A STUDY on EQUITY ANALYSIS At INDIA INFOLINE LIMITED (Report submitted to JNTU in partial fulfillment of the requirement for the

award of Master of Business Administration) Submitted by SHAMEEM BEGUM Roll No: 08N31E0048 Under the guidance of Mr. K Hari Krishna Assoc. Professor Finance

MALLA REDDY COLLEGE OF ENGINEERING & TECHNOLOGY (Affiliated to JNTU, Hyderabad) Secunderabad - 14 2008- 2010

Equity Analysis

DECLARATION

I declare that this project report entitled “EQUITY ANALYSIS” is original and bonafide work of my own in the partial fulfillment of the requirements for the award of the Degree of MASTER OF BUSINESS ADMINISTRATION and submitted to the Department of Management, MALLAREDDY COLLEGE OF ENGINEERING AND TECHNOLOGY, Secunderabad.

The data that has been collected by me is truly authentic and contains true and complete information.

SHAMEEM BEGUM

Equity Analysis

SUMMARY
The automobile industry, one of the core sectors, has undergone metamorphosis with the advent of new business and manufacturing practices in the light of liberalization and globalization. The sector seems to be optimistic of posting strong sales in the couple of years in the view of a reasonable surge in demand. The Indian automobile market is gearing towards international standards to meet the needs of the global automobile giants and become a global hub.

A detailed analysis of Automobile industry has been covered in respect of past growth and performance. Under this project to better understand the Industry I have used Fundamental tools to make it more authentic and meaningful. An economy-industry-company (E.I.C) approach has been followed under Fundamental Analysis which covers effect of Recession, the impact of inflation, FDI’s, Export, and GDP etc. on Automobile Industry. The Industry Analysis has been done with the help of SWOT analysis and industry life cycle. For Company Analysis as a part of Fundamental tool we have undergone with the comparative analysis of TATA Motors the leading company, Maruti Suzuki India’s largest Car manufacturer and Mahindra and Mahindra along with the help of ratio analysis. The fundamental aspect consists of financial and Non-Financial analysis of these companies. At the end conclusion and recommendations have been specified so as to make the project work more meaningful and purposeful.

Equity Analysis

H. co-operation and deliberation from seniors. and all the faculty members for their valuable advice and guidance in this project.Siva Kumar Reddy. Mallareddy College of Engineering and Technology for his support and professional approach in guiding me through the careful details of the project. I am very grateful to my company guides. Hari Krishna. Associate Professor. Ashok who not only helped me on this topic but also helped me to understand the nuances of capital market. I would like to thank Mr.O.V. In spite of having a very busy schedule. I would be failing in my duty if I do no express my deep sense of gratitude to Sri K. Mr. SHAMEEM BEGUM Equity Analysis . I am also thankful to our college Principal.ACKNOWLEDGEMENT Accomplishment of a task with desired success calls for dedication towards work and prompting guidance.D. Dr. Subramaniam and Mr. At the outset.R. they made sure in every way that we acquire the best possible exposure and knowledge during our project. K.K Murthy.

Name of the concept Introduction Need of the study Objectives of the study I Scope of the study Methodology of the study Limitations of the study II III IV V VI VII Review of Literature Industry Profile Company Profile Data analysis and interpretation Findings. Suggestions and Conclusion Bibliography Page No. 1 2 3 4 5 6 7-22 23-42 43-52 53-73 74-80 81 Equity Analysis .CONTENTS Chapter No.

CHAPTER I .INTRODUCTION Equity Analysis .

In an industry plagued with skepticism and a stock market increasingly difficult to predict and contend with. If he expects the security's price to rise. fundamental analysis) becomes less important than knowing what other investors expect it to sell for. then knowing what a security should sell for (i. and to save tax in honest way. he will sell it. But there is usually a fairly strong consensus of a stock's future earnings that the average investor cannot disprove Fundamental analysis and technical analysis can co-exist in peace and complement each other. he will buy it. humans expectations are neither easily quantifiable nor predictable. Since all the investors in the stock market want to make the maximum profits possible. It is the price at which one person agrees to buy and another agrees to sell. Equity Analysis . Nowadays many people are interested to invest in financial markets especially on equities to get high returns. if one looks hard enough there may still be a genuine aid for the Day Trader and Short Term Investor. because they refer to human expectations. if the investor expects the price to fall. The price at which an investor is willing to buy or sell depends primarily on his expectations. large numbers of investors are showing interest to invest in stock market. As we all know firsthand. they just cannot afford to ignore either fundamental or technical analysis. Since the introduction of shares concept..e. Equities are playing a major role in contribution of capital to the business from the beginning. That's not to say that knowing what a security should sell for isn't important--it is.INTRODUCTION India is a developing country. The price of a security represents a consensus. These simple statements are the cause of a major challenge in forecasting security prices. If prices are based on investor expectations.

NEED OF THE STUDY
To start any business capital plays major role. Capital can be acquired in two ways by issuing shares or by taking debt from financial institutions or borrowing money from financial institutions. The owners of the company have to pay regular interest and principal amount at the end. Stock is ownership in a company, with each share of stock representing a tiny piece of ownership. The more shares you own, the more of the company you own. The more shares you own, the more dividends you earn when the company makes a profit. In the financial world, ownership is called “Equity”. Advantages of selling stock: • • • A company can raise more capital than it could borrow. A company does not have to make periodic interest payments to creditors. A company does not have to make principal payments

Stock/shares play a major role in acquiring capital to the business in return investors are paid dividends to the shares they own. The more shares you own the more dividends you receive. The role of equity analysis is to provide information to the market. An efficient market relies on information: a lack of information creates inefficiencies that result in stocks being misrepresented (over or under valued). This is valuable because it fills information gaps so that each individual investor does not need to analyze every stock thereby making the markets more efficient.

Equity Analysis

OBJECTIVES OF THE STUDY
The objective of this project is to deeply analyze our Indian Automobile Industry for investment purpose by monitoring the growth rate and performance on the basis of historical data.

The main objectives of the Project study are:

Detailed analysis of Automobile industry which is gearing towards international standards

Analyze the impact of qualitative factors on industry’s and company’s prospects

Comparative analysis of three tough competitors TATA Motors, Maruti Suzuki and Mahindra and Mahindra through fundamental analysis.

• invest.

Suggesting as to which company’s shares would be best for an investor to

Equity Analysis

SCOPE OF THE STUDY
The scope of the study is identified after and during the study is conducted. The project is based on tools like fundamental analysis and ratio analysis. Further, the study is based on information of last five years.

The analysis is made by taking into consideration five companies i.e. TATA Motors, Maruti Suzuki and Mahindra and Mahindra.

• •

The scope of the study is limited for a period of five years. The scope is limited to only the fundamental analysis of the chosen stocks.

Equity Analysis

The stocks are chosen from the automobile sector. The sample size for the number of stocks is taken as 3 for fundamental analysis of stocks as fundamental analysis is very exhaustive and requires detailed study. The stocks are chosen in an unbiased manner and each stock is chosen independent of the other stocks chosen. Equity Analysis . The sample of the stocks for the purpose of collecting secondary data has been selected on the basis of Random Sampling. analyzing and interpreting the data to diagnose the problem and react to the opportunity in such a way where the costs can be minimized and the desired level of accuracy can be achieved to arrive at a particular conclusion. The methodology used in the study for the completion of the project and the fulfillment of the project objectives.METHODOLOGY Research design or research methodology is the procedure of collecting.

• Suggestions and conclusions are based on the limited data of five years. Detailed study of the topic was not possible due to limited size of the project. Equity Analysis .e. The study is limited to the companies having equities. for a period of 45 days. There was a constraint with regard to time allocation for the research study i. The study is restricted to three companies based on Fundamental analysis.LIMITATIONS • • • • • This study has been conducted purely to understand Equity analysis for investors.

CHAPTER II .REVIEW OF LITERATURE Equity Analysis .

If the company is healthy and can demonstrate strength and growth. fundamental analysis and technical analysis The value of common stock is determined in large measure by the performance of the firm that issued the stock. timing and matching actions an investor must conduct deep security analysis. 1. Fundamental analysis examines all the dimensions of risk exposure and the probabilities of return. and merges them with broader economic analysis and greater industry analysis to formulate the valuation of a stock.SECURITY ANALYSIS Investment success is pretty much a matter of careful selection and timing of stock purchases coupled with perfect matching to an individuals risk tolerance. the mix is complicated by the risk factors involved.e. An investor has to carefully understand and analyze all these factors. There are basically two approaches to study security prices and valuation i. To make capital profits by selling shares at higher prices. just to keep the savvy investor on their toes. Investors purchase equity shares with two basic objectives. 2. Equity Analysis . These two factors are affected by a host of factors. the value of the stock will increase. In order to carry out selection. However. To earn dividend income. When values increase then prices follow and returns on an investment will increase.

FUNDAMENTAL ANALYSIS Fundamental analysis is a method of forecasting the future price movements of a financial instrument based on economic. It is the study of economic. Fundamental analysis is the cornerstone of investing. The fundamental approach calls upon the investors to make his buy or sell decision on the basis of a detailed analysis of the information about the company. The fundamental analysis is to appraise the intrinsic value of a security. and the economy. It is also known as “top-down approach”.1 in buying a share of a company. environmental and other relevant factors and statistics that will affect the basic supply and demand of whatever underlies the financial instrument. about the industry. Fundamental analysis typically focuses on key statistics in company’s financial statements to determine if the stock price is correctly valued. Equity Analysis . industry position and the company expectations and is also known as “economic-industry-company approach (EIC approach)”. industry and company conditions in an effort to determine the value of a company’s stock. The term simply refers to the analysis of the economic well-being of a financial entity as opposed to only its price movements. It insists that no one should purchase or sell a share on the basis of tips and rumors. political. how much expected returns from this investment he has. The basic philosophy underlying the fundamental analysis is that if an investor invests re. This approach attempts to study the economic scenario.

Economic analysis 2. Company analysis Equity Analysis . Industry analysis 3.Thus the EIC approach involves three steps: 1.

