED BETWEEN
24TH OCT TO 7TH DEC 2014 (30 OBSERBVATIONS) LISTED ON BSE
SL BANK OP HIGH LOW CL BETA VALUE
1 KARUR S VYSYA 538.5611 544.6556 531.7111 536.7519 0.71
2 HDFC 400.9103 406.7414 394.8293 400.3759 0.91
3 KOTAK MAHINDRA BANK 1,136.26 1,151.20 1,123.48 1,138.39 1.08
4 SOUTH INDIAN BANK 27.65484 28.062 27.159 27.54 1.2
5 BANK OF BARODA 1001.011 1019.483 989.9315 1007.441 1.28
6 ING 743.43 759.92 729.64 744.74 1.41
7 FEDERAL BANK 144.5704 146.5037 142.3704 144.2796 1.42
8 ANDHRA BANK 84.47037 86.24074 82.65556 84.52963 1.49
9 INDIAN OVERSEAS 58.32 59.32 57.32 58.22 1.49
10 SBI 288.6281 292.0342 285.58 289.0029 1.49
11 INDISIN BANK 723.8597 733.3177 717.1065 725.6129 1.57
12 DENA BANK 61.98704 62.8537 60.91111 61.72407 1.58
13 PNB 971.2537 989.9204 960.7778 976.5241 1.66
14 CANARA BANK 400.9103 406.7414 394.8293 400.3759 1.75
15 BANK OF BARODA 6921.802 6979.671 6865.454 6938.259 1.77
16 ICICI 1,605.91 1,625.36 1,593.48 1,613.21 1.77
17 AXIS BANK 464.6056 470.76 460.23 466.32 1.82
18 UNION BANK 212.7907 216.4256 210.1453 213.2151 1.93
19 YES BANK 684.25 693.97 676.81 686.89 1.95
20 IDBI 70.86296 71.95185 69.53333 70.77593 2.07
GRAPHICAL REPRESENTATION OF BETA VALUES
KOTAK MAHINDRA BANK
SOUTH INDIAN BANK
SBI
HDFC
CANARA BANK
PNB
BANK OF BARODA
ANDHRA BANK
YES BANK
INDISIN BANK
FEDERAL BANK
DENA BANK
KARUR S VYSYA
AXIS BANK
ING
INDIAN OVERSEAS
BANK OF BARODA
IDBI
ICICI
UNION BANK
0
0.5
1
1.5
2
2.5
0 5 10 15 20 25
BETA VALUES of the 20 BANKS'S STOCK
BETA VALUE
Linear (BETAVALUE)
COST OF EQUITY
HUL & DLF
DATE HUL DHL SENSEX
Jan-08 206.5 812.55 17648.71
Feb-08 227.35 780.55 17578.72
Mar-08 228.7 646.5 15644.44
Apr-08 249.5 705.25 17287.31
May-08 237.15 587.45 16415.57
Jun-08 206.1 396.2 13461.6
Jul-08 239.7 509.3 14355.75
Aug-08 245.4 493.2 14594.53
Sep-08 251.55 352.4 12860.43
Oct-08 221.95 220.25 9788.06
Nov-08 236.2 198.25 9092.72
Dec-08 250.25 281.9 9647.31
Jan-09 261.2 177.2 9424.24
Feb-09 253.8 151.7 8891.61
Mar-09 238.2 167.2 9708.5
Apr-09 234.55 230.9 11403.25
May-09 231.1 403.3 14625.25
Jun-09 267.1 310.8 14493.84
Jul-09 291.2 396.15 15670.31
Aug-09 259.85 424.2 15666.64
Sep-09 262.85 438 17126.84
Oct-09 282.95 370 15896.28
Nov-09 285.25 351.6 16926.22
Dec-09 264.75 361.15 17464.81
MONTHLY
RETURN HUL DLF SENSEX
10.0968523 -3.93821919 -0.396572894
0.593798109 -17.1737877 -11.00353154
9.094884128 9.087393658 10.5013027
-4.9498998 -16.7032967 -5.042658459
-13.09297913 -32.5559622 -17.99492799
16.30276565 28.54618879 6.642226778
2.377972466 -3.16120165 1.663305644
2.506112469 -28.5482563 -11.88184888
-11.76704433 -37.5 -23.89010321
6.420364947 -9.98864926 -7.103961357
5.948348857 42.19419924 6.099275024
4.375624376 -37.1408301 -2.312250772
-2.833078101 -14.3905192 -5.651702418
-6.146572104 10.21753461 9.187200068
-1.532325777 38.09808612 17.45635268
-1.470901727 74.66435686 28.25510271
15.577672 -22.9357798 -0.898514555
9.022837888 27.46138996 8.117034547
-10.7657967 7.080651268 -0.023420085
1.154512219 3.253182461 9.320441396
7.646946928 -15.5251142 -7.184979833
0.812864464 -4.97297297 6.479125934
-7.186678352 2.716154721 3.181986291
1.399403512 -0.05284572 0.587777469
COV-1.033689759
DEV 1 DEV2 COMBINED
8.697449 -3.885373468 -33.79283676
-0.80561 -17.120942 13.79272339
7.695481 9.140239376 70.33853494
-6.3493 -16.65045099 105.7187636
-14.4924 -32.50311649 471.0476012
