150116379 equity analysis

8/13/2019 150116379 Equity Analysis

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A STUDY on

EQUITY ANALYSIS

AtINDIA INFOLINE LIMITED

(Report submitted to JNTU in partial fulfillment of the requirement for the

award of Master of Business Administration

Submitted b!

SHAMEEM BEGUM

Roll No: 08N31E0048

Under the "uidan#e of

Mr. K Har Kr!"#a

A!!o$. %ro&'!!or F#a#$'

MALLA REDDY (OLLEGE OF ENGINEERING ) TE(HNOLOGY

(Affiliated to JNTU$ %!derabad

Se#underabad & '

)**+& )*'*

Equity Analysis


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DE(LARATION

, de#lare that this pro-e#t report entitled *EQUITY ANALYSIS+ is ori"inal and

bonafide wor. of m! own in the partial fulfillment of the requirements for the award of

the De"ree of MASTER OF BUSINESS ADMINISTRATIONand submitted to the

Department of Mana"ement$ MALLAREDDY (OLLEGE OF ENGINEERING AND

TE(HNOLOGY$ Se#underabad/

The data that has been #olle#ted b! me is trul! authenti# and #ontains true and #omplete

information/

SHAMEEM BEGUM

Equity Analysis


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SUMMARY

The automobile industr!$ one of the #ore se#tors$ has under"one metamorphosis with the

ad0ent of new business and manufa#turin" pra#ti#es in the li"ht of liberali1ation and

"lobali1ation/ The se#tor seems to be optimisti# of postin" stron" sales in the #ouple of

!ears in the 0iew of a reasonable sur"e in demand/ The ,ndian automobile mar.et is

"earin" towards international standards to meet the needs of the "lobal automobile "iants

and be#ome a "lobal hub/

A detailed anal!sis of Automobile industr! has been #o0ered in respe#t of past "rowth

and performan#e/ Under this pro-e#t to better understand the ,ndustr! , ha0e used

2undamental tools to ma.e it more authenti# and meanin"ful/

An e#onom!&industr!ompan! (3/,/4 approa#h has been followed under 2undamental

Anal!sis whi#h #o0ers effe#t of Re#ession$ the impa#t of inflation$ 2D,5s$ 36port$ and

7D8 et#/ on Automobile ,ndustr!/ The ,ndustr! Anal!sis has been done with the help of

S9:T anal!sis and industr! life #!#le/ 2or 4ompan! Anal!sis as a part of 2undamental

tool we ha0e under"one with the #omparati0e anal!sis of TATA Motors the leadin"

#ompan!$ Maruti Su1u.i ,ndia5s lar"est 4ar manufa#turer and Mahindra and Mahindra

alon" with the help of ratio anal!sis/ The fundamental aspe#t #onsists of finan#ial and

Non&2inan#ial anal!sis of these #ompanies/

At the end #on#lusion and re#ommendations ha0e been spe#ified so as to ma.e the

pro-e#t wor. more meanin"ful and purposeful/

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(ONTENTS

("a-'r No. Na/' o& "' $o#$'- %a' No.

,

,ntrodu#tion '

Need of the stud! )

:b-e#ti0es of the stud! =

S#ope of the stud!

Methodolo"! of the stud! >

?imitations of the stud! @

,, Re0iew of ?iterature &))

,,, ,ndustr! 8rofile )=&)

,< 4ompan! 8rofile =&>)

< Data anal!sis and interpretation >=&=


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(HA%TER I INTRODU(TION

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INTRODU(TION

,ndia is a de0elopin" #ountr!/ Nowada!s man! people are interested to in0est in finan#ial

mar.ets espe#iall! on equities to "et hi"h returns$ and to sa0e ta6 in honest wa!/ 3quities

are pla!in" a ma-or role in #ontribution of #apital to the business from the be"innin"/

Sin#e the introdu#tion of shares #on#ept$ lar"e numbers of in0estors are showin" interest

to in0est in sto#. mar.et/

,n an industr! pla"ued with s.epti#ism and a sto#. mar.et in#reasin"l! diffi#ult to predi#t

and #ontend with$ if one loo.s hard enou"h there ma! still be a "enuine aid for the Da!

Trader and Short Term ,n0estor/

The pri#e of a se#urit! represents a #onsensus/ ,t is the pri#e at whi#h one person a"rees

to bu! and another a"rees to sell/ The pri#e at whi#h an in0estor is willin" to bu! or sell

depends primaril! on his e6pe#tations/ ,f he e6pe#ts the se#urit!s pri#e to rise$ he will

bu! itC if the in0estor e6pe#ts the pri#e to fall$ he will sell it/ These simple statements are

the #ause of a ma-or #hallen"e in fore#astin" se#urit! pri#es$ be#ause the! refer to human

e6pe#tations/ As we all .now firsthand$ humans e6pe#tations are neither easil!

quantifiable nor predi#table/ ,f pri#es are based on in0estor e6pe#tations$ then .nowin"

what a se#urit! should sell for (i/e/$ fundamental anal!sis be#omes less important than.nowin" what other in0estors e6pe#t it to sell for/ Thats not to sa! that .nowin" what a

se#urit! should sell for isnt important&&it is/ But there is usuall! a fairl! stron" #onsensus

of a sto#.s future earnin"s that the a0era"e in0estor #annot dispro0e

2undamental anal!sis and te#hni#al anal!sis #an #o&e6ist in pea#e and #omplement ea#h

other/ Sin#e all the in0estors in the sto#. mar.et want to ma.e the ma6imum profits

possible$ the! -ust #annot afford to i"nore either fundamental or te#hni#al anal!sis/

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NEED OF THE STUDY

To start an! business #apital pla!s ma-or role/ 4apital #an be a#quired in two wa!s b!

issuin" shares or b! ta.in" debt from finan#ial institutions or borrowin" mone! fromfinan#ial institutions/ The owners of the #ompan! ha0e to pa! re"ular interest and

prin#ipal amount at the end/

Sto#. is ownership in a #ompan!$ with ea#h share of sto#. representin" a tin! pie#e of

ownership/ The more shares !ou own$ the more of the #ompan! !ou own/ The more

shares !ou own$ the more di0idends !ou earn when the #ompan! ma.es a profit/ ,n the

finan#ial world$ ownership is #alled *E2+.

Ad0anta"es of sellin" sto#.

A #ompan! #an raise more #apital than it #ould borrow/

A #ompan! does not ha0e to ma.e periodi# interest pa!ments to #reditors/

A #ompan! does not ha0e to ma.e prin#ipal pa!ments

Sto#.Eshares pla! a ma-or role in a#quirin" #apital to the business in return in0estors are

paid di0idends to the shares the! own/ The more shares !ou own the more di0idends !ou

re#ei0e/

The role of equit! anal!sis is to pro0ide information to the mar.et/ An effi#ient mar.et

relies on information a la#. of information #reates ineffi#ien#ies that result in sto#.s

bein" misrepresented (o0er or under 0alued/ This is 0aluable be#ause it fills information

"aps so that ea#h indi0idual in0estor does not need to anal!1e e0er! sto#. thereb! ma.in"

the mar.ets more effi#ient/

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OB5E(TI6ES OF THE STUDY

The ob-e#ti0e of this pro-e#t is to deepl! anal!1e our ,ndian Automobile ,ndustr! for

in0estment purpose b! monitorin" the "rowth rate and performan#e on the basis of

histori#al data/

The main ob-e#ti0es of the 8ro-e#t stud! are

Detailed anal!sis of Automobile industr! whi#h is "earin" towards

international standards

Anal!1e the impa#t of qualitati0e fa#tors on industr!5s and #ompan!5s

prospe#ts

4omparati0e anal!sis of three tou"h #ompetitors TATA Motors$ Maruti

Su1u.i and Mahindra and Mahindra throu"h fundamental anal!sis/

Su""estin" as to whi#h #ompan!5s shares would be best for an in0estor to

in0est/

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METHODOLOGY

Resear#h desi"n or resear#h methodolo"! is the pro#edure of #olle#tin"$ anal!1in"

and interpretin" the data to dia"nose the problem and rea#t to the opportunit! in su#h

a wa! where the #osts #an be minimi1ed and the desired le0el of a##ura#! #an be

a#hie0ed to arri0e at a parti#ular #on#lusion/

The methodolo"! used in the stud! for the #ompletion of the pro-e#t and the

fulfillment of the pro-e#t ob-e#ti0es/

The sample of the sto#.s for the purpose of #olle#tin" se#ondar! data has been

sele#ted on the basis of Random Samplin"/ The sto#.s are #hosen in an unbiased

manner and ea#h sto#. is #hosen independent of the other sto#.s #hosen/ The sto#.s

are #hosen from the automobile se#tor/

The sample si1e for the number of sto#.s is ta.en as = for fundamental anal!sis of

sto#.s as fundamental anal!sis is 0er! e6hausti0e and requires detailed stud!/

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LIMITATIONS

This stud! has been #ondu#ted purel! to understand 3quit! anal!sis for in0estors/

The stud! is restri#ted to three #ompanies based on 2undamental anal!sis/

The stud! is limited to the #ompanies ha0in" equities/

Detailed stud! of the topi# was not possible due to limited si1e of the pro-e#t/

There was a #onstraint with re"ard to time allo#ation for the resear#h stud! i/e/ for

a period of > da!s/

Su""estions and #on#lusions are based on the limited data of fi0e !ears/

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(HA%TER II RE6IE, OF LITERATURE

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SE(URITY ANALYSIS

,n0estment su##ess is prett! mu#h a matter of #areful sele#tion and timin" of sto#.

pur#hases #oupled with perfe#t mat#hin" to an indi0iduals ris. toleran#e/ ,n order to #arr!

