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CONSTRUCTION OF PORTFOLIO OF

EQUITY AND DEBT

By
KIRAN KUMAR
(Reg. No 03VWCM6043)

This dissertation report is submitted in partial fulfillment of the


requirements
of the MBA program of Bangalore University

Under the guidance of


Prof. MIHIR DASH
Alliance Business Academy

Alliance Business Academy


19th cross, 7th main,
N.S.Palya, BTM 2nd Stage,
Bangalore 560076
2003 2005

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DECLARATION

I Kiran Kumar of MBA IV SEMESTER studying in Alliance Business


Academy, Bangalore do hereby declare that this Project titled

Construction of Portfolio of Equity and Debt has been prepared by


me in the partial fulfillment of the award of MASTER OF BUSINESS
ADMINISTRATION under Bangalore University during session 2003-
05. My guide for the dissertation has been Prof. Mihir Dash

I further declare that this project report has not been submitted earlier to
any other University or Institute for the award of any Degree or Diploma.

Date:
Place: Bangalore

Kiran Kumar
(03VWCM6043)

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CERTIFICATE

I, Prof. Mihir Dash hereby certify that this dissertation


report titled Construction of Portfolio of Equity and Debt
has been successfully carried out by Kiran Kumar with
Registration number 03VMCM6043 under my supervision
and guidance during the months of April June 2005.

Prof. Mihir Dash


Faculty
Alliance Business Academy
Bangalore

DATE:

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ACKNOWLEDGEMENT

I would like to take this opportunity to express my sincere thanks and indebtedness to
my president Sudhir Angur, my director, Prof. B.V. Krishna murthy for their valuable
guidance and encouragement.

I here by extend my sincere thanks to my program manager Prof.Narsimhan for his


support and co-operation.
I am greatly indebted to Prof. Mihir Dash for his guidance and encouragement
through out the project work. My sincere thanks go to him.

I am grateful to my parents without whose support and blessings this project would
not have been complete.

Last but not the least; I thank my friend Tejeshwari who have helped me in the
various stages of the project.

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Sl No Table of Contents Pg No
Chap 1 Theoretical background of the study 1
Fundamental Analysis 1
Debt Valuation techniques and concepts 6
Valuation 10
Total Return Index 13
Chap 2 Design of the study 14
Statement of problem 14
Research Methodology 15
Plan of analysis 15
Operational definitions 16
Chapter Scheme 21
Chap 3 Industry profile 22
Indian cement industry 24
Automobile industry 30
Hero Honda Valuation 34
Portfolio construction on the basis of FA 41
Chap 4 Analysis and Interpretation 43
Corporate debt 43
G securities 45
Portfolio of Equity and Debt 46
Hypothesis testing 48
Chap 5 Findings and suggestions 49
Cement industry 49
Automobile Industry 50
Portfolio evaluation 51

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Tab No List of Tables Pg No
1 Market share in motorcycles 35
2 Calculation of TRI 37
3 Calculation of Beta 37
4 Calculation of WACC 38
5 Calculation Of CAPEX 39
6 Fixed Asset Turn Over Ratio 39
7 Sales growth 39
8 FCFF Valuation 40
9 Exp returns on portfolio 41
10 Beta of the Portfolio 42
11 Corporate Debt Portfolio 44
12 G-Sec portfolio 45
13 Equity Portfolio 46
14 Debt Portfolio 47
Different combinations of debt and
15 equity. 47

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Theoretica
l
Backgroun
d
Of The
Study

Design
Of
The
Study
Industry
Profile

Analysis
And
Interpretat
ion