SRI MANAGEMENT - RESEARCH

SHARDA

INSTITUTE

OF

INDIAN

THE DISSERTATION REPORT ON

“STUDY OF THE PERFORMANCE OF CONSUMER DURABLE INDUSTRY IN INDIA WITH SPECIAL REFERENCE TO SAMSUNG PVT . LTD”

SUBMITTED TO: PROF. DR.RITVIK DUBEY

SUBMITTED BY : NEETU KUMARI ROLL NO-20100140
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PGDM (2010-2012)

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DECLARATION
I hereby declare that the project on “STUDY OF THE PERFORMANCE OF CONSUMER DURABLE INDUSTRY IN INDIA WITH SPECIAL REFERENCE TO SAMSUNG PVT . LTD”of “DISSERTATION” of PGDM to Sri Sharada Institutes of Indian Management Research is my own original work for the fulfillment of the requirement for any course of the study. I also declare that no chapter of the manuscript in whole or part is lifted and incorporated in this report from any other work done by me or others.

Place: Date:

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4 . No classroom routine can substitute which is possible while working in real situations. Swami Ji (Dr. Without a proper combination of inspection & perspiration.Acknowledgement Survey is an excellent tool for learning & exploration. Working under them was an extremely knowledgeable and enriching experience for me. I am thankful to them for their encouraging and valuable support. Ritvik Dubey for helping me in this project work. I would like to acknowledge to my sincere gratitude to our CMT& MD Rev. which we express to others for the help & needy services they render during the different phases of our lives. it’s not easy to achieve to anything. I am very thankful to them for all the value addition and enhancement done to me. Application of theoretical knowledge to practical situations is the bonanzas of this survey. I really wish to express my gratitude towards all those who have been helpful to me directly or indirectly during the development of this project.) Parthasarathy and my project guide Prof. No words can adequately express my overriding debt of gratitude to my parents and friends whose support helps me in all the way. There is always a sense of gratitude.

I Introduction Need of the study Objectives of the study Scope of the study Methodology of the study Limitations of the study 6 15 16 16 16 18 19 32 46 II III IV V Review of Literature Industry Profile Data analysis and interpretation Findings.CONTENTS:Chapter No. Name of the concept Page No. Conclusion Suggestions and 73 77 79 VI Bibliography 5 .

A detailed analysis of Automobile industry has been covered in respect of past growth and performance. The fundamental aspect consists of financial and Non-Financial analysis of these companies. For Company Analysis as a part of Fundamental tool we have undergone with the comparative analysis of TATA Motors the leading company. on Automobile Industry. The Indian automobile market is gearing towards international standards to meet the needs of the global automobile giants and become a global hub. the impact of inflation. At the end conclusion and recommendations have been specified so as to make the project work more meaningful and purposeful. Under this project to better understand the Industry I have used Fundamental tools to make it more authentic and meaningful. one of the core sectors. An economy-industry-company (E. Maruti Suzuki India’s largest Car manufacturer and Mahindra and Mahindra along with the help of ratio analysis.SUMMARY The automobile industry.I. FDI’s.C) approach has been followed under Fundamental Analysis which covers effect of Recession. The Industry Analysis has been done with the help of SWOT analysis and industry life cycle. The sector seems to be optimistic of posting strong sales in the couple of years in the view of a reasonable surge in demand. Export. 6 . and GDP etc. has undergone metamorphosis with the advent of new business and manufacturing practices in the light of liberalization and globalization.

CHAPTER I – INTRODUCTION 7 .

