Equity Research Analysis on Aditya Birla Capital

A Project Submitted to

University of Mumbai for partial completion of the degree of

Bachelor in Commerce (Financial Markets)

Under the Faculty of Commerce

By

Nikhil Shailesh Malankar

(Roll No. 31)

Under the Guidance of

Prof. Mubeen Shaikh

TOLANI COLLEGE OF COMMERCE

March 2019
 Certificate

This is to certify that Mr Nikhil Shailesh Malankar has worked and duly
completed her/his Project Work for the degree of Bachelor in Commerce
(Financial Markets) under the Faculty of Commerce in the subject
of Project Work and her/his project is entitled, “Equity Research
Analysis of Aditya Birla Capital” under my supervision.
I further certify that the entire work has been done by the learner under my
guidance and that no part of it has been submitted previously for any Degree or
Diploma of any University.
It is her/ his own work and facts reported by her/his personal findings
and investigations.

Date of Submission:
 Declaration by learner

I the undersigned Miss / Mr. Nikhil S Malankar here by, declare that
the work embodied in this project work titled “Equity
Research Analysis on Aditya Birla Capital”, forms my own contribution
to the research work carried out under the guidance of Prof. Mubeen
Shaikh is a result of my own research work and has not been previously
submitted to any other University for any other Degree/ Diploma to this or
any other University.
Wherever reference has been made to previous works of others, it has
been clearly indicated as such and included in the bibliography.
I, here by further declare that all information of this document has been
obtained and presented in accordance with academic rules and ethical
conduct.

Name and Signature of the learner

Certified by

Name and signature of the Guiding Teacher

Mubeen Shaikh

4
 Acknowledgment

To list who all have helped me is difficult because they are so numerous and the
depth is so enormous.

I would like to acknowledge the following as being idealistic channels and

fresh dimensions in the completion of this project.

I take this opportunity to thank the University of Mumbai for giving me

chance to do this project.

I would like to thank my Principal, Dr. Vijaya Krishna for providing the
necessary facilities required for completion of this project.

I take this opportunity to thank our Co-ordinator Prof. Mubeen Shaikh, for
his moral Support and guidance.

I would also like to express my sincere gratitude towards my project

guide Mr. Mubeen Shaikh whose guidance and care made the project
successful.

I would like to thank my College Library, for having provided various

reference books and magazines related to my project.

Lastly, I would like to thank each and every person who directly or indirectly
helped me in the completion of the project especially my Parents and Peers
who supported me throughout my project.

5
 SR.No. NAME OF THE CHAPTER PAGE No.
 What is Equity Research? 6
 NBFC- An overview of the Industry 8
 Evolution of Aditya Birla Group 10
1. Introduction of the industry 14
1.1 Company Management 16
1.2 Company Background 19
1.3 Company Vision 19
1.4 Financial Services 20
1.5 Subsidiaries 23
1.6 Aditya Birla Capital Stucture 38

2. Research methodology 39
2.1 Research Methodology- Aditya Birla Capital 39
2.2 Scope of Study 40
2.3 Limitations 41
2.4 Objectives 41
2.5 Survey on Aditya Birla Capital 41
3. Literature Review 48
3.1 Fundamental Analysis 48
3.2 Ratio Analysis 51
3.3 Risk Management 56
3.4 Technical Analysis 56
4 Data Analysis, Interpretation & Presentation 64
4.1 Financial Statement Analysis 64
4.2 Sum Of The Parts 75
5 Conclusion, Suggestions & Finding 76
6 Bibliography 77
7 Appendix 78
Index

What is Equity Research?

6
Equity research is nothing but research of equities. Sounds simple but it takes a whole lot of
work to research equities. By equity we mean common shares or stock of businesses. These
businesses may either be formed as a company (which is usually the case) or they may be
partnerships. Let’s focus on our subject of interest: companies. At this stage, we have to bear in
mind that these companies may either be listed or unlisted.

Let’s talk about the second term: Research in “Equity Research”. Research implies deep
understanding of these companies, what makes them tick, what are their strong points, their
weaknesses, what lies in future for these companies, etc. thus, equity research is aimed at
unraveling the value of companies especially in equity markets. High quality research can be a
powerful tool for wealth creation as it would enable higher returns on investment over the long
run.

Use of equity research depends upon the maturity of financial markets in an economy and the
extent of market depth and breadth. Local institutions have grown in size over the last decade
as local investors started increasing their exposure to domestic equities. Gone is the time when
the market was dominate by a single large institutional investor in UTI as we have comparable
sized institutions actively participating in the markets now. The implementation of economic
reforms in India and the opening up of the economy has resulted in many large foreign
institutional investors (FII) investing in Indian companies.

The equity research process has its own limitations and challenges. These vary from market to
market. In more developed markets like the US, Europe, etc. availability of information and
corporate reporting is more transparent than developing markets. It depends on the eagerness
and the forthrightness of management to share information with the investing community and
keep all stakeholders apprised of business situation. This may not necessarily be the case in
some developing markets. Corporate governance entails these and many other aspects of
corporate-investor relationship and is nowadays a focal area with lots of investors.
`

Overview

7
However, equity research is fundamental to the investment process as it helps in identifying
attractive businesses as investment opportunities. Research analysts keep fine tuning their
skills and adapt to changing business environment. The future belongs to those who possess a
clear understanding of what is expected from the research and how they should go about
conducting it. It is important to learn and interpret financial numbers and o assess qualitative
factors, including those which are not immediately reflected in numbers.

Economy-Industry-Company Approach
Every company depends on its industry and every industry on the economy. It is this
philosophy that is commonly referred to as EIC approach or a top-down approach as it starts at
the economy and then filters down to company level.

8
NBFC- An overview of the Industry.

In recent years, non-banks, particularly non-banking financial companies (NBFCs), have

outperformed banks in new credit deployment. By leveraging technology to penetrate
underserved segments, NBFCs have capitalized on the inability of banks to rapidly scale
operations and customize rigid policies. NBFCs have seen a significant increase in their share
of total new disbursals at the cost of public sector banks. This is witnessed in the form of their
share in the total credit market going up from 13% in 2015 to 16% in 2017.

Retail and MSME segments have been key growth areas for NBFCs, with total credit
outstanding of INR 7.5 trillion as on FY18.4 NBFCs have disrupted these segments with a
varied range of product offerings such as equipment financing, hire purchase and leasing,
housing finance and gold loans in addition to carving out new segments such as consumer
durable finance. Additionally, with Government initiatives such as GST and demonetisation
moving individuals and enterprises gradually into the formal economy, NBFCs are well
positioned to capture share and gain advantage in coming years. Moreover, with the RBI
enhancing scrutiny on corporate lending and NPA reporting by banks, the opportunity has
opened up for NBFCs to grow their lending portfolio to a sector traditionally dominated by
commercial banks.

Reason for Growth:

• Deep understanding of the customer segment:

Given their operations in unorganised and under-served segments of the economy, NBFCs
have created a niche for themselves through a deep understanding of needs of their customer
segments and ensuring last-mile delivery of products and services.

• Customised product offerings:

Several NBFCs have focused on a limited line (or often mono-line set of products) to serve the
target customer segment. Armed with a thorough comprehension of their target segment,
NBFCs have customised product offerings to address unique characteristics of the customer
segment and focus on meeting the right needs. Additionally, several NBFCs are also adopting

9
non-standard pricing models for product lines, in-line with the customer profile and inherent
risk of lending.

• Wider and effective reach:

NBFCs are now reaching out to Tier-2, Tier-3 and Tier-4 markets, distributing the loan across
several customer touch-points. Furthermore, they are also building a connected channel
experience, that provides an omni-channel, seamless experience with 24/7 sales and service.
With the consumer of today evolving and accessing digital media like never before, NBFCs
have embarked on new and better ways to engage with the customer.

• Leveraging technology advances for improved efficiency and enhanced experience:

The use of technology is helping NBFCs customise credit assessment models and optimise
business processes, thereby reducing the time to market and helping improve customer
experience. Select NBFCs are also investing in data analytics and artificial intelligence to build
robust relationships with their target customer segments.

• Co-lending arrangements:
NBFCs have been tying up with multiple alternative lenders with digital platforms and
commercial banks as well, which has been adding to their targeted customer base.

• Robust risk management:

Given their focus on lending to the sub-prime customer segment, and regulatory disadvantage
(SARFEASI, DRT and capital adequacy requirements) in comparison to commercial bank
lenders, NBFCs are ensuring enhanced governance through a proactive, robust and agile risk
management model.
However, despite making rapid progress and capturing market share from commercial banks,
the NBFC market has been largely dominated by prominent players, with small ones struggling
to ramp-up operations and lend sustainably.
In the first half of 2018, the RBI pro-actively cancelled license of 368 NBFC lenders,
deeming them economically nonviable for failing to meet the requirement of net owned fund
(NOF) of INR 2 crore.

This is more than double the number of cancellations in entire 2017. Recently, in the wake of
the IL&FS crisis, news reports also indicate that the RBI may embark on a further clean-up of
10
the sector, and resort to cancellation of NBFC licenses and making it difficult for new entities
to obtain NBFC licenses.

Evolution- Aditya Birla Group

The roots of the Aditya Birla Group date back to the 19th century in the picturesque town of
Pilani set amidst the Rajasthan desert. It was here that Seth Shiv Narayan Birla started trading
in cotton, laying the foundation for the House of Birla.

Through India's arduous times of the 1850s, the Birla business expanded rapidly. In the early
part of the 20th century, the Group's founding father, Mr. Ghanshyam Das Birla, set up
industries in critical sectors such as textiles and fiber, aluminum, cement, and chemicals. As a
close confidant of Mahatma Gandhi, he played an active role in the Indian freedom struggle.
He represented India at the first and second round-table conferences in London, along with
Gandhiji. It was at Birla House in Delhi that the luminaries of the Indian freedom struggle
often met to plot the downfall of the British Raj.

Mr. Ghanshyam Das Birla found no contradiction in pursuing business goals with the
dedication of a saint, emerging as one of the foremost industrialists of pre-independence India.
The principles by which he lived were soaked up by his grandson, Mr. Aditya Vikram Birla,
the Group's legendary leader.
Aditya Birla Group is one of India's largest conglomerates and also claims to be the most
international of the country's major corporations. The company acts as a holding company for
more than 72 manufacturing and services subsidiaries throughout India, and in Thailand,
Indonesia, the Philippines, Malaysia, Australia, China, Egypt, and Canada.

