SECURITY ANALYSIS & PORTFOLIO MANAGEMENT

CIA I-B

TITLE:
STOCK SELECTION THROUGH FUNDAMENTAL ANALYSIS

SUBMITTED BY:

SHIRIN BATRA - 2020456

AYUSH AGARWAL - 2020465
DIYA SINGHVEE - 2020475

SUBMITTED TO:

PROF RAMESH CHANDRA BABU

SCHOOL OF BUSINESS AND MANAGEMENT
DATE OF SUBMISSION: AUGUST 19, 2022
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 TABLE OF CONTENTS

S.NO. PARTICULARS PAGE NUMBER

1. ECONOMIC ANALYSIS (INDIA) 3
2. GDP ANALYSIS (INDIA) 5
3. INDUSTRY-WISE ANALYSIS
 Indian Tyre Industry 6
 Conglomerate Industry 8
 Automobile Industry 9

4. COMPANY ANALYSIS
 Apollo Tyres 12
 JK Tyres 15
 Adani Enterprises 19
 Reliance Industries 22
 Tata Motors 26
5. BUY/SELL RECOMMENDATION 30
6. REFERENCES 32

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 FUNDAMENTAL ANALYSIS

ECONOMIC ANALYSIS

Economic analysis is the study of economic systems. It may also be a study of a production
process or an industry. The analysis aims to determine how effectively the economy or
something within it is operating. For example, an economic analysis of a company focuses
mainly on how much profit is making.

ECONOMIC ANALYSIS OF INDIA:

 India has emerged as the fastest growing major economy in the world and is expected
to be one of the top three economic powers in the world over the next 10-15 years,
backed by its robust democracy and strong partnerships.
 India’s economic growth strongly rebounded to 6-6.5 per cent in 2020-21 from 5 per
cent estimated.. One of the Survey said that there are tentative signs of bottoming out
of slowdown in manufacturing activity and global trade, which will have a positive
impact on growth in the next fiscal.
 India's gross domestic product (GDP) (at constant 2011-12 prices) was estimated to
be Rs 145.65 lakh crore (US$ 2.06 trillion) for 2019-20, growing 4.2 per cent over the
previous year.
 India retained its position as the third largest start-up base in the world with over
8,900-9,300 start- ups as 1,300 new start-ups got incorporated in 2019.
 India’s labor force touched 160-170 million in 2021 based on the rate ofpopulation
growth, increased labor force participation and higher education enrolment among
other factors. India's GDP is expected to reach US$ 5 trillion by FY25 and achieve
upper-middle income status on the back of digitization, globalization, favorable
demographics, and reforms.
 But due to coronavirus pandemic, The economy suffered in FY 2020 due to
containment measures and weaker external demand. A major downside risk is a
significant prolongation of the national lockdown. More positively, fiscal stimulus
should support activity, as should looser monetary policy, although the fiscal deficit
will spike in tandem.

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Current Macro-economy:
One of the most important factors to look at while investing in the stock market is to look the
instruments traded related to equity indices, government bonds, interest rates, currencies,
commodities, and yields.

Stock Indices:

The indices of the Nifty and BSE have been corrected

by 16.2% due to the recent data of high inflation in the
economy due to supply chain issues of Crude oil and
natural gas that occurred due to the war between Russia
and Ukraine and the global markets being weak due to
high inflation data.

Commodities:

We have used copper and gold for analyzing the

commodities as they are considered to be universal
metals. As we see copper and gold have corrected by
37.88%, which shows that the inflation in the economy
is easing and will be good for equities.

Bond Yields:
The bond yields are a leading indicator of the sentiment of
the market, over here we have taken one of the most
popular bonds yields are US 10Y Bond yield which has
declined from 3.364% to 2.887, this shows there are a lot
of buyers for the bonds and can indicate that people are investing in safe havens as they think
the current situation is riskier.

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Yield Spread:
The difference in yield between two bonds,
or two classes of bonds, is referred to as the
bond spread or yield spread. The spread is
a measure of a bond's relative pricing or
valuation used by investors. The above
graph is the US 10Y 2Y Yield spread, The 10-year minus 2-year Treasury bond spread is
generally considered to be a warning of severe weakness in the stock market; credit spreads
often widen during times of financial stress wherein the flight-to-safety occurs toward safe-
haven assets such as U.S. treasuries and other sovereign instruments.

