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This is to certify that Mr. JITESH JAIN student of SINHGAD INSTITUTE OF BUSINESS
ADMINISTRATION & RESEARCH, Pune has completed his field work report at SHAREKHA
N on the topic of EQUITY RESEARCH and has submitted the field work report in par
tial fulfillment of PGDM of the auto for the academic year 2008-10
He has worked under our guidance and direction. The said report is based on bona
fide information.

Prof. Shachi Kacker

Dr. V. S. Mangnale
Project guide
Place: - PUNE

I herby declare that the project titled “EQUITY RESEARCH (BSE-30)” is an original pi
ece of research work carried out by me under the guidance and supervision of Pro
f. Shachi Kacker . The information has been collected from genuine & authentic s
ources. The work has been submitted in partial fulfillment of the requirement of
PGDM autonomous.
Place: PUNE

First of all I would like to take this opportunity to thank the Sinhgad Institit
e Of Business Administration & Research and Prof. Mangnale, Director- SIBAR who
has given the opportunity to our P.G.D.M. programme & project work. I also thank
my Project guider Prof, Shachi Kacker who has guided throughout my project wor
Many people have influenced the shape and content of this project, and many supp
orted me through it. I express my sincere gratitude to Mr. Ram Bengani (Branch M
anager) for assigning me a project on “EQUITY RESEARCH ON SENSEX COMPANIES” which is
an interesting and exhaustive subject.
They have been an inspiration and role model for this project. Their guidance an
d active support has made it possible to complete the assignment.
I also would like to thank all the SHAREKHAN staff and friends who has helped an
d encouraged me throughout the working of the project.


1. Introduction………………………………………………………………..
1.5Company Profile……………………………………………………………………….
1.6Benefits of the study to organization…………………………………………………..
1.7Structure of the Report………………………………………………………………...
2. Literature Survey………………………………………………………..
3. Methodology……………………………………………………………...
3.1Data & Research……………………………………………………………………..
4. Result & Analysis………………………………………………………..
4.1 SWOT Analysis…………………………………………………………………….. 4.2 Market Scenario affecting the
4.4 Long Term Analysis…………………………………………………………………
4.5 Short Term Analysis………………………………………………………………….
4.6 Comparative Analysis………………………………………………………………..
5. Appendices (Company Analysis)………………………………………..
5.1 Larsen n Toubro……………………………………………………………………..... 5.2 Infosys………………………………………
5.8Mahindra and Mahindra………………………………………………………………….
5.9 Tata Motors……………………………………………………………………………....
5.10 ICICI Bank Ltd…………………………………………………………………………. 5.11HDFC Bank Ltd………………………………………………………………
6. References……………………………………………………………………
This report would help the potential investors and clients of Sharekhan invest i
n large cap blue chip stocks on the Sensex. The detailed company analysis of som
e (BSE 30) stocks would help them understand the company fundamentals - how stro
ng is the company financially and business wise. The effect of market scenario o
n various sectors would help them make sound and intelligent investment decision
s. SWOT analysis would help an investor weigh a company with its pros and cons.
Finally, top 10 stocks from the Sensex have been recommended for investment.
This should be a handy report for future investors and Share khan’s clients.