out sele#tion$ timin" and mat#hin" a#tions an in0estor must #ondu#t deep se#urit!

anal!sis/

,n0estors pur#hase equit! shares with two basi# ob-e#ti0esC

'/ To ma.e #apital profits b! sellin" shares at hi"her pri#es/

)/ To earn di0idend in#ome/

These two fa#tors are affe#ted b! a host of fa#tors/ An in0estor has to #arefull!

understand and anal!1e all these fa#tors/ There are basi#all! two approa#hes to stud!

se#urit! pri#es and 0aluation i/e/ fundamental anal!sis and te#hni#al anal!sis

The 0alue of #ommon sto#. is determined in lar"e measure b! the performan#e of the

firm that issued the sto#./ ,f the #ompan! is health! and #an demonstrate stren"th and

"rowth$ the 0alue of the sto#. will in#rease/ 9hen 0alues in#rease then pri#es follow and

returns on an in0estment will in#rease/ %owe0er$ -ust to .eep the sa00! in0estor on their

toes$ the mi6 is #ompli#ated b! the ris. fa#tors in0ol0ed/ 2undamental anal!sis e6amines

all the dimensions of ris. e6posure and the probabilities of return$ and mer"es them with

broader e#onomi# anal!sis and "reater industr! anal!sis to formulate the 0aluation of a

sto#./

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FUNDAMENTAL ANALYSIS

2undamental anal!sis is a method of fore#astin" the future pri#e mo0ements of a

finan#ial instrument based on e#onomi#$ politi#al$ en0ironmental and other rele0ant

fa#tors and statisti#s that will affe#t the basi# suppl! and demand of whate0er underlies

the finan#ial instrument/ ,t is the stud! of e#onomi#$ industr! and #ompan! #onditions

in an effort to determine the 0alue of a #ompan!5s sto#./ 2undamental anal!sis

t!pi#all! fo#uses on .e! statisti#s in #ompan!5s finan#ial statements to determine if the

sto#. pri#e is #orre#tl! 0alued/ The term simpl! refers to the anal!sis of the e#onomi#

well&bein" of a finan#ial entit! as opposed to onl! its pri#e mo0ements/

2undamental anal!sisis the #ornerstone of in0estin"/ The basi# philosoph! underl!in"

the fundamental anal!sis is that if an in0estor in0ests re/' in bu!in" a share of a

#ompan!$ how mu#h e6pe#ted returns from this in0estment he has/

The fundamental anal!sis is to appraise the intrinsi# 0alue of a se#urit!/ ,t insists that

no one should pur#hase or sell a share on the basis of tips and rumors/ The fundamental

approa#h #alls upon the in0estors to ma.e his bu! or sell de#ision on the basis of a

detailed anal!sis of the information about the #ompan!$ about the industr!$ and the

e#onom!/ ,t is also .nown as Ftop&down approa#hG/ This approa#h attempts to stud! the

e#onomi# s#enario$ industr! position and the #ompan! e6pe#tations and is also .nown

as *'$o#o/$#7!r$o/-a# a--roa$" EI( a--roa$"9+/

Equity Analysis
http://www.investopedia.com/terms/f/fundamentalanalysis.asphttp://www.investopedia.com/terms/f/fundamentalanalysis.asp


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Thus the EI( a--roa$"in0ol0es three steps

'/ 3#onomi# anal!sis

)/ ,ndustr! anal!sis

=/ 4ompan! anal!sis

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'/ E(ONOMI( ANALYSIS

The le0el of e#onomi# a#ti0it! has an impa#t on in0estment in man! wa!s/ ,f the

e#onom! "rows rapidl!$ the industr! #an also be e6pe#ted to show rapid "rowth and

0i#e 0ersa/ 9hen the le0el of e#onomi# a#ti0it! is low$ sto#. pri#es are low$ and when

the le0el of e#onomi# a#ti0it! is hi"h$ sto#. pri#es are hi"h refle#tin" the prosperous

outloo. for sales and profits of the firms/ The anal!sis of ma#ro e#onomi# en0ironment

is essential to understand the beha0ior of the sto#. pri#es/

The #ommonl! anal!1ed ma#ro e#onomi# fa#tors are as follows

Gro!! Do/'!$ %ro7$ GD%9: 7D8 indi#ates the rate of "rowth of the e#onom!/ ,t

represents the a""re"ate 0alue of the "oods and ser0i#es produ#ed in the e#onom!/ ,t

#onsists of personal #onsumption e6penditure$ "ross pri0ate domesti# in0estment and

"o0ernment e6penditure on "oods and ser0i#es and net e6ports of "oods and ser0i#es/

The "rowth rate of e#onom! points out the prospe#ts for the industrial se#tor and the

return in0estors #an e6pe#t from in0estment in shares/ The hi"her "rowth rate is more

fa0orable to the sto#. mar.et/

Sa#! a#7 #'!/'#: ,t is ob0ious that "rowth requires in0estment whi#h in turn

requires substantial amount of domesti# sa0in"s/ Sto#. mar.et is a #hannel throu"h

whi#h the sa0in"s are made a0ailable to the #orporate bodies/ Sa0in"s are distributed

o0er 0arious assets li.e equit! shares$ deposits$ mutual funds$ real estate and bullion/

The sa0in"s and in0estment patterns of the publi# affe#tthe sto#. to a "reat e6tent/

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I#&lao#: Alon" with the "rowth of 7D8$ if the inflation rate also in#reases$ then the

real "rowth would be 0er! little/ The effe#ts of inflation on #apital mar.ets are

numerous/ An in#rease in the e6pe#ted rate of inflation is e6pe#ted to #ause a nominal

rise in interest rates/ Also$ it in#reases un#ertaint! of future business and in0estment

de#isions/ As inflation in#reases$ it results in e6tra #osts to businesses$ thereb!

squee1in" their profit mar"ins and leadin" to real de#lines in profitabilit!/

I#'r'! ra'!: The interest rate affe#ts the #ost of finan#in" to the firms/ A de#rease in

interest rate implies lower #ost of finan#e for firms and more profitabilit!/ More mone!

is a0ailable at a lower interest rate for the bro.ers who are doin" business with

borrowed mone!/ A0ailabilit! of #heap funds en#oura"es spe#ulation and rise in the

pri#e of shares/

Ta; !r$r': 30er! !ear in Mar#h$ the business #ommunit! ea"erl! awaits the

7o0ernment5s announ#ement re"ardin" the ta6 poli#!/ 4on#essions and in#enti0es

"i0en to a #ertain industr! en#oura"e in0estment in that parti#ular industr!/ Ta6 relief5s

"i0en to sa0in"s en#oura"e sa0in"s/ The t!pe of ta6 e6emption has impa#t on the

profitabilit! of the industries/

I#&ra!r$r' &a$l'!: ,nfrastru#ture fa#ilities are essential for the "rowth of

industrial and a"ri#ultural se#tor/ A wide networ. of #ommuni#ation s!stem is a must

for the "rowth of the e#onom!/ Re"ular suppl! of power without an! power #ut would

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Rapid growth stage: This sta"e starts with the appearan#e of sur0i0in" firms

from the pioneerin" sta"e/ The #ompanies that ha0e withstood the #ompetition

"row stron"l! in mar.et share and finan#ial performan#e/ The te#hnolo"! of the

produ#tion would ha0e impro0ed resultin" in low #ost of produ#tion and "ood

qualit! produ#ts/ The #ompanies ha0e stable "rowth rate in this sta"e and the!

de#lare di0idend to the shareholders/ ,t is ad0isable to in0est in the shares of

these #ompanies/

Maturity and stabilization stage: the "rowth rate tends to moderate and the rate

of "rowth would be more or less equal to the industrial "rowth rate or the "ross

domesti# produ#t "rowth rate/ S!mptoms of obsoles#en#e ma! appear in the

te#hnolo"!/ To .eep "oin"$ te#hnolo"i#al inno0ations in the produ#tion pro#ess

and produ#ts should be introdu#ed/ The in0estors ha0e to #losel! monitor the

e0ents that ta.e pla#e in the maturit! sta"e of the industr!/

Decline stage: demand for the parti#ular produ#t and the earnin"s of the

#ompanies in the industr! de#line/ ,t is better to a0oid in0estin" in the shares of

the low "rowth industr! e0en in the boom period/ ,n0estment in the shares of

these t!pes of #ompanies leads to erosion of #apital/

Gro=" o& "' #7!r: The histori#al performan#e of the industr! in terms of "rowth

and profitabilit! should be anal!1ed/ The past 0ariabilit! in return and "rowth in

rea#tion to ma#ro e#onomi# fa#tors pro0ide an insi"ht into the future/

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Nar' o& $o/-'o#:Nature of #ompetition is an essential fa#tor that determines the

demand for the parti#ular produ#t$ its profitabilit! and the pri#e of the #on#erned

#ompan! s#rips/ The #ompanies abilit! to withstand the lo#al as well as the

multinational #ompetition #ounts mu#h/ ,f too man! firms are present in the or"ani1ed

se#tor$ the #ompetition would be se0ere/ The #ompetition would lead to a de#line in the

pri#e of the produ#t/ The in0estor before in0estin" in the s#rip of a #ompan! should

anal!1e the mar.et share of the parti#ular #ompan!s produ#t and should #ompare it

with the top fi0e #ompanies/

S,OT a#al!!: S9:T anal!sis represents the stren"th$ wea.ness$ opportunit! and

threat for an industr!/ 30er! in0estor should #arr! out a S9:T anal!sis for the #hosen

industr!/ Ta.e for instan#e$ in#rease in demand for the industr!5s produ#t be#omes its

stren"th$ presen#e of numerous pla!ers in the mar.et$ i/e/ #ompetition be#omes the

threat to a parti#ular #ompan!/ The pro"ress in R I D in that industr! is an opportunit!