Currency:

The above two charts are of the dollar index and USD/INR. When USD/INR depreciates the
FII and FDI inflow reduces and the market corrects, now the currency is trading at its all-time
high.

GROWTH RATE OF GROSS DOMESTIC PRODUCT (GDP)

An economy's overall economic activity is summarized by a measure of aggregate output. As

the production or output of goods and services generates income, any aggregate output
measure is closely associated with an aggregate income measure. The GDP is a measure of
all currently produced goods and services valued at market prices. According to verified
information from the World Bank, India's GDP was approximately 3173.40 billion US dollars
in 2021. India's GDP amounts to 0.21 percent of the global economy.

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 INDUSTRIES CHOSEN FOR REVIEW
The following companies across different Industries are chosen for review on the basis of its market
capitalization as part of this project: -

 Apollo Tyres, JK Tyre (Small Cap)

 Adani Enterprises, Tata Motors (Large Cap)

 Reliance Industries (Blue Chip)

INDUSTRY ANALYSIS

The Indian Tyre Industry: (Apollo Tyres, JK Tyres)

 The origin of the Indian Tyre Industry dates back to 1926 when Dunlop Rubber
Limited set up the first tyre company in West Bengal MRF followed suit in 1946.
Since then, the Indian tyre industry has grown rapidly. Indian Tyre Industry now
provides direct and indirect employment to nearly million persons, including dealers,
retailers, growers of Natural Rubber, employment raw material sector etc.
 The Indian tyre industry has become one of the most competitive markets in the world
and with the help of new technology ultra-modern production facilities and availability
of raw materials beer rate, the sector is set to grow further. At present, India has forty
large and medium tyre manufacturing tyre production companies, of which the top 10
account for over 90 percent of the country's total

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  The Indian Auto Sector is an integral part of the Indian economy contributing to about
7.5 percent to the GDP The Indian Tyre Industry which provide services to the Auto
Sector in India also contributes to around 3% of the manufacturing GDP of India and
0.5% of the total GDP directly.
 Indian tyre industry has almost doubled from Rs 30,000 crores in 2010-11 to Rs 59,500
crores in 2017-18 of which 90-95% came from the domestic markets. The topthree
companies – MRF, Apollo Tyres and JK Tyres have 60% of the market share interms
of revenue.

Nature of the Industry:

Tyre Industry is highly raw material intensive. Raw material cost accounts for approx. 63%
of tyre industry turnover and 72% of production cost. The industry is a major consumer of the
domestic rubber market. Natural rubber constitutes 80% while synthetic rubber constitutes
only 20% of the material content in Indian tyres, 62% of total Natural Rubber consumption is
by the Tyre Sector, balance by rubber based non-tyre industry. Interestingly, world-wide, the
proportion of natural to synthetic rubber in tyres is 30:70.

Demand Drivers of the Industry

1) Industrial and freight activity
The truck and bus tyre segment accounted for 19% of tyres produced in India. Every truck/bus
manufactured generates a demand for seven tyres. In addition, the price of a truck tyre is
significantly higher than that of a passenger car tyre (roughly 10 times).

2) Personal purchasing power

As the economy booms and disposable incomes in the hands the sale of passenger cars has
been witnessing an upward swing over the past decade. Since tyre sales are directly linked to
car sales, both through OEMs and the replacement market, the tyre industry has witnessed a
corresponding increase in its sales figures

3) Automobile sales
The demand from the OEM segments a derived one directly correlated to the level of
automotive production. The recent Slowdown in automotive industry and global economies
general negatively impacted the Indian Tyre industry.

