Share value forecasting - Statistics project

Post Graduate Programme

Post Graduate Programme in Management:

2010 – 2012

Statistics Project
Submitted by,
ASHIK ABDULLAH
(10-PG-066)
Section-B

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INDEX

Contents: Pg no.
1. Executive Summary 3
2. Introduction 4
3. Objective of the Study 10
4. Data Analysis 10
5. Findings and Conclusions 11
6. References 17

ACKNOWLEDGEMENT

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I owe a great many thanks to a great many people who helped and supported me during the
project.

My deepest thanks to Prof. Viswanathaiah  for guiding and correcting various

documents of mine with attention and care. He has taken pain to go through the project and
make necessary correction as and when needed.

I would also thank my Institution and my faculty members without whom this project
would have been a distant reality. I also extend my heartfelt thanks to my friends, family and
well wishers

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EXECUTIVE SUMMARY

The focus of this study is the forecasting of share values of 4 tyre manufacturers,
Apollo Tyres Ltd, Ceat Ltd, Balkrishna Industries Ltd and JK Tyre & Industries Ltd for 4
months.

Here the methodology of linear trend is used to forecast the share values. The deviation
from the linear trend can be analysed by the plotting the trend line. Measures of Central
Tendencies such as Mean, Median, Mode and Measures of Dispersion such as Standard
Deviation and others like Skewness, Kurtosis, Regression and Correlation between
companies are also estimated to have a better view of the company.

The trend lines are plotted for each company. Linear trend function is used in this case,
and this is used for forecasting the share values. These data is used in interpreting the stability
and growth of each company.

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INTRODUCTION:

TYRE MAKERS HISTORY-AN INDIAN PERSPECTIVE

The Indian tyre industry is around eighty years old. In the pre-Independence period,
the tyre manufacturers were mainly foreign companies. Raw material in the form of natural
rubber was easily available and labour was cheap.

The origin of the Indian tyre industry dates back to 1926 when Dunlop Rubber
Limited set up the first tyre company in West Bengal and soon after that the Tyre giants MRF
followed and set the ball rolling for the tyre industry in India. The Indian tyre industry
produces the complete range of tyres required by the Indian transports except for aero tyres
and some specialized tyres. The Indian tyre industry produces tyres for trucks, buses,
passenger cars, jeeps, light trucks, tractors, animal drawn vehicles, scooters, motorcycles,
mopeds, bicycles, off-the-road vehicles and special defence vehicles.

The Indian tyre

industry registered a
5-year
Compounded Annual
Growth Rate (CAGR) of
8.02% between
20003-08.

Percentage of different tyres made in India

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The Indian tyre industry is perhaps the only industry that has registered an average
annual growth rate of 6.5%. The reasons for growth are the robust growth of the economy
and the automobile industry. India's automotive tyre sector is the largest consumer of all the
natural rubber produced in India which is 53%. Today 7 Indian tyre companies feature in the
list of the world's top 75 tyre manufacturers. Besides domestic growth, there has been a smart
growth in the export of tyres also. It is expected that the Indian tyre industry will have a very
bright future.

JK Tyre & Industries Ltd. is an India-based tire company that develops, manufactures,
markets and distributes automotive tires, tubes and flaps for the transportation industry. The
Company manufactures its products in four manufacturing centres in India, and has
marketing operations spread across India and abroad in over 75 countries, including the
United States, Latin America, the Middle East, South East Asia, Africa and Australia. It
markets tires for sale to vehicle manufacturers for mounting as original equipment and for
sale in the replacement markets worldwide.

The Company’s subsidiaries include J.K International Ltd, J.K Asia Pacific Ltd, and
J.K Asia Pacific (S) Pte. Ltd. The Company’s products include Jet Trak, Jet One, Jet Trak-39,
Jet Trak-39 DX, Jetking-10, Jet Trak XL, Jet Speed, Jet Xtra, Jet Rib, Jet R Plus, Ultima XP,
Tornado, Brute, Steel King, Sona HF and Sona 2001. In June 2008, the Company acquired
100% interest in Tornel, a Mexican tyre company.

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Apollo Tyres Ltd is a high-performance company and the leading Indian tyre
manufacturer. Head quartered in Gurgaon, a corporate-hub in the National Capital Region of
India, Apollo is a young, ambitious and dynamic organisation, which takes pride in its unique
identity. Registered as a company in 1976, Apollo is built around the core principles of
creating stakeholder value through reliability in its products and dependability in its
relationships.

