Final Project Sem4

THREE MANDATORY PROJECT REPORTS ON
GENERAL MANAGEMENT, SPECIALIZATION & SOCIAL RELEVANCE
Comprehensive Study On leadership style & its impact on employees.

Fundamental Analysis of Automobile Sector.
A study on farmers Suicide in India.
Submitted in partial fulfillment for the award of the degree of

MASTER OF MANAGEMENT STUDIES
UNIVERSITY OF MUMBAI
Submitted by
Mr. Shubham Prashant Patil
ROLL NO. 2021160

2021-2023
Under The Guidance of

Dr. Kinjal Shah
LALA LAJPATRAI INSTITUTE OF MANAGEMENT

MAHALAXMI, MUMBAI – 400 034
THREE MANDATORY PROJECT REPORTS ON
GENERAL MANAGEMENT, SPECIALIZATION & SOCIAL RELEVANCE

Fundamental Analysis of Automobile Sector.
A study on farmers Suicide in India.
Submitted in partial fulfillment for the award of the degree of

MASTER OF MANAGEMENT STUDIES
UNIVERSITY OF MUMBAI
Submitted by
Mr. Shubham Prashant Patil
ROLL NO. 2021160

2021-2023
Under The Guidance of

Dr. Kinjal Shah
LALA LAJPATRAI INSTITUTE OF MANAGEMENT

MAHALAXMI, MUMBAI – 400 034
GENERAL MANAGEMENT PROJECT
DECLARATION
I hereby declare that this project report submitted by me to the partial fulfillment of the
requirement for the award of MASTER OF MANAGEMENT STUDIES (MMS) of
the University of Mumbai is a bonafide work undertaken by me and it has not been
submitted to any other University or institution for the award of any other degree or
diploma certificate or published any time before.
Name: Shubham Prashant Patil
Roll No.2021160 Signature of the student
Shubham Prashant Patil

CERTIFICATE
This is to certify that the “Comprehensive Study On leadership style & its impact
on employees.
”, has been
successfully completed by Mr. Shubham Prashant Patil
during the MMS II, SEM IV in partial fulfillment of the Master’s degree in
Management Studies recognized by the University of Mumbai for the academic year
2021-2023. This project work is original and has not been submitted earlier for the
award of any degree, diploma or associateship of any other University / Institution.
Date :
DR. H. J. Bhasin DR. Kinjal Shah

DIRECTOR (PROJECT GUIDE)
ACKNOWLEDGEMENT
This project has been a great learning experience for me. I take this opportunity to thank
Dr. Kinjal Shah, my internal project guide whose valuable guidance & suggestions
made this project possible. I am extremely thankful to him/her for his/her support.
She has encouraged me and channelized my enthusiasm effectively.
I express my heart-felt gratitude towards my parents Prashant Patil, siblings and all
those friends who have willingly and with utmost commitment helped me during the
courseof my project work.
I also express my profound gratitude to Dr. H. J. Bhasin, Director of Lala Lajpatrai

Institute of Management for giving me the opportunity to work on the projects and
broaden my knowledge and experience.
I would like to thank all the professors and the staff of Lala Lajpatrai Institute especially
the library staff who were very helpful in providing books and articles I needed for my
project.
Last but not the least, I am thankful to all those who indirectly extended their co-
operation and invaluable support to me.
EXECUTIVE SUMMARY of General Management Project
The objective of the study is to find a correlation between the traits of leader and the job satisfaction
of the employees working under him/her.
There are various surveys (Gallup poll in the US) and articles (in economic times) which have
pointed to the supervisor as one of the deciding factors of employee job satisfaction.
Job satisfaction relates to the feeling of contention among the employees with respect to their job.
Many Authors like Stephen Robbins have reiterated the importance of job satisfaction by stating
that an organization with greater number of satisfied employees has the tendency to be more
effective. Some of the factors affecting job satisfaction are pay, job involvement, job autonomy,
motivation, work pressure, working environment, on-the-job stress and numerous other aspects of
their jobs. However, the study will be limited to those factors arising directly or indirectly out of
leadership styles.
Leadership is defined as the ability to influence a group towards the achievement of a vision or set
of goals. It is a social influence process in which the leader seeks the voluntary participation of
subordinates in an effort to reach organization goals. Effective leadership is the extent to which a
leader continually and progressively leading and directing his/her followers to the agreed destination
which is defined by the whole group.
Democratic leadership, also known as participative leadership, is a type of leadership style in which
members of the group take a more participative role in the decision-making process. Researchers
have found that this learning style is usually one of the most effective and lead to higher productivity,
better contributions from group members, and increased group morale.
Autocratic leadership, also known as authoritarian leadership, is a leadership style characterized
by individual control over all decisions and little input from group members. Autocratic leaders
typically make choices based on their own ideas and judgments and rarely accept advice from
followers. Autocratic leadership involves absolute, authoritarian control over a group.
The method used to gather the data was through an online questionnaire. It consisted of questions
aimed at determining various factors like the desired traits of a leader, employee job autonomy,
leader-member relationship, leader-member communication and job involvement of employees.
Something significant observed from the study is that those leaders giving greater job autonomy to
sub-ordinates, giving a sense of purpose to them, communicating more with them and having a
healthy work relationship leads to employee job satisfaction. The leader described above has traits
mostly observed in a democratic leader.
TABLE OF CONTENTS
1. Introduction .................................................................................................................................... 1
2. Literature Review ............................................................................................................................ 3
A. Leadership 4
B. Leadership Styles .............................................................................................................................. 5

C. Job Satisfaction ..................................................................................................................................6
3. Research Methodology .................................................................................................................. 22
A. Research Objectives ........................................................................................................................ 23
B. Research Methodology ....................................................................................................................23
4. Response Analysis .......................................................................................................................... 27
5. Findings & Recommendation ....................................................................................................... 34
6. Limitations ..................................................................................................................................... 36
7. References ...................................................................................................................................... 39
8. Appendix ........................................................................................................................................ 41
CHAPTER 1: INTRODUCTION
1
INTRODUCTION
Companies or organizations are set up with the aim of achieving identified goals, which may include
profit margin, consumer satisfaction, environmental or economic reasons, the list is endless. In a bid
to reach the goals as well as objectives, the human element is really important. The top of the human
component checklist is going to be the leader. Organizational members are affected by a leader to
incorporate initiatives willingly about the satisfaction of pre-determined goals in addition to
aspirations. Consequently, leadership is to begin with the potential to affect individuals into
executing duties over some time utilizing principally motivational approaches (Kotter, 1996;
Yammarino & Dubinsky, 1994).
Within our modern society these days, countless people are appointed as or maybe put in power to
assume the tasks as well as responsibilities of leadership. The problems of coping with existing
unstable business atmosphere have placed quite a few organizations in situations where they are
fighting for survival in the heat of competition. The driver of these strategic adjustments towards
surviving the competitors is the leadership provided by managers which are expected to have an
effect on others in recognizing organizational goals along with improving employee's efficiency.
Shafie et al. (2013) describes that the most significant asset that businesses, particularly the
employees, who are the most significant resource of any firm because they are the primary drivers
and give life to businesses and offer goals, can gain much benefit from is leadership in business
A review of the literature relevant to the study is contained in this chapter. Referencing past
scientific studies is actually a crucial part of any study since they guide the researcher on many other
related subject areas that were performed. From this assessment, using the independent and
dependent variables, a conceptual framework is actually produced, the groundwork for the entire
study is layered by this particular framework.
2
CHAPTER 2: LITERATURE REVIEW
3
A vast amount of research has been done in the quest of finding best leadership style. This section
of the literature review is directed towards scholarly articles to determine the leadership styles; its
significance in employee satisfaction.
Two types of leadership styles - transformational and transactional were identified byBurns (1978).
Further, Bass (1995) determined one more leadership style - laissez-faire - and placed emphasis on
these three leadership styles. This paper focuses primarily on these three styles.
According to transformational and transactional theory, leaders can influence the duties of
subordinates by ensuring that the work done by the followers has significance (Purvanova et al.,
2006). This influence can improve job satisfaction and elicit an emotional response of the
subordinate to several aspects of his or her job (Kinicki & Kreitner, 2008). Moreover, the literature
review also discusses the importance of the organizational commitment of the employees.
A. Leadership:
Stogdill (1974) commented in a study of leadership research; "there are almost as many different
definitions of leadership as there are people who have tried to define it." Leadership is the
accomplishment of a goal through the direction of human associates. A leader is one who
successfully directs his human associates to achieve particular outcomes. (Prentice, 2004).
Merton (1969) mentioned that leadership is a process to influence a particular group of people in an
organized way to achieve certain goals. “Leadership is practiced when a person mobilizes 11
institutional, political, psychological, and other resources to inspire, engage and satisfy the objects of
followers” (Bums, 1978).
Researcher J. M. Bums stated that “Leadership is one of the most observed and least understood
phenomena on earth” (Zenger & Folkman, 2002). Smylie et al. (2005) mentioned that leadership is
performed by an individual who has unique roles and task-oriented perspectives and also serves as
a key “function” in the interactions with other leaders, followers, and situations.
B. Leadership Styles:
Many studies have proved that transformational leadership is the most preferred style by the
employees of an organization. Burns (1978), concluded that transformational leadership style
connects the authority of a position to respond to the followers' needs and responsibilities. Bass
(1997) discussed that transformational leaders act cooperatively with employees' by engaging to
their crucial needs and encouraging them to move towards a particular direction.
Burns (1978) referred transactional leadership as to one that focuses on the changes that happen
between leaders and their followers. Similarly, managers who offer raises to employees who exceed
their goals are displaying transactional leadership. The exchang
aspect of transactional leadership is prevalent and can be perceived at many levels throughout all
types of organizations. This leadership style focuses on meeting the targets of the given job. The
fundamental concept of transactional leadership is that the understanding of the relationship
between effort and reward, the receptivity to exhibit the issues, the use of incentive, reward,
4
punishment, the motivation of goal setting and rewarding of performance, and the use of power to
subject followers to complete the tasks (Burns, 1978).
A leader who avoids or does not interfere with the work assignments or may entirely avoid
responsibilities and does not guide or support the followers can be considered as a laissezfaire style of
leader. This leader's style is compared with 22 dissatisfaction, unproductiveness, and ineffectiveness
(Limsila &Ogunlana, 2008).
Job Satisfaction:
Ellickson and Logsdon (2002) defined job satisfaction as the degree to which employees enjoy their
work. Parvin & Kabir (2011) state that job satisfaction is suggested 23 by some researchers to be the
aspect of need fulfillment. Schermerhorn (1993) defined job satisfaction as a practical or emotional
response towards several aspects of an employees' work. Job satisfaction is also defined as an
emotional reaction to an individual's responsibilities and workplace conditions, and the extent to
which a worker’s expectations are satisfied (Kreitner & Kinicki, 2009)
5
Leadership
Stogdill (1974) thought that there are basically as many definitions of leadership as individuals
that have attempted to illustrate the concept. A good evaluation of the different definitions of
leadership uncovers the primary context is the character. Generally there appears to be certain
freedom with regard to the contemporary problems. A few examples of leadership definitions
are as follows:
According to Yukl (2006), they see leadership as a process of influencing their followers to
understand and agree upon what is needed to be done and how it should be achieved, and the
process of facilitating collective and individual efforts to realize a common objective or goal.
The definition talks about direct and indirect influences but doesn’t imply about the success of
the process or achieving the goal. Also, leadership has been described by Memon (2014) as the
means by which a person influences the behavior, thoughts and attitudes of others by being
responsible for the direction in which the firm heads, as well as the obligation for what others
see and also imagine about what lies ahead and how to attain it.
Kumar (2014) states that “leadership is defined as a process by which a person influences others
to accomplish an objective and directs the organization in a way that makes it more cohesive
and coherent”. Kumar believes these are achieved through the application of leadership
attributes, including values, belief, character, knowledge, ethics and skills.
Talat et al (2015) is convinced that leadership is actually a prevalent practice which often calls
for responsibility, authority and delegation of power. He feels that the principal goal of a leader
is to guide, direct and also persuade their supporters towards attaining individual in addition to
organizational goals and objectives.
6
Approaches to leadership research

There are three levels associated with leadership methods and so they include; the leader, the
follower, as well as the dyadic partnership between the initial two levels stated (Fig. 2 1) and also
leadership analysis needs to address each and every level individually. Centering on the leader,
trait as well as behavioral approaches are implemented, in the case of the follower the
empowerment approach is employed and also the leader-member exchange concentrates on
the relationship. Additionally, situational approach is focused on the blend of the three domains
of leadership process (Uhl-Bien and Graen, 1995).
LEADER FOLLOWER
RELATIONSHIP
Figure 2 1: The Domains of Leadership (Graen & Uhl-Bien, 1995)
7
Conceptualization of leadership
Yukl (2006) reported that the conceptualization of leadership is of four distinct levels that can
be referred to as a hierarchy; Organization, Group, Dyadic and Individual.
Studies performed involving the individual procedure is actually focused on the behavioral
characteristics of a person out of a motivational, choice producing as well as cognitive
perspectives, and just how these single traits & an individual is encouraged by skills to be a
leader. The disadvantage to this kind of approach is it does not take into account probably the
most significant element of leadership, which is influencing as well as inspiring others (Yukl,
2006).
As regards to the dyadic process, the connection involving the leader as well as follower is
analyzed. This research is primarily based upon this kind of process that is going to be even
further defined in the upcoming chapters. Leadership study revolving on the group process
examines the dynamics of the leadership role within a group and exactly how a leader is able
to motivate team efficiency. The key aspects centered on within this process are dedication of
the members belonging to the group, self-belief of the group in realizing success on projects,
degree of the trust as well as synergy among members of the group and exactly how well work
is structured among them (Yukl, 2006).
Compared to the dyadic as well as group processes, organizational processes allows a much
wider comprehension of the usefulness of leadership. Such a study is focused on the most
effective approach available technologies, resources as well as personnel that are implemented
to set up and also execute work to boost efficiency and productivity.
8
Theoretical research on leadership
Leadership is actually among the most complicated and varied indicator by which
organizational and psychological review has, over the decades, been used to describe. Despite
the fact that the term "leader" was detailed as early on as the 1300s in the oxford English
dictionary (1933) and as well conceptualized quite possibly in times before religion, the term
leadership can be said to have been in existence just before the early 1800s (Stogdill, 1974).
Furthermore, scientific review on the topic did not get started on until we came into the 20th
century (Bass, 1981). Ever since that time, extensive research on the subject matter has been
witnessed by us, trying what best way to describe leadership while viewing it from different
perspectives.
Warren bass (1959) mentioned in his study on leadership that of all the many confounding,
unclear facets within social psychology, leadership concept without doubt contends for the top
spot. In a twist of irony, almost certainly much more has been written on leadership and
significantly less which is known when compared to other subject within the behavioral
sciences.
Burns (1978) similarly mentioned that leadership is actually among the most studied and at the
same time the very least understood phenomena on the planet. Nonetheless we are even now
striving to explain the crucial question: What tends to make up a highly effective leader? This
concern has engendered extensive focus largely because leadership brings about powerful
images (Meindl, Ehrlich and Dukerich, 1985; Yukl, 1989). As a matter of fact, in these points
during the environmental complexity and rapid change, leadership has brought on more
significant value than in the past.
Taking into consideration the above content, it appears to be actually beneficial to revisit the
historical beginnings of leadership idea and as well analyze the advancement that has been
made. The goal of this particular part is to try to examine the important components of
leadership research in terms of evolutionary periods. This kind of developmental approach
uncovers the route along which leadership theory has developed.
9
The personality period
This period brought about the emergence of the first formal theories of leadership which rejects
the initial understanding of the leadership process. This period gave rise to two distinctive
theories of leadership which includes the great man theory and the trait theory. The great man
theory suggested, by studying great men, that for a person to become a strong leader, he/she
needed to copy the personalities and behaviors of a great men or women (Borgotta, Rouch and
Bales, 1954; Galton 1869). Although, the great man eras most significant work which was
conducted by Bowden (1927) equates the personality of great men to leadership. Some
researchers like Jennings (1960) also tried to relate leadership with inheritance. But all these
theories held no basis because it seemed apparent that every leader had very different
personalities for example Adolf Hitler, Martin Luther King Jr. And also the realization that
personalities are very hard to imitate further debunked that theory.
Leadership theory took another slight step forward when the trait theory which attempted to
remove links to specific individuals like the great man theory did by stating that adoption and
development of general traits would amplify the leadership potential and performance of an
individual. But due to fact that there was no single trait or group of characteristics linked with
good leadership proved to be a wrong notion as studies brought to light (Jenkins, 1947). The
theories of this era proved to be too simple minded as traits cannot be learnt, so these theories
were swept under the rug. Traits, however, proved to be an important explanatory variable in
later theories (e.g. Fielder, 1967, 1964; House, 1971), though the focus of these theories were
not the traits of a leader.
Peter G. Northouse (2007, p.18) offers a very good summary of the traits as well as qualities
which were identified by researchers coming from the trait approach (Table 2 1). It can easily
be seen that some of the traits show up as part of a number of research studies, while others
appear as part of one or two research studies. Northouse has tailored that comparison from "The
Bases of Social Power", by J. R. P. French, B and Jr. Raven, 1962, in D. Cartwright (Ed),
Group Dynamics: Research and Theory (pp. 259-269), New York: Harper and Row.
The influence era

This era recognized the relationship between individuals as leadership, not a solitary leader’s
characteristic. It addressed the aspects of influence and power giving rise to the power relations
and persuasion periods. Attempts have been made to explain a leader's effectiveness in the
10
former period, in terms of the source of power as well as the amount they wielded not to
mention the way the power was used. Although, the impact of power is still present in today's
leaders (Pfeffer, 1981), the authoritarian and also dictating kind of this specific sort of
leadership has no place or perhaps less successful in the modern day setting (French, 1956). In
today’s business world, there is more consideration for the wants and needs of employees unlike
in previous times where there is a unidirectional flow of power without regards for its effects
on followers.
Later, in the persuasion period, the act by which leaders coerce their subordinates was
abolished, this didn’t change the fact that the leader was still recognized as the dominating factor
(Schenk, 1928). Just like the power of lower participants, this approach is still being employed
given its limitations. (Mechanic, 1962).
11
The behavior era

The period in the evolution of leadership theory took a different perspective by laying much
more emphases on the actions of leaders, rather than highlighting the traits they exhibit or their
source and management of power. Leadership was consequently described as a subset of
human behavior (Hunt and Larsson, 1977). This proved to be a major leap in the study of
leadership and not just because it had a basis for its claim (Fleishman and Harris, 1962), asides
that, practicing leaders could apply this to enhance their effectiveness as leaders. Some of the
work done in this era highlighted the differences in behavioral patterns of effective and non-
effective leaders (Yukl, 1989), while others focused on the general behavioral patterns of
leaders.
In the early parts of this era, more focus was placed on developing behavioral traits rather than
studying them. The Ohio and Michigan studies highlighted two significant behavioral traits of
leaders: structure initiation and consideration (Griffin, Skivington, and Moorhead, 1987)
In the latter stages of the behavior era, there was an advancement of the theories in the early
stages as these theories were adapted for application in managerial settings. The Managerial
Grid Model is most likely the best known, it uses a 9 x 9 with consideration behavior marked
along an axis and structure initiation behavior marked along the other. This model suggests that
the most effective leader will be rated 9 on each of these behaviors (Blake and Mouton, 1964,
1978). Other theories that are widely considered are the Theory X and
Y. Theory X states that people must be directed and externally motivated to serve
organizational needs because they are passive and Theory Y suggests
there is motivation already inside of people, they just require the right conditions to achieve
their goals (McGregor, 1966). After much research has been done, it was realized that
employee behavior is as a result of the provision of the conditions and stimulation for its
evocation and not because of the leaders. (Bass, 1981).
12
The situation era

In this era, progress was made in leadership theory by recognizing the significance of the
factors that are beyond the bounds of leaders and employees. This included the leader’s social
status, the combined power of the leader and employees, the type of task being carried out and
the nature of external environmental factors (Bass, 1981). These aspects relative to the
situation, affect the kinds of traits, skills, behavior and influence the leader exhibits which in
turn causes effective leadership.
As regards to the environment, leaders were believed to arise, if only it was the right time and
place and in the right circumstances; whatever they do is of no consequence. With respect to
this approach, the leader is deemed irrelevant, because, if they were to leave their position,
another would take it up. (Hook, 1943). There was empirical studies to back up this claim and
also, some researchers have proposed the introduction of more external variables into the
leadership context, variables like economic factors. (McCall and Lombardo, 1977)
When viewed from a social status perspective, researchers believed that as members of a group
undertake specific tasks towards a defined goal, they emphasize the assumption that each
individual will exhibit a manner that is consistent with his or her previous behavior. As a result,
the roles of leaders and employees are outlined by mutually established expectations of the
behavior as well as interactions they're allowed to contribute to the group (Stogdill, 1959).
Later research actually combined the environmental and social status factors (Bamforth and
Trist, 1951) which are actually deemed an advancement over the environmental viewpoint
because recognition of the group influences.
13
Contingency Era
There was clearly a tremendous leap in the evolution of leadership theory in this era as for the
very first time, it was proven that leadership was not associated with any of the unadulterated,
unidimensional forms that was previously reviewed but that leadership contained features of
every one of them. As a result, highly effective leadership relied upon one or perhaps several
variables which included personality, behavior, influence and situation. The study accomplished
in this era made an effort to decide on variables which best revealed which leadership style to
employ given different situations. This brought about a lot of research being carried out in that
era because researchers thought they have finally uncovered the source of effective leadership.
A few of the more noteworthy research done by researchers during that period includes the
Contingency Theory (Fielder, 1964, 1967), the Path-Goal Theory (Evans, 1970; House, 1971;
House and Mitchell, 1974) and the Normative Theory (Vroom and Jago, 1988). Fielders
Contingency Theory laid emphasis on leaders needing to be placed in situations being tailored
to their capabilities (Fielder, 1967), or training leaders to alter the situation to suit his or her
unique style (Fielder, Chemers and Mahar, 1976).
House’s Path-Goal Theory talked about a different type of contingency. It talked more about
coming up with conditions that are prime to enable the employees rather than the situation or
the leaders behavior (House, 1971). The Normative Model is actually different in the sense that
it advises the leader on the most suitable decision making behavior, which is dependent on the
situation and the need for decision quality and/or acceptance (Vroom and Yetton, 1973). The
Normative model commanded a lot of appeal because it had a broader application to leaders.
It supports the fact that you could switch your behavior as a leader to increase effectiveness
depending on the situation, regardless of your trait or degree of power or influence.
Although the contingency approach to leadership has a lot of empirical evidence backing it up
which is not devoid of controversy (Burke, 1965; Dessler and Valenzi, 1977; Field, 1979, 1982;
Jago and Ragan, 1986; Peters, Hartke and Pohlman, 1985; Vroom and Jago, 1978), they are not
exempt from
14
drawbacks. These drawbacks include: each theory is different from the other and they each
hold a piece of the answer to the question of leadership, what makes an effective leader? Yet
none has the complete answer. Also, many are so unmanageable that it’ll be a pain to integrate
into daily managerial practices.
The transactional Era
The research on leadership took steps forward in this era by implying that leadership probably
does not only originate from the person or the situation, but most likely, also in role
differentiation and social interaction. This era is thought to be the revisitation of the influence
era because it talks about the influence between a leader and his/her employees. But in this era,
the influence is not only seen from the leader’s perspective but also from the employee’s, a
sort of reciprocal influence between the leader and his employees.
Theories and approaches that were established in this era include the Vertical Dyad Linkage
Theory (Dansereau, Graen and Haga, 1975; Duchon, Green and Taber, 1986), the Leader-
Member Exchange Theory (Dienesh and Liden, 1986; Graen, Novak and Sommerkamp, 1982)
and the Reciprocal Influence Approach (Greene, 1975). These theories emphasized that
leadership involves transactions between the leader and his/her employees which in turn affects
their relationship and that depending on the kind of transactions between different employees,
there is a different relationship in each instance. Bass (1981) said that leadership only exists
after the acknowledgement of the leader by other members of the group. This is where aspects
of emergent leadership originates, as it requires the approval of the members in choosing who
their leader is. (Hollander, 1958).
Other theories that were proposed in this era which talks more about the relative roles of the
leader and employees but hints at elements of exchange include Social Exchange Theory
(Jacobs, 1970; Hollander, 1979) and also the Role-Making Model (Graen and Cashman, 1975).
These theories talk about how the members of the group gives status to leader in order to
acquire the leader’s skills towards achieving a goal. This course of leadership brings about
15
an equality between the leader and the employee, hence there is no one dominant entity in the
group (Bass, 1981). With this approach, it can be established that leadership might as well,
given the circumstance, rest in the hand of the employee rather than the general idea that
leadership stems from the leaders.
The Anti-Leadership Era