and entr! of multinationals in the industr! is a threat/ ,n this wa! the fa#tors are to be

arran"ed and anal!1ed/

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=/ (OM%ANY ANALYSIS

,n the #ompan! anal!sis the in0estor assimilates the se0eral bits of information related

to the #ompan! and e0aluates the present and future 0alues of the sto#./ The ris. and

return asso#iated with the pur#hase of the sto#. is anal!1ed to ta.e better in0estment

de#isions/ The present and future 0alues are affe#ted b! a number of fa#tors/

(o/-'' '7' o& "' $o/-a#: Ma-or industries in ,ndia are #omposed of

hundreds of indi0idual #ompanies/ Thou"h the number of #ompanies is lar"e$ onl! few

#ompanies #ontrol the ma-or mar.et share/ The #ompetiti0eness of the #ompan! #an be

studied with the help of the followin"C

Market share: The mar.et share of the annual sales helps to determine a

#ompan!5s relati0e #ompetiti0e position within the industr!/ ,f the mar.et share

is hi"h$ the #ompan! would be able to meet the #ompetition su##essfull!/ The

#ompanies in the mar.et should be #ompared with li.e produ#t "roups

otherwise$ the results will be misleadin"/

Growth of sales:The rapid "rowth in sales would .eep the shareholder in a

better position than one with sta"nant "rowth rate/ ,n0estors "enerall! prefer

si1e and "rowth in sales be#ause the lar"er si1e #ompanies ma! be able to

withstand the business #!#le rather than the #ompan! of smaller si1e/

Stability of sales:,f a firm has stable sales re0enue$ it will ha0e more stable

earnin"s/ The fall in the mar.et share indi#ates the de#linin" trend of #ompan!$

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from the #ompan!/ The hi"her the number$ the better is the performan#e of the

#ompan! and su""ests the usefulness of the pro-e#ts the #ompan! has in0ested in/

The #omputation of return on equit! is as follows

R'r# o# '2 > N' -ro& o o=#'r!?al' o& "' !-'$&$ o=#'r!

(o#r@o# o "' @!#'!!9 ; 100

The ratio is more meanin"ful to the equit! shareholders who are in0ested to .now

profits earned b! the #ompan! and those profits whi#h #an be made a0ailable to pa!

di0idend to them/

79 Ear##! -'r S"ar' E%S

This ratio determines what the #ompan! is earnin" for e0er! share/ 2or man! in0estors$

earnin"s are the most important tool/ 38S is #al#ulated b! di0idin" the earnin"s (net

profit b! the total number of equit! shares/

The #omputation of 38S is as follows

Ear##! -'r !"ar' > N' -ro&?N/@'r o& !"ar'! o!a#7#

The 38S is a "ood measure of profitabilit! and when #ompared with 38S of similar

other #ompanies$ it "i0es a 0iew of the #omparati0e earnin"s or earnin"s power of a

firm/ 38S #al#ulated for a number of !ears indi#ates whether or not earnin" power of

the #ompan! has in#reased/

Equity Analysis


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internall! for business "rowth opportunities/ %en#e$ when di0idends are not de#lared$

the entire profit is plou"hed ba#. into the business for its future in0estments/

9 D7'#7 Y'l7

Di0idend !ield is #omputed b! relatin" the di0idend per share to the mar.et pri#e of the

share/ The mar.et pla#e pro0ides opportunities for the in0estor to bu! the #ompan!s

share at an! point of time/ The pri#e at whi#h the share has been bou"ht from the

mar.et is the a#tual #ost of the in0estment to the shareholder/ The mar.et pri#e is to be

ta.en as the #um&di0idend pri#e/ Di0idend !ield relates the a#tual #ost to the #ash flows

re#ei0ed from the #ompan!/ The #omputation of di0idend !ield is as follows

D7'#7 'l7 > D7'#7 -'r !"ar' ? MarC' -r$' -'r !"ar'9 100

%i"h di0idend !ield ratios are usuall! interpreted as under0alued #ompanies in the

mar.et/ The mar.et pri#e is a measure of future dis#ounted 0alues$ while the di0idend

per share is the present return from the in0estment/ %en#e$ a hi"h di0idend !ield

implies that the share has been under pri#ed in the mar.et/ :n the other hand a low

di0idend !ield need not be interpreted as o0er0aluation of shares/ A #ompan! that does

not pa! out di0idends will not ha0e a di0idend !ield and the real measure of the mar.et

pri#e will be in terms of earnin"s per share and not throu"h the di0idend pa!ments/

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"9 %r$'?Ear##! Rao %?E9

The 8E3 multiplier or the pri#e earnin"s ratio relates the #urrent mar.et pri#e of the

share to the earnin"s per share/ This is #omputed as follows

%r$'?'ar##! rao > (rr'# /arC' -r$' ? Ear##! -'r !"ar'

This ratio is #al#ulated to ma.e an estimate of appre#iation in the 0alue of a share of a

#ompan! and is widel! used b! in0estors to de#ide whether or not to bu! shares in a

parti#ular #ompan!/ Man! in0estors prefer to bu! the #ompan!s shares at a low 8E3

ratio sin#e the "eneral interpretation is that the mar.et is under0aluin" the share and

there will be a #orre#tion in the mar.et pri#e sooner or later/ A 0er! hi"h 8E3 ratio on

the other hand implies that the #ompan!s shares are o0er0alued and the in0estor #an

benefit b! sellin" the shares at this hi"h mar.et pri#e/

9 D'@oE2 Rao

Debt&3quit! ratio is used to measure the #laims of outsiders and the owners a"ainst the

firm5s assets/

D'@o'2 rao > O!7'r! F#7! ? S"ar'"ol7'r! F#7!

The debt&equit! ratio is #al#ulated to measure the e6tent to whi#h debt finan#in" has

been used in a business/ ,t indi#ates the proportionate #laims of owners and the

outsiders a"ainst the firm5s assets/ The purpose is to "et an idea of the #ushion a0ailable

to outsiders on the liquidation of the firm/

Equity Analysis


30/94

(HA%TER III INDUSTRY %ROFILE

Equity Analysis


31/94


32/94

(LASSIFI(ATION OF FINAN(IAL MARKETS

Equity Analysis

F#a#$al /arC'!

Ora#'7 /arC'! U#ora#'7 /arC'!

(a-al MarC'! Mo#' MarC'!

I#7!ral S'$r'!

MarC'

Go'r#/'#

S'$r'! MarC'

Lo#'r/ loa#

/arC'

%r/ar MarC'

S'$o#7ar /arC'

(all Mo#' MarC'

(o//'r$al Bll

MarC'

Tr'a!r Bll MarC'

Mo#' L'#7'r!

I#7'#o! Ba#C'r!


33/94


34/94

Secondary market: Se#ondar! mar.et is a mar.et where e6istin" se#urities are traded/

,n other words$ se#urities whi#h ha0e alread! passed throu"h new issue mar.et are

traded in this mar.et/ 7enerall!$ su#h se#urities are quoted in the sto#. e6#han"e and it

pro0ides a #ontinuous and re"ular mar.et for bu!in" and sellin" of se#urities/ This

mar.et #onsists of all sto#. e6#han"es re#o"ni1ed b! the "o0ernment of ,ndia/

Mo#' MarC'

Mone! mar.ets are the mar.ets for short&termhi"hl! liquid debt se#urities/ Mone!

mar.et se#urities are "enerall! 0er! safe in0estments whi#h return relati0el! low

interest rate that is most appropriate for temporar! #ash stora"e or short term time

needs/ ,t #onsists of a number of sub&mar.ets whi#h #olle#ti0el! #onstitute the mone!

mar.et namel! #all mone! mar.et$ #ommer#ial bills mar.et$ a##eptan#e mar.et$ and

Treasur! bill mar.et/

D'ra'! MarC'

The deri0ati0es mar.et is the finan#ial mar.etfor deri0ati0es$finan#ial instrumentsli.e

futures #ontra#ts or options$ whi#h are deri0ed from other forms of assets/ A deri0ati0e

is a se#urit! whose pri#e is dependent upon or deri0ed from one or more underl!in"

assets/ The deri0ati0e itself is merel! a #ontra#t between two or more parties/ ,ts 0alue

is determined b! flu#tuations in the underl!in" asset/ The most #ommon underl!in"

assets in#lude sto#.s$ bonds$ #ommodities$ #urren#ies$ interest rates and mar.et

inde6es/ The important finan#ial deri0ati0es are the followin"

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


35/94

Forwards: 2orwards are the oldest of all the deri0ati0es/ A forward #ontra#t

refers to an a"reement between two parties to e6#han"e an a"reed quantit! of an

asset for #ash at a #ertain date in future at a predetermined pri#e spe#ified in that

a"reement/ The promised asset ma! be #urren#!$ #ommodit!$ instrument et#/

Futures: 2uture #ontra#t is 0er! similar to a forward #ontra#t in all respe#ts

e6#eptin" the fa#t that it is #ompletel! a standardi1ed one/ ,t is nothin" but a

standardi1ed forward #ontra#t whi#h is le"all! enfor#eable and alwa!s traded on

an or"ani1ed e6#han"e/

ptions: A finan#ial deri0ati0e that represents a #ontra#t sold b! one part!

