FUNDAMENTAL ANLYSIS OF VOLTAS

P.E.S Institute of Technology Department of MBA

“FUNDAMENTAL ANALYSIS OF VOLTAS”

SUBMITTED TO, Mr K.R.RAVI Professor of Management Department of MBA P.E.S Institute of Technology Bangalore. SUBMITTED BY, Sandeep -1PB11MBA02 Shameem -K. K 1PB11MBA14 Santosh. Tungal- 1PB11MBA06

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government policy and societal factors (to name just a few elements) within a business cycle framework. Foreign Exchange Risk This is a real risk and one must be cognizant of the effect of a revaluation or devaluation of the currency either in the home country or in the country the company deals in. taxes and a host of others. some of which are beyond its control .FUNDAMENTAL ANLYSIS OF VOLTAS FUNDAMENTAL ANALYSIS A CONCEPTUAL OVERVIEW Fundamental analysis refers to the study of the core underlying elements that influence the economy of a particular entity.the world economy. Foreign Exchange Reserves A country needs foreign exchange reserves to meet its commitments. I. therefore. to have an appreciation of the politico-economic factors that affect an industry and a company. It is a method of study that attempts to predict price action and market trends by analyzing economic indicators. 2 . its sales and its costs are affected by factors. pay for its imports and service foreign debts. It is important. balanced growth. If a country is ruled by a stable government which takes decisions for the long-term development of the country. price inflation. It may have splendid managers and a tremendous product. ECONOMIC ANALYSIS: POLITICO-ECONOMIC ANALYSIS: No industry or company can exist in isolation. However. The political equation A stable political environment is necessary for steady. industry and companies will prosper.

especially if it is very large. high interest rates result in higher cost of production and lower consumption. A government that is perceived to be proindustry will attract investment.FUNDAMENTAL ANLYSIS OF VOLTAS Restrictive Practices Restrictive practices or cartels imposed by countries can affect companies and industries. Interest Rates A low interest rate stimulates investment and industry. As a consequence. people have more disposable income. Government Policy Government policy has a direct impact on the economy. If the rate of inflation in the country from which a company imports is high then the cost of production in that country will automatically go up. India pays around $ 5 billion a year in principal repayments and interest payments. Inflation Inflation has an enormous effect in the economy. demand falls. Conversely. Within the country it erodes purchasing power. Foreign Debt and the Balance of Trade Foreign debt. crystallizing the exposure. If tax rates are low. 3 . The Threat of Nationalization The threat of nationalization is a real threat in many countries – the fear that a company may become nationalized. can be a tremendous burden on an economy. Taxation The level of taxation in a country has a direct effect on the economy.

demand reaches an all time high. Conspicuous spending begins once again. Inflation is high and so are interest rates. crippled by high borrowing and falling sales. Investment is also high. Companies. Prices that had been rising begin to stabilize and even fall. employment. The four stages of an economic cycle are: Depression Recovery Boom Recession Depression At the time of depression. supply begins to exceed the demand. Recovery During this phase. demand and the profitability of companies. Interest rates and inflation are high. are forced to curtail production. demand is low and falling. close down plants built at times of higher demand. Companies begin to post profits.FUNDAMENTAL ANLYSIS OF VOLTAS THE ECONOMIC CYCLE: It affects investment decisions. Companies start finding it difficult to sell their goods. Boom In the boom phase. and let workers go. There is an increase in demand. The economy slowly begins to downturn. the economy begins to recover. Gradually as time goes on. Interest rates are low. Then as the boom period matures prices begin to rise again. Recession The economy slowly begins to downturn. Investment begins anew and the demand grows. Demand starts falling.. 4 .

it may actually make losses. The Expansion or Growth Stage Once the industry has established itself it enters a growth stage.FUNDAMENTAL ANLYSIS OF VOLTAS II. and 4. Cycle The first step in industry is to determine the cycle it is in. Stabilization. sunrise or nascent stage 2. many new companies enter the industry. stagnation or maturity stage. The Stabilization or Maturity Stage 5 . Expansion or growth stage 3. INDUSTRY ANALYSIS The importance of industry analysis is now dawning on the Indian investor as never before. Decline or sunset stage to properly establish itself. The Entrepreneurial or Nascent Stage At the first stage. Entrepreneurial. As the industry grows. All industries evolve through the following stages: 1. the industry is new and it can take some time for it to properly establish itself. In the early days. or the stage of maturity of the industry.