The growth rate of economy points out the prospects for the industrial sector and the return investors can expect from investment in shares. ECONOMIC ANALYSIS The level of economic activity has an impact on investment in many ways. Equity Analysis . the industry can also be expected to show rapid growth and vice versa. The savings and investment patterns of the public affect the stock to a great extent. Savings and investment: It is obvious that growth requires investment which in turn requires substantial amount of domestic savings. deposits. The analysis of macro economic environment is essential to understand the behavior of the stock prices. gross private domestic investment and government expenditure on goods and services and net exports of goods and services. and when the level of economic activity is high. stock prices are high reflecting the prosperous outlook for sales and profits of the firms. Stock market is a channel through which the savings are made available to the corporate bodies. It consists of personal consumption expenditure. The higher growth rate is more favorable to the stock market. stock prices are low. real estate and bullion.1. Savings are distributed over various assets like equity shares. The commonly analyzed macro economic factors are as follows: Gross Domestic Product (GDP): GDP indicates the rate of growth of the economy. It represents the aggregate value of the goods and services produced in the economy. mutual funds. When the level of economic activity is low. If the economy grows rapidly.

thereby squeezing their profit margins and leading to real declines in profitability. Regular supply of power without any power cut would Equity Analysis . Interest rates: The interest rate affects the cost of financing to the firms. Concessions and incentives given to a certain industry encourage investment in that particular industry. A wide network of communication system is a must for the growth of the economy. A decrease in interest rate implies lower cost of finance for firms and more profitability. if the inflation rate also increases. An increase in the expected rate of inflation is expected to cause a nominal rise in interest rates. The type of tax exemption has impact on the profitability of the industries.Inflation: Along with the growth of GDP. More money is available at a lower interest rate for the brokers who are doing business with borrowed money. The effects of inflation on capital markets are numerous. Tax structure: Every year in March. As inflation increases. Also. the business community eagerly awaits the Government’s announcement regarding the tax policy. then the real growth would be very little. Tax relief’s given to savings encourage savings. it results in extra costs to businesses. Availability of cheap funds encourages speculation and rise in the price of shares. Infrastructure facilities: Infrastructure facilities are essential for the growth of industrial and agricultural sector. it increases uncertainty of future business and investment decisions.

differentiate the product and create a product image. The life cycle of the industry is separated into four well defined stages. some industries might be expected to perform better. The producers try to develop brand name. like "manufacturing"). INDUSTRY ANALYSIS An industry is a group of firms that have similar technological structure of production and produce similar products and Industry analysis is a type of business research that focuses on the status of an industry or an industrial sector (a broad industry classification. it is difficult to select companies for investment because the survival rate is unknown. In this situation.boost the production. Good infrastructure facilities affect the stock market favorably. 2. Equity Analysis . There would be severe competition and only fittest companies survive this stage. Banking and financial sectors also should be sound enough to provide adequate support to the industry. • Pioneering stage: The prospective demand for the product is promising in this stage and the technology of the product is low. Irrespective of specific economic situations. and share prices in these industries may not decline as much as in other industries. This identification of economic and industry specific factors influencing share prices will help investors to identify the shares that fit individual expectations Industry Life Cycle: The industry life cycle theory is generally attributed to Julius Grodensky. The demand for the product attracts many producers to produce the particular product.

It is better to avoid investing in the shares of the low growth industry even in the boom period.• Rapid growth stage: This stage starts with the appearance of surviving firms from the pioneering stage. • Maturity and stabilization stage: the growth rate tends to moderate and the rate of growth would be more or less equal to the industrial growth rate or the gross domestic product growth rate. Growth of the industry: The historical performance of the industry in terms of growth and profitability should be analyzed. Investment in the shares of these types of companies leads to erosion of capital. The past variability in return and growth in reaction to macro economic factors provide an insight into the future. • Decline stage: demand for the particular product and the earnings of the companies in the industry decline. Symptoms of obsolescence may appear in the technology. The investors have to closely monitor the events that take place in the maturity stage of the industry. Equity Analysis . It is advisable to invest in the shares of these companies. The companies that have withstood the competition grow strongly in market share and financial performance. The technology of the production would have improved resulting in low cost of production and good quality products. To keep going. technological innovations in the production process and products should be introduced. The companies have stable growth rate in this stage and they declare dividend to the shareholders.

weakness. The competition would lead to a decline in the price of the product. In this way the factors are to be arranged and analyzed. The progress in R & D in that industry is an opportunity and entry of multinationals in the industry is a threat. increase in demand for the industry’s product becomes its strength. Take for instance. its profitability and the price of the concerned company scrips.Nature of competition: Nature of competition is an essential factor that determines the demand for the particular product. competition becomes the threat to a particular company. Every investor should carry out a SWOT analysis for the chosen industry. i. SWOT analysis: SWOT analysis represents the strength. presence of numerous players in the market. The companies' ability to withstand the local as well as the multinational competition counts much. opportunity and threat for an industry.e. The investor before investing in the scrip of a company should analyze the market share of the particular company's product and should compare it with the top five companies. the competition would be severe. If too many firms are present in the organized sector. Equity Analysis .

The companies in the market should be compared with like product groups otherwise. Equity Analysis . The competitiveness of the company can be studied with the help of the following. COMPANY ANALYSIS In the company analysis the investor assimilates the several bits of information related to the company and evaluates the present and future values of the stock. The present and future values are affected by a number of factors. • Stability of sales: If a firm has stable sales revenue. the company would be able to meet the competition successfully. it will have more stable earnings. only few companies control the major market share. Competitive edge of the company: Major industries in India are composed of hundreds of individual companies. Investors generally prefer size and growth in sales because the larger size companies may be able to withstand the business cycle rather than the company of smaller size. • Market share: The market share of the annual sales helps to determine a company’s relative competitive position within the industry. The risk and return associated with the purchase of the stock is analyzed to take better investment decisions. • Growth of sales: The rapid growth in sales would keep the shareholder in a better position than one with stagnant growth rate. The fall in the market share indicates the declining trend of company. Though the number of companies is large. the results will be misleading.3. If the market share is high.

the company's financial situation at a moment in time.even if the sales are stable. listing the company's current assets and liabilities. The company’s sales might have increased but its earnings per share may decline due to rise in costs. but should analyze the earnings of the company. It helps to study the capital structure of the company. It is better for the investor to avoid a company with excessive debt component in its capital structure. earnings do not always increase with increase in sales. This is a primary source of information for evaluating the investment prospects in the particular company’s stock. The two main statements used in the analysis are Balance sheet and Profit and Loss Account. the investor should not only depend on the sales. The balance sheet is one of the financial statements that companies prepare every year for their shareholders. It is prepared at the year end. Hence the stability of sales should be compared with its market share and the competitor’s market share. Financial analysis: The best source of financial information about a company is its own financial statements. Historical financial statement helps to predict the future and the current information aids to analyze the present status of the company. Further. Earnings of the company: Sales alone do not increase the earnings but the costs and expenses of the company also influence the earnings. It is like a financial snapshot. The statement gives the historical and current information about the company’s operations. Hence. Equity Analysis . Financial statement analysis is the study of a company’s financial statement from various viewpoints.

Companies can have one of two strategies: cost leadership. ROA = (Net Profit/Total income) x (Total income/Total Assets) This ratio indicates the firm's strategic success. Profitability ratios are the most popular ratios since investors prefer to measure the present profit performance and use this information to forecast the future strength of the company. Ratios for investment purposes can be classified into profitability ratios. Ratios summarize the data for easy understanding. and profit margins. comparison and interpretations. Financial ratios are calculated from the balance sheet and profit and loss account. and price to sales. return on equity. liquidity position of the company can also be assessed with the information on current assets and current liabilities. a) Return on Assets (ROA) ROA is computed as the product of the net profit margin and the total asset turnover ratios. and leverage ratios. price to book value. price earnings multiplier. or product differentiation. The relationship can be either expressed as a percent or as a quotient. present value of cash flows. Ratio analysis: Ratio is a relationship between two figures expressed mathematically. ROA should be rising or keeping pace with the company's competitors if the company is successfully pursuing either of Equity Analysis . The most often used profitability ratios are return on assets. price to cash flow. dividend yield. Financial ratios provide numerical relationship between two relevant financial data.From the balance sheet. turnover ratios.

b) Return on Investment (ROI) ROI is the return on capital invested in business. c) Return on Equity Return on equity measures how much an equity shareholder's investment is actually earning. but how ROA rises will depend on the company's strategy. The computation of return on investment is as follows: Return on Investment (ROI) = (Net profit/Equity investments) x 100 As this ratio reveals how well the resources of a firm are being used. ROA should rise with a successful cost leadership strategy because the company’s increasing operating efficiency. An example is an increasing. if an investment Rs 1 crore in men. machines. The return on shareholder’s investment should be compared with the return of other similar firms in the same industry. ROA will rise because of a rising profit margin. land and material is made to generate Rs..e. With a successful product differentiation strategy. turnover ratio as the company expands into new markets. then the ROI is 25%. increasing its market share. better are the results. 25 lakhs of net profit. higher the ratio. The inert-firm comparison of this ratio determines whether the investments in the firm are attractive or not as the investors would like to invest only where the return is higher. The return on equity tells the investor how much the invested rupee is earning Equity Analysis . The company may achieve leadership by using its assets more efficiently. i. total asset.these strategies.

EPS is calculated by dividing the earnings (net profit) by the total number of equity shares. it gives a view of the comparative earnings or earnings power of a firm.from the company. The higher the number. Equity Analysis . d) Earnings per Share (EPS) This ratio determines what the company is earning for every share. The computation of EPS is as follows: Earnings per share = Net profit/Number of shares outstanding The EPS is a good measure of profitability and when compared with EPS of similar other companies. The computation of return on equity is as follows: Return on equity = (Net profit to owners/value of the specific owner's Contribution to the business) x 100 The ratio is more meaningful to the equity shareholders who are invested to know profits earned by the company and those profits which can be made available to pay dividend to them. EPS calculated for a number of years indicates whether or not earning power of the company has increased. earnings are the most important tool. For many investors. the better is the performance of the company and suggests the usefulness of the projects the company has invested in.

The payout ratio is computed as follows: Payout Ratio = (Dividend per share / Earnings per share) * 100 The percentage of payout ratio can also be used to compute the percentage of retained earnings. In all. The dividend per share gives the amount of cash flow from the company to the owners and is calculated as follows: Dividend per share = Total dividend payment / Number of shares outstanding The payment of dividend can have several interpretations to the shareholder. out of the company's profit is measured through the payout ratio. it could also be negatively interpreted as lack of investment opportunities. apart from the price differentials (capital gains) in the market. The profits available for distribution are either paid as dividends or retained Equity Analysis . The return to the shareholders. This is the continuous stream of cash flow to the owners of shares. On the other hand. The distribution of dividend could be thought of as the distribution of excess profits/abnormal profits by the company. in the form of dividend. f) Dividend Payout Ratio From the profits of each company a cash flow called dividend is distributed among its shareholders. dividend payout gives the extent of inflows to the shareholders from the company.e) Dividend per Share (DPS) The extent of payment of dividend to the shareholders is measured in the form of dividend per share.

when dividends are not declared. The price at which the share has been bought from the market is the actual cost of the investment to the shareholder. Dividend yield relates the actual cost to the cash flows received from the company. On the other hand a low dividend yield need not be interpreted as overvaluation of shares. Equity Analysis . g) Dividend Yield Dividend yield is computed by relating the dividend per share to the market price of the share. The market place provides opportunities for the investor to buy the company's share at any point of time. The market price is to be taken as the cum-dividend price. Hence. The computation of dividend yield is as follows Dividend yield = (Dividend per share / Market price per share) * 100 High dividend yield ratios are usually interpreted as undervalued companies in the market. The market price is a measure of future discounted values. while the dividend per share is the present return from the investment. a high dividend yield implies that the share has been under priced in the market. Hence. the entire profit is ploughed back into the business for its future investments. A company that does not pay out dividends will not have a dividend yield and the real measure of the market price will be in terms of earnings per share and not through the dividend payments.internally for business growth opportunities.