Apollo Tyres Ltd is the fastest growing top tier tyre manufacturer, with annual
revenues of over US$ 1.8 billion (2009-10). Its first plant was commissioned in Perambra in
Kerala state. It commenced its production in 1977 under the leadership of Raunaq Singh. In
2006, the company acquired Dunlop Tyres International of South Africa. The company now
has four manufacturing units in India, two in South Africa and two in Zimbabwe. It has a
network of over 4,000 dealerships in India, of which over 2,500 are exclusive outlets. In
South Africa, it has over 900 dealerships, of which 190 are Dunlop Accredited Dealers.

"Apollo Tyres Ltd." has been pioneer in the implementation of "Six Sigma" among all
the tyre companies in India, and is in the list of top 15 tyre manufacturers of the world in
terms of Revenues. The construction of fully automated plant at chennai with an initial
capacity of 6000 TBR and 8000 PCR is under progress.

The company currently produces the entire range of automotive tyres for ultra and
high speed passenger cars, truck and bus, farm, Off-The-Road, industrial and specialty
applications like mining, retreaded tyres and retreading material. These are produced across
Apollo’s eight manufacturing locations in India, Netherlands and Southern Africa. A ninth
facility is currently under construction in southern India, and is expected to commence
production towards the end of 2009. The major brands produced across these locations are:
Apollo, Dunlop, Kaizen, Maloya, Regal and Vredestein.

In the three domestic markets of India, Southern Africa and Europe, Apollo operates
through a network of branded, exclusive or multi-product outlets. In South Africa the branded
outlets are called Dunlop Zones; while in India they are variously named Apollo Tyre World
(for commercial vehicles) and Apollo Radial World (for passenger cars). Exports out of these
three key manufacturing locations reach over 70 destinations across the world, with key
comprising Europe, Africa, the Middle East and South-East Asia.

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Apollo is one of the largest corporate investors in developing sporting talent through its
Mission 2018, which is focused on nurturing and training youngsters in the sport of tennis to
enable an Indian to win a Singles Grand Slam Championship by the year 2018

Ceat Ltd, a part of the RPG conglomerate is one of the leading tyre manufacturers in
India. The company offers the widest range of tyres to leading Original Equipment
Manufacturers across the world. They manufacture a range of tyres catering various
segments, which includes tires for heavy duty trucks and buses (T&B), light commercial
vehicles (LCVs), earthmovers and forklifts (specialty segment), tractors, trailers, passenger
cars (PC), motorcycles, scooters and auto-rickshaws. They produce over 7 million tyres a
year and commands around 13% share of the Indian tyre market.

The company operates two plants in Maharashtra, one in Bhandup and the other in
Nasik. They have a robust national network consisting of 34 regional offices and over 3,500
dealers among which approximately 100 are exclusive dealers running the CEAT Shoppe
outlets for passenger cars segments and 96 exclusive dealers running the CEAT HUBs for
Truck & Bus Segments. The company has their presence in 110 countries. Ceat Ltd was
incorporated in the year 1958 as Ceat Tyres of India Ltd in collaboration with Tata Group.

The company was established with the main object to construct, produce, prepare,
manufacture, press, vulcanize, repair, retread, purchase, sell, import and to deal in tyres,
semi-tyres for all types of vehicles and inner tubes, flaps and repairs material in general. Over
the last 50 years, the company has established a strong presence in both the domestic and the
international markets.

Ceat is the first tyre company in India was awarded the International accreditation
ISO/TS 16949 - 2002 Quality Standard Certification. The company entered into agreement
with Pirelli of Italy for outsourcing radial tyres, which were marketed in the brand name,
CEAT Spider Radials.

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Part of well known industrial conglomerate in India, namely “Siyaram-Poddar Group” with
group turnover of US$ 550 million, BKT today is one of the world’s leading manufacturers
of “OFF-HIGHWAY TYRES”. BKT has the widest product range containing more that 1700
SKU’s (Stock Keeping Units) and is “One Stop Shop” for off-highway tyre solutions.

The success story of BKT, begun in 1995 when it entered into production of cross ply off-
highway tyres, With the help of persistent & intensive market research coupled with ever
expanding production capabilities, BKT has made its mark in the niche segments like
Agricultural, Construction, Industrial, Earthmover, ATV (All Terrain Vehicle) and Turf care
applications.

BKT is continuously developing its production base and has expanded its product range
significantly. With three manufacturing plants and one In-house Hi-tech Mould-
manufacturing facility at different locations in India, BKT is very well equipped to feed the
ever-growing demand of its worldwide customers. 4th Tyre plant a Greenfield project is
already underway.