This occurs when its products are no longer popular. and the like. the industry declines. THE THREAT OF SUBSTITUTION New inventions are always taking place and new and better products replace existing ones. Though sales may increase.FUNDAMENTAL ANLYSIS OF VOLTAS After the halcyon days of growth. The question that arises is how easy is it to enter an industry ? There are some barriers to entry: a) Economies of scale b) Product differentiation c) Capital requirement d) Switching costs e) Access to distribution channels f) Cost disadvantages independent of scale g) Government policy h) Expected retaliation j) International cartels 2. companies often have to spend large sums of money in advertising and promotion. Products are more standardized and less innovative and there are several competitors. BARRIER TO ENTRY New entrants increase the capacity in an industry and the inflow of funds. Growth is moderate. Rewards are low and so too is the risk. 6 . The Decline or Sunset Stage Finally. An industry where this occurs constantly is the packaging industry -bottles replaced by cans. 1. To ward off the threat of substitution. they do so at a slower rate than before. This may be on account of several factors such as a change in social habits The film and video industries. cans replaced by plastic bottles. an industry matures and stabilizes. An industry that can be replaced by substitutes or is threatened by substitutes is normally an industry one must be careful of investing in.

This occurs mainly by price cuts. i) The supplier's product is unique. in a buyer's market. g) The supplier's product is an important input for the buyer's. 7 . buyers are constantly forcing prices down. heavy advertising.FUNDAMENTAL ANLYSIS OF VOLTAS 3. and the like. f) The supplier's product does not have a substitute. This rivalry occurs mainly when: a) There are many competitors and supply exceeds demand. e) The switching costs are high. i. Companies resort to price cuts and advertise heavily in order to attract customers for their goods. d) The supplier supplies to various industries. 5. The factors one should check are whether: a) A particular buyer buys most of the products (large purchase volumes). 4. b) The industry growth is slow and companies are competing with each other for a greater market share. c) The economy is in a recession and companies cut the price of their products and offer better service to stimulate demand.e. They can also force prices down. demanding better services or higher quality and this often erodes profitability. they can destroy an industry. If such buyers withdraw their patronage. b) Buyers can play one company against another to bring prices down. This occurs when: a) The suppliers have a monopoly. h) The buyer is not important to the supplier. BARGAINING POWER OF THE BUYERS In an industry where buyers have control. or if there are few suppliers. b) Suppliers control an essential. c) Demand for the product exceeds. RIVALRY AMONG COMPETITORS Rivalry among competitors can cause an industry great harm. BARGAINING POWER FOR THE SUPPLIERS An industry unduly controlled by its suppliers is also under threat. additional high cost services or offers.

f) Competitors may have very different strategies in selling their goods and in competing they may be continuously trying to stay ahead III. In India management can be broadly divided in two types: Family Management Professional Management 8 . COMPANY ANALYSIS: At the final stage of fundamental analysis. This analysis has two thrusts: How has the company performed vis-à-vis other similar companies and How has the company performed in comparison to earlier years It is imperative that one completes the politico economic analysis and the industry analysis before a company is analyzed because the company's performance at a period of time is to an extent a reflection of the economy.FUNDAMENTAL ANLYSIS OF VOLTAS d) There is lack of differentiation between the product of one company and that of another. the buyer makes his choice on the basis of price or service. What does one look at when analyzing a company? The different issues regarding a company that should be examined are: The Management The Company The Annual Report Ratios Cash flow THE MANAGEMENT: The single most important factor one should consider when investing in a company and one often never considered is its management. In such cases. e) In some industries economies of scale will necessitate large additions to existing capacities in a company. the investor analyzes the company. The increase in production could result in over capacity & price cutting. the political situation and the industry.