The western hub near Maharashtra is 33% of the market.9%). Hyundai. if one looks hard enough there may still be a genuine aid for the Day Trader and Short Term Investor. According to recent reports. The majority of India's car manufacturing industry is based around three clusters in the south. The northern cluster is primarily Haryana with 32%. India emerged as Asia's fourth largest exporter of passenger cars. growing 16-18 per cent to sell around three million units in the course of 2011-12. In an industry plagued with skepticism and a stock market increasingly difficult to predict and contend with. As of 2010. In 2009. Since the introduction of shares concept. According to the Society of Indian Automobile Manufacturers. Nowadays many people are interested to invest in financial markets especially on equities to get high returns. behind Japan. India's passenger car and commercial vehicle manufacturing industry is the seventh largest in the world. India is set to overtake Brazil to become the sixth largest passenger vehicle producer in the world. the country is expected to top the world in car volumes with approximately 611 million vehicles on the nation's roads. Equities are playing a major role in contribution of capital to the business from the beginning. making the country the second fastest growing automobile market in the world.7 million automotive vehicles were produced in India in 2010 (an increase of 33. and Thailand. is also referred to as the "Detroit of India” with the India operations of Ford. annual vehicle sales are projected to increase to 5 million by 2015 and more than 9 million by 2020.INTRODUCTION India is a developing country. with an annual production of more than 3. More than 3. The southern cluster near Chennai is the biggest with 35% of the revenue share. South Korea. and to save tax in honest way. Chennai. India is home to 40 million passenger vehicles. large numbers of investors are showing interest to invest in stock market. The automotive industry in India is one of the largest in the world and one of the fastest growing globally. By 2050. west and north. Renault and Nissan headquartered in the city 8 .7 million units in 2010.

The price at which an investor is willing to buy or sell depends primarily on his expectations. These simple statements are the cause of a major challenge in forecasting security prices. he will sell it. Mahindra and Mahindra. if the investor expects the price to fall.. Noida with Honda and Bangalore with Toyota are some of the other automotive manufacturing regions around the country The price of a security represents a consensus. Volkswagen. But there is usually a fairly strong consensus of a stock's future earnings that the average investor cannot disprove Fundamental analysis and technical analysis can co-exist in peace and complement each other. It is the price at which one person agrees to buy and another agrees to sell. If he expects the security's price to rise. Since all the investors in the stock market want to make the maximum profits possible. Skoda and Volkswagen also forms part of the western cluster. As we all know first hand. Gurgaon and Manesar in Haryana form the northern cluster where the country's largest car manufacturer. they just cannot afford to ignore either fundamental or technical analysis. Ford. Aurangabad with Audi. 9 . If prices are based on investor expectations. That's not to say that knowing what a security should sell for isn't important--it is. Another emerging cluster is in the state of Gujarat with manufacturing facility of General Motors in Halol and further planned for Tata Nano at Sanand. is based. Tata Motors. humans expectations are neither easily quantifiable nor predictable. Maruti Suzuki and Peugeot-Citroen plants are also set to come up in Gujarat. Skoda.and BMW having an assembly plant on the outskirts. Kolkata with Hindustan Motors. he will buy it. Maharashtra is Rover. The Chakan corridor near Pune. then knowing what a security should sell for (i. Land Motors having assembly area. Fiat and Force the western cluster with companies plants like General in the Motors.e. Chennai accounts for 60% of the country's automotive exports. Maruti Suzuki. Mercedes Benz. because they refer to human expectations. fundamental analysis) becomes less important than knowing what other investors expect it to sell for.