The purpose is to get an idea of the cushion available to outsiders on the liquidation of the firm. Debt-to-equity ratio = Outsiders Funds / Shareholders Funds The debt-equity ratio is calculated to measure the extent to which debt financing has been used in a business. A very high P/E ratio on the other hand implies that the company's shares are overvalued and the investor can benefit by selling the shares at this high market price. i) Debt-to-Equity Ratio Debt-Equity ratio is used to measure the claims of outsiders and the owners against the firm’s assets. Many investors prefer to buy the company's shares at a low P/E ratio since the general interpretation is that the market is undervaluing the share and there will be a correction in the market price sooner or later. Equity Analysis .h) Price/Earnings Ratio (P/E) The P/E multiplier or the price earnings ratio relates the current market price of the share to the earnings per share. It indicates the proportionate claims of owners and the outsiders against the firm’s assets. This is computed as follows: Price/earnings ratio = Current market price / Earnings per share This ratio is calculated to make an estimate of appreciation in the value of a share of a company and is widely used by investors to decide whether or not to buy shares in a particular company.

CHAPTER III .INDUSTRY PROFILE Equity Analysis .

Hence financial markets are pervasive in nature since financial transactions are themselves very pervasive throughout the economic system. It is through financial markets and institutions that the financial system of an economy works. bills. issue of equity shares. claims and services. financial markets are the credit markets catering to the various needs of the individuals. bonds. it is deemed to have taken place in the financial market. In a nutshell. Wherever a financial transaction takes place. etc. purchase of debentures. Equity Analysis . there is no specific place or location to indicate a financial market. basic regulations on trading.FINANCIAL MARKETS Finance is the pre-requisite for modern business and financial institutions play a vital role in the economic system. equities. Financial market is a broad term describing any marketplace where buyers and sellers participate in the trade of assets such as equities. cheques. Generally. bonds. Financial markets refer to the institutional arrangements for dealing in financial assets and credit instruments of different types such as currency. deposit of money into a bank. They are typically defined by having transparent pricing. bank deposits. granting of loan by term lending institutions. currencies and derivatives. sale of shares and so on. For instance. costs and fees and market forces determining the prices of securities that trade. firms and institutions by facilitating buying and selling of financial assets.

CLASSIFICATION OF FINANCIAL MARKETS Financial markets Organized markets Unorganized markets Capital Markets Money Markets Money Lenders. Indigenuos Bankers Industrial Securities Market Call Money Market Primary Market Commercial Bill Market Secondary market Treasury Bill Market Government Securities Market Long-term loan market Equity Analysis .

The market. Securing the foreign capital and know-how to fill up deficit in the required resources for economic growth at a faster rate. therefore. As a whole. Equity Analysis . Mobilization of financial resources on a nation-wide scale. Capital market consists of primary market and secondary market. it deals with long term securities which have a period of above one year. it deals with raising of fresh capital by companies either for cash or for consideration other than cash. The best example could be Initial Public Offering (IPO) where a firm offers shares to the public for the first time. Generally. it consists of a series of channels through which the savings of the community are made available for industrial and commercial enterprises and public authorities. It basically deals with those securities which are issued to the public for the first time. Primary market: Primary market is a market for new issues or new financial claims. capital market facilitates raising of capital. 2. by directing the same to projects yielding highest yield or to the projects needed to promote balanced economic development. Effective allocation of the mobilized financial resources. 3.Capital Market The capital market is a market for financial assets which have a long or indefinite maturity. makes available a new block of securities for public subscription. The major functions performed by a capital market are: 1. In the widest sense. Hence it is also called as New Issue Market. In other words.

A derivative is a security whose price is dependent upon or derived from one or more underlying assets. Its value is determined by fluctuations in the underlying asset. securities which have already passed through new issue market are traded in this market. Money market securities are generally very safe investments which return relatively low interest rate that is most appropriate for temporary cash storage or short term time needs.Secondary market: Secondary market is a market where existing securities are traded. financial instruments like futures contracts or options. The important financial derivatives are the following: Equity Analysis . In other words. This market consists of all stock exchanges recognized by the government of India. currencies. It consists of a number of sub-markets which collectively constitute the money market namely call money market. The derivative itself is merely a contract between two or more parties. Derivatives Market The derivatives market is the financial market for derivatives. interest rates and market indexes. commodities. bonds. The most common underlying assets include stocks. highly liquid debt securities. acceptance market. and Treasury bill market. commercial bills market. such securities are quoted in the stock exchange and it provides a continuous and regular market for buying and selling of securities. which are derived from other forms of assets. Generally. Money Market Money markets are the markets for short-term.

Infact. so the buyer would want the stock to go up. The contract offers the buyer the right. instrument etc. Call options give the option to buy at certain price. it is the combination of forwards by two counterparties. A forward contract refers to an agreement between two parties to exchange an agreed quantity of an asset for cash at a certain date in future at a predetermined price specified in that agreement. • Futures: Future contract is very similar to a forward contract in all respects excepting the fact that it is completely a standardized one. It is arranged to reap the benefits arising from the fluctuations in the market – either currency market or interest rate market or any other market for that matter. Put options give the option to sell at a certain price. The promised asset may be currency. so the buyer would want the stock to go down. commodity.• Forwards: Forwards are the oldest of all the derivatives. to buy (call) or sell (put) a security or other financial asset at an agreed-upon price (the strike price) during a certain period of time or on a specific date (exercise date). but not the obligation. Equity Analysis . • Options: A financial derivative that represents a contract sold by one party (option writer) to another party (option holder). It is nothing but a standardized forward contract which is legally enforceable and always traded on an organized exchange. • Swaps: It is yet another exciting trading instrument.

central banks. oil. they are believed to be the most efficient financial markets. whereas soft commodities are agricultural products or livestock (corn. etc. Commodities Market It is a physical or virtual marketplace for buying.) Equity Analysis .Foreign Exchange Market It is a market in which participants are able to buy. selling and trading raw or primary products. coffee. but is constructed of a global network of computers that connects participants from all parts of the world. Because the currency markets are large and liquid. etc. and retail forex brokers and investors. The forex market is considered to be the largest financial market in the world. commercial companies. wheat. soybeans. Hard commodities are typically natural resources that must be mined or extracted (gold. For investors' purposes there are currently about 50 major commodity markets worldwide that facilitate investment trade in nearly 100 primary commodities. hedge funds.). pork. Commodities are split into two types: hard and soft commodities. sugar. It is important to realize that the foreign exchange market is not a single exchange. exchange and speculate on currencies. rubber. Foreign exchange markets are made up of banks. investment management firms. It is a worldwide decentralized over-the-counter financial market for the trading of currencies. sell.

Bangalore and Pune. By the early 1960s the total number of securities exchanges in India rose to eight. Ahmadabad and Kolkata were established as early as the 19th century. The corporate sector wasn't allowed into many industry segments. Today there are 21 regional securities exchanges in India in addition to the centralized NSE (National Stock Exchange) and OTCEI (Over the Counter Exchange of India). Delhi. Kanpur. including Mumbai. However the stock markets in India remained stagnant due to stringent controls on the market economy that allowed only a handful of monopolies to dominate their respective sectors. Ahmadabad and Kolkata apart from Madras.INDIAN FINANCIAL MARKETS India Financial market is one of the oldest in the world and is considered to be the fastest growing and best among all the markets of the emerging economies. which were dominated by the state controlled public sector resulting in stagnation of Equity Analysis . The financial market in India today is more developed than many other sectors because it was organized long before with the securities exchanges of Mumbai. The development of the capital market in India concentrated around Mumbai where no less than 200 to 250 securities brokers were active during the second half of the 19th century. The history of Indian capital markets dates back 200 years toward the end of the 18th century when India was under the rule of the East India Company.

A remarkable feature of the growth of the Indian economy in recent years has been the role played by its securities markets in assisting and fuelling that growth with money rose within the economy. This resulted in many new companies across different industry segments to come up with newer products and services. The integration of IT into the capital market infrastructure has been particularly smooth in Equity Analysis . The NSE was conceived as the market for trading in the securities of companies from the large-scale sector and the OTCEI for those from the small-scale sector. the securities markets witnessed a flurry of IPO’s that were launched. This was in marked contrast to the initial phase of growth in many of the fast growing economies of East Asia that witnessed huge doses of FDI (Foreign Direct Investment) spurring growth in their initial days of market decontrol.the economy right up to the early 1990s. Thereafter when the Indian economy began liberalizing and the controls began to be dismantled or eased out. Many PSUs (Public Sector Undertakings) that decided to offload part of their equity were also helped by the well-organized securities market in India. The launch of the NSE (National Stock Exchange) and the OTCEI (Over the Counter Exchange of India) during the mid 1990s by the government of India was meant to usher in an easier and more transparent form of trading in securities. During this phase in India much of the organized sector has been affected by high growth as the financial markets played an all-inclusive role in sustaining financial resource mobilization. While the NSE has not just done well to grow and evolve into the virtual backbone of capital markets in India the OTCEI struggled and is yet to show any sign of growth and development.

After this initial phase of struggle SEBI has grown in strength as the regulator of India’s capital markets and as one of the country’s most important institutions. This has pushed up the operational efficiency of the Indian stock market to global standards and as a result the country has been able to capitalize on its high growth and attract foreign capital like never before. The regulating authority for capital markets in India is the SEBI (Securities and Exchange Board of India).India due to the country’s world class IT industry. SEBI came into prominence in the 1990s after the capital markets experienced some turbulence. Equity Analysis . It had to take drastic measures to plug many loopholes that were exploited by certain market forces to advance their vested interests.

furthering the development of the economy. Kolkata. The basic objectives of the Board were identified as: • • • to protect the interests of investors in securities. Chennai and Ahmedabad.FINANCIAL MARKET REGULATIONS Regulations are an absolute necessity in the face of the growing importance of capital markets throughout the world. and contribute in. Southern and Western regional offices in New Delhi. a statutory and autonomous regulatory board with defined responsibilities. It is the apex body to develop and regulate the stock market in India It was formed officially by the Government of India in 1992 with SEBI Act 1992 being passed by the Indian Parliament. to cover both development & regulation of the market. to promote the development of Securities Market. The regulation of a capital market involves the regulation of securities. In place of Government Control. Eastern. SEBI is the regulator for the securities market in India. and has Northern. these rules enable the capital market to function more efficiently and impartially. SEBI is headquartered in the popular business district of Bandra-Kurla complex in Mumbai. The chief capital market regulatory authority is Securities and Exchange Board of India (SEBI). to regulate the securities market and Equity Analysis . A well regulated market has the potential to encourage additional investors to partake. The development of a market economy is dependent on the development of the capital market. and independent powers has been set up. Chaired by C B Bhave.

For matters connected therewith or incidental thereto.

Since its inception SEBI has been working targeting the securities and is attending to the fulfillment of its objectives with commendable zeal and dexterity. The improvements in the securities markets like capitalization requirements, margining, establishment of clearing corporations etc. reduced the risk of credit and also reduced the market.