Bombay Stock Exchange Limited is the oldest stock exchange in Asia. Popularly kn
own as "BSE", it was established in 1875. It is the first stock exchange in the
country to obtain permanent recognition in 1956 from the Government of India. Se
nsex is the benchmark index of the Bombay Stock Exchange (BSE). It is composed o
f 30 of the largest and most actively traded stocks on the BSE.
The report contains detailed analysis for all the BSE 30 (Sensex) companies. The
analysis is in terms of the services offered by the company, its management and
history, recent initiatives, the stocks movements since the year 2000, bonuses
and splits, dividends, debt-equity structure, capital structure, Price by earnin
g analysis followed by the final analysis of the stock. Key events affecting the
stock prices of the company were also identified. In addition to the above deta
ils Capital Adequacy Ratio and Non performing Assets were also looked at for the
banking sector companies. Following the company analysis a market scenario anal
ysis was done and it was seen how each of the 14 sectors on the Sensex are getti
ng affected by the prevailing market scenario. Based on our company analysis, ma
rket scenario analysis and future financials the ten best stocks on the Sensex w
ere recommended. This would help the blue chip investors invest in some of the l
arge cap stocks on the Sensex and also move their stocks accordingly depending u
pon the market conditions. Some of the good stocks which have performed well ove
r the long term and short term were also identified.
A SWOT analysis was also done. Detailed company analysis and sector analysis hel
ped in coming up with a SWOT. This would help an investor weigh the pros and con
s for a company and make sound investment decisions.
Finally a few stocks belonging to the same sector on the Sensex were compared wi
th each other. The comparison was made in terms of Price by earnings, Earnings p
er share, Profit after Taxes, Sales and Long term & Short term returns.
Thus through this study an attempt has been made to help the potential blue chip
investors make good and intelligent investment decisions among the 30 stocks on
the Sensex.
The project is on detailed analysis of the BSE companies for Sharekhan with the
following objectives.
1) Conducting a SWOT for some companies. This will help in understanding th
e pros and cons of stock on BSE 30 and help investors pick up stocks which could
suit them. It would also help investors take intelligent decisions with good un
derstanding of what they are doing.
2) Identify early indicators of changing market scenarios affecting the var
ious sectors which an investor should be aware of and should watch out so that h
e can move stocks for that sector, as and when necessary, at an early enough tim
3) To recommend blue chip investors (BSE 30 are all blue chip stocks) the t
op 10 stocks on the Sensex based on the company analysis and the prevailing mark
et scenario.
4) Identify those stocks on the Sensex which have given good long term retu
rns and good short term returns
5) To do a comparison for some of the stocks with any other BSE 30 stock wi
thin the same sector.
This project is on fundamental analysis of some of BSE 30 (Sensex) company. This
is inclusive of the company history, its operations, management and any recent
contracts. A financial analysis of the company is done wherein the stock movemen
ts over the years with respect to the Sensex, the bonuses and dividends paid, de
bt equity structure, P/E analysis of the stock and the capital structures are an
alyzed. In case of Banking and Financial institutions, Capital adequacy ratio an
d Non-performing assets are also analyzed. The trends (upward & downward) are ex
plained. Finally a stock analysis is done wherein the kind of returns (long term
& short term) made by the particular stock, risk, fundamentals and future prosp
ects of the stocks are discussed.
Following the company analysis for the BSE companies, a SWOT analysis for stock
s is done. This would help the investor take intelligent decisions about the sto
cks with a good understanding of the company. The study also tries to identify h
ow the market scenario is affecting each of the twelve sectors within the Sensex
. A good investor should be aware of the market scenario before moving his stock
s. Based on the scenario analysis and the company analysis, the 10 best stocks o
n the Sensex are recommended. Recommendations are also done on some of the stock
s which have done well in long term and short term. A comparison is made between
two or more stocks belonging to the same sector.
1) The market scenario keeps changing and not all events can be foreseen. T
his could affect the analysis and the results. For instance the stocks at the In
dian bourses had been doing well until the recent slump and nobody could foresee
these changing circumstances.
2) This kind of an analysis is subjective to an extent and could differ fro
m the analysis done by professional analysts.
3) There was little access to the graphs showing the effective values of th
e stocks i.e. the effective value of the stocks considering the bonuses and spli
ts. This led to manually calculating those values and plotting them.
4) Interpretation of risk became a little difficult going only by the value
s of Beta. Financial ratio debt equity was also considered but many a times it r
an contrary to the value suggested by Beta. For instance a high beta and low deb
t equity and vice versa. Hence the results were not that conclusive.
The methodology for this study is based on secondary research. This is a descrip
tive research with clear objectives for the study. The company analysis is done
using secondary research referring to websites such as, www,,, and Various sectoral reports from Motilal Oswal, UBS and Credi
t Suisse were also consulted for the analysis. Finally a database in the form a
spreadsheet was made based on the sectoral reports and the company analysis whic
h helped in doing the final analysis.
Sharekhan, one of India s leading brokerage houses, is the retail arm of SSKI. W
ith over 510 share shops in 170 cities, and India s premier online trading porta
l. Some of the services offered by share khan are the following:
1) Online Services: With a Sharekhan online trading account, one can buy an
d sell shares in an instant. Anytime and from anywhere. One can choose the onlin
e trading account that suits their trading habits and preferences. The various o
nline accounts are:
Classic Account: This account enables to buy and sell shares through the website
. The features offered are Streaming quotes, multiple watch list, Integrated ban
king, demat and digital contracts , instant credit & transfer, IPO bookings and
real time portfolio tracking with price alerts.
Speed Trade: Speed trade is an Internet-based executable application that provid
es everything a trader needs on one screen. It provides services such as Real ti
me streaming quotes, live Tic by Tic intra-day charting and trading in cash and
derivatives on a single screen.
2) Share Shops: A Sharekhan outlet offers the following services:
Online BSE and NSE executions
Free access to investment advice from Sharekhan s Research team
Sharekhan ValueLine (a monthly publication with reviews of recommendations, stoc
ks to watch out for etc)
Daily research reports and market review (High Noon & Eagle Eye)
Pre-market Report
Daily trading calls based on Technical Analysis
Cool trading products (Daring Derivatives and Market Strategy)
Personalized Advice
Live Market Information
Depository Services: Demat Transactions
Derivatives Trading (Futures and Options)
Commodities Trading
IPOs & Mutual Funds Distribution
3) Mutual Funds
4) Commodities Trading: Through Sharekhan one can trade in on both the lead
ing commodity exchanges MCX and NCDEX. They provide with various commodity repor
ts and analysis, daily commodity data and end of day statistics.
5) Portfolio Management Services
PMS Pro-Prime: Ideal for investors looking at steady and superior returns with l
ow to medium risk appetite. This portfolio consists of a blend of quality bluech
ip and growth stocks ensuring a balanced portfolio with relatively medium risk p
rofile. The portfolio will mostly have large capitalization stocks based on sect
ors & themes who have medium to long term growth potential.
PMS Pro-Tech: Protech uses the knowledge of technical analysis and the power of
derivatives market to identify trading opportunities in the market. The Protech
line of products are designed around various risk/reward/volitality profiles for
different kinds of investment needs.
6) Demat Services: Dematerialization and trading in the demat mode is the s
afer and faster alternative to the physical existence of securities. This system
works through depository participants (DPs) who offer demat services and the se
curities are held in the electronic form for the investor directly by the Deposi
tory. Sharekhan Depository Services offers dematerialization services to individ
ual and corporate investors.
7) Sharekhan Valueline: This is the monthly investment report based on fund
amental research with stock ideas, stock updates, earning guide, Stock recommend
ations, Mutual fund guide, Market outlook and sector updates.
This report would help the potential investors and clients of Sharekhan invest i
n large cap blue chip stocks on the Sensex. The detailed company analysis of som
e (BSE 30) stocks would help them understand the company fundamentals - how stro
ng is the company financially and business wise. The effect of market scenario o
n various sectors would help them make sound and intelligent investment decision
s. SWOT analysis would help an investor weigh a company with its pros and cons.
Finally, top 10 stocks from the Sensex have been recommended for investment.
This should be a handy report for future investors and Share khan’s clients.
The second section gives the literature survey for the report. It starts with ex
plaining about the Sensex and is followed by various technical terms which shoul
d be familiarized before going through the report.
The third section explains the methodology used for the report, the data used an
d the kind of research done.
The fourth section looks at the Results and the Analysis done. Analysis is done
in five sub-parts. The first part does a SWOT analysis for the some companies. T
he second part looks at how the market scenario is affecting the various sectors
on the Sensex and particularly the stocks within those sectors. Third part give
s the recommendations for the top 10 stocks on the Sensex as of now. Following t
his is a list of those stocks which have given good long term and short term ret
urns. Finally a few stocks on the Sensex from the same sector are compared with
each other. The comparison is done in terms of Price by earnings, Earnings per s
hare, Profits after Tax and Sales, profitability and long term & short term retu
rns. In addition to this, the banking stocks are also compared using their non p
erforming assets and capital adequacy ratio. This part also carries the recommen
dations and suggestions.
The appendices consist of the company reports for some companies and a database
in the form of spreadsheet which helped in the final analysis of the stocks. The
company reports are further structured. It starts with the explanation of the c
ompany and its services, companies past history, the stock movement of the compa
ny since the year 2000 with respect to the sensex, dividends, bonuses & splits,
capital structure, debt equity structure, P/E analysis followed by a final analy
sis of the stock. Key historic dates affecting the share prices of the company a
re also identified while having a look at the share price movement with respect
to the Sensex.
A Stock or a Share is an instrument that signifies an ownership position (called
equity) in a corporation, and represents a claim on its proportional share in t
he corporation s assets and profits. Ownership in the company is determined by t
he number of shares a person owns divided by the total number of shares outstand
Bombay Stock Exchange Limited (the Exchange) is the oldest stock exchange in Asi
a. Popularly known as "BSE", it was established in 1875. It is the first stock e
xchange in the country to obtain permanent recognition in 1956 from the Governme
nt of India.
Sensex is the benchmark index of the Bombay Stock Exchange (BSE). It is composed
of 30 of the largest and most actively traded stocks on the BSE. These 30 stock
s belong to 14 sectors viz Capital goods, Information and Technology, Cement, Re
al Estate, Infrastructure, FMCG, Automobile, Banking, Oil and Gas, Metals, Power
, Health Care, Telecom and Diversified.
An index is basically an indicator. It gives a general idea about whether most o
f the stocks have gone up or most of the stocks have gone down. If the Sensex go
es up, it means that the prices of the stocks of most of the major companies on
the BSE have gone up. If the Sensex goes down, this tells you that the stock pri
ce of most of the major stocks on the BSE have gone down. The index is calculat
ed based on a free-float capitalization method when weighing the effect of a com
pany on the index. To find the free-float capitalization of a company, first fin
d its market cap then multiply its free-float factor.
Free-float market capitalization is defined as that proportion of total shares i
ssued by the company, which are readily available for trading in the market. It
generally excludes promoters holding, government holding, strategic holding and
other locked-in shares, which will not come to the market for trading in the no
rmal course. Thus, the market capitalization of each company in a Free-float ind
ex is reduced to the extent of its Free-float available in the market.
Stock split simply involves a company altering the number of its shares outstand
ing and proportionately adjusting the share price to compensate. The balance she
et items remain same except that the total number of outstanding shares of the c
ompany increases proportionately to the ratio of split. Split can occur at any r
atio. The most commonly used ratios are 2:1, 3:2, 5:4, 4:3 etc.
Bonus issues are simply distributions of additional stocks made to existing shar
eholders in proportion to their current investment. If a company distributes a b
onus issue by using retained earnings, it makes a book entry to allocate retaine
d earnings into paid up capital in the stock holders’ equity section of the compan
y balance sheet. Alternatively, if a company decides to make a bonus issue by us
ing accumulated capital reserves, it adjusts the accumulated capital reserves in
to paid-up capital. In both the cases the company does not receive any cash. The
re is no effect on stock holder’s proportional ownership of stocks, capital struct
ure and financial position of the company.