grouped logically under specific heads. and the Profit and Loss Account or Income Statement summarizing the activities of the company for the accounting period. B) The Auditor's Report.FUNDAMENTAL ANLYSIS OF VOLTAS THE ANNUAL REPORT: The primary and most important source of information about a company is its Annual Report. The Annual Report is broken down into the following specific parts: A) The Director's Report. It must however. of the company's assets (that which the company owns). C) The Financial Statements. be noted that the Balance Sheet details the financial position on a particular day and that the position can be materially different on the next day or the day after. SOURCES OF FUNDS SHAREHOLDERS FUNDS SHARE CAPITAL (i) Private Placement (ii) Public Issue 9 .Financial Statements The published financial statements of a company in an Annual Report consist of its Balance Sheet as at the end of the accounting period detailing the financing condition of the company at that date. BALANCE SHEET The Balance Sheet details the financial position of a company on a particular date. and liabilities (that which the company owes). By law. A tremendous amount of data is given about the performance of a company over a period of time. this is prepared every year and distributed to the shareholders. Annual Reports are usually very well presented. and D) The Schedules and Notes to the Accounts C.

It is.its competence.FUNDAMENTAL ANLYSIS OF VOLTAS iii) Rights issues RESERVES i) Capital Reserves ii) Revenue Reserves LOAN FUNDS i) Secured loans: ii) Unsecured loans FIXED ASSETS INVESTMENTS STOCK OR INVENTORIES i) Raw materials ii) Work in progress iii) Finished goods CASH AND BANK BALANCES LOANS AND ADVANCES PROFIT AND LOSS ACCOUNT The Profit and Loss account summarizes the activities of a company during an accounting period which may be a month. in effect. its cost and the resulting profit or loss. and the result achieved by the company. It details the income earned by the company. a quarter. the performance appraisal not only of the company but also of its management. six months. 10 . a year or longer. foresight and ability to lead.

4. Gross profit to sales. Net profit to sales and 4. 2. Selling expenses to sales. Current assets to current liabilities. Shareholders equity to borrowed funds. (B) Balance Sheet Ratios These deal with the relationship in the balance sheet such as : 1. Sales to cost of goods sold. Liabilities to assets. Net income to assets employed. 3. 2. No single ratio tells the complete story Ratios can be broken down into four broad categories: (A) Profit and Loss Ratios These show the relationship between two items or groups of items in a profit and loss account or income statement. 2. Sales to debtors and 11 . Debt to assets and 5. These relate an item on the balance sheet to another in the profit and loss account such as: 1. 3. (C) Balance Sheet and Profit and Loss Account Ratios. Sales to stock. The more common of these ratios are: 1.FUNDAMENTAL ANLYSIS OF VOLTAS RATIOS: Ratios express mathematically the relationship between performance figures and/or assets/liabilities in a form that can be easily understood and interpreted. 4. Earnings to shareholder's funds. Liabilities to net worth. 3.

The major ratios that are considered: (i) Market value (ii) Price.FUNDAMENTAL ANLYSIS OF VOLTAS 5. (D) Financial Statements and Market Ratios These are normally known as market ratios and are arrived at by relative financial figures to market prices: 1.earnings ratio (iii) Market-to-book ratio (iv) Earnings (v) Earnings per share (vi) Dividend per share (vii) Dividend payout ratio (viii) Leverage ratios (ix) Return on investments/total assets 12 . Cost of goods sold to creditors. Market value to earnings and 2. (a) Market value (b) Earnings (c) Profitability (d) Liquidity (e) Leverage (f) Debt Service Capacity (g) Asset Management/Efficiency (h) Margins. Book value to market value.