(option writer to another part! (option holder/ The #ontra#t offers the bu!er

the ri"ht$ but not the obli"ation$ to bu! (#all or sell (put a se#urit! or other

finan#ial asset at an a"reed&upon pri#e (the stri.e pri#e durin" a #ertain period

of time or on a spe#ifi# date (e6er#ise date/ 4all options "i0e the option to bu!

at #ertain pri#e$ so the bu!er would want the sto#. to "o up/ 8ut options "i0e the

option to sell at a #ertain pri#e$ so the bu!er would want the sto#. to "o down/

Swaps: ,t is !et another e6#itin" tradin" instrument/ ,nfa#t$ it is the #ombination

of forwards b! two #ounterparties/ ,t is arran"ed to reap the benefits arisin"

from the flu#tuations in the mar.et K either #urren#! mar.et or interest rate

mar.et or an! other mar.et for that matter/

Equity Analysis


36/94

For'# E;$"a#' MarC'

,t is a mar.et in whi#h parti#ipants are able to bu!$ sell$ e6#han"e and spe#ulate on

#urren#ies/ 2orei"n e6#han"e mar.ets are made up of ban.s$ #ommer#ial #ompanies$

#entral ban.s$ in0estment mana"ement firms$ hed"e funds$ and retail fore6 bro.ers and

in0estors/ The fore6 mar.et is #onsidered to be the lar"est finan#ial mar.et in the

world/ ,t is a worldwide de#entrali1ed o0er&theounterfinan#ial mar.et for the tradin"

of #urren#ies/ Be#ause the #urren#! mar.ets are lar"e and liquid$ the! are belie0ed to be

the most effi#ient finan#ial mar.ets/ ,t is important to reali1e that the forei"n e6#han"e

mar.et is not a sin"le e6#han"e$ but is #onstru#ted of a "lobal networ. of #omputers

that #onne#ts parti#ipants from all parts of the world/

(o//o7'! MarC'

,t is a ph!si#al or 0irtual mar.etpla#e for bu!in"$ sellin" and tradin" raw or primar!

produ#ts/ 2or in0estors purposes there are #urrentl! about >* ma-or #ommodit!

mar.ets worldwide that fa#ilitate in0estment trade in nearl! '** primar!

#ommodities/ 4ommodities are split into two t!pes hard and soft #ommodities/ %ard

#ommodities are t!pi#all! natural resour#es that must be mined or e6tra#ted ("old$

rubber$ oil$ et#/$ whereas soft #ommodities are a"ri#ultural produ#ts or li0esto#. (#orn$

wheat$ #offee$ su"ar$ so!beans$ por.$ et#/

Equity Analysis
http://en.wikipedia.org/wiki/Over-the-counter_(finance)http://en.wikipedia.org/wiki/Over-the-counter_(finance)


37/94


38/94

the e#onom! ri"ht up to the earl! 'LL*s/ Thereafter when the ,ndian e#onom! be"an

liberali1in" and the #ontrols be"an to be dismantled or eased outC the se#urities mar.ets

witnessed a flurr! of ,8:5s that were laun#hed/ This resulted in man! new #ompanies

a#ross different industr! se"ments to #ome up with newer produ#ts and ser0i#es/

A remar.able feature of the "rowth of the ,ndian e#onom! in re#ent !ears has been the

role pla!ed b! its se#urities mar.ets in assistin" and fuellin" that "rowth with mone!

rose within the e#onom!/ This was in mar.ed #ontrast to the initial phase of "rowth in

man! of the fast "rowin" e#onomies of 3ast Asia that witnessed hu"e doses of 2D,

(2orei"n Dire#t ,n0estment spurrin" "rowth in their initial da!s of mar.et de#ontrol/

Durin" this phase in ,ndia mu#h of the or"ani1ed se#tor has been affe#ted b! hi"h

"rowth as the finan#ial mar.ets pla!ed an all&in#lusi0e role in sustainin" finan#ial

resour#e mobili1ation/ Man! 8SUs (8ubli# Se#tor Underta.in"s that de#ided to offload

part of their equit! were also helped b! the well&or"ani1ed se#urities mar.et in ,ndia/

The laun#h of the NS3 (National Sto#. 36#han"e and the :T43, (:0er the 4ounter

36#han"e of ,ndia durin" the mid 'LL*s b! the "o0ernment of ,ndia was meant to

usher in an easier and more transparent form of tradin" in se#urities/ The NS3 was

#on#ei0ed as the mar.et for tradin" in the se#urities of #ompanies from the lar"e&s#ale

se#tor and the :T43, for those from the small&s#ale se#tor/ 9hile the NS3 has not -ust

done well to "row and e0ol0e into the 0irtual ba#.bone of #apital mar.ets in ,ndia the

:T43, stru""led and is !et to show an! si"n of "rowth and de0elopment/ The

inte"ration of ,T into the #apital mar.et infrastru#ture has been parti#ularl! smooth in

Equity Analysis


39/94

,ndia due to the #ountr!5s world #lass ,T industr!/ This has pushed up the operational

effi#ien#! of the ,ndian sto#. mar.et to "lobal standards and as a result the #ountr! has

been able to #apitali1e on its hi"h "rowth and attra#t forei"n #apital li.e ne0er before/

The re"ulatin" authorit! for #apital mar.ets in ,ndia is the S3B, (Se#urities and

36#han"e Board of ,ndia/ S3B, #ame into prominen#e in the 'LL*s after the #apital

mar.ets e6perien#ed some turbulen#e/ ,t had to ta.e drasti# measures to plu" man!

loopholes that were e6ploited b! #ertain mar.et for#es to ad0an#e their 0ested interests/

After this initial phase of stru""le S3B, has "rown in stren"th as the re"ulator of

,ndia5s #apital mar.ets and as one of the #ountr!5s most important institutions/

Equity Analysis


40/94

FINAN(IAL MARKET REGULATIONS

Re"ulations are an absolute ne#essit! in the fa#e of the "rowin" importan#e of #apital

mar.ets throu"hout the world/ The de0elopment of a mar.et e#onom! is dependent on

the de0elopment of the #apital mar.et/ The re"ulation of a #apital mar.et in0ol0es the

re"ulation of se#uritiesC these rules enable the #apital mar.et to fun#tion more

effi#ientl! and impartiall!/

A well re"ulated mar.et has the potential to en#oura"e additional in0estors to parta.e$

and #ontribute in$ furtherin" the de0elopment of the e#onom!/ The #hief #apital mar.et

re"ulator! authorit! is Se#urities and 36#han"e Board of ,ndia (S3B,/

SEBIis the re"ulatorfor the se#urities mar.et in ,ndia/ ,t is the ape6 bod! to de0elop

and re"ulate the sto#. mar.et in ,ndia ,t was formed offi#iall! b! the 7o0ernment of

,ndiain 'LL) with S3B, A#t 'LL)bein" passed b! the ,ndian 8arliament/ 4haired b! 4

B Bha0e$ S3B, is headquartered in the popular business distri#t of Bandra&;urla

#omple6 inMumbai$ and has Northern$ 3astern$ Southern and 9estern re"ional offi#es

in New Delhi$ ;ol.ata$ 4hennaiand Ahmedabad/ ,n pla#e of 7o0ernment 4ontrol$ a

statutor! and autonomous re"ulator! board with defined responsibilities$ to #o0er both

de0elopment I re"ulation of the mar.et$ and independent powers has been set up/

T"' @a!$ o@'$'! o& "' Boar7 ='r' 7'#&'7 a!:

to prote#t the interests of in0estors in se#uritiesC

to promote the de0elopment of Se#urities Mar.etC

to re"ulate the se#urities mar.et and

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


41/94

2or matters #onne#ted therewith or in#idental thereto/

Sin#e its in#eption S3B, has been wor.in" tar"etin" the se#urities and is attendin" to

the fulfillment of its ob-e#ti0es with #ommendable 1eal and de6terit!/ The

impro0ements in the se#urities mar.ets li.e #apitali1ation requirements$ mar"inin"$

establishment of #learin" #orporations et#/ redu#ed the ris. of #redit and also redu#ed

the mar.et/

S3B, has introdu#ed the #omprehensi0e re"ulator! measures$ pres#ribed re"istration

norms$ the eli"ibilit! #riteria$ the #ode of obli"ations and the #ode of #ondu#t for

different intermediaries li.e$ ban.ers to issue$ mer#hant ban.ers$ bro.ers and sub&

bro.ers$ re"istrars$ portfolio mana"ers$ #redit ratin" a"en#ies$ underwriters and others/

,t has framed b!e&laws$ ris. identifi#ation and ris. mana"ement s!stems for 4learin"

houses of sto#. e6#han"es$ sur0eillan#e s!stem et#/ whi#h has made dealin" in

se#urities both safe and transparent to the end in0estor/

Another si"nifi#ant e0ent is the appro0al of tradin" in sto#. indi#es (li.e SI8 4N