the country manufactures about 2. Hyundai Motors. The thriving market place in the country has attracted a number of automobile manufacturers including some of the reputed global leaders to set their foot in the soil looking forward to enhance their profile and prospects to new heights. Hero Honda and Hindustan Motors in addition to a number of others. over the years. The automobile sector of India is the seventh largest in the world. the manufacturers in India have started using their own technology evolved in the native soil. In a year. the Indian automobile market has once again picked up a remarkable momentum witnessing a buoyant sale for the first time in its history in the month of September 2009. India will top the car volumes of all the nations of the world with about 611 million cars running on its roads. Some of the leading names echoing in the Indian automobile industry include Maruti Suzuki. The figures published by the Asia Economic Institute indicate that the Indian automobile sector is set to emerge as the global leader by 2012.Overviews of Indian Automobile Industry Indian automobile industry has demonstrated a phenomenal growth to this day. Experts state that in the year 2050. Industry experts have visualized an unbelievably huge increase in these figures over the immediate future. During the early stages of its development. Tata Motors. Indian automobile industry heavily depended on foreign technologies. Today.6 million cars making up an identifiable chunk in the world’s annual production of about 73 million cars in a year. India rose to be the fourth largest exporter of automobiles following Japan. the Indian automobile industry presents a galaxy of varieties and models meeting all possible expectations and globally established industry standards. South Korea and Thailand. Mahindra and Mahindra. The country is the largest manufacturer of motorcycles and the fifth largest producer of commercial vehicles. However. 10 . Following a temporary setback on account of the global economic recession. In the year 2009.

have declared significant expansion plans. Maruti Splash (Suzuki). Bajaj small car (Bajai Auto). This segment has in fact invited a huge amount of India-specific investment by a number of multinational automobile manufacturers.000 units in February 2009. with the figure ranking the nation on top of any other country on the globe. and Hyundai. On account of its huge market potential. Maruti Suzuki and Mahindra and Mahindra. the country is expecting the arrival of more than a dozen new brands making compact car models. VW Up and VW Polo (Volkswagen). A number of Indian automobile manufacturers including Tata Motors. As a significant milestone in its progress. Volkswagen. Over the next two or three years.At present. the monthly sales of passenger cars in India exceeded 100. have dramatically expanded both their domestic and international operations. Jazz (Honda) and Cobalt. about 75 percent of India’s automobile industry is made up by small cars. Aveo (GM) in addition to several others. Honda. a very low base of car ownership in the country estimated at about 25 per 1. Some of the upcoming cars in the India soil comprise Maruti A-Star (Suzuki).000 people. The country’s active economic growth has paved a solid road to the further expansion of its domestic automobile market. the automotive giants of India including General Motors (GM). the nation is firmly set on its way to become an outsourcing platform for a number of global auto companies. Recently. History of the Automobile industry in India The economic liberalization that dawned in India in the year 1991 has succeeded in bringing about a sustained growth in the automotive production sector triggered by enhanced competitiveness and relaxed restrictions prevailing in the Indian soil. 11 . and a rapidly surging economy.

During the period that followed. General Motors and Ford have started looking at India as a prospective hot destination to establish and expand their operations.The beginnings of automotive industry in India can be traced during 1940s. 12 . automotive component and automobile manufacturing growth remarkably speed-up to meet the demands of domestic and export needs. Therefore. After this. the liberalization policy and various tax reliefs announced by the Indian government over the recent past have pronounced a significantly encouraging impact on this industry segment. scooters and commercial vehicles. Eventually. the period that followed 1970s. Even till those days. However. Like many other nations India’s highly developed transportation system has played a very important role in the development of the country’s economy over the past to this day. witnessed a sizeable growth contributed by tractors. After the nation became independent in the year 1947. several foreign based companies started joint ventures with Indian companies. cars were something of a sort of a major luxury. Indian automobile industry has been growing at a pace of about 18% per year. Estimates reveal that owing to several boosting factors. Experts have an opinion that during the early stages the policies and the treatment by the Indian government were not favorable to the development of the automobile industry. global automobile giants like Volvo. Empowered by its present growth. today the automobile industry in the country can produce a diverse range of vehicles under three broad categories namely cars. the Indian Government and the private sector launched their efforts to establish an automotive component manufacturing industry to meet the needs of the automobile industry. The growth of this segment was however not so encouraging in the initial stage and through the 1950s and 1960s on account of nationalization combined with the license raj that was hampering the private sector in the country. two-wheelers and heavy vehicles. several Japanese manufacturers started joint-ventures for manufacturing motorcycles and light commercial-vehicles. However. During 1980s. One can say that the automobile industry in the country has occupied a solid space in the platform of Indian economy. the country saw the entry of Japanese manufacturers establishing Maruti Udyog.