Shri. Ghanshyam Das Birla

11
Ghanshyam Das Birla laid the foundation of his industrial empire by establishing GM Birla
Company, trading in jute, in 1911. The First World War began in 1914 greatly increasing the
demand for gunny bags. During the war the Birla's worth is estimated to have risen from 2
million rupees to 8 million. In 1919, he became among the first group of Indian entrepreneurs
to become owner of a Jute mill named Birla Jute.

In the next few years he acquired several cotton mills. He later started several sugar mills. The
publication Hindustan Times was co-founded by GD Birla in 1924 and fully acquired by him
in 1933. Hindustan Motors was started in 1942. After India's independence in 1947 he
started Grasim (Gwalior Rayon Silk Manufacturing, 1948) and Hindalco (Hindustan
Aluminum Company 1958) among others.

Baldeo Das, as well his sons were among the key supporters of the swaraj movement led by
Mahatma Gandhi, in addition to being dedicated Hindu activists. They were active supporters
of the Banaras Hindu University founded by Pt. Madan Mohan Malaviya and were also
financial supporters of activities initiated by Mahatma Gandhi. The landmark Laxminarayan
Temple in Delhi was built by Jugal Kishore Birla and was inaugurated by Mahatma Gandhi
and as asked by Mahatma, all Hindus, including harijans were welcomed in this temple.

In the few decades before India's independence, Indian merchants, including the Birlas, made
successful attempts to enter and acquire industries in India which were once dominated
by Scots from Britain. This became a part of Mahatma Gandhi's Swadeshi movement.
12
Birlas remained close to some of the leaders of India, like Sardar Patel after India's
independence. As leading industrialists, they were often accused by the leftists of exploiting
their workers and aspiring to be among the richest in the world. Still when E. M. S.
Namboodiripad became the chief minister of Kerala (1957–59), as a result of the first elected
Marxist government anywhere, Birlas were invited to establish a pulp factory there.

Shri. Aditya Vikram Birla

Aditya was born on 14thNovember 1943 in Kolkata. His grandfather Ghanshyam Das Birla
had established the Birla Empire. He received his formal education from Kolkata and
graduated in science from St. Xavier’s College. He was graduated from Massachusetts Institute
of Technology in chemical engineering. He came back to India and looked after the textiles
business.

He started the Eastern Spinning Mills in Kolkata which was a great success. He then expanded
his business in oil sector. In the year 1969, he started the Indo-Thai Synthetics Company Ltd.
which was the first overseas company. He later established the P.T. Elegant Textiles which was
the first venture in Indonesia. He set up Thai Rayon in Thailand and Indo Phil Group of
companies in Philippines. Under his leadership the companies became the largest producer of
Viscose staple fiber and refiner of palm oil.
13
On the death of his grandfather he was given most of his companies under the name of Aditya.
The Birla group has come across a great success when he took the initiative. The expansion of
Hindustan Gas was a huge success when the Indo-Gulf Fertilizers and Chemicals Ltd. were
suffering from a liquidity crisis into a blue-chip company.He founded the awards like Aditya
Vikram Birla KalaShikhar and KalakuranPuraskars for excellence in theatre and performing
arts. He founded the Sangeeta Kala Kendra which encourages nurture performing arts. The
government of India has honored him the India’s first global industrialist.

Aditya Birla's major subsidiaries include Grasim, the world's leading producer of viscose
staple fiber, and a manufacturer of rayon grade pulp, cement, sponge iron, textiles, and
chemicals; Hindalco, a leading producer of aluminum and copper; UltraTech Cement, which
produces portland cement and related products; Aditya Birla Nuvo, which manufactures
clothing, textiles, and carbon black and is India's second largest producer of viscose filament
yarn; Indo Gulf, a fertilizer producer; Birla NGK Insulators (a joint venture with NGK of
Japan), which is the world's leading producer of insulators; and Idea Cellular Ltd., a mobile
service provider jointly owned with fellow Indian conglomerate Tata Industries. The company
also produces software and provides IT services, and operates a number of financial products
subsidiaries.

The company's Birla Sun Life Insurance Co. is the second largest private sector insurance
company in India, and its Birla Sun Life Asset Management Co. is the country's fourth
largest assets manager. In other areas, the company claims to be the world's eighth largest
producer of cement and the world's fourth largest producer of carbon black. These operations
combine to generate revenues of nearly $7.6 billion per year. The company is led by Kumar
Mangalam Birla, son of Aditya Birla.

14
1. INTRODUCTION- ADITYA BIRLA CAPITAL

Aditya Birla Capital Limited (ABCL) is the financial services platform of the Aditya Birla
Group.

Formerly known as Aditya Birla Financial Services Limited, ABCL has a strong presence
across the life insurance, asset management, private equity, corporate lending, structured
finance, project finance, general insurance broking, wealth management, equity, currency and
commodity broking, online personal finance management, housing finance, pension fund
management, health insurance and asset reconstruction business.
Anchored by more than 17,000 employees, ABCL has a nationwide reach and more than
2,00,000 agents / channel partners, ABCL is committed to serving the end-to-end financial
services needs of its retail and corporate customers under a unified brand — Aditya Birla
Capital.

As of December 31st, 2018, Aditya Birla Capital manages aggregate assets worth Rs. 3,000
billion and has a consolidated lending book of over Rs. 600 billion, through its subsidiaries and
joint ventures.
Aditya Birla Capital is a part of the Aditya Birla Group, a US$ 44.3 billion Indian
multinational, in the league of Fortune 500. Anchored by an extraordinary force of over
120,000 employees, belonging to 42 nationalities, the Aditya Birla Group operates in 35
countries across the globe.

15
Aditya Birla Capital Limited (ABCL) is one of the largest non-bank financial services player in
India. It ranks among the top fund managers in India with over $47.0 Billion (C3,05,295 Crore)
of assets under management and lending book of over $8 Billion (C51,378 Crore).
Last year, in order to unlock value for shareholders, your Company listed on both the stock
exchanges through composite scheme of arrangement where Aditya Birla Nuvo Limited got
merged with Grasim Industries Limited followed by the subsequent demerger and listing of the
financial services businesses.

The integration of all financial services businesses under one corporate listed structure enables
to accelerate the already strong growth. With the listing of ABCL, it also unlocked embedded
value for investors, positioning for future growth of company.
Just ahead of listing, the Company received equity funding of `704 Crore for issue of 2.2%
shareholding to PI Opportunities Fund – I, an affiliate of Premji Invest, a leading private equity
fund in India. This is in recognition of the quality and size of business created by the Company,
in just under a decade.

The company is located in Veraval, Gujarat as its registered address whereas the company’s
registrar is in Telangana, Hyderabad.

ABCL, being the subsidiary of Aditya Birla Group is being managed under the chairmanship
of Kumar Mangalam Birla as Chairman as well as Non-Executive Director.

16
1.1 Company Management- Aditya Birla Capital

Board of directors

Mr. Kumar Mangalam Birla

Chairman & Non-Executive Director

Dr. Santrupt Misra Mr. Sushil Agarwal Mr. Arun Adhikari

Non-Executive Director Non-Executive Director Independent Director

17
 Mr. S C Bhargava Mr P H Ravikumar Mrs. Vijayalakshmi
Iyer

Independent Director Independent Director Independent Director

Leadership Team

Mr. Ajay Srinivasan

Chief Executive, Aditya Birla Capital Limited

18
Mr. Pankaj Razdan Mr. Rakesh Singh Mr. Tushar Shah Mr. A Bala S.
CEO and MD, Aditya CEO, Aditya Birla CEO, Infrastructure CEO, Aditya
Birla
Birla Sun Life Finance Ltd. & Structured Finance, Sun Life
AMC Ltd.
Insurance Company Aditya Birla Finance
Ltd. Ltd.

Mr. D Muthukumaran Dr. Sandeep Dalia Mr. Mayank Bathwal

CEO, Aditya Birla PE CEO and Principal CEO, Aditya Birla Health
Advisors Pvt Ltd officer, Aditya Birla Insurance Company Ltd.
Insurance Broker Ltd

19
 1.2 Company Background

Finance & Investments

Industry Name
House Name Aditya Birla Group
Collaborative Country Name N.A.
Joint Sector Name N.A.
Year Of Incorporation 2007
Year Of Commercial Production N.A.

1.3 Company Vision

To be a Leader among top 5:

 Fund Managers in India
 Diversified NBFCs in India
 Mutual Funds in India
 General Insurance Brokers in India

Role Model
 Renowned for Risk Management, product innovation, fund management capabilities and
investor education.
 Acknowledged for leadership development and talent management.
 Among the top 2 financial services players to work for, and among the top 15 companies to
work for India.

In a broad-based and integrated financial service business

 Present across the spectrum of financial services and catering to varied needs of customers
across their lifetime.

 An integrated play with a competitive edge through sharing of best practices, deriving cross-
business synergies and giving the talent pool a world of opportunities to grow.

1.4 Financial Services

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AB Capital provides wide range of financial services to its clients. Following are the various
types of services provided by the company.

NBFC
Health Life
Insurance Insurance

Mutual
Funds Asset
Managem
ent
Housing AB Portfolio
Finance CAPITA Managem
L ent
Services
Private
Equity
Broking
Asset Re-
constructi
on Pension
Wealth

Life Insurance:
Life insurance provides that much needed mental and financial security against the
uncertainties of our life. It enables customers to save, along with financially protecting what
they value, such as their child’s future, income after retirement and financial cover for the
family in case of death.

Portfolio Management Services:

In a market that offers a plethora of investment avenues, Portfolio Management is an exclusive
and premium service available to the more discerning investor. Portfolios will receive
individual attention of an expert and can benefit from a wide range of portfolio strategies. PMS
warrants an allocation in the core portfolio of a high net-worth individual.

Broking:

21
One of the ways of investing to grow wealth is investing in Stocks and Securities. The ensures
their investors receive sound advice and service of the highest professional standards, for
which they also offer an advanced multi-device technology platform, which is backed by
expert research, risk management and execution capabilities to deliver best-in-class experience.

Pension funds:
For individuals looking to create an income for their post-retirement phase of life, a Pension
Fund is a sound investment product. The money is invested in a suite of themed funds, run
specifically for retirement savers. These funds are tax-free.