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 S.W.O.T. Analysis

Strengths Weakness
 Highly Capital Intensive
 Revival in economic activity
 Fluctuation in Exchange Rate
 Limited competition
 Pricing Pressures
 R&D initiative by Top players

Opportunity
 Improvement in Auto-Mobile Industry
 Access to global sources for raw
material
 Exploration of new markets
Threats
 Introduction of other transport facilities
 Cheaper Import of tyres
 Expectation of rise in natural rubber
price

Conglomerate Industry (Reliance Industries & Adani Enterprises)

A corporation that manages multiple distinct and apparently unconnected enterprises is referred
to as a conglomerate. The fundamental idea behind a conglomerate is that one large organisation
oversees numerous other organisations that manage independent enterprises. The primary
business—or parent organisation, as it is more frequently known—acquires control of these
small businesses.
Top Conglomerates in India: The Indian economy opened to the rest of the world and underwent
liberalisation and privatisation about three decades ago. Since then, our economy has grown to
be worth $3 trillion in 2019 and we have set goals to reach a $5 trillion economy by 2025.
Private actors who have established themselves in numerous industries to create conglomerates
can be held somewhat responsible for the accomplishments. Today, we examine India's leading
conglomerates.
Some of the prominent players in the conglomerate industry are:-
1. Reliance Industries Ltd.
2. Tata Group
3. Aditya Birla Group
4. Mahindra Group
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6. Adani Group
Nature of Conglomerate Industry: -
The licence-quota-permit raj is the source of many of India's large corporate empires, including
the Tatas, Birlas, Ambanis, and many more. It made sense to keep all businesses, whether
related or unrelated, in one conglomerate, or even one company when business opportunities
were not open to all comers, when access to capital depended on the blue chip nature of your
entrepreneurial parentage, and when multi-point tax structures (both excise and sales tax) were
in vogue.

But that's not the case now. Due to their excessive debt loads and ongoing demands for large
amounts of stock to expand, conglomerates have turned into lumbering, slow-moving
leviathans. Conglomerates must now simplify their operations. being concentrated on five, six,
or seven large enterprises rather than acting as a conglomerate.

S.W.O.T. Analysis

Strengths Weakness
 Presence from diversified sectors.  Highly Capital Intensive
 Inbuilt expertise in different arenas.  Fluctuation in Exchange Rate
 Customer credibility.  Pricing Pressures

Opportunity Threats
 5G Spectrum  Highly competitive market
 Rise in healthcare  High Attrition rate
 Exploration of new markets  High probability of impact of
governmental implications impact

Automobile Industry (Tata Motors)

According to statistics from 2021, India has the fourth-largest automobile industry worldwide.
India became to the fourth-largest nation in the world by automobile industry worth in 2022.

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India will overtake Germany as the world's fifth-largest auto market in 2020 in terms of sales.

The auto sector in India is currently valued more than $100 billion, produces 8% of the total
exports, and accounts for 2.3% of the country's GDP. Tata Motors, Ashok Leyland, and
Mahindra & Mahindra are just a few of India's leading automakers.

There are new launches and inexpensive cars coming in every other day; all of these vehicles
have been modified to ensure that the average person is not left behind. Between FY 2009
and FY 2020, the sales of the Indian automobile industry will grow at a CAGR of about 8%.

The automobile industry has been segmented in the following manner: -

 Passenger Vehicle: 13%
 Commercial Vehicles: 3%
 Three wheelers: 3%
 Two Wheelers: 81%

Nature of Automobile Industry: -

The automobile industry is highly capital intensive since it involves huge amount of
infrastructure which comprises of production plants, machines and other components included
in a particular car. It also involves a considerable amount of Information Technology in the
entire value chain of the production.

Besides this, Human Resource Management plays a vital role for all vehicle brands since
motivated and well managed human capital is the key to success in the automotive industry.
Considering the amount of capital expenditure required, management of financial
procurement is an imperative step that any company in the automobile industry needs to carry
out in the best possible manner.

Demand Drivers of The Industry

1. Economic Conditions
The state of the economy is the primary motivator. People are more likely to buy new
cars when the economy is doing well, which helps the industry grow. The economy’s
output is slowing down, which lowers consumer and company confidence and
decreases vehicle use.

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 2. Consumer Demand and Interests

Consumer demand, preferences, and interest constitute the second important driver.
More options are being sought after increasingly. With more vehicles being built to
order based on a multi-option selection, volume production may resemble that of
premium cars. The demand for more variety in body type and appearance among
consumers is driving up the market for niche automobiles. As a result, various body
shapes have been built on common bases.