Voice Antilles NV. spanning office complexes. and water pollution control. associates Voltas's subsidiaries include Metrovol FZE. It provides solutions in turnkey pumping projects for water. manufacture and marketing of a range of air conditioners and water coolers for household and institutional use. Voltas has its head office in Mumbai and regional offices in several major cities in India. its core competencies lie in air conditioning and cooling appliances and services. Hong Kong and Singapore. sourcing. ventilation and air-conditioning (HVAC) solutions: Includes the entire range of mechanical. specialty and pharmaceutical chemicals. Africa and Europe. training. mercantile ships. Simto Investment Company and Auto Aircon (India). mining and construction equipment and materials handling equipment. malls. machine tools. Its overseas offices are in Abu Dhabi (UAE). Cooling appliances: Design. etc. effluent and sewage treatment. IT parks. Central Asia. installation. the union territory of Dadra and Sanathnagar (Andhra Pradesh).FUNDAMENTAL ANLYSIS OF VOLTAS COMPANY PROFILE: Voltas is among India's leading air-conditioning. hospitals. Jebel Ali (Dubai). all in India. refrigeration and engineering services companies. airports. etc of engineering products and services in the fields of textile machinery. Southeast Asia. Chemicals: Import and distribution of an array of industrial. The company has ISO 9001-2000 certification and has executed projects in the Middle East. electrical and plumbing services for a diverse range of applications. Joint ventures. atomic energy plants. 13 . The company also exports gelatine. industrial plastics and bulk drugs. Engineering products and services: Design. Voltas is India's largest supplier of engineering products and services for the textile machinery sector and is a major manufacturer of forklift trucks. subsidiaries. maintenance. Weathermaker. Set up in 1954. Areas of business The company mainly operates in the following areas:     Heating. VIL Overseas Enterprises BV. ultramarine blue and agrochemicals. The company has factories at Thane (Maharashtra).

8 Chairman: Ishaat Hussain. 14 .FUNDAMENTAL ANLYSIS OF VOLTAS ANALYSIS OF VOLTAS: Company Analysis Key Highlights Symbol: VOLTAS LIMITED.38 crs Last close: Rs. Sector: Consumer Goods Industry: Diversified Market Cap: 3732. 112.

05 0.48 10.14 34.81 1.00 146.07 0.03 5.82 40.00 0.00 0.14 1.00 0.50 3.92 694.77 94.72 33.52 -54.80 4.22 1.53 15.00 0.124. Capitalised Other Expenses P/L Before Other Inc.22 15 .055.73 7.00 0.68 0.00 3.00 0.23 1.05 136.56 0.00 0.15 141.40 24.41 -116.98 1..05 38.94 0.00 144.64 733.00 0.00 -116.03 24.676.34 17.08 64.46 6. Int.51 1.00 0.07 0.65 44.10 610.11 92.00 0.00 1.33 16.00 0.00 0.38 17. Excpt.00 0.61 72.75 35.036.00 101.41 6.00 0.00 152.82 63.11 0.57 0.22 1.22 1.64 134.51 -3.00 0.00 0. And Selling Expenses R & D Expenses Provisions And Contingencies Exp.00 -84.00 84.) Sep ' 12 Jun ' 12 Mar ' 12 Dec ' 11 Sep ' 11 Net Sales/Income from operations Other Operating Income Total Income From Operations EXPENDITURE Increase/Decrease in Stocks Consumption of Raw Materials Purchase of Traded Goods Power & Fuel Employees Cost Depreciation Excise Duty Admin.00 64.56 42.93 1.621.90 17.34 1.46 7.00 0.00 130.00 0.00 0.45 1.03 77.98 0.09 2.07 0.00 -3. .00 0.07 1.00 135.31 -27.94 33.00 0.62 33. Items & Tax Other Income P/L Before Int. Excpt.58 18.65 133.93 1.00 0.71 27.00 1.00 0.12 22.91 128.27 19.00 150.45 -170.09 28.47 0.00 105.01 0.33 5.00 0.134.111.17 88.75 0.00 1.93 1.98 58.48 7.94 0.674.33 63.00 40.72 0.87 261.93 -259.10 5.18 599.05 0.07 0.61 101.68 90.00 0.00 0.95 1.07 3.107. Items & Tax Interest P/L Before Exceptional Items & Tax Exceptional Items P/L Before Tax Tax P/L After Tax from Ordinary Activities Prior Year Adjustments Extra Ordinary Items Net Profit/(Loss) For the Period Equity Share Capital Reserves Excluding Revaluation Reserves Equity Dividend Rate (%) EPS Before Extra Ordinary Basic EPS Diluted EPS EPS After Extra Ordinary Basic EPS Diluted EPS 1.51 -3.01 33.45 1.07 3.42 101.00 0.03 628.07 3.19 0.42 2.00 0.51 -3.45 1.45 1.620.59 47.46 123.00 0.07 0.93 1.66 10.56 33.03 603.FUNDAMENTAL ANLYSIS OF VOLTAS FINANCIALS OF VOLTAS (Rs in Cr.07 0.00 113.01 33.00 96.00 0.11 33.00 47.29 39.29 571..94 0.