The New York Times has rated India as a very strong engineering base with an incomparable expertise in the arena of manufacturing a number of low-cost. In the year 2009. Fiat motors has stated that it will source a big volume of auto components from India worth about US$1 billion. In the similar lines. Volkswagen and Suzuki. Hyundai Motors is the largest passenger car exporter and the second largest car manufacturer in the country. Various Segments of the Indian Automobile Industry 13 . General Motors has announced its plans to export not less than 50.000 cars made in India by the year 2011. Hyundai motors exported its 10.Exports of Automobile Industry Today. the feat which was achieved by the firm in just over 10 years. fuel-efficient cars has encouraged the expansion plans of the manufacturing facilities of a number of automobile leaders like Hyundai Motors.000th car. India overtook China by emerging as the fourth largest exporter of cars in Asia.000 cars. Nissan.00. Toyota. The firm has stated that the facility will play a major part in its strategic plan to make India a hub for its global production business. Ford Motors is to setup a manufacturing facility costing about US$500 million in India with an annual capacity of 250. In yet another significant move. On 22 February 2010. In yet another proposal. India is among the world’s largest producers of small cars.

The firm produces about 68% percent of the three wheelers used for passenger transport in India. a number of overseas companies have started grabbing a big chunk of the market share in both domestic and export sales. Potential of Indian Automobile Industry There is a very stiff competition in the automobile industry segment in India. This has helped many to realize their dreams of driving the most luxurious cars. About 40% of the three-wheelers manufactured in India are used for transporting goods with Piaggio manufacturing 40% of the vehicles sold in the Indian market. The Indian passenger vehicle segment is dominated by cars which make up about 80% of it. With some innovative 14 . Every new day dawns in India with some new launches by active players in the Indian automobile arena. While Honda manufactures about 46% of the scooters. Maruti Suzuki manufactures about 52% of passenger cars while the firm enjoys a complete monopoly in the manufacture of multi-purpose vehicles. In the utility vehicles segment Mahindra makes up a 42% share. On the other hand. TVS produces 82% of the mopeds running on the Indian roads. About 50% of the motorcylcles are manufactured by Hero Honda. During the recent past. Tata Motors also enjoys the credit of being the world’s fifth largest manufacturer of medium and heavy commercial vehicles. By introducing some low cost cars. Bajaj has emerged as the leader in manufacturing three-wheelers used for passenger transport.Motor cycles manufacture makes up the major share in the twowheeler segment of the Indian automobile industry. Tata Motors is the leader in the Indian commercial vehicles market while it holds more than 60% share. the industry had made it possible for common men to buy cars for their personal use.

During the same period.96 crores. This achievement will succeed in consolidating India’s position as the seventh largest automobiles manufacturer on the globe.77 crore. Over and above. in the year 2009. Predictions made by Ernst and Young have estimated that the Indian passenger car market will have a growth rate of about 12 percent per annum over the next five years to reach the production of 3. the passenger vehicle segment in the country witnessed a growth of 27 per cent over the last fiscal year by reporting a total revenue of Rs 76. the segment of commercial vehicles witnessed the biggest jump in revenues by 31 per cent by reporting Rs 38. A reply produced in the Lok Sabha recently has quoted data from the Society of Indian Automobile Manufacturers and has revealed that the total turnover of the Indian automobile Industry in April-February 2009-10 was 1. Specifically.28. Nissan Motors has revealed its prospective plans to export 250.62.545.53 crore reported during the same period of last fiscal year. the country emerged as the fourth largest automobiles exporter on the globe following Japan.strategies and by adopting some alternative remedial measures.708. During the current fiscal year.845. General Motors has also come up with similar plans.000 vehicles produced in its India plant by the year 2011.09 crore. This is a remarkable achievement compared with the total revenue of Rs 1.384. These figures imply a highly prospective road lying immediately ahead of the Indian automobile industry. South Korea and Thailand. a number of automobile manufacturers based in India have expanded their operations around the globe also giving way for a number of reputed MNCs to enthusiastically invest in the Indian automobile sector.75 million units by the year 2014. While the automobile industry in India is the ninth largest in the world. As a result the total turnover of the domestic automobile industry increased by about 27 per cent. The analysts have further stated that the industry’s turnover will touch $155 billion by 2016. 15 . the Indian automobile industry has successfully come unaffected out of the global financial crisis. the Indian automobile industry rode high on the resurgence of consumer demand in the country as a result of the Government’s fiscal stimulus and attractively low interest rates.