A lot of studies have been carried out prior to this era to test the theories on the subject of
leadership but all have come up with little or no conclusive results which led to the opinion that
perhaps there was no such concept as leadership. Though a lot of variables concerning
leadership had been explained, it still seemed like leadership itself remained untouched. This
led to the rise of the Anti-leadership era. Mitchell (1979) argued that “leadership is just a
perceptual phenomenon in the mind of followers”. Miner (1975) proposed that the concept of
leadership should be abandoned and left behind. Meindl et al. (1985), following in that path
stated that “leadership is actually a term to describe organizational changes that we do not
understand yet”.
Researchers tried to look for a substitute for leadership with the subsequent studies that were
carried out. Kerr and James (1978) suggested that the characteristics and duties of the
organization and employees respectively, can keep leadership from impacting the employee's
effectiveness. In addition, they pointed out substitutes for leaders in the work environment.
The Culture Era

The pessimistic train of thought of the Anti-leadership era was outmoded in this era, when it
was suggested that leadership may not be a phenomenon of the dyad, the individual, or a small
group but is present throughout the culture of an entire organization. This shifted the focus
from the trail of productivity and efficiency to quality of work. This new view included the 7-
S Framework (Pascale and Athos, 1981), Theory Z (Ouchi and Jaegeer, 1978; Ouchi, 1981) and
also the In Search of Excellence attributes (Peters and Waterman, 1982).
16
This era can also be said to be a continuation of the studies on substitutes for leadership since
it proposed that employees will lead themselves as long as the leader can create a strong
organizational culture (Manz and Sims, 1987). Schein (1985) also stated that formal leadership
is only needed when existing organizational culture is replaced and a new one must be
developed. Nevertheless, a leadership paradigm has been made that advocated passive or
possibly inadequate leadership except during the initiation as well as change process.
The Transformational Era

This era gives rise to the most promising and latest period in the timeline of the evolution of
leadership theory. The huge advancements observed in this era is as a result of intrinsic, as
opposed to extrinsic, motivation. Compared to the transactional era, leaders are expected to be
proactive and have foresight rather than being reactive in their thought process as situations
arise. They also need to be less conservative and more of a radical leader and also open to new
ideas while being more creative and innovative (Bass, 1985). Leadership needed here aims to
cultivate enthusiastic commitment by employees rather than indifferent compliance or
reluctant obedience (Yukl, 1989). It was also reported by Tichy and Ulrich (1984) that
transformational leadership is critical in the course of organizational transitions by shaping
visions of possible opportunities and imbuing commitment to change in employees. Early
analysis of this era highlighted that leaders are required to be visionary. Individuals who see
the vision should be developed by providing them a new and stronger sense of purpose and
meaning. This particular era builds on the culture era by looking at leadership as a process of
the collective action of a group (Robert, 1985).
Adams (1984) stated that leadership does not rest on the shoulders of an individual but on all
who share the same vision and mission, thereby, leadership is not perceived as a personality
trait or set of skills but a state of consciousness. This era also resulted in the Charisma
Leadership Theory in which comprehensively explains the combination of traits, influence,
behavior and situational factors leading to a rise in the employees’ reception to
17
ideological appeals (Conger and Kanungo, 1987; House, 1977). Howell and Frost (1989) also
provided empirical evidence showing that charisma can be trained.
The self-fulfilling prophecy phenomenon which was theorized by Field (1989) discusses the
transformation of individual self-concepts and also improves on older theories by looking at
the transformation as occurring from the leader to the employees and vice versa. This process
does not only work in group and organizational situations but also in dyadic contexts. Field
and Van Seters (1988) further explained the key success factor responsible for that leadership
type is building positive and realistic expectations.
Bass (1985) suggests that work groups most likely would elect leaders who they expect will
make sure tasks are accomplished, enable group cohesion and maintain strategic focus.
Thereby moving concerns of employees away from affiliation and security to recognition,
achievement and self-actualization.
Although this era has not experienced scrutiny and empirical testing as other eras have, it shows
great promise because it weaves many aspects of previous eras into each other in a
comprehensible manner.
Employee performance
Employee performance can be described as the ability of an employee, assigned to specific
tasks, to carry out all those tasks in line with the expectations of the organization. The
effectiveness of a leader, regardless of whether positive or negative, may be assessed through
employee performance and organizational growth. Pattanayak (2005) states that the overall
performance of an employee can be as a consequence of his or perhaps her behavior on the job
that can easily be observed as well as assessed. Basically, Pattanayak views employee
performance as “the contribution of an individual towards the realization of organizational goals
and objectives”.
Objectively, the performance of employees is able to be quantified through profit margins,

productivity, return on investment, quality of work completed, market share etc. from the
subjective viewpoint, employee performance may
18
be assessed through alteration in the demeanor of the employee, the level to which an employee
can easily master and improve, commitment etc. (Erkutlu, 2008). It can certainly be said that
leadership and organizational effectiveness is as a result of employee performance. The chief
aim of each and every organization is stimulating work overall performance of its employees
to its highest point as a way for it to make it through in a naturally competitive market that is
unrelenting.
Leadership styles and employee performance

Leadership styles just about translates to the conduct of a leader towards his employees which
often motivates or even coerces them towards attaining a clear purpose. Luthans (1977)
described it as the way in which a leader influences his/her followers. Podsakoff et al (1990)
thought that leadership behavior has the capacity to have an effect on satisfaction and trust of
staff members in the organization as well as organizational citizenship conduct even further
increases the relationship among leadership style and organizational dedication directly. There
are a variety of approaches to leadership depending on the situation and every leader has his
own style, whether you've used a single approach or integrating different styles. In accordance
along with the Oladipo et al (2013) study, the success or failure of business organizations,
nations together with other social units is primarily acknowledged to be dependent on the form
of their leadership style. The majority of research has established that leadership style features
an essential relationship with employee performance, and depending on the variables employed
by researchers, unique leadership styles could have a beneficial correlation or perhaps
undesirable correlation with employee performance (Fu-Jin et al., 2010).
McGrath and MacMillan (2000) report vital relationships can be found between styles of
management and performance of the employees and ultimately, the organization. Highly
effective leadership style is viewed as an excellent way to obtain management development
along with a consistent competitive benefit. Leadership style makes it possible for
organizations acquire their existing goals and objectives better by linking employee
performance to valuable
19
benefits and also making certain that employees have got the essential resources to accomplish
the work.
Broadly speaking, performance in leadership is the exact same with performance within the
organization. Business administrators attributes the achievements of theirs to leadership
effectiveness, i.e., administrative supervisors' leadership style has a significant influence on
organizational overall performance (Sun, 2002). Fu-Jin et al. (2010) believe that when
managers take advantage of their leadership style to exhibit concern, care and also respect for
employees, employees' desire in their work would improve and also permit them to do the job
much better, and in so doing positively influencing their job satisfaction and ultimately affect
organizational goals and objectives.
Autocratic leadership style and employee performance

It is recognized as one in which the leader retains as much power along with decision-making
power as possibly can. Milgron (1991) previously mentioned autocratic way of leadership
evidently defines the division in between leaders and employees. This form of leadership does
not accommodate suggestions from the employees and also they are required to follow orders
without any form of explanation concerning exactly why the task needs to be completed. The
motivation that is given is in a form of rewards and punishment.
Despite the fact that this style of leadership is widely rejected, it is practical when there is
limited time frame for decision making. In recent times, such style of leadership can easily still
be seen in nations being ruled by a dictator or even in the military of various governments.
Michael (2010) is convinced that the majority of supporters of autocratic rulers as individuals
who are just biding their time, waiting for the unavoidable collapse that this governance yields,
eliminating the leader that follows.
In a study carried out by Peter (2013) which had been centered on relating management styles
to job performance of employees of selected Nigerian breweries. The outcome of this research
revealed that there was clearly a significant relationship in between management styles and
job performance.
20
This study likewise indicated that the employees were discovered to be a great deal more responsive to
the autocratic form of leadership in comparison with other styles management as a result of the nature
of the work in the industry.
Peterson and smith (1988) came to the realization in their study that a highly effective manager is
influenced by the criterion in which leadership was being accessed. Thereby, in the event that
leadership is seen from the point of work productivity, subsequently autocratic style is most effective,
however, if the goal is maintaining excellent morals as well as a consistent measure of work,
democratic approach is effective.
Cole (2000) even claims that autocratic leadership style is very effective in situations where
modification needs to be fostered, there are times when in ending disputes like strikes, confidence
implementation, plus a great deal more. If applied in its appropriate position, it brings about
performance efficiency. Ispas (2012) conducted a survey on perceived leadership type as well as
overall performance of employees in the hotel industry, discovering that autocratic management type is
regarded by supervisors as the most frequently used form to guarantee anticipated end results.
Additionally, they highlighted the reality that managers need to discover the appropriate approach to
aid employees improve their performance individually.
21
CHAPTER 3: RESEARCH METHODOLOGY
22
A. Research Objectives:
• To understand individual needs and expectations at work

• To determine the desired work environment
• To determine the traits in a leader that leads to higher job satisfaction of employees working under
him/her
• To outline the main trends and correlations regarding job satisfaction
• To enlist the significant findings that the organization can improve upon and make related
recommendations
B. Research Methodology:
Scope of the study:
This is a primary research & wherein the scope of the study is concentrated on the employees working
in Mumbai. It consists of questions aimed at determining various factors like the desired traits of a
leader, employee job autonomy, leader-member relationship, leader- member communication and
job involvement of employees. The data is collected through an online questionnaire.
Sample Design:
Convenience based sampling was used to capture response of 65 respondents participatedin primary
research. The study doesn’t demand to know the gender, age of the respondent.
Questionnaire design:
The questionnaire consisted of 9 questions.. Here, we have used Likert scale to measure the
responses. Likert scale is a 5- or 7-point scale that offers a range of answer options from 'strongly
agree' to 'strongly disagree'. It is preferred over binary response (yes or no) as it is one of the most
reliable ways to measure opinions, perceptions, and behaviours.
The literature suggests that five-point scale is readily comprehensible to respondents and enables
them to express their views (Marton-Williams, 1986) and also moving from a 5 point scale to a 7
point does not improve the reliability of responses (Elmore & Beggs, 1975). Hence this study uses
a five point Likert scale for evaluating the correlation between the traits of leader and the job
satisfaction of the employees working under him/her.
23
Introduction: The study attempts to find a relation between leadership styles and job satisfaction.
Disclaimer: The responses given to these questions shall only be used for academic purposes.
Questionnaire- (feel free to comment if you want to justify your answer choice)
I, as an employee, would like to work under a leader who is always authoritative. (Select one
option)
o Strongly disagree
o Disagree
o Neither agree nor disagree
o Agree
o Strongly agree
Comments-
I don’t feel stressed if my superior creates a friendly and supportive environment. (Select one option)
o Strongly disagree
o Disagree
o Agree
o Strongly agree
Comments-
I would like to work under a leader who builds consensus before taking a decision. (Select one
option)
o Strongly disagree
o Disagree
o Agree
o Strongly agree
Comments-
24
I would like my superior to communicate with me only matters pertaining to the job assigned. (Select
one option)
o Strongly disagree
o Disagree
o Agree
o Strongly agree
Comments-
I want my superior to develop and groom me as a future leader. (Select one option)
o Strongly disagree
o Disagree
o Agree
o Strongly agree
Comments-
I, as an employee, would like if my superior appreciates my work. (Select one option)
o Strongly disagree
o Disagree
o Agree
o Strongly agree
Comments-
I feel more involved in my job and my performance level increases if exercised a high degree of
control over me. (Select one option)
o Strongly disagree
o Disagree
o Agree
o Strongly agree
Comments-
25
I feel very satisfied when my superior involves me in decision making. (Select one option)
o Strongly disagree
o Disagree
o Agree
o Strongly agree
Comments-
My manager does not interfere with the project until problems become severe.
o Strongly disagree
o Disagree
o Agree
o Strongly agree
Comments-
26
CHAPTER 4: RESPONSE ANALYSIS
27
The questionnaire has mainly indirect questions aimed at finding the traits that the employees want in
their leader. The responses collected for each of the questions are tabulated below. Some statistics
based on the responses have also been drawn.
Question - I, as an employee, would like to work under a leader who is always authoritative.
No of Employees
Strongly Agree
4 Agree
32 Neither Agree nor Disagree

29
Disagree
Strongly Disagree
61 out of 65 respondents either disagree or in strong disagreement with the idea of working under
an authoritative leader.
So the response overwhelmingly suggests that employees would certainly not like to work under
such a leader. Since employees don’t like to work under an authoritative leader, it is clear that they
would be dissatisfied working under him/her. This is a direct question just to tap the mood of the
employees.
Question- I don’t feel stressed if my superior creates a friendly and supportive

environment.
No of Employees
Strongly Agree
Agree
34
Disagree
Strongly Disagree
The bar chart reveals that all the employees either agree or strongly agree to the idea that stress
levels are minimum if the superior creates a friendly and supportive environment.
28
Question- I would like to work under a leader who builds consensus before taking a
decision.
No of Employees
52
2 Strongly Agree
Agree
29
Neither Agree nor Disagree
Disagree
27 Strongly Disagree
Majority of the employees i.e. around 85% either strongly agree or agree to the idea of consensus
building before taking a decision. However there are a few who feel that consensus building should
not be done before taking a decision. It could be because consensus building is difficult and at times
delays the overall process.
Question- I would like my superior to communicate with me only matters pertaining to the
job assigned.
No of Employees
Strongly Agree
11 10 Agree
16
Disagree
There are divided opinions on whether the communication between an employee and leader should
be strictly related to job. About 40% employees agree that the communication should be pertaining
to the job and around 60% either disagree or strongly disagree. So there is no definitive conclusion
that is reached however, majority of employees want the communication to be not always pertaining
to job.
29
Question- I want my superior to develop and groom me as a future leader.
No of Employees
Strongly Agree
17 7
Agree
41 Disagree
Strongly Disagree
Majority of respondents feel that their superior should groom them as future leaders. There also
seem to be some employees (around 10%) who are not actually looking for the leader to groom
them.
Question- I, as an employee, would like if my superior appreciates my work.
No of Employees
Strongly Agree
Agree
38
Disagree
Strongly Disagree
The employees strongly agree (around 60%) to the notion of getting appreciated for the work done by
them. There is no response against the stated idea.
30
Question- I feel more involved in my job and my performance level increases if exercised a high
degree of control over me.
No of Employees
Strongly Agree
9 Agree
17
18 Disagree
It is difficult to draw a unilateral conclusion. Few employees prefer high degree of control for
better performance & few don’t.
Question- I feel very satisfied When my superior involves me in decision making.
No of Employees
Strongly Agree
28 Agree
37 Disagree
Strongly Disagree
This pie chart shows high employee satisfaction when he/she gets recognition from his/her
superior.
31
My manager does not interfere with the project until problems become
Severe.
No of Employees
12 Strongly Agree
14
Agree
17 Disagree
Strongly Disagree
15
7
Almost 50% of employees feel their manager does not interfere with the project until problems
become severe. 40% employees are against the statement whereas 10% are neutral.
32
CHAPTER 5: FINDINGS AND RECOMMENDATIONS
33
The general mood of the Employees (tapped through a direct question) is that an authoritative leader
is undesired. The sentiment looks strongly against a leader who is always authoritative. Maximum
responses strongly disagree with the idea of working under an authoritative leader. This helps in
predicting the responses of the employees to other questions in the questionnaire.
The responses received and analysed have given rise to the following set of findings-
• Employees want to be appreciated at work, have flexibility in their working style and want to have
very less stress at work.
• Employees want to work in an environment that creates greater employee commitment and good
employee-leader relationship.
• Employees want to work under a leader who accepts his/her mistakes, grooms subordinates as
leaders, gives utmost importance to discipline and ensures consensus building before taking a
decision.
• Employees feel dissatisfied with their job if their point of view is not considered in decision making.
They also don’t want his/her superior to exercise a higher degree of control over him/her.
Through the study, it is found that there are many factors that make an employee satisfied or
dissatisfied with his/her job. The traits of the leader that made employees satisfied with their job were
identified in the process. It was observed that the leaders encouraging participative decision making,
job autonomy, efficient communication and a healthy work relationship were desired by the
employees. These traits are mostly observed in a democratic leader. In contradiction, most
Employees want their leaders to attach a higher value to discipline and that discipline should be
given utmost importance. Authoritative leader is about control, organization and discipline. There
seems to be some traits of an authoritative leader that are desired by the employees. So it would not
be entirely correct to conclude that democratic leaders lead to higher job satisfaction among their
sub-ordinates rather the leader should possess a mixture of both democratic and autocratic
leadership style.
34
CHAPTER 6: LIMITATIONS
35
• In this study, the population used for the survey was only limited to one company & only 65
respondents.
• The study is not extended to various companies, departments, and larger sample size.
• The results from the data cannot precisely prove the leadership styles of Indian Industry.
36
CHAPTER 7: REFERENCES
39
• Chukwura, F. A. (2017): The impact of elected leadership styles and behaviours on employee
motivation and job satisfaction.
• Clinebell, S., Skudiene, V., Trijonyte, R., & Reardon, J. (2013): Impact of leadership tyles on
employee organizational commitment.
• Burg-Brown, S. A. (2016): The relationship between leadership styles and organizational
performance moderated by employee job satisfaction in united states government 82 agencies
• Burns, J. M. (1978). Leadership. New York, NY: The Free Press
• Alkahtani, A. H. (2015). The influence of leadership styles on organizational commitment: The
moderating effect of emotional intelligence.
• Bass, B. M. (1997). Does the transactional-transformational leadership paradigm transcend
organizational and national boundaries?
• Bono, J. E., & Judge, T. A. (2004). Personality and transformational and transactional Leadership.
40
CHAPTER 8: APPENDIX
41
E I, as an I don't feel I would like to I would like my My manager

employee, stressed if my work under a superior to does not
would like to superior creates leader who communicate interfere with
work under a a friendly and builds with me only the project
leader who is supportive consensus matters until problems
always environment before taking a pertaining to become severe
authoritative decision the job
assigned
1 Disagree Strongly Agree Agree Agree Agree
2 Disagree Agree Agree Disagree Strongly Agree
3 Disagree Strongly Agree Disagree Agree Agree
4 Disagree Strongly Agree Agree Disagree Strongly
Disagree
5 Disagree Agree Agree Disagree Strongly Agree
7 Agree Strongly Agree Strongly Agree Disagree Strongly Agree
8 Strongly Strongly Agree Strongly Strongly Strongly
Disagree Disagree Disagree Disagree
9 Strongly Strongly Agree Strongly Agree Agree
Disagree Disagree
10 Strongly Strongly Agree Neither Agree Disagree Agree
Disagree nor Disagree
11 Agree Strongly Agree Strongly Agree Disagree Agree
Disagree
13 Disagree Strongly Agree Disagree Strongly Strongly
Disagree Disagree
14 Disagree Strongly Agree Disagree Strongly Agree
Disagree
15 Strongly Strongly Agree Strongly Agree Disagree Neither Agree
16 Agree Strongly Agree Strongly Agree Disagree Agree
17 Strongly Strongly Agree Agree Disagree Strongly Agree
Disagree
18 Strongly Strongly Agree Strongly Agree Disagree Agree
Disagree
19 Strongly Agree Strongly Strongly Neither Agree
Disagree Disagree Disagree nor Disagree
20 Disagree Agree Strongly Agree Agree Strongly Agree
21 Disagree Agree Strongly Agree Agree Agree
22 Disagree Strongly Agree Agree Disagree Neither Agree
nor Disagree
23 Disagree Strongly Agree Strongly Agree Agree Strongly Agree
42

25 Disagree Strongly Agree Disagree Disagree Neither Agree
nor Disagree
26 Disagree Agree Strongly Agree Agree Strongly Agree
27 Strongly Agree Agree Strongly Agree Agree
Disagree
28 Disagree Strongly Agree Agree Strongly Agree Disagree
29 Strongly Agree Agree Disagree Agree
Disagree
30 Strongly Agree Agree Strongly Agree Strongly
Disagree Disagree
31 Disagree Strongly Agree Strongly Agree Disagree Strongly
Disagree
32 Strongly Strongly Agree Strongly Agree Disagree Disagree
Disagree
33 Strongly Strongly Agree Agree Disagree Agree
Disagree
34 Agree Strongly Agree Strongly Agree Disagree Strongly
Disagree
35 Disagree Agree Agree Disagree Disagree
36 Strongly Agree Disagree Disagree Strongly Agree
Disagree
37 Strongly Agree Agree Agree Disagree
Disagree
38 Strongly Agree Strongly Agree Strongly Agree Strongly
Disagree Disagree
39 Strongly Strongly Agree Strongly Agree Strongly Disagree
Disagree Disagree
40 Strongly Agree Agree Agree Strongly Agree
Disagree
41 Strongly Agree Strongly Agree Disagree Disagree
Disagree
42 Strongly Agree Neither Agree Disagree Strongly
Disagree nor Disagree Disagree
43 Strongly Agree Strognly agree Disagree Neither Agree
Disagree
45 Strongly Agree Strongly Agree Disagree Strongly
Disagree Disagree
46 Strongly Agree Strongly Agree Disagree Disagree
Disagree
47 Strongly Agree Agree Strongly Agree Strongly Agree
Disagree
43
48 Strongly Agree Strongly Agree Agree Strongly

Disagree Disagree
49 Strongly Agree Strongly Agree Agree Agree
Disagree
Disagree
51 Strongly Agree Agree Agree Strongly
Disagree Disagree
Disagree
53 Strongly Strongly Agree Agree Strongly Strongly Agree
Disagree Disagree
54 Strongly Agree Agree Disagree Neither Agree
55 Strongly Agree Strongly Agree Strongly Agree Disagree
Disagree
Disagree
57 Disagree Strongly Agree Strongly Agree Strongly Agree Disagree
58 Disagree Strongly Agree Strongly Agree Strongly Agree Strongly
Disagree
59 Disagree Strongly Agree Agree Disagree Agree
60 Disagree Strongly Agree Strongly Agree Strongly Agree
Disagree
61 Disagree Strongly Agree Strongly Agree Strongly Strongly Agree
Disagree
62 Disagree Strongly Agree Strongly Agree Strongly Disagree
Disagree
63 Disagree Agree Strongly Agree Strongly Disagree
Disagree
64 Disagree Agree Agree Strongly Agree Neither Agree
nor Disagree
65 Disagree Strongly Agree Strongly Agree Strongly Disagree
Disagree
44
E I want my I, as an employee I feel more I feel very

superior to would like if my involved in my job satisfied when my
develop and superior and my superior involves
groom me as a appreciates my performance level me in decision
future leader work increases if making
exercised a high
degree of control
over me
1 Strongly Agree Agree Agree Agree

4 Neither Agree nor Strongly Agree Disagree Strongly Agree
Disagree
5 Strongly Agree Strongly Agree Disagree Agree

6 Neither Agree nor Agree Agree Agree
Disagree
7 Strongly Agree Strongly Agree Strongly Agree Agree

Disagree

13 Strongly Agree Strongly Agree Strongly Agree Strongly Agree
14 Strongly Agree Strongly Agree Agree Strongly Agree
Disagree
45

20 Agree Agree Disagree Agree
21 Strongly Agree Strongly Agree Strongly Disagree Agree
22 Strongly Agree Strongly Agree Strongly Disagree Strongly Agree
23 Agree Agree Agree Agree
24 Strongly Agree Agree Strongly Disagree Agree
26 Agree Agree Agree Agree
29 Neither Agree nor Strongly Agree Strongly Agree Strongly Agree
Disagree
30 Agree Strongly Agree Disagree Agree

33 Agree Agree Strongly Disagree Strongly Agree
34 Strongly Agree Strongly Agree Disagree Strongly Agree
36 Strongly Agree Agree Strongly Agree Agree
37 Strongly Agree Agree Strongly Disagree Strongly Agree
41 Neither Agree nor Agree Strongly Agree Agree
Disagree

43 Agree Strongly Agree Strognly agree Strongly Agree
44 Strongly Agree Agree Disagree Strongly Agree
46
47 Neither Agree nor Agree Disagree Strongly Agree