and promoter group) . of the company) b) Non-encumbered .71 4.00 30.010.02 -10.58 which is calculated using MPS/EPS= 112. 16 . With EPS 4.23 1.59 the stock value is to be on a raising note as investors are keen on EPS rate.85 2.00 0. of shares (as a % of the total Share Cap.53 100.00 0.29 100. of shares (as a % of the total sh.31 69.15 2.00 997.Per.15 7.00 0. of prom.(Cr.00 0.27 1.8/4. and promoter group) .8.49 3.76 5.59= 24.39 6.Number of shares (Lakhs) .31 69.21 4.Per.311.42 Face Value P/E M/L 1.00 0. which means that growth potential of Voltas Ltd is on a higher side usually average P/E ratio will b around 15-25 with ratio standing @ 24.FUNDAMENTAL ANLYSIS OF VOLTAS Public Share Holding No Of Shares (Lakhs) Share Holding (%) Promoters and Promoter Group Shareholding a) Pledged/Encumbered .62 8.58 times it would be advisable to investors to buy the shares of Voltas Ltd.31 997.42 5.68 2.00 0.31 69. of shares (as a % of the total sh.53 3.53 1. P/E ratio is 24.85 2.00 30.298.21 5.00 0.47 0.00 0.12 100.00 30.53 100.27 8.00 30.32 6.311.58 1 Current market price is floating around 112.81 997.16 5.003.53 100.24 3.85 2.Per.00 0.8 Mkt Cap.73 69.84 VALUES OF INDICATORS OF VOLTAS : ISIN No Bookclosure Price INE226A01021 23/08/2012 112.00 0.00 0.Number of shares (Lakhs) .15 3.81 7.) Price/BookValue 52WeekH/L 3732.58 .83 -15.56 69. of shares (as a % of the total Share Cap.305.00 0.00 30. of the company) PBITOE margin (%)/ Operating profit Margin (%) PBTE Margin (%) PBT Margin (%) PAT Margin/ NP Margin (%) 2.59 1.62 3.00 24.38 2.311.Per. of prom.00 0.74 136/72 Book Value EPS Div Yield 41.00 0.

8 117487366.9 21157 2212015 The share price is hobbling around 115 there is growth with market fluctuations in mind it’s doing relatively good job so hence it would be suggestive to investors to buy shares.75 145312845.45 112.8 12256 1316137 110.1 9197 980195 114.65 114.4 8480 846386 112.1 9506 1024917 113.95 111.8 112.75 108 110.5 111.95 107.6 113.7 115.6 115.65 110.1 84838478.8 115.05 250786103.35 6468 753079 115. 17 .1 109.7 114.9 152808878.3 113.3 115.25 109.25 114.8 93178189.05 116.8 107849506.1 10676 1276636 110.FUNDAMENTAL ANLYSIS OF VOLTAS History of share price Price Date 02-112012 01-112012 31-102012 30-102012 29-102012 26-102012 25-102012 Open Price High Price Low Price Close Price Traded Value Number Of Trades Traded Quantity 115 117.

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