Stock split and bonus issues are similar in several aspects. In particular, they
are both Corporate events in which each shareholder receives a certain number o
f new shares free of charge, whereby the stock price is reduced accordingly. Ho
wever, there is at least one important difference between the two events that is
often neglected in the literature. In the case of a stock split, each old share
is split into a number of new shares with a reduced par value, leaving the tota
l share capital unchanged. In the case of a bonus, a number of new shares are re
ceived for each share owned. The new shares have the same par value as the oldsh
ares, whereby the total share capital increases proportionately with the size of
the bonus. Empirical research has shown that the market generally reacts positi
vely to the announcement of a stock split / bonus issues ( Dhar and Chhaochhari
Debt-to-equity ratios, and specifically long-term debt/equity ratios, measure a
firm’s borrowing capacity. The heavier its debt load, the more earnings must be us
ed to pay it down instead of on growing the business. Additionally, the lower th
e (positive) debt/equity number, the wider the margin of protection to business
operations. For example, a company that shows steady revenue growth and a low de
bt/equity ratio would be regarded as a more stable market performer and more lik
ely to remain in the marketplace than one experiencing revenue losses over sever
al. Such a company also shows a low financial risk hence investors and creditors
invest in such companies. It is the ratio between debt (secured loans, unsecure
d loans) and equity (Equity share capital &Reserves and Surplus).
The P/E ratio (price to earnings ratio) of a stock (also called its "earnings mu
ltiple", or simply "multiple", "P/E", or "PE") is a measure of the price paid fo
r a share relative to the annual income or profit earned by the firm per share.
A higher P/E ratio means that investors are paying more for each unit of income.
It is a valuation ratio included in other financial ratios. The P/E ratio can a
lso be calculated by dividing the company s market capitalization by its total a
nnual earnings.
The P/E gives an idea of what the market is willing to pay for the company’s earni
ngs. A P/E is seen with respect to the other companies in the same sector and it
is normally expected to be around the industry average. Some investors read a h
igh P/E as an overpriced stock or it can also indicate the market has high hopes
for this stock’s future and has bid up the price but if it is low then it could b
e just the thing there are looking for. But then further one might like to inves
tigate as to why the stock price is low before going for the stock.
Dividend is the distribution of earnings among the shareholders. It is expressed
as the amount of dividend a share earns. It can also be expressed in terms of p
ercentage ie % of face value. A 100% dividend on face value of Rs 10 for a share
with market price of Rs100 would give a dividend of Rs 10.
EPS (Earning per Share) is calculated by taking company s net earnings and divid
ing by the number of outstanding shares of stock the company has. For example, i
f a company reports Rs 1Crore in net earnings for the previous year and has 50 l
akh shares of stock outstanding, then that company has an EPS of $2 per share.
Dividend Payout Ratio is a dividend as a percentage of earnings. It is calculate
d as
Dividend Per Share/ Earning per Share. Growing companies will typically retain m
ore profits to fund growth and pay lower or no dividends. Companies that pay hi
gher dividends may be in mature industries where there is little room for growth
and paying higher dividends is the best use of profits.
Return, is the ratio of money gained or lost on an investment relative to the am
ount of money invested. Returns from each share have two components: the dividen
d income and the capital gain. Bonuses are also considered in the returns if any
. Hence, the rate of return on a share would consist of the dividend yield and t
he capital gain yield. The rate of return of a share held for one year is as fol
Rate of Return=Dividend yield+ Capital gain yield
Returns could be long term having a holding period of say 8-10 years or they cou
ld be short term with a period of 3-5 years.
Risk is the quantifiable likelihood of loss or less-than-expected returns. Varia
nce or standard deviation is a measure of the risk of returns on a security. Inv
estors have different risk preferences. Investors may be risk averse (low risk i
nvestors), risk seekers (high risk investors) or risk neutral.
Beta is the quantitative measure of the volatility of a given stock relative to
the overall market usually the sensex. A beta of 1.0 indicates average level of
risk while more than 1 means that securities return fluctuates (aggressive secur
ity) more than the market portfolio. A zero beta means no risk.
The Capital Structure of the company constitutes of the Authorized Capital, Issu
ed Capital and Paid up Capital.
Authorized capital of a company (sometimes referred to as the nominal capital) i
s the maximum amount of share capital that the company is authorized to issue to
shareholders. Part of the authorized capital can (and frequently does) remain u
Issued share capital of a company is the total nominal value of the shares of a
company which have been issued to shareholders and which remain outstanding. The
se shares, represent the capital invested by the shareholders in the company.
Paid-up capital is essentially the portion of authorized stock that the company
has issued and received payment for.
The following ratios are also looked upon while studying banks.
Capital adequacy ratio is a measure of a bank s capital. It is expressed as a pe
rcentage of a bank s risk weighted credit exposures. This ratio is used to prote
ct depositors and promote the stability and efficiency of financial systems arou
nd the world. Two types of capital are measured: tier one capital, which can abs
orb losses without a bank being required to cease trading, and tier two capital,
which can absorb losses in the event of a winding-up and so provides a lesser d
egree of protection to depositors.
Risk weighted assets mean fund based assets such as cash, loans, investments and
other assets. Degrees of credit risk expressed as percentage weights have been
assigned by RBI to each such assets. The minimum capital adequacy ratio to be ma
intained by each bank as per the RBI norms is 9.0%.
Nonperforming asset is loan or lease that is not meeting its stated principal an
d interest payments. Banks usually classify as nonperforming assets any commerci
al loans which are more than 90 days overdue and any consumer loans which are mo
re than 180 days overdue.
The Net interest income (NII) is the difference between the revenues on the asse
ts and the cost of servicing the liabilities. In other words, the NII is the dif
ference between the interest payments to the bank on loans and the interest paym
ents by the bank to the customers on the deposits.
NII= {Interest Payment on Assets}-{Interest Payment on Liabilities}
1) Company analysis has been done through a secondary research (Internet Re
search) going through company website, financial services websites such as www.m,,,, www.r,,,, etc.
2) The company analysis is broadly done under the following headings
a) Company profile, management and its history
b) The stock price movements and the effective stock price movements since
the year 2000 viz a viz the sensex. The effective price of the stock has been ca
lculated taking into account the bonuses and splits. Maximum value of the stock
in the particular year and the corresponding Sensex values on that day were take
n to plot the graphs.
c) Following this, the key events since the year 2000 which have influenced
the share price of the company are identified.
d) Bonuses and stock splits since the year 2000. An attempt is made to see
what made the companies give all these bonus and splits
e) Dividends, dividend payouts and EPS since the FY 2003 and what explains
the dividends and earnings per share of the company.
f) P/E since the FY 2003
g) Capital structure of the company since the year 2000.
h) Final analysis of the stock. This section describes the effective price
movement of the stocks with respect to the Sensex., the weightage of each stock
towards the Sensex, the long term and short term returns the stock has given, th
e risk and a bit of outlook for the future. The long term and short term returns
were calculated considering the dividends, bonuses and splits. Long term return
s have been calculated since the year 2000 and short term returns since the year
3) SWOT (Strength, Weakness, Opportunities, Threats) analysis for the compa
nies was done. The company analysis and the sectoral research helped in this.
4) Market scenario analysis was done, where in it was identified what are t
he recent market variables affecting the various sectors and the company stocks
within them.
5) A database was produced using the company analysis, market scenario anal
ysis and a bit of predicted future financial ratios (P/E and EPS) of the company
. This database helped in short listing the 10 best stocks on the Sensex. The da
tabase also helped in selecting the stocks which have been good for long term an
d short term.
6) A few stocks from similar sectors have been compared. Automobile majors
Maruti Suzuki, Mahindra & Mahindra and Tata Motors are compared with each other.