Nift! I Sense6 in )***/ A mar.et ,nde6is a #on0enient and effe#ti0e produ#t be#ause

of the followin" reasons

,t a#ts as a barometer for mar.et beha0iorC

,t is used to ben#hmar. portfolio performan#eC

,t is used in deri0ati0e instruments li.e inde6 futures and inde6 optionsC

,t #an be used for passi0efund mana"ementas in #ase of ,nde6 2unds/

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


42/94

Two broad approa#hes of S3B, is to inte"rate the se#urities mar.et at the national le0el$

and also to di0ersif! the tradin" produ#ts$ so that there is an in#rease in number of

traders in#ludin" ban.s$ finan#ial institutions$ insuran#e #ompanies$ mutual funds$

primar! dealers et#/ to transa#t throu"h the 36#han"es/ ,n this #onte6t the introdu#tion

of deri0ati0es tradin" throu"h ,ndian Sto#. 36#han"es permitted b! S3B, in )*** AD

is a real landmar./

S3B, has en-o!ed su##ess as a re"ulator b! pushin" s!stemi# reforms a""ressi0el! and

su##essi0el! (e/"/ the qui#. mo0ement towards ma.in" the mar.ets ele#troni# and

paperless rollin" settlement on T) bases/ S3B, has been a#ti0e in settin" up the

re"ulations as required under law/

STO(K E(HANGES IN INDIA

Sto#. 36#han"es are an or"ani1ed mar.etpla#e$ either #orporation or mutual

or"ani1ation$ where members of the or"ani1ation "ather to trade #ompan! sto#.s or

other se#urities/ The members ma! a#t either as a"ents for their #ustomers$ or as

prin#ipals for their own a##ounts/

As per the Se#urities 4ontra#ts Re"ulation A#t$ 'L>@ a sto#. e6#han"e is an

asso#iation$ or"ani1ation or bod! of indi0iduals whether in#orporated or not$

established for the purpose of assistin"$ re"ulatin" and #ontrollin" business in bu!in"$

sellin" and dealin" in se#urities/

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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Sto#. e6#han"es fa#ilitate for the issue and redemption of se#urities and other finan#ial

instruments in#ludin" the pa!ment of in#ome and di0idends/ The re#ord .eepin" is

#entral but trade is lin.ed to su#h ph!si#al pla#e be#ause modern mar.ets are

#omputeri1ed/ The trade on an e6#han"e is onl! b! members and sto#. bro.er do ha0e

a seat on the e6#han"e/

L! o& So$C E;$"a#'! # I#7a

Bomba! Sto#. 36#han"e

National Sto#. 36#han"e

:T4 36#han"e of ,ndia

R'o#al So$C E;$"a#'!

'/ Ahmedabad

)/ Ban"alore

=/ Bhubaneswar

/ 4al#utta

>/ 4o#hin

@/ 4oimbatore/ Delhi

+/ 7uwahati

L/ %!derabad

'*/ Jaipur

''/ ?udhiana

')/ Madh!a 8radesh

'=/ Madras

'/ Ma"adh

'>/ Man"alore

'@/ Meerut

'/ 8une

'+/ Saurashtra ;ut#h

'L/Uttar 8radesh

)*/


44/94

BOMBAY STO(K E(HANGE

A 0er! #ommon name for all traders in the sto#. mar.et$ BS3$ stands for Bomba!

Sto#. 36#han"e/ ,t is the oldest mar.et not onl! in the #ountr!$ but also in Asia/ ,n

the earl! da!s$ BS3 was .nown as HThe Nati0e Share I Sto#. Bro.ers Asso#iation/H

,t was established in the !ear '+> and be#ame the first sto#. e6#han"e in the #ountr!

to be re#o"ni1ed b! the "o0ernment/ ,n 'L>@$ BS3 obtained a permanent re#o"nition

from the 7o0ernment of ,ndia under the Se#urities 4ontra#ts (Re"ulation A#t$ 'L>@/

,n the past and e0en now$ it pla!s a pi0otal role in the de0elopment of the #ountr!s

#apital mar.et/ This is re#o"ni1ed worldwide and its inde6$ S3NS3$ is also tra#.ed

worldwide/ 3arlier it was an Asso#iation of 8ersons (A:8$ but now it is a

demutualised and #orporatised entit! in#orporated under the pro0isions of the

4ompanies A#t$ 'L>@$ pursuant to the BS3 (4orporatisation and Demutuali1ation

S#heme$ )**> notified b! the Se#urities and 36#han"e Board of ,ndia (S3B,/

BSE 6!o#

The 0ision of the Bomba! Sto#. 36#han"e is to H3mer"e as the premier ,ndian sto#.

e6#han"e b! establishin" "lobal ben#hmar.s/H


45/94


46/94

BSE Fa$!

BS3 as a brand is s!non!mous with #apital mar.ets in ,ndia/ The BS3 S3NS3 is

the ben#hmar. equit! inde6 that refle#ts the robustness of the e#onom! and finan#e/ ,t

was the K

2irst in ,ndia to introdu#e 3quit! Deri0ati0es

2irst in ,ndia to laun#h a 2ree 2loat ,nde6

2irst in ,ndia to laun#h USO 0ersion of BS3 Sense6

2irst in ,ndia to laun#h 36#han"e 3nabled ,nternet Tradin" 8latform

2irst in ,ndia to obtain ,S: #ertifi#ation for Sur0eillan#e$ 4learin" I

Settlement

BS3 :n&?ine Tradin" S!stem5 (B:?T has been awarded the "loball!

re#o"ni1ed the ,nformation Se#urit! Mana"ement S!stem standard

BSLL&))**)/

2irst to ha0e an e6#lusi0e fa#ilit! for finan#ial trainin"

Mo0ed from :pen :ut#r! to 3le#troni# Tradin" within -ust >* da!s


47/94

!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&


48/94

NATIONAL STO(K E(HANGE OF INDIA

LIMITED

The National Sto#. 36#han"e of ,ndia ?imited has "enesis in the report of the %i"h

8owered Stud! 7roup on 3stablishment of New Sto#. 36#han"es$ whi#h

re#ommended promotion of a National Sto#. 36#han"e b! finan#ial institutions (2,5s

to pro0ide a##ess to in0estors from all a#ross the #ountr! on an equal footin"/ Based

on the re#ommendations$ NS3 was promoted b! leadin" 2inan#ial ,nstitutions at the

behest of the 7o0ernment of ,ndia and was in#orporated in No0ember 'LL) as a ta6&

pa!in" #ompan! unli.e other sto#. 36#han"e in the #ountr!/

:n its re#o"nition as a sto#. e6#han"e under the Se#urities 4ontra#ts (Re"ulation

A#t$ 'L>@ in April 'LL=$ NS3 #ommen#ed operations in the 9holesale Debt Mar.et

(9DM se"ment in June 'LL/ The 4apital Mar.et (3quities se"ment #ommen#ed

operations in No0ember 'LL and operations in Deri0ati0es se"ment #ommen#ed in

June )***/

NSE GROU%

Nao#al S'$r'! (l'ar# (or-orao# L7. NS((L9

,t is a wholl! owned subsidiar!$ whi#h was in#orporated in Au"ust 'LL> and

#ommen#ed #learin" operations in April 'LL@/ ,t was formed to build #onfiden#e in

#learin" and settlement of se#urities$ to promote and maintain the short and #onsistent


49/94

settlement #!#les$ to pro0ide a #ounter&part! ris. "uarantee and to operate a ti"ht ris.

#ontainment s!stem/

NSE.IT L7.

,t is also a wholl! owned subsidiar! of NS3 and is its ,T arm/ This arm of the NS3 is

uniquel! positioned to pro0ide produ#ts$ ser0i#es and solutions for the se#urities

industr!/ NS3/,T primaril! fo#uses on in the area of tradin"$ bro.er front&end and

ba#.&offi#e$ #learin" and settlement$ web&based$ insuran#e$ et#/ Alon" with this$ it

also pro0ides #onsultan#! and implementation ser0i#es in Data 9arehousin"$

Business 4ontinuit! 8lans$ Site Maintenan#e and Ba#.ups$ Stratus Mainframe

2a#ilit! Mana"ement$ Real Time Mar.et Anal!sis I 2inan#ial News/

I#7a I#7'; S'r$'! ) %ro7$! L7. IISL9

,t is a -oint 0enture between NS3 and 4R,S,? ?td/ to pro0ide a 0ariet! of indi#es and

inde6 related ser0i#es and produ#ts for the ,ndian 4apital mar.ets/ ,t was set up in

Ma! 'LL+/ ,,S? has a #onsultin" and li#ensin" a"reement with the Standard and

8oors (SI8$ worlds leadin" pro0ider of in0estible equit! indi#es$ for #o&brandin"

equit! indi#es/

Nao#al S'$r'! D'-o!or L7. NSDL9

NS3 -oined hands with ,DB, and UT, to promote demateriali1ation of se#urities/ This

step was ta.en to sol0e problems related to tradin" in ph!si#al se#urities/ ,t

#ommen#ed operations in No0ember 'LL@/


50/94

NSE Fa$!

,t uses satellite #ommuni#ation te#hnolo"! to ener"i1e parti#ipation from

around ** #ities in ,ndia/

NS3 #an handle up to ' million trades per da!/

,t is one of the lar"est intera#ti0e


51/94

mar.et ma.in" and s#rip less tradin"/ As a measure of su##ess of these efforts$ the

36#han"e toda! has ''> listin"s and has assisted in pro0idin" #apital for enterprises

that ha0e "one on to build su##essful brands for themsel0es li.e


52/94

(HA%TER I6 (OM%ANY %ROFILE


53/94

INDIA INFOLINE LIMITED

,ndia ,nfoline is a one&stop finan#ial ser0i#es shop$ most respe#ted for qualit! of its

information$ personali1ed ser0i#e and #uttin"&ed"e te#hnolo"!/

6!o#

:ur 0ision is to be the most respe#ted #ompan! in the finan#ial ser0i#es spa#e/

I#7a I#&ol#' Gro-

The ,ndia ,nfoline "roup$ #omprisin" the holdin" #ompan!$ ,ndia ,nfoline ?imited

and its wholl!&owned subsidiaries$ in#lude the entire finan#ial ser0i#es spa#e with

offerin"s ran"in" from 3quit! resear#h$ 3quities and deri0ati0es tradin"$

4ommodities tradin"$ 8ortfolio Mana"ement Ser0i#es$ Mutual 2unds$ ?ife ,nsuran#e$

2i6ed deposits$ 7o, bonds and other small sa0in"s instruments to loan produ#ts and

,n0estment ban.in"/

,ndia ,nfoline also owns and mana"es the websites www/indiainfoline/#om and

www/>paisa/#om/ The #ompan! has a networ. of o0er )'** business lo#ations

(bran#hes and sub&bro.ers spread a#ross more than >* #ities and towns/ The "roup

#aters to appro6imatel! a million #ustomers/

2ounded in 'LL> b! Mr/ Nirmal Jain (4hairman and Mana"in" Dire#tor as an

independent business resear#h and information pro0ider$ the #ompan! "raduall!

e0ol0ed into a one&stop finan#ial ser0i#es solutions pro0ider/
http://www.5paisa.com/http://www.5paisa.com/


54/94


55/94

I#7a I#&ol#' M'7a a#7 R'!'ar$" S'r$'! L/'7

The ser0i#es represent a stron" support that dri0es the bro.in"$ #ommodities$ mutual

fund and portfolio mana"ement ser0i#es businesses/ ,t underta.es equities resear#h

whi#h is a#.nowled"ed b! none other than 2orbes as Best of the 9eb and a must

read for in0estors in Asia/ ,ndia ,nfolines resear#h is a0ailable not -ust o0er the

internet but also on international wire ser0i#es li.e Bloomber" (4ode ,,??$

Thomson 2irst 4all and ,nternet Se#urities where ,ndia ,nfoline is amon"st the most

read ,ndian bro.ers/

I#7a I#&ol#' (o//o7'! L/'7.