Disagree
48 Agree Strongly Agree Disagree Strongly Agree

54 Agree Agree Agree Strongly Agree
56 Agree Agree Disagree Agree
57 Agree Agree Disagree Strongly Agree
58 Strongly Agree Strongly Agree Strongly Disagree Strongly Agree
61 Disagree Agree Strongly Agree Agree
64 Agree Agree Strongly Agree Agree
47
Fundamental Analysis Of Automobile Sector
SPECIALIZATION PROJECT
48
DECLARATION
I hereby declare that this project report submitted by me to the partial fulfillment
of the requirement for the award of MASTER OF MANAGEMENT
STUDIES (MMS) of the University of Mumbai is a bonafide work undertaken
by me and it has not been submitted to any other University or institution for the
award of any other degree or diploma certificate or published any time before.
Roll No. 2021160 Signature of the student
49
CERTIFICATE
This is to certify that the “Fundamental Analysis Of Automobile Sector” , has

been successfully completed by Mr. Shubham Prashant Patil during the MMS
II, SEM IV in partial fulfillment of the Master’s degree in Management Studies
recognized by the University of Mumbai for the academic year 2020 – 2022.
This project work is original and has not been submitted earlier for the award of
any degree, diploma or associateship of any other University / Institution.
Date :

50
ACKNOWLEDGEMENT
This project has been a great learning experience for me. I take this opportunity to thank Dr.
Kinjal Shah my internal project guide whose valuable guidance & suggestions made this
project possible. I am extremely thankful to him/her for his/her support. She has encouraged
me and channelized my enthusiasm effectively.
I express my heart-felt gratitude towards my parents Mr. Prashant Patil, siblings and all those friends
who have willingly and with utmost commitment helped me during the course of my project work.
I also express my profound gratitude to Dr. H. J. Bhasin, Director of Lala Lajpatrai Institute of
Management for giving me the opportunity to work on the projects and broaden my knowledge and
experience.
I would like to thank all the professors and the staff of Lala Lajpatrai Institute especially the Library
staff who were very helpful in providing books and articles I needed for my project.
Last but not the least, I am thankful to all those who indirectly extended their co-operation and
invaluable support to me.
51
EXECUTIVE SUMMARY of Specialization Project
The report contains detailed study of assigned project Sectorial analysis of Automobile sector
using fundamental analysis and technical analysis as an option for investment and trading
option for retail investors. The project is included as a part of the MMS course and has been
executed from 5th May to 5th July 2021.
The study was undertaken to understand the factors which influence the decision of investor
or trader in investing in a sector or its stock, and also to find out the working of the Automobile
sector.
The purpose of this study is to analyse the competitive growth among the top companies that
are involved in this business and the factors governing the moment of share prices of these
companies. It gives a clear mind set from an investor/trader perspective whether the financial
stability of the company affects the decision of investing.
The fundamental analysis is based on various ratios like P/E ratios, Net Profit Margin,
Inventory Turnover Ratio, Debt to Equity, Return on Investment, EPS etc. It also considered
the top line and bottom-line factors of the companies. The top line is sales of a particular
company and the bottom line is the company’s net income
Technical analysis is a method of evaluating securities by analysing the statistics generated
by market activity, such as past prices and volume. Technical analysts do not attempt to
measure a security's intrinsic value, but instead use charts and other tools to identify patterns
that can suggest future activity.
52
TABLE OF CONTENTS
S Contents P
r a
N g
o e
. N
o
1 Research Methodology 5
5
2 Introduction 5
7
3 Sector Analysis 6
6
4 Fundamental Analysis 7
4
5 Company Analysis 9
4
6 Ratio Analysis 1
0
0
7 Technical Analysis 1
0
5
8 Findings and Recommendations 1
1
1
9 Bibliography 1
1
3
53
CHAPTER 1 : RESEARCH METHODOLOGY
54
Research Objectives:
• To study the growth of Automobile sector in India.
• To study and understand the industry trends in this sector.
• To understand and demonstrate the movement of stock prices of selected companies of the
Automobile sector through technical and fundamental analysis.
• To explain the various tools of technical analysis that can be used in forecasting stock
prices.
• To use the findings to make suitable investment decision.
Research Methodology:
Scope of the study: This is a secondary project wherein various Automobile companies have
been selected for evaluating their performance and peer to peer comparison. The scope of the
study is mainly concentrated on the different parameters/tools which can be used to make a
better evaluation and hence arrive at a better conclusion.
Data collection method: The entire study was carried on the basis of secondary research.
Secondary data has been used for the research, collected from various publications and reports
of the apex bodies, annual reports of the companies, the company’s websites, journals and
money control, reports of various websites such as Morningstar, Value Research.
Parameters used: Various Ratios like Net Profit Margin, Inventory Turnover Ratio, Debt to
Equity, Return on Investment, Earnings per Share (EPS) are also looked upon to compare its
position with its peers, and to take decision regarding investment.
Data analysis method: In order to analyse the performance of the companies under various
parameters such as sales growth, profitability, and fundamental analysis were viewed forthe
purpose of data analysis.
Limitations: There is a large number of listed pharmaceutical companies on the exchange;
but the study is performed on a selected number of entities. Besides the companies selected
are top performing/with large market share.
55
CHAPTER 2 : INTRODUCTION
56
The words of the last German Emperor may sound ironic today, given the renaissance ushered by
automobiles in our life. Apart from the obvious benefits, use of automobiles has also created
environmental concerns and car companies have nefariously tried to go around them rather strive to
mitigate its negative effects . In the following, an analysis of the global automobile industry is
presented with a focus on the European automobile market. The current trends and issues surrounding
the automotive industry are discussed at the end of this part.
Global Automobile Industry: An Introduction

The global automobile industry is intrinsically an assembly industry where the suppliers of
components and different manufacturers are mutually dependent throughout the production proces.57
More accurately, the global automobile industry is an interlocked network of specialised oligopolies
where the marketplce is affected by the actions of individual manufacturers.58 It is a capital intensive
industry having high fixed capital and labour costs resulting in a relatively high capital-to-labour ratio
where the global manufacturers compete on price, product and technology.59 This leads to a high
concentration market resulting from high entry barrier for new entrants. Mergers, alliances and other
various collaborations among the global automobile industry and it suppliers are leading to
consolidation thereby globalizing the competition and contributing to the inorganice growth. These
consolidations resulted fromfactors such as economies of scale, technological change and scope.
The automotive sector is one of the most industrial sectors. The arrival of the automobiles has
transformed lives across the globe and significantly contributes to productivity growth and
employment in global economies. The Forbes Global 2000 ranking includes eight companies in top
hundred rankings, further elaborates the importance of automobile industry. The rankings is based on
an equally weighted composite score of revenue, profits, assets and market value whichincludes
Toyota, Daimler, Volkswagen, General Motors, BMW Group, Ford Motor, Honda and Nissan Motor
in the top 100.
57
Global Automobile Sales

The automobile companies have a global presence and are not only limited to their country oforigin.
The following paragraph details the global car sales.
Sales by region
The following chart shows the sales of motor vehicles in different countries across the world.The
data is only available till 2016 in OICA statistics.
Figure 1: Worldwide motor vehicle sales of passenger car(2005-2016)
100
Million
90
80
70
60
50
40
30
20
10
0
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
CHINA AFRICA ASIA/OCEANIA/MIDDLE EAST (without China) NAFTA EU 28 countries + EFTA
Source: Author’s calculation from OICA statistics. http://www.oica.net/category/sales-statistics/
In the 2005-2016 period, world auto vehicle sales have grown at 42.4% from 65.9 million to
93.85 million. China is the biggest market with sales of 28.9 million vehicles in the year 2017 and
has shown an astronomical growth of 401.5% since 200562. The second biggest market isUS with
sales of 17.9 million in 2016. In 2009, China overtook America as the biggest country for auto sales
and in 2010 became the largest automotive market leaving behind NAFTAcountries namely US,
Canada and Mexico. EU-28 countries and EFTA members are the third biggest market with sales of
17.6 million registering a slight decline of -3.4% during the period 2005 to 2016. Japan, India and
South Korea are the other big markets in the Asia/Oceania/Middle East markets. India and Indonesia
with respective growth rates of 154.7%
58
and 96.3% since 2006, with atleast a million cars in 2016, highlighting their importance. Central and
South America have sales of 4.05 million and the least in Africa amounting to 1.31 million.
Automobile Sector In India
In 2020, India was the fifth-largest auto market, with ~3.49 million units combined sold in the
passenger and commercial vehicles categories. It was the seventh-largest manufacturer of commercial
vehicles in 2019.
The two wheelers segment dominates the market in terms of volume owing to a growing middle class
and a young population. Moreover, the growing interest of the companies in exploring the rural markets
further aided the growth of the sector.
India is also a prominent auto exporter and has strong export growth expectations for the near future.
In addition, several initiatives by the Government of India and major automobile players in the Indian
market is expected to make India a leader in the two-wheeler and four-wheeler market in the world by
2020.
MARKET SIZE
Domestic automobiles production increased at 2.36% CAGR between FY16-20 with 26.36 million
vehicles being manufactured in the country in FY20. Overall, domestic automobiles sales increased at
1.29% CAGR between FY16-FY20 with 21.55 million vehicles being sold in FY20.
In FY21, the total passenger vehicles production reached 22,652,108.
In October 2021, the total production volume of passenger vehicles (except for BMW, Mercedes, Tata
Motors & Volvo Auto), three wheelers, two wheelers and quadricycles reached 2,214,745 units.
Two wheelers and passenger vehicles dominate the domestic Indian auto market. Passenger car sales
are dominated by small and mid-sized cars. Two wheelers and passenger cars accounted for 80.8% and
12.9% market share, respectively, accounting for a combined sale of over 20.1 million vehicles in
FY20.
59
In July-September 2021 quarter, the luxury car market registered sales of 8,500 units.
Overall, automobile export reached 4.77 million vehicles in FY20, growing at a CAGR of 6.94%
during FY16-FY20. Two wheelers made up 73.9% of the vehicles exported, followed by passenger
vehicles at 14.2%, three wheelers at 10.5% and commercial vehicles at 1.3%.
Indian automobile exports stood at 1,419,430 units from April 2021 to June 2021 as compared to
436,500 units in April 2020 to June 2020.
EV sales, excluding E-rickshaws, in India witnessed a growth of 20% and reached 1.56 lakh units in
FY20 driven by two wheelers. According to NITI Aayog and Rocky Mountain Institute (RMI) India's
EV finance industry is likely to reach Rs. 3.7 lakh crore (US$ 50 billion) in 2030. A report by India
Energy Storage Alliance estimated that EV market in India is likely to increase at a CAGR of 36%
until 2026. In addition, projection for EV battery market is forecast to expand at a CAGR of 30%
during the same period.
Premium motorbike sales in India recorded seven-fold jump in domestic sales, reaching 13,982 units
during April-September 2019. The luxury car market is expected to register sales of 28,000-33,000
units in 2021, up from 20,000-21,000 units sold in 2020. The entry of new manufacturers and new
launches is likely to propel this market in 2021.
60
GOVERNMENT INITIATIVES
The Government of India encourages foreign investment in the automobile sector and has allowed
100% foreign direct investment (FDI) under the automatic route.
Some of the recent initiatives taken by the Government of India are -
• In November 2021, the union government added >100 advanced technologies, including alternate fuel
systems such as compressed natural gas (CNG), Bharat Stage VI compliant flex fuel engines, electronic
control units (ECU) for safety, advanced driver assist systems and e-quadricycles, under the
production-linked incentive (PLI) scheme for the automobiles.
• In September 2021, the Union Minister for Road, Transport and Highways, Mr. Nitin Gadkari
announced that government is planning to make it mandatory for car manufacturers to produce flex-
fuel engines after getting the required permissions from the Supreme Court of India.
• In September 2021, the Indian government issued notification regarding a PLI scheme for automobile
and auto components worth Rs. 25,938 crore (US$ 3.49 billion). This scheme is expected to bring
investments of over Rs. 42,500 (US$ 5.74 billion) by 2026.
• The Indian government has planned ~US$ 3.5 billion in incentives over a five-year period until 2026
under a revamped scheme to encourage production and export of clean technology vehicles.
• As of June 2021, Rs. 871 crore (US$ 117 million) has been spent under the FAME-II scheme, 87,659
electric vehicles have been supported through incentives and 6,265 electric buses have been sanctioned
to various state/city transportation undertakings.
• In July 2021, India inaugurated the national automotive test tracks (NATRAX), which is Asia’s longest
high-speed track to facilitate automotive testing.
• In Union Budget 2021-22, the government introduced the voluntary vehicle scrappage policy, which
is likely to boost demand for new vehicles after removing old unfit vehicles currently plying on the
Indian roads.
• In February 2021, the Delhi government started the process to set up 100 vehicle battery charging
points across the state to push adoption of electric vehicles.
• The Union Cabinet outlaid Rs. 57,042 crore (US$ 7.81 billion) for automobiles & auto components
sector in production-linked incentive (PLI) scheme under the Department of Heavy Industries.
• The Government aims to develop India as a global manufacturing centre and a Research and
Development (R&D) hub.
61
• Under NATRiP, the Government of India is planning to set up R&D centres at a total cost of US$
388.5 million to enable the industry to be on par with global standards.
• The Ministry of Heavy Industries, Government of India has shortlisted 11 cities in the country for
introduction of EVs in their public transport systems under the FAME (Faster Adoption and
Manufacturing of (Hybrid) and Electric Vehicles in India) scheme. The Government will also set up
incubation centre for start-ups working in the EVs space.
• In February 2019, the Government of India approved FAME-II scheme with a fund requirement of Rs.
10,000 crore (US$ 1.39 billion) for FY20-22.
Exhibit 1: Industry Snapshot for FY2020
62
Exhibit 2: Domestic Segment Market Share FY20
Commercial Vehicles, 2.7%
Three Wheelers,
2.6%
COVID IMPACT
Demand Side
• Fall in consumption demand due to decrease in disposable income and reduction in net worth due to
asset price decline.
• Poor economic activity levels with manufacturing and service sector indices at record lows.
• Low investment demand with deferring of Capex and infrastructure expenditure by the private sector
and government respectively
Supply Side
• Short term supply chain disruptions for OEMs - Port congestion, labour issues and lockdown induced
DE growth
• Liquidity crunch and credit shortage – Banks still averse to lending to NBFCs ;Poor response to
TLTRO 2.0 by the RBI
• Deferring of new launches to product portfolio
• Poor utilisation levels and low production leading to high fixed cost burdenswith declining
revenue
63
COVID-19 Impact Analysis

Segment Growth Drivers Challenges COVID Impact Post COVID
2W Rural income ABS norms and BS 6 rules 1) Informal Sector – 1) Shift towards
Rising demand forto increase cost of key client base to used vehicle
fuel efficiency andproduction leading to 10%- 2) market Online
2) be worse affected
convenience 15% price rise in a highly Supply chain sales channel
3)
price elastic market – disruptions- high growth
potential fall in volumes concentration of Shift towards
Low availability of credit sourcing location EScooters
and insurance norms
Highest GST Slab
PVs Disposable Income 1) Low disposable 1) Low 1) Behavioural
– PFCE on PVs income and poor discretionary shift –
Product Portfolio 2) discretionary expenditure and preference from
Diversification expenditure subdued demand public to PV
3) Competition from transport
aggregators and
rentals
BS 6 norms
CVs Industrial Growth 1) Macroeconomic 1) Delay in infra 1) Delayed
Cycle and Fiscal slowdown and projects and recovery and
Expenditure subdued demand subdued industry 2) overcapacity
2)
Growth in allied from industry 2) activity – low Scrappage
3)
industries – Liquidity crunch freight demand policy may
Investment 4) Axle Norms and Deferred provide demand
Demand 5) overcapacity BS investment relief
6 Price increases demand
Highest GST Slab
Tractors 1) Rainfall and crop Fragmented farm size 1) Falling rural income 1) Increased fiscal
yield – farmer Credit unavailability – unpaid subsidies expenditure on
income 2) Emission norms 2) Labour shortage and agriculture and
Regulatory Support logistical issues good
3) Affordable Credit increasing time to monsoon
market expectation ;
improvement in
demand
64
CHAPTER 3: SECTOR ANALYSIS
66
TWO WHEELERS
INTRODUCTION AND DOMESTIC MARKET STRUCTURE

India is the largest two-wheeler market in the world and the fourth largest automobile market in
the world behind China, the United States and Japan. Two-wheelers are the major mode of transport
in most of the rural and semi-urban areas in India. But the two-wheeler industry is shrinking and
the pandemic is not the only reason why this is happening this year. The regulatory changes in
terms of emission and safety regulations for two-wheelers like the transition to BS-VI have led to
an increase in the price by 7-9% thus causing a decrease in the demand. A few other major reasons
for the reduction in demand are NBFC liquidity crisis leading to an increase in the insurance
premium and also rising raw material costs which lead to an increase in the price of the vehicle.
The two-wheelers have 81% market share in production as well as sales volumes in the Indian
automotive sector and the major players are Hero MotoCorp Ltd., Bajaj Auto Ltd. and TVS Motors
Ltd. Two-wheeler penetration in India is 30- 40%. Urban areas that account for 60% of industry
volumes have penetration levels of 40-45% while the rural areas that account for 40% industry
volumes have penetration levels of only 20-25%, indicating a huge opportunity for growth.
The two wheeler industry saw a 13.19% fall in sales in FY 2021 y-o-y. This was mainly due to
the loss in student demand due to the lockdown and subdued festive season. However, the
premium segment two wheelers saw a better demand than the entry level segment.
India is also a prominent auto exporter and has strong export growth expectations for the near
future. Bajaj Auto exported a total of 1,48,740 units of two-wheelers this march compared to
1,12,564 units exported during the month of March last year. Hence despite a y-o-y decline in
exports by 3.89%, it has remained one of the top exporters.
67
24.5
25 23.02
23.1
21.18
19.93 19.93
20 17.42
18.35
16.66
15.11
15
10
5 2.82 3.28 3.52 3.27

2.34
0
FY 2017 FY 2018 FY 2019 FY 2020 FY 2021
Production Domestic Sales Export

Exhibit 4: Production, Domestic Sales and Exports of Two-Wheelers (in mn)
GROWTH DRIVERS
1. Growing Disposable income: With the rising disposable income of the households and the
middle-income segment wishing to own a personal vehicle, two-wheeler seems to be a good
bet for the price.
2. Convenience: The convenience they provide on busy city roads, their ease ofparking
and maintenance.
3. Demand in the Rural Area: Due to inadequate public transport facilities in the rural
region, people prefer using two-wheelers for personalised transportation.
4. Increasing Women participation in work-force: The increase in women participation
in the labour force is expected to increase from current levels of 22%, creating a new demographic
benefit and expected increase in scooter sales.
5. Fuel-Efficient: As two-wheelers are fuel-efficient and sturdy, they are preferred for
longer distances.
6. EVs: Government’s emphasis on green mobility and electric vehicles, especially for
two-wheelers is a big opportunity.
7. Personal Mobility post Lockdown: According to a report by ET Auto, post lockdown
people are preferring personal mobility over public transport because of which the sales of two-
wheelers has increased across India.
CHALLENGES
1. BS-VI emission norms: It has been mandated that from April 1 2020, all vehiclessold must have
BS-VI compliant engines requiring BSVI fuel. This has led to an increased cost, further
dampening consumer sentiments.
2. Five-year third-party insurance cover: The Insurance Regulatory and Development Authority
of India mandated for all new two-wheelers to have the cover which has resulted in an increased
insurance cost.
3. ABS: It has also been mandated from April 1, 2019, for all new two-wheelers having an engine
displacement of above 125cc to have an anti-lock braking system. This has added to the cost of
the two-wheelers resulting in low demand.
68
4. GST Slab: Currently, two-wheelers are taxed in the highest GST slab of 28%. For the
industry to revive, it is necessary that the slab is reduced. The high rate is a hindrance to demand
pick up.
5. NBFC Crisis: Money supply has been tightened after the IL&FS debt crisis. Thishas resulted in
a liquidity crunch for NBFCs and affected their lending capacity. 70% of twowheeler sales are
financed by NBFC
IMPACT OF COVID-19
Indian two-wheeler market was reported to have zero sales in April, 2020, due to the shutdown of
all plants and all dealers. Due to the same reason, the Indian two-wheeler market in India
contracted by 12.13% this financial year (FY 2020-21).
The Indian two-wheeler market that was 21.19 million in sales volume in 2019, is forecasted to
expand at a CAGR of 7.33 % to 24.89 million units by 2024
The sales might increase as people who commute daily would prefer not sharing a vehicle or using
public transport, they would rather own a vehicle and given the options twowheeler is the best
option as it is cost-friendly
PASSENGER VEHICLES
INDUSTRY OVERVIEW AND DOMESTIC MARKET STRUCTURE
Domestic sales in the Indian Passenger Vehicle (PV) market declined by 9.3% to reach 3.1 million
units in FY 2021. The study estimates the market size of the Indian PV market, as well as segment
forecasts up to 2024, with due consideration for the various factors driving and restraining its
growth .
India passenger car market can be classified based on Vehicle type, by Fuel type, by Transmission
type and by Company/Brand. In terms of Vehicle type, the market is segmented into Sedan,
Hatchback, Sports Utility Vehicle and Multi-Purpose Vehicle. In FY2020, the Hatchback segment
accounted for the majority market share, followed by SUV, Sedan and MPV segments. Over the
next five years, the Hatchback segment is expected to continue its dominance in the country’s
passenger car market, however, the other vehicle segments are expected to witness faster growth
during the forecast period. In terms of transmission type, market is divided into Automatic and
Manual segments.
Though Manual transmission segment continues to dominate the market, vehicles with Automatic
transmission are anticipated to witness faster rate of adoption in India over the next five years.
Based on engine capacity, vehicles with mid ranges of engine capacity, usually between 1,000 to
2,000 cubic centimetres, are expected to witness strong growth in the coming years. Maruti Suzuki
India Limited, Hyundai Motors India Limited, Mahindra and Mahindra Limited, Honda Cars India
Limited, Tata Motors India Limited, Toyota Kirloskar Motor Private. Limited, Ford India Private
Limited, Volkswagen Group India Limited, Mitsubishi Motors India Limited and Fiat Chrysler
Automobiles India Private Limited are some of the leading players and cumulatively account for
a market share above
69
The segmental shifts in the PV market in India are evident from the greater number of participants
and available models in the hatchback and the UV segments. The disparity within the segments is
also clear in the shifting segmental share within the market.
However, more than 50% of the market share remains with a single OEM. The market has also
witnessed rapid growth and increasing popularity of a few companies, with their well- received
new product launches in 2018–2019 and greater focus on rural segments.
The electric vehicles market in the country is gaining traction with the entry of new market
participants and government incentives. Cars eRetailing and digitalization trends have been major
disrupters in 2020. A move toward active safety features is another key trend witnessed in the
market.
Airbag and sensor penetration are increasing incrementally across all vehicle segments, and the
next logical step toward driver and passenger safety in India is expected to be active safety
features. Ride-hailing and ride-sharing service categories are highly competitive in India, with a
few participants having the biggest market shares and new participants entering the segment with
innovative offerings and OEM tie-ups.
Furthermore, the PV market in India is expected to witness increased diffusion of automotive
transmission technologies such as Automatic Manual Transmission (AMT), Continuous Variable
Transmission (CVT), Dual-clutch Transmission (DCT), and Stepped-Automatic Transmission (S-
AT). Out of these, certain transmission technologies are expected to see higher diffusion than
others, due to OEM interest and affordability.
3.42
3.06
2.77 2.71
0.66
0.4
FY 2020 FY 2021
Production Domestic Sales Export
Exhibit 5: Sales, Production and Exports of Passenger Vehicles (in mn)
70
GROWTH DRIVERS
1. GST slab adjustments: Moreover, reduction of GST to 18% from earlier 28% as well tax benefits
on EMIs for loan amounts is also expected to positively influence the market in the coming years.
India passenger car market witnessed sales of around
2.71 million units in FY2021.
2. Consumer spending: India passenger car market is projected to grow at a CAGR of
around 10% and surpass $ 31.7 billion by 2026, owing to increasing per capita income and rising
demand for enhanced travelling comfort. Increase in consumer spending and demand for
economical and technologically advanced vehicles with automatic transmission systems such as
Hatchback and Sedan cars is expected to boost demand for passenger cars during the forecast
period.
3. Product Diversification: The sheer number of products available across all segments
have increased. However, the increase in products available for special needs is on a tremendous
rise as well. This in turn provides customers with the option of buying vehicles that are specially
designed for their needs. This is also fuelled by the arrival of new entrants like Kia and MG Motors
who did their homework, identified key trends of the Indian market and with their success stories
in other economies, launched products that were very attractive and served the needs of their
target audience.
4. Behavioural shifts: It is expected that post the COVID crisis, the consumer base for usage of
privately owned vehicle will increase dramatically as public transport poses a threat.
CHALLENGES
1. Due to the government’s implementation of various environmental norms and Corporate Average
Fuel Efficiency Norms, Diesel engine variants are less likely to be the preferred choice of
consumers in the coming years. The market will rely on how well the other variants can act as a
substitute for diesel powered vehicles. If the introductions of alternatives aren’t up to the mark,
this may contribute to lower consumption.
2. It is yet to be seen how well the cab-for-hire segment is going to recover. Market leaders like
Ola and Uber have a tough road ahead and sales of vehicles that served their purpose is
obviously heavily dependent on it.
3. Shifting to Bharat Stage VI is another factor that is bound to have an impact. The last
time Indian automobile market adopted new BS norms back in 2019, the revenue figures across
the industry felt the shockwave. This happened as the inventory held by manufacturers was much
higher than their forecasted sales from the time of announcement of the new norms to their
implementation.
71
IMPACT OF COVID-19
The COVID-19 outbreak has negatively affected many industries including automotive industry.
The global economy has been largely affected by the growth in the automotive sector. The sector
employs more than 9 million people alone in manufacturing of automobiles globally, which
includes over 5% of the global manufacturing workforce. Many other industries including steel,
iron, glass, plastics, textile, rubber, software among others are dependent on the demand from
automotive sector. Unavailability of labour has plagued the entire supply chains of manufacturing
setups across all locations and hence an adverse impact due to the same has been observed in the
passenger vehicle manufacturing units as well as their suppliers. Shutdown of manufacturing
facilities has impacted the supply and sales of a few OEMs as a result of which some of them have
reduced their production targets by 10- 20% for the first quarter of FY2022. However, they expect
the demand to slowly pick up in the subsequent quarters due to increased preference for personal
mobility, pent up demand and opening up of the economy due to larger vaccination drives.
According to the Society of India Automobile Manufacturers (SIAM), the domestic sales for
passenger vehicles dropped by 2.24% to 2.71 million units and the exports fell by 38.92% to 0.404
million units in March 2021 in India. However, there was a 12.13% increase in the domestic sales
for utility vehicles in FY 2021 over the last year.
72
CHAPTER 4:- Fundamental analysis
73
This chapter provides an overview of fundamental equity analysis methods with an