The research being done is more like a descriptive research wherein clear object
ives have been defined and according to that the secondary data has been picked.
The maximum values of each stock since the year 2000 were picked up from the BSE
website. Yahoo finance site helped in picking the data for Sensex on that parti
cular day. The other financial data for debt-equity, price by earnings, capital
structure, dividends, earnings per share, bonuses and splits were picked up from
the following websites.,, and www.capitalmarkets.
This section has some parts to it. First part does a current market scenario ana
lysis affecting the sectors on the Sensex and the stocks within them. A databas
e comprising of company analysis done, sectorial analysis and future financial r
atios was made. This database can be referred to in the appendices. Finally the
last part looks at the comparisons done between two or more stocks belonging to
the same sector. Suggestions are also given over which is the better stock among
the ones which are being compared. Each of these subsections carries recommenda
tions or suggestions.
Sensex the Bombay Stock Exchange (BSE) benchmark index is made up of 30 stocks.
These stocks belong to 13 sectors viz Capital Goods, Information Technology, Cem
ent, Real Estate Infrastructure, Automobile, FMCG, Banking and Finance, Oil and
Natural Gas, Metals, Power, Telecom, Pharmaceuticals and Diversified. These sect
ors often get affected by changing macro economics and market scenarios. The sec
tors are affected by factors like Changing Global Economy, Government regulation
s, prevailing domestic economy, climate etc. Let us have a look how the prevaili
ng market scenario is affecting these sectors and the Sensex stocks within them.
Auto stocks have outperformed the benchmark indices in the recent stock market c
The worst phase of the volume decline and stagnation in profitability has been n
egotiated. The industry remains on track to achieve volume growth of 8-12% CAGR.
The benefits accruing from productivity improvement and cost reduction programs
undertaken by the auto companies would continue to partially offset the pressure
s from rising input prices.
Recent excise duty cuts to help.
Higher disposable income in the hands of the consumers would lead to an increase
in demand for vehicles.
Export market to become volume growth driver for the industry.
Cause of concern is the rapidly increasing price of steel.
Exchange rate fluctuation is another concern. Could effect companies exporting a
utomobiles overseas.
The three automobile companies on the Sensex are Mahindra and Mahindra, Maruti S
uzuki and Tata Motors
Mahindra and Mahindra
The recent excise duty cut from 16% to 12% on small cars would help.
It is the market leader in Utility Vehicles. Rural bias of the government toward
s the agricultural sector should help the company
The recent excise duty cut from 16% to 12% on small cars would help.
The Japanese yen has appreciated on a YoY and QoQ basis and this negative for Ma
ruti Suzuki.
Maruti is investing heavily in its facilities; it will invest a further Rs90b in
India over the next 8 years
Tata Motors
Have set up their plants in tax exempt region of Uttaranchal. Company would be i
n a better position to take advantage of the tax benefit.
Tata Motors has acquired the luxury brands of Jaguar and Land Rover from Ford UK
. Automobile company should benefit from its various overseas ventures.