14.90336 28.59903451 426.2217681
0.978569 -3.108355931 -3.04174061
1.106709 -28.49541057 -31.53612611
-13.1664 -37.44715428 493.0460035
5.020961 -9.935803544 -49.88728642
4.548945 42.24704496 192.1794985
2.976221 -37.08798436 -110.3820328
-4.23248 -14.33767347 60.68393934
-7.54598 10.27038033 -77.50003951
-2.93173 38.15093184 -111.8482043
-2.87031 74.71720258 -214.461178
14.17827 -22.8829341 -324.4403835
7.623434 27.51423568 209.7529701
-12.1652 7.133496987 -86.78041908
-0.24489 3.306028179 -0.809617518
6.247543 -15.47226844 -96.6636688
-0.58654 -4.920127255 2.885846759
-8.58608 2.76900044 -23.77486446
OBSERVATIONS
HUL DHL
AVERAGE RETURN 1.399403512 -0.05284572
SD 8.11912649 27.7892237
COV -1.033689759 -1.033689759
CORRELATION -0.004581466 -0.004581466
BETA VALUE 0.37 1.54
-60
-40
-20
0
20
40
60
80
100
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24
MONTHLY RETURN HUL
DLF
SENSEX
HUL DHL
AVERAGE
RETURN1.399403512 -0.05284572
STANDARD DEVIATION
HIGHER THE SD HIGHER THE VOLATILITY OF STOCK
0
5
10
15
20
25
30
HUL DLF
Series1
COVARIANCE
The correlation coefficient will vary from -1 to +1.
Here covariance of securities is -1.03 which means it is negative and the movement of the securities are not closely associated.
If an investor wants a portfolio whose assets have diversified earnings, he or she should pick financial assets that have low covariance to each other.
-1.03368975
9
-1.2
-1
-0.8
-0.6
-0.4
-0.2
0
1
cov
BETA
0
0.2
0.4
0.6
0.8
1
1.2
1.4
1.6
HUL
DLF
0.37
1.54
Series1•DLF stock’s price experiences movements greater (more volatile) than the stock
market by 54% (BETA >1)
•HUL stock’s price movements are less than the market fluctuations by 63%
(BETA <1)
COST OF EQUITY
HUL DLF
Rf 8% 8%
Expected Return 16% 16%
Rj 0.1095 0.2032
Rj = Rf + bj(RM - Rf)
DEBT PROBLEMS
AT
ASAHI GLASS LIMITED
YEAR MAJOR LANDMARKS IMPICATION
1986-88 IST PUBLIC OFFER 6.81 TIMES OVER SUBSCRIBED
SALES TURN OVER 115 M
1988-90 1ST DIVIDENT
1996-97 SALES TURN OVER CROSSED 1000M
1997-98 1ST BONUS SHARES 1:1 RATIO WITH 45% DIVIDEND
1999-2000 SALES TURN OVER CROSSED 1000M
2001-2002 2ND BONUS SHARE 55%
EQUITY STAKE IN FGI 79.6% STAKE
2002-03 STOCK SPLIT 10 Eq OF RS 1 FROM RS 10
SALES TURN OVER 5000M
2004-05 3rd BONUS ISSUE 1:01
DIVIDEND 250%
INTRIM DIVIDEND 100%
FINANCIAL STRUCTURE
1999-2000 2000-2001 2001-2002 2002-2003 2003-2004 2004-2005 2005-2006 2006-2007 2007-2008 2008-2009
shareholders fund 293 350 400 791 1301 1756 2509 2811 2945 1896
DEBT:
Interest free sales tax loan 205 249 257 248 243 235 227 190 146 91
interest free foreign currency loan 2268 2088 2088 2130 2075 1915 2421
Interest bearing loan 498 633 920 854 373 2128 6311 10132 11853 13661
Total debt 703 882 1177 3370 2704 4451 8668 12397 13914 16173
Debt/equity 239.931741 252 294.25 426.0429836 207.8401 253.4738 345.47629 441.0174 472.4618 853.0063
Industry Bench mark od Debt-equity ratio1.77 for manufacturing
LOW LEVERAGE MEDIUM LEVERAGE HIGH LEVERAGE
1999-2000 2000-2001 2001-2002 2002-2003 2003-2004 2004-2005 2005-2006 2006-2007 2007-2008 2008-2009
OPERATING INCOME 401 398 414 933 1320 1289 1207 1649 2046 1428
(INTEREST) 76 58 49 79 24 32 108 355 848 1243
Gross profit 325 340 365 854 1296 1257 1099 1294 1199 185
(DEPRECIATION) 161 193 174 439 501 403 63 653 1005 1135
PROFIT BEFORE TAX 139 130 173 382 776 850 912 632 196 -958