emphasis on applied methods in the practical part of this thesis. Firstly, the basic inputs
fitted into the models used to calculate the internal value will be presented, followed by
methods of valuation based on the method of discounting the cash flow and using relative
valuation.
4.1 Estimating the discount rate and other inputs to the model
One of the most important input parameters of valuation models is the discount rate, which
is used to convert future cash flows to the present. The discounting process is based on the
fact thatthe amount of money received today is higher than the same amount earned in the
future, due to both inflation and a certain degree of uncertainty associated, for example,
with the probability of bankruptcy, the development of the competitive environment,
political influences and other unclear variables. It follows logically that with the increasing
risk of the investment, the requiredinvestor rate of return also increases. In calculating and
determining the appropriate discount rate, the analyst must always take into account the
cash flows that he will discounted at that rate.The following are the basic concepts of
setting a suitable discount rate.
4.2 Risk-free rate
Most valuation models are reflected by the determination of the risk-free asset and the
resulting risk-free interest rates. An asset can be termed risk-free if the actual return is
always equal to the expected return. The issuer of such an asset must not carry a default
risk, which narrows potential candidates practically only to the government securities
ruling out securities issued bya private equity. At the same time, the investors should not
be exposed to reinvestment risk in the choice of such an asset, i.e. the uncertainty about
the future coupons from bonds will not be reinvested at the prevailing interest rate since
the bond was initially purchased. Therefore, forthe determination of the risk-free interest
rate, it is better to refer a zero bond of developed country than a classic bond with ongoing
coupon payments. In practice, long-term government bond yields, most often with a 10-
year maturity, are used in the valuation models predicting cashflow over a very long future
(or infinitely) to estimate risk-free interest rates.10
Two examples as proxies for default risk-free assets are US government issued bonds and
time deposits insured by Federal Deposit Insurance Corporation, which are part of M2
money aggregate.11 However, in the case of a company valuation, the choice of a risk-
free asset can be based on a default-free security whose duration matches to the duration
of the cash flows in the analysis and can be used as the terminal growth rate12.
74
4.1.2 Beta (𝖰𝖰)
An important element in the calculation of the discount rate is the beta coefficient, which
reflectsthe sensitivity of the stock’s return to the market’s overall return. A firm’s beta is a
measure ofits systematic risk. It is typically measured with monthly or quarterly data over the
last four years or so. As the stock’s sensitivity to market conditions may change over a period
of time dueto the changes in the firm’s operating characteristics, the beta of the stock may
adjust with time and in response, the stock’s value also adjusts. The beta measures the
systematic risk bydetermining how the value of the stock portfolio has been affected by market
volatility. One of the approaches to calculating the indicator is the regression analysis of the
historical movements of the traded title against the basket of shares representing the market
portfolio.13
A beta of one indicates that the security’s price is expected to move exactly with the market
movement while a greater than one value of beta indicates that the stock’s price is more volatile
than the market. A beta smaller than one signal the security’s price is expected to be less
volatilethan the market.14
The simplest estimation of bet is based, as noted above, on least squares regression analysis.
Theresult of such a procedure is the so-called untrained beta (raw beta or unadjusted
beta). Theresult is often termed as “raw” historical beta or an unadjusted beta. The values
estimated of betaare dependent upon the choice of the index representing a market portfolio.
NYSE Composite and the S&P 500 are used to represent US equities market. The value of
estimated beta also depends upon the frequency and the length of data period of observations.
The most frequently used is five-year period with monthly observations. The Bloomberg
default values use a two- year period with weekly observations. Generally speaking, a shorter
period is more suitable for fast growing The value of beta for a future period has been estimated
to be on average closer to the mean value of 1.0, the beta of an average-systematic-risk
security, than to the value of raw beta. Given the reason that valuation is forward looking, the
raw beta should be adjusted so it more accurately predicts a future beta. For the purposes of
valuation, the coefficient is therefore often corrected to the so-called adjusted beta according
to the following relationship:15
2 1
𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴 𝑏𝑏𝐴𝐴𝐴𝐴𝑏𝑏 = × 𝑈𝑈𝑈𝑈𝑏𝑏𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴 𝑏𝑏𝐴𝐴𝐴𝐴𝑏𝑏 + ×
1.0
3 3
The beta of a firm is not a mere abstract number generated as a result of a regression analysis
rather it is determined by these three underlying variable:16
• Type of Business– A firm has a higher beta if it is involved in a business that is more
sensitive to market conditions. Thus, cyclical businesses can be expected to have higher
75
betas than non-cyclical businesses. Considering other remaining things equal, automobile
companies are sensitive to economic conditions and will have higher betas than food
processing and tobacco companies, which are relatively insensitive to business cycles.
• Degree of Operating Leverage–A firm with a high operating leverage (i.e., high fixed costs
relative to total costs) exhibit a more volatile operating income as compared to a firm
producing a similar product with low operating profit. The higher variance inoperating income
results in higher beta for the forms with high operating leverage. In a similar business, small
firms have higher betas as compared to larger firms as they enjoy fewer economies of scale.
• Degree of Financial Leverage– Generally, the increase in the financial leverage leads toan
increase in the beta coefficient. The fixed interest payments in favorable conditions results in
higher earnings per share and lowers in bad times. Higher leverage not only increases the
variance in earnings per share but also makes the firm riskier.
The capital structure affects the beta factor can be demonstrated using the following
relationship:17
𝐷𝐷
𝛽𝛽𝐿𝐿 = 𝛽𝛽𝐴𝐴 × �1 + (1 − 𝐴𝐴) �
𝐸𝐸
βL= Levered beta for equity in the firm

βu= Unlevered beta of the firm
t= Marginal tax rate for the firm
D/E= Debt/Equity ratio (in market value terms)
Damodaran suggests a methodology to estimate the beta factors corresponding for bottom-up
approach. A company is not only a single division and does not focus only on one activity, but
rather a holding or a company with a more complex structure of divisions, products and
services.In the bottom-up approach, the analyst first tries to identify the specific spheres of
activity of thefirm. Most companies divide their revenue and profits among divisions into their
annual report. Every business division of a firm has a different risk, financial leverage
composition and type of business, which are also the factors affecting beta values, as discussed
earlier. According to the methodology by Damodaran, the business or businesses are identified
in which the firm operates. Next step is to find other publicly traded firms in each business
and their regression betas are obtained to calculate an average beta for the firms. The average
unlevered beta for the
76
business is calculated by unlevering the average (or median) beta for the firms by their
average(or median) debt-to-equity ratio. The following formula is used:18
𝑈𝑈𝑈𝑈𝑈𝑈𝐴𝐴𝑈𝑈𝐴𝐴𝑈𝑈𝐴𝐴𝐴𝐴 𝑏𝑏𝐴𝐴𝐴𝐴𝑏𝑏 𝑏𝑏𝐴𝐴𝐴𝐴𝑏𝑏𝑈𝑈𝐴𝐴𝐴𝐴𝐴𝐴
𝐷𝐷
= 𝐵𝐵𝐴𝐴𝐴𝐴𝑏𝑏 𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑏𝑏𝑈𝑈𝑏𝑏𝑏𝑏𝑈𝑈𝐴𝐴 ÷ �1 + (1 − 𝐴𝐴) � 𝑈𝑈𝑏𝑏𝐴𝐴𝑏𝑏𝑐𝑐 𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑏𝑏𝑈𝑈𝑏𝑏𝑏𝑏𝑈𝑈𝐴𝐴
𝐸𝐸 𝑓𝑓𝑏𝑏𝑈𝑈𝑐𝑐𝐴𝐴�� [3]
Further, to estimate an unlevered beta for the firm being analyzed, a weighted average of the
unlevered betas for the different business divisions it operates in is calculated using the
proportion of firm value derived from each business division as the weights. This weighted
average is termed as the bottom-up unlevered beta and is calculated as:19
𝐴𝐴 =𝑘𝑘
𝑈𝑈𝑈𝑈𝑈𝑈𝐴𝐴𝑈𝑈𝐴𝐴𝑈𝑈𝐴𝐴𝐴𝐴 𝑏𝑏𝐴𝐴𝐴𝐴𝑏𝑏 𝑓𝑓𝑏𝑏𝑈𝑈𝑐𝑐 = �(𝑈𝑈𝑈𝑈𝑈𝑈𝐴𝐴𝑈𝑈𝐴𝐴𝑈𝑈𝐴𝐴𝐴𝐴 𝑏𝑏𝐴𝐴𝐴𝐴𝑏𝑏 𝐴𝐴 ∗ 𝑉𝑉𝑏𝑏𝑈𝑈𝐴𝐴𝐴𝐴 𝑤𝑤𝐴𝐴𝑏𝑏𝑤𝑤ℎ𝐴𝐴

𝐴𝐴)
𝐴𝐴 =1
j = business division of the firm

k= number of business divisions a firm is operating
Subsequently, the current market values of debt and equity of the firm are estimated and this
debt-to-equity ratio is used to calculate a levered beta.
In the valuation part of this thesis, the beta coefficient will be calculated by bottom-up
approach.The regression of the price development of a stock over a selected index often results
in an inaccurate result influenced by the chosen period and frequency of observation, as well
as to a certain extent by accidental movement of rates or temporary events within the company
and world markets. On the other hand, the calculation based on the average values of
companies appears in most cases to be more accurate and statistically more conclusive.
Equity Risk Premium (ERP)
The premium required by investors for holding equities and not a free asset is called equity
risk premium. It is calculated as the required return on equities minus a specified expected
risk-free rate of return. Equity risk premium is dependent on future expectations since the
investor’s return is dependent only on investment’s future cash flows. The equity risk premium
can be estimated using two approaches. First approach is based on historical average
differences between equity market returns and government debt returns and the second on
current exceptional data.20
77
For a selected sample period, the mean value of the differences between a broad based equity
market index returns and a government debt returns is equivalent to historical equity risk
premium. Historical estimates are the preferred choice of estimation if reliable long-term
recordsof equity returns are available. Over a long term, average returns are an unbiased
estimate of investor expectation if the investors do not make systematic errors in forming
expectation. During the usage of historical estimate to represent the equity risk going forward,
the parametersdescribing return generating process are assumed to be constant over the past
and into the future.The parameters on which an analyst bases his proposition to develop a
historical ERP estimate are as follows:21
I. Equity index to represent equity market returns– Analysts tries to choose an equity index
that precisely represents average returns earned by equity investors in the analyzedmarket.
Usually, broad-based market value-weighted indexes are selected.
II. Time period for computing the estimate–The precision in estimating the mean cannot be
achieved by dividing a data period of a given length into smaller sub periods. The accuracy
can be achieved only by extending the length of the data.
III. Type of mean calculated–It is calculated using an arithmetic mean or a geometric mean.An
arithmetic mean equity risk premium is equal to the sum of annual return differences divides
by the number of sample observation. A geometric mean equity risk premium estimate is
equivalent to the compound annual excess return of equities over the risk-freereturn. CAPM
model uses arithmetic for estimating required return, as both are model- consistent choice with
their focus on single period return.
IV. Proxy for the risk-free return– The choice for the risk-free rate area short-term government
debt instrument, such as a 30-day T-bill rate or a long-term governmentbond yield to
maturity (YTM). Highest rated corporate bonds are not preferred, as they are not considered
to have less or near zero default and equity market risk. Industry practice has favored the use
of a 10-year government bond yield even though short-term rate points out that long-term
government bonds are subject to risks, such as interest rate risk complicating their
interpretation.
The problem of estimating the market risk premium may be due to the so-called survivorship
bias. The fallacy occurs because of phasing out of poorly performing or defunct companies
frommembership in a stock index, so that only relative successful companies remain. It inflates
historical estimates of the equity risk premium. To solve this issue, an equity returns series
that are free from survivorship bias must be used by the analyst. In many emerging markets,
thescant availability of historical data and volatility of existing data fails to yield a meaningful
estimate of the risk premium. The equity risk premium of a developing market can be viewed
as extra risk over a mature market. In such cases, the following formula can be used to calculate
theequity risk premium:
78
𝐸𝐸𝐸𝐸𝐴𝐴𝑏𝑏𝐴𝐴𝐸𝐸 𝑈𝑈𝑏𝑏𝐴𝐴𝑘𝑘 𝑐𝑐𝑈𝑈𝐴𝐴𝑐𝑐𝑏𝑏𝐴𝐴𝑐𝑐

= 𝐵𝐵𝑏𝑏𝐴𝐴𝐴𝐴 𝑃𝑃𝑈𝑈𝐴𝐴𝑐𝑐𝑏𝑏𝐴𝐴𝑐𝑐 𝑓𝑓𝑐𝑐𝑈𝑈 𝑀𝑀𝑏𝑏𝐴𝐴𝐴𝐴𝑈𝑈𝐴𝐴 𝐸𝐸𝐸𝐸𝐴𝐴𝑏𝑏𝐴𝐴𝐸𝐸 𝑀𝑀𝑏𝑏𝑈𝑈𝑘𝑘𝐴𝐴𝐴𝐴 + 𝐶𝐶𝑐𝑐𝐴𝐴𝑈𝑈𝐴𝐴𝑈𝑈𝐸𝐸 𝑃𝑃𝑈𝑈𝐴𝐴𝑐𝑐𝑏𝑏𝐴𝐴
As a premium for a mature market, the US equity risk premium is assigned by default due to
sufficiently long series of available historical data. To determine a country risk premium, the
easiest way is by referring the rating of sovereign bonds of renowned agencies (Standard &
Poor’s and Moody's) and their comparison with the yield premium of the country's debt
securities relative to the US bond yield. Both bonds must be denominated in the same currency.
This way we can estimate the risk margins of the appropriate rating of the bonds of the leading
agencies. It is appropriate to adjust the premium calculated to the higher risk of equity
investments compared to the bond. The standard deviation of returns is considered to be a risk
measure; therefore, by comparing the standard deviation of daily earnings on the stock and
bond markets, the relative risk of the stock market can be estimated and incorporated into the
country's risk premium. The market risk premium is then calculated as the sum of the required
market risk premium (US) and the country risk premium (country risk premium). Estimation
of the required risk premium for specific regions or continents is then calculated as a weighted
average where weights are the values of the gross domestic product of each country:23
The second approach used is the use of so-called implied market risk premiums. The analyst
does not need to rely on historical data or make adjustments for the risk premium of the
country,but it assumes that the stock market is correctly priced. The method consists in
creating a valuation model equivalent to present value of dividends growing at a constant rate.
It as a market-driven model, current and does not require any past data. Thus, it can be used
to estimateimplied equity premiums in any market. The basic model looks as follows:24
𝐸𝐸𝐸𝐸𝑐𝑐𝐴𝐴𝑐𝑐𝐴𝐴𝐴𝐴𝐴𝐴 𝐴𝐴𝑏𝑏𝑈𝑈𝑏𝑏𝐴𝐴𝐴𝐴𝑈𝑈𝐴𝐴𝐴𝐴 𝑈𝑈𝐴𝐴𝐸𝐸𝐴𝐴 𝑐𝑐𝐴𝐴𝑈𝑈𝑏𝑏𝑐𝑐𝐴𝐴

𝑉𝑉 =
𝑅𝑅𝐴𝐴𝐸𝐸𝐴𝐴𝑏𝑏𝑈𝑈𝐴𝐴𝐴𝐴 𝑈𝑈𝐴𝐴𝐴𝐴𝐴𝐴𝑈𝑈𝑈𝑈 𝑐𝑐𝑈𝑈 𝐴𝐴𝐸𝐸𝐴𝐴𝑏𝑏𝐴𝐴𝐸𝐸 − 𝐸𝐸𝐸𝐸𝑐𝑐𝐴𝐴𝑐𝑐𝐴𝐴𝐴𝐴𝐴𝐴 𝑤𝑤𝑈𝑈𝑐𝑐𝑤𝑤𝐴𝐴ℎ 𝑈𝑈𝑏𝑏𝐴𝐴𝐴𝐴
For the calculation of the market risk premium, the practical part of this thesis will be based
on Damodaran's methodology and its estimates of these values for the specific regions in which
the analyzed companies operate. As a benchmark for calculating stakeholder interests in
specific regions, the proportion of revenue generated by the companies in question in those
parts of the world will be taken into account.
79
Capital Asset Pricing Model (CAPM)
The previous introduction of the key determinants of the discount rate now allows us to
estimate the required yield for the shareholders, which is usually used in the CAPM model,
the capital asset pricing model.
The CAPM equation for required return must be valid in equilibrium (the condition when
demand equals supply) if the model’s assumptions are fulfilled. The assumptions of the model
states that the investors are risk averse and their investment decisions are based on the mean
return and variance of returns of their complete portfolio. The CAPM is based on the premise
that investors evaluate the risk of an asset in terms of the asset’s contribution to the systematic
risk of their total portfolio (systematic risk that results from exposure to general stock market
movement). CAPM is widely used in valuation due to its relatively objective procedure for
required return estimation. It can be expressed as:25
𝐸𝐸(𝑅𝑅𝑏𝑏 ) = 𝑅𝑅𝐹𝐹 + 𝛽𝛽𝑏𝑏 ∗ [𝐸𝐸(𝑅𝑅𝑀𝑀 ) − 𝑅𝑅𝐹𝐹 ]
E(Ri)= expected return of the security

RF= risk-free rate of return
βi= beta of the security
E(RM)= expected return on the market portfolio
Weighted Average Cost of Capital (WACC)
To value a company’s assets, the analyst must discount the cash flows available to equity and
debt holders. The discount rate used is called the weighted average cost of capital (WACC).
Theinterest rate on the debt is the cost of debt, which is used to calculate WACC, value debt
capital or calculate the present value of the tax shield on debt during the asset valuation. The
current interest rate will be a good proxy if the assumed capital structure in future periods is
similar to the historical structure. If the analyst assumes a change in capital structure, then it
is pertinent to estimate the expected interest rate given the new level of debt ratio. A possible
way to approach to this would be to estimate the expected credit rating at the new debt level
of the company and use the appropriate interest rates for that category. The formula for WACC
is as follows:26
𝐷𝐷𝐴𝐴𝑏𝑏𝐴 𝐸𝐸𝐸𝐸𝐴𝐴𝑏𝑏𝐴𝐴𝐸𝐸
𝑊𝑊𝐴𝐴𝐶𝐶𝐶𝐶 = 𝐴 (1 − 𝑇𝑇𝑏𝑏𝐸𝐸 𝑈𝑈𝑏𝑏𝐴𝐴𝐴𝐴) × 𝐶𝐶𝑐𝑐𝐴𝐴𝐴𝐴
𝑐𝑐𝑓𝑓 𝐴𝐴𝐴𝐴𝑏𝑏𝐴𝐴 + 𝐷𝐷𝐴𝐴𝑏𝑏𝐴𝐴 + 𝐸𝐸𝐸𝐸𝐴𝐴𝑏𝑏𝐴𝐴𝐸𝐸
𝐷𝐷𝐴𝐴𝑏𝑏
𝐴𝐴 +
𝐸𝐸𝐸𝐸𝐴𝐴
𝑏𝑏𝐴𝐴𝐸𝐸
× 𝐶𝐶𝑐𝑐𝐴𝐴𝐴𝐴 𝑐𝑐𝑓𝑓 𝐴𝐴𝐸𝐸𝐴𝐴𝑏𝑏𝐴𝐴𝐸𝐸 [8]

The cost of debt will vary if there is an expectation of market interest rates to change. This
may arise if the investor expects a change in inflation over the forecasted period. The changes
in inflation will reflect in the cost of debt since it is a nominal rate and used to discount nominal
80
earnings or cash flows. This can be done by altering the cost of debt to increase or decrease
over time to reflect expected changes in interest rates each year. The yield curve shows the
how the investors expect changes in the interests over a period of time can be used to scrutinize
whether the changing interest rate are important in the analysis. The cost of debt, in the WACC
calculation, must be expressed after tax because it net-of-tax cash flows that are being
discounted. Usually the interest rate in the market can be converted to after-tax basis by
multiplying it by one minus the corporate tax rate. The rate of equity and debt capital funding
may change over time, especially with relatively small growth companies. This is also related
to the change in the WACC indicator during the transformation of the company, so the analyst
can incorporate its estimate of the company's capital structure in the future into its model:
81
Growth rate (g)