Automobile sector companies Maruti, Mahindra & Mahindra and Tata Motors are comp
ared to each other. The comparison is done in terms of EPS, P/E, Profit after Ta
xes, Sales, Profitability and Long term and Short term returns. Finally suggesti
on is given over which is the better stock between the three companies.
(Data Source:
The graph above shows earnings per share comparison for the three automobile maj
ors viz Maruti, Mahindra & Mahindra and Tata Motors. Maruti showed an increase i
n EPS for the FY 2007 in wake of good dividends announced by the company. Mahind
ra and Mahindra had a huge increase in EPS for the financial year 2005 but subse
quently it dropped to 34.19 in the year 2006. The major drop in EPS for FY 2006
for Mahindra and Mahindra was due to a bonus of 1:1 in the FY 2005. Hence the e
ffective EPS for FY 2006 would be 68.38 and greater than Maruti and Tata Motors.
Tata Motors has had an increasing EPS since the FY 2004. This has been due to
a good increase in earnings before interest and tax and Profit after Tax


(Data Source:
Tata Motors has shown a declining trend in its P/E ratio over the last few years
this has been due to an increasing EPS as explained in the section above. In co
ntrast Mahindra and Mahindra’s P/E increased for the year 2006 due to a decreased
EPS on the back of a bonus issue in 2005. Subsequently the P/E increased due to
an increase in share price for Mahindra and Mahindra. Maruti’s P/E has also been s
teadily declining due to an increasing EPS.
Among the three automobile companies Maruti has the least P/E for FY 08. The sha
re prices are underpriced as compared to the other two automobile companies.

(Data Source:

Tata Motors has been a company with a better PAT and Sales in comparison to Maru
ti and Tata Motors as suggested by the figures given above. But if one takes a l
ook at the profitability Maruti has outperformed the other two companies. Infact
Tata Motors has been taking a steady dip in its profitability since the year 20
*The returns have been calculated till date taking into consideration dividends,
bonuses and splits. The details are in the company analysis attached in the App
Mahindra and Mahindra has been a stock which has given better long term and shor
t term returns in comparison to Maruti Suzuki and Tata Motors.
SUGGESTIONS: Mahindra and Mahindra has performed better than the other two autom
obile stocks on the Bourses. This is due to its good EPS, bonuses and outstandin
g long term and short term returns over the past. Maruti has also done well over
the past given its good EPS and profitability. It has been a better performer t
han Tata Motors in the past. But considering the recent initiatives Tata Motors
has taken with the acquisition of Land Rover and Jaguar and the announcement of
Tata Nano , Tata Motors becomes a better pick for the future.


Maruti started as a government company, with Suzuki as a minor partner, to make
a people s car for middle class India. Suzuki Motor Corporation, has been a glob
al leader in mini and compact cars for three decades. Suzuki s technical superio
rity lies in its ability to pack power and performance into a compact, lightweig
ht engine that is clean and fuel efficient. Right from inception, Maruti brought
to India, a very simple yet powerful Japanese philosophy smaller, fewer lighte
r, shorter and neater .
India s largest passenger car company, Maruti accounts for over 50 % of the dome
stic car market. They have a sales network of 562 outlets in 372 towns and citie
s, and provide maintenance support to customers at 2538 workshops in over 1200 t
owns and cities. Maruti since inception, has produced and sold over 6.75 million
vehicles, including almost 500,000 units in Europe and other export markets. Th
ey are a subsidiary of Suzuki Motor Corporation, Japan.
It has sold more than 450,000 cars to more than 100 countries of the world.
Some of these cars became bestsellers. Like the old Zen was projected as the Wor
ld Car and was very well received in Europe. At present, many entry level models
are exported to Latin American and African nations. With a heavy focus on Non E
uropean countries the car maker has managed to bring incremental sales and expor
ts to these countries by 47%, 65% and 40% in the past three years.
Maruti offers 11 models ranging from people s car Maruti 800 to stylish hatchbac
k Swift, DZire, SX4 sedan and luxury Sports Utility vehicle Grand Vitara. They
forayed in Maruti Finance back in 2002 providing enhanced services and convenien
ces to customers. Leading companies in auto-finance partnered with in this ventu
re with a mission to offer convenience, transparency and value for money to cust
omers. The consortium of companies financing Maruti includes ICICI Bank, HDFC Ba
nk, Kotak Mahindra, Sundram Finance etc.
It has got 15 Joint Venture companies, including Suzuki Powertrain India Limited
for component supply. One of them is the joint venture with Bellsonica Corporat
ion launched in 2008.
Maruti depends on a national network of suppliers, sales outlets and workshops,
managed by independent entrepreneurs, to manufacture car components and look aft
er their customers. Nearly 75,000 people are employed directly by Maruti and the
ir partners.
Maruti has got facilities in Gurgaon (3 Vehicle Assembly Plants) and Manesar (1
Vehicle Assembly Plant). The facility in Gurgoan houses three fully integrated p
lants. The three plants have a total installed capacity of 350,000 cars per year
, several productivity improvements or shop floor Kaizens over the years have en
abled the company to manufacture nearly 6,50,000 cars per year at the Gurgaon fa
cilities. The entire facility is equipped with more than 150 robots, out of whic
h 71 have been developed in-house. More than 50 per cent of our shop floor emplo
yees have been trained in Japan.
There are 13 board of directors with Mr Sinzo Nakanishi as the Chairman and Mr J
agadish Khattar as the Managing Director.
1981: It was incorporated in this year.
1982: Joint venture agreement with Suzuki. The company born out of this JV was M
aruti Udyog Limited.
1983: Maruti 800 launched. The company went into production in just 13 months.
1987: First lot of 500 cars exported to Hungary
1992: Suzuki Corporation increases its stakes in Maruti upto 50%.
1993: Maruti Zen launched
1997: Maruti achieved the highest Customer Satisfaction Index
2000: IDTR launched jointly with Delhi Government to promote safe driving habits
. First car company in India to launch a call center.
2002: Suzuki Motor Corporation acquires majority stakes in MUL (Increases to 54.
2 %)
Maruti Finance and Insurance Launched
2003: Maruti got listed in BSE and NSE. IPO oversubscribed 11.2 times.
2005: Swift launched, first world strategic model from Suzuki Maruti Corporation
2007: Company name changed from Maruti Udyog Limited to Maruti Suzuki Limited.