3. Globalisation

Global industry influences and globalisation are the third major force. The modern,
international automotive sector competes on a worldwide scale today. Due to the
building of significant overseas facilities and mergers between massive multinational
automakers, the globalisation of the automotive industry has significantly increased
throughout the latter half of the 1990s. In order to lower production costs, the biggest
automakers in the world invest in factories in developing nations. To develop in
foreign markets, automakers have merged with, and in some cases formed commercial
strategic agreements with, other automakers.

S.W.O.T. Analysis

Strengths Weakness
 Domestic market is large  Infrastructural setbacks
 Reduced labour cost.  Low productivity
 Evolving industry.  Too many taxes levied by the
 Growth shifting to Asian markets. government
 Government monetary assistance  Low investments in R&D

Opportunity Threats
 Reduction in excise duty  Increasing rates of interest
 Rising rural demand  Too much competition
 Constant increase in income level  Rising cost of raw materials
 Introduction of Fuel-efficient vehicles  Slow economy
 Changing lifestyle and customer demand  Economic recession
 High fixed cost and investments

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 APOLLO TYRES

Company Summary

Apollo Tyres Ltd is the leading tyre manufacturing company in India. They are engaged in
manufacturing automobile tyres and tubes. They are the first Indian tyre company to launch
exclusive branded outlets for truck tyres and also the first Indian company to introduce radial
tyres for the farm category. Apollo Tyres currently has four manufacturing facilities in India -
- two (including a leased facility) in the rubber-producing state of Kerala and one each in
Gujarat and Tamil Nadu. Outside India the company has a manufacturing facility each in The
Netherlands and Hungary. These products are available in countries across the globe through a
vast network of branded, exclusive and multi-product outlets. Apollo Tyres has multiple
manufacturing units in India, the Netherlands and Hungary.

With its corporate headquarters in Gurgaon, India, we cater to over 100 countries across the
globe. At the end of the financial year 2019, the company clocked a turnover of US$ 2.48
billion, backed by a global workforce of approximately 17,200 employees.

As of March 31, 2019, the company traded in India on the Bombay Stock Exchange and
National Stock Exchange, with 59.10% of shares held by the public, government entities, banks
and financial institutions.

Serial No. Valuation Metrices Fundamentals

1. Earnings per share (EPS) 4.11

2. Price-to-earnings (P/E) ratio 19.01

3. Return on equity 2.74

4. Debt-to-Equity Ratio 0.46

5. Price-to-book (P/B) ratio 1.28

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 Price-Earnings Ratio
45
40
35
30
25
20
15
10
5
0
2018 2019 2020 2021 2022

The above graph shows the P/E ratio of Apollo Tyres for last 5 years. This helps us to
understand that the company had an unstable P/E ratio wherein it was best valued in 2020,
however it rose very high in 2021 and then again came back to considerable rate in 2022. The
lower, the more viable option.

Earning per Share

14

12

10

0
2018 2019 2020 2021 2022

The above graph shows Earning per Share of Apollo Tyres for last 5 years. Through this we
can infer that the earning capacity of each share has been steady from 2018-2021. However, it
has declined in the year 2022, this proves to be a setback for the investors investing in the share.

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 Return on Equity
9
8
7
6
5
4
3
2
1
0
2018 2019 2020 2021 2022

The above graph shows the ROE of Apollo Tyres for last 5 years. Thus, helps us to make
conclusion that the company had overall increasing/stable ROE for the last 5 years. However,
in the current year a dip can be seen which indicates the company’s low efficiency in that year.

Debt-Equity Ratio
0.6

0.5

0.4

0.3

0.2

0.1

0
2018 2019 2020 2021 2022

The above graph shows the Debt-Equity ratio of Apollo tyres for last 5 years. This helps us to
infer that the company had fluctuations terms of long-term interest-bearing debt that it had over
the last years and remained stable from 0.48 in 2018 to 0.49 in 2019 which is good for the
performance of the company. The company’s current D/E ratio stands at 0.6 which is lower
than industry standards of 1 and it means that the company has high dependence on equity
which leads to loss on tax.