SEBI has introduced the comprehensive regulatory measures, prescribed registration norms, the eligibility criteria, the code of obligations and the code of conduct for different intermediaries like, bankers to issue, merchant bankers, brokers and subbrokers, registrars, portfolio managers, credit rating agencies, underwriters and others. It has framed bye-laws, risk identification and risk management systems for Clearing houses of stock exchanges, surveillance system etc. which has made dealing in securities both safe and transparent to the end investor.

Another significant event is the approval of trading in stock indices (like S&P CNX Nifty & Sensex) in 2000. A market Index is a convenient and effective product because of the following reasons:
• • • •

It acts as a barometer for market behavior; It is used to benchmark portfolio performance; It is used in derivative instruments like index futures and index options; It can be used for passive fund management as in case of Index Funds. Equity Analysis

Two broad approaches of SEBI is to integrate the securities market at the national level, and also to diversify the trading products, so that there is an increase in number of traders including banks, financial institutions, insurance companies, mutual funds, primary dealers etc. to transact through the Exchanges. In this context the introduction of derivatives trading through Indian Stock Exchanges permitted by SEBI in 2000 AD is a real landmark. SEBI has enjoyed success as a regulator by pushing systemic reforms aggressively and successively (e.g. the quick movement towards making the markets electronic and paperless rolling settlement on T+2 bases). SEBI has been active in setting up the regulations as required under law.

STOCK EXCHANGES IN INDIA
Stock Exchanges are an organized marketplace, either corporation or mutual organization, where members of the organization gather to trade company stocks or other securities. The members may act either as agents for their customers, or as principals for their own accounts. As per the Securities Contracts Regulation Act, 1956 a stock exchange is an association, organization or body of individuals whether incorporated or not, established for the purpose of assisting, regulating and controlling business in buying, selling and dealing in securities.

Equity Analysis

Stock exchanges facilitate for the issue and redemption of securities and other financial instruments including the payment of income and dividends. The record keeping is central but trade is linked to such physical place because modern markets are computerized. The trade on an exchange is only by members and stock broker do have a seat on the exchange. List of Stock Exchanges in India Bombay Stock Exchange National Stock Exchange OTC Exchange of India Regional Stock Exchanges 1. Ahmedabad 2. Bangalore 3. Bhubaneswar 4. Calcutta 5. Cochin 6. Coimbatore 7. Delhi 8. Guwahati 9. Hyderabad 10. Jaipur 11. Ludhiana 12. Madhya Pradesh 13. Madras 14. Magadh 15. Mangalore 16. Meerut 17. Pune 18. Saurashtra Kutch 19. Uttar Pradesh 20. Vadodara

Equity Analysis

In 1956. 1956. 2005 notified by the Securities and Exchange Board of India (SEBI). In the past and even now.BOMBAY STOCK EXCHANGE A very common name for all traders in the stock market. BSE." . This is recognized worldwide and its index. 1956. but also in Asia. it plays a pivotal role in the development of the country's capital market. stands for Bombay Stock Exchange. BSE obtained a permanent recognition from the Government of India under the Securities Contracts (Regulation) Act. Earlier it was an Association of Persons (AOP). SENSEX. but now it is a demutualised and corporatised entity incorporated under the provisions of the Companies Act. BSE was known as "The Native Share & Stock Brokers Association. is also tracked worldwide. It is the oldest market not only in the country. In the early days." It was established in the year 1875 and became the first stock exchange in the country to be recognized by the government. pursuant to the BSE (Corporatisation and Demutualization) Scheme. BSE Vision The vision of the Bombay Stock Exchange is to "Emerge as the premier Indian stock exchange by establishing global benchmarks.

BSE Management Bombay Stock Exchange is managed professionally by Board of Directors. in 1997. The Board exercises complete control and formulates larger policy issues. nationwide. debt instruments and derivatives. It provides an efficient market for the trading in equity. is a proprietary system and it is BS 7799-2-2002 certified. The framework of it has been designed to safeguard market integrity and to operate with transparency. BSE Network The Exchange reaches physically to 417 cities and towns in the country. Its online trading system. The surveillance and clearing & settlement functions of the Exchange are ISO 9001:2000 certified. popularly known as BOLT. It comprises of eminent professionals. representatives of Trading Members and the Managing Director. The dayto-day operations of BSE are managed by the Managing Director and its school of professional as a management team. The BOLT network was expanded. The Board is an inclusive one and is shaped to benefit from the market intermediaries participation. .

• • First to have an exclusive facility for financial training Moved from Open Outcry to Electronic Trading within just 50 days . Clearing & Settlement • 'BSE On-Line Trading System’ (BOLT) has been awarded the globally recognized the Information Security Management System standard BS7799-2:2002. The BSE SENSEX is the benchmark equity index that reflects the robustness of the economy and finance.BSE Facts BSE as a brand is synonymous with capital markets in India. It was the – • • • • • First in India to introduce Equity Derivatives First in India to launch a Free Float Index First in India to launch US$ version of BSE Sensex First in India to launch Exchange Enabled Internet Trading Platform First in India to obtain ISO certification for Surveillance.

. thus helping India increases its sphere of influence in international financial markets.BSE with its long history of capital market development is fully geared to continue its contributions to further the growth of the securities markets of the country.

On its recognition as a stock exchange under the Securities Contracts (Regulation) Act.NATIONAL LIMITED STOCK EXCHANGE OF INDIA The National Stock Exchange of India Limited has genesis in the report of the High Powered Study Group on Establishment of New Stock Exchanges. NSE was promoted by leading Financial Institutions at the behest of the Government of India and was incorporated in November 1992 as a taxpaying company unlike other stock Exchange in the country. It was formed to build confidence in clearing and settlement of securities. Based on the recommendations. (NSCCL) It is a wholly owned subsidiary. which was incorporated in August 1995 and commenced clearing operations in April 1996. 1956 in April 1993. to promote and maintain the short and consistent . NSE commenced operations in the Wholesale Debt Market (WDM) segment in June 1994. The Capital Market (Equities) segment commenced operations in November 1994 and operations in Derivatives segment commenced in June 2000. NSE GROUP National Securities Clearing Corporation Ltd. which recommended promotion of a National Stock Exchange by financial institutions (FI’s) to provide access to investors from all across the country on an equal footing.

Site Maintenance and Backups. Along with this. . it also provides consultancy and implementation services in Data Warehousing. Stratus Mainframe Facility Management. etc. web-based.IT primarily focuses on in the area of trading. world's leading provider of investible equity indices. It commenced operations in November 1996. IISL has a consulting and licensing agreement with the Standard and Poor's (S&P). for co-branding equity indices. to provide a variety of indices and index related services and products for the Indian Capital markets.settlement cycles. Real Time Market Analysis & Financial News. India Index Services & Products Ltd. It is also a wholly owned subsidiary of NSE and is its IT arm. broker front-end and back-office. (IISL) It is a joint venture between NSE and CRISIL Ltd. This step was taken to solve problems related to trading in physical securities. services and solutions for the securities industry. It was set up in May 1998. This arm of the NSE is uniquely positioned to provide products. (NSDL) NSE joined hands with IDBI and UTI to promote dematerialization of securities. NSE. NSE. insurance. to provide a counter-party risk guarantee and to operate a tight risk containment system. National Securities Depository Ltd.IT Ltd. Business Continuity Plans. clearing and settlement.

Today. OTCEI introduced many novel concepts to the Indian capital markets such as screen-based nationwide trading. At NSE. we are constantly working towards creating a more transparent. 1956. sponsorship of companies.Band VSAT network in the world. • Presently more than 9000 users are trading on the real time-online NSE application. vibrant and innovative capital market. The exchange was set up to aid enterprising promotes in raising finance for new projects in a cost effective manner and to provide investors with a transparent and efficient mode of trading Modeled along the lines of the NASDAQ market of USA. • • • NSE can handle up to 1 million trades per day. OVER THE COUNTER EXCHANGE OF INDIA OTCEI was incorporated in 1990 as a section 25 company under the companies Act 1956 and is recognized as a stock exchange under section 4 of the securities Contracts Regulation Act.NSE Facts • It uses satellite communication technology to energize participation from around 400 cities in India. The NSE. NSE is one of the largest exchanges in the world and still forging ahead. . It is one of the largest interactive VSAT based stock exchanges in the world.network is the largest private wide area network in India and the first extended C.

software technology parks of India. As a measure of success of these efforts. Such companies. Sonora Tiles & Brilliant mineral water. as well as rising interest in IT. it is essential that these companies not only expand existing operations but also set up new units. Pharmaceutical. Need for OTCEI: Studies by NASSCOM. particularly those that have been in operation for a short time. because they have not yet been evaluated by the financial world. etc. the venture capitals funds and the government’s IT tasks Force. Biotechnology and Media shares have repeatedly emphasized the need for a national stock market for innovation and high growth companies. the Exchange today has 115 listings and has assisted in providing capital for enterprises that have gone on to build successful brands for themselves like VIP Advanta. are unable to raise funds through the traditional financing methods. With their abilities to generate employment opportunities and contribute to the economy. Innovative companies are critical to developing economics like India.market making and scrip less trading. The key issue for these companies is raising timely. . which is undergoing a major technological revolution. cost effective and long term capital to sustain their operations and enhance growth.

COMPANY PROFILE .CHAPTER IV .

GoI bonds and other small savings instruments to loan products and Investment banking. Commodities trading. comprising the holding company.5paisa.com.indiainfoline. personalized service and cutting-edge technology. India Infoline Group The India Infoline group. the company gradually evolved into a one-stop financial services solutions provider. The group caters to approximately a million customers. Vision Our vision is to be the most respected company in the financial services space. Founded in 1995 by Mr. Life Insurance. Mutual Funds. India Infoline also owns and manages the websites www. The company has a network of over 2100 business locations (branches and sub-brokers) spread across more than 450 cities and towns. most respected for quality of its information. include the entire financial services space with offerings ranging from Equity research.com and www.INDIA INFOLINE LIMITED India Infoline is a one-stop financial services shop. Portfolio Management Services. India Infoline Limited and its wholly-owned subsidiaries. . Equities and derivatives trading. Nirmal Jain (Chairman and Managing Director) as an independent business research and information provider. Fixed deposits.

received in principle approval to sponsor a mutual fund. it offers Portfolio Management Services to clients. Mumbai (BSE) and the National Stock Exchange (NSE) and is also a member of both the exchanges. received the venture capital license. A SEBI authorized Portfolio Manager. COMPANY STRUCTURE India Infoline Limited is listed on both the leading stock exchanges in India. the Stock Exchange. .India’ award from Asia money. providing a one-stop solution for clients trading in the equities market. viz. It offers broking services in the Cash and Derivatives segments of the NSE as well as the Cash segment of the BSE.India Infoline received registration for a housing finance company from the National Housing Bank and received the ‘Fastest growing Equity Broking House . It is registered with NSDL as well as CDSL as a depository participant. These services are offered to clients as different schemes. ‘Most Improved Brokerage. It also received the Insurance broking license from IRDA. received ‘Best broker. which are based on differing investment strategies made to reflect the varied risk-return preferences of clients.India’ award from Finance Asia. Wealth Advisory Services and Portfolio Management Services. It has recently launched its Investment banking and Institutional Broking business.Large firms’ in India by Dun & Bradstreet in 2009. It is engaged in the businesses of Equities broking.

India Infoline Commodities Limited. commodities. India Infoline Commodities Pvt Limited is engaged in the business of commodities broking. mutual fund and portfolio management services businesses. India Infoline's research is available not just over the internet but also on international wire services like Bloomberg (Code: IILL).India Infoline Media and Research Services Limited The services represent a strong support that drives the broking. Thomson First Call and Internet Securities where India Infoline is amongst the most read Indian brokers. It undertakes equities research which is acknowledged by none other than Forbes as 'Best of the Web' and '…a must read for investors in Asia'. Their experience in securities broking empowered them with the requisite .

Orient Global. India Infoline Marketing & Services India Infoline Marketing and Services Limited is the holding company of India Infoline Insurance Services Limited and India Infoline Insurance Brokers Limited. Recently. • India Infoline Insurance Services Limited is a registered Corporate Agent with the Insurance Regulatory and Development Authority (IRDA). India Infoline was the first corporate agent to get licensed by IRDA in early 2001. two leading Indian commodities exchanges. making it among the select few to offer online as well as offline trading facilities. This will help focused expansion and capital raising in the said . a Singapore-based investment institution invested USD 76. It enjoys memberships with the MCX and NCDEX. • India Infoline Insurance Brokers Limited India Infoline Insurance Brokers Limited is a newly formed subsidiary which will carry out the business of Insurance broking.5% stake in India Infoline Investment Services.7 million for a 22.skills and technologies to allow them to offer commodities broking as a contracyclical alternative to equities broking. It has a multi-channel delivery model. India Infoline Investment Services Limited Consolidated shareholdings of all the subsidiary companies engaged in loans and financing activities under one subsidiary. and recently acquired membership of DGCX. which is India's largest private Life Insurance Company. It is the largest Corporate Agent for ICICI Prudential Life Insurance Co Limited.

consumer finance business and housing finance business. . • India Infoline Distribution Company Limited (distribution of retail loan products) • • Moneyline Credit Limited (consumer finance) India Infoline Housing Finance Limited (housing finance) IIFL (Asia) Private Limited IIFL (Asia) Private Limited is wholly owned subsidiary which has been incorporated in Singapore to pursue financial sector activities in other Asian markets.subsidiaries for various lending businesses like loans against securities. SME financing. Further to obtaining the necessary regulatory approvals. the company has been initially capitalized at 1 million Singapore dollars. distribution of retail loan products. India Infoline Investment Services Private Limited consists of the following step-down subsidiaries.

Chartered Accountants). in 1995. is a B. a member firm of HLB International. Tech (Electronics and Electrical Communications Engineering.IIFL MANAGEMENT • THE MANAGEMENT TEAM Mr. Mr. co-promoter and Executive Director of India Infoline Ltd. founded India’s leading financial services company India Infoline Ltd. Independent Director Mr. Board member since February 2005 . Nilesh Vikamsey. life insurance and mutual funds distribution. Ahmadabad) and a Chartered and Cost Accountant. Vikamsey. providing globally acclaimed financial services in equities and commodities broking. He joined the India Infoline board in July 1999. MBA (IIM. Nirmal Jain. R Venkataraman. • THE BOARD OF DIRECTORS Apart from Nirmal Jain and R Venkataraman.. IIT Kharagpur) and an MBA (IIM Bangalore). comprises: Mr. Executive Director R Venkataraman.. the Board of Directors of India Infoline Ltd. Chairman & Managing Director Nirmal Jain.a practicing Chartered Accountant and partner (Khimji Kunverji & Co. headed the audit . among others.

Mr Arun K. Kranti Sinha — Board member since January 2005 — completed his masters from the Agra University and started his career as a Class I officer with Life Insurance Corporation of India. Purvar. Mr Kranti Sinha.K. . helping the under-privileged Indians in Singapore. . valuations etc Mr Sat Pal Khattar. Independent Director Mr. Chairman of the Board of Trustee of Singapore Business Federation. consultancy. A.Board member since April 2001 . Purvar – Board member since March 2008 – completed his Masters degree in commerce from Allahabad University in 1966 and a diploma in Business Administration in 1967. Independent Director Mr. He joined the India Infoline board in April 2001. investigations. is also a life trustee of SINDA.department till 1990 and thereafter also handles financial services.Presidential Council of Minority Rights member. Non Executive Director Mr Sat Pal Khattar. a non profit body. mergers and acquisitions.

The Companies commodities business provides a contra-cyclical alternative to equities broking. India Infoline leveraged technology to bring the convenience of trading to the investor’s location of preference (residence or office) through computerized access. Commodities India Infoline’s extension into commodities trading reconciles its strategic intent to emerge as a one stop solutions financial intermediary. Average monthly turnover on the commodity exchanges increased from Rs 0. Research for the retail investor did not exist prior to India Infoline. Its experience in securities broking has empowered it with requisite skills and technologies. . The Companies network of branches also allows customers to place orders on phone or visit our branches for trading.PRODUCTS & SERVICES Equities India Infoline provided the prospect of researched investing to its clients. The Company was among the first to offer the facility of commodities trading in India’s young commodities market (the MCX commenced operations in 2003). The Company is among the few financial intermediaries in India to offer a complement of online and offline broking.34 bn to Rs 20. India Infoline made it possible for clients to view transaction costs and ledger updates in real time. which was hitherto restricted only to the institutions.02 bn.

India Infoline was the first corporate in India to get the agency license in early 2001. . The IIFL Private Wealth Management Team of financial experts will recommend an appropriate financial strategy to effectively meet customer’s investment requirements. concurrently. Wealth Management The key to achieving a successful Investment Portfolio is to have a carefully planned financial strategy based on a thorough understanding of the client's investment needs and risk appetite. it graduated the Company into a one stop retail financial solutions provider. Invest Online India Infoline has made investing in Mutual funds and primary market so effortless. To ensure maximum reach to customers across India. No paperwork no queues and No registration charges. backed by in-depth research and advice from research house and tools configured as investor friendly.Insurance An entry into this segment helped complete the client's product basket. it has employed a multi pronged approach and reaches out to customers via our Network. Only registration is needed. India Infoline offers a host of mutual fund choices under one roof. Direct and Affiliate channels.

The Indiainfoline Weekly Newsletter is the flashback for the week gone by. client’s get research reports of India Infoline research team on a priority basis. depending on client’s risk-return profile. . India Infoline invests the client’s resources into stocks from different sectors. A weekly outlook coupled with the best of the web stories from Indiainfoline and links to important investment ideas. Leader Speak and features is delivered in the client’s inbox every Friday evening. It operates primarily in the retail segment leveraging its existing distribution network to reach prospective clients. This service is particularly advisable for investors who cannot afford to give time or don't have that expertise for day-to-day management of their equity portfolio. It has received the in-principle approval to set up a mutual fund. Newsletters As a subscriber to the Daily Market Strategy. Portfolio Management IIFL Portfolio Management Service is a product wherein an equity investment portfolio is created to suit the investment objectives of a client.Asset Management India Infoline is a leading pan-India mutual fund distribution house associated with leading asset management companies.

CHAPTER V DATA ANALYSIS & INTERPRETATIONS .

C Approach) a. industry and company statistics. Industry analysis c. The typical approach to analyzing a company involves three basic steps: .I. Fundamental analysis typically focuses on key statistics in company s financial statements to determine if the stock price is correctly valued.ANALYSIS OF AUTOMOBILE INDUSTRY Over a period of more than two decades the Indian Automobile industry has been driving its own growth through phases. Most fundamental information focuses on economic. industry and company conditions in an effort to determine the value of a company s stock. Company analysis Fundamental Analysis Fundamental analysis is the study of economic. With comparatively higher rate of economic growth rate index against that of great global powers. The automobile sector has been contributing its share to the shining economic performance of India in the recent years. India has become a hub of domestic and exports business. Economy analysis b. To understand this industry for the purpose of investment we need to analyze it by the following approach: Fundamental Analysis (E.

Determine the condition of the company. 2. 3. GDP and Automobile Industry In absolute terms. ECONOMY ANALYSIS Economic analysis is the analysis of forces operating the overall economy a country. . This is the pie. Determine the condition of the general economy. Economic analysis is a process whereby strengths and weaknesses of an economy are analyzed.1. The service sector is growing rapidly in the past few years. Determine the condition of the industry. 1.chart showing contributions of different sectors in Indian economy. India is 16th in the world in terms of nominal factory output. Economic analysis is important in order to understand exact condition of an economy.

As the world economy slipped into recession hitting the demand hard and the banking sector takes conservative approach towards lending to corporate sector. Major names among these are General Motors. These companies have major plans lined up for India auto industry. Recession Auto industry in India had been hit hard by ongoing global financial recession. . the GDP growth has downgraded it to 7.6% in 2010 by overcoming the setbacks of recession. automobile sector in India is one of the key sectors of the economy in terms of the employment. There are some other automobile companies of world who have shown interest in India auto market. But it is in a good shape now.Today. These are few signs of the revolutionized auto industry after recession. Directly and indirectly it employs more than 10 million people and if we add the number of people employed in the auto-component and auto ancillary industry then the number goes even higher. Much of this optimism resulted from renewed interest being shown in India auto industry by reputed overseas car makers. Nissan Motors which is a well known Japanese car making company regarded India automobile market as a global car manufacturing hub for future and invested huge amount in our market.1 per cent for 2008-09 and it has increased to 8. Skoda Auto and Mercedes-Benz.

Foreign Direct Investment The automobile sector in the Indian industry is one of the high performing sectors of the Indian economy. Automatic approval for foreign equity investment up to 100 per cent of manufacture of automobiles and component is permitted. The effect of inflation has affected every sector which is related to car manufacturing and production.Inflation The rise in inflation will have adverse impact on the industry that will not only see interest rates getting further hardened but also a drop in demand due to the squeeze in purchasing power. more and more MNC’s coming in India to setup their ventures which clearly shows the scope of expansion. The increase in the price of fuel and the steel due to inflation has led to a slower growth rate of the car industry in India. During April-January 2010. Exports Despite recession. . the Indian automobile market continues to perform better than most of the other industries in the economy in coming future.24 percent. This has contributed largely in making India a prime destination for many international players in the automobile industry who wish to set up their businesses in India. overall automobile exports registered a growth rate of 13.