(Data Source:,

In May’2003 Maruti Udyog Ltd (MUL) set floor price of its share at Rs 115 for its
initial public offering (IPO) to divest 25 % of the Indian Government’s stake. Suz
uki offered to buy the entire 25 % stake that the government was divesting. The
government offered shares through a bidding or book building process. At the flo
or rate, the issue size amounted to Rs 830 crore (Rs 8.3 billion). After the iss
ue, the government’s stake would come down to 20.8 per cent from 45 per cent.
Shares in the Indian carmaker Maruti surged by 31% on the first day of trading,
as investors bet on the growth of car use among the country s burgeoning middle
class. Analysts had expected share prices to rise by a fifth at their trading d
ebut, but the performance was even better than expected. Shares by the end of t
rading reached 164.05 rupees each, up from the original flotation price of 125 r
upees per share
The stock price of Maruti Udyog (MUL) doubled in Dec’2003 since it got listed on J
uly 9, 2003. At about Rs 355, the stock trades at a price earnings of 17 times.
Investors with an appetite for high risk considered buying the stock. MUL s new
price positioning strategy Suzuki Alto, the redesigned Wagon R and Zen, and the
plans for a new small car by its parent Suzuki were the factors that clearly poi
nted to upside potential.
Concerns over profitability led to a dip in Maruti s share price by 1.72 per cen
t on the BSE to Rs 363 as on Sept 24th’2004. The likely investment of Rs 6,000 Cro
re had raised fresh concerns that a large proportion of the investment would be
borne by Maruti. This would have put pressure on the company s profitability in
coming years.
Oct 31st’2004 ( Closing: Rs 375.4) the company enjoyed the potential for an increa
se in sales for after it enters new segments, and the long-term prospects for th
e two new subsidiaries that the company set up in collaboration with its parent,
Suzuki Motor Corporation.
On the cost front, MUL was likely to be on stream to achieve a further reduction
in operating costs and, to a lesser extent, on the cost of components and other
raw materials. The price of steel and oil continued to be sustained and, as a r
esult, input costs of raw material and logistics remained under strain.
Indians rushed to buy new cars in the past two years as a buoyant economy booste
d middle class incomes. Sales were also helped by loans at their cheapest in 30
years. But the auto makers were also battling the rising cost of raw materials s
uch as steel, plastics, aluminium and rubber. Maruti sold 4 percent fewer vehicl
es in April’2005 than in the same month previous year.
Oct 03’05 (Closing: Rs429.25), productivity improved, with cost cutting measures a
nd change in product mix. As a result they were able to absorb quite a bit of th
e cost increases in steel, aluminium and other raw materials. Maruti shares rose
3 % in a flat Bombay market. The stock had fallen more than 9 % this year, in l
ine with an 8 percent drop on Bombay s auto index and a 6 percent fall on the ma
in index.
Feb 28th’2006 (834.30) Shares for top car maker Maruti Udyog Ltd., rose nearly 6 p
ercent to a record 834.20 rupees after the excise duty was cut to 16 percent fro
m 24 percent.
The residual stake sale by the Government was expected to fetch at least Rs 2,25
0 crore. The bidders included Life Insurance Corporation, Corporation Bank, Sta
te Bank of India, Punjab National Bank and Union Bank of India. While Corporatio
n Bank made the highest bid at Rs 850 per share (1 lakh shares), Life Insurance
Corporation bid for 1 crore shares at Rs 800 per share. LIC currently holds 8.10
per cent stake in MUL.
The Government was all set to exit Maruti Udyog Ltd (MUL) as on May’2007 with a Gr
oup of Ministers finalized the allotments for the sale of its 10.27 per cent res
idual stake. Japan s Suzuki Motor Corporation (SMC) held 54.21 per cent stake i
n MUL while the Government held 10.27 per cent. The balance equity was with fina
ncial institutions and individuals.
The allottees were decided under a French auction method, wherein the highest bi
dder (in terms of price) got priority on the number of shares to be acquired, fo
llowed by others as per the order of their bid price. Maruti s shares opened at
Rs 801 and closed at Rs 802.30.


