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Financial Analysis

BAJAJ AUTO LTD.

NMPXX Group-XIII

1. Abhya Nand Singh 20-NMP-03

2. Rajeev Kumar 20-NMP-66

3. Manoj Kumar Gupta 20-NMP-30

4. B Venkata Rao 20-NMP-16

5. Kundan Kumar 20-NMP-28

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Directors & Auditors report Significant Accounting Policies

Financial statements

Balance sheet

Profit & loss account

Cash Flow Statements

Ratio Analysis

Profitability

Liquidity

Solvency Other Ratios including EVA

Dupont Control Chart

Industry Comparison

Summary

Financial Analysis

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DIRECTORS REPORTMarch 31st 2006

Annual Dividend for 2005-06 : Rs 40/share ( 400%)

R & D efforts:

CT100 was upgraded with ExhausTEC and SNS suspension resulting in

improved performance, fuel economy and riding comfort.

New plant at Pantnagar, Uttaranchal

Cordial Industrial Relations : No man-hour lost.

Statutory Disclosures : Made under Indian companies act 1956

Reflection on Auditors ReportThe observations made in the Auditors' Report, read together with the

relevant notes thereon, are self explanatory and hence do not call for any

comments under section 217 of the Companies Act, 1956.

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Audit : -Conducted in accordance with standards generally accepted inIndia and Indian companies act 1956.

- Obtained all information and explanations necessary for audit

- Proper books of account as required by law have been kept by the

company

Balance sheet, P& L Account and Cash flow statement :

-In agreement with books of Accounts of the company

- Comply with accounting standards referred to in section 211( 3c ) of

the companies act 1956

- Balance sheet as on 31st March 2006

- P & L Account for the year April 1st 2005 March 31st 2006

- Cash flow statement for the year April 1st 2005 March 31st 2006

AUDITORS REPORTMarch 31st 2006

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AUDITORS REPORTAnnexure

Fixed assets : Physically verified by auditors

Inventories : Physically verified by the management at reasonable

intervals during the year

Loans - Secured or unsecured :

- Not granted to any companies, firms or other parties

- Not taken from any companies, firms or other parties

Internal control systems : No major weakness noticed by the auditors

RBI Directives : Complied by the Company

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Significant Accounting PoliciesSystem of Accounting

-Mercantile system of accounting

- Income and expenditure on an accrual basis

- Financial Statements under the Historical cost

- Sales considered at the time of dispatch

- Exchange rates prevailing on the date of the transaction

- Profit/loss on sale of investments on the contract date

Depreciation and Amortisation- Rates as specified in Schedule XIV to the companies Act 1956

- Premium on leasehold land amortised over the period of lease

- Plant,Machinery and other fixed assets -Straight Line Method -

- Technical know-how acquired amortised over six years

- Technical know-how developed amortised over three yearsInventories Valuation

- Finished stocks at cost or Net realisable value

- Raw materials on weighted average basis or Net realisable value

- Goods in transit are stated at actual cost

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KEY FINANCIALS- BALANCE SHEETSOURCES OF FUNDS(% Total Liability)

As on

31/03/2006

As on

31/03/2005

As on

31/03/2004

As on

31/03/2003

Net Worth 47.80 49.00 50.20 51.80

Loan Funds 14.70 15.00 13.80 14.20

Current liabilities 35.60 33.00 33.00 30.00

Deferred Tax liabilities 1.90 3.00 3.00 4.00

Total Liability 100.00 100.00 100.00 100.00

APPLICATION OF FUNDS (% Total Asset)

Net Fixed Assets 11.20 13.36 16.71 20.66

Investments 58.70 54.50 53.03 43.60Current Assets 28.60 31.00 28.26 34.40

Deferred Tax Asset 1.00 0.80 1.70 1.08

Capital work in progrs. 0.30 0.14 0.10 0.06

Lease adjustment 0.30 0.20 0.20 0.20

Total Assets 100.00 100.00 100.00 100.00

Continued

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BALANCE SHEET

Decreasing trend of equity as % of total sources of funds.