75 million units and selling about a million units to be operated on the domestic roads. 16 . industry experts believe that the nation will soon establish its stand as an automobile hub exporting about 2.eventually surging forth to become the third largest by the year 2030 behind China and the US. Further. The Automotive Mission Plan launched by the Indian government has envisaged that the country will emerge as the seventh largest car maker on the globe thereby contributing more than 10 percent to the nation’s $1.2-trillion economy.

The more shares you own. ➢ A company does not have to make principal payments Stock/shares play a major role in acquiring capital to the business in return investors are paid dividends to the shares they own. 17 . ➢ A company does not have to make periodic interest payments to creditors. Advantages of selling stock: ➢ A company can raise more capital than it could borrow. The more shares you own. Capital can be acquired in two ways by issuing shares or by taking debt from financial institutions or borrowing money from financial institutions. An efficient market relies on information: a lack of information creates inefficiencies that result in stocks being misrepresented (over or under valued). In the financial world. The more shares you own the more dividends you receive. ownership is called “Equity”. the more dividends you earn when the company makes a profit. Stock is ownership in a company. This is valuable because it fills information gaps so that each individual investor does not need to analyze every stock thereby making the markets more efficient. with each share of stock representing a tiny piece of ownership. The role of equity analysis is to provide information to the market. The owners of the company have to pay regular interest and principal amount at the end.NEED OF THE STUDY To start any business capital plays major role. the more of the company you own.

RESEARCH METHODOLOGY OF THE STUDY Research is often described as an active. SCOPE OF THE STUDY The scope of the study is identified after and during the study is conducted. diligent and systematic process of inquiry aimed at discovering.OBJECTIVES OF THE STUDY The objective of this project is to deeply analyze our Indian Automobile Industry for investment purpose by monitoring the growth rate and performance on the basis of historical data. behavior or theories and makes practical applications through laws 18 . ➢ The scope is limited to only the fundamental analysis of the chosen stocks. Maruti Suzuki and Mahindra . This intellectual investigation produces a greater understanding of events.e. ➢ Suggesting as to which company’s shares would be best for an investor to invest. The project is based on tools like fundamental analysis and ratio analysis. ➢ The analysis is made by taking into consideration five companies i. The main objectives of the Project study are: ➢ Detailed analysis of Automobile industry which is gearing towards international standards ➢ Analyze the impact of qualitative factors on industry’s and company’s prospects ➢ Comparative analysis of three tough competitors TATA Motors. interpreting and revising facts. TATA Motors. Maruti Suzuki and Mahindra and Mahindra through fundamental analysis.