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About 95% of our tyre production is exported, out of which 70% is sold in Europe, where
farms are large and scientific methods of farming, requiring tractors with different tyre types.

OBJECTIVE OF STUDY:

To forecast the share values of certain specific tyre manufacturing companies which include
J.K Tyres, MRF Tyres, Apollo Tyres and Balakrishna Tyres in order to determine the
financial stability of these companies in the future by using required statistical tools in MS.
Excel.

STATISTICAL TOOLS UTILIZED

 Mean, median and mode

 Skewness
 Correlation
 Regression
 Trend analysis
 Standard deviation
 Sample Variance
 Kurtosis
 Skewness
 Range
 T-test
 F-test

PROGRAMME UTILIZED DURING THE RESEARCH

 Microsoft Excel 2007

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INTERPRATION

Correlation: A statistical technique that is used to analyse the strength and direction of the
relationship between two quantative variables is called correlation.

JK TYRES

EXPECTED SHARE VALUE VS ACTUAL SHARE VALUE:

r= 0.133079625

By this value it can be determined that the two share values have positive correlation which
indicates that changes in share value are increasing in the positive direction.

APOLLO TYRES

EXPECTED SHARE VALUE VS ACTUAL SHARE VALUE:

R = 0.11045013

By this value it can be determined that the two share values have positive correlation which
indicates that changes in share value are increasing in the positive direction.

CEAT TYRES

EXPECTED SHARE VALUE VS ACTUAL SHARE VALUE:

r= 0.64851435

By this value it can be determined that the two share values have positive correlation which
indicates that changes in share value are increasing in the positive direction.

BALAKRISHNA TYRES

EXPECTED SHARE VALUE VS ACTUAL SHARE VALUE

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r= 0.906401892

By this value it can be determined that the two share values have positive correlation which
indicates that changes in share value are increasing in the positive direction.

Skewness: The statistical technique to indicate the direction and extent of skewness in the
distribution of numerical values in the data set.

JK Tyre & Industries Ltd.

Skewness: 0.83476965

It can be determined that JK Tyre & Industries Ltd.share values are right to the skew of
83.46%

Apollo Tyres Ltd

Skewness: 0.644694043

It can be determined that Apollo Tyres Ltd share values are right to the skew of 64.46%

Ceat Ltd

Skewness: 1.643716655

It can be determined that Ceat Ltd share values are right to the skew of 16.43%

BALAKRISHNA TYRES

Skewness: 0.253013069

It can be determined that BALAKRISHNA TYRES values are right to the skew of 38.4%

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Regression:

Regression studies nature of relationship between variables, regression clearly explains the
cause and effect relationship between the variables. Regression coefficients are absolute
measure indicating the change in the value of one variable for a unit change in the value of
other.

Regression for JK Tyre & Industries Ltd.:

Actual Share Value v/s Volume:

1951.34012
Regression Line y = a+bx   where; a= 5
= 166.2983438     b= 10

Thus Y=166.2983438

So we can say that for a significant change in Actual Share Value there will be a small
significant change in Volume

Volume v/s Actual Share Value:

Regression Line y = a+bx

= -2781238.988

Thus Y= - 2781238.988

So we can say that for a significant change in Volume there will be small significant change
in Actual Share Value.

Regression for APOLLO TYRES

Actual Share Value v/s Volume:

2485.16465
Regression Line y = a+bx   where; a= 7
= 64.59925225     b= 0.00001

Thus Y=64.59925225

So we can say that for a significant change in Actual Share Value there will be a small
significant change in Volume

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Volume v/s Actual Share Value:

272733.937
Regression Line y = a+bx   where; a= 5
= -17897723.56     b= 0.00001

Thus Y= -17897723.56

So we can say that for a significant change in Volume there will be significant change in
Actual Share Value

Regression for CEAT TYRES:

Actual Share Value v/s Volume:

124.277910
Regression Line y = a+bx   where; a= 6
= 135.527029     b= 0.00001

Y= 135.527029

So we can say that for a significant change in Actual Share Value there will be a small
significant change in Volume

Volume v/s Actual Share Value:

4180403.30
Regression Line y = a+bx   where; a= 1
= -4384066.143     b= 0.00001

Thus Y= -4384066.143

So we can say that for a significant change in Volume there will be significant change in
Actual Share Value.