,ndia ,nfoline 4ommodities 80t ?imited is en"a"ed in the business of #ommodities

bro.in"/ Their e6perien#e in se#urities bro.in" empowered them with the requisite


56/94

s.ills and te#hnolo"ies to allow them to offer #ommodities bro.in" as a #ontra&

#!#li#al alternati0e to equities bro.in"/ ,t en-o!s memberships with the M4 and

N4D3$ two leadin" ,ndian #ommodities e6#han"es$ and re#entl! a#quired

membership of D74/ ,t has a multihannel deli0er! model$ ma.in" it amon" the

sele#t few to offer online as well as offline tradin" fa#ilities/

I#7a I#&ol#' MarC'# ) S'r$'!

,ndia ,nfoline Mar.etin" and Ser0i#es ?imited is the holdin" #ompan! of ,ndia

,nfoline ,nsuran#e Ser0i#es ?imited and ,ndia ,nfoline ,nsuran#e Bro.ers ?imited/

,ndia ,nfoline ,nsuran#e Ser0i#es ?imited is a re"istered 4orporate A"ent with

the ,nsuran#e Re"ulator! and De0elopment Authorit! (,RDA/ ,t is the lar"est

4orporate A"ent for ,4,4, 8rudential ?ife ,nsuran#e 4o ?imited$ whi#h is

,ndias lar"est pri0ate ?ife ,nsuran#e 4ompan!/ ,ndia ,nfoline was the first

#orporate a"ent to "et li#ensed b! ,RDA in earl! )**'/

,ndia ,nfoline ,nsuran#e Bro.ers ?imited ,ndia ,nfoline ,nsuran#e Bro.ers

?imited is a newl! formed subsidiar! whi#h will #arr! out the business of

,nsuran#e bro.in"/

I#7a I#&ol#' I#'!/'# S'r$'! L/'7

4onsolidated shareholdin"s of all the subsidiar! #ompanies en"a"ed in loans and

finan#in" a#ti0ities under one subsidiar!/ Re#entl!$ :rient 7lobal$ a Sin"apore&based

in0estment institution in0ested USD @/ million for a ))/> sta.e in ,ndia ,nfoline

,n0estment Ser0i#es/ This will help fo#used e6pansion and #apital raisin" in the said


57/94

subsidiaries for 0arious lendin" businesses li.e loans a"ainst se#urities$ SM3

finan#in"$ distribution of retail loan produ#ts$ #onsumer finan#e business and housin"

finan#e business/ ,ndia ,nfoline ,n0estment Ser0i#es 8ri0ate ?imited #onsists of the

followin" step&down subsidiaries/

,ndia ,nfoline Distribution 4ompan! ?imited (distribution of retail loan

produ#ts

Mone!line 4redit ?imited (#onsumer finan#e

,ndia ,nfoline %ousin" 2inan#e ?imited (housin" finan#e

IIFL A!a9 %ra' L/'7

,,2? (Asia 8ri0ate ?imited is wholl! owned subsidiar! whi#h has been in#orporated

in Sin"apore to pursue finan#ial se#tor a#ti0ities in other Asian mar.ets/ 2urther to

obtainin" the ne#essar! re"ulator! appro0als$ the #ompan! has been initiall!

#apitali1ed at ' million Sin"apore dollars/


58/94

IIFL MANAGEMENT

THE MANAGEMENT TEAM

Mr. Nr/al 5a# ("ar/a# ) Ma#a# Dr'$or

Nirmal Jain$ MBA (,,M$ Ahmadabad and a 4hartered and 4ost A##ountant$ founded

,ndia5s leadin" finan#ial ser0i#es #ompan! ,ndia ,nfoline ?td/ in 'LL>$

pro0idin" "loball! a##laimed finan#ial ser0i#es in equities and

#ommodities bro.in"$ life insuran#e and mutual funds distribution$ amon" others/

Mr. R 6'#Caara/a# E;'$' Dr'$or

R


59/94

department till 'LL* and thereafter also handles finan#ial ser0i#es$ #onsultan#!$

in0esti"ations$ mer"ers and a#quisitions$ 0aluations et#

Mr Sa %al K"aar No# E;'$' Dr'$or

Mr Sat 8al ;hattar$ & Board member sin#e April )**' & 8residential 4oun#il of

Minorit! Ri"hts member$ 4hairman of the Board of Trustee of

Sin"apore Business 2ederation$ is also a life trustee of S,NDA$ a non

profit bod!$ helpin" the under&pri0ile"ed ,ndians in Sin"apore/ %e -oined the ,ndia

,nfoline board in April )**'/

Mr Kra# S#"a I#7'-'#7'# Dr'$or

Mr/ ;ranti Sinha Board member sin#e Januar! )**> #ompleted

his masters from the A"ra Uni0ersit! and started his #areer as a 4lass ,

offi#er with ?ife ,nsuran#e 4orporation of ,ndia/

Mr Ar# K. %rar I#7'-'#7'# Dr'$or

Mr/ A/;/ 8ur0ar K Board member sin#e Mar#h )**+ K #ompleted his

Masters de"ree in #ommer#e from Allahabad Uni0ersit! in 'L@@ and a

diploma in Business Administration in 'L@/


60/94

%RODU(TS ) SER6I(ES

E2'!

,ndia ,nfoline pro0ided the prospe#t of resear#hed in0estin" to its #lients$ whi#h was

hitherto restri#ted onl! to the institutions/ Resear#h for the retail in0estor did not e6ist

prior to ,ndia ,nfoline/ ,ndia ,nfoline le0era"ed te#hnolo"! to brin" the #on0enien#e

of tradin" to the in0estor5s lo#ation of preferen#e (residen#e or offi#e throu"h

#omputeri1ed a##ess/ ,ndia ,nfoline made it possible for #lients to 0iew transa#tion

#osts and led"er updates in real time/ The 4ompan! is amon" the few finan#ial

intermediaries in ,ndia to offer a #omplement of online and offline bro.in"/ The

4ompanies networ. of bran#hes also allows #ustomers to pla#e orders on phone or

0isit our bran#hes for tradin"/

(o//o7'!

,ndia ,nfoline5s e6tension into #ommodities tradin" re#on#iles its strate"i# intent to

emer"e as a one stop solutions finan#ial intermediar!/ ,ts e6perien#e in se#urities

bro.in" has empowered it with requisite s.ills and te#hnolo"ies/ The 4ompanies

#ommodities business pro0ides a #ontra!#li#al alternati0e to equities bro.in"/ The

4ompan! was amon" the first to offer the fa#ilit! of #ommodities tradin" in ,ndia5s

!oun" #ommodities mar.et (the M4 #ommen#ed operations in )**=/ A0era"e

monthl! turno0er on the #ommodit! e6#han"es in#reased from Rs */= bn to Rs

)*/*) bn/


61/94


62/94

A!!' Ma#a'/'#

,ndia ,nfoline is a leadin" pan&,ndia mutual fund distribution house asso#iated with

leadin" asset mana"ement #ompanies/ ,t operates primaril! in the retail se"ment

le0era"in" its e6istin" distribution networ. to rea#h prospe#ti0e #lients/ ,t has

re#ei0ed the in&prin#iple appro0al to set up a mutual fund/

%or&olo Ma#a'/'#

,,2? 8ortfolio Mana"ement Ser0i#e is a produ#t wherein an equit! in0estment

portfolio is #reated to suit the in0estment ob-e#ti0es of a #lient/ ,ndia ,nfoline

in0ests the #lient5s resour#es into sto#.s from different se#tors$ dependin" on

#lient5s ris.&return profile/ This ser0i#e is parti#ularl! ad0isable for in0estors who

#annot afford to "i0e time or dont ha0e that e6pertise for da!&to&da!

mana"ement of their equit! portfolio/

N'=!l''r!