Wealth management:
Creating wealth is a craft and so is managing it. The Wealth Management team is trained to
hand-pick investment opportunities and carve out a portfolio that is as distinct as customer’s
life’s goals and aspirations. The relationship managers ensure that our customers’ wealth is
continuously managed as per their changing needs throughout their life.

Private Equity:
AB Capital plays an important role in helping individuals and companies looking to make
substantial and long-term investments. Investments through this vertical are made
predominantly in unlisted companies with high growth potential. They partner their portfolio
companies in growing core businesses, launching new initiatives, making transformative
acquisitions and upgrading technologies and systems to support their long-term strategy and
growth. As a result, they create value for all stakeholders.

Housing Finance:
Our home has a special place in our life and therefore, each of us deserves a home that is
forever ours, for our entire life. Therefore, Home Finance is a vital solution. The company
works with the customers to tailor-make a solution that is just right for their needs, be it
finance for a new home, home extension, home improvement, home construction or buying a
plot and building a home.

Mutual Funds:
22
Mutual Funds are a good choice for individuals to put their hard-earned money to work. As
their hard-earned money starts working, they will find it so much easier to afford all the things
and experiences that make the quality of their life and that of their loved ones truly rich.

Health Insurance:
Health is the most precious asset we own. No matter how much wealth we have, we will not be
able to live our life well if we don’t enjoy good health. Therefore, our Health Insurance
Solutions don’t just protect our customers from unforeseen health expenses but also enable
them to stay healthy, because quality of their life begins with the quality of their health.

23
 1.5 Subsidiaries

In today’s growing world, the economy too is growing faster. The economic growth is taking
boost with the increasing financial needs of the people. For a secure future tomorrow, people
are looking for financial services for their help for a secure future. Financial products such as
Loans, Insurance, and Investments are in the picture as essentials. Gone is the time when
human needs were restricted to food, clothing and shelter. Now each and every individual is
thinking about persuading financial goals. With financial goals, it means wealth creation and
assets appreciation with the help of investments in financial securities.
To boost the national economy to new heights the businesses need to be encouraged especially
the start-ups with innovative ideas. These start-ups will grow only when they are funded with
the required amount of capital either through Loans or through Private Equity funds

Aditya Birla Capital provides wide range of financial services to its customers having its
operations in Loans & Advances, Insurance, Security Broking, Pension funds, etc. covering the
financial needs of the individuals.
Following are Subsidiaries and financial services of Aditya Birla Capital.

1. Aditya Birla Finance Ltd.

Aditya Birla Finance Limited (“ABFL”) is among the leading well-diversified financial
services company in India offering end-to-end lending, financing and wealth management
solutions to a diversified range of customers across the country. ABFL is registered with RBI
as a systemically important non-deposit accepting non-banking finance company (“NBFC”)
and ranks among the top five largest private diversified NBFCs in India based on AUM as of
March 31st, 2017 (source: CRISIL). 

24
 SME+ Retial+HNI Oters

44 49

52 49

Q3 FY18 Q3 FY19

For the Quarter ended 31st December 2018, ABFL’s loan book has reached Rs. 493 billion.
Along with its growth, ABFL has maintained healthy asset quality with GNPA (Gross NPA) at
1.17% as of 31st December 2018. This is reflected in its long-term credit rating of AAA
(Stable) by ICRA and AAA (Stable) by India Ratings, Perpetual debt credit rating of AA+
(Stable) by ICRA and AA+ (Stable) by India Ratings (Stable) and short-term credit rating.

PBT at Rs.323 Crore for Q3 FY19 grew by 22% y-o-y.

25
Multiple products catering to a rang of Customer needs.

SME (26% of Loan Book) Retail (13% of Loan Book)

Average Ticket Size of 7 Crore Average Ticket Siz of 5 Lacs

HNI + Others (12% of Loan book) Large & Mid Corporate (49% of Loan Book)

26
Industry Overview
India’s economic structure and growth make it an attractive market for NBFCs that can cater to
the growing needs of both the banked customers as well as the under-served segment.
The outstanding credit of NBFCs expanded at a compound annual growth rate (CAGR) of 19%
since fiscal 2012, although this growth has not been uniform across segments. NBFCs have
expanded their share in total credit extended by banks and NBFCs from 9.5% in March 2008 to
15.5% in March 2017.

27
Industry aggregate gross non-performing assets (NPAs) of NBFCs stood at 4.4% vis-à-vis
9.3% of banks in FY 17. Additionally, industry aggregate Return on Assets (ROA) and Return
on Equity (ROE) of NBFCs for FY 17 stood at 1.8% and 6.8% compared to 0.4% and 4.2% for
bank

Performance review
The overall lending book for ABFL grew year-on-year by 25% to `43,242 Crore as on 31st
March, 2018. The retail, SME and ultra HNI segments continued to grow faster and constituted
47% of the portfolio as on 31st March, 2018 vs. 43% in the previous year.

2. Aditya Birla Housing Finance Ltd.

Aditya Birla Housing Finance Limited ("ABHFL"), a subsidiary of Aditya Birla Capital
Limited, is a fast-growing housing finance company ("HFC") in India with a net worth of Rs.
11,569 million and lending book valued at Rs. 1,08,283 million as on December 31st, 2018.
This is reflected in its long-term credit rating of AAA (Stable) by ICRA and AAA (Stable) by
India Ratings, and short-term credit rating of A1+ by ICRA & India Ratings.

Initially incorporated in 2009 as an investment company, ABHFL commenced operations in

the housing finance sector in October 2014. ABHFL is registered with the NHB as a
systemically important non-deposit accepting housing finance company.The company offers a
complete range of housing finance solutions such as Home loans, Home Extension Loan, Plot
& Home Construction Loan, Home Improvement Loans, Loan Against Property, Construction
Financing, Lease Rental Discounting, Commercial Property Purchase Loan and Property
Advisory Services. Through its lending solutions, ABHFL enables customers to own their
dream home.

Performance Review
ABHFL, which commenced operations in October 2014, has rapidly grown its loan portfolio
and turned profitable within 7 quarters of full operations. Its loan book doubled year-on-year
from `4,136 Crore in FY 17 to `8,137 Crore in FY 18. The gross disbursement has doubled
year-on-year from `2,802 Crore to `5,105 Crore in FY 18.

28
ABHFL reported its first full profitable year in FY 18. With expansion in the book size and
operating efficiency, the cost to income ratio has reduced from 102% in FY 17 to 76% in

FY 18. The business continues to focus on a balanced sourcing mix with direct sourcing
contributing ~45% in FY 18.

Strong growth in lending book by 60% y-o-y. Affordable book at Rs. 1,176 Crore (grew
27% y-o-y)

Q3 PBT grew 3x y-o-y to 32 crore. YTD PBT Rs. 67 Crore.

KEY FINANCIALS (in Crore)

Key Performance
Parameters FY 17-18 FY 18-19

Lending book 8,137 4,136

Average yield 9.9% 10.7%
Interest cost/Avg. Loan
book 6.9% 7.6%
Net Interest Income1 3.0% 3.2%
Revenue 615 315
Cost Income Ratio (%) 76% 102%
Provision for NPA 6 2

29
Provision for Standard
Assets 17 12
Earnings before tax 24 (16)
Net profit after tax 33 (16)

Net worth 750 367

Housing credit as a percentage of GDP in India has increased steadily from ~7% as on 31st
March, 2007 to ~9.7% as on 31st December, 2017. However, it continues to be significantly
lower than developed markets at 63% in the US, 65% in the UK, and 18% in China. Therefore,
there is significant headroom for growth over the medium term. Housing Finance Companies
(HFCs) and NBFCs are likely to benefit from their focus on the housing finance market, their
thrust on relatively high-growth segments like affordable housing and self-employed
customers, and their service excellence. NBFCs (including HFCs) have grown their housing
loan portfolio at 21% CAGR during FY 12 to FY 17, compared to 18% of banks and have
improved their share in outstanding housing loans from 36% in FY 12 to 41% in FY 17
(Source: National Housing Board).

3. Aditya Birla Sun Life AMC Limited.

Aditya Birla Sun Life AMC Limited (formerly known as Birla Sun Life Asset Management
Company Limited), the investment manager of Aditya Birla Sun Life Mutual Fund (formerly
known as Birla Sun Life Mutual Fund), is a joint venture between the Aditya Birla Group and
the Sun Life Financial Inc. of Canada. The joint venture brings together the Aditya Birla
Group's experience in the Indian market and Sun Life's global experience.
Established in 1994, Aditya Birla Sun Life Mutual Fund (ABSLMF), is co-sponsored by
Aditya Birla Capital Limited (ABCL) and Sun Life (India) AMC Investments Inc.
Having total domestic assets under management (AUM) of close to Rs.2423 billion for the
quarter ended December 31st, 2018; ABSLMF is one of the leading Fund Houses in India
based on domestic average AUM as published by the Association of Mutual Funds of India
(AMFI). ABSLMF has an impressive mix of reach, a wide range of product offerings across
equity, debt, balanced as well as structured asset classes and sound investment performance,
and around 6.8 million investor folios as of December 31st, 2018.
Technical Line chart of Aditya Birla Sun Life AMC Ltd as on 29th March 29, 2019

30
Industry Overview
India’s mutual fund industry comprises 42 asset management companies. The dominance of
Top 5 asset management companies continues with these companies, contributing to 57% of
industry’s AAUM
In the FY 18, the industry witnessed a 26% growth in AAUM. AAUM grew from about
`18,29,583 Crore in the quarter ended March 2017 to `23,05,212 Crore in the quarter ended
March 2018.
The industry’s equity assets rose by 61% from `5,85,310 Crore in the quarter ended March
2017 to `9,41,395 Crore in the quarter ended March 2018. The share of equity AAUM in total
industry AAUM touched 41%.