Increase in current liability and decrease in current assets,

hence decreasing trend of liquidity.

Decrease in fixed assets as % of total asset.Increase in investment as % of total asset

Thus the company is investing its profit outside its

business.

Continued

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KEY FINANCIALS- P&L A/C

INCOME ( Cr) 2005-06 2004-05 2003-04 2002-03

Net Sales 7469.38 5723.96 4755.17 4159.08Other income 636.97 598.82 515.09 326.65

Total Income 8106.35 6322.78 5270.26 4485.73

EXPENDITURE (Cr)

Purchases 5324.6 4089.68 3199.22 2692.75

Other Exp 1009.67 960.62 929.79 832.1

Depreciation 191 185.37 179.89 171.16

Interest 0.34 0.67 0.94 1.12

Total Expenditure 6525.61 5236.34 4309.84 3697.13

PBIT 1581.08 1087.11 961.36 789.72

PBT 1580.74 1086.44 960.42 788.60

Total taxes 479.11 319.63 228.91 250.2

PAT 1101.63 766.81 731.51 538.4

For the period

Constant growth of income in terms of sales and other sources over the years.

Profit after tax (PAT) got doubled over the span of 4 years.

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KEY FINANCIALS- P&L A/C

INCOME (%) 2005-06 2004-05 2003-04 2002-03

Net Sales 92.14 90.53 90.23 92.72

Other income 7.86 9.47 9.77 7.28

Total Income 100.00 100.00 100.00 100.00

EXPENDITURE (%)

Purchases 81.60 78.10 74.23 72.83

Other Exp 15.47 18.35 21.57 22.51

Depreciation 2.93 3.54 4.17 4.63

Interest 0.01 0.01 0.02 0.03

Total Expenditure 100.00 100.00 100.00 100.00

PBIT 1581.08 1087.11 961.36 789.72

PBT 1580.74 1086.44 960.42 788.60

Total taxes 479.11 319.63 228.91 250.2

PAT 1101.63 766.81 731.51 538.4

For the period

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Cash Flow Statement

Cash Flow Summary

( Cr)

2005-06 2004-05 2003-04 2002-03

Cash & Cash Equivalent

(Beginning of FY)

108.69 79.37 (30.02) 25.2

Operating Activities 1072.62 455.49 837.21 573.38

Investing Activities (1087.54) (395.32) (811.09) (640.95)

Financing Activities (11.68) (30.85) 23.23 72.3

Cash & Cash Equivalent

(End of FY )

82.09 108.69 79.37 30.02

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Ratio Analysis

Ratios have been analyzed under four

major heads

Liquidity

Solvency

Profitability

Others

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LIQUIDITY RATIOS

Liquidity Ratios 2005-06 2004-05 2003-04 2002-03

Current Ratio

(CA/CL) 0.81 0.93 0.88 1.11

Quick Ratio

(CA-Inv./CL) 0.73 0.85 0.80 1.00

Decreasing Liquidity of the company, hence short of funds

which may become roadblock to honor its commitments

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Liquidity Ratio

0.81

0.73

0.93

0.850.88

0.80

1.11

1.00

0.00

0.20

0.40

0.60

0.80

1.00

1.20

Current Ratio (CA/CL) Quick Ratio (CA-Inv./CL)

ValueofRatios

2005-06 2004-05 2003-04 2002-03

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Solvency ratios 2005-06 2004-05 2003-04 2002-03

Debt Equity ratio

( Debt/Equity) 0.31 0.30 0.27 0.26

Interest Coverage Ratio

Times 4650.2 1622.6 1022.7 705.1

SOLVENCY RATIOS

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SOLVENCY RATIOS

Analysis

- Overall borrowings are low

- Higher degree of protection to the lenders.