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Regression for BALAKRISHNA TYRES

Actual Share Value v/s Volume:

11.0305691
Regression Line y = a+bx   where; a= 9
= 11.03056919     b= 0.00001

Thus Y=11.03056919

So we can say that for a significant change in Actual Share Value there will be a small
significant change in Volume

Volume v/s Actual Share Value:

-
Regression Line y = a+bx   where; a= 1434693.31
= -9110.769724     b= 0.00001

Thus Y= -9110.769724

So we can say that for a significant change in Volume there will be significant change in
Actual Share Value

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TREND LINES

JK TYRES
190
185
180
175
170
165
NSE(Y)
160 EXPECTED (Y)
155
150
145
140

Actual share value is so fluctuating along the trend line.

Financial position of the company is unstable.

It is volatile so trading is not going smoothly.

So it can be said that to trade the share of JK TYRES is very risky

Apollo Tyres Ltd:

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90
80
70
60
50 #REF!
40 #REF!
NSE (Y)
30
EXPECTED (Y)
20
10
0

Actual share value is so fluctuating along the trend line.

Financial position of the company is unstable.

It is volatile so trading is not going smoothly

Ceat Ltd:
180
160
140
120
100
80 NSE (Y)
60 EXPECTED Y

40
20
0

Actual share value is fluctuating along the trend line.

Financial position of the company is moderate stable.

It is not volatile so trading is going on smoothly.

Share of Ceat Ltd is not risky.

Here linear trend forecasting is efficient in the Tata Communication Company.

BALAKRISNA TYRES:

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800

700

600

500

400
NSE (Y)
300 EXPECTED Y

200

100

0
1 5 9 1 3 17 2 1 2 5 2 9 33 3 7 4 1 4 5 49 53 5 7 6 1 65 69

Actual share value is so fluctuating along the trend line.

Financial position of the company is unstable.

It is volatile so trading is not going smoothly.

GRAPH SHOWING THE COMBINED SHARE VALUES OF THE COMPANYS

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SHARE VALUE COMPARISON

800

700

600
JK TYRES
500
APOLLO
400
CEAT
300 BALAKRISHNA

200

100

0
1 4 7 10 13 16 19 22 25 28 31 34 37 40 43 46 49 52 55 58 61 64 67 70

GRAPH SHOWING THE STOCKS OF COMPANYS

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JK TYRES STOCK VALUE

250 1400000

1200000
200
1000000
150 800000

100 600000

400000
50
200000

0 0
1 4 7 10 1 3 16 19 2 2 25 2 8 31 34 3 7 40 43 4 6 49 5 2 5 5 58 6 1 6 4 67 7 0

APOLLO TYRES STOCK VALUE

90 18000000
80 16000000
70 14000000
60 12000000
50 10000000
40 8000000
30 6000000
20 4000000
10 2000000
0 0
1 4 7 1 0 13 1 6 1 9 2 2 25 28 31 3 4 3 7 40 43 46 4 9 5 2 5 5 58 61 64 6 7 7 0

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CEAT TYRES STOCK VALUE

180 2500000
160
140 2000000

120
1500000
100
80
1000000
60
40 500000
20
0 0
1
4
7
10
13

28
31
34

46
49
52

61
64
67
16
19
22
25

37
40
43

55
58

70
BALAKRISNA TYRES
800 70000
700 60000
600
50000
500
40000
400
30000
300
20000
200
100 10000

0 0
1 4 7 1 0 13 16 1 9 22 25 2 8 3 1 3 4 37 40 4 3 4 6 49 5 2 5 5 58 61 6 4 6 7 70

LIMITATIONS OF THE STUDY

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Influences of external forces such as occurrence of natural disasters, changes in fiscal policy
(such as tax, subsidies ,incentives, etc) ,pricing policies adopted by companies for
competition purpose or political changes in the government, lead to a change in the
forecasted share values. This will render the entire process invaluable as trend analysis is a
process which is highly sensitive to external changes in the business environment.

References:

 Business Statistics, Second Edition, J.K.Sharma.

 www.nseindia.com
 www.yahoo/finance.com
 www.capitalline.com
 www.moneycontrol.com.
 http://en.wikipedia.org.
 http://wikicompany.org/wiki/JK_Tyre_&_Industries_Ltd.
 http://venturebeatprofiles.com/company/profile/ceat-ltd
 http://www.mrftyres.com/
 www.apollotyres.com
 www.ceattyres.in

BIBILOGRAPHY:

 Statistics for managers using Microsoft Excel by Levine, Stephan, Krehbiel,

Berenson.
 www.nseindia.com
 www.yahoo/finance.com
 www.capitalline.com

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