(Data Source:

The company s profit after tax stood at Rs 146.4 crore (Rs 1.464 billion) in the
FY2004, up by 40 % over Rs 104.5 crore (Rs 1.045 billion) year-on-year and it d
eclared a 30 per cent dividend for the fiscal year ended 2003.
The total income went up by 36.6 per cent to Rs 4,634.7 crore during the quarter
against Rs 3,392.3 crore in the same period of the previous year. MUL s recomme
nded a dividend of 90 per cent for the financial year 2006-07.
(Data Source:
From Year To Year Face Value Authorised Capital (Rs Cr) Issued C
(Rs Cr) Paidup shares
2006 2007 5 372.00 144.46 288910060
2005 2006 5 155.00 144.46 288910060
2004 2005 5 155.00 144.46 288910060
2003 2004 5 155.00 144.46 288910060
2002 2003 5 155.00 144.46 288910060
2001 2002 100 135.00 132.29 13229162

The stock split decision was taken in the financial year 2002-03 where the share
holders of Maruti approved a twenty for-one share split. The face value of a sha
re earlier was Rs. 100 which was split into Rs. 5 shares just before going in fo
r a preferential share issue in which the Suzuki raised its stake in the company
. The Govt. Holding in the company was the same , due to which the Indian govern
ment’s percentage holding in the company went down. Suzuki’s stake went up from 50%
to 54.21%. Suzuki bought the shares at a price of approximately Rs.164 per share


As on 17/04/2008
Maruti (P/E) Industry (P/E)
13.99 13.77
The P/E multiples for Maruti are at 13.99 as compared to the industry average of
13.77. The other companies in the transportation sector are at Mahindra (13.83)
, Tata Motors (12.35), Ashok Leyland (11.42) and Hero Honda (17.3).
The movement of the share for Maruti Suzuki Limited has been along the sensex al
though it has not moved as sharply as sensex. The weightage of the stock in the
sensex has been 1.04%.
Term Returns
Since IPO in 2003 @Rs 164.05 428.6%
Short Term since 2005 36.2%
Short Term since 2006 -11.6%
The beta value of 0.81 goes to show that the stock has been very defensive in na
ture and low on risk compared to other scrips in the market. A low debt- equity
of 0.09 shows that the company hardly has any debt and hence less risky.
Sales are expected to grow 13.1% YoY to Rs50 billion. Maruti should be able to m
inimize the impact of higher input prices due to its ongoing cost reduction effo
rts, productivity improvement and increased localization, leading to higher inte
rnal efficiencies. EBITDA is expected to be at Rs7.2b (+11% YoY) and PAT at Rs4.
8b (+7.3% YoY).
Maruti is investing heavily in its facilities; it intends to invest a further Rs
90 billion in India over the next 8 years. This additional outlay would be util
ized to set up world class R&D facilities, design facility, regional distributio
n centers, and logistics support.
Maruti’s growth prospects remain positive. A strong volume growth is expected over
the next two years and it is estimated that EPS will be at Rs66.2 for FY08 and
Rs73.1 for FY09.
Mahindra & Mahindra is the only Indian company among the top three tractor manuf
acturers in the world. The group has a leading presence in key sectors of the In
dian economy, including the financial services, trade and logistics, automotive
components, IT and infrastructure development.
Mahindra and Mahindra was conceived when Mahindra brothers joined hands with Ghu
lam Mohammed on Oct 2nd 1945 for assembling jeeps from Willys, USA. Two years la
ter, India became an independent nation and Mahindra & Mohammed changed its name
to Mahindra & Mahindra. Ghulam Mohammed migrated to Pakistan post partition and
became the first finance minister of Pakistan.

The Mahindra Group’s Automotive Sector is in the business of manufacturing and mar
keting utility vehicles and light commercial vehicles. It is the market leader i
n utility vehicles in India since beginning, and currently accounts for about ha
lf of India’s market for utility vehicles.
M&M has one tractor manufacturing plant in China, three assembly plants in the U
nited States and one at Brisbane, Australia. It has made strategic acquisitions
across the globe including Stokes Forgings (UK), Jeco Holding AG (Germany) and S
choneweiss & Co GmbH (Germany). Its global subsidiaries include Mahindra Europe
Srl. based in Italy, Mahindra USA Inc. and Mahindra South Africa. M&M has entere
d into partnerships with international companies like Renault SA, France, and In
ternational Truck and Engine Corporation, USA
Over the years, the Group has developed a large product portfolio catering to a
diverse customer base spanning rural and semi-urban customers, defence requireme
nts and luxurious urban utility vehicles.
1945: 2nd October, Mahindra & Mohammed established
1948: The company was renamed Mahindra & Mahindra Limited (M&M). Steel trading b
usiness commenced, in association with suppliers in UK.
1949: Jeep assembly commenced
1953: Otis Elevator Company (India) was established
1956: Shares listed on the Bombay Stock Exchange.
1963: International Tractor Company of India established a joint venture with In
ternational Harvester Company, USA
1965: Manufacture of light commercial vehicles commenced
1969: The Company entered the world market with export of utility vehicles and s
pare parts
1975: Mahindra Engines developed an indigenous diesel engine for its vehicles to
beat the fuel crisis.
1977: International Tractor Company of India merged with Mahindra & Mahindra to
become its Tractor Division.
1983: Mahindra & Mahindra became market leader in the Indian tractor market, a p
osition it has retained till date.
1986: Tech Mahindra (formerly known as Mahindra British Telecom) established a j
oint venture with British Telecommunications Plc (BT), UK, leading the way for t
he Group s entry into Information Technology.
1993: Armada range of vehicles launched
1994: Group reorganized creating six Strategic Business Units: Automotive, Farm
Equipment, Infrastructure, Trade & Financial Services, Information Technology (e
arlier known as Telecom and Software) and Systech (earlier known as MSAT).
1996: Mahindra Ford India Limited established a joint venture with Ford Motor Co
mpany, USA, to manufacture passenger cars.
2000: Bolero GLX (a utility vehicle) launched in response to the needs of urban

2002: Scorpio launched, a new generation, world-class sports utility veh

icle that redefined the SUV market and lived up to its positioning: Nothing els
e will do .
2003: An alliance formed between Mahindra Defence & Lockheed Martin Information
Systems, UK, for defence products
2005: Mahindra Renault Limited established a joint venture with Renault to manuf
acture and market Logan, a mid-sized sedan, in India.
2006: Mahindra announced its plan to enter the United States with a Sports Utili
ty Vehicle and pick up by signing a distribution agreement with Global Vehicles
USA Inc. for the import and distribution of Mahindra vehicles, parts and accesso
ries in September


