B11066

Long Term Financing, EVA & MVA
Dewan housing finance limited
a) Long term financing of DHFL1,2,3- (in lacs Rs)

year

2011-2010

2010-2009

2009-2008

2008-2007

2007-2006

Internal sources

4993.01

1378.7

1139.73

888.25

504.69

PAT

26512.68

15069.28

9176.49

8,257.74

4,840.17

(dividends plus dividend taxes)

-4392.67

-2973.28

-1778.31

-1857.21

-1680.17

(transfer reserves)

-17500

-11000

-6500

-5725

-2850

retained earnings

4620.01

1096

898.18

675.53

310

373

282.7

241.55

212.72

194.69

641,540.98

335,237.20

190,695.40

83,579.43

95,820.61

issue of equity shares

2,239.99

2,150.35

0

1,040.05

0.00

premium on equity shares

46,973.35

28,046.21

0

6,760.30

0.00

Issue of new share capital

49,213.34

30,196.56

0.00

7,800.35

0.00

loans from banks/ institutions

439716.12

275750.25

181953.77

85266.52

84295.36

non convertible debentures

55350.03

15761.68

13744.13

5527.48

513.33

unsecured loans

97261.49

13528.71

-5002.5

-15014.92

11,011.92

New debts

592327.64

305040.64

190695.4

75779.08

95820.61

Depriciation
External sources

151.02 7.208.949.399.567.266.00 731900 4.0 0 5187717000 11.094.00 4324830 791.2.00 81351980 66883496 10938194 242877 712557 527306286 71.359.658.670.302. 00 1131174666 -350000000 100000000 -350000000 -650000000 1400000000 1594376882 291139651 -2362918124 35855939963 -279681976 6432093882 779689682 4721113540 36948313846 2251492690 External sources issue of equity shares premium on equity shares Issue of new share capital loans from banks/ institutions non convertible debentures unsecured loans New debts .20 8.326.610 36.41 3.95 6.503.b) Long term financing of GRUH financing limited1. 00 388550031 285.00 125010 2.00 42.77 6.487.860.150.00 837.3 (in Rs) year 2011-2010 2010-2009 2009-2008 2008-2007 2007-2006 Internal sources 171966186 196733703 877994192 116715602 7745610 PAT 915117611 689585678 502759530 423409334 296068349 (dividends plus dividend taxes) (transfer reserves) -449471881 -263201662 194597091 -162144302 -121564350 -312000000 -244000000 171000000 -153000000 -175000000 retained earnings 153645730 182384016 868356621 108265032 -496001 Depriciation 18320456 14349687 9637571 8450570 8241611 6.721.00 7434031664 1742373883 608.

middle to lower income class.  GRUH Finance Limited. may be because of this reason the company has decided to raise more money by equity. The proportion of money raised via external sources when compared to internal sources is very high.the Company derives most of the financing needs from external sources. This could be due to the segment of population that the company caters to i. The company acquires most of its financing needs from outside because of the sector it operates in. The company has increased the amount of money raised by equity over the years.e. . Because of this reason company fulfils its financing needs via acquiring new debt. the finance required by a housing finance company is huge so the company raises most of the money by acquiring new debts. Most of the financing needs of the company are met by external sources. The cost of debt is less as compared to the cost of equity.C) Reasons behind the long term financing of the two companies DHFL-The Company derives its long term financing from both internal as well as external resources. Within external sources most of the funding is by the way of new debts acquired by the company. This could be because of the fact that the company has been doing good and the public perception of the company has also been good. But in the last two years the company has issued greater amount of equity as compared to the new debts acquired. Company did not even issue equity in two years in the last 5 year period. This segment has shown tremendous growth potential in the housing finance sector. Also the sector has been really good in terms of growth. The reason could be that the cost of debt provided to the company by banks and NBH is lower than the cost of equity.

94 87.25 208.943.65 78.3 37754.342.89 0.428.37 2315 9.019970048 3.2 50.775 240.367.34 66.86 1.61 52336.67 5769.3 195 104.15 128286.71 10850.83 137.7 50.38 32.21 80570.507.348.674.17 5.81 30075.426.02 0.312715623 60.06 6352.86 4.72 7.017046066 7.61 37678.46 1105.36 9.202.252.025 322.61 28.026.36 116.11% 884.35 41.10 33.691.437.77232206 70.43 10.39849 45.426.580.641.027.99 7.15 337.74 6752.10 5.85 57.408.3 (in lacs Rs) ECONOMIC VALUE ADDED NOPAT EBIT TAX WACC CAPITAL INVESTED TOTAL ASSETS CASH AND BANK BALANCES INVESTMENTS Loans and Advances CAPITAL CHARGE BOOK VALUE OF EQUITY Share Capital free reserves and surplus share application money equity share warrant Share price Highest share price Lowest share price No of equity shares MARKET VALUE OF EQUITY MARKET VALUE ADDED Return on Operating assets Retur on OP assets/ WACC P/BV ratio Book value per share 2011-2010 9.792.04 9.45 50.442.841.28 13.64 144.87 30.13 73.048.921.77 7687.45 82.953.544 20426660120 0 125.00 99255 515 9.449.435.229.93 46544.41 98.93 1.37 52.45 42.014664419 0.193.932.60 2008-2007 12.11% 1.206667785 0.71 0.018827435 20.2.26 2009-2008 13.029.402 27793086892 0 249.062.848.066.51 0 5600 0 0 0 0 266.56 .92 11.124.400.85 639450.65 89.11% 330.032.567.10 0.7421 92.137.3 39401.87 1.68 2007-2006 2.72 980.79443096 148.015976678 7.253.00 69246 3235 9.011.219162076 0.055.174.187031664 0.421009139 102.302157001 56.843.238.11% 413.124.11% 574.26 441.79 14.519 7055997612 250.70 73.506.02 9.489.67 2.486.467 154.754.32 2.169.527.05 60522975 7580502619 0 140.18 357.00 7635 9.04 10.26584 36.456.86 4049.000.175336673 0.69041 44.519 3691523524 27.53 2010-2009 18.64 8.160935236 1.21 0.00 145.122.6 175.502.PART B d) compute EVA & MVA for DHFL for the past five years1.997.740.631.25 10.122.