Performance Review
ABSLAMC achieved the milestone of becoming India’s third largest mutual fund with a
quarterly AAUM of `2,67,739 Crore for the quarter ended March 2018. It grew faster than the
industry resulting in an improved 10.75% market share.
The domestic AAUM as on Q4 FY 18 of ABSLAMC expanded y-o-y by 27% to `2,47,529
Crore. The equity market share improved to an all-time high of 9.18% in Q4 FY 18 vis-à-vis
8.53% in Q4 FY 17. Equity AAUM contributed 35% of total domestic AAUM in Q4 FY 18 as
against 26% in Q4 FY 17
ABSLAMC has a strong focus on scaling up its customer base and higher margin assets. The
SIP book size almost doubled to an all-time high of `844 Crore (excl. STP) with market share
at 12.16%. The total number of folios has increased from 3.9 Million in March 2017 to 6.0
Million in March 2018, demonstrating the retail granularity of the business

31
Equity Market Share.

Key Financials (in crores)

Key Performance
Parameters FY 18-19 FY 17-18

Domestic Avg. AUM 2,47,529 1,95,049

Domestic Equity Avg.
AUM 86,450 49,914
Revenue from
Operations 1,249 968
Other Income 41 46
Total Income 1,290 1,014
Costs 797 677
Earnings before tax 493 337
Net profit after tax 330 223

SIP book size Market 12.16% 11.01%

32
Share (%)

1. Aditya Birla Sun Life Insurance Company Ltd.

Aditya Birla Sun Life Insurance Company Limited (ABSLI), is a subsidiary of Aditya Birla
Capital Ltd (ABCL). is one of the leading private sector life insurance companies in India.
ABSLI was incorporated on August 4th, 2000 and commenced operations on January 17th,
2001. ABSLI is ABSLI is a 51:49 a joint venture between the Aditya Birla Group and Sun Life
Financial Inc., a leading international financial services organization in Canada. 

Formerly known as Birla Sun Life Insurance Company Limited, ABSLI is one of India's
leading life insurance companies offering a range of products across the customer's life cycle,
including children future plans, wealth protection plans, retirement and pension solutions,
health plans, traditional term plans and Unit Linked Insurance Plans ("ULIPs").

As of December 31st, 2018, total AUM of ABSLI stood at Rs. 389,548 million. ABSLI
recorded a gross premium income of Rs. 18,599 million in Q3 FY 2018-19 and registering a y-
o-y growth of 68% in Individual First Year Premium and currently ranked 7th in Individual
Business (Individual FYP adjusted for 10% single premium) (Source: IRDAI reported
Financials). ABSLI has a nation-wide distribution presence through 425 branches, 9
bancassurance partners, 6 distribution channels, over 83,000 direct selling agents, other
Corporate Agents and Brokers and through its website. The company has over 10,000
employees and more than 16 lac active customers.

The Company offers a complete range of protection solutions to help secure your family's
future and provide financial support for your child's education, wealth with protection
solutions, health and wellness solutions, retirement solutions and savings with protection
solutions to help you stay financially secure in the future with small disciplined savings at
regular intervals. ABSLI puts people's need first and aims to protect what is dear to the
customer, with assurance. While, Life Insurance cannot prevent risk, it can compensate
financial losses arising from risk

Industry Overview

33
In the last decade, the total new business premium written by the industry grew at 10% CAGR.
Private players have done well over the last 3-4 years. FY 17-18 saw a significant
improvement in the performance of almost all life insurance players. The industry witnessed a
19% year-on-year growth in the individual new business premium. Group business, on the
other hand registered 10% de-growth year-on-year and total new business registered 12%
growth.

Both private sector players and Life Insurance Corporation of India (LIC) recorded healthy
growth during the last year. While LIC achieved 13% growth in individual new business
premium, private players registered 24% growth. Private players, on the back of strong growth,
increased their market share in individual new business premium from 54% in FY 17 to 56% in
FY 18.
The industry continues to focus on the quality of business and improve financial performance
to drive long-term shareholder value. This can be seen through improving persistency ratios
across cohorts, reducing surrender to AUM ratios, better opex management and lower
complaints.
Protection products command higher margins compared to savings products and an increase in
protection share can meaningfully boost margins. Top players have sharpened their focus on
protection with a share of 8-10% (from 2-4% a few years back).

On the distribution mix, there has been a distinct shift with Bancassurance now emerging as
the primary distribution channel with >50% share (21% in FY 10) among private sector
insurers. This shift is primarily driven by the captive customer base of bank owned insurer and
leveraging the wide-spread network of bank branches. Direct channel, led by online and other
modes is also moving upward.

KEY (In
FINANCIALS CRORE)
Key Performance
Parameters FY 18 FY 17

Individual First year

Premium 1,152 960
Group First year
Premium 1,511 1,574
34
Renewal Premium 3,240 3,190
Total Gross Premium 5,903 5,724
Revenue 6,375 6,041
Opex to Premium
(Excl. 15.6% 16.3%
Commission)
Opex to Premium (Incl.20.1% 20.7%
Commission)
Earnings before tax 166 124
Indian Embedded
Value 4,281 3,810
Net VNB Margin 4.3% (5.5%)

Performance Review
ABSLI recorded a gross premium income at `5,903 Crore, registering 3% growth over the
previous year. While new business premium income was up by 5% at `2,663 Crore, individual
business grew by 20% from `960 Crore in FY 17 to `1,152 Crore in FY 18.

ABSLI has maintained a balanced product mix with continued focus to improve protection
share for higher margins. in FY 18, the share of protection has doubled from 2% to 5% in FY
17. The non-agency channel increased significantly from 23% in FY 17 to 32% in FY 18 in the
individual distribution mix. ABSLI has tied up with HDFC Bank during the year with access to
the bank’s non-branch channel. HDFC has provided access to its pan-India branches with
effect from 1st April 2018, leading to a significant business potential in the coming years.

2. Aditya Birla PE Advisor Pvt Ltd (Private Equity).

Aditya Birla PE Advisors is a wholly owned subsidiary of ABCL. It provides financial
advisory and management services with focus on managing venture capital funds and alternate
investment funds. ABPE is presently appointed as an investment manager to two SEBI
registered domestic venture capital funds, namely, Aditya Birla Private Equity - Fund I and
Aditya Birla Private Equity – Sunrise Fund, where it currently manages a gross AUM of Rs.
8.81 billion under these two funds.

In addition, ABPE offers investment management and advisory services to domestic and global
investors and partners with its portfolio companies to provide them strategic direction for their

35
operations and growth. ABPE focuses on growth investments in mid-market companies based
in India. ABPE seeks to tap the broader alternative funds market through a variety of products
such as buyout funds and mezzanine funds in the future.

Industry Overview
PE/VC investments in India amounted to $22 Billion in FY 18, registering the highest ever
growth of 29% year-on-year. IT/ ITES and BFSI were the largest sources of investment,
aggregating to more than 66% of entire deal value for the financial year. Fund raising by PE
Funds also increased by 46% to $6.1 Billion in CY 2017 from $4.2 Billion in CY 2016. FY 18
witnessed increased investment activity from sovereign wealth funds and pension funds.

Performance Review
ABPE has a gross AUM of `1179 crores and is managing two sector agnostic funds, i.e. Aditya
Birla Private Equity – Fund I, (providing growth capital to the established companies across
sectors) and Aditya Birla Private Equity – Sunrise Fund (providing growth capital to emerging
companies in sunrise sectors).

3. Aditya Birla Money Ltd (Stock and Securities Broking)

Aditya Birla Money Limited ("ABML"), a subsidiary of Aditya Birla Capital Limited, is listed
on BSE Limited ("BSE") and National Stock Exchange of India Limited ("NSE") since 2008.
ABML is currently engaged in the business of securities broking and is registered as a Stock
Broker with SEBI. It is a member of BSE and NSE and offers equity and derivatives trading
through NSE and BSE. It holds PMS license from SEBI and offers portfolio management
services.

ABML is also registered as a Depository Participant with National Securities Depository

Limited ("NSDL") and the Central Depository Services (India) Limited ("CDSL"). It also
holds SEBI license as a Research Analyst and an Investment Adviser. ABML also holds an
ARN code issued by AMFI and is registered with CDSL as an e-Repository for holding
insurance policies in electronic form. Aditya Birla Commodities Broking limited (a wholly
owned subsidiary of ABML), a member of Multi Commodity Exchange of India Limited and
National Commodity & Derivatives Exchange Limited and offering commodity broking
services, got amalgamated with ABML during Dec 2018.

36
ABML reported revenues from operations of over Rs. 1,285 Million in nine months of
FY2018-19. It has a combined pan India distribution network of over 41 branches, spread
across Andhra Pradesh, Chandigarh, Rajasthan, Chhattisgarh, Madhya Pradesh, UP, West
Bengal, Punjab, Maharashtra, Kerala, Karnataka, Delhi, Gujarat and Tamil Nadu and 755
franchisee offices. It also has a robust online and offline model with a strong technological
backbone to support a large registered customer base of around 350,685 customers. It offers a
wide range of solutions including broking, portfolio management services, depository and e-
insurance repository solutions and distribution of other financial products. 

Industry Overview
During FY 18, daily cash market volumes were led by the domestic investor’s participation in
the Indian equity market for both direct and mutual funds. What further strengthened the cash
market volumes was the steady rise in the Systematic Investment Plan (SIP) book of the
domestic equity mutual funds.

Daily derivatives turnover increased sharply due to a rise in the underlying prices of
stocks/indices. Indian markets continue to be heavy on derivatives while light on cash trading,
thereby suggesting higher speculative activity than investing activity. A higher share of lower
yielding derivatives segment in the Indian stock market has been the key reason for earnings
pressure for the broking industry over the years.

Performance Review
ABML continued to focus on the retail investor segment, cost reduction, technology and client
acquisition.
ABML increased its total revenues from `131 Crore in FY 17 to `162 Crore in FY 18, led by
higher broking income. PBT improved from `8 Crore in FY 17 to `13 Crore in FY 18.

Outlook
The outlook for the industry is dependent upon multiple key factors such as domestic and
global economic growth, buoyancy in primary markets, lack of alternative investment
opportunities and technological up-gradation.

37
A broad-based macro-economic recovery will lead to improved corporate profits, thus
supporting higher stock prices and positive equity market sentiments. While foreign
institutional investor (FII) have sold lately, India’s structural long-term attractiveness will draw
foreign investors.

ABML will continue to focus on technology, drive client acquisition, widen its business
partner network, rationalize cost and provide efficient trading tools and value-added research
advice to its clients. The overall strategic focus is to create product and service differentiators
across all segments.

38
1.6 Aditya Birla Capital Structure

39
40
2. Research Methodology

The process used to collect information and data for the purpose of making business
decisions. The methodology may include publication research, interviews, surveys and other
research techniques, and could include both present and historical information.