(Data Source:,

As on 11th Feb’2000(Closing: Rs 616.95), Mahindra & Mahindra did well on the back
of reports that the company would shortly have an e-commerce portal.
Nov 01’2000 (Closing: Rs128.10), technical indicators suggested that the undertone
is weak. Mahindra & Mahindra ended the day lower by about Rs 2.50. The accompan
ying volume showed a sharp increase over the previous day s volume to finally lo
g 2.61 lakh shares.
The stock moved up to Rs 184 from Rs 158 on Feb 23rd’2001, accompanied by huge vol
umes. The spurt in the stock was due to attractive valuations ahead of the initi
al public offer from Mahindra British Telecom, in which the tractor major had a
substantial stake.
The stock closed at Rs 90.30 on Nov 29th’2001 up 7.3 per cent as the ESOPS were al
lotted and it would do a whole lot of good for the motivation of employees. The
scrip had been steadily falling, since February last year when it had touched an
all time high of Rs 665.
As On Sept 17th’2003, the scrip was at Rs 222.55, up 6.53 per cent. It was at a hi
gh of Rs 224. It was presumed that revived demand for tractors on the back of a
good monsoon was the driver for
the stock. Just prior to the company announcing its vehicle sales for August, th
ere was a strong rally in the share prices of the company in the first week of S
eptember. However, after that the scrip went down on profit booking.
On Nov 01 of 2003 market players, witnessed a substantial increase in demand pos
t monsoon. Demand picked up substantially as some dealers saw their inventories
getting sold. Tractor maker Mahindra and Mahindra also saw its share price surge
5.3% to Rs 341.
As on June 28’2005, Mahindra and Mahindra shares closed at Rs 581 against the futu
re price of Rs 563. Japanese investors had injected over $1.6bn in Indian equiti
es over the past few months.
The stock price for Mahindra fell down to Rs 362.4 on 1st sept’2005 from Rs 712.35
as of 31st Aug’2005. This was after a bonus issue of 1:1 came into affect.
As on Feb 1st’2007 (Closing: Rs906.9) Mahindra & Mahindra (M&M) posted a 3.9 % r
ise in net profit at Rs 242 crore (Rs 233 Crore) in the third quarter ended Dece
mber 31, 2006. Gross revenues and other income registered a growth of 16 % at Rs
2,942.8 crore (Rs 2,537 crore). Sales of the company s utility vehicle grew 12.
6 % from 29,594 units to 33,312 units. M&M exported 1,954 vehicles in the third
quarter as compared to 1,432 units in the corresponding period last year, a rise
of 36.5 %.
2005 JUNE 1:1
(Data Source:


Mahindra & Mahindra declared a dividend of 130 per cent including a 30 per cent
special dividend for FY 2004-05. The shareholders approved the payment of divide
nd of 100 per cent and a special dividend of 30 per cent aggregating 130 per cen
t on ordinary equity shares of the company.
Mahindra & Mahindra posted a net profit after tax of Rs 3211.78 million for the
quarter ended March 31, 2006 (Q4 FY 05-06) compared with Rs 1526.66 million for
the quarter ended March 31, 2005 (Q4 FY 04-05). The Board of Directors recommend
ed a dividend at 75% on the enhanced share capital and also a Special Dividend o
f 25% aggregating to Rs 10 per share. The special dividend was recommended on a
very successful listing of the MMFSL equity shares on the stock exchange.
The Board of Directors of Mahindra & Mahindra Ltd declared an Interim Dividend a
t the rate of 75% i.e. Rs. 7.50 per Ordinary Share of the face value of Rs.10 ea
ch to the Shareholders of the Company for the financial year ending 31st March,
The Interim Dividend, together with the tax thereon, absorbed a sum of Rs. 209.8
4 Crores.

From Year To Year Face Value Authorised Capital (Rs Cr) Issued C
(Rs Cr) Paidup shares
2006 2007 10 275.00 238.03 238032707
2005 2006 10 275.00 233.40 233399584
2004 2005 10 175.00 116.01 116008599
2003 2004 10 175.00 116.01 116008599
2002 2003 10 175.00 116.01 116008599
2001 2002 10 175.00 116.01 116008599
2000 2001 10 175.00 110.48 110484380
The issued capital and the paid up shares doubled in the year 2005-06 from the y
ear 2004-05 as a bonus of 1:1 was given in the year 2005.

As on 17/04/2008
MAHINDRA (P/E) Industry (P/E)
13.83 13.77
The P/E multiples for Mahindra are at 13.83 as compared to the industry average
of 13.77. The other companies in the transportation sector are at Maruti (13.99)
, Tata Motors (12.35), Ashok Leyland (11.42) and Hero Honda (17.3).
The weightage of the stock towards sensex is 1.13 %.
Long term since 2000 @Rs212.5 751.4%
Short term since 2005 Pre-bonus @ Rs 721.8 145.5%
Short term since 2005 Post-bonus @Rs 378 140.15%
*Returns have been calculated taking into account the dividends and bonuses give
n over the years. The details for dividends and bonuses have been given in the s
ections above.
The beta value of 0.9 goes to show that the stock has been very defensive in nat
ure and low on risk compared to other scrips in the market. A low debt equity of
0.46 shows that the company hardly has any debt and hence less risky.
M&M is expected to report overall volume growth of 2.5% YoY in 4QFY08. However,
three-wheelers and tractors are likely to register volume declines of 19.8% YoY
and 5.5% YoY, respectively.
Net sales is expected to grow 9.1% YoY to Rs29.9 billion. Margins are expected t
o decline to 11.2%, resulting in 8.2% increase in EBITDA to Rs3.4 Billion. M&M i
s expected to deliver 12.7% total income growth for FY 2008 to Rs112.6b, while n
et profit is expected to decline marginally by 1.1% to Rs9.1b. The stock quotes
at 11x FY08E and 9.5x FY09E consolidated earnings of Rs62.8 and Rs72.9, respecti