Its primary objective is the advancement of knowledge and the theoretical understanding of the relations among the variables. Basic research often lays down the foundation for further applied research. The sample of the stocks for the purpose of collecting secondary data has been selected on the basis of Random Sampling. The stocks are chosen from the automobile sector .The sample size for the number of stocks is taken as 3 for fundamental analysis of stocks as fundamental analysis is very exhaustive and requires detailed study. practical questions. It is almost always done on the basis of basic research. As far as equity research is concerned there are two types of research methods that are followed: ➢ Fundamental analysis ➢ Technical analysis 19 . and is usually associated with science and scientific method. It is conducted without any practical end in mind. APPLIED RESEARCH: Applied research is done to solve specific. It is exploratory and often driven by researcher’s curiosity or interest. Research design or research methodology is the procedure of collecting. It is usually descriptive in nature. The methodology used in the study for the completion of the project and the fulfillment of the project objectives. The term research is also used to describe a collection of information about a particular subject. analyzing and interpreting the data to diagnose the problem and react to the opportunity in such a way where the costs can be minimized and the desired level of accuracy can be achieved to arrive at a particular conclusion. The stocks are chosen in an unbiased manner and each stock is chosen independent of the other stocks chosen.and theories. BASIC RESEARCH: Basic research is also called as fundamental or pure research. Its primary objective is not to gain knowledge for its own sake.

primary data could not be gathered as the company officials could not be contacted for a one to one interview or a telephonic interview LIMITATIONS OF THE STUDY ➢ This study has been conducted purely to understand Equity analysis for investors.  Secondary data for a project would be the collection of information that has a bearing on the outcome of the project from secondary sources like news. ➢ The study is restricted to three companies based on Fundamental analysis. Internet. In this regard the primary data for this project would be getting the necessary information from the company management by an interview. In this research. The data collected for this project was from a secondary source. the latest developments in this regard. press releases. the management discussions on the part of every company and the government policies concerned with the automobile sector. it involves looking at historical performance data to estimate the future performance of stocks whereas Technical analysis does not care one bit about the value of the company. The data was complied with the help of sources like News articles. telephonic conversation or direct mail. the environment surrounding the telecom sector. DATA COLLECTION:  Primary data for a project is the first hand information regarding the project being studied. Capitaline software. This project deals with the fundamental analysis aspect of the equity research.Financial statement analysis is the biggest part of Fundamental analysis also known as quantitative analysis. 20 . The researcher in this project has tried to look into the details of the financial statements of the companies. internet etc. it is only interested in the price movements of the company s share in the market.

21 . ➢ Suggestions and conclusions are based on the limited data of five years. ➢ Detailed study of the topic was not possible due to limited size of the project.➢ The study is limited to the companies having equities.

CHAPTER II .REVIEW OF LITERATURE 22 .

e. namely fundamental analysis & Technical analysis. 23 . However. The subject of Equity analysis. The value of common stock is determined in large measure by the performance of the firm that issued the stock. the mix is complicated by the risk factors involved. timing and matching actions an investor must conduct deep security analysis. fundamental analysis and technical analysis . There are basically two approaches to study security prices and valuation i. anticipated growth and calculations are based on considered FACTS & not on HOPE. Equity analysis is basically a combination of two independent analysis. In order to carry out selection. the attempt to determine future share price movement & its reliability by references to historical data is a vast one.e. Investors purchase equity shares with two basic objectives. 2. To earn dividend income.Equity analysis Investment success is pretty much a matter of careful selection and timing of stock purchases coupled with perfect matching to an individuals risk tolerance. covering many aspect from the calculating various FINANCIAL RATIOS. In Equity Analysis. and merges them with broader economic analysis and greater industry analysis to formulate the valuation of a stock. the value of the stock will increase. An investor has to carefully understand and analyze all these factors. When values increase then prices follow and returns on an investment will increase. To make capital profits by selling shares at higher prices. i. 1. If the company is healthy and can demonstrate strength and growth. plotting of CHARTS to extremely sophisticated indicators. These two factors are affected by a host of factors. Fundamental analysis examines all the dimensions of risk exposure and the probabilities of return. just to keep the savvy investor on their toes.