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 Price-to-Book Value
2.5

1.5

0.5

0
2018 2019 2020 2021 2022

The above graph shows the Price to Book ratio of Apollo Tyres for the last 5 years which helps
us to make conclusion that the company’s market valuation to its book value decreased until
2020. However, it again rose in 2021 and 2022. This signifies that the book value of the
company is slightly overvalues since it is over 1. The investors can be apprehensive on buying
this stock.

JK TYRES

Company Summary
The J. K. Organization is an Indian industrial conglomerate, with headquarters in Delhi, Kanpur
and Mumbai. It is run by the Singhania family, which rose to prominence in Kanpur, India,
under Lala Kamlapat Singhania. JK Tyre is the pioneer of Radial Technology in India.It was the
first company to launch radials in the passenger car segment way back in 1977. With a vast
experience and understanding of operating conditions in India, JK Tyre brings one of the best
technologies for all the cars & SUVs. JK Tyre & Industries Ltd is one of India’s foremost tyre

15
manufacturers and is also amongst the top 25 manufacturers in the world. It is the only Indian
tyre manufacturer to be included in the list of Super-brands India in 2019 for the seventh
consecutive year. JK Tyre recently was awarded the most coveted Safety award in the world -
the Sword of Honor for Safety across its plants by the British Safety Council, UK. JK Tyre
launched India's first ever „Smart Tyre‟ technology-and introduced Tyre Pressure Monitoring
Systems (TPMS) by offering TREEL Sensors, which monitors the tyre’s vital statistics,
including pressure and temperature.

Serial No. Valuation Metrices Fundamentals

1. Earnings per share (EPS) 7.43

2. Price-to-earnings (P/E) ratio 13.75

3. Return on equity 7.24

4. Debt-to-Equity Ratio 1.12

5. Price-to-book (P/B) ratio 1.14

Earnings Per Share

12

10

0
2018 2019 2020 2021 2022

The above chart shows that JK Tyres EPS has risen over the years consistently which points
towards efficient financial performance of the company. The current EPS stands at 7.43 which
tells that the company has the potential to earn Rs. 7.43 on equity share. This parameter helps
the investors to make a firm decision regarding the profitability of the business.

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 Price-Earnings Ratio
60

50

40

30

20

10

0
2018 2019 2020 2021 2022

The above graph shows the P/E ratio of JK Tyres for the ladt 5 years which shows that it has
seen a sharp decline in the year 2019. It is more viable to invest when it is lower, however it
risen up back to more than 10 in the year 2022.

Return on Equity
12

10

0
2018 2019 2020 2021 2022

The above graph shows the ROE for JK Tyres for the last 5 years. It clearly helps us to make a
conclusion since the company’s EPS has been performing well over the last few years however
it has declined in the year 2022 since it came down to an approximate of 7.8. This is one metric
to identify how well the company is working.

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 Debt-Equity Ratio
2
1.8
1.6
1.4
1.2
1
0.8
0.6
0.4
0.2
0
2018 2019 2020 2021 2022

The above graph shows the Debt-Equity ratio of JK Tyres for the last 5 years which helps us to
conclude that the company has had fluctuating in terms of long-term interest-bearing debt that
it had over last years and remained stable around 2019-2020. The current debt equity ratio
stands closer to 1 which is appropriate to industry standards and it can be a safe and efficient
plan for the company.

Price-Book Value Ratio

2.5

1.5

0.5

0
2018 2019 2020 2021 2022

The above graph shows the Price to Book Ratio of JK Tyres for the last 5 years which helps us
to make a conclusion that company’s market evaluation relative to its book value decreased
until 2020 however it again raised to 1.1 in 2022. This helps the investors to identify the
potential investments.

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 ADANI ENTERPRISES

Adani Enterprises Limited, the flagship company of the Adani Group has been driven by the
philosophy of incubating stellar infrastructural asset catering to underserved sectors of India.
Since the Company’s listing in 1994, it has maximised value for stakeholders, while
contributing to nation building. Adani Enterprises Limited is presently focused on businesses
related to airports, roads, water management, data centres, solar manufacturing, defence and
aerospace, edible oils and foods, mining, integrated resource solutions and integrated
agricultural products.

Adani Group is an Indian multinational conglomerate, headquartered in Ahmedabad. It was

founded by Gautam Adani in 1988 as a commodity trading business, with the flagship company
Adani Enterprises. The Group's diverse businesses include port management, electric power
generation and transmission, renewable energy, mining, airport operations, natural gas, food
processing and infrastructure. The group has annual revenue of over US$20 billion with
operations at 70 locations in 50 countries.

In April 2021, Adani Group became the third Indian conglomerate to cross US$100 billion in
market capitalization. It crossed the market capitalization of US$200 billion in April 2022
becoming the third Indian conglomerate after Tata Group and Reliance Industries to do so.

Serial No. Valuation Metrices Fundamentals

1. Earnings per share (EPS) 6.55

2. Price-to-earnings (P/E) ratio 285.47

3. Return on equity 15.23

4. Debt-to-Equity Ratio 0.89

5. Price-to-book (P/B) ratio 46.86

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 Earnings Per Share (EPS)
7

0
2018 2019 2020 2021 2022

The EPS for Adani Enterprises has been variable, however in the last year it has risen up to Rs.
6.55 which points towards a strong financial position of the company as it refers to the Earning
power of each share.

Price-to-earnings (P/E) ratio

300

250

200

150

100

50

0
2018 2019 2020 2021 2022

The above graph shows the P/E ratio for Adani Enterprises for the last 5 years wherein it was
coming at a very good valuation however the shares are now highly overvalued and has risen
closer to around 300 per share, which points towards its riskiness.

20
 Return on Equity
20
18
16
14
12
10
8
6
4
2
0
2018 2019 2020 2021 2022

The above graph shows the Return on Equity for Adani Enterprises limited for the last 5 years.
It can be clearly interpreted that the ROE has been variable but this also risen up to Rs. 15.23
which points towards good shareholder returns and dividend for the shareholders.

Debt/Equity Ratio
1.8
1.6
1.4
1.2
1
0.8
0.6
0.4
0.2
0
2018 2019 2020 2021 2022

The above graph shows the Debt-Equity ratio for Adani Enterprises for last 5 years wherein the
cpmpany has seen highest D/E ratio in 2018, however it has now become closer to 1 which
implies that the company has reduced debt financing and is maintaining optimal debt-equity mix
for optimal returns.

21
 Price/BV Ratio
6

0
2018 2019 2020 2021 2022

The above graph points towards the Price to B/V ratio for Adani Enterprises wherein the
valuation in the years 2018 and 2019 was very high, but due to the fundamental improvements
in the company’s financials, the ratio came down to a considerable amount and it is safer for
investors to invest.

RELIANCE INDUSTRIES LTD.

Company Summary
Reliance Industries, the largest private company in India, has grown from being a manufacturer
of textiles and polyester to an integrated player in the energy, petrochemicals, material, natural
resources, retail, and telecommunications industries. It also runs top-notch manufacturing
facilities all over the nation. The range of goods and services offered by Reliance touches nearly
all the daily needs of people from all socioeconomic backgrounds.

Following the division of the family firm among the two brothers, Reliance Industries Limited,

22
with its headquarters in Mumbai, is expanding under the direction of Mukesh Ambani, the late
Dhirubhai Ambani's son and the company's elder brother.

Reliance Group is the largest taxpayer in the Indian private sector and is a conglomerate holding
corporation with a diverse range of businesses. It contributes more than 5% of the government
of India's income and roughly 8% of all goods exported from India. In 2007, RIL became the
first Indian company to surpass a market capitalization of $100 billion, and in 2019, it became
the first to reach a market worth of Rs. 9 lakh crores. As of 2019, the company was listed as the
106th largest corporation in the world by Fortune Global 500.

Serial No. Valuation Metrices Fundamentals

1. Earnings per share (EPS) 13.68

2. Price-to-earnings (P/E) ratio 26.47

3. Return on equity 9.50

4. Debt-to-Equity Ratio 0.34

5. Price-to-book (P/B) ratio 2.22

P/E Ratio
35

30

25

20

15

10

0
2018 2019 2020 2021 2022

P/E Ratio

The above graph shows the P/E ratio of Reliance for last 5 years. This helps us to understand
that the company had an steadily rising P/E ratio. Since 2018 we can see a positive trend
however it rose very high in 2021 and then again came back to considerable CAGR rate in
2022. A high P/E ratio could mean that a company's stock is overvalued, or that investors are
expecting high growth rates in the future.

23
 EPS
120

100

80

60

40

20

0
2019 2020 2021 2022 June, 2022

The above graph shows Earning per Share of Reliance Industries for last 5 years. Through this
we can infer that the earning capacity of each share has been steady from 2019-2022. In the
first quarter of June it has continued to grow which is a positive for the investors.

Return on Equity
9
8
7
6
5
4
3
2
1
0
2018 2019 2020 2021 2022

The above graph shows the ROE of Apollo Tyres for last 5 years. Thus, helps us to make
conclusion that the company had overall increasing/stable ROE for the last 5 years. However,
in the current year a dip can be seen which indicates the company’s low efficiency in that year.

24
 Debt/Equity Ratio
0.7

0.6

0.5

0.4

0.3

0.2

0.1

0
2018 2019 2020 2021 2022

The above graph shows the Debt-Equity ratio of Reliance for last 5 years. This helps us to infer
that the company had minimum fluctuations in terms of long-term interest-bearing debt that it
had over the last years and remained stable from 0.4 in 2018 to 0.31 in 20 which is good for the
performance of the company. The company’s current D/E ratio stands at 0.31 which is lower
than industry standards of 1 and it means that the company has high dependence on equity
which leads to loss on tax.

P/B Ratio
4

3.5

2.5

1.5

0.5

0
2018 2019 2020 2021 2022

The above graph shows the Price to Book ratio of Reliance for the last 5 years which helps us
to make conclusion that the company’s market valuation to its has been decreasing on an
average However, it again rose in 2021. This signifies that the book value of the company is
slightly overvalued since it is over 1. The investors can be apprehensive on buying this stock.

25
 TATA MOTORS

Tata Motors Limited is an Indian multinational automotive manufacturing company,

headquartered in the city of Mumbai, India which is part of Tata Group. The company produces
passenger cars, trucks, vans, coaches, buses, luxury cars, sports cars, and construction
equipment.
Tata Motors continues to take the lead in shaping the Indian commercial vehicle landscape,
with the introduction of leading-edge powertrains and electric solutions packaged for power
performances and user comfort at the lowest life-cycle costs.

Current valuation ratios:

Sl No Particulars Ratio
1 Earnings per share -29.88
2 Price-to-earnings ratio 30.84
3 Return on equity -24.60
4 Debt to equity 3.13
5 Price to book 8.33

Price-Equity Ratio
35

30

25

20

15

10

0
2018 2019 2020 2021 2022

The price to earning of tata motors is constant and is increasing at a good rate, the company has

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had a good top-line and bottom-line growth in the past few years. The Price to earning ratio has
increased from 22.78 to 30.84. The P/E of tata motors is comparatively lesser compared to its
peers, which shows that it’s fairly valued.

Earnings Per Share

0
2018 2019 2020 2021 2022
-10

-20

-30

-40

-50

-60

-70

-80

-90

Tata motors price to earnings ratio of tata motors has improved from -84.89 to -36.12, which
has improved drastically for the past 5 years. The main reason for negative P/E for the company
is due to high debt which was incurred by big acquisitions, led by covid 19 and now due to the
semiconductor chips shortage.

Debt to equity ratio

3.5

2.5

1.5

0.5

0
2018 2019 2020 2021 2022

The debt to equity ratio of tata motors was at 3.21 in 2018 due to very big leverage buyouts
made by the company in the attempt to revive the company, the company has reduced major
debts over the period of years. It has reduced debt by almost 50%, which allows the profit to
grow and also the company to higher risks.

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 Return on Equity
0
2018 2019 2020 2021 2022
-5

-10

-15

-20

-25

-30

-35

-40

The company has consistently provided a negative return on equity, this number can turn
profitable as the company owns the majority of the share in the EV Segment and the 4 by 4
segment in the Indian and the European market.