Following is the segmentation that how much each sector comprises of whole Indian Automobile Industry. leaving ample opportunity for volume growth. and there is high risk of . and Three-wheelers. and other vehicles. estimated rate of growth of India Auto industry is going to be 9% . Two-wheelers.The Indian automobile sector is far from being saturated. Business strategies are developing. maturity and decline.3 million units in 2008. powered by the increase in the income is the primary growth driver of the automobile industry in India. passenger cars. the product has not been widely accepted or adopted. In 2009. The increase in the demand for cars. growth. buses. Industry life cycle classification generally groups industries into one of four stages: pioneer. tempos. Segmentation of Automobile Industry The automobile industry comprises of Heavy vehicles (trucks. India emerged as Asia's fourth largest exporter of automobiles. behind Japan. The Automobile Industry is one of the fastest growing sectors in India. In 2009. INDUSTRY ANALYSIS (AUTOMOBILE) The automobile industry in India is the ninth largest in the world with an annual production of over 2. tractors). Industry life cycle The industrial life cycle is a term used for classifying industry life over time.2. Commercial Vehicles. In the pioneer phase. South Korea and Thailand.

Indian Automotive Industry is booming with a growth rate of around 15 % annually. Environmental factors internal to the firm usually can be classified as strengths (S) or weaknesses (W). so the automobile sector can be very well be said to be in the growth phase. The industry is growing rapidly. Weaknesses • Low labor productivity . Such an analysis of the strategic environment is referred to as a SWOT analysis. However. Strengths • Large domestic market • Sustainable labor cost advantage • Competitive auto component vendor base • Government incentives for manufacturing plants • Strong engineering skills in design etc 2.failure. successful companies can grow at extraordinary rates. often at an accelerating rate of sales and earnings growth. SWOT analysis of the Indian automobile sector gives the following points: 1. The Indian automobile sector has passed this stage quite successfully. The growth rate of the automobile industry in India is greater than the GDP growth rate of the economy. and those external to the firm can be classified as opportunities (O) or threats (T). Swot analysis: A scan of the internal and external environment is an important part of the strategic planning process.

and globalization. • • • Heavy thrust on mining and construction activity Increase in the income level Cut in excise duties 4.• • • • High interest costs and high overheads make the production uncompetitive Various forms of taxes push up the cost of production Low investment in Research and Development Infrastructure bottleneck 3. COMPANY ANALYSIS The company analysis shows the long-term strenght of the company that what is the financial position of the company in the market. Threats • • • Ignorance of Research & development Rising interest rates Cut throat competition 3. technology development. what are the future plans of the company. . Opportunities • Increasing challenges in consumer demands. what are the policies of government towards the company and how the stake of the company divested among different groups of people. where it stands among its competitors and who are the key drivers of the company.

Its turnover for the fiscal 2008-09 stood at Rs. More than half the numbers of cars sold in India wear Maruti Suzuki badge. Maruti Suzuki and Mahindra and Mahindra for the purpose of fundamental analysis.5 million vehicles in India and exported over 500.519 crores (USD 20 billion) in 2009-10.583 Million & Profit after Tax at Rs. Tata Motors Limited is India's largest automobile company. The company is the world's fourth largest truck manufacturer. 203. with consolidated revenues of Rs. Wagon R. I have taken three companies namely TATA Motors. Since inception. It is the leader in commercial vehicles in each segment. SX4 and Sports Utility Vehicle Grand Vitara. 12. midsize car and utility vehicle segments.187 Million. and among the top three in passenger vehicles with winning products in the compact. .Here. Maruti Suzuki is a subsidiary of Suzuki Motor Corporation Japan.000 units to Europe and other countries. it has produced and sold over 7. 92. Estillo and sedans Dzire. They offer a full range of cars – from entry level Maruti 800 & Alto to stylish hatchback Ritz. Swift. A star. and the world's second largest bus manufacturer.

. It is the market leader in utility vehicles in India since inception. The Automotive Sector continues to be a leader in the utility vehicle segment with a diverse portfolio that includes mass transport as well as new generation vehicles like Scorpio. Bolero and the recently launched Xylo.The Mahindra Group’s Automotive Sector is in the business of manufacturing and marketing utility vehicles and light commercial vehicles. and currently accounts for about half of India’s market for utility vehicles. including three-wheelers.

61 2.606.21 -2.36 1.064.94 8.387.57 14.83 5.05 0.95 3.95 6.83 Mar '06 Mar '07 Mar '08 Mar '09 .90 7.07 12.04 1.836.00 5.997.51 3.461.26 2.954.91 2.012.433.58 0.32 345.24 715.06 1.936.17 10.39 489.07 177.971.00 7.79 0.00 6.07 822.20 638.055.70 13.18 5.54 0.04 7.65 10.00 2.42 6.839.65 7.831.43 12.120.111.64 361.009.19 2.70 4.80 4.647.16 1.912.53 6.00 6.75 2.26 12.61 791.165.52 14.84 8.537.812.881.757.00 6.968.00 4.10 4.248.888.78 327.77 9.477.00 10.894.04 12.37 1.95 782.280.259.91 6.590.52 5.559.15 2.96 4.54 385.923.818.27 5.142.869.TATA MOTORS .00 11.606.659.00 6.59 10.20 1.74 1.54 3.846.601.56 25.66 3.39 25.009.318.98 10.68 5.987.989.84 2.28 3.78 7.473.81 382.208.50 2. Depreciation Net Block Capital Work in Progress Investments Inventories Sundry Debtors Cash and Bank Balance Total Current Assets Loans and Advances Fixed Deposits Total CA.495.423.02 514.040.32 113.14 10.611.215.15 25.555.394.91 385.251.450.88 0.87 0.321.22 10.022.65 1.855.08 2.45 25.32 2.00 3.421.87 382.Balance sheet Balance Sheet of Tata Motors Mar '05 Sources of funds Total Share Capital Equity Share Capital Share Application Money Reserves Revaluation Reserves Networth Secured Loans Unsecured Loans Total Debt Total Liabilities Application of funds Gross Block Less: Accum.877.95 1.02 5.559.17 6.428.775.878.92 6.00 10.781.130.23 0.268.83 202.248.31 5.39 5.06 0.570.32 8.61 1.229.909.126.401.157.005.94 2.81 26.364.67 538.80 -19.75 503.81 1.53 290.968.83 1.13 2.964.36 811.73 750.65 7.645.55 4.79 361.443.41 385.500.63 143.818.80 -1.831.27 2.26 2.120.458.18 535.196.78 3.749.51 7.27 6.910.60 0.41 0.913.17 4.454.14 4.91 13.185.81 2.127.029.42 0.114.05 514.04 951.63 25. Loans & Advances Deffered Credit Current Liabilities Provisions Total CL & Provisions Net Current Assets Total Assets Contingent Liabilities Book Value (Rs) 6.89 5.81 1.88 1.905.83 5.473.513.015.302.76 2.06 7.878.830.99 3.89 385.07 240.673.41 8.956.

461.28 237.54 1.95 3.93 1.63 150.652.00 177.95 1.07 98.633.TATA MOTORS – Profit & Loss account Profit & Loss account of Tata Motors Mar '05 Income Sales Turnover Excise Duty Net Sales Other Income Stock Adjustments Total Income Expenditure Raw Materials Power & Fuel Cost Employee Cost Other Manufacturing Expenses Selling and Admin Expenses Miscellaneous Expenses Preoperative Exp Capitalised Total Expenses Operating Profit PBDIT Interest PBDT Depreciation Other Written Off Profit Before Tax Extra-ordinary items PBT (Post Extra-ord Items) Tax Reported Net Profit Total Value Addition Preference Dividend Equity Dividend Corporate Dividend Tax Per share data (annualised) Shares in issue (lakhs) Earning Per Share (Rs) Equity Dividend (%) Book Value (Rs) 12.88 3.652.053.31 64.83 872.42 3.63 852.47 547.31 1.55 2.16 67.91 3.50 1.48 60.49 -577.64 20.343.76 15.39 704.65 1.05 12.43 81.000.197.146.03 234.913.54 4.891.17 -40.551.91 734.00 578.65 150.43 15.44 26.425.34 39.051.57 904.00 311.355.55 3.17 1.25 3.18 2.50 1.52 3.84 0.660.664.528.586.20 2.576.573.73 450.00 452.30 2.10 2.573.41 256.12 1.00 2.07 2.401.34 592.81 1.17 403.199.75 3.94 69.998.58 0.02 258.039.37 304.00 240.650.21 620.74 49.143.19 1.38 349.78 2.41 1.78 -1.648.04 26.69 4.51 1.29 1.061.64 890.53 520.19 125.61 34.65 14.747.94 1.367.805.644.77 350.69 471.131.42 2.169.029.828.939.197.92 1.14 586.00 143.05 24.13 671.37 1.94 19.097.53 1.92 4.898.49 964.56 3.089.12 2.114.48 29.33 325.35 2.801.547.39 866.54 51.98 144.07 740.60 Mar '09 28.47 874.245.92 .855.92 20.245.51 3.617.94 73.81 524.29 -238.47 0.19 63.89 -916.95 Mar '07 31.088.505.91 21.59 20.67 921.764.95 2.293.25 1.13 652.199.00 202.40 25.404.140.44 17.128.02 2.879.31 1.31 Mar '08 33.853.29 85.438.236.699.00 17.576.25 3.063.83 -0.84 3.08 19.05 2.27 -282.767.16 0.53 25.24 2.001.00 497.262.16 0.45 -1.15 Mar '06 23.68 28.877.04 52.63 28.427.00 2.99 -308.36 2.343.70 18.09 5.538.053.490.91 415.028.85 18.61 3.566.23 1.56 327.00 113.544.02 23.030.700.89 455.00 578.81 0.696.94 130.46 4.76 660.723.123.86 0.52 34.013.26 4.

90 0.70 Mar '08 144.00 2.60 0.452.00 6.700.270.40 Mar '06 144.80 698.00 3.454.524.50 0.00 3.173.315.40 893. Loans & Advances Deffered Credit Current Liabilities Provisions Total CL & Provisions Net Current Assets Miscellaneous Expenses Total Assets Contingent Liabilities Book Value (Rs) 5.50 0.70 2.10 2.10 0.50 144.308.088.00 9.50 0.00 4.60 666.70 0.043.20 881.254.718.176.50 0.30 630.MARUTI SUZUKI – Balance Sheet Balance Sheet of Maruti Suzuki India Mar '05 Sources Of Funds Total Share Capital Equity Share Capital Share Application Money Reserves Revaluation Reserves Networth Secured Loans Unsecured Loans Total Debt Total Liabilities Application Of Funds Gross Block Less: Accum.90 0.56 4.20 713.20 747.50 324.00 6.90 0.20 9.00 3.30 Mar '07 144.659.40 1.90 0.80 307.173.60 71.40 0.60 599.90 3.720.50 144.30 3.072.50 567.40 0.40 0.853.10 1.038.00 4.50 3.234.80 480.779.60 237.524.10 3.80 1.060.60 1.40 0.60 490.180.20 1.017.70 3.00 3.053.288.28 8.40 1.60 2.20 1.40 1.70 42.90 950.00 5.30 902.00 2.90 10.484.587.350.956.50 0.00 71.80 3.70 0.23 7.60 Mar '09 144.686.80 51.043.190.843.094.00 7.10 1.60 3.00 3.704.70 5.00 4.30 0.00 9.901.60 1.631.315.73 6.685.10 698.60 4.70 323.00 9.00 2.60 1.50 1.40 114.00 5.296.873.30 1.70 1.146.00 5.70 188.10 1.60 151.575.378.097.00 0.709.20 389.40 1.90 239.60 933.809.80 861.30 5.345.409.308.988.00 1.40 1.00 5.90 380.051.00 0.285.50 144.686.00 1.80 3.10 0.00 655.00 0.695.484.80 1.20 92.200.20 291.00 0. Depreciation Net Block Capital Work in Progress Investments Inventories Sundry Debtors Cash and Bank Balance Total Current Assets Loans and Advances Fixed Deposits Total CA.00 2.80 1.50 2.938.10 900.250.40 0.070.649.487.734.80 .80 1.415.259.50 144.10 900.00 10.90 369.00 2.50 801.870.50 144.184.289.954.20 654.45 144.70 238.00 8.516.00 2.344.80 4.50 736.00 307.80 7.60 4.50 79.179.30 3.50 0.570.40 102.00 8.30 918.90 63.