- Predominantly Debt is deferred tax- Ratios increasing due to accumulation of deferred tax

Debt Equity Ratio

0.307

0.29

0.27

0.26

0.23

0.24

0.25

0.26

0.27

0.28

0.29

0.3

0.31

0.32

Debt Equity Ratio (Debt/ Equity)

Valueof

Ratio

2006 2005 2004 2003

Interest Coverage Ratio

4650.23

1622.011022.34

704.8

0

500

1000

1500

2000

25003000

3500

4000

4500

5000

Interest Coverage Ratio (PBIT/INT)

ValveinTimes

2006 2005 2004 2003

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PROFITABILITY RATIOS

Profitability Ratios 2005-06 2004-05 2003-04 2002-03

Gross Profit Margin

(PBIT/Sales)*100 19.50 17.19 18.24 17.61

Net Profit Margin

(PAT/Sales)*100 13.59 12.13 13.88 12.00

Return on Investment

(PBIT/CE )*100 25.35 20.28 20.46 19.35

Return on Equity

(PAT/Equity)*100 23.09 18.55 19.80 16.61

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PROFITABILITY RATIOS

Profitability Ratios

0.00

5.00

10.00

15.00

20.00

25.00

30.00

Gross Profit Margin

(PBIT/Sales)*100

Net Profit Margin

(PAT/Sales)*100

Return on Investment

(PBIT/CE )*100

Return on Equity

(PAT/Equity)*100

Ratios

2005-06 2004-05 2003-04 2002-03

Continued

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PROFITABILITY RATIOSANALYSIS

Increasing ROI implies surplus generation of money invested(higher productivity of investment).

Increasing ROE makes the equity holder to enjoy higher returns.

Equity Share capital has increased over previous years due toincrease of Reserve & Surplus.

Continued

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Important Ratios-I

Turnover Ratio 2005-06 2004-05 2003-04 2002-03

Capital Employed Turnover

( Net Sales /CE) 1.30 1.18 1.12 1.10

Fixed Assets Turnover

( Net Sales/Fixed Assets) 7.28 5.67 4.37 3.51

Current Assets Turnover

( Net Sales/CA ) 2.84 2.44 2.57 2.08

Inventory Turnover

( Cost of sales/ Ave. Inventory ) 23.69 21.73 18.48 16.20

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Important Ratios-IContinued

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ANALYSIS

High degree of efficiency in asset utilizations

Increasing Inventory Turnover, hence better utilization ofinventory.

Increasing current asset turnover implying better utilizationof funds deployed in current assets.

Important Ratios-IContinued

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Important Ratios-II

Other Ratios 2005-06 2004-05 2003-04 2002-03

Inv. Stock in no of days

(365/Inv. Turnover ratio) 15.41 16.80 19.75 22.53

Dividend Payout Ratio

(Dividend/PAT)*100 36.74 32.99 34.58 26.31Book Value per Share

( BV of Eq /No. Sh) 471.42 408.53 364.98 320.22

Earning per Share

( PAT-Pref. share

devidend/No. Sh) 111.0 75.77 72.28 53.20

Dividend Per Share

(Divident/No. of Shares) 40.0 25.0 25.0 14.0

Avg. collection period

(365*receivables/sales) 14.74 11.25 10.28 14.66

i

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1 3 . 3 4

4 0

1 4 . 2 4

2 5

1 5 . 5 2

4 4 . 7 6

1 8 . 1 9

3 7 . 0 43 6 %

3 2 . 9 8 %

3 4 . 5 8 %

2 6 . 3 1 %

0

5

10

15

20

25

30

35

40

45

50

Inv . S tock in no of days ( 365 / Inv .

Turnover Rat io)

Div idend Payout Rat io

( D iv ide nd /P AT) *1 0 0

Div idend Per S hare

( D iv ide n t / No . of S ha re s)

2006 2005 2004 2003

Important Ratios-IIContinued

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ANALYSIS

No. of days Inventory stock is decreasing over the yearsimplies that lesser capital is block in this head.

Average collection period is increasing implies money isgetting blocked at sundry debtors.

Dividend payout ratio is increasing over the years resultingin the higher part of profit after tax is being enjoyed by theshare holders.