This may also include Objectives, Hypothesis, Limitations and scope of study of the
subject. The methodology is the general research strategy that outlines the way in which
research is undertaken and, among other things, identifies the methods to used in it.
These methods, described in the methodology, define the means or modes of data collection or,
sometimes, how a specific result is to be calculated. Methodology does not define specific
methods, even though much attention is given to the nature and kinds of processes to be
followed in a particular procedure or to attain an objective.

Primary Data:
Primary data is data that is collected by a researcher from first-hand sources, using methods
like surveys, interviews, or experiments. It is collected with the research project in mind,
directly from primary sources.

Secondary Data:
The term is used in contrast with the term secondary data. Secondary data is data gathered from
studies, surveys, or experiments that have been run by other people or for other research.

2.1Research Methodology- Aditya Birla Capital.

 Annual Reports
Annual reports play an important role in understanding the fundamentals of the
company. The history, current affairs and its financial position can be defined while we
go through the Annual Reports of the company. From Auditor’s report to Director
Remuneration, every information is mentioned in the Annual report which is of the
interest of the shareholders. Aditya Birla Capital Ltd issued its Annual Shareholders

41
 Report on its website. It is the most popular tool to collect secondary data. This helped
a lot of research analyst to have access to company’s position in the NBFC sector.
Annual Reports are one of the most important tool of research analysts to interpret their
research on the company where the validity of the information is purely disclosed by
the company itself.
We were able to grab ample amount of information which would make this report
relevant to the reader and can be well interpreted by a financially literate individual.

 Investor Presentation-
Aditya Birla Capital Ltd. publishes Investor presentation for its shareholders to have
access to the information and financials of the company. This is published for those
who are already invested or have an investing interest in the company.
It is published once in every financial year and is a tool for Secondary data collection

This report helped us to study each and every subsidiary of the company in depth with
its financial position industry overview and performance in the current financial year.
 Online Survey-
Online survey is the best way to gather maximum information through surveying
individuals and knowing people’s opinion on the subject matter. It is the most
convenient way to collect primary data.
Online surveying is becoming more popular form of gathering the data with consuming
minimal time and resources.
Surveys were conducted with a set of questionnaires and delivered to various
individuals having enough subject knowledge to make a note on their opinions as a
form of primary data.

2.2 Scope of Study

 The scope of the study is identified after and during the study is conducted.
T h e  project is based on tools like fundamental analysis, technical analysis and ratio
analysis. Further, the study is based on the subsidiaries held by the company
 The analysis is made by taking into consideration company’s fundamentals like
financial statements and ratios of Aditya Birla Capital and its subsidiaries.

42
  The scope of the study is limited with the comparison with previous year’s progress.
 The scope is limited to only the fundamental, technical and ratio analysis of the
company.

2.3 Limitations of Study

 This study has been conducted purely to understand Equity analysis for investors.
 The study is restricted to three companies based on Fundamental analysis.
 Detailed study of the topic was not possible due to limited size of the project.
 Suggestions and conclusions are based on the limited data.
 The study is limited with the comparison with only previous year’s data.

2.4 Objectives of Study

The objective of this project is to deeply analyze Aditya Birla Capital 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 Aditya Birla Capital, n NBFC which is gearing towards growing
standards.
 Analyze the impact of qualitative factors on industry’s and company’s prospects.
 Interpret fundamental, technical and ratio analysis to the simplest for the reader.
 Suggesting as to whether company’s shares would be best for an investor to
invest.

Survey on Aditya Birla Capital

A survey on Aditya Birla Capital was conduct from financially literate people. This survey
included the views of people on NBFC Sector and the company itself. People have different
views on this sector as it had a glitch in the recent times in the market. After the recent panic in
this sector, investors are in a doubt about their investments. Investors already invested here are
in doubt whether to stay hold their stocks or exit with losses.

43
 Which is the best option for Investment.
Equity Mutual Funds Baank FDs Other

4%

13%

48%

35%

As we can see in the above survey, 48% of the majority investors think equity is the best option
for investment. Usually, these are new generation investors who are ready to risk their earnings
in order to earn extraordinary returns.

Equity investments carry high risk. In turn it also has the capability to earn extraordinary
returns to investors. Mutual funds carry moderate rate of risk if invested in Equity Mutual
funds.

Bank FD investments are made by comparatively low or zero risk taking groups. They are one
of the safest investments. These investors are risk adverse investors.

44
 Which research method is preferred most for investment
14
12 13
10
8
6
4 6
2 3
0 Which research method is
is is t
lys lys ke preferred mot
a a ar
l An l An n
m
ta ica .I
en n Co
am ch of
nd Te s
Fu
New
e
tiv
ega
N
v e/
ositi
P

In the above survey explains that majority of the investors consider technical analysis as the
most reliable way of finding an investment opportunity. Technical analysis depends on charts,
volumes and indicators for analysis. Investors with literate and rational knowledge about charts
and patterns can easily interpret the analysis. Traders, especially intraday traders use charts and
patterns for trading.

The survey drew as to a conclusion that investors prefer more of technical analysis then that of
fundamental analysis. Technical analysis predicts about the reaction of stock in current
situation on the basis of past price reaction of stock.

This has its own limitations. Technical analysis cannot be a relevant choice when the company
is newly listed and entered the stock market in recent times which is the case of Aditya Birla
Capital. This is the time where fundamental analysis is the most reliable source of research for
investment.

45
 Can NBFC still be an attractive sector for
Investment?
Yes No Can't Say

18%

14%

68%

As mentioned in the earlier paragraph, retail investors are still in doubt whether to invest in
NBFC sector or not. In the above chart, we can see majority of investors are not able to decide
whether this sector can still recover from its current situation.

According to survey, 68% of investors can’t decide with their investment decision with
relation to this sector. These investor’s strategy may or may not include investments in NBFCs.
Such investors are cautious with their investments or are unware about the recent liquidity
crunches in NBFC sector.

Cautiousness in this sector is seen where many NBFC stocks crashed in market in
September’18 last year. Deewan Housing Finance Ltd stock fell up to 60% or 364 points in the
market. This spurred heavy selling in other housing finance stock.

The sell-off in turn forced Sensex and Nifty shed over 1128 points 368 points in intraday
trades. The reason behind this downfall was because of the news spread in market that DSP
MF was forced to sell commercial papers of Deewan Housing Finance in the secondary market
at a higher yield. The higher yields of the commercial papers were due to tight liquidity into
the system.

46
 When Asked about which NBFC looks more promising
Aditya Birla Capital Mahindra Finance
Bajaj Finserv Shriram Transport Finance

5%

26%

47%

21%

In the above chart, we can see that majority of the investors trust Aditya Birla Capital as highly
preferred stock. Even after major fall in stock, people are ready to put their hard earned money
in this stock. This is one of the few stocks which survived the liquidity crunch faced by
NBFCs.

48% of investors still think that this is a promising stock and can give good returns in the near
future. This is the thinking of majority of investors looking for investment opportunities. While
Mahindra Finance and Bajaj Finserv has 26% of preference among investors.

47
 How strong is AB Capital fundamentally

5%

16%

37%
Weak
Fair
Medium
Very Strong

42%

In the survey, when asked about how strong is AB Capital as far as the fundamentals are
concerned the reactions to this were positive for the company. When the backbone of the
company which is the fundamentals are strong, the company looks more promising in the near
future.

42% of the investors think this stock is fundamentally medium strong. This is because a lot of
investors think the results of this company are moderate and so are the financial ratios.

Today, AB Capital is considered among the most trusted NBFC competing with its peers like
Indiabulls Housing Finance, Bajaj Finserv, DHFL, etc.

48
 Stock of AB Capital is falling. What's your Action?
Hold Exit
Add more qty to bring your averge price down

40%
45%

15%

In the above pie chart, the question to the individual was raised about what would be your
action if the stock of AB Capital is falling. This had different reactions of people which
ultimately drew us to a positive conclusion.

15% of the investors in this scenario would rather choose to exit from the position. Basically
these investors are risk adverse one’s and don’t invest with a stop loss level in their position.

40% of the investors in this survey were ready to hold their position without making any
changes in their holdings. These investors are silent type of investors which rather don’t worry
much about the stock’s performance

Rest of the 45% of investors are the ones who have utmost confidence in the company. They
are ready to buy at every dip of stock.

When the stock of a well reputed company falls, it gives an opportunity for investors to
average their buy price by adding more to their quantity and bring down their average
buy price which is ultimately a smart way of investment. The only thing that matters over
here is the confidence in the company. Remember, there is nothing wrong with the
company but the market is discounting itself maybe because of bad sentiments.

49
3. Literature Review

A literature review discusses published information in a particular subject area, and sometimes
information in a particular subject area within a certain time period.

A literature review can be just a simple summary of the sources, but it usually has an
organizational pattern and combines both summary and synthesis. A summary is a recap of the
important information of the source, but a synthesis is a re-organization, or a reshuffling, of
that information. It might give a new interpretation of old material or combine new with old
interpretations. Or it might trace the intellectual progression of the field, including major
debates. And depending on the situation, the literature review may evaluate the sources and
advise the reader on the most pertinent or relevant.

Stocks & Markets are analyzed by using various methods by the learnedResearchers &
Analysts. All these methods can be broadly classified into - Fundamental Analysis and
Technical Analysis.

3.1 Fundamental Analysis

Fundamental analysis is a method of forecasting the future price movements of a financial

instrument based on economic, political, environmental and other relevant factors and statistics
that will affect the basic supply and demand of whatever underlies the financial instrument. It
is the study of economic, industry and company conditions in an effort to determine the
value of a company’s stock. Fundamental analysis typically focuses on key statistics in
company’s financial statements to determine if the stock price is correctly valued. The term
simply refers to the analysis of the economic well-being of a financial entity as opposed to only
its price movements.
 Fundamental analysis attempts to measure a security's intrinsic value.
 Fundamental analysis seeks to identify securities that are not correctly priced by the
market.
 Investors can utilize fundamental analysis to optimize their portfolio's performance.
 If the fair market value is higher than the market price, then the stock is deemed to be
undervalued and a buy recommendation is given.

50
  Conversely, if the fair market value is lower than the market price, then the stock is
considered to be overvalued and a sell recommendation is issued.

Aditya Birla Capital is been considered as a strong fundamental stock despite its consistent fall
in the stock performance since its listing. While the ratios have a strong hold on the
fundamentals. Traders and Investors are talking about this stock while some say it is a
multibagger stock and can give above expected returns in long term.
We saw a downfall in the price of this stock because of its overvaluation in market since its
listing. Since its listing, the stock made lower lows and went under correction. However,
market is with a bullish view and expects greater in the coming years.

Strengths
Diversified Platform:
Diversified platform gives company the opportunity to gain exposure to the long term secular
growth trends in the Indian financial services sector. Company’s diversity extends across
products and services, customer segments, channels and geographies in India with solutions
that cater to customers ranging from large corporates to medium and small enterprises, and
mass market retail to high net worth individuals. Diversified platform provides complementary
revenue streams that help balance against market cycles and provides a natural hedge against
downturns in any particular business segment or asset class.

Strong Parentage and Brand:

Customers look for three main criteria from their financial service provider: trust, financial
stability and experience. In the financial services space a trusted brand is crucial as customers
‘buy the brand’ first, before the product. Therefore, having a strong brand is a distinct
competitive edge in the financial services sector as we benefit from the strong brand equity
generated by the ‘Aditya Birla’ brand.

The Aditya Birla group is one of the most respected, largest and oldest business houses in
India. The group pedigree is also a factor in our receiving ‘AAA’ ratings for long term
borrowing in both the lending businesses.

Pan-India Multi Distribution Channel:

51
Multi-channel approach to distribution in businesses enables to reach diverse customer
segments which contributes to new customer acquisition as well as maintaining ongoing
customer relationships. Multi-channel distribution network provides with the flexibility to
adapt to changes and mitigate the risk of over-reliance on any single channel. Online initiatives
also complement the physical distribution infrastructure, driving efficiency and enhancing
customer experience.

Distribution presence is being built in tier 2 and tier 3 cities, where the next wave of growth is
expected to come from. Combined with the trustworthy ‘Aditya Birla’ brand, this puts in a
unique position to take advantage of increasing financial products participation in India.

Integrated Risk Management Processes:

Effective Risk Management framework is core to a Financial services business. Company has a
differentiated approach to managing risk across platforms with robust governance mechanisms
in place, that not only manage risk at each of the segment levels but also at an overall financial
services platform level.

Systemic risks are managed by monitoring concentration risk in Client groups, integrating deep
sector expertise across segmented lines of business and maintaining constant oversight over
event risks. This forms an integral part of risk appetite framework at an ABC platform level.
Company has in place a robust Internal Risk Rating system, as an integral part of Credit Risk
framework, being used effectively to assess default risk of Borrowers/ Facilities and in Risk
based pricing decisions

Below are some of the important figures to be kept in mind with respect to investment in
stock.

Current Price (Rs.) 103.05

Face Value (Rs.) 10
Book Value (Rs.) 46.53
52 Week High (Rs.) 175.00 (01-Feb-18)
52 Week Low (Rs.) 81.60 (29-Jan-19)

52
Life Time high (Rs.) 255.00 (01-Sep-17)
Life Time low (Rs.) 81.60 (29-Jan-19)
Exchange Symbol ABCAPITAL
(NSE)
Average Daily Movement [ADM] 3.54
Average Volume [20 days](No. of 4645765
shares)
Market Cap (Rs. in Cr) 18117.49 (Cr)
1 Month Return (%) -17.70
P/E Ratio (x) 27594

3.2 Ratio Analysis

It is one of the tools of measuring financial performance of the organization It is a comparative

analysis between two factors . Business performance can be measured by the use of ratios . It
must be interpreted against some standards . Apart from the absolute profit figures, the
management might find a need of relative data/information about the variables, thus, at this
time, ratio analysis assists the management. It evaluates the financial conditions and the
purpose of a firm through various yardsticks . This tool is useful for all the various
stakeholders of the company like, shareholders, bankers, creditors, lenders, investors,
government, etc.

Among all the ratios these are the most important ratios to look before investing in a company.
Get the latest key Financial Ratios and the Ratio Analysis of to gauge the overall financial
health of a company before investing.

P/E Stands @ 27.59

Industry P/E Stands @ 39.37
Price/Book Stands @ 3.17
Book Value (Rs) @ 32.45

Name Rati Good/Not Good Description

o
Current Ratio (x) 1.79 > 2 is Good, A liquidity ratio that
< 2 is Not Good measures a companys
53
Name Rati Good/Not Good Description
o
ability to pay short-
term obligations. The
higher the current ratio,
the more capable the
company is of paying
its obligations.
1.79 > 1 is Good, The quick ratio
< 1 is Not Good measures a company's
ability to meet its short-
term obligations with
Quick Ratio (x) its most liquid assets.
For this reason, the
ratio excludes
inventories from
current assets
0.00 > 1.5 is Good, A financial ratio that
< 1.5 is Not Good shows how much a
company pays out in
dividends each year
relative to its share
Dividend Yield (%)
price. Dividend yield is
calculated as annual
dividends per share
divided by market price
per share.
1.55 > 2 is Good,  It is used to determine
< 2 is Not Good  how easily a company
(For Banks & NBFC this is not can pay interest on
Interest Coverage Ratio
Valid) outstanding debt. It is
(x)
calculated by dividing a
companys EBIT by the
interest expenses.
Debt Equity Ratio (x) 4.62 < 2 is Good,  A measure of a
54
Name Rati Good/Not Good Description
o
> 2 is Not Good  companys financial
(For Banks & NBFC this is not leverage calculated by
Valid) dividing its total
liabilities by
stockholders equity.
The debt/equity ratio
also depends on the
industry in which the
company operates.
1.29 > 5% is Good, An indicator of how
< 5% is Not Good efficient management is
at using its assets to
generate earnings.
Return On Asset (%)
Calculated by dividing
a companys annual
earnings by its total
assets
9.51 > 18% is Good, Also called Return on
< 18% is Not Good networth, it measures a
companys profitability
by revealing how much
profit a company
generates with the
money shareholders
Return On Equity (%)
have invested, it is
calculated by dividing
the net profit after tax
by shareholder's fund
For high growth
companies you should
expect a higher ROE.

55
 Shareholding Pattern

Shareholding pattern shows the number of shares which are held by various category of
investors. Companies equity comprises 100 percent out of this certain percentage is hold by
promoters and rest by outside parties like retail, FII and so on. Shareholding pattern shows
exact percentage and amount of shares hold by various people in the market and therefore it
can be of great help because before investing into any stock you would like to see whether
promoter and big players are increasing or decreasing their stake in the company and therefore
it helps in better investment decisions.

Shareholdiing Pattern
1%

14% Promoters
FIIs
3% Mutual Funds
3% Insurance Companies
1% Other DIIs
5%
Non Institutional Insvestors
Others

73%

Promoter Holding - Dec 18

Total
Shareholders in %
Shares (cr)
GRASIM INDUSTRIES LIMITED 123.2 56.0%
Turquoise Investment and Finance Pvt Ltd 5.9 2.7%
Trapti Trading and Investment Pvt Ltd 5.8 2.6%
TGS Investment and Trade Private 5.0 2.3%
IGH Holdings Pvt Ltd 4.7 2.1%
HINDALCO Ind Ltd 4.0 1.8%
Umang Commercial Company Pvt Ltd 3.7 1.7%
56
 Total
Shareholders in %
Shares (cr)
Pilani Investment And Industries Corporation 3.3 1.5%
Ltd.
P.T. Indo Bharat Rayon 2.8 1.3%
Birla Group Holdings Pvt Ltd 0.8 0.4%
Thai Rayon Public Company Limited 0.3 0.1%
P T Sunrise Bumi Textiles 0.2 0.1%
P T elegant Textile Industry 0.1 0.1%
Raja Shree Birla 0.1 0.0%
Birla Institute of Technology and Science 0.1 0.0%
Renuka Investments and Finance Ltd 0.0 0.0%
ECE Industries Ltd 0.1 0.0%

Grasim Industries Limited is an Indian manufacturing company based in Mumbai,

Maharashtra. The company holds 123.2 Crore (56%) shares in Aditya Birla Capital. It is one of
the subsidiaries of Aditya Birla Group manufacturing fibre and pulp, chemicals, cement and
textiles.

3.3 Risk Management

Being into financial services business, Company faces a host of risks across its businesses. It
has adopted a 3-tier risk management framework comprising:
1) Oversight by function,
2) Risk oversight and
3) Audit & governance committees.
To manage its credit risk efficiently, the Company follows a robust internal risk-rating
mechanism and has implemented a centralised risk aggregation system. Strong underwriting,
structuring and legal capabilities form the core of its credit risk management framework. Your
Company further engages in credit delegation, approval structure and portfolio monitoring

57
activities on a continuous basis. Its risk management framework across the businesses
continuously monitors and fine-tunes its portfolio after a careful analysis of portfolio and
attribution risks. Company has adopted robust business continuity and disaster recovery
mechanisms to keep operational risks under check.

3.4 Technical Analysis

Technical Analysis is the forecasting of future financial price movements based on an

examination of past price movements. Like weather forecasting, technical analysis does not
result in absolute predictions about the future. Instead, technical analysis can help investors
anticipate what is “likely” to happen to prices over time. Technical analysis uses a wide variety
of charts that show price over time.
Technical analysis is applicable to stocks, indices, commodities, futures or any tradable
instrument where the price is influenced by the forces of supply and demand. Price data (or as
John Murphy calls it, “market action”) refers to any combination of the open, high, low, close,
volume, or open interest for a given security over a specific timeframe. The timeframe can be
based on intraday (1-minute, 5-minutes, 10-minutes, 15-minutes, 30-minutes or hourly), daily,
weekly or monthly price data and last a few hours or many years.

Key Assumptions of Technical Analysis

Technical analysis is applicable to securities where the price is only influenced by the forces of
supply and demand. Technical analysis does not work well when other forces can influence the
price of the security. In order to be successful, technical analysis makes three key assumptions
about the securities that are being analyzed:

High Liquidity
Liquidity is essentially volume. Heavily-traded stocks allow investors to trade quickly and
easily, without dramatically changing the price of the stock. Thinly-traded stocks are more
difficult to trade, because there aren't many buyers or sellers at any given time, so buyers and

58
sellers may have to change their desired price considerably in order to make a trade. In
addition, low liquidity stocks are often very low priced (sometimes less than a penny per
share), which means that their prices can be more easily manipulated by individual investors.
These outside forces acting on thinly-traded stocks make them unsuitable for technical
analysis.

No Artificial Price Changes

Splits, dividends, and distributions are the most common “culprits” for artificial price changes.
Though there is no difference in the value of the investment, artificial price changes can
dramatically affect the price chart and make technical analysis difficult to apply. This kind of
price influence from outside sources can be easily addressed by adjusting the historical data
prior to the price change.