An essential component of the vast majority of valuation models is the estimate of the rate of
future growth of the company's financial indicators. The analyst tries to predict the
development of sales, earnings, cash flows and other variables in order to place them in
valuation models to estimate the intrinsic value of the share.
The rate of growth can be determined using:
Based on retention ratio and the return on equity–Retention ratio is defined as the
percentage of earnings retained by the firm. The growth rate can be calculated using the
equation, g = b * ROE, where ROE is return on equity and “b” is the retention ratio. Thefirm
is not allowed to issue new shares, which would raise the equity and affect the formula.
Based on historical growth–Estimation of the average growth rate can vary depending upon
whether it is arithmetic average or geometric average. If a firm has volatile earnings, it gives
two different estimates. When year-to-year growth has been erratic, the geometric average
gives a more precise account of historical growth rate. Choosing a period beginning near the
bottom or top of the market cycle can produce distorted data regarding estimation of historical
growth rate. Negative earnings also distort the calculated value.
Based on analyst estimates of growth– The usual form of estimating growth rates is reliance
on the consensus of financial analysts presented by large news agencies (for example,
Bloomberg or Reuters). Analyst forecast of growth are better than using the historical growth
rate. Analyst incorporate the firm-specific information released publically since the last
earnings report into their valuation models. This news can leadto major reevaluation of the
expected cash flow of the firm. Macroeconomic information such as GNP growth, interest
rates and inflation affect the expected growth rate. Analyst can update their estimated based
on new information being released. They can also condition their growth estimates for a firm
based on the information revealed by
82
competitors. For example, a negative earnings report by one mobile service provider firmcan
lead to a reassessment of earnings of other mobile service providers. Analyst sometimes have
access to private information about the firm they follow, which could beuseful in forecasting
future growth. To curtail information leakage, the Securities and Exchange Commission (SEC)
issued new guidelines preventing firms to reveal information to selected analyst. However,
outside US, firms convey sensitive information to analyst tracking them.
In valuation models, the analyst has to make the choice of choosing the growth rate at the
terminal stage. The underlying limitation is that no company can grow faster than the growth
rate of the economy, rather there will be a tendency to choose a lower rate of growth. It is true
that over the long term, the nominal risk-free interest rate approaches the nominal rate of
growthof the economy (GDP). The simple rule for choosing the growth rate of a stable
company is therefore that it should not exceed the risk-free interest rate used in the model.
However, growth companies in the economy provide the extra growth, higher than the real
interest rates.29
Dividend Discount Model (DDM)
Dividend Discount Model is one of the first models for pricing stocks and was developed by
John B. Williams in 1931. It is still a widely applicable model and discounts the expected
future dividends by the required rate of return. The DDM model can account for uncertainty
by allowing Dt and k to be updated when expectations of a firm’s cash flows and the required
rate of return respectively, are changed. The formula for DDM is as follows:30
∞
𝐷𝐷𝐴𝐴
𝑉𝑉 = �
(1 + 𝑘𝑘)𝐴𝐴
𝐴𝐴=1
V = Value per share of equity

t = period
Dt = expected dividend per share in period t
k = discount rate
If the expected growth rate in dividends is constant, the above formula is called the Gordon
growth model:31
𝐷𝐷𝐴𝐴
𝑉𝑉 =
(𝑘𝑘𝐴𝐴 − 𝑤𝑤)
V = Value per share of equity in stable growthDt = expected dividend per share in period t ke
= cost of equity
g = expected growth rate in perpetuity
83
The DDM may give an inaccurate valuation of a firm and has some major weaknesses
pertainingto its practical application. The paramount problem being of the observed dividends
not directly related to value creation within the company and therefore to future dividends.
According to Miller and Modigliani (1961) presently, observed dividends are not
informative unless thedividend payout policy is connected to the value generation within the
company.32Penman (1992) describes this as the dividend conundrum: “price is based on future
dividends butobserved dividends do not tell us anything about price”. The missing connection
between value creation and value distribution leads to the difficulty in forecasting dividends,
as it is difficult to forecast payout ratios.33The practical application of DDMs in the present
scenario, is further complicated by share repurchases. Grullon and Michaley (2002) showed
that since mid-1980, large chunk of share repurchasing has been executed by many
corporations. Share repurchases transfer cash from firm to investors, which, in principal, is not
different from dividends. These reasons resulted in replacement of dividends as the relevant
cash flow to investors since the 1980’s with free cash flows.34
Discounted Cash Flow Models (DCFM)

The discounted cash flow model is the concept where the intrinsic value of the share is equal
to the present value of the expected cash flows generated by the company. In practice, two
methodsare widely used: Free cash flow to firm (FCFF) and Free cash flow to equity (FCFE).
The first is a cash-flow approach available to all capital providers, both creditors and
shareholders. The second limits discounted cash flows only to the shareholders of the firm.
These models are particularly useful when the company under review does not pay any
dividends or dividends paid out is less than the company’s capacity to pay dividends. In
applying this approach, the analyst looks at the company from the point of view of the majority
owner, who may decide to increase the dividends paid up to the level of free cash flows, to the
maximum sustainable level. Application of FCFE or FCFF should, in theory, use the same
assumptions to determine inputs to the model to provide the same estimates of company
internal values. Generally, if the capital structure of the company is comparatively stable, the
FCFE model appears to be more straightforward and simpler than using FCFF. Conversely,
using FCFF is easier if the analyst values a levered company with negative FCFE, or a levered
company with a changing capital structure. If the past financial data are used to forecast free
cash flow growth rates, FCFF growth may reflect underlying fundamentals more clearly than
FCFE growth, which reflects changing amounts of net borrowing. In addition, the
required
84
return on equity is more affected by the changes in financial leverage than that of WACC,
whichmakes the use of a constant discount rate is difficult to defend.35
Free Cash Flow to Firm (FCFF)
Free cash flow to the firm is the cash available to all investors holding claims against firm’s
resources. Claimholders include common stockholders, preferred stockholders and lenders.
The cash flow is calculated prior to the determination of sources of financing and, as such, is
not affected by the firm’s capital structure. An enterprise-specific FCFF is usually not found
in the financial statements and must be calculated using the following formula:36
𝐹𝐹𝐶𝐶𝐹𝐹𝐹𝐹 = 𝐸𝐸𝐵𝐵𝐸𝐸𝑇𝑇(1 − 𝑇𝑇𝑏𝑏𝐸𝐸 𝑈𝑈𝑏𝑏𝐴𝐴𝐴𝐴) + 𝐷𝐷𝐴𝐴𝑐𝑐𝑈𝑈𝐴𝐴𝑐𝑐𝑏𝑏𝑏𝑏𝐴𝐴𝑏𝑏𝑐𝑐𝑈𝑈 𝑏𝑏𝑈𝑈𝐴𝐴 𝐴𝐴𝑐𝑐𝑐𝑐𝑈𝑈𝐴𝐴𝑏𝑏𝐴𝐴𝑏𝑏𝐴𝐴𝑏𝑏𝑐𝑐𝑈𝑈
− 𝐺𝐺𝑈𝑈𝑐𝑐𝐴𝐴𝐴𝐴 𝐶𝐶𝑏𝑏𝑐𝑐𝑏𝑏𝐴𝐴𝑏𝑏𝑈𝑈 𝐸𝐸𝐸𝐸𝑐𝑐𝐴𝐴𝑈𝑈𝐴𝐴𝑏𝑏𝐴𝐴𝐴𝐴𝑈𝑈𝐴𝐴 − 𝛥𝛥 𝑁𝑁𝐴𝐴𝐴𝐴 𝑊𝑊𝑐𝑐𝑈𝑈𝑘𝑘𝑏𝑏𝑈𝑈𝑤𝑤 𝑐𝑐𝑏𝑏𝑐𝑐𝑏𝑏𝐴𝐴𝑏𝑏𝑈𝑈
The cash flow from operating and investment activities is included, but not from financing
activities. The tax rate is equivalent to marginal tax rate of the firm. Net working capital is the
current operating assets minus current operating liabilities. Current operating assets does not
include cash balances in excess of the amount required to meet normal operating expenses.
Depreciation and amortization are added to the operating income in calculating cash flow
because they are not actual cash expenses.
In the FCFF calculation, an appropriate tax rate must be selected. It can be either the firm’s
marginal rate (the rate paid on each additional dollar of income) or its effective tax rate (income
tax expense divided by pretax income). The marginal tax rate is generally more than the
effective tax rate because of depreciation charge to defer tax and use of tax credits to lower
the actual taxes paid. Post the exhaustion of ability to defer taxes and benefits of tax credits,
the effective rate can exceed the marginal tax rate in the future. In the early years of cash flow
projection, effective rates lower than the marginal rate may be used given the current
advantageous tax treatment is likely to continue. Eventually, the effective rate may climb till
the firm’s marginal tax rate. Thus, it is important to use the marginal tax rate in calculating
after-tax profits in perpetuity.37
The simplest approach to valuing a FCFF-based company is a stable growth FCFF model. Two
conditions must be met to use this model. First, growth rate used in the model must be less
than or equal to the economic growth rate. Second, the assumptions of stable growth and the
characteristics of the firm have to be consistent. This method is used to evaluate stable firms
where no significant changes in the economy can be expected. The assumptions affect the
sensitivity made about capital expenditures relative to depreciation. If the return on capital is
the basis for estimation of the reinvestment rate, changes in the return on capital impacts the
firm value significantly. If expected growth is not a function of the reinvestment rate, the
FCFF can
be increased (decreased) by deflating (inflating) capital expenditures relative to depreciation.
The stable growth model is given by:38
𝐹𝐹𝐶𝐶𝐹𝐹𝐹𝐹1
𝑉𝑉 =
𝑊𝑊𝐴𝐴𝐶𝐶𝐶𝐶 − 𝑤𝑤𝑈𝑈
85
V=Value of firm
FCFF1= Expected FCFF next year WACC= Weighted average cost of capitalgn = Growth rate
in the FCFF (forever)
Amore complex version of the stable growth formula is used when the firm reaches steady
state after n years and starts growing at a stable growth rate gn after that. It is as follows:
𝐴𝐴=𝑈𝑈
𝐹𝐹𝐶𝐶𝐹𝐹𝐹𝐹𝐴 𝐴 [𝐹𝐹𝐶𝐶𝐹𝐹𝐹𝐹𝑈𝑈+1 ⁄(𝑊𝑊𝐴𝐴𝐶𝐶𝐶 𝐶 − 𝑤𝑤𝑈 𝑈
)]
𝑉𝑉 = � +
(1 + 𝑊𝑊𝐴𝐴𝐶𝐶𝐶𝐶)𝐴𝐴 (1 + 𝑊𝑊𝐴𝐴𝐶𝐶𝐶𝐶)𝑈𝑈
𝐴𝐴=1
As mentioned already, this procedure will calculate the value of the company's operating
assets. However, equity investors are interested in the value of equity, which can be estimated
by adding assets that are not directly attributable to the operating activities of the enterprise
and deducting the company's non-equity claims on the company. Non-operating assets
typically include estimated value of minority interests in consolidated companies. Similarly, a
firm may have assets that are not used in operating activities, but which are of considerable
value (e.g. unused land, real estate, etc.). Items that should be deducted include liabilities to
creditors (interest-bearing debt). In addition, the present value of future lease payments (the
equivalent of debt) is often among the items deducted. If a company holds a majority stake in
a subsidiary (50% or more), it requires full consolidation of the subsidiaries’ assets and
earnings in the parentcompany. If these statements are the basis for the parent company's
valuation, then the estimatedvalue of the minority interest must be deducted subsequently for
an estimate of value of the parent company. In addition, the value of liabilities arising under
other potential claims against the firm including unfunded pension plans, medical insurance
obligations (they are not labeled thus excluded from cost of capital calculations) should be
deducted. If the company is embroiledin litigations that may lead to large payouts, the expected
liability from these lawsuits must be calculated and subtracted to arrive at the equity value. If
a company has issued preference shares, it is necessary to reflect this fact in order to estimate
the intrinsic value of ordinary sharesand deduct their market value from the quoted price of
the operating assets. After these adjustments, the analyst can estimate the internal equity value
of the company attributable to ordinary shareholders.39
86
Free Cash Flow to Equity (FCFE)
The FCFE does not represent a radical departure from the traditional dividend discount model.
Afree cash flow to equity is a model where rather than actual dividends potential dividends
are discounted. Using this model, discounting free cash flows to equity yields the value of
equity in business. The FCFE value can be calculated using FCFF as follows:40
𝐹𝐹𝐶𝐶𝐹𝐹𝐸𝐸
= 𝐹𝐹𝐶𝐶𝐹𝐹𝐹𝐹 − 𝑏𝑏𝑈𝑈𝐴𝐴𝐴𝐴𝑈𝑈𝐴𝐴𝐴𝐴𝐴𝐴 𝐴𝐴𝐸𝐸𝑐𝑐𝐴𝐴𝑈𝑈𝐴𝐴𝐴𝐴 (1 − 𝑇𝑇𝑏𝑏𝐸𝐸 𝑈𝑈𝑏𝑏𝐴𝐴𝐴𝐴) − 𝑃𝑃𝑈𝑈𝑏𝑏𝑈𝑈𝑐𝑐𝑏𝑏𝑐𝑐𝑏𝑏𝑈𝑈 𝑈𝑈𝐴𝐴𝑐𝑐𝑏𝑏𝐸𝐸𝑐𝑐𝐴𝐴𝑈𝑈𝐴𝐴𝐴𝐴 + 𝑁𝑁𝐴𝐴𝑤𝑤 𝐴𝐴𝐴𝐴𝑏𝑏𝐴𝐴 𝑏𝑏𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴
− 𝑃𝑃𝑈𝑈𝐴𝐴𝑓𝑓𝐴𝐴𝑈𝑈𝑈𝑈𝐴𝐴𝐴𝐴 𝐴𝐴𝑏𝑏𝑈𝑈𝑏𝑏𝐴𝐴𝐴𝐴𝑈𝑈𝐴𝐴𝐴𝐴
The model based on the free cash flows attributable to shareholders is a certain alternative to
dividend discount models for companies that do not pay a substantial portion of their dividend
profit. The difference between the values of the firm calculated using FCFE and DDM
measures the value of controlling dividend policy. Considering a case of a potential hostile
takeover, the bidder may control the firm and alter the dividend policy (to reflect FCFE), thus
garnering the higher FCFE value. The implicit assumption of the free cash flow to equity
model pertains to FCFE being paid to the stockholders and the remaining earnings are invested
only in operating assets. The FCFE model measures growth only in operating assets. The
simplest way to determine the intrinsic value of a firm growing at a stable growth rate can be
expressed using theformula:41
𝐹𝐹𝐶𝐶𝐹𝐹𝐹𝐹1
𝑉𝑉 =
(𝑊𝑊𝐴𝐴𝐶𝐶𝐶𝐶 − 𝑤𝑤𝑈𝑈 )
V = Value of firm
FCFF1 = Expected FCFF next year WACC = Weighted average cost of capitalgn = Growth
rate in the FCFF forever
The caveats of using this formula is that the growth rate specified in the models has to be
smaller or equal to the economic growth rate (nominal growth, if the cost of capital is
nominalor real growth, if the cost of capital is real). In addition, the assumptions of stable
growth should be consistent with the characteristics of the firm. The above model is the
simplest way to determine the intrinsic value of a stable firm based on FCFE model. In
comparison of asimplistic model to value a firm with stable growth, a more complex version
with a transition growth phase is described formerly to the aforementioned formula.42
87
Relative valuation
The most accurate and flexible method for valuing companies is the discounted cash flow
analysis. The accuracy of DCFM model is dependent upon the forecasts it relies on.
Misjudgments in estimation of key performance parameters of corporate value such as
company’s return on invested capital (ROIC), growth rate and WACC can lead to errors in
valuation. Relative valuation- comparing a company’s valuation multiples against the
comparable companies
Relative valuation is an approach used by analysts to value stocks, mainly due to its simplicity.
As the name suggests, companies are compared to each other based on valuation multiples of
certain parameters, such as profit, sales, book value, or cash flow. This is a fairly simple and
quick procedure in which the analyst compares the specific parameters of the firm being
evaluated relative to similar companies or industry averages. Importantly, companies with
different sizes can also be compared with relative valuation. With the help of financial data
providers (Bloomberg, Reuters, Morningstar, etc.), the investor are able to quickly assess
whether or not a given share price is understated or overestimated in comparison with its
competitors, thereby it is widely in investment community. However, there are reasons for
differences in valuation, which will be described in detail in the other section of this thesis.
TheP / E and EV / EBITDA indicators are introduced in the following text.
P/E
In investment practice, the most pervasive valuation multiplier is the P / E ratio, the share price
/ earnings per share ratio. It simply indicates the dollar amount an investor can expect to invest
in a company to receive that company’s earnings equivalent to one dollar. It can be calculated
by the following formula:43
𝑃𝑃 Market value per share
=
𝐸𝐸 𝐸𝐸𝑏𝑏𝑈𝑈𝑈𝑈𝑏𝑏𝑈𝑈𝑤𝑤𝐴𝐴 𝑐𝑐𝐴𝐴𝑈𝑈 𝐴𝐴ℎ𝑏𝑏𝑈𝑈𝐴𝐴
The P / E mirrors the market expectation about a company’s growth prospect. Analyst must
reach a conclusion about the implied expectations by the market multiple, whether the market
isovervaluing or undervaluing the firm. Recall that, the constant-growth DDM formula, where
dividends represent the earnings that are not reinvested in the firm: D1 = E1(1 – b), and growth
rates given by𝑤𝑤 = 𝑅𝑅𝑂𝑂𝐸𝐸×𝑏𝑏.These formulas are substituted in the constant-growth model to
arrive at more precise market expectations, as shown below:44
𝑃𝑃𝑂𝑂 1 − 𝑏𝑏
=
𝐸𝐸1 𝑘𝑘 − (𝑅𝑅𝑂𝑂𝐸𝐸 × 𝑏𝑏)
PO = current price of the stock
E1 = next year earnings
88
ROE = return on equity

b = retention ratio
k = required rate of return
The above formula implies that the P / E ratio is directly proportional to ROE, P / E increases
with ROE. With high ROE, the company has solid prospects of future growth. The indicator
alsoincreases with the increasing retention ratio, assuming that the ROE is higher than the
required rate of return. Therefore, if a company exploits good investment opportunities by
plowing back more earnings into those opportunities, the market will grant it with a higher P
/ E multiple. However, if ROE is below the required rate of return, investors prefer receiving
earnings as dividends rather than investing into low-yield projects.
The P / E ratio the following alternative definitions:45
Trailing P / E–It can be referred as current P / E and is calculated by ratio of current market
share and earnings per share for the last four quarters. For companies facing dilution of
shareholdings through the issue of new shares(executive stock options, equity warrants and
convertible bonds exercised to obtain common stock)it appears more conservative to use
diluted EPS per share instead of the basic earnings per share. Earnings per share are also
adjusted for nonrecurring items such as asset impairments, discontinued operation and the
disposal of a portion of a business segment and extraordinary items, and so on, for analytical
purposes, as the analyst focuses on profits that can be consistently expected in the future. For
these purposes, it is possible to use cautiously the companies presenting adjusted earnings per
share (adjusted EPS).
Forward P / E–It can also be called as leading P / E or prospective P / E. It is calculated as
the ratio of the stock’s current market price and the next years expected earnings. The expected
earnings per share are based on the analytical consensus, with variants based onthe expected
EPS for the following four quarters, the next 12 months or the next fiscal year.
Normalized P / E– Due to the business-cycle influences, net profit for the last four quarter
may not correspond to the average or long-term ability of an enterprise to generate, especially
for the cyclically sensitive sectors such as automotive and steel manufacturers. The trailing
EPS for such companies is often unusually high at the crest of the cycle, and depressed or
negative at the trough of a cycle. Thus, the analyst tries to normalize the EPS by estimating
the EPS that the business could be expected to sustain corresponding to the middle of the
economic cycle. This can be done by two methods— the method of historical average EPS,
in which the average EPS over the most recent full economic cycle is calculated and the
method of average return on equity, in which the normalized EPS is calculated as the ROE
from the latest full economic cycle
The most common use of the P / E ratio is to estimate the current multiple of the company’s
89
stock and the multiples of comparable companies or the peer group. The average or median
value of the P / E for the company’s peer group is then compared to the company's valuation,
with the analyst taking into account the company specifics (as expected growth and risk),
including historical premium or historical discount compared to competing companies.46
The comparisons of P / E multiple across time has its pitfalls. The usual practice of calling a
market to be over or undervalued based on comparison of recent to past P / E ratios will lead
to unscrupulous judgments when the interest rates are lower or higher than the historical
norms.The relative valuations have short lifespan as a stock may look cheap today relative to
peer companies today but a drastic shift in assessment can happen over the next few months47.
It is well understood that companies in the same industry can have ghastly different expected
growth rates, capital structures and return on invested capital. This fact is overlooked by using
the peer group average. The P / E ratio commingles operating and non-operating items, thus
can exhibit flaws when comparing companies with identical prospects. In contrast, a well-
formulated forward-looking multiples analysis can provide insights about a firm and its
competitors.
EV / EBITDA
The EV / EBITDA is the most used enterprise value multiple and is a firm value multiple.
EBITDA is a flow to both debt & equity and enterprise value (EV) is the total company’s value
(the market value of debt, equity and preference shares). Therefore, EV / EBITDA is a
valuationindicator for the overall company not limited only to its common stock. Enterprise
Value (EV) isthe total value of the company and is taken as the theoretical price to which the
eventual buyer would have taken over the entire business. It can be expressed as:4950
𝐸𝐸𝑉𝑉⁄𝐸𝐸𝐵𝐵𝐸𝐸𝑇𝑇𝐷𝐷𝐴𝐴
(𝑀𝑀𝑏𝑏𝑈𝑈𝑘𝑘𝐴𝐴𝐴𝐴 𝑈𝑈𝑏𝑏𝑈𝑈𝐴𝐴𝐴𝐴 𝑐𝑐𝑓𝑓 𝐴𝐴𝐸𝐸𝐴𝐴𝑏𝑏𝐴𝐴𝐸𝐸 + 𝑀𝑀𝑏𝑏𝑈𝑈𝑘𝑘𝐴𝐴𝐴𝐴 𝑈𝑈𝑏𝑏𝑈𝑈𝐴𝐴𝐴𝐴 𝑐𝑐𝑓𝑓 𝐴𝐴𝐴𝐴𝑏𝑏𝐴𝐴 − 𝐶𝐶𝑏𝑏𝐴𝐴ℎ)
=
𝐸𝐸𝑏𝑏𝑈𝑈𝑈𝑈𝑏𝑏𝑈𝑈𝑤𝑤𝐴𝐴 𝑏𝑏𝐴𝐴𝑓𝑓𝑐𝑐𝑈𝑈𝐴𝐴 𝑏𝑏𝑈𝑈𝐴𝐴𝐴𝐴𝑈𝑈𝐴𝐴𝐴𝐴𝐴𝐴, 𝐴𝐴𝑏𝑏𝐸𝐸𝐴𝐴𝐴𝐴, 𝐴𝐴𝐴𝐴𝑐𝑐𝑈𝑈𝐴𝐴𝑐𝑐𝑏𝑏𝑏𝑏𝐴𝐴𝑏𝑏𝑐𝑐𝑈𝑈, 𝑏𝑏𝑈𝑈𝐴𝐴 𝑏𝑏𝑐𝑐𝑐𝑐𝑈𝑈𝐴𝐴𝑏𝑏𝐴𝐴𝑏𝑏𝐴𝐴𝑏𝑏𝑐𝑐𝑈𝑈 𝑐𝑐𝑓𝑓 𝐴𝐴ℎ𝐴𝐴
𝑓𝑓𝑏𝑏𝑈𝑈𝑐𝑐
The EV / EBITDA is the most used enterprise value multiple. Therefore, the enterprise value
is calculated as the sum of the market value of the equity (market capitalization), market value
of preferred stock (if any) and the market value of the company's debt, deducing subsequently
the
90
value of the cash and investment. Analyst offer the following reason for using EV / EBITDA
• Analyst argue in favor of EV / EBITDA against P / E for comparing companies with different
debt, because EBITDA is calculated pre-interest in contrast to EPS, which is post interest.
• Depreciation and amortization are added back in EBITDA and thus controls for differences in
depreciation and amortization among businesses, contrary to net income, which is after-
depreciation and after-amortization. Thus, EV / EBITDA is used in the valuation of capital-
intensive businesses.
• When EPS is negative, EBITDA is frequently positive.
For all the above-mentioned reasons, this multiple is particularly favored for firms in sectors
that require large investments in infrastructure with large gestation periods. Companies
operating in telecom, airport or toll road construction are few examples.
Kim & Ritter (1998)used different multiples for the matching companies in the valuation of
IPO companies. The valuation multiples used in their study were P/ E, EV / EBITDA, price to
sales, market value to book value and enterprise value to sales. According to their study, they
found that at all of these multiples yield positively biased estimates but that the EBITDA
multiple results in the most precise valuation, especially for the more established IPO
companies. They also inferred that valuations are precise when forecasted earnings rather than
historical earnings are used and when the comparable companies or peer group are selected by
a specialist research firm rather than computer algorithm.53
To analyze EV / EBITDA multiples, the free cash flow to the firm in terms of EBITDA can
be expressed as:54
𝐹𝐹𝐶𝐶𝐹𝐹𝐹𝐹 = 𝐸𝐸𝐵𝐵𝐸𝐸𝑇𝑇𝐷𝐷𝐴𝐴 × (1 − 𝐴𝐴) + 𝐷𝐷𝐴𝐴𝑐𝑐𝑈𝑈𝐴𝐴𝑐𝑐𝑏𝑏𝑏𝑏𝐴𝐴𝑏𝑏𝑐𝑐𝑈𝑈(𝐴𝐴) − 𝐶𝐶𝑏𝑏𝑐𝑐𝐴𝐴𝐸𝐸
− 𝐶𝐶ℎ𝑏𝑏𝑈𝑈𝑤𝑤𝐴𝐴 𝑏𝑏𝑈𝑈 𝑤𝑤𝑐𝑐𝑈𝑈𝑘𝑘𝑏𝑏𝑈𝑈𝑤𝑤 𝑐𝑐𝑏𝑏𝑐𝑐𝑏𝑏𝐴𝐴𝑏𝑏𝑈𝑈
Substituting this equation with inputs for the next year into the stable growth firm valuation
model:
𝐸𝐸𝐵𝐵𝐸𝐸𝑇𝑇𝐷𝐷𝐴𝐴1 × (1 − 𝐴𝐴) + 𝐷𝐷𝐴𝐴𝑐𝑐𝑈𝑈𝐴𝐴𝑐𝑐𝑏𝑏𝑏𝑏𝐴𝐴𝑏𝑏𝑐𝑐𝑈𝑈1 (𝐴𝐴) − 𝐶𝐶𝑏𝑏𝑐𝑐𝐴𝐴𝐸𝐸1 − 𝐶𝐶ℎ𝑏𝑏𝑈𝑈𝑤𝑤𝐴𝐴 𝑏𝑏𝑈𝑈 𝑊𝑊𝐶𝐶1
𝐸𝐸𝑉𝑉 =
𝑊𝑊𝐴𝐴𝐶𝐶𝐶𝐶 − 𝑤𝑤
91
Dividing the equation by EBITDA yields the determinants of the multiple:

𝐷𝐷𝐴𝐴𝑐𝑐𝑈𝑈𝐴𝐴𝑐𝑐𝑏𝑏𝑏𝑏𝐴𝐴𝑏𝑏𝑐𝑐𝑈 𝑈 1 (𝐴𝐴)− 𝐶𝐶𝑏𝑏𝑐𝑐𝐴𝐴𝐸 𝐸 1 −𝐶𝐶ℎ𝑏𝑏𝑈𝑈𝑤𝑤𝐴 𝐴 𝑏𝑏𝑈 𝑈 𝑊𝑊𝐶𝐶1
𝐸𝐸𝑉𝑉 (1 − 𝐴𝐴) + � �
𝐸𝐸𝐵𝐵𝐸𝐸𝑇𝑇𝐷𝐷𝐴𝐴 1
=
𝐸𝐸𝐵𝐵𝐸𝐸𝑇𝑇𝐷𝐷𝐴𝐴1 𝑊𝑊𝐴𝐴𝐶𝐶𝐶𝐶 − 𝑤𝑤
For simplification and better clarity, we can consolidate the reinvestment terms as the sum of
capital expenditures and changes in working capital, from which we then subtract depreciation:
𝑅𝑅𝐴𝐴𝑏𝑏𝑈𝑈𝑈𝑈𝐴𝐴𝐴𝐴𝐴𝐴𝑐𝑐𝐴𝐴𝑈𝑈𝐴𝐴 𝐷𝐷𝐴𝐴𝑐𝑐𝑈𝑈𝐴𝐴𝑐𝑐𝑏𝑏𝑏𝑏𝐴𝐴𝑏𝑏𝑐𝑐𝑈𝑈
×(1−𝐴𝐴)
𝐸𝐸𝑉𝑉 (1 − 𝐴𝐴) − −
𝐸𝐸𝐵𝐵𝐸𝐸𝑇𝑇𝐷𝐷𝐴𝐴 1 𝐸𝐸𝐵𝐵𝐸𝐸𝑇𝑇𝐷𝐷𝐴 𝐴
=
𝐸𝐸𝐵𝐵𝐸𝐸𝑇𝑇𝐷𝐷𝐴𝐴 𝑊𝑊𝐴𝐴𝐶𝐶𝐶𝐶 − 𝑤𝑤
It shows that that companies with higher growth rates, lower cost of capital, higher return on
capital (which lowers reinvestment) will achieve higher EV / EBITDA multiples. Firms with
significant depreciation charges should trade at lower multiple of EBITDA rather than similar
firms (in terms of growth, reinvestment, and cost of capital) without this depreciation. At the
same time, the tax rate applied to the company's income is influenced by the earnings multiple,
with higher tax rates amounting to lower multiple of pre-tax earnings. Consequently,
companies incorporated and trading in higher-tax territories may trade at lower multiple of
EBITDA than companies in lower-tax territories.55
Intrinsic vs. Relative Value

Generally, intrinsic and relative valuation will yield different estimates of the value of the same
firm in the same period. It is even possible for one approach to generate the result that the
stock is overvalued while the other shows that it is undervalued. In the early 2000, prior to dot-
com bubble burst, the discounted cash flow valuation of Amazon.com suggested that it was
significantly overvalued, whereas valuing the company relative to other internet companies
atthe same time yielded the opposite conclusion. Even within relative valuation, the results
can differ depending upon which multiple is used and what firms the relative valuation is
based. Thedifference between the values calculated by FCFF and relative valuation appear due
to different views of market efficiency or inefficiency. When calculating the share price using
FCFF, we assume that markets make mistakes, that they correct these mistakes over time, and
that these mistakes can often occur across entire sectors or even the entire market. In relative
valuation, weassume that while markets make mistake on individual stocks, they are correct
on average. Thus,a stock may be overvalued on a discounted cash flow basis but undervalued
on a relative basis,if the firms used for comparison in the relative valuation are all overpriced
by the market. The reverse would occur if an entire sector or market were underpriced.56
92
CHAPTER 5: COMPANY ANALYSIS
93
1. Maruti Suzuki India Ltd.
Maruti Suzuki India Limited, formerly known as

Maruti Udyog Limited, is
an Indian automobile manufacturer, based in New
Delhi. It was founded in 2001 and owned by
the Government of India until 2003, when it was sold
to the Japanese automaker Suzuki Motor Corporation.
As of September 2021 Maruti Suzuki has a market
share of 49 percent in the Indian
passenger car market. From the day the iconic Maruti 800 was launched in 1983, the company
has been spearheading a revolution of change. Turning an entire country’s need for driving, into
its love for driving.
However, tastes and demands keep on evolving with each new generation of Indians. This has not
been looked at by Maruti Suzuki as a challenge, but as an inspiration to go beyond traditional
boundaries of car-making. Infusing design and technology is one such step it has taken to make
its cars meet new age expectations smoothly.
Today, Maruti Suzuki has its eyes set firmly on the possibilities of tomorrow. And everybody is
invited on this journey.
Key Financials
Peer to Peer Comparison
S Ratios Maruti M&M Hindustan

r Suzuki Motors
N
o
1 CMP Rs. 8250 900.25 13.83
2 P/E 59.34 26.05 848.76
3 Mar Cap 249215.96 111918. 288.55

Rs.Cr. 42
4 Div Yld % 0.56 0.99 0
5 NP Qtr Rs.Cr. 486.9 1928.64 10.14
6 Qtr Profit Var -65.7 276.02 -205

%
7 Sales Qtr 20550.9 21469.8 0

Rs.Cr.
8 Qtr Sales Var 9.57 11.67 -100

94
9 Earnings Yield 2.16 6.28 0.95

%
95
Share Holdings
2.45 0.79
4.18
1.01
0.81
20.56
2.79
14.84 10.52
20.98
Mar '17
30 27.22
25
20.17
20
15.21
15
11.39 10.8
10
Operating Profit Gross Profit Net Profit Return On Return On Net

Margin(%) Margin(%) Margin(%) Capital Worth(%)
Employed(%)
25
20.25
20 18.51
16.24
15
11.48
10 8.36
2017 2018 2019 2020 2021
96
2. 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, construction equipment.
Formerly known as Tata Engineering and Locomotive Company (TELCO), the company was
founded in 1945 as a manufacturer of locomotives. The company manufactured its first commercial
vehicle in 1954 in a collaboration with Daimler-Benz AG, which ended in 1969. Tata Motors
entered the passenger vehicle market in 1988 with the launch of the Tata
Mobile followed by the Tata Sierra in 1991, becoming the first Indian manufacturer to achieve
the capability of developing a competitive indigenous automobile. In 1998, Tata launched the
first fully indigenous Indian passenger car, the Indica, and in 2008 launched
the Tata Nano, the world's most affordable car. Tata Motors acquired the South Korean truck
manufacturer Daewoo Commercial Vehicles Company in 2004. Tata Motors has been the parent
company of Jaguar Land Rover since the company established it for the acquisition
of Jaguar Cars and Land Rover from Ford in 2008.
Vision
By FY 2024, we will become the most aspirational Indian auto brand, consistently winning, by
• Delivering superior financial returns
• Driving sustainable mobility solutions
• Exceeding customer expectations, and
• Creating a highly engaged work force
Mission
We innovate mobility solutions with passion to enhance the quality of life
97
Key Financial
Peer to Peer Comparison
Tata
T Ash M Olectr F S
Nam a ok ot a o M
e t Leyl or Green r L
a and s- tec c I
M D e S
o V M U
t R o Z
o t U
r o
s r
s
CMP 525 139 265.1 809.7 13 6

Rs. .3 39. 7
05 8
Mar
Cap 187 408 13480 6646. 17 9
Rs.Cr 926. 91. .45 08 64. 8
. 09 82 88 1
.
0
7
Div 0 0.4 0 0 0.3 0

Yld 3 8
%
NP
Qtr - - 2906. 3.6 3.7 -
Rs.Cr 444 103 45 3 2
. 1.57 .43 9
.
1
1
Qtr
Profit - 15. 921.5 - 1
Var 131 88 7 77. 6
% 2.49 09 .
1
6
Sales
Qtr 613 556 75653 71.43 93 2
98
Rs.Cr 78.8 2.4 .79 7.6 3

. 2 7 4 2
.
7
Qt
r 14.6 44. 42.18 35. 9
Sa 6 37 01 3
les .
Va 1
9
r
%
ROC 5.82 5.6 6.6 2.5 - -

E% 2 4.7 2
5 0
.
2
8
Debt 3.33 3.3 2.19 0.02 0.4 1

/ Eq 6 5 .
8
1
ROE - - -22.74 1.13 - -

% 22.9 2.1 4.6 4
1 7 1
.
7
4
Ea
rni 4.4 3.0 13.02 0.51 - -
ng 1 2.2 6
s 3 .
Yi 7
el 7
d
%
99
350000
294619 301938
300000 269692 261067
249794
250000
200000
150000
100000
50000
2017 2018 2019 2020 2021
Share Holdings
26.80%
46.41%
13.45%
13.35%
Promoter FII DII Public
ROE
20
12.83
9.41
10
2017 2018 2019 2020 2021

-10
-20
-19.13
-30 -24.34
-40
-50
-47.9
-60
100
CHAPTER 6: RATIO ANALYSIS
101
TATA MOTORS
Ratios Mar-17 Mar-18 Mar-19 Mar-20 Mar-21
Gross Profit Margin (%) -3.21 0.35 2.66 -9.16 -4.65
Net Profit Margin (%) -5.48 -1.75 2.91 -16.59 -5.09
Adjusted Net Profit Margin (%) -5.36 -1.71 2.81 -16.08 -5

Return On Capital Employed (%)
-1.11 4.84 11.07 -6.72 -3.54
Return On Net Worth (%) -11.48 -5.13 9.11 -41.6 -12.57
Return on Long Term Funds (%) -1.27 5.29 12.18 -8.18 -3.8
Current Ratio 0.53 0.57 0.54 0.46 0.56
Quick Ratio 0.42 0.44 0.51 0.53 0.49
Debt Equity Ratio 0.89 0.81 0.79 1.19 0.99
Long Term Debt Equity Ratio 0.65 0.65 0.63 0.84 0.86
Interest Cover -0.28 1.01 2.45 -1.34 -0.57
Total Debt to Owners Fund 0.89 0.81 0.79 1.19 0.99

Financial Charges Coverage Ratio
1.65 2.79 4.18 0.37 0.99
Inventory Turnover Ratio 8.83 10.52 14.84 11.46 10.33
Debtors Turnover Ratio 21.24 20.98 20.56 16.8 23.14
Investments Turnover Ratio 8.83 10.52 1.74 1.14 1.24
Fixed Assets Turnover Ratio 1.3 1.65 1.86 1.07 1.12
Total Assets Turnover Ratio 1.19 1.78 1.94 1.31 1.5
Asset Turnover Ratio 1.14 1.54 1.82 1.11 1.22
102
MARUTI SUZUKI INDIA
Mar Mar Mar Mar Mar

RATIOS '17 '18 '19 '20 '21
Operating Profit Margin (%) 15.21 15.12 12.78 9.65 7.6
Gross Profit Margin (%) 11.39 11.66 9.27 4.99 3.28
Net Profit Margin (%) 10.8 9.68 8.71 7.47 6.01
Return On Capital Employed (%) 27.22 27.1 22.77 14.82 10.14
Return On Net Worth (%) 20.17 18.49 16.25 11.66 8.23
Return on Long Term Funds (%) 27.58 27.17 22.84 14.85 10.24
Current Ratio 0.55 0.49 0.56 0.63 0.62
Quick Ratio 0.35 0.31 0.37 0.41 0.48
Debt Equity Ratio 0.01 -- -- -- 0.01
Interest Cover 112.41 32.83 139.07 54.16 52.18
Total Debt to Owners Fund 0.01 0 0 0 0.01
Inventory Turnover Ratio 23.69 25.94 25.87 23.52 23.06
Debtors Turnover Ratio 53.97 59.95 45.61 35.29 43.26
Investments Turnover Ratio 23.69 25.94 1.86 1.56 1.36
Fixed Assets Turnover Ratio 3.76 3.84 3.38 2.63 2.31
Total Assets Turnover Ratio 1.86 1.92 1.88 1.57 1.36
Asset Turnover Ratio 2.03 2.02 1.95 1.59 1.4
103
Interpretation
Growth Ratios
Higher is better, but also look for long term stability and consistency
Lower is better, but compare with sales growth. Growth higher than sales growth suggests
weakening pricing power and pressure on margins
Higher is better, but also look for long term stability and consistency Higher is better, but also look
for long term stability and consistency
Margin Ratios
Higher is better, but also look for long term stability and consistency, plus the nature of the
industry. Also compare with industry peer(s)
Gross margin
This shows profitability or mark-up on goods sold Operating margin Operating Margin indicates
the profitability of a company before the cost of financing, tax and other miscellaneous and
Income Pre-tax margin This is calculated to determine the rate earned on sales after the cost of
financing but before tax
Net Profit Margin
The net profit margin indicates rate of earnings a company makes after tax on sales
Efficiency Ratios
Inventory turnover
This measures the times stocks have turned over in a year or the number of days stocks are held
A support sales This enables one to check whether the com pany holds excessive stock
Lower/reducing is better. Compare with industry peer(s)
Debtor days
This ratio represents the length of time a company must wait after making a sale before it actually
receives cash from its customers. This ratio is important in assessing the effective ness of the
credit administration of the company Higher/rising is better. Compare with industry peer(s)
Profitability Ratios
Profitability ratios indicate a company's profitability in relation to other companies within the
industry or previous years and show the management's effectiveness as shown return s generated
on sales and investments
Return on equity
This measures whether the return on shareholders investments is better than other alternatives
available. 28 Return on total invested Capital this ratio enables one to examine whether the
104
return earned is in excess of that earned elsewhere. Invested capital includes shareholders'
funds and loans
Debt ratios
Debt service capacity ratios are calculated to check whether company can service itsdebts
i.e. generate enough profit be able to pay the interest and principal repayment on inrgiven:
Debt coverage ratio
This ratio indicates the period it would take for a company to pay its short and long term debt from
internally generated funds or profits Interest coverage Interest coverage ratio measures whether a
company has adequate profits to meet the interest payments on its obligations
Cash Flow
Look for positive and rising number. If the company consistently generates negative FCF over
say 10 years, avoid it
The higher the percentage, the better as it shows how profitable the company is. Check for OCF
growing in line with sales over time. Large deviations may be a sign of weakness and
inconsistency
Higher is better. Show how well the company uses its assets to generate operating cash flow
Higher, and more than 100%, is better. Shows the ability of the company to use its operating cash
flows to pay off its debt indicates the company's ability to make interest payments on its entire
debt.
A highly leveraged company will have a low multiple, and a company with a strong balance sheet
will have a high multiple.
For the Two Companies
1. Operating Profit Margin (%) – It is decreasing for Maruti Suzuki and it is negative for the Tata
Motors that means it is a loss making company
2. Net Profit Margin (%) – It is decreasing over the years for Maruti Suzuki fallen from 10.8-6.01,
while for Tata Motors it is a loss making company it also has a negative net profit margin
3. Current Ratio – It is constant for the Tata motors while it is decreasing for the Maruti Suzuki and
the value is less than 1 that means the current asset of both the companies is less than current
liabilities
4. Debt Equity Ratio – It is increasing for the Tata motors and almost constant at a value of 1 that
means the debt and equity value are almost same
5. Inventory Turnover Ratio – It is constant for the Maruti Suzuki at a value of 25, while for Tata
Motors it is around 10 which means Maruti Suzuki is better at managing the inventory
105
CHAPTER 7: TECHNICAL ANALYSIS
106
Introduction
Technical analysis is a trading discipline employed to evaluate investments and identify trading
opportunities by analyzing statistical trends gathered from trading activity, such as price
movement and volume.
Unlike fundamental analysis, which attempts to evaluate a security's value based on business
results such as sales and earnings, technical analysis focuses on the study of price and volume.
Technical analysis tools are used to scrutinize the ways supply and demand for a security will
affect changes in price, volume, and implied volatility.
Technical analysis is often used to generate short-term trading signals from various charting
tools, but can also help improve the evaluation of a security's strength or weakness relative to the
broader market or one of its sectors. This information helps analysts improve their overall
valuation estimate.
Technical analysis can be used on any security with historical trading data. This includes stocks,
futures, commodities, fixed-income, currencies, and other securities. In this tutorial, we’ll usually
analyze stocks in our examples, but keep in mind that these concepts can be applied to any type
of security. In fact, technical analysis is far more prevalent in commodities and forex markets
where traders focus on short-term price movements.
Technical analysis as we know it today was first introduced by Charles Dow and the Dow Theory
in the late 1800s.1 Several noteworthy researchers including William P. Hamilton, Robert Rhea,
Edson Gould, and John Magee further contributed to Dow Theory concepts helping to form its
basis. Nowadays technical analysis has evolved to include hundreds of patterns and signals
developed through years of research.
Technical analysis operates from the assumption that past trading activity and price changes of a
security can be valuable indicators of the security's future price movements when paired with
appropriate investing or trading rules. Professional analysts often use technical analysis in
conjunction with other forms of research. Retail traders may make decisions based solely on the
price charts of a security and similar statistics, but practicing equity analysts rarely limit their
research to fundamental or technical analysis alone.
Among professional analysts, the CMT Association supports the largest collection of chartered or
certified analysts using technical analysis professionally around the world. The association's
Chartered Market Technician (CMT) designation can be obtained after three levels of exams that
cover both a broad and deep look at technical analysis tools. The association now waives Level
1 of the CMT exam for those who are Certified Financial Analyst (CFA) charterholders. This
demonstrates how well the two disciplines reinforce each other.2
Technical analysis attempts to forecast the price movement of virtually any tradable instrument
that is generally subject to forces of supply and demand, including stocks, bonds, futures, and
currency pairs. In fact, some view technical analysis as simply the study of supply and demand
forces as reflected in the market price movements of a security. Technical analysis most
107
commonly applies to price changes, but some analysts track numbers other than just price, such as
trading volume or open interest figures.
Across the industry, there are hundreds of patterns and signals that have been developed by
researchers to support technical analysis trading. Technical analysts have also developed
numerous types of trading systems to help them forecast and trade on price movements. Some
indicators are focused primarily on identifying the current market trend, including support and
resistance areas, while others are focused on determining the strength of a trend and the
likelihood of its continuation. Commonly used technical indicators and charting patterns include
trendlines, channels, moving averages, and momentum indicators.
Characteristics:
Technical analysis employs models and trading rules based on price and volume transformations,
such as the relative strength index, moving averages, regressions, inter- market and intra-market
price correlations, business cycles, stock market cycles or, classically, through recognition of
chart patterns.
Technical analysis stands in contrast to the fundamental analysis approach to security and stock
analysis. In the fundamental equation M = P/E technical analysis is the examination of M
(multiple). Multiple encompasses the psychology generally abounding, i.e. the extent of
willingness to buy/sell. Also in M is the ability to pay as, for instance, a spent-out bull can't make
the market go higher and a well-heeled bear won't. Technical analysis analyzes price, volume,
psychology, money flow, and other market information, whereas fundamental analysis looks at
the facts of the company, market, currency, or commodity. Most large brokerages, trading
groups, or financial institutions will typically have both a technical analysis and fundamental
analysis team.
In the 1960s and 1970s, it was widely dismissed by academics. In a 2007 review, Irwin and Park
reported that 56 of 95 modern studies found that it produces positive results but noted that many
of the positive results were rendered dubious by issues such as data snooping, so that the evidence
in support of technical analysis was inconclusive; it is still considered by many academics to be
indistinguishable from pseudoscience. Academics such as Eugene Fama say the evidence for
technical analysis is sparse and is inconsistent with the weak form of the efficient-market
hypothesis. Users hold that even if technical analysis cannot predict the future, it helps to identify
trends, tendencies, and trading opportunities.
While some isolated studies have indicated that technical trading rules might lead to consistent
returns in the period prior to 1987, most academic work has focused on the nature of the
anomalous position of the foreign exchange market. It is speculated that this anomaly is due to
central bank intervention, which obviously technical analysis is not designed to predict.
In general, technical analysts look at the following broad types of indicators:
• Price trends (Price Action)

• Chart patterns
• Volume and momentum indicators
• Oscillators
• Moving averages
• Support and resistance levels
108
Benefits of Technical Analysis:
• Technical analysis focuses on price movement.