As a subs#riber to the Dail! Mar.et Strate"!$ #lient5s "et resear#h reports of ,ndia

,nfoline resear#h team on a priorit! basis/ The ,ndiainfoline 9ee.l! Newsletter is

the flashba#. for the wee. "one b!/ A wee.l! outloo. #oupled with the best of

the web stories from ,ndiainfoline and lin.s to important in0estment ideas$

?eader Spea. and features is deli0ered in the #lient5s inbo6 e0er! 2rida! e0enin"/


63/94

(HA%TER 6

DATA ANALYSIS ) INTER%RETATIONS


64/94


65/94

'/ Determine the #ondition of the "eneral e#onom!/

)/ Determine the #ondition of the industr!/

=/ Determine the #ondition of the #ompan!/

1. E(ONOMY ANALYSIS

3#onomi# anal!sis is the anal!sis of for#es operatin" the o0erall e#onom! a #ountr!/

3#onomi# anal!sis is a pro#ess whereb! stren"ths and wea.nesses of an e#onom! are

anal!1ed/ 3#onomi# anal!sis is important in order to understand e6a#t #ondition of an

e#onom!/

GD% a#7 Ao/o@l' I#7!r

,n absolute terms$ ,ndia is '@th in the world in

terms of nominal fa#tor! output/ The ser0i#e

se#tor is "rowin" rapidl! in the past few !ears/

This is the pie& #hart showin" #ontributions of

different se#tors in ,ndian e#onom!/


66/94


67/94

I#&lao#

The rise in inflation will ha0e ad0erse impa#t on the industr! that will not onl! see

interest rates "ettin" further hardened but also a drop in demand due to the squee1e in

pur#hasin" power/ The effe#t of inflation has affe#ted e0er! se#tor whi#h is related to

#ar manufa#turin" and produ#tion/ The in#rease in the pri#e of fuel and the steel due

to inflation has led to a slower "rowth rate of the #ar industr! in ,ndia/

For'# Dr'$ I#'!/'#

The automobile se#tor in the ,ndian industr! is one of the hi"h performin" se#tors of

the ,ndian e#onom!/ This has #ontributed lar"el! in ma.in" ,ndia a prime destination

for man! international pla!ers in the automobile industr! who wish to set up their

businesses in ,ndia/ Automati# appro0al for forei"n equit! in0estment up to '** per

#ent of manufa#ture of automobiles and #omponent is permitted/

E;-or!

Despite re#ession$ the ,ndian automobile mar.et #ontinues to perform better than

most of the other industries in the e#onom! in #omin" futureC more and more MN45s

#omin" in ,ndia to setup their 0entures whi#h #learl! shows the s#ope of e6pansion/

Durin" April&Januar! )*'*$ o0erall automobile e6ports re"istered a "rowth rate of

'=/) per#ent/


68/94


69/94

failure/ %owe0er$ su##essful #ompanies #an "row at e6traordinar! rates/ The ,ndian

automobile se#tor has passed this sta"e quite su##essfull!/ The industr! is "rowin"

rapidl!$ often at an a##eleratin" rate of sales and earnin"s "rowth. ,ndian Automoti0e

,ndustr! is boomin" with a"rowth rateof around '> annuall!/ The "rowth rate of

the automobile industr! in ,ndia is "reater than the 7D8 "rowth rate of the e#onom!$

so the automobile se#tor #an be 0er! well be said to be in the "rowth phase/

S=o a#al!!:

A s#an of the internal and e6ternal en0ironment is an important part of the strate"i#

plannin" pro#ess/ 3n0ironmental fa#tors internal to the firm usuall! #an be #lassified

as stren"ths (S or wea.nesses (9$ and those e6ternal to the firm #an be #lassified as

opportunities (: or threats (T/ Su#h an anal!sis of the strate"i# en0ironment is

referred to as a S9:T anal!sis/ S9:T anal!sis of the ,ndian automobile se#tor "i0es

the followin" points

'& Strengths

?ar"e domesti# mar.et

Sustainable labor #ost ad0anta"e

4ompetiti0e auto #omponent 0endor base

7o0ernment in#enti0es for manufa#turin" plants

Stron" en"ineerin" s.ills in desi"n et#

(& )eaknesses

?ow labor produ#ti0it!


70/94

%i"h interest #osts and hi"h o0erheads ma.e the produ#tion un#ompetiti0e


71/94

the #ompan!$ what are the poli#ies of "o0ernment towards the #ompan! and how the

sta.e of the #ompan! di0ested amon" different "roups of people/

%ere$ , ha0e ta.en three #ompanies namel! TATA Motors$ Maruti Su1u.i and

Mahindra and Mahindra for the purpose of fundamental anal!sis/

Tata Motors ?imited is ,ndias lar"est automobile #ompan!$ with #onsolidated

re0enues of Rs/ L)$>'L #rores (USD )* billion in )**L&'*/ ,t is the leader in

#ommer#ial 0ehi#les in ea#h se"ment$ and amon" the top three in passen"er 0ehi#les

with winnin" produ#ts in the #ompa#t$ midsi1e #ar and utilit! 0ehi#le se"ments/ The

#ompan! is the worlds fourth lar"est tru#. manufa#turer$ and the worlds se#ond

lar"est bus manufa#turer/

Maruti Su1u.i is a subsidiar! of Su1u.i Motor 4orporation Japan/ More than half the

numbers of #ars sold in ,ndia wear Maruti Su1u.i bad"e/ The! offer a full ran"e of

#ars K from entr! le0el Maruti +** I Alto to st!lish hat#hba#. Rit1$ A star$ Swift$

9a"on R$ 3stillo and sedans D1ire$ S and Sports Utilit! **$*** units to 3urope and other #ountries/ ,ts turno0er for the fis#al

)**+&*L stood at Rs/ )*=$>+= Million I 8rofit after Ta6 at Rs/ ')$'+ Million/


72/94

The Mahindra 7roup5s Automoti0e Se#tor is in the business of manufa#turin" and

mar.etin" utilit! 0ehi#les and li"ht #ommer#ial 0ehi#les$ in#ludin" three&wheelers/ ,t

is the mar.et leader in utilit! 0ehi#les in ,ndia sin#e in#eption$ and #urrentl! a##ounts

for about half of ,ndia5s mar.et for utilit! 0ehi#les/ The Automoti0e Se#tor #ontinues

to be a leader in the utilit! 0ehi#le se"ment with a di0erse portfolio that in#ludes mass

transport as well as new "eneration 0ehi#les li.e S#orpio$ Bolero and the re#entl!

laun#hed !lo/


73/94


74/94

TATA MOTORS %ro& ) Lo!! a$$o#

%ro& ) Lo!! a$$o# o& Taa

Moor! 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


75/94

MARUTI SUUKI Bala#$' S"''

Bala#$' S"'' o& Mar

SC I#7a 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

Equity Share Capital 144.50 144.50 144.50 144.50 144.50

Share Applicatio !oey 0.00 0.00 0.00 0.00 0.00

"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

'e##: Accu,. -epreciatio 3%179.40 3%259.40 3%487.10 3%988.80 4%649.80

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


76/94

MARUTI SUUKI %ro& ) Lo!! a$$o#

%ro& ) Lo!! a$$o# o&

Mar SC 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


77/94

MAHINDRA ) MAHINDRA Bala#$' S"''

Bala#$' S"'' o&

Ma"#7ra a#7 Ma"#7ra 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

Equity Share Capital 116.01 233.40 238.03 239.07 272.62

Share Applicatio !oey 0.00 0.00 0.00 0.00 0.00

/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

'e##: Accu,. -epreciatio 1%335.56 1%510.27 1%639.12 1%841.68 2%326.29

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


78/94

MAHINDRA ) MAHINDRA %ro& ) Lo!! a$$o#

%ro& ) Lo!! a$$o# o&

Ma"#7ra a#7 Ma"#7ra

Mar '05 Mar '06 Mar '07 Mar '08 Mar '09

)nco+e

Sale# Turo$er 7%649.51 9%273.09 11%231.99 12%894.94 14%713.03

Eci#e -uty 1%054.82 1%136.50 1%310.65 1%584.57 1%587.05

et Sale# 6%594.69 8%136.59 9%921.34 11%310.37 13%125.98

>ther co,e 209.74 455.20 531.17 575.96 369.85

Stoc+ A&;u#t,et# 174.05 103.20 6.41 149.11


79/94

RATIO ANALYSIS OF TATA MOTORS MARUTI SUUKI AND

MAHINDRA ) MAHINDRA

EARNINGS %ER 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

.%3N)N8S 2.3 S9%3.

0

10

20

30

40

50

60

70

!arB05 !arB06 !arB07 !arB08 !arB09

:.%3S

3s

TATA

!A"(T

!A:-"A

I#'r-r'ao#!

38S measures the profit a0ailable to the equit! shareholders per share$ that is$ the

amount that the! #an "et on e0er! share held/ Till )**+ TATA and Maruti had a

risin" 38S but in )**L both of them fall and the effe#t is more on Tata motors

be#ause of the slump in domesti# and international mar.ets and sharp fall in sales and

net profits whi#h resulted in low 38S/ Mahindra is not mu#h affe#ted as its sales ha0e

in#reased from the pre0ious !ear/ But as trend shows Mahindra motors has potential

so a shareholder #an e6pe#t better in future/


80/94

SALES

S%#S


TATA 20%262.61 23%490.55 31%089.69 33%123.54 28%538.20

!A"(T 13%458.20 14%898.80 17%358.40 21%200.40 23%381.50

!A-"A 7%649.51 9%273.09 11%231.99 12%894.94 14%713.03

S%#.S

0.00

5%000.00

10%000.00

15%000.00

20%000.00

25%000.00

30%000.00

35%000.00


:.%3S

3s$n,rores

TATA

!A"(T

!A:-"A

I#'r-r'ao#!