474898023 2.240289366 P/BV ratio 4.80300033 4.321282133 0.75 221.75 193.267654033 0.1 Lowest share price 313.312943172 0.21% 9.6 178.025 313.21% 9.99 76.85 -1474160.2.075 Highest share price 560.111993177 2.029580446 0.75 160.3 433.73 288038987.922964852 3.022123442 Retur on OP assets/ WACC 0.375 157.8 43097240.024642907 0.17 NOPAT 2924268664 2491588195 2514547966 1634071950 1230658389 EBIDTA 3283200000 2760600000 2717200000 1811700000 1238900000 TAX 340610880 254662118 193014463 169177480 Depreciation 18320456 14349687 9637571 8450570 8241611 9.75 99.21% 9.21 63.143715732 90.e) compute EVA & MVA for GRUH finance limited for the past five years1.6 636154712.266132033 0.91 47.028812678 0.74 54.21% 9.5 149.45 81.024502776 0.4 120.42 WACC Share price Book value per share .3 233.05 No of equity shares 34938346 34671607 34649660 34640765 31483622 MARKET VALUE OF EQUITY 15268930661 10865214844 5465983865 5559842783 4693420950 MARKET VALUE ADDED 12089553123 8218954061 3257281294 3657177466 3051083576 Return on Operating assets 0.21% CAPITAL INVESTED 30936572437 23933411615 20401794865 17280055492 13382562715 TOTAL ASSETS 32842694342 25877483705 24660235811 19633085017 14694789228 CASH AND BANK BALANCES 1236942775 1355952468 3748818375 1595507534 829345654 INVESTMENTS 346609125 327195511 127779263 166421520 174575743 Loans and Advances 322570005 260924111 381843308 591100471 308305116 CAPITAL CHARGE 2848330224 2203549207 1878393253 1590974709 1232132549 BOOK VALUE OF EQUITY 3179377538 2646260783 2208702571 1902665317 1642337374 Share Capital 351576330 347251500 346519600 346476990 346351980 free reserves and surplus 2827801208 2299009283 1862182971 1556188327 1295985394 share application money 0 0 0 0 0 equity share warrant 0 0 0 0 0 437.3 (in Rs) 2011-2010 2010-2009 2009-2008 2008-2007 2007-2006 ECONOMIC VALUE ADDED 75938439.

f) historical performance of the two firms: DHFL & GRUH finance limited DHFL. The MVA of the company has been constantly increasing. it signifies that the market perception of the company is very good.  GRUH finance limited. Also because of the growth in the housing finance sector the market perception of the company has been good. The company operates in a single segment and has good operational control so operational inefficiency could not be reason for the reduction in EVA. The company also kind of enjoys a monopoly in that segment. Other reason could also be because of the fact that all the segments of the housing finance sector may not be growing at an equal pace. . The reason for such decline could be the increased amount of equity raised form the market. It could be one of the factors for a positive market perception of the company. This could because of the fact that the company has now diversified its portfolio and now it caters to almost every segment of the population.the EVA of the company has been declining over the past 5 years. The MVA of the firm has been constantly rising. This could be because of the fact that the company has recently widens its horizons to other segments as well. it reflects a positive market perception of the company. This may have resulted in the decreased operational efficiency of the firm in a new segment.the EVA of the company has been positive for the past 5 years but it has been reducing over the past two years. It could be because of the increase in the size of the segment in which the company operates. This signifies that though the company has been growing by increasing its value but it has not been able to increase the rate of growth.

g) EVA as performance indicator as compared to MVA and other financial ratios MVA reflects the perception of the market of a particular company. So EVA provides a great deal of information to a company. EVA on the other hand reflects the value added to the company. Because of the perceptive nature of MVA it is more dynamic in nature as compared to EVA and other financial ratios.com 2 annual report 2011 to 2007 DHFL 3 annual report 2011 to 2007 GRUH finance limited . capital structure adopted by the company.xlsx 1 www. operation restructuring. When compared to other financial ratios EVA is more comprehensive as it tells not only about a single parameter but tells us about the wealth created by the company.nseindia. capital restructuring.i B11066_6. EVA also helps a company to plan for the future in terms of diversification. It also reflects the operational efficiency of the company.