• Trends are easily found.
• Patterns are easily identified.
• Charting is quick and inexpensive.
• Charts provide a wealth of information.
Basic Patterns Support
& Resistance:
Areas of congestion or previous lows below the current price mark support levels. A break below
support would be considered bearish. Areas of congestion and previous highs above the current
price mark the resistance levels. A break above resistance would be considered bullish.
Upward & Downward trend:
Upward trend signifies when demand is greater than supply resulting in increase in prices.
An uptrend line has a positive slope and is formed by connecting two of more low points.
The second low must be higher than the first for the line to have a positive slope.
Downward trend signifies when supply exceeds the demand resulting in decreasein prices.
A down trend line has a negative slope and is formed by connecting two or more high
points. The second high must be lower than the first for the line to have a negative slope.
109
Sideways:
A sideways market or sideways drift occurs where the price of a security trades within
a range without forming any distinct trends. Price action oscillates in a horizontal range
or channel, with neither the bulls or bears taking control of prices.
Moving Average:
Themoving average(MA) is a simpletechnicalanalysistoolthatsmooth’soutpricedata by
creating a constantly updated average price. The average is taken over a specific period of
time, like 10 days, 20 minutes, 30 weeks or any time period the trader chooses.
110
111
CHAPTER 8: CONCLUSION
112
The performance and health of stock exchange is solely dependent on the behaviour and pattern
of investments by the investor. Every investor wants high return at low risk and they buy and sell
on the basis of their perception causing stock market taking random walk. The capital market goes
through brisk changes, investors should look for right opportunities keeping in tune with the
dynamics of market environment.
Sustainability is becoming more important to the industry. Today, more people and companies
are focused on making sure suppliers are paid fairly, practices are sustainable and carbon
footprints are kept small.
Analysing the stock prices for more than two months shows a rally drastically as the whole stock
market was going through a turmoil due to the novel Corona virus which had an adverse impact
on the Indian stock markets as well.
113
CHAPTER 9: BIBLIOGRAPHY
114
https://www.screener.in/
https://www.moneycontrol.com/
https://economictimes.indiatimes.com/
https://www.bseindia.com/sensex/code/16/
https://www.tatamotors.com/
https://www.marutisuzuki.com/
115
A study on farmers Suicide in India
SOCIAL RELEVANCE PROJECT
116
DECLARATION
I hereby declare that this project report submitted by me to the partial fulfillment of
the requirement for the award of MASTER OF MANAGEMENT STUDIES
(MMS) of the University of Mumbai is a bonafide work undertaken by me and it has
not been submitted to any other University or institution for the award of any other
degree or diploma certificate or published any time before.
Roll No.: 202116 Signature of the student
117
CERTIFICATE
This is to certify that the “A study on farmers Suicide in India”, has been
successfully completed by Mr. Shubham Prashant Patil during the MMS II, SEM
IV in partial fulfillment of the Master’s degree in Management Studies recognized
by the University of Mumbai for the academic year 2021 – 2023. This project work
is original and has not been submitted earlier for the award of any degree, diploma
or associateship of any other University / Institution.
Date :

118
ACKNOWLEDGEMENT
This project has been a great learning experience for me. I take this opportunity
to thank Dr. Kinjal Shah, my internal project guide whose valuable guidance
& suggestions made this project possible. I am extremely thankful to him/her
for his/her support. She has encouraged me and channelized my enthusiasm
effectively.
I express my heart-felt gratitude towards my parents Mr. Prashant Patil,

siblings and all those friends who have willingly and with utmost commitment
helped me during the course of my project work.
I also express my profound gratitude to Dr. H. J. Bhasin, Director of Lala

Lajpatrai Institute of Management for giving me the opportunity to work on
the projects and broaden my knowledge and experience.
I would like to thank all the professors and the staff of Lala Lajpatrai Institute
especially the library staff who were very helpful in providing books and
articles I needed for my project.
Last but not the least, I am thankful to all those who indirectly extended their
co-operation and invaluable support to me.
119
EXECUTIVE SUMMARY of Social Relevance Project
India is a land of endless diversity and exuberant cultures with majority of its population
thriving on the agrarian sector that is not merely an occupation, but also a way of life. It is
one of the core sectors of the Indian economy and has contributed sizably to industrial
development, export promotion and capital formation. These are essential requisites to bring
India onto the global grid. Its contribution of 20.2% to the GDP in 2020-21 at constant prices
is not as noteworthy when compared to other sectors yet; it serves as a backbone of the fastest
growing economy by providing food and sustenance security.
Agricultural cultivators form 50% of the workforce in India (CSO-Mospi, 2017). The status
of farmers in India stands at a pathetic juncture. Bankruptcy and loan repayment defaults
have been identified as the main cause of farmer suicides in India. This study reaches
beyond this and examines what are the underlying social factors that lie behind the
bankruptcy and defaults.
What we are exactly trying to gauge here is despite making such significant efforts to
assistfarmers in getting access to credit, why do we come across frequent reports of farmer
suicides that take place every other day in the country? Is this because of failure of crop,
inability to repay creditors, peer pressure or is it just the farmers’ social lifestyle? This
studyaims to identify an effective, pragmatic measure to reduce farmer suicides in India?
120
TABLE OF CONTENTS
1. Literature Review ................................................................................................................... 121
2. Research Methodology ........................................................................................................... 124
A. Research Objectives ........................................................................................................................... 125
B. Research Methodology ....................................................................................................................... 125
3. Analysis & Inferences- Probing Suicide Deaths ..................................................................132
A. Psychology of farmer ......................................................................................................................... 133
B. Social habits ..........................................................................................................................................134
C. Dependency on rainfall & Irrigation facilities .................................................................................. 135
D. Exposure to fertilizers and pesticides ................................................................................................ 136
E. Disbursement of loans ........................................................................................................................ 137
4. Summary & Policy Suggestions ............................................................................................ 142
7. References ...............................................................................................................................150
8. Appendix .................................................................................................................................152
121
CHAPTER 1: LITERATURE REVIEW
122
The Indian peasantry is the largest surviving body of small farmers in the world. It is currently
facing an epidemic of suicide. For thousands of years farmers have depended on the earth to
sustain their families. Now in the twenty-first century, their livelihood, prosperity and the
wellbeing of their families for generations to come are being threatened by globalization. This
is owing to a shift in the linkage of agriculture from the Earth to a few profit driven
multinational corporations. In this study we attempt to deep dive into the underlying factors
in the agrarian sector that thrust the act of suicide and as a result leave numerous families
helpless and weighed down under the burden of large debts.
Some concepts that were reviewed in the course of the research to facilitate better
understanding of the subject are as follows:
Agricultural credit:
Agricultural credit has played a vital role in supporting farm production in India. Mohan
(2004) drew attention to this fact, stating that the Centre has made drastic attempts in the post-
independence era to provide adequate credit to needy farmers. He goes on to say that even
though the outreach and amount of agricultural credit have increased over the years, several
weaknesses have crept up, which have affected the viability and sustainability of these
institutions. He later talks about the silent transformation that is taking place in rural areas
that call for diversification in agricultural production and value addition processes to protect
employment and incomes of the rural population.
Chowdary (2013) found that failures in loan disbursements from the government led to
farmers borrowing credit from non-institutional sources. He then explains the reality of such
a scenario where the farmer finds himself in a comfortable position due to the informal
relationship with the moneylender but in the process gets exploited. Non-institutional sources
of finance are completely unregulated and attract hefty amounts of interest.
Agrarian crisis:
Mishra (2007) in his paper professes that poor returns to cultivation and absence of non-farm
opportunities are indicative of the larger socio-economic malaise in rural India. This is
accentuated by the multiple risks that the farmer faces – yield, price, input, technology and
credit etc. The increasing incidence of farmers’ suicides is symptomatic of a larger crisis,
which is much more widespread. Risk mitigation strategies should go beyond credit.
Longterm strategies require more stable income from agriculture and also from non-farm
sources. He believes that private credit and input markets need to be regulated. This could be
the start point of cleansing this sector. A challenge that is difficult to combat is to provide
innovative products that reduce costs while increasing returns. He suggests that the only way
out is when risk management in agriculture is addressed by yield, price, credit or weather
related uncertainties. He is also a believer of the thought that greater involvement from the
civil society could dissolve this crisis situation. This literature brings out various camouflaged
factors that usually require attention but are neglected and in due course end up being the root
of the issue.
123
Social roots of farmer suicides:

Mohanty (2004) looks into the causes of farmer suicides in Maharashtra and his findings
clearly accord with the hypothesis that self-destruction is rooted in all social conditions. He
stated that a farmer’s suicidal tendency was strengthened by various socio-cultural factors
such as old age, illness, family tension, failure in business, politics, trade etc. He diverts the
attention from the so-called ‘mainstream’ factors of farmer suicides such as bankruptcy and
indebtedness to social factors, which are significant but usually overlooked.
Women participation in Indian agriculture:

Ghosh and Ghosh(2014) in their paper delves into the ignorance of women labor in the
agricultural sector and their presence as ‘invisible workers’. This piece of research highlights
the trends of female participation in agriculture across various states in India. It also analyzes
the growth trend of agricultural worker from 1961 to 2001. The study clearly depicts active
involvement and participation of women in the agricultural sector in almost all the states with
few exceptions like Kerala, Punjab and West Bengal where women are actively participating
in non-agricultural activities which includes house-hold industry, service sector etc. The
growth rate trend illustrates how much the population grew on average per year, over the
multiple year periods. It is almost uniform for all the states showing very slight changes in
few states, which shows a bit higher growth rate than the rest. Thus the entire work can be
concluded with the facts that women participation in agriculture is increasing with time and
women are now acknowledged with the status of an ‘agricultural worker’.
124
CHAPTER 2: RESEARCH METHODOLOGY
125
Research Objectives:
• To study psychology of farmers & social factors behind suicide
• To gauge dependency of paucity of rainfall, exposure to fertilizers, & agriculturecredit on
farmers suicide
Research Methodology:
Scope of the study:
This is a secondary project wherein the data has been gathered from various government
websites such as Directorate of Economics and Statistics, National Crime Record Bureau,
Indian Meteorological Department, Department of Agriculture, Cooperation & Farmers
Welfare. The scope of the study is limited to Indian agricultural farmers.
Limitations:
The data for farmer’s suicide is not available after 2015.
INTRODUCTION
Farmer suicides has turned out to be a major socioeconomic concern in India that has resulted in
profound implications on the quality life of farmers. According to the United Nations Commission
on Sustainable Development (UNCSD), one farmer committed suicide for every 32 minutes between
1997 and 2005 in India. The prominent causes recognized for farmer suicides were bankruptcy
or indebtedness, family problems, farming related issues, illness and drug abuse/alcohol
addiction.These causes can be seen from Figure 1.1 [National Crime Records Bureau (NCRB),
2014].
126
Other Causes Bankruptcy or
24.50% Indebtedness
20.60%
Alcoholic
Addiction
4.40%
Family problems
20.10%
Illness
13.20%
Farming related issues

17.20%
Figure 1.1. Reasons for farmer suicides in India (NCRB, 2014)
Farmers feel a repeated sense of hopelessness due to the loss of crops, income and land. Another
factor that increases suicides is the social isolation due to the loss of communities as well as
geographical remoteness. Lack of access to mental health services in rural areas and the stigma
attached to treatment is also a contributing factor. Depression arising from exposure to agricultural
chemicals/pesticides may increase the risk for mood disorders and ultimately suicide.
The Situation Assessment Survey of the National Sample Survey Organization (NSSO, 2013)
has reconfirmed the worsening situation of farm households which indicated that 51.9 per cent
of
the farm households in India are indebted (Table 1.1). The percentage of indebtedness was
highest in Andhra Pradesh (93%), followed by Telangana (89%), Tamil Nadu (83%), Kerala
(78%) andKarnataka (77%). It is to note that the NSSO in its 59th round survey has revealed
that given thechoice, 40 per cent of farmers would like to quit farming because it is risky and
not profitable (NSSO, 2003). Interestingly, indebted farmers have taken higher credit from
institutional sources(60%) as compared to non-institutional sources (40%) (NSSO, 2013). The
Intelligence Bureau inits report had mentioned that there was an upward trend in the number of
farmers resorting to the extreme measure of suicide in Maharashtra, Telangana, Karnataka and
Punjab. The report also stated that the main reason for such incidents were natural and man-
126
made factors. “While natural factors like uneven rains, hailstorms, droughts and floods adversely
affect crop yield, man-made factors such as pricing policies and inadequate marketing facilities
resulted in post- yield losses” (GoI, 2014).
Table 1.1. Suicides and indebtedness in farming
% of indebted farm
Sl. States Number of of farmer Suicides toall
HHs to total farm HHs
No. Suicides in 2014 India total in 2014
in 2012-13
1 Maharashtra 2,568 45.5 57.3

2 Telangana 898 15.9 89.1
3 Madhya Pradesh 826 14.6 45.7
4 Chhattisgarh 443 7.8 37.2
5 Karnataka 321 5.7 77.3
6 Andhra Pradesh 160 2.8 92.9
7 Kerala 107 1.9 77.7
8 Tamil Nadu 68 1.2 82.5
9 Uttar Pradesh 63 1.1 43.8
10 Gujarat 45 0.8 42.6
11 Punjab 24 0.4 53.2
12 Haryana 14 0.3 42.3
13 West Bengal - - 51.5
14 Other states 105 1.9 -
15 UT's 8 0.1 37.2
Total 5650 100.0 51.9
The NCRB publication of 2014 reported 5650 farmer suicides in the country. Maharashtra,
Telangana, Madhya Pradesh, Chhattisgarh and Karnataka states together accounts for 89.5 per
cent of the total farmer suicides as per the details presented in Table 1.1.
The main consequence of agrarian distress was discontinuation of agriculture by marginal and
small farmers. The land holding status of the victim farmers revealed that 44.5 per cent and 28
per cent of victims were marginal and small farmers, respectively, which together accounts for
72.5 per cent of total suicides in farming. The report further revealed that 53.1 per cent and 14.5
per cent of small farmers who committed suicides were reported in Maharashtra and Telangana,
respectively during 2014. Among marginal farmers, 39.7 per cent and 25.5 per cent of farmer
suicides were reported in Maharashtra and Madhya Pradesh, respectively. Figure 1.2 represents
127
the overview of farmer suicides in India (NCRB, 2015).
Consuming food regularly? Sleeping adequately?
100
90
80
70
60
50
40
30
20
10
Figure 4.2. Per cent of victim HHs who answered that the victim was consuming food
regularly
Figure 1.2. Farmerand slept in
suicides adequately
India (NCRB, 2015)
Causes of farmer suicides

The decision to commit suicide by the victim cannot be assigned to any single reason. The final
act of committing suicide would be a combination of several causes which are broadly grouped
into social, farming and debt related.
Social causes of farmer suicides

Responses of victim households and neighbours / relatives / friends are presented in Table 4.2.
The respondents reported multiple and interconnected causes for committing suicides. Addiction
to alcohol and drug abuse (26%) was opined by victim HHs as one of the prominent social
causesfollowed by Illness (18%), family quarrel (16%), daughter’s marriage (11%) and extra-
marital affair(8%).
Fall in social reputation was reported as one of the causes for suicide by all the sample states
128
except UP. Gambling was reported by 33 per cent of HHs in Kerala, 27 per cent in TN, 18 per
cent in Chhattisgarh, eight per cent in MP and two per cent in Telangana. Family quarrel was also
reported by all states except TN. Partition of income was reported by four per cent of the victim
HHs in Maharashtra and two per cent in Karnataka.
It is to note that dowry was reported as a cause of suicide in TN (10%), AP (3%), Gujarat (3%),
Telangana (2%) and Maharashtra (2%). Daughter’s marriage was reported as social cause in all
thestates except Chhattisgarh, UP and Haryana. Only three per cent of the victim HHs in
Punjab
reported divorce as one of the reason for suicide. The various social causes are presented in
Figure 4.3. Social autopsy results of neighbours, relatives and friends about the social causes of
suicide are in line with the opinions of the victim HHs.
Per cent to total
Divorce
Partition of house
Extra marital affairs

Partition of income
Drug abuse/Alcoholic
Dowry related issues
Social functions
Partition of jewelleries
Fall in social reputation

Frequent quarrel in family
Gambling
Illness
Love failure
Partition of land
addiction
Daughter’
Son’
s
s
Figure 4.3. Social causes of farmer suicides
Farming related causes of farmer suicides

It is important to know the farming related causes for farmer suicides considering the focus of
the study. Hence the data was collected on farming related causes leading to suicides for two
consecutive years, 2014-15 and 2015-16, which is presented in Table 4.3. The overall responses
of the victim HHs for these years remain more or less same with minor changes.
129
Lack of access to expected non-institutional credit and failure of rain was reported as major
farming-related causes by 37 per cent and 36 per cent of the victim HHs, respectively. This is
followed by non-realisation of higher output (35%), non-realisation of higher price (33%), lack
ofaccess to expected institutional credit (33%) and lack of irrigation (32%).
The failure of the crop during the successive years (2014-15 and 2015-16) in the sample states was
considered as a major setback, which was responsible for suicides. Lack of access to expected
credit (70%), non-realisation of higher output and prices (69%) and crop failure (60%) were
majorreasons reported by victim HHs for committing suicides. Failure of crops due to attack of
pests and diseases was reported by all the sample states, and lack of access to irrigation water
was reported by all states except MP, Chhattisgarh, UP and Punjab. The HHs of UP have reported
crop failure due pest and diseases (30%) and cyclones (30%) as causes for suicides.
Cyclone was reported as one of the causes in Kerala (56%), UP (30%), AP (3%) and Karnataka
(1%).Drought was common cause in all states except UP, Punjab and WB. Inability to sell the
output was mainly reported by the HHs of Kerala (59%). Well failure was reported by 40 per
cent of victim HHs in Telangana.
Non realization of higher output was one of the major causes in all states except UP and
MP. Similarly, non realisation of higher prices was also the major reason in all states except
Chhattisgarh and UP. Non-realization of higher output was opined as a major reason for suicides
in Telangana (68%), West Bengal (60%), Tamil Nadu (50%) and Kerala (52%), while non-
realizationof higher price was 60 per cent, 60 per cent in Telangana and West Bengal, and 80
per cent in Tamil Nadu and Kerala each.
Failure to avail expected amount of credit was mentioned as a major cause in all the sample
states, except Uttar Pradesh and Chhattisgarh. Lack of access to expected institutional credit
was highest in TN (80%), whereas expectation of non-institutional credit was highest in
Telangana(68%). Expectation of loan waiving was cited as a reason for suicide in West Bengal
(97%), Kerala(78%), Karnataka (67%) and Tamil Nadu (63%).
Lack of extension services was highlighted as a farming-related cause which was opined by 73
percent of victim HHs in West Bengal and 70 per cent in Punjab. Kerala (37%) is the only state
where
a relatively higher percentage of victim households committed suicide due to delayed payment
130
to the output sold. This was followed by Karnataka (7%), Telangana (6%), Andhra Pradesh (3%)
andHaryana (7%).
Indebtedness related causes of farmer suicides
Over time, indebtedness has become one of the major problems leading to agrarian distress,
which is responsible for farmer suicide. Existing literature strongly supports this argument as
well. It can be clearly seen from Table 4.4 and Figure 4.5 that crop loan was identified as the
prominent indebted-related cause of farmer suicide. Forty four per cent of the total victim
households indicated crop loan as the major reason for farmer suicide.
Suicides due to institutional loan (44%), non-institutional loan (37%), pressure from money
lenders(36%), non-agricultural loan (28%), pressure from institutional sources (28%) and farm
equipmentloan (10%) were the major indebted related causes of suicides as opined by the victim
HHs acrosssample states.
Suicides committed due to institutional loan was mainly stated by HHs of Karnataka (87%), TN
(77%), Maharashtra (62%), Kerala (59%) and West Bengal (50%), whereas as non-institutional
loan
by Punjab (80%), Karnataka (71%), West Bengal (67%), Telangana (60%) and TN (50%).
131
CHAPTER 3: ANALYSIS & INFERENCES- PROBING SUICIDE
DEATHS
132
The data used in this analysis consists of data pan India. This includes farmer suicides data
from the National Crime Record Bureau of India website and other agriculture related
statistics from the Directorate of Economics and Statistics website. The study takes a deep
dive into the primary and underlying factors that disrupt the normal course of living of a
farmer and compel him to take away his life. This is achieved by reviewing the statistics over
a time series to identify possible trends and make forecasts into the future. Some factors,
which are crucial to a farms’ productivity and in turn to the wellbeing of the farmer, are
analyzed in due course. These factors include dependency of agriculture on rainfall and hence
irrigation facilities used, cropping intensity, exposure to fertilizers and pesticides,
disbursement of credit loans and other influencing socio-economic risk factors.
50
44.3
45
40 37.1 36.1
35
30 27.5 28.1
Per cent to total
25
20
15
9.9
10
Due to crop loan Due to farm Due to non- Due to non- Due to pressure Due to pressure
equipment loan agricultural loan institutional loan from institutional from non-
sources institutional
sources (mainly
money lenders)
Figure 4.5. Indebtedness related causes of farmer suicides
133
A. Psychology of farmer:
In the recent review of neurobiological literature, most suicide victims have a diagnosable
psychiatric illness or disorders such as mood swings and depression. In the case of farmers,
this is the result of constant exposure to pesticides and insecticides that contain hazardous
chemicals. Poor land fertility levels and frequent attacks by pests persist all around the
country and compel farmers to revert to artificial substances to enhance fertility and
productivity. These chemicals act like catalysts in the breakdown of the central nervous
system and activate emotional unrest. This coupled with socio-economic risk factors triggers
the psyche of farmer.
Some risk factors associated with the deceased farmer could be indebtedness, deterioration of
economic status before the incident, crop failure, change in social position, substance
addictions to name a few. The NCRB Government data of 2015 suggested that Family
Problems and Illness were the two primary causes for farmer suicides in that year. These
causes are in accord to the Durkheim’s hypothesis that self-destruction is rooted in social
conditions. In most agrarian families, the head of the family is the sole earning member who
is burdened with innumerable responsibilities. These consist of daily expenditure for
household requirements, education of children, maintenance of farm, purchase of seeds and
equipment etc. In such a scenario, multi-tasking of activities is required which becomes
tedious for one person to overlook single-handedly. This could cause a tremor in the state of
mind of the farmer who in his moment of weakness would give up on life thinking there is no
cure to his problem. Hence, Family Problems seem to have huge impact on the disposition of
the farmer proving that social wellbeing is critical to a farmer to have a content and peaceful
life. Farmers are also prone to various illnesses and diseases due to poor standards of living
in the villages. Insecticides and pesticides have adverse impacts on the nervous system of the
farmer leading to emotional instability due to increased exposure to chemicals. Low hygiene
levels could cause breeding of rodents and insects. This increases the risk of diseases such as
water-borne diseases. Frequent illness, inability to receive proper treatment and medication.
B. Social habits:
It is believed that habits in any form are unfavourable, be it good habits or bad habits. It may
be the small decisions we take and actions that we perform every single day. It unknowingly
becomes a part of life. With the passage of time, it fits into our daily routines and eventually
becomes a vice that is difficult to get rid of.
In recent years there has been a noticeable rise in the number of urban males who claim to
use alcohol as a means to relax. It still tends to be the poor and those who live in the rural
areas that are the highest consumers of alcohol. It is believed that as little as 5 percent of
alcohol consumers are females (Alcoholism In India, 2012). It has been reported in numerous
articles that Indian farmers resort to all sorts of addictive substances and materials that are
detrimental to their health and wellbeing. Consumption of spurious liquor and drugs on a
regular basis has become a part of the lives of farmers. They resort to these substances either
in order to maintain their social status within the community or because of the pressures
associated with the credit or loans that they have borrowed. They believe that consumption
of such substances would provide them mental relief from their grave issues. Under the
influence of these substances, they delve into activities that are not reputable such as domestic
134
and sexual abuse. The increasing dependency on alcohol makes it difficult for them to
function normally within the society. In such cases their families suffer as financial support
starts deteriorating and the farmers fail to meet their social and work related commitments.
Their business and overall economy suffers because of lost productivity, as one does not
deliver their best under the effects of alcohol. This in turn increases the vulnerability of crops
to attacks from weeds and pests, which leads to failure of crops. An unsuccessful harvest
builds a lot of pressure on the farmer since his only source of income also becomes uncertain
due to the failed crop. Usually they also borrow substantial loan amounts and mortgage
properties against it. When repayment is not possible, they tend to lose all their physical assets
slowly. In the presence of such a scenario he feels that there is no other alternative to his
problems and thinks that taking his life is best escape.
C. Dependency on rainfall & Irrigation facilities:
Water is the most critical resource for agriculture, gaining primacy even over soil. India has
only about 4 per cent of the world’s freshwater resources (Central Water Commission). Thus,
large tracts of land are dependent on seasonal rainfall for crop cultivation, which hampers
productivity and the adoption of high- yielding varieties and other inputs. Yields in rain fed
areas remain low and this low yield underscores the importance of irrigation in the country.
Figure 1 depicts the state wise coverage of irrigated area over major crops along with each
states cropping intensity. The figures used in the following graph are taken from the
Directorate of Economics and Statistics. Cropping intensity refers to the number of times a
crop is planted per year in a given agricultural area. It is the ratio of total cropped area to net
135
area sown. The graph depicts that several states have less than 50 per cent irrigated area. This
water shortage to fields is detrimental to agricultural growth since it reduces the likelihood of
a successful crop. The figure also illustrates that the cropping intensity in these states is very
high even when the proportion of irrigated area under all crops is low. Hence, targeted efforts
are required to expand irrigation in such states where the investment is likely to lead to an
increase in cropping intensity. It is evident that the states of Punjab and Haryana have better
irrigation facilities in comparison to other states but also have an equivalent high cropping
intensity. Hence it can be seen that majority of the states do not have proper irrigation facilities
in place to support their crop. This increases their dependence on rainfall, which is uncertain.
It widens the vulnerability of the farmer and exposes him to the risk of having a failed crop.
This could stir a lot of problems for the rural cultivators, financially as well as
Source: Directorate of Economics and Statistics- Agricultural Statistics at a Glance 2018
On looking into the time series of cropping and irrigation patterns, it can be seen that both
gross cropped area and irrigation show a linear trend over time as indicated in figure 2.It can
be seen from the graph that irrigation facilities in the past were really poor and only a meagre
chunk of farmland received the irrigation it actually required. However over time significant
improvements were made so as to increase the coverage of irrigation over larger areas of land.
The drastic advancement in irrigation facilities from the pre-independence era to the post is
commendable but however still not sufficient to support its relative cropped area. The figure
clearly depicts that there is a perpetual shortage of irrigation facilities in comparison to its
gross cropped area despite upgrading irrigation facilities.
Figure 2: Changes in Gross Cropped and Gross Irrigated

Area
Gross Cropped Area Area sown more than once Gross Irrigated Area
250
188.99 197.56 195.69 194.14 200.86 198.36
185.74 185.34
200
131.89
150
85.08 88.89 91.78 92.25 95.77 96.46
100 63.2 76.19
49.82 56 54.71 54.2 59.43 58.23
42.75 44
50
2009 - 10 2010 - 11 2011 - 12 2012 - 13 2013 - 14 2014