Price to Book Value

9
8
7
6
5
4
3
2
1
0
2018 2019 2020 2021 2022

The above graph shows the Price to Book ratio of Tata Motors for the last 5 years which helps
us to make conclusion that the company’s market valuation to its has been variable over the
years. After declining in 2020, it again came back to pre-covid valuation in 2021. In 2022 it
was more than 8 which signifies that the book value of the company is slightly overvalued since
it is over 1. The investors can be apprehensive on buying this stock.

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 COMPANY STOCK RECOMMENDATION

Apollo Tyres Strong Buy

JK Tyres Sell

Reliance Industries Buy

Adani Enterprises Sell

Tata Motors Buy

1. Apollo Tyres:
The following are the reasons for a strong buy rating: -
 Company's annual revenue growth of 20.22% outperformed its 3 year CAGR of 5.98%.
 It is expected that Apollo tyres will benefit from higher CV sales and stable replacement
demand.
 It expects revenue growth of 11%YoY but lower margins of 12.5%, which is down 485bps
YoY on very high base and higher input costs.
 Company has spent 2.12% of its operating revenues towards interest expenses and 12.29%
towards employee cost in the year ending 31 Mar, 2022.

2. JK Tyre
The following are the reasons for a sell rating:-
 Return on Equity has declined versus last 3 years average to 6.50%
 Sales growth has been subdued in last 3 years 1.81%
 Net Profit has been subdued in last 3 years 2.14%
 Debt to equity has increased versus last 3 years average to 1.12

3. Reliance Industries
The following are the reasons for a buy rating: -
 Company's annual revenue growth of 52.42% outperformed its 3 year CAGR of 8.35%.
 Reliance Industries Ltd. emerged as the highest bidder in the 5G Spectrum auction which
is expected to generate revenues upon the 5G rollout.
 Windfall tax on Oil&Petroleum business will be revised by the government.

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4. Adani Enterprises
The following are the reasons for a sell rating: -
 Company's annual revenue growth of 74.81% outperformed its 3 year CAGR of 19.6%.
 Stock gave a 3 year return of 2040.52% as compared to Nifty 100 which gave a return of
58.48%.
 Stock is also touching 52 week high on a regular basis and pointing towards overvaluation.

5. Tata Motors
The following are the reasons for a buy rating: -
 The focus remains on E-PVs, with medium-term investments of US$2bn toward new
products, capacity expansion, localization, and charging infrastructure.
 Chip supplies are expected to improve in a staggered manner going ahead.
Despite an 11% YoY dip in sales through JLR, it is expected to have a CAGR of 20%.

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 REFERENCES:

[1] Apollo Tyres Ltd. Share Price: Live BSE/NSE. (n.d.). Retrieved August 12, 2022, from
https:// www.valueresearchonline.com/stocks/241/apollo-tyres-ltd?utm_source=direct-click

[2] JK Tyre & Industries Ltd. Share Price: Live BSE/NSE. (n.d.). Retrieved August 10, 2022,
from https://www.valueresearchonline.com/stocks/1834/jk-tyre-and-industries-ltd

[3] Adani Enterprises Ltd. Share Price: Live BSE/NSE. (n.d.). Retrieved August 10, 2022,
from https://www.valueresearchonline.com/stocks/40886/adani-enterprises-ltd/#snapshot

[4] Reliance Industries Ltd. Share Price: Live BSE/NSE. (n.d.). Retrieved August 10, 2022,
from https://www.valueresearchonline.com/stocks/44052/reliance-industries-ltd/#snapshot

[5] Tata Motors Ltd. Share Price: Live BSE/NSE. (n.d.). Retrieved August 10, 2022, from
https://www.valueresearchonline.com/stocks/44818/tata-motors-ltd/#snapshot

[6] Satija, A. (2020, February 20). The Indian Tyre Industry, Key Players & The Road Ahead.
Retrieved August 10, 2022, from https://www.alphainvesco.com/blog/understanding- the-
indian-tyre- industry/

[7] Top Companies in India by Market Capitalization - BSE. (n.d.). Retrieved August 10, 2022,
from https://www.moneycontrol.com/stocks/marketinfo/marketcap/bse/tyres.html

[8] List of Top Conglomerates in India Retrieved August 10, 2022,https://tradebrains.in/top-

conglomerates-india/

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