Book value of the share is significantly higher than facevalue implying the high net worth of the company.

Earning per share is just doubled over last four years showshandsome earning of the capital owners.

The company is providing a encouraging dividend of

almost 4 fold of the face value to equity holders

Important Ratios-IIContinued

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ECONOMIC VALUE ADDED

YEAR 2005-06 2004-05 2003-04 2002-03

NET WORTH 4770.73 4134.35 3693.62 3240.6

P A T 1101.63 766.81 731.51 538.4

E V A =

(PAT-10% of NW) 624.557 353.375 362.148 214.34

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ANALYSIS

Economic value of the company gradually increasing overthe years. It has grown three fold over past 4 years and two

fold from previous year.

This shows the better managerial efficiency.

ECONOMIC VALUE ADDED

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DUPONT ANALYSIS

Bajaj Auto Limited (FY2005-06)

ROI=

25.35%

OperatingProfit

margin

19.5%

Turnover

of Capital

employed

= 1.30

PBIT

1581.08Cr

Sales

8106.35

Cr.

Sales

8106.35

Cr.

C E

6237.88

Cr.

FA :1114.16

Cr

Net CA:

(688.69) Cr

Total

Costs

6525.61

Cr.

(+)

(-)

(x)

(/)

(/)

Sales

8106.35

Cr.

Mfg.

:6009.3 Cr

Admn.:

257.39 Cr

Investments:5856.97Cr

Mark.:

258.92 Cr

(+)

(+)

(+)

Buildings

171.83 Cr

Machinery:

942.33 Cr

CL:3544.76 Cr

CA: 2856.07 Cr

(+)

(-)

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Total Management

Performance (PAT/NW) 0.23 0.19 0.20 0.17

Operating Management

Performance 0.25 0.20 0.20 0.19

Financial Operations Ratio

(PAT/PBIT) 0.70 0.71 0.76 0.68

Financial Leverage Ratio(CE/NW) 1.31 1.30 1.27 1.26

Financial Management

Performance 0.91 0.91 0.97 0.86

Management Achievement Ratios

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CONCLUSIONS

Financial leverage ratio is influenced by debt, as a large amount ofdebt would increase this ration.

Operating management performance indicates the productivity of

the investment. It is nothing but ROI.

Financial operation Ratio is consistent, it implies profits areconsistent over the period. One can asses the tax & Interest

payment also form this ratio.

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INDUSTRY ANALYSIS

Parameter

(Financial Year 2005-06)

Bajaj Auto

Ltd.

Hero Honda

Motors Ltd.

TVS Motors

Ltd.

Debt-Equity Ratio 0.307 0.092 0.502

Current Ratio 0.806 0.525 1.117

Interest Cover Ratio 4650.23 231.38 13.84

ROCE (%) 25.34 64.60 15.77

Dividend per Share 40.0 20.0 0.70

Earning Per Share 108.86 48.24 4.92

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Comparative Analysis

25.34

40

108.86

64.6

20

48.24

15.77

0.74.92

0

20

40

60

80

100

120

ROCE (%) Dividend per Share Earning Per Share

Bajaj Auto Ltd. Hero Honda Motors Ltd. TVS Motors Ltd.

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Comparative Analysis

0.307

0.806

0.092

0.5250.502

1.117

0

0.2

0.4

0.6

0.8

1

1.2

Debt-Equity Ratio Current Ratio

Bajaj Auto Ltd. Hero Honda Motors Ltd. TVS Motors Ltd.

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CONCLUSIONS

It is found that the financial health of the company is very good.

Companys growth over the years and the return enjoyed by the

investors are highly appreciable. The company has been expanding

its business considerably and the EVA is higher over years. Some

of the particulars about company are as follows:

- Sales and Profits consistently Increasing over the years

- Low debt company

- Short term low liquidity.

- High fixed asset utilization.

- Low interest burden, predominantly utilizing Owners capital

- Return on Investment although Improving still less than Hero

Honda.

- High EPS - Best in Industry.

- Highest dividend per share in industry.

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Thank you