industry and company conditions in an effort to determine the value of a company’s stock. It should be pointed out that. watchful attention. but does discuss a method which enables the investor to arrive at buying & selling decision EQUITY ANALYSIS FUNADAMENTAL ANALYSIS TECHNICAL ANALYSIS ECONOMIC ANALYSIS INDUSTRY ANALYSIS COMPANY ANALYSIS FUNDAMENTAL ANALYSIS Fundamental analysis is a method of forecasting the future price movements of a financial instrument based on economic. ruler. Fundamental analysis typically focuses on key statistics in company’s financial statements to determine if the stock price is correctly valued.A general investor can apply the principles by using the simplest of tools: pocket calculator. pencil. chart paper & your cautious mind. The term simply refers to the analysis of the economic well-being of a financial 24 . this equity analysis does not discuss how to buy & sell shares. It is the study of economic. environmental and other relevant factors and statistics that will affect the basic supply and demand of whatever underlies the financial instrument. political.

The basic philosophy underlying the fundamental analysis is that if an investor invests in buying a share of a company. Industry analysis 3. how much expected returns from this investment he has . This approach attempts to study the economic scenario.ANALYSIS 1. about the industry.The fundamental analysis is to appraise the intrinsic value of a security. industry position and the company expectations and is also known as “economic-industry-company approach (EIC approach)” Thus the EIC approach involves three steps: 1. It insists that no one should purchase or sell a share on the basis of tips and rumors.INDUSTRY ANALYSIS 3. It is also known as “top-down approach”. and the economy.COMPANY ANALYSIS entity as opposed to only its price movements.ECONOMIC 2. Economic analysis 2. Company analysis 1. Fundamental analysis is the cornerstone of investing. The fundamental approach calls upon the investors to make his buy or sell decision on the basis of a detailed analysis of the information about the company. ECONOMIC ANALYSIS 25 .

The commonly analyzed macro economic factors are as follows: 1. When the level of economic activity is low. A decrease in interest rate implies lower cost of finance for firms and more profitability. Also. If the economy grows rapidly. Inflation: Along with the growth of GDP. 4. the industry can also be expected to show rapid growth and vice versa. More money is available at a lower interest rate for the brokers who are doing business with 26 . Stock market is a channel through which the savings are made available to the corporate bodies. The savings and investment patterns of the public affect the stock to a great extent. stock prices are low. 3. it increases uncertainty of future business and investment decisions. then the real growth would be very little. it results in extra costs to businesses. Savings and investment: It is obvious that growth requires investment which in turn requires substantial amount of domestic savings. stock prices are high reflecting the prosperous outlook for sales and profits of the firms. As inflation increases. It consists of personal consumption expenditure. Gross Domestic Product (GDP): GDP indicates the rate of growth of the economy. gross private domestic investment and government expenditure on goods and services and net exports of goods and services. The analysis of macro economic environment is essential to understand the behavior of the stock prices. The higher growth rate is more favorable to the stock market. An increase in the expected rate of inflation is expected to cause a nominal rise in interest rates. Savings are distributed over various assets like equity shares. mutual funds. The growth rate of economy points out the prospects for the industrial sector and the return investors can expect from investment in shares. deposits. thereby squeezing their profit margins and leading to real declines in profitability.The level of economic activity has an impact on investment in many ways. It represents the aggregate value of the goods and services produced in the economy. The effects of inflation on capital markets are numerous. real estate and bullion. Interest rates: The interest rate affects the cost of financing to the firms. 2. and when the level of economic activity is high. if the inflation rate also increases.

INDUSTRY ANALYSIS An industry is a group of firms that have similar technological structure of production and produce similar products and Industry analysis is a type of business research that focuses on the status of an industry or an industrial sector (a broad industry classification. like "manufacturing"). 27 . Tax relief’s given to savings encourage savings. 5. Availability of cheap funds encourages speculation and rise in the price of shares. Concessions and incentives given to a certain industry encourage investment in that particular industry. Regular supply of power without any power cut would boost the production. the business community eagerly awaits the Government’s announcement regarding the tax policy. Infrastructure facilities: Infrastructure facilities are essential for the growth of industrial and agricultural sector. Irrespective of specific economic situations. 6. Good infrastructure facilities affect the stock market favorably. Banking and financial sectors also should be sound enough to provide adequate support to the industry. A wide network of communication system is a must for the growth of the economy.borrowed money. This identification of economic and industry specific factors influencing share prices will help investors to identify the shares that fit individual expectations. and share prices in these industries may not decline as much as in other industries. 2. The type of tax exemption has impact on the profitability of the industries. Tax structure: Every year in March. some industries might be expected to perform better.