(TAX) 46 50 54 5 58 68 50 212 62 -552
PROFIT AFTER TAX 93 80 119 377 718 782 862 420 134 -406
EPS 25.22 21.51 16.03 4.71 8.91 9.69 6.17 2.63 0.83 -2.54
ROE 23.01 19.31 18.89 10.96 19.78 19.63 20.09 10.06 7.04 1.68
DFL 1.23384615 1.170588 1.134247 1.092505855 1.018519 1.025457 1.0982712 1.274343 1.706422 7.718919
DEBT73%
EQUITY27%
CAPITAL STRUCTURE- LOW LEVERAGE
EQUITY
15%
DEBT85%
CAPITAL STRUCTURE-HIGH LEVERAGE
EQUITY25%
DEBT75%
CAPITAL STRUCTURE - MEDIUM LEVERAGE
Industry Bench mark od Debt-equity
ratio1.77 for manufacturing
-5
0
5
10
15
20
25
30
EPS
LOW LEVERAGE MEDIUM LEVERAGE
HIGH LEVERAGE
-5
0
5
10
15
20
25
30
1 2 3 4 5 6 7 8 9 10
Series1
EPS
ROE
LOW LEVERAGE 23.01 19.31 18.89
MEDIUMLEVERAGE
10.96 19.78 19.63 20.09
HIGH LEVERAGE 10.06 7.04 1.68
0
5
10
15
20
25
RO
E
ROE
0
5
10
15
20
25
1 2 3 4 5 6 7 8 9 10
ROE
Series1
DCL
-6
-4
-2
0
2
4
1 2 3 4 5 6 7 8 9 10
DOL
DOL-10
-5
0
5
10
15
20
25
1 2 3 4 5 6 7 8 9 10
DFL
DFL
-30
-20
-10
0
10
1 2 3 4 5 6 7 8 9 10
DCL
DCL
0
500
1000
1500
2000
2500
EBIT
EBIT
0
200
400
600
800
1000
1200
1400
1 2 3 4 5 6 7 8 9 10
INTEREST
Series1
0
100
200
300
400
500
600
700
800
900
1 2 3 4 5 6 7 8 9 10
DEBT-EQUITY RATIO
Series1401 398 414
933
1320 1289 1207
1649
2046
1428
93 80 119377
718 782 862
420134
-406
EBIT &EAT
EBIT EAIT
0 0 0
22682088 2088 2130 2075
1915
2421
1 2 3 4 5 6 7 8 9 10
INTEREST FREE FOREGIN CURRENCY LOAN
Series1
48.3953
45.9516
43.66
45.2444.59
49.85
51.24
38
40
42
44
46
48
50
52
1 2 3 4 5 6 7
EX RATE
EX RATE
0
10
20
30
40
50
60
1 2 3 4 5 6 7
USD
USD
HERO HONDA
NET PROFIT AFTER TAX, 12818
DIVIDEND, 39940
5000
10000
15000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
EAT AND DIVIDEND
0
1000
2000
3000
4000
5000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
DIVIDEND,DIVIDEND RATE,DIVIDEND PAYOUT RATIO
DIVIDEND DIVIDEND RATE DIVIDEND PAYOUT
STABLE DIVIDEND POLICY
11.4 10.57
16.97 15.6 15.34 13.519.25
6.694.48
2.09
2327
7570
62
56
47 46 46
37
1 2 3 4 5 6 7 8 9 10
DEBT EQUITY RATIO DIVIDEND PAYOUT
0
50
100
150
200
250
300
350
400
1 2 3 4 5 6 7 8 9 10
INTEREST
INTEREST
STOCK SPLIT 2001
PARTICULARS AMOUNT(millions)
EQUITY(face value Rs.10* 39,900,000) 3,99,000,000
RESERVES 6292000000
SHARE HOLDER’S EQUITY 6689000000
EPS 6.18
PARTICULARS AMOUNT(millions)
EQUITY(face value Rs.2* 199,500,000 ) 3,99,000,000
RESERVES 6269000000
SHARE HOLDER’S EQUITY 6689000000
EPS 1.23
HYPOTHETICAL EXAMPLE
EPS(100 Shares) 6.18*100= 618
EPS(500 Shares) 1.23*500= 618
BONUS
PARTICULARS IN MILLIONS
BEFORE 1994 SHARE CAPITAL 49.87
1994 (Bonus 1:4) 199.5
1998 (Bonus 1:1) 399
Hypothetical Example 1994 1998
PAT 1400 1900
Share Holdings 199.5 399
EPS 7.02 4.76
Share Holders value 702 (100shares) 952 (100 shares+100
bonus share)
BUY BACK OF SHARES
On the down sideshare prices of Deccan Chronicle Holdings (DCHL),
Jindal Poly Films, Amtek Auto and Praj Indusries, Balrampur Chini
and FDC fell 32.2 per cent, 24.4 per cent, 16.6 per cent, 7.6 per cent,
6.1 per cent and 5.2 per cent, respectively.
The price trend depends on various factors such as the market
situation, the mode of the offer, that is, tender or market purchase,
the size of the offer, the difference between the offer price and the
market price of the stock
0
20
40
60
80
1 2 3 4 5 6 7 8 9 10
EPS
EPS
0
10000
20000
30000
40000
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
Reserves
Reserves
THANK YOU