No Extreme News
Technical analysis cannot predict extreme events, including business events such as a
company's CEO dying unexpectedly, and political events such as a terrorist act. When the
forces of “extreme news” are influencing the price, technicians have to wait patiently until the
chart settles down and starts to reflect the “new normal” that results from such news.

It is important to determine whether or not a security meets these three requirements before
applying technical analysis. That's not to say that analysis of any stock whose price is
influenced by one of these outside forces is useless, but it will affect the accuracy of that
analysis.

Indicators:
Indicators represent a statistical approach to technical analysis as opposed to a subjective
approach. By looking at money flow, trends, volatility, and momentum, they provide a
secondary measure to actual price movements and help traders confirm the quality of chart
patterns or form their own buy or sell signals.
There are two primary types of indicators:

Leading Indicators.
Leading indicators precede price movements and try to predict the future. These indicators are
most helpful during periods of sideways or non-trending price movements since they can help
identify breakouts or breakdowns.
59
Lagging Indicators:
Lagging indicators follow price movements and act as a confirmation tool. These indicators are
most useful during trending periods where they can be used to confirm that a trend is still in
placing or if it’s weakening.

1 9 6 3 1 2 1 Last
Company Name
Year Month Month Month Month Week Week Price
AB Capital 151.80 129.65 110.20 99.45 99.65 100.15 101.75 103.05
- -20.52% -6.49% 3.62% 3.41% 2.90% 1.28%
32.11%

Understanding technical perfomance of Aditya Birla Capital with the help of

various Indicators.

1. Moving Averages:
 Moving Average is the only indicator that we can track on a daily basis.
 We use 50-day moving average and 200-day moving average for our calculation.

60
 50-day moving average moving abouve 200-day moving average is a bulliish indicator
and vice versa.

61
 2. Moving Average Convergence Divergence (MACD).
 Moving Average Convergence Divergence (MACD) identifies the trend between two
moving averages, the 12-period and 26-period exponential moving averages.
 Exponential moving averages give higher weightage to recent price movement and are
more sensitive to recent prices than simple moving averages.
 To calculate MACD, two factors are used- MACD line and Signal line.
 MACD line is the difference in two moving averages and the signal line is average of
the difference over the past few periods.
 When MACD line moves the above signal line it is a bullish indicator and when
MACD line goes below the signal line it is a bearish indicator.

The above chart represented weekly performances of stock AB Capital through MACD
Indicator.
The above chart showed us a bearish reversal at January end. The MACD line crossed the
Signal line in blue at the last week of February indicating the bullish trend has started.

62
 3. Relative Strength Index
 Relative Strength Index (RSI) is used to identify whether due to recent movement in
stock price has the stock moved into over-bought or over-sold territories.
 The value of RSI ranges between 0 to 100.
 In case of RSI reaches the upper band it indicates the stock is over-bought at these
levels and may fall, and in case RSI reaches the lower band it indicates the stock is
over-sold and may rise back up.
 In between the two bands the RSI does not give any indication.

In the above chart is the weekly chart of RSI. It indicates the RSI line reaching till the upper
band which is a clear indication of the stock being over-bought in December indicating the
stock may fall which did happen. In mid-feb the RSI line was seen reaching the lower band
which indicated short covering in stock from this level.

63
 4. Bollinger Bands
 Bollinger Bands plot the range from mean basis the standard deviation of prices.
 Since standard deviation measure volatility, the bands widen when volatility increase
and become narrow when volatility falls.
 When stock prices move out of the bands, it signals a potential ‘Breakout’ from the
current levels.
 In times of very low volatility the bands ‘squeeze’ and become very close to the mean.

In the above chart we can see the price line meeting the lower band signaling a breakout for
the stock from that level in the month of February. From the level of breakout, the price took a
small bullish rally.

64
5. Dow Theory
 Dow Theory has its origins in the writings of Charles Dow- founder of the Wall
Street Journal and creator of the Dow Jones Industrial Average
 His editorials pioneered technical analysis. On his death in 1902, William Hamilton
continued Dow's work, writing editorials of his own until 1929.
 Robert Rhea then collected the work of both of these men and used it as a basis to
publish The Dow Theory in 1932.

 The Dow theory tracks the stock movement on the basis of previous movements and
identifies the points where it beats the previous highs or falls below its previous low
 It identifies the trends and key levels for the stock movement.
 Dow Theory is considered the base on which all modern technical analysis is based.

65
4. Data Analysis, Interpretation & Presentation

The purpose of analyzing data is to obtain usable and useful information to the investors to
make investment decisions. The analysis, irrespective of whether the data is qualitative or
quantitative, may
• describe and summarise the data
• identify relationships between variables
• compare variables
• identify the difference between variables
• forecast outcomes.
In this chapter, we will have a glance at the Financials of Aditya Birla Capital which will help
the reader to analyse the company’s performance. We will also compare the statements with
that of previous years and also with the peers.

4.1 Financial Statement Analysis

Analysis of financial statements broadly has two components- qualitative and quantitative. The
financial statements by themselves do not convey all the information required by an investor
evaluating an investment option. Hence, some standard tools are used to operate on the
financial statements in order to understand the implications of these numbers both on an
absolute basis and on a relative basis.

Another important point to be noted that Aditya Birla Capital have subsidiaries and hence
declare two separate results- a standalone and a consolidated one. Though analyzing both is
useful, from an investor’s perspective it is better to analyze consolidated one. The reasons for
this are that in most cases subsidiary companies perform the same activities as the parent
company and are retained as subsidiaries mainly for strategic or other extraneous reasons.
The tools used to analyze financial statements, though appear to be different from each other,
there is a significant overlap in the effects they highlight.

For example, declining profitability of the company could be highlighted by more than one
tool (horizontal analysis, vertical analysis and profitability ratios), each analyzing from a
different perspective.

66
Horizontal/Growth Analysis
The easiest tool to use and interpret is the horizontal analysis. The various entries in a profit
and loss statement and balance sheet are compared over years and their year-on-year growth
rates are computed. These growth rates tell us how the top-line and bottom-line of the company
are growing with time..
These growth rates have to be analyzed in relation to each other, to check for consistencies.

In other words, the cause for ant growth or decline in the various parameters has to be
understood. For example, it the revenues are growing faster than the profits, it might be an
indication that the company has achieved additional revenues by either cutting their costs or
expanding without focusing on efficiency etc. These numbers used in conjunction with vertical
analysis provide greater insight into causes for historical performance of the company.
Let’s have a look at the Standalone Balance sheet of Aditya Birla Capital

Balance Sheet as at 31st March 2018

figures in
crore
As at As at
31st
Particulars Note No.
March 31st March,
2018 2017
EQUITY AND LIABILITIES
(A)Shareholders’ Funds
Share Capital 3 2,201.04 1,232.24
Reserves and Surplus 4 4,943.05 3,378.66
Sub-Total 7,144.09 4,610.90
(B) Non-Current Liabilities
Deferred Tax Liabilities 5 103.26 -
Long-term Provisions 6A - 13.94
Sub-Total 103.26 13.94
(C)Current Liabilities
Short-term Borrowings 7 674.96 492.97
Trade Payables- total outstanding dues of 8
- Micro Enterprises and Small Enterprises - -
- Creditors Other Than Micro Enterprises and Small
Enterprises 39.05 17.98
Other Current Liabilities 9 12.54 1.63
Short-term Provisions 6B 37.08 18.00
Sub-Total 763.63 530.58
TOTAL 8,010.98 5,155.42

67
ASSETS
(D)Non-Current Assets
Property, Plant and Equipment 10 27.56 2.48
Intangible Assets 11 6.01 1.28
Intangible Assets Under Development 0.04 4.67
Non-Current Investments 12 7,849.41 5,053.97
Long-term Loans and Advances 13A 22.53 8.24
Sub-Total 7,905.55 5,070.64
(E)Current Assets
Current Investments 14 6.46 29.99
Cash and Cash Equivalents 15 1.96 2.47
Short-term Loans and Advances 13B 70.81 12.55
Other Current Assets 16 26.20 39.77
Sub-Total 105.43 84.78
TOTAL 8,010.98 5,155.42

Comparative Balance
------------------ in Rs. Cr. -------------------
Sheet with Peers
AB Bajaj
Bajaj Finserv HDFC AMC
Capital Holdings
Mar '18 Mar '18 Mar '18 Mar '18
Sources Of Funds
Total Share Capital 2,201.04 79.57 111.29 105.28
Equity Share Capital 2,201.04 79.57 111.29 105.28
Share Application Money 0.00 0.00 0.00 0.00
Preference Share Capital 0.00 0.00 0.00 0.00
Reserves 4,943.05 2,800.16 8,105.15 2,054.69
Revaluation Reserves 0.00 0.00 0.00 0.00
Networth 7,144.09 2,879.73 8,216.44 2,159.97

68
Secured Loans 674.96 0.00 0.00 0.00
Unsecured Loans 0.00 0.00 0.00 0.00
Total Debt 674.96 0.00 0.00 0.00

Total Liabilities 7,819.05 2,879.73 8,216.44 2,159.97

Application Of Funds
Gross Block 36.95 348.74 114.34 108.33
Less: Accum. Depreciation 3.38 281.34 90.48 75.53
Net Block 33.57 67.40 23.86 32.80
Capital Work in Progress 0.04 8.19 191.13 5.96
Investments 7,855.87 2,763.86 7,551.68 1,950.56
Inventories 0.00 0.00 0.00 0.00
Sundry Debtors 0.00 3.96 0.00 90.28

Cash and Bank Balance 1.96 12.40 81.14 2.07

Total Current Assets 1.96 16.36 81.14 92.35

Loans and Advances 119.54 78.24 441.92 288.96

Fixed Deposits 0.00 0.00 0.00 0.00

Total CA, Loans & Advances 121.50 94.60 523.06 381.31

Deffered Credit 0.00 0.00 0.00 0.00

Current Liabilities 154.85 25.67 56.14 209.76

Provisions 37.08 28.65 17.15 0.89

Total CL & Provisions 191.93 54.32 73.29 210.65

Net Current Assets -70.43 40.28 449.77 170.66

Miscellaneous Expenses 0.00 0.00 0.00 0.00

Total Assets 7,819.05 2,879.73 8,216.44 2,159.98

Contingent Liabilities 0.00 54.38 424.66 60.49

Book Value (Rs) 32.46 180.96 738.27 102.58

69
Statement of Profit and Loss for the year ended 31st March, 2018

` crore

Year Ended Year Ended

31st March,
Particulars Note No.
31st March, 2018 2017

Revenue from Operations 17 174.79 34.99

Other Income 18 0.46 0.03

Total Revenue 175.25 35.02

EXPENSES

Employee Benefits Expenses 19 22.27 24.45

Finance Cost 20 25.38 0.53
Depreciation and Amortisation
Expenses 21 0.49 0.14
Other Expenses 22 65.62 5.66

Total Expenses 113.76 30.78

Profit Before Tax 61.49 4.24

Tax Expenses - -

Profit For The Year 61.49 4.24

Basic Earnings Per Share (`) 23 0.32 0.05

Diluted Earnings Per Share (`) 0.31 0.05
(Face Value of ` 10/- each)

Significant Accounting Policies. 2

The accompanying notes are an integral
part of the Financial Statements

Consolidated Revenue for Q3 FY19

70
PAT has seen a promising growth of 42% y-o-y giving a positive sign for the investors.
Impressive results in the last quarter gained investor’s trust in the company even after downfall
in the stock since the tock as listed.
The company’s PAT for the Q3 FY19 stood at 206 Crores.