06 303.70 2.90 1.80 2.60 271.189.10 751.593.60 2.40 0.046.50 141.60 3.18 70.10 17.00 2.80 23.48 287.90 1.70 10.90 456.594.729.781.62 -19.07 90.40 483.60 1.40 2.20 0.10 59.10 42.358.324.20 17.423.889.60 2.494.80 51.00 151.256.80 10.40 491.28 2.80 37.730.80 8.50 2.218.44 -22.556.650.066.80 15.10 1.60 20.30 706.745.39 -6.60 943.MARUTI SUZUKI – Profit & Loss account Profit & Loss account of Maruti Suzuki Mar '05 Income Sales Turnover Excise Duty Net Sales Other Income Stock Adjustments Total Income Expenditure Raw Materials Power & Fuel Cost Employee Cost Other Manufacturing Expenses Selling and Admin Expenses Miscellaneous Expenses Preoperative Exp Capitalized Total Expenses Operating Profit PBDIT Interest PBDT Depreciation Other Written Off Profit Before Tax Extra-ordinary items PBT (Post Extra-ord Items) Tax Reported Net Profit Total Value Addition Preference Dividend Equity Dividend Corporate Dividend Tax Per share data (annualized) Shares in issue (lakhs) Earning Per Share (Rs) Equity Dividend (%) Book Value (Rs) 2.50 0.082.30 1.56 2.00 57.20 58.00 291.40 0.70 -356.628.23 2.594.943.00 215.897.552.285.00 97.00 237.70 12.70 302.318.889.562.889.00 336.30 521.30 1.70 14.00 188.90 36.30 1.40 3.70 11.00 2.983.40 1.20 2.20 14.10 20.10 54.413.40 199.10 20.889.60 0.063.20 446.60 2.200.70 457.27 121.411.50 763.80 1.396.710.45 13.16 70.70 374.30 18.864.486.076.40 2.10 -200.10 196.50 15.381.00 2.00 1.197.571.60 705.652.20 228.20 Mar '06 Mar '07 Mar '08 Mar '09 .133.00 14.781.061.90 184.30 147.30 187.73 -22.70 285.00 101.80 16.70 59.499.976.40 1.51 145.458.00 144.60 2.00 101.90 76.417.90 12.44 -14.776.30 12.122.898.10 14.10 0.20 33.20 523.00 9.30 51.90 21.20 1.50 24.30 356.30 5.00 130.10 716.468.582.40 2.10 29.10 13.00 1.40 338.00 1.700.897.00 323.50 8.00 0.806.40 0.863.272.50 0.50 853.816.10 2.10 41.40 2.60 471.91 100.748.40 1.60 18.10 568.30 18.00 21.70 560.70 3.55 40.40 349.40 57.73 2.774.958.20 193.40 392.26 239.10 1.375.20 37.40 288.70 2.00 1.90 1.349.90 11.40 9.889.80 494.

277.326.43 2.340.93 1.908.043.916.220.76 283.87 216.01 12.529.94 4.37 550.00 0.14 178.676.25 1.95 Mar '06 233.97 258.00 2.06 Mar '07 238.35 1.350.20 0.711.816.MAHINDRA & MAHINDRA – Balance Sheet Balance Sheet of Mahindra and Mahindra Mar '05 Sources Of Funds Total Share Capital Equity Share Capital Share Application Money Preference Share Capital Reserves Revaluation Reserves Networth Secured Loans Unsecured Loans Total Debt Total Liabilities Application Of Funds Gross Block Less: Accum.587.995.356.94 0. Depreciation Net Block Capital Work in Progress Investments Inventories Sundry Debtors Cash and Bank Balance Total Current Assets Loans and Advances Fixed Deposits Total CA.58 375.012.469.636.76 9. Loans & Advances Deffered Credit Current Liabilities Provisions Total CL & Provisions Net Current Assets Miscellaneous Expenses Total Assets Contingent Liabilities Book Value (Rs) 116.95 133.254.008.20 1.90 3.07 617.13 985.180.64 13.40 233.00 4.74 17.77 347.00 5.00 2.959.00 1.12 1.06 1.792.67 1.11 1.62 0.46 878.45 938.510.541.88 310.92 2.052.00 4.41 0.662.13 3.48 700.72 Mar '08 239.47 4.00 3.00 3.26 2.92 1.04 0.71 1.62 272.57 1.80 1.96 649.062.00 0.138.53 6.797.01 116.710.841.00 0.41 1.20 1.02 471.40 0.14 13.51 1.18 3.01 0.792.93 1.68 1.58 2.73 5.88 758.064.05 3.56 1.89 1.335.881.296.011.79 759.65 3.27 1.90 106.00 1.39 3.302.402.243.25 946.552.980.44 12.07 0.55 5.567.348.969.480.786.09 878.82 715.10 558.26 12.43 Mar '09 272.07 239.98 205.89 415.68 666.19 550.73 1.215.72 2.89 2.26 1.97 981.83 511.805.41 0.56 4.45 329.64 1.57 866.26 1.052.65 635.65 1.38 3.893.50 910.520.189.552.43 461.468.27 148.53 198.399.00 1.03 238.07 1.74 637.237.23 543.31 943.71 883.739.296.081.32 2.859.33 2.00 0.525.14 2.03 0.55 9.39 1.76 4.60 646.87 499.060.064.854.669.46 3.004.35 181.80 2.82 5.00 0.93 14.62 3.00 2.188.07 425.937.77 715.46 1.937.639.86 3.61 2.084.53 12.83 24.36 124.071.91 .39 191.91 2.88 2.26 336.67 18.06 6.098.29 2.775.73 4.09 5.188.00 3.

83 1.69 209.368.57 141.54 9.00 191.33 853.05 6.41 10.01 545.299.380.49 10.458.220.73 46.82 91.885.647.310.95 2.72 100.00 148.55 1.854.791.19 666.88 115.22 Mar '07 11.00 1.20 103.00 124.694.61 87.83 11.036.231.98 291.437.87 718.02 238.390.59 0.00 278.60 209.83 558.273.16 65.72 2.61 75.46 551.01 0.81 21.65 73.10 1.77 0.80 1.28 1.54 199.05 13.116.310.208.099.65 9.39 1.00 243.95 -31.11 12.96 149.52 1.89 -26.59 1.79 200.646.21 57.78 2.17 201.74 174.406.75 26.48 4.937.829.29 52.44 1.87 928.726.00 181.03 -47.92 6.09 1.713.092.91 7.03 1.68 -19.23 1.82 6.05 0.16 30.00 1.78 54.23 .29 13.48 45.44 7.33 257.068.040.69 1.049.649.00 714.69 100.25 1.136.103.59 455.35 1.61 38.65 1.108.327.44 667.99 1.67 1.99 177.10 8.51 1.00 282.40 19.07 -42.136.01 0.98 369.963.15 115.36 954.462.483.71 98.594.00 1.34 531.00 282.136.37 2.17 6.054.58 0.50 0.035.69 836.33 44.73 0.29 210.587.53 7.50 Mar '08 12.37 0.406.338.49 350.97 34.12 1.47 4.50 512.94 1.MAHINDRA & MAHINDRA – Profit & Loss account Profit & Loss account of Mahindra and Mahindra Mar '05 Income Sales Turnover Excise Duty Net Sales Other Income Stock Adjustments Total Income Expenditure Raw Materials Power & Fuel Cost Employee Cost Other Manufacturing Expenses Selling and Admin Expenses Miscellaneous Expenses Preoperative Exp Capitalized Total Expenses Operating Profit PBDIT Interest PBDT Depreciation Other Written Off Profit Before Tax Extra-ordinary items PBT (Post Extra-ord Items) Tax Reported Net Profit Total Value Addition Preference Dividend Equity Dividend Corporate Dividend Tax Per share data (annualized) Shares in issue (lakhs) Earning Per Share (Rs) Equity Dividend (%) Book Value (Rs) 1.667.64 464.17 0.51 0.301.84 6.339.733.10 134.19 1.48 Mar '09 14.125.40 857.99 5.50 8.334.20 8.15 Mar '06 9.57 11.978.77 303.33 1.894.23 42.024.418.37 575.84 -46.80 891.37 184.43 2.15 68.83 33.50 242.59 1.04 0.25 48.00 36.668.877.157.92 130.06 2.326.099.07 1.00 150.584.00 178.40 1.66 0.24 871.96 1.24 898.61 30.15 714.921.10 1.85 -156.

Rs . Till 2008 TATA and Maruti had a rising EPS but in 2009 both of them fall and the effect is more on Tata motors because of the slump in domestic and international markets and sharp fall in sales and net profits which resulted in low EPS.RATIO ANALYSIS OF TATA MOTORS.55 45.69 EARNINGS PER SHARE 70 60 50 40 30 20 10 0 Mar'05 Mar'06 Mar'07 YEARS Mar'08 Mar'09 TATA MARUTI MAHINDRA Interpretations EPS measures the profit available to the equity shareholders per share.91 46.19 29.16 36.65 54.18 30.88 Mar'08 52.63 59.94 41.72 Mar'07 49. the amount that they can get on every share held. that is.07 44. But as trend shows Mahindra motors has potential so a shareholder can expect better in future.15 Mar'09 19.48 42. Mahindra is not much affected as its sales have increased from the previous year.92 Mar'06 39. MARUTI SUZUKI AND MAHINDRA & MAHINDRA EARNINGS PER SHARE EARNINGS PER SHARE YEARS TATA MARUTI MAHINDRA Mar'05 34.

000.000. Though slowdown in the economy brought hurdles but these companies have potential to grow in future as lots of products are still to add in their portfolio.00 30.231.00 5.80 9.000.00 25.20 7.538.00 Mar'05 Mar'06 Mar'07 YEARS Mar'08 Mar'09 Rs in Crores TATA MARUTI MAHINDRA Interpretations Maruti and Mahindra show a positive trend in sales over the past five years.273.000.54 21.50 14.00 20.200. TATA has witnessed a decline in sales of each segment.089.894.358.20 23.SALES SALES YEARS TATA MARUTI MAHINDRA Mar'05 20.94 Mar'09 28.51 Mar'06 23. .000.40 12.649.69 17.00 15. Maruti and Mahindra are going swiftly.000.381.713.09 Mar'07 31.00 10.458.262.000.123.55 14. Moreover increased demand in foreign market also seems to be a positive signal for better future.40 11.61 13.03 SALES 35.00 0.99 Mar'08 33.490.898.