2015
Years
Source: Directorate of Economics and Statistics- Agricultural Statistics at a Glance 2018
Hence, the above analysis reveals that irrigation facilities in spite of significant advancements
is still lacking for majority of the cropped areas. This could lead to increased dependency on
rainfall that is already erratic in nature. Poor irrigation widens the possibility of crop failure
and declining health of soil and land. A poor crop would eventually hamper the repayment of
136
loans if any, as there is no source of income that could be used to make the EMI payments.
Therefore irrigation is an underlying secondary factor that could disrupt the wellbeing of a
farmer and lead to circumstances that would push him to suicide.
The Indian economy is heavily dependent on agriculture and the livelihood of the Indian
farmer largely depends on the Monsoon rains. A major portion of the country’s crop area is
completely dependent on monsoon rains as they are not equipped with methods of manual
irrigation. Weak monsoon rains result in crop failure, which affects the economy in a negative
manner due to lower production. This translates into price-rise, low industrial output, and
other issues.
Figure 3 depicts the rainfall and farmer suicides level over a time series. On looking into the
chart, it can be seen that in years when there was low rainfall such as in 2002, 2004, 2009 and
2012, farmer suicides were higher in comparison to other years. One of the reasons for an
increase in suicides would be lack of availability of irrigation facilities. The fate of most crops
depends on the performance of the monsoons in India.
Source: National Crime Record Bureau & Indian Meteorological Department
D. Exposure to fertilizers and pesticides:
Fertilizers and pesticides both have pros and cons associated with their use. In countries like
India with poor irrigation facilities and erratic rainfall, dependency on artificial substances to
increase yields accelerates. Shortage of water leads to declining soil health, which in turn
affects cropping. Fertilizers and pesticides make a significant difference in food production
by doubling outputs and increasing yields. The downside of fertilizers and pesticide usage is
when they are used excessively causing damage to the environment. Excessive usage could
lead to depleting soil of its organic matter, reducing its ability to hold water and subjecting it
to more erosion. In addition to its environmental hazards, persistent exposures to chemicals
and fertilizers have negative effects on the health and psychology of human beings. Farmers
who experience routine exposure to pesticides have exhibited neurological symptoms such as
headache and hand tremors.
137
Figure 4 shows the region wise consumption of fertilizers and pesticides pan India.
Figure 4: Region wise consumption of fertilizers

10000
9000
8000
7000
6000
5000
4000
3000
2000
1000
2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18

Years
South West North East North East
Source: Department of Agriculture, Cooperation & Farmers Welfare
From the above chart it is evident that the western region of India comprising of states such
as Maharashtra, Rajasthan, Gujarat, and Madhya Pradesh have large fertilizer consumption
levels. This is because the soil in this region is not very fertile and rain is seasonal hence these
states have to rely majorly on fertilizers to increase productivity. The Southern and Northern
regions too use significant amounts of fertilizers and pesticides. Overall it can be seen that
India is heavily dependent on usage of artificial substances to increase farm yields. Constant
exposure to fertilizers and pesticides is one of the critical factors that could trigger emotional
unrest in the farmer’s life.
Figure 5 indicates fertilizer consumption in thousand tonnes and farmer suicides in the year
2015. The South and West regions indicate both high levels of fertilizer consumption and in
turn large number of suicides. The North, East and Northeast region however show low
instances of suicides even though fertilizer consumption is relatively high.
138
E. Disbursement of loans:
Credit is one of the most essential inputs for improving farm production and productivity and
also to mitigate farmers’ distress. Although the informal sector has a large presence in the
agricultural credit in India, there has been a gradual increase in the share of formal institutions.
Policy initiatives revolving around replacing the informal sources of lending to farmers by
formal sources and to support enhancement of production and incomes have been made.
Over the decades, the agricultural credit system has improved through cooperative credit
societies at various levels, expansion of rural branches of commercial banks, and setting up
of regional rural banks. Figure 6 depicts that between 2011-12 and 2016-17, institutional
credit to agriculture increased from 4.75 Rupees crores to Rupees 10.65 crores, registering an
annual growth rate of 14 per cent. It is noteworthy that the flow of agricultural credit has not
just increased over the years but has consistently exceeded the target.
139
Figure 6: Agriculture Credit Target &Achievement
12 10.65
10 9.15
8.45 8.5
7 7.11
5.756.07
4.755.11
2011-12 2012-13 2013-14 2014-15 2015-16 2016-17

Axis Title
Target allotted by GoI Achievement
Source: Department of Agriculture, Cooperation & Farmers Welfare
Hence the secondary government data brings out various unexplored facets related to farmer
suicides, which may not be primary factors but are underlying factors that lead to troubles in
the agrarian sector. In spite of provision of institutional credit, it is seen that Bankruptcy and
Indebtedness are major factors that compel a farmer to suicide. This is because most farmers
prefer borrowing from non-institutional sources such as moneylenders, friends and relatives
who they share an informal relationship with. Hence they are more comfortable in dealing
with them with any regulations. What they fail to realize is the exploitation they are subjected
to due to alarming rates of interest that are charged on the loaned amounts. A string of such
problems tend to hinder the normal working of the farmers business that in turn leads to failure
of crop. When the farmer cannot handle a multitude of miseries, he thinks it is best to relieve
himself of all the trouble by ending his life.
140
CHAPTER 4: SUMMARY AND POLICY SUGGESTIONS
141
A deep agrarian crisis can be averted by policy interventions beneficial at an overall level.
Agriculture related strategies:
Revitalize rural financial market: The credit market needs immediate attention. Present
loophole must be fixed and free flow must be ensured. The formal credit structure should be
simplified and more user friendly.
Information Centre: There is a demand for credit but the supply side of rural financial market
is not responding due to some constraints. Enabling the formation of an information bureau
will help formal institutions to judge credit worthiness of an individual. When moneylenders
operate in a village, they take the help of a prominent person of the village to gather
information on credit worthiness of an individual and at times also use their influence to
recover loans. In return, they pay him a commission. The presence of an information center
would prove to be beneficial to both parties- the State as well as the farmers.
Micro credit: Formal institutions have by now started entering into rural credit market through
Self-help groups and other micro credit enterprises. They should be encouraged to intervene
and have a greater presence among farmers.
Regulate private moneylenders: The Non-Governmental Organizations (NGOs) are already

involved in facilitating self-help groups (SHGs). The NGO’s and local SHG’s should be
encouraged to act as pressure groups to regulate private moneylenders.
Land management: Excessive use of fertilizer and pesticides can affect the fertility of land.
Appropriate land management techniques should be devised. This should complement the
efforts in improving water management.
Diversification of cropping pattern: To reduce their vulnerability, the farmer should have
more options and be able to go beyond these crops. Policies that can make diversification of
cropping pattern feasible should be put into place. Inter-cropping, fitting two crops, crop
rotation and horticulture should be encouraged. Better water and land management will also
help in attaining this objective.
Non-farm employment: A large proportion of rural population being dependent on agriculture

indicates that there are not many avenues of diversifying sources of income. Agro based
industries and other non-farm opportunities should be increased.
Suicide Mitigation Strategies:
Reduce access to pesticides: Reduce the easy access and availability of insecticides and
pestici
des. From those available, toxicity should be reduced to non-lethal levels. The containers of
these toxic chemicals should have prominent warning signs as also instructionsfor proper
handling, storage and usage in the vernacular language.
Helplines: Introduce helplines and disseminate the numbers in the villages so that individuals
in distress can turn to someone.
142
Community groups: Develop a protocol for starting survivor support groups. Form
community/farmer groups in rural areas. These groups can discuss farm related and other
socio-economic problems.
Suggestions that can be implemented immediately

• Crop failure and collapse of income was found to be the root cause for farmer suicides.
Therefore, it is suggested that individual farmers should be brought under the ambit of crop
insurance programme. More intensively the state must ensure through the proper policy
framework that indemnity be paid within a week after reporting of the failure. CropInsurance
payment provided months after the crop failure is by design pushes the farmer into the debt trap
of the moneylender.
• One of the main causes for crop failure was insufficient availability of water. Hence judicious
use of available water is needed. Groundwater recharge, rain water harvesting and, de-siltation
of ponds / tanks can ensure increased water supply. To avoid under- or overuse of water to
crops, farmers should carefully monitor the weather forecast, as wellas soil and plant moisture
and adapt their irrigation schedule to the current conditions. Farmers can participate in the
construction of percolation ponds and check dams in theirsurrounding areas both in private and
common land. This helps to increase the availabilityof water.
• Poor awareness among the farmers regarding scientific and improved methods of cultivation is
one of the reasons for crop failure. This may be addressed through proper extension activities.
Instances in Andhra Pradesh indicate that in the absence of adequate
extension services, most farmers were misled by the traders and were found using pesticides
indiscriminately. The farmers were also supplied with low quality seeds. Propermeasures to
eliminate such practices has to be made. The Seeds Act, 2004, Insecticide Act 1968, Pesticide
Control Act, Fertilizer Control Order, be implemented very strictly andthe abettors be punished.
Special extension efforts are needed towards capacity buildingof farmers for usage of quality
inputs and efficient options in production and marketing.
• Though, this problem is highlighted by Andhra Pradesh victim households, the possibility of
existence of such unscrupulous dealers in other states cannot be ruled out. Hence, Government
intervention in the supply of seeds and other agricultural inputs by establishing fair price retail
outlets in rural areas, where quality of inputs is assured is required.
143
• It is suggested by the victim households that Government should make policy to waive or
reschedule the outstanding amount of farmers loan whenever the crop fails due to natural
calamities. This will save the farmers from debt trap. The same suggestions were offeredin the
Report of the Commission on Farmers’ Welfare (2005). The report mentioned that the interest
should not be charged for the period of current rescheduling. Whenever an area is declared as
drought-affected, interest should be waived, without changing other terms of rescheduling
(GoAP, 2005).
• Local money lenders are the main non-institutional sources who charge exorbitant rates of
interest and adopt harsh ways to recover borrowed amount. Farmers prefer to borrow normally
from institutional sources but they approach non-institutional sources only whenthey are denied
loans from institutional sources for various reasons. Hence the governmentmust implement
stringent laws on informal lending through fixing a cap on the interest rates equivalent to the
institutional lending rates with sufficient monitoring.
• Release of loans in phased manner is needed. Thereby proper utilization of funds can be
ensured. Releasing of funds at one stretch (usually done in Kisan Credit Card) may result in
diversion of the borrowed amount to other activities rather than cultivation. Monitoringof funds
thus released is required to ensure proper utilization.
• Government may consider extending institutional credit without collateral security of property
for tenant farmers as well.
• The compensation was extended only to farmers who own land/lease in land (on record) and
have availed credit from institutional sources against land record. But the present study reveals
that a majority of the farmers borrow from non-institutional sources as theyare denied loans by
institutional sources due to various problems pertaining to land records.
• Though the study had not made an attempt to obtain the data on MSP received, a fair majority
of the victim households, at aggregate level, have mentioned that MSP doesnot cover cost
of production. This needs to be considered by CACP. CACP may reviewthe methodology
for arriving at MSP considering explicit and implicit costs along with reasonable profit
margin. This was suggested by 84 per cent of the Telangana victim HHs and 100 per cent
victim HHs of Andhra Pradesh.
• The condition of the victim households was seen to be worsening after the suicide event
involving the main family member. Hence certain institutional mechanism for post suicide
144
welfare of the family is required.
• The victim families should be given preference in availing benefits of various developmental
schemes at least for a period of five years. Such schemes may also include social welfare
schemes of State and Central Government.
• NGOs, religious institutions and agriculture department should also be involved in providing
counselling to farmers to handle the distress situation through establishment of Farmer Welfare
Cell and Help Desk Services.
• Maximum number of suicides occur during kharif season and mainly among highly indebted
farmers, therefore help lines may be established based on the information on crop failureand
extent of indebtedness. The helpline may act as immediate relief providers for the distressed
through helping them in sourcing finance to meet the immediate needs.
• Programmes aimed at addressing the health issues of marginal, small and medium rural
households should be launched. One such scheme in operation was launched by Governmentof
Andhra Pradesh (Aroggyasree). This programme helped the rural households to overcometheir
health issues. This may be taken up on priority basis in Madhya Pradesh, Chhattisgarhand
Gujarat as 46 per cent, 44 per cent and 27 per cent of the households, respectively indicated
illness as a cause for suicide in these states.
• The study noticed that around 58 per cent of the victim HHs were BPL families. Field evidence
shows that food grains supplied is insufficient. Hence, the quantum of food grainssupplied to
BPL card holders needs to be at least doubled to ensure food and nutrition security for the victim
households.
• Higher incidence of suicides among BPL, AAY card holders and among OBC category
necessitates special focus on strengthening their weakness to cope with distress conditions.
Special counseling to women farmers in Telangana may be done since the state has
witnessed highest number of women farmer suicides.
• Higher number of farmer suicides was reported in resource rich districts of Karnataka, whereas
the resource poor (drought prone) districts exhibited relatively lesser numberof suicides. This
might be due to the ability of farmers in resource poor regions to cope up with the distress and
their awareness of alternate choices. On the contrary, farmers from resource rich areas are left
with fewer options to take up. For instance, in commandareas, main crops were paddy and
sugarcane and during water crisis, they hardly have anyother option to sustain the crop since
145
techniques like drip irrigation and mulching are notviable options. Hence capacity building on
coping strategies should be given to resource rich regions as well.
Suggestions that can be implemented over a span of time
• Regulating the informal credit market through licensing and fixing the norms for charging
interest rate and terms of lending is required. There is a need to create indemnity to non-
institutional borrowers. Radhakrishna Committee recommendations (2007) regarding rural
informal credit market be implemented, which underlines the need for mitigating the burden of
farmers’ indebtedness to money lenders. It recommends a one-time measure ofproviding long-
term loans by banks to farmers to enable them to repay their debts to themoney lenders. Further,
it recommends that Panchayat Raj Institutions (PRIs), civil societyorganizations like farmers’
collectives and Non-Governmental Organizations (NGOs) shouldbe involved in arriving at
negotiated settlements with the Money lenders.
• Most of the victims HHs were not seen practicing crop and enterprise diversification.Risk
hedging through crop and enterprise diversification should be encouraged to reduce farmers’
distress aiming at sustainable income.
• Establishment of farmers’ Welfare Fund / Farmers’ Welfare Department in every state is the
need of the hour to meet social consumption needs of farmers. The Central and State
Government should contribute to this fund. NABARD can also be roped into this scheme forfund
contribution. This has been suggested by Deshpande and Arora (2010), Bhende and Thippaiah
(2010) and Radhakrishna Report (2007) as well.
• Prime Ministers Rehabilitation Package may be reintroduced in the suicide prone states by
plugging the loopholes mentioned in the study by Bhende and Thippaiah (2010).
• Farmers may include various effective water saving techniques in cultivation like drip irrigation
and protective cultivation as lack of water was mentioned by victim HHs in mostof the sample
states.
• Most of the Cooperative banks of eastern region of Uttar Pradesh are bankrupt at presentand
are not functioning. Hence, there is a need for its financial revival to eliminate the illegal money
lenders from remote rural areas. In this context, NABARD may provide the financial help to
cooperative banks.
146
• Fodder shortage was one of the issues of concern in Maharashtra. Most of the farmers were
compelled to sell their animals at low prices due to non-availability of fodder, thereby,
discontinuing livestock farming. Such a situation should not arise and there must be enough
fodder camps so that livestock farming is continued.
• It is also suggested that rural non-farm employment programme under MNREGS must be
enhanced.
• There should be a Compassionate Distress Consulting Officer at the Department ofAgriculture

heading a special cell. This cell may be assigned with the responsibility of counseling and
financing the small ventures in the villages. This may be integrated with the employment
generating departments and agencies across states and nation as a whole. It should encourage
the farmers to start dairy, poultry, fishery and other livestockactivities.
• At aggregate level, 17 per cent of 528 victim households mentioned illness as cause of suicide.
The discussion with victim households of Madhya Pradesh amply highlighted the lack of access
to mental health services in rural areas. Hence, Primary health care and support system to
vulnerable farmers must be strengthened so that illness does not serve asa trigger factor to an
already indebted farmer. Without exception, the victim households ofall the states were honest
enough to accept that victims were alcohol addicts. Therefore,rehabilitation centre for drug
abuse and alcohol addiction should be established.
• Health insurance programme for the farmers be enhanced not only covering the Government
Hospitals but should also include the private hospitals. A scheme like Employees State
Insurance (for industrial workers), called “Farmers’ State Insurance Scheme (FSIS)” that will
enable the farmer to seek medical treatment from the ESI hospitals may go a long way(suggested
by Deshpande and Arora, 2010).
Suggestions that can be implemented in long run
• Failure of rain, attack of pest and disease leads to crop loss. This was reported as one of the causes
for farmer suicides across states. Prominent states among them are: Maharashtra, Punjab,
Haryana and West Bengal. Hence, there is a need to install automated weather stations so that
farmers are alerted on natural calamities and can take precautionary measures. The Government
of Maharashtra launched the Crop Pest Surveillance Project (CROPSAP) during 2009-10.
Though the scheme was not a huge success, further refinement and proper measures in
147
implementation can aid the farmers in suicide prone states.
• Another important request of victim households was to improve the access to market within their
reach. For instance, cotton is purchased at a few agricultural market centresrather than at
affordable distance by Cotton Corporation of India (CCI).
• Construction of large tanks, watersheds, de-siltation of community tanks and completionof

irrigation projects has to be given top priority so as to ensure water availability.
148
CHAPTER 5: REFERENCES
149
• Agricultural Statistics at a Glance 2018
• Directorate of Economics and Statistics
• National Crime Record Bureau
• Indian Meteorological Department
• Department of Agriculture, Cooperation & Farmers Welfare
• Chowdary, N. P. (2013). “Farmer Suicides: Transitional Cost for Indian Society, as aresult
of policy changes of 1990”.
• Ghosh, M. and Ghosh, A. (2014). “Analysis of Women Participation in Indian Agriculture”.
IOSR Journal of Humanities And Social Science.,Volume 19. Issue 5
150
CHAPTER 6: APPENDIX
151
Table 1: State wise Sown and Irrigated Area
State Cropping intensity Total Irrigated Area
1
Andhra Pradesh 122.78 50.4
Arunachal Pradesh 131.94 19.3
2
3
Assam 145.68 9.1
4
Bihar 143.98 67.9
5
Chhattisgarh 121.84 30.7
6
Goa 123.48 24.3
Gujarat 122.31 47.6
7
8
Haryana 181.50 88.2
9 Himachal Pradesh 174.40 21.2
10 Jammu and Kashmir 155.97 42.9
11
Jharkhand 117.85 14.2
12
Karnataka 119.96 33.5
13
Kerala 126.56 17.9
14
Madhya Pradesh 150.66 41.2
Maharashtra 126.12 19.5
15
16
Manipur 100.00 18.2
17
Meghalaya 119.30 37
18
Mizoram 100.00 14.2
19 Nagaland 128.68 20
20 Odisha 115.57 29.1
21 Punjab 189.64 98.5
22 Rajasthan 137.04 37.8
23 Sikkim 187.01 8.6
24 Tamil Nadu 113.12 56.1
25 Tripura 143.75 26.8
26 Uttar Pradesh 155.89 49.5
27 Uttarakhand 159.21 78.8
28
West Bengal 185.94 58.9
Total (States) 138.84 37.9
152
Note: Cropping Intensity is obtained by dividing total cropped area by
net area sown expressed in percentage. Total cropped area and net area
sown figures are expressed in thousand hectares. Total irrigated area is
in percentage terms.
Source: Agricultural Statistics 201 at glance
Table 2: Changes in gross cropped and gross irrigated area

Year Gross Cropped Area Area sown more than once Gross Irrigated Area
1950-51 131.89 13.15 22.56
1990-91 185.74 42.75 63.2
2000-01 185.34 44 76.19
2009-10 188.99 49.82 85.08
2010-11 197.56 56 88.89
2011-12 195.69 54.71 91.78
2012-13 194.14 54.2 92.25
2013-14 200.86 59.43 95.77
2014-
198.36 58.23 96.46
2015
Note: Figures are in million hectares Source:Agricultural Statistics at
a Glance 2018
Table 3: Changes in Rainfall & farmer suicides

Years Rainfall in mm Farmer Suicides
1995 1242.4 1072
1996 1182.9 1372.9
1997 1183.1 1362.2
1998 1208.8 1601.5
1999 1116.6 1608.2
2000 1035.4 1660.3
2001 1076.2 1641.5
2002 930.1 1797.1
2003 1182.3 1716.4
2004 1086.2 1824.1
2005 1238.7 1713.1
2006 1202.4 1706
2007 1219.8 1663.2
2008 1144.1 1679.6
2009 961.8 1736.8
2010 1212.1 1596.4
153
2011 1116.3 1402.7
2012 1054.7 1375.4
2013 1242.6 1177.2
2014 1044.6 1236
2015 1163.8 1260.2
2016 1083.2 1137
Source: Rainfall data from India meteorological dept. Source:
Farmer suicide data from NCRB; figures in ('0) terms.
Table 4: Region wise consumption of fertilizers

Year South West North East North East
2010-11 7150.24 9152.32 7918.7 3588.57 312.38
2011-12 7266.62 8607.24 7922.37 3683.41 310.68
2012-13 5519.08 7636.3 8284.48 3775.01 321.28
2013-14 6004.82 8042.24 7039.97 3078.25 317.13
2014-15 5985.38 8205.58 7634.61 3427.26 323.29
2015-16 6177.58 8382.02 7906.44 4001.47 285.09
2016-17 5788 8426.41 7805.66 3653.88 275.2
154
2017- 5724.2 8560.0 8087.7 3923.2 295.61
18 8 3 5 3
Source: Department of Agriculture, Cooperation & Farmers Welfare.
Table 5: Agriculture Credit Target &Achievement

Ye Target allotted by Achieve
ar GoI ment
20 4.75 5.11
11-
12
20 5.75 6.07
12-
13
20 7 7.11
13-
14
20 8 8.45
14-
15
20 8.5 9.15
15-
16
20 9 10.65
16-
17
Note: Amount in Rs. Crore
Source: Department of Agriculture, Cooperation &
Farmers
Welfare
155

Final Project Sem4

Uploaded by

Document Information

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Final Project Sem4

Uploaded by

Copyright:

Available Formats

THREE MANDATORY PROJECT REPORTS ON

GENERAL MANAGEMENT, SPECIALIZATION & SOCIAL RELEVANCE

Comprehensive Study On leadership style & its impact on employees.

Submitted in partial fulfillment for the award of the degree of

ROLL NO. 2021160

Under The Guidance of

LALA LAJPATRAI INSTITUTE OF MANAGEMENT

GENERAL MANAGEMENT, SPECIALIZATION & SOCIAL RELEVANCE

Comprehensive Study On leadership style & its impact on employees.

Submitted in partial fulfillment for the award of the degree of

ROLL NO. 2021160

Under The Guidance of

LALA LAJPATRAI INSTITUTE OF MANAGEMENT

Name: Shubham Prashant Patil

Roll No.2021160 Signature of the student

Shubham Prashant Patil

DR. H. J. Bhasin DR. Kinjal Shah

I also express my profound gratitude to Dr. H. J. Bhasin, Director of Lala Lajpatrai

2. Literature Review ............................................................................................................................ 3

B. Leadership Styles .............................................................................................................................. 5

A. Research Objectives ........................................................................................................................ 23

B. Research Methodology ....................................................................................................................23

4. Response Analysis .......................................................................................................................... 27

5. Findings & Recommendation ....................................................................................................... 34

CHAPTER 2: LITERATURE REVIEW

Approaches to leadership research

Figure 2 1: The Domains of Leadership (Graen & Uhl-Bien, 1995)

Theoretical research on leadership

The personality period

The influence era

The behavior era

The situation era

The transactional Era

The Anti-Leadership Era

The Culture Era

The Transformational Era

Objectively, the performance of employees is able to be quantified through profit margins,

Leadership styles and employee performance

Autocratic leadership style and employee performance

CHAPTER 3: RESEARCH METHODOLOGY

• To understand individual needs and expectations at work

Scope of the study:

I, as an employee, would like if my superior appreciates my work. (Select one option)

CHAPTER 4: RESPONSE ANALYSIS

32 Neither Agree nor Disagree

Question- I don’t feel stressed if my superior creates a friendly and supportive

Question- I want my superior to develop and groom me as a future leader.

Question- I, as an employee, would like if my superior appreciates my work.

Question- I feel very satisfied When my superior involves me in decision making.

CHAPTER 5: FINDINGS AND RECOMMENDATIONS

E I, as an I don't feel I would like to I would like my My manager

24 Disagree Strongly Agree Agree Agree Agree

48 Strongly Agree Strongly Agree Agree Strongly

E I want my I, as an employee I feel more I feel very

1 Strongly Agree Agree Agree Agree

5 Strongly Agree Strongly Agree Disagree Agree

7 Strongly Agree Strongly Agree Strongly Agree Agree

10 Strongly Agree Strongly Agree Disagree Agree

19 Strongly Agree Strongly Agree Strongly Agree Strongly Agree

30 Agree Strongly Agree Disagree Agree

42 Strongly Agree Agree Strongly Disagree Strongly Agree

47 Neither Agree nor Agree Disagree Strongly Agree

48 Agree Strongly Agree Disagree Strongly Agree

Name: Shubham Prashant Patil