Figures in Rs Crore Q2 FY19 Q3 FY19

PAT after MI (As per IGAAP) 227 239

EIR on assets and liabilities (15) (15)
ECL methodology adoption 1 (18)
MTM/ Fair Valuation (25) 4
Non-controlling interest adj. on 21 8
above
Group share on account of Ind AS (3) 3
on Joint Ventures
Others (incl. impact of Deferred (11) (13)
Tax)
71
PAT after MI (As per Ind AS) 195 206
Difference -Ind AS PAT vs. (14%) (14%)
IGAAP PAT

Consolidated PAT: Bridge from Q3 FY18 to Q3 FY19

 Established Businesses grew by 30% y-o-y

 HFC delivering strong growth in profits

 Reducing losses in Health Insurance

72
Cash Flow Statement of
Aditya Birla Capital
Year Ended Year Ended
Particulars 31st March,2018 31st March, 2017
A CASH FLOW FROM
OPERATING ACTIVITIES
Profit before tax 61.49 4.24
Adjustments For:
Depreciation and Amortisation
Expenses 0.49 0.14
Share Issue Expenses (2.81) -
Provision for Employee Benefits 28.46 47.17
Provision for Standard Loan Assets
and Advances 0.91 -
Gain on Sale of Investments -
Private Equity Fund (47.83) -
Gain on Sale of Current Investments (9.34) (1.46)
Employee Stock Options 2.01 -
Gain on Fixed Assets Sold (0.01) (28.12) (0.01) 45.84

Operating Profit Before Working Capital Changes 33.37 50.08

Adjustments For:
Decrease/(Increase) in Loans and
Advances (57.85) (9.79)
Decrease/(Increase) in Other Assets 64.94 (22.00)
Increase/(Decrease) in Trade
Payables 20.84 4.86
Increase/(Decrease) in Other
Liabilities 6.48 1.36
Increase/(Decrease) in Provisions (23.60) 10.81 (18.45) (44.02)

Cash Generated From Operations 44.18 6.06

Income Taxes Refund / (Paid) (1.88) (3.09)
Net Cash Generated From Operating
Activities 42.30 2.97
B CASH FLOW FROM
INVESTING ACTIVITIES
Sale/(Purchase) of Current
Investments (Net) 148.10 (28.53)
Purchase of Fixed Assets (7.17) (7.43)
Sale of Fixed Assets 0.01 0.02
Acquisition of Additional Shares/Investment in (1,156.72) (2,005.00) (1,973.5)
73
Subsidiary
Proceeds Received from Private Equity Fund on
Redemption of Units 138.04 (877.74) 67.39

Net Cash (Used in) Investing

Activities (877.74) (1,973.5)
C CASH FLOW FROM
FINANCING ACTIVITIES
Proceeds from borrowings 1,732.30 492.97
Repayment of borrowings (1,601.58) -
Redemption of Preference Shares - (1,471.11)
Proceeds from Issue of Shares (Including Securities
Premium) 704.21 834.93 2,948.06 1,969.92

Net Cash Generated From Financing

Activities 834.93 1,969.92
Net Decrease In Cash and Cash Equivalents
(A+B+C) (0.51) (0.66)
Cash and Cash Equivalents at the Beginning of the
year 2.47 3.13
Cash and Cash Equivalents at the End of the year 1.96 2.47

Comparing With Peers

Name Last Price Market Cap. Sales Net Profit Total Assets
(Rs. cr.) Turnover
Bajaj Finserv 7,279.60 115,844.72 239.76 141.34 2,879.73
Bajaj Holdings 3,423.55 38,101.89 1,469.68 1,313.55 8,216.44
HDFC AMC 1,569.00 33,352.74 1,759.75 721.62 2,159.98
L&T Finance 150.70 30,122.10 449.93 367.84 9,056.53
Muthoot Finance 617.10 24,724.81 6,161.83 1,720.27 26,459.80
AB Capital 103.00 22,674.46 174.79 61.49 7,819.05
Indiabulls Vent 340.85 20,620.72 12863 52.12 2,571.60
Max Financial 437.05 11,773.51 228.74 123.04 1,981.43
JM Financial 90.45 7,597.18 114.03 136.16 2,378.58
Rel Capital 203.30 5,137.57 3,275.00 828.00 32,748.00

74
4.2 Sum Of The Parts (SOTP) Valuation

Valuing a company by determining what its divisions or lines of business (LOB) would be
worth if it was broken up and spun off or acquired by another company is called as SOTP.

This is usually applicable in the case of conglomerates as they usually have more than two
business lines. For example, General Electric is a conglomerate with exposure to appliances,
aviation, consumer electronics, energy, financial services, healthcare, lighting, media and
entertainment, rail, security, etc. industries. Each of these business lines have different risks
and return profile mandating analysts to look at each of them independently and then
combining all of them to find the overall value of GE as a company.

Rationale Stake % to total Value per share

NBFC 3.2x P/BV FY20 100% 63% 111
Housing 2.8x P/BV FY20 100% 8% 22

75
Finance
AMC 4.2x AUM FY20 51% 18% 42
Life Insurance 2.4x EV FY20 51% 10% 28
Other P/E FY20 1% 4.5
Businesses
Target 208

5. Conclusion, Suggestions and Findings.

NBFCs have continued to be in limelight, recently, though, not for the right reasons. In spite of
continued growth, coupled with improved asset quality and more than adequate capital
adequacy, the stock markets have suddenly reacted negatively. With one of the important
infrastructure financing NBFCs going down, the sentiment suddenly turned negative and as a
result there has been a virtual blood bath at the stock markets, when it came to stocks of all the
leading NBFCs. This recent development has once again highlighted the crying need to create
a marked distinction between what is known as a ‘typical NBFC model’ focused on retail
lending (primarily secured) with small ticket size and average tenure of two to four years. The
NBFC facing the crisis today, is primarily engaged in long-term project financing and cannot
be treated as a representative for the NBFC sector.

Unfortunately, as has been the case in the past, it got clubbed with the other long-term
financing, non-bank players such as the housing finance companies (HFCs). While all these
long-term finance players may be exposed to an increased risk of asset liability mismatch, the

76
same cannot be held true for retail lending NBFCs, which constitute more than 95% of the
sector
.
It has been heartening to note that the regulator has voiced the same feelings and have till date,
refrained from any knee-jerk reactions.

With the timely intervention of the Government in resolving the crisis in the concerned NBFC,
followed by the much needed clarifications and awareness messages given by the
representative body FIDC and the leading industry players, the sudden panic seems to have
died down.

The NBFC sector have withstood such turbulent times even in the past, and have always come
out stronger. Backed by strong financials, increased reach, better understanding of the market
dynamics, down up to the local level, and ample growth opportunities, I am confident that
NBFCs will not only continue but vastly enhance their role in providing credit to the unbanked,
under banked and MSMEs including start-ups, which are the core focus areas in our Hon’ble
Prime Minister’s vision of a new India.

Aditya Birla Capital has gone under correcting since its listing in the stock exchanges. Price at
which it was listed 261.20 on BSE which touched 248.15 at the same day hitting 5% lower
circuit. It market capitalization was Rs 54615.58 crore after listing.

The reason for such correction of price over the period of time was the valuation of price.
Investors in the market were not convinced with the price they paid to buy the stock. The
expensive valuation in price of the stock saw excessive sell side.

For now, the stock is fairly valued and is open for fresh buying in secondary market. Following
the general elections in the country and RBI’s role in eradicating the liquidity crunch in the
economy, there is a lot more that can be expected from this stock.

77
6. Bibliography

6.1 Bibliography

 Aditya Birla Capital Annual Report 17-18

 Equity Research And Valuation- By Dun & Bradstreet
 Security Analysis- By Benjamin Graham & David L. Dodd.
 Investor Presentation Q3FY19

6.2Webliography

 www.marketsmojo.com
 www.wallstreetmojo.com
 www.referenceforbusiness.com

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7. Appendix

1. Age Group

o 15-21
o 21-30
o 30-45
o 45-60
o >60

2. Profession

o Student
o Salaried Person
o Self-Employed
o Retired

3. Do you invest your earned money somewhere?

o Yes
o No

4. Which is the best option for investment?

o Equity
o Mutual Funds
o Bank FDs
o Other

5. Which research method would you prefer for investment?

o Fundamental Analysis
o Technical Analysis
o Positive/Negative news of company in market
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6. Which of these factors make the company look good for investment?

o Higher dividend
o Leader in the industry
o Strong hold on fundamentals
o A holding company having larger subsidiaries.
o All of these

7. What will you do if you are making losses in your investment?

o Ignore the losses because the company is fundamentally strong

o Invest more to bring the average price down.
o Exit with losses.

8. Can NBFC still be an attractive sector even after liquidity crises?

o Yes
o No
o Can’t say

9. Which of these NBFC Company looks more promising for investment?

o Aditya Birla Capital

o Mahindra Finance
o Bajaj Finserv
o Shriram Transport Finance

10. Will you stay invested in Aditya Birla Capital even if the price of stock is falling?

o Yes
o No
o Can’t say

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