5 Mar'08 15 5 11.5 per share in 2008 to rs. Therefore Mahindra would be the best option for an investor.10 per share this year.5 Mar'09 6 3. .DIVIDEND PER SHARE DIVIDEND PER SHARE YEARS TATA MARUTI MAHINDRA Mar'05 12.5 10 DIVIDEND PER SHARE 20 15 Rs 10 5 0 Mar'05 Mar'06 Mar'07 YEARS Mar'08 Mar'09 TATA MARUTI MAHINDRA Interpretations Tata motors and Maruti Suzuki both the companies showed a positive trend in paying dividends till 2008.5 10 Mar'07 15 4.5 11. Mahindra has made a slight reduction from rs. but the scenario changed in 2009 as both the company’s dividend per share fell.11. According to graph Tata’s dividend has fallen drastically while Maruti stick to below 5 per share.5 2 13 Mar'06 13 3.

09 13.49 25.98 20. making it a quite risky investment.56 25.74 21.96 22.03 RETURN ON INVESTMENT 35 30 25 20 15 10 5 0 Mar'05 Mar'06 Mar'07 YEARS Mar'08 Mar'09 TATA MARUTI MAHINDRA Interpretations ROI is one of the most important ratios used for measuring the overall efficiency of a firm and determines whether the investments in the firms are attractive or not.81 29. Maruti’s ROI has also declined but Mahindra’s ROI is showing a higher rate compared to TATA and Maruti in 2009.79 30.04 16.66 Mar'06 27.51 Mar'09 8. As the investors would like to invest only where the return is higher. % . Mahindra would be attractive for investment.18 Mar'08 25. According the graph. ROI of TATA has declined to a large extent in 2009.09 19.RETURN ON INVESTMENT (ROI) Return on Investment YEARS TATA MARUTI MAHINDRA Mar'05 30.6 Mar'07 27.

Maruti has maintained a stable payout ratio.78 29.DIVIDEND PAYOUT RATIO DIVIDEND PAYOUT RATIO YEARS TATA MARUTI MAHINDRA Mar'05 41.72 30. . Both TATA and Mahindra have increased their payout ratio in which Mahindra shows a higher payout ratio.39 Mar'08 32.34 9.1 Mar'09 34.45 Mar'07 35.52 9.68 7. It provides an idea to an investor of how well earnings support the dividend payments.29 DIVIDEND PAYOUT RATIO 50 40 % 30 20 10 0 Mar'05 Mar'06 Mar'07 YEARS Mar'08 Mar'09 TATA MARUTI MAHINDRA Interpretations Dividend payout ratio is the percentage of earnings paid to shareholders in dividends.13 9.69 32.73 33.54 Mar'06 37.51 9.7 37.

2 PRICE EARNINGS RATIO 50 40 % 30 20 10 0 Mar'05 Mar'06 Mar'07 YEARS Mar'08 Mar'09 TATA MARUTI MAHINDRA Interpretations This ratio is widely used by investors to decide whether or not to buy shares in a particular company. in 2008.9 35.9 18.6 36. As per the graph.5 11.5 24.09 21. the P/E ratio of the three companies was the lowest compared to the previous years.02 8.1 Mar'06 22.1 Mar'08 3.6 Mar'07 14.PRICE-EARNINGS RATIO (P/E RATIO) PRICE-EARNINGS RATIO YEARS TATA MARUTI MAHINDRA Mar'05 19.3 19. so the investors can benefit by selling the shares. An investor can go for Mahindra as its P/E ratio is the lowest in 2009 which indicates that it is undervalued and there is a scope for growth in the future. .6 5.5 22. TATA has the highest P/E ratio in 2009 which indicates that it is overvalued.9 Mar'09 40.

SUGGESTIONS & CONCLUSION .CHAPTER VI FINDINGS.

Mahindra has made a slight reduction from rs. the dividends per share have declined in all the three companies. Tata’s dividend has fallen drastically while Maruti stick to below 5 per share.10 per share this year. • In case of dividend per share. • The return on investment has been fluctuating since 2005 and the year 2009 witnessed low returns in case of all the companies amongst which TATA has the least rate of return. Maruti Suzuki and Mahindra and Mahindra. Especially. TATA’s sales have declined whereas Maruti and Mahindra have maintained the same upward positive trend. The sales growth looks positive but in the year 2009. there were fluctuations during the period 20052009.5 per share in 2008 to rs. Tata Motors. But there was a downward trend in 2009. TATA has witnessed a steep fall in the year 2009. Compared to the three companies. Due to recession.FINDINGS From the data analysis and interpretations of the ratios of three companies’ viz. the following findings have been given: • The three companies were performing well till 2008 with a positive trend in the earnings per share.11. . Mahindra has the highest ROI in 2009. • The sales trend has been upward and positive in case of all the three companies.

foreign investments are few of the opportunities which the industry has to explore for developing the economy. • The three companies have witnessed a low price earnings ratio in 2008 compared to the previous years. . TATA has the highest P/E ratio in 2009 which indicates that it is overvalued and Mahindra’s P/E ratio is the lowest in 2009 which indicates that it is undervalued and there is a scope for growth in the future. increase in consumer demand. Increase in income level. globalization. TATA and Mahindra have increased their payout ratio in which Mahindra shows a higher payout ratio. technology development.• Maruti had a stable dividend payout ratio since 2005. By analyzing the current trend of Indian Economy and Automobile Industry I have found that being a developing economy there is lot of scope for growth and this industry still has to cross many levels so there are huge opportunities to invest in and this is being proved as more and more foreign companies are setting up there ventures in India. But the ratio increased in 2009 in three companies.

In view of the slump in the domestic and international market. the sales of Maruti Suzuki increased from Rs 21200 Crore to Rs 23381 Crore. it has been revealed that this industry has a lot of potential to grow. It has reduced its dividend per share from rs. TATA has recorded a slowdown in sales and income level.SUGGESTIONS By analyzing the automobile industry with the help of fundamental analysis. Its sales have grown over past five years. So recommending investing in Automobile industry with no doubt is going to be a good and smart option because this industry is booming like never before not only in India but all over the world.6 in 2009. it can be recommended that for now Maruti share price shows . Its Earnings per share has also declined drastically. Maruti Suzuki and Mahindra and Mahindra have outperformed in the industry. The return on investment is also very low. • From the company analysis. In view of all these.15 in the previous year to rs. TATA is not a better option for an investor. As it is maintaining a stable position. • The global turmoil in financial markets has affected Maruti also. we can know that Mahindra would be a better option for an investor compared to TATA and Maruti. Inspite of the general economic slowdown. The three giants of Indian Automobile industry viz. The company is maintaining a stable position. TATA Motors.

Mahindra has maintained its upward sales level. This is because a relatively lower P/E would save investors from paying a very high price that does not justify the value of an investment. visibility of the business. • Business: An investor must look into what kind of business the company is doing. • Investing in Maruti Suzuki for long time could be a good option whereas in TATA motors there is a chance of getting correction. the investor can buy these shares. capital needs of the company for expansion etc. . • Holding the shares for long time could be a wrong step and at this point of time those who invested earlier can book their profits. its past track record. As Mahindra’s shares are undervalued. as it already went on high side in a very short period of time and is experiencing a downfall from 2008. The dividend per share is rs. • Despite the challenging business environment. Few Suggestions for “Right Stock Selection” There are three factors which an investor must consider for selecting the right stocks.10 which is higher amongst the three companies. Its Return on Investment is much higher compared to TATA and Maruti.that it’s a time to hold the position or buy more shares as there is scope of further rise in share prices. It would be the best option for the investor. The company has potential to grow.

• Bargaining: This is the most important factor which shows the true worth of the company. price-earning ratio. Long term goals should be the objective of equity investment.• Balance Sheet: The investor must focus on its key financial ratios such as earnings per share. Set the purpose for investment. Knowledge and Discipline are very crucial for investment. Investment rules • • • • • • Invest for long term in equity markets Align your thought process with the business cycle of the company. . dividends per share etc and he must also check whether the company is generating cash flows. Disciplined investment during market volatility helps attains profits. An investor needs to choose valuation parameters which suit its business. debt-equity ratio. Planning.

6 million units in 2009. have collectively had a devastating effect on the automotive sector. also had to face the impact of global meltdown. The main reason behind this downfall is because of the global recession. The collapse in market place witnessed unprecedented turbulence in the wake of global financial meltdown. Tata purchased Britain’s Jaguar Land Rover (JLR) from Ford Motor Company. which was trying to consolidate its leadership position in the market. . India emerged as Asia's fourth largest exporter of automobiles. A runaway inflation touching a high point of 12% early in the year.CONCLUSION The Automobile industry in India is the seventh largest in the world with an annual production of over 2. the tight monetary policies followed by the authorities for most of the year to control inflation with the consequent high interest rates and weak consumer demand. TATA Motors. company has a trend of growth from till 2008. behind Japan.During the financial year 2008-09 the there is downfall in the growth of the company.6% over the financial year 2007-2008. In 2009. South Korea and Thailand. Dividends and earnings remain low. The downfall of net profit during the financial year 2008-09 is 29. Acquiring JLR saddled Tata with some tough losses. Maruti Suzuki India LTD. Amid the crippling economic crisis.

At present its shares are undervalued giving it a potential for growth. Global recession had a dampener effect on the growth of automobile industry but it was a short term phenomenon. The industry is bouncing back. Mahindra has given a satisfactory performance. One factor favoring this point is that India has become a hot destination for companies of diverse nature to invest in. The analysis gives an optimistic view about the industry and its growth which recommends the investors to keep a good watch on the major players to benefit in terms of returns on their investments. Cut throat competition among top companies. .Inspite of it being a tough year for all the companies across the globe and in India. A continuous effort at cost cutting and improving productivity will help the companies in making reasonable profits despite the impact of higher commodity prices and weaker rupee. lots of new car and vehicle model launches at regular intervals keeps the Indian auto sector moving.

com www. ♦ Newspapers ♦ ♦ Economic times Business line Websites ♦ ♦ ♦ ♦ ♦ ♦ ♦ ♦ ♦ ♦ www.com www.mahindra.com www.yahoofinance. K Sharma. ♦ Security analysis and portfolio management by V.indiainfoline.moneycontrol. Avadhani ♦ Financial Markets and Services by Gordon and Natarajan. Financial Management by Shashi K Gupta and R.investopedia.sebi.BIBLIOGRAPHY Text Books ♦ Security Analysis and Portfolio Management by Punithavathy Pandian.com www.bseindia. Himalaya Publications.A.tatamotors.com www.gov.com www.com www.marutisuzuki.in www.nseindia.com www.com • CNBC TV18 – “The Informed Investor” supported by SEBI and presented by NSE . Kalyani Publications. Vikas Publications.

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