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Analysis of Investor Relations practices at Escorts Ltd


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Six decades of legacy

Escorts Legacy Started under leadership of

Mr. HP Nanda in 1944 atLahore.

Started with franchisee of

Massey Ferguson tractors forNorth India & graduallyEscort brand.

Started tractor manufacturingin 1960

Started manufacturing of

construction equipment in1971.

Group turnover over USD500mn (FY2010)

Shareholding pattern: Escorts Ltd.(as on 31th Dec 2010)

Total outstanding equityshares : 10crs

Promoters& gro

up26.7

7%

FII's30.3

8%

IndianMFs13.

3%

FI's(Individual)

3.45%

Public&Others26.0

7%


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Objectives


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Methodology


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TOP PLAYERS

1. Mahindra & Mahindra (42.04%)

2. TAFE (22.82%)

3. Escorts Ltd (13.03%)

4. Sonalika Tractors( ITL ) (8.71%)

5. John Deere (9.6%)

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Market share of players

Market Share Jan-Dec 2010-11


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Comparison between the top 5 players, their presentcapacities, expansion plans and Capital Expenditurenumbers :-

Present

capacities

Expansion

Plans

Capex

(Rs crs)

Commencement

&M + PTL 2.6lacs+1lacs 1lac tractors 450crs 2012,2013, 2014

TAFE + Eicher 1.20lac tractors 1.20lac tractors340crs 2012-13

scorts 98980 50k - 1lac

tractors

Not Yet

decided

2012-13

John Deere 50k-80k 1lac tractors 450crs 2011-12

onalika Tractors 60k tractors Up to 1lac

tractors

100-150crs 2011-12


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Investor Relations


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Investor Relations (IR) is a strategic management responsibility thatintegrates finance, communication, marketing and securities lawcompliance

It is considered the most effective two-way communication between acompany, the financial community, and other constituencies

IR describes the department of a company devoted to handlingqueries from shareholders and investors, as well as others who might

be interested in a company's stock or financial stability.

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What is Investor Relations?


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Comparative

Financial Analysis


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Mahindra & Mahindra and Escorts Ltd

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6

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10

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EBITDA (%)v

The EBITDA margin showshow much cash is thrown offafter most of the expenses aremet. The EBITDA margin forEscorts is lower by 7.95 thanthat of M&M.

vThe operating profit marginfor Escorts is low due to the

percentage to sales ofoperating cost,administration cost and

personal cost is higher thanthat of M&M.


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v In the financial year 2008-09, thedifference of the net profit marginfor M&M and Escorts was of 2.15

but for the year 2009-10 itincreased to 6.18.

v Due to the percentage to sales ofthe operating cost, administrationcost, personal cost, finance costand depreciation cost being on thehigher side than that of M&M,

Escorts has a low Net ProfitMargin.

120

2

4

6

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10

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Net Profit margin



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v The value of EBIT reflects onthe valuation of ROCE. M&Mshows a high rate on the returnof capital employed whichshows that with M&M borrows

at a lower rate that what itreturns.

130

2

4

6

8

10

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Return on capital employed



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The graph shows that thestock prices of M&M have

been less volatile ascompared to that of Escorts.The share prices of M&Mhave been on a higher end

but slight fluctuation inprices has been seen.

The share price of Escortshas been low. The stock

prices of Escorts are highlyvolatile. High volatilitymeans high unpredictability,and therefore greater risk butalso greater opportunity tomake money.

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Share Price Volatility

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10

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Investor Relations practices at EL andM&M

asis of Difference Escorts Ltd Mahindra & Mahindraembers in the IR team 2 member team:-1 Senior Manager

1 Manager

5 member team:-

1 Head

3 Senior Managers

1 Communicator

eetings with Investors On an average 7-8 meetings in a

month

On a average 12-15 meetings in a

month

Quite period The IR team maintains a 15day

quiet period before the results

are announced ( not by the

promoters)

The IR team maintains a quiet

period of 15 working days before

the results are announced

Domestic Road shows Once in a month or once in two

months the IR team attends road

shows domestically

M&M follow a particular season to

attend road shows (Jan-Feb),

around 10-15 road shows are

attended in a year domestically

nternational road show Till date, only one was done

internationally

1 road show per geography is

attended internationally


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Promoters should maintain a quite period before announcing its resultsso as to not inflate the value of the stock artificially.

Road shows should be attended more frequently, domestically and atleast one road show should be attended internationally, per geographyin a year. This increases the chances of international or foreign investorand helps increase awareness of the company and its products.

As the investor relations function has grown more strategic andcomplex, the IR team should make sure that the investment community

is fully informed about the pluses and minuses of investing in acompanys equity.

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Recommendations


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The IR team should deliver by incorporation of results from investorperception studies and feedback reports into positioning of thecompanys message, in terms of the vision and mission of thecompany.

Involvement of the promoters for investor conferences or meetings toprovide a broader mosaic of information to investors is well receivedby the investors.

The IR team should follow a process of giving financial guidance,

like giving prior estimates of financials, sales margins and arrestingthe stock price volatility, which gives an idea to the investors what toexpect when the results are declared.

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Recommendations (cont..)


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On the Job Training


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Preparing investor presentations

Attending conference calls and meetings withinvestors, analysts and brokers

Preparing a business model

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On the Job Training


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For new investors:1. Company History

2. Business Portfolio

3. Key Financials ( Sales figures, EBITDA, PAT, Debt- equityposition)

4. Industry Trends

5. Vision and Mission of the company

. For existing investors:

1. Annual report

2. Previous quarter results

3. Share price volatility

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Investor Presentations


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It helps know the credit worthiness of the business andthe current financial position of the company

It is prepared for a bank or a financial institution in

case of generating loans

A Business Model consists of:-

Previous years financials

Present year actual financialsNext years estimates

Projections for following three years

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Business model


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THANK YOU

Presented by:Neethi Menon

neeti menon

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