Maruti and Mahindra show a positi0e trend in sales o0er the past fi0e !ears/ Thou"h

slowdown in the e#onom! brou"ht hurdles but these #ompanies ha0e potential to

"row in future as lots of produ#ts are still to add in their portfolio/ Moreo0er

in#reased demand in forei"n mar.et also seems to be a positi0e si"nal for better

future/ TATA has witnessed a de#line in sales of ea#h se"ment/ Maruti and Mahindra

are "oin" swiftl!/


81/94

DI6IDEND %ER SHARE

!);)!N! S%

EA"S !arB05 !arB06 !arB07 !arB08 !arB09

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

!);)!.N! 2.3 S9%3.

0

5

10

15

20


:.%3S

3s

TATA

!A"(T

!A:-"A

I#'r-r'ao#!

Tata motors and Maruti Su1u.i both the #ompanies showed a positi0e trend in pa!in"

di0idends till )**+$ but the s#enario #han"ed in )**L as both the #ompan!5s di0idend

per share fell/ A##ordin" to "raph Tata5s di0idend has fallen drasti#all! while Maruti

sti#. to below > per share/ Mahindra has made a sli"ht redu#tion from rs/''/> per

share in )**+ to rs/'* per share this !ear/ Therefore Mahindra would be the best

option for an in0estor/


82/94


83/94

DI6IDEND %AYOUT RATIO

!);)!N! %:


84/94

%RI(EEARNINGS RATIO %?E RATIO9

)-%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

23),. .%3N)N8S 3%T)0

0

10

20

30

40

50


:.%3S

=

TATA

!A"(T

!A:-"A

I#'r-r'ao#!

This ratio is widel! used b! in0estors to de#ide whether or not to bu! shares in a

parti#ular #ompan!/As per the "raph$ in )**+$ the 8E3 ratio of the three #ompanieswas the lowest #ompared to the pre0ious !ears/ TATA has the hi"hest 8E3 ratio in

)**L whi#h indi#ates that it is o0er0alued$ so the in0estors #an benefit b! sellin" the

shares/ An in0estor #an "o for Mahindra as its 8E3 ratio is the lowest in )**L whi#h

indi#ates that it is under0alued and there is a s#ope for "rowth in the future/


85/94

(HA%TER 6I

FINDINGS SUGGESTIONS ) (ON(LUSION


86/94

FINDINGS

2rom the data anal!sis and interpretations of the ratios of three #ompanies5 0i1/ Tata

Motors$ Maruti Su1u.i and Mahindra and Mahindra$ the followin" findin"s ha0e been

"i0en

The three #ompanies were performin" well till )**+ with a positi0e trend in

the earnin"s per share/ But there was a downward trend in )**L/ 3spe#iall!$

TATA has witnessed a steep fall in the !ear )**L/

The sales trend has been upward and positi0e in #ase of all the three

#ompanies/ The sales "rowth loo.s positi0e but in the !ear )**L$ TATA5s

sales ha0e de#lined whereas Maruti and Mahindra ha0e maintained the same

upward positi0e trend/

,n #ase of di0idend per share$ there were flu#tuations durin" the period )**>&

)**L/ Due to re#ession$ the di0idends per share ha0e de#lined in all the three

#ompanies/ Tata5s di0idend has fallen drasti#all! while Maruti sti#. to below

> per share/ Mahindra has made a sli"ht redu#tion from rs/''/> per share in

)**+ to rs/'* per share this !ear/

The return on in0estment has been flu#tuatin" sin#e )**> and the !ear )**L

witnessed low returns in #ase of all the #ompanies amon"st whi#h TATA has

the least rate of return/ 4ompared to the three #ompanies$ Mahindra has the

hi"hest R:, in )**L/


87/94

Maruti had a stable di0idend pa!out ratio sin#e )**>/ TATA and Mahindra

ha0e in#reased their pa!out ratio in whi#h Mahindra shows a hi"her pa!out

ratio/

The three #ompanies ha0e witnessed a low pri#e earnin"s ratio in )**+

#ompared to the pre0ious !ears/ But the ratio in#reased in )**L in three

#ompanies/ TATA has the hi"hest 8E3 ratio in )**L whi#h indi#ates that it is

o0er0alued and Mahindra5s 8E3 ratio is the lowest in )**L whi#h indi#ates

that it is under0alued and there is a s#ope for "rowth in the future/

B! anal!1in" the #urrent trend of ,ndian 3#onom! and Automobile ,ndustr! , ha0e

found that bein" a de0elopin" e#onom! there is lot of s#ope for "rowth and this

industr! still has to #ross man! le0els so there are hu"e opportunities to in0est in and

this is bein" pro0ed as more and more forei"n #ompanies are settin" up there 0entures

in ,ndia/

,n#rease in in#ome le0el$ in#rease in #onsumer demand$ te#hnolo"! de0elopment$

"lobali1ation$ forei"n in0estments are few of the opportunities whi#h the industr! has

to e6plore for de0elopin" the e#onom!/


88/94

SUGGESTIONS

B! anal!1in" the automobile industr! with the help of fundamental anal!sis$ it has

been re0ealed that this industr! has a lot of potential to "row/ So re#ommendin"

in0estin" in Automobile industr! with no doubt is "oin" to be a "ood and smart

option be#ause this industr! is boomin" li.e ne0er before not onl! in ,ndia but all

o0er the world/

The three "iants of ,ndian Automobile industr! 0i1/ TATA Motors$ Maruti Su1u.i

and Mahindra and Mahindra ha0e outperformed in the industr!/

2rom the #ompan! anal!sis$ we #an .now that Mahindra would be a better

option for an in0estor #ompared to TATA and Maruti/ ,n 0iew of the slump in

the domesti# and international mar.et$ TATA has re#orded a slowdown in

sales and in#ome le0el/ ,ts 3arnin"s per share has also de#lined drasti#all!/ ,t

has redu#ed its di0idend per share from rs/'> in the pre0ious !ear to rs/@ in

)**L/ The return on in0estment is also 0er! low/ ,n 0iew of all these$ TATA

is not a better option for an in0estor/

The "lobal turmoil in finan#ial mar.ets has affe#ted Maruti also/ The

#ompan! is maintainin" a stable position/ ,ts sales ha0e "rown o0er past fi0e

!ears/ ,nspite of the "eneral e#onomi# slowdown$ the sales of Maruti Su1u.i

in#reased from Rs )')** 4rore to Rs )==+' 4rore/ As it is maintainin" a

stable position$ it #an be re#ommended that for now Maruti share pri#e shows


89/94

that it5s a time to hold the position or bu! more shares as there is s#ope of

further rise in share pri#es/

Despite the #hallen"in" business en0ironment$ Mahindra has maintained its

upward sales le0el/ ,ts Return on ,n0estment is mu#h hi"her #ompared to

TATA and Maruti/ The di0idend per share is rs/'* whi#h is hi"her amon"st

the three #ompanies/ The #ompan! has potential to "row/ ,t would be the best

option for the in0estor/

,n0estin" in Maruti Su1u.i for lon" time #ould be a "ood option whereas in

TATA motors there is a #han#e of "ettin" #orre#tion$ as it alread! went on

hi"h side in a 0er! short period of time and is e6perien#in" a downfall from

)**+/

%oldin" the shares for lon" time #ould be a wron" step and at this point of

time those who in0ested earlier #an boo. their profits/ As Mahindra5s shares

are under0alued$ the in0estor #an bu! these shares/ This is be#ause a relati0el!

lower 8E3 would sa0e in0estors from pa!in" a 0er! hi"h pri#e that does not

-ustif! the 0alue of an in0estment/

F'= S'!o#! &or *R" So$C S'l'$o#+

There are three fa#tors whi#h an in0estor must #onsider for sele#tin" the ri"ht sto#.s/


90/94

B!#'!! An in0estor must loo. into what .ind of business the #ompan! is

doin"$ 0isibilit! of the business$ its past tra#. re#ord$ #apital needs of the

#ompan! for e6pansion et#/

Bala#$' S"'' The in0estor must fo#us on its .e! finan#ial ratios su#h as

earnin"s per share$ pri#e&earnin" ratioC debt&equit! ratio$ di0idends per share

et# and he must also #he#. whether the #ompan! is "eneratin" #ash flows/

Bara## This is the most important fa#tor whi#h shows the true worth of

the #ompan!/ An in0estor needs to #hoose 0aluation parameters whi#h suit its

business/

I#'!/'# rl'!

,n0est for lon" term in equit! mar.ets

Ali"n !our thou"ht pro#ess with the business #!#le of the #ompan!/

Set the purpose for in0estment/

?on" term "oals should be the ob-e#ti0e of equit! in0estment/

Dis#iplined in0estment durin" mar.et 0olatilit! helps attains profits/

8lannin"$ ;nowled"e and Dis#ipline are 0er! #ru#ial for in0estment/


91/94


92/94

,nspite of it bein" a tou"h !ear for all the #ompanies a#ross the "lobe and in ,ndia$

Mahindra has "i0en a satisfa#tor! performan#e/ At present its shares are under0alued

"i0in" it a potential for "rowth/

7lobal re#ession had a dampener effe#t on the "rowth of automobile industr! but it

was a short term phenomenon/ The industr! is boun#in" ba#./ :ne fa#tor fa0orin"

this point is that ,ndia has be#ome a hot destination for #ompanies of di0erse nature to

in0est in/ 4ut throat #ompetition amon" top #ompanies$ lots of new #ar and 0ehi#le

model laun#hes at re"ular inter0als .eeps the ,ndian auto se#tor mo0in"/

A #ontinuous effort at #ost #uttin" and impro0in" produ#ti0it! will help the

#ompanies in ma.in" reasonable profits despite the impa#t of hi"her #ommodit!

pri#es and wea.er rupee/

+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&


93/94

BIBLIOGRA%HY

T'; BooC!

Se#urit! Anal!sis and 8ortfolio Mana"ement by8unitha0ath! 8andian$


94/94

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