I. The demand for the product attracts many producers to produce the particular product. Pioneering stage: The prospective demand for the product is promising in this stage and the technology of the product is low. it is difficult to select companies for investment because the survival rate is unknown.Industry Life Cycle: The industry life cycle theory is generally attributed to Julius Groden sky. In this situation. The producers try to develop brand name. differentiate the product and create a product image. The life cycle of the industry is separated into four well defined stages. There would be severe competition and only fittest companies survive this stage. 28 .

It is better to avoid investing in the shares of the low growth industry even in the boom period. The companies have stable growth rate in this stage and they declare dividend to the shareholders. Rapid growth stage: This stage starts with the appearance of surviving firms from the pioneering stage. the competition would be severe. Nature of competition: Nature of competition is an essential factor that determines the demand for the particular product. its profitability and the price of the concerned company scrips. The competition would lead to a decline in the price of the product. The past variability in return and growth in reaction to macro economic factors provide an insight into the future. IV. If too many firms are present in the organized sector. The investor before investing in the scrip of a company should analyze the market share of the particular company's product and should compare it with the top five companies. Symptoms of obsolescence may appear in the technology. The companies' ability to withstand the local as well as the multinational competition counts much. The technology of the production would have improved resulting in low cost of production and good quality products. Maturity and stabilization stage: the growth rate tends to moderate and the rate of growth would be more or less equal to the industrial growth rate or the gross domestic product growth rate. Growth of the industry: The historical performance of the industry in terms of growth and profitability should be analyzed. To keep going. Investment in the shares of these types of companies leads to erosion of capital. The investors have to closely monitor the events that take place in the maturity stage of the industry. III. technological innovations in the production process and products should be introduced.II. It is advisable to invest in the shares of these companies. The companies that have withstood the competition grow strongly in market share and financial performance. 29 . Decline stage: demand for the particular product and the earnings of the companies in the industry decline.

B. presence of numerous players in the market. D. Competitive edge of the company: Major industries in India are composed of hundreds of individual companies. If the market share is high. increase in demand for the industry’s product becomes its strength. The risk and return associated with the purchase of the stock is analyzed to take better investment decisions. the company would be able to meet the competition successfully. Growth of sales: The rapid growth in sales would keep the shareholder in a better position than one with stagnant growth rate. Take for instance. The progress in R & D in that industry is an opportunity and entry of multinationals in the industry is a threat. COMPANY ANALYSIS In the company analysis the investor assimilates the several bits of information related to the company and evaluates the present and future values of the stock. Investors generally prefer size and growth in sales because the larger size companies may be able to withstand the business cycle rather than the company of smaller size. The present and future values are affected by a number of factors. competition becomes the threat to a particular company. the results will be misleading. 3.SWOT analysis: SWOT analysis represents the strength. The companies in the market should be compared with like product groups otherwise. The competitiveness of the company can be studied with the help of the following. The fall in the market share indicates the declining trend of company. only few companies control the major market share. Stability of sales: If a firm has stable sales revenue. C. even if the 30 . opportunity and threat for an industry. Market share: The market share of the annual sales helps to determine a company’s relative competitive position within the industry. weakness.e. In this way the factors are to be arranged and analyzed. it will have more stable earnings. Every investor should carry out a SWOT analysis for the chosen industry. i. A. Though the number of companies is large.

It helps to study the capital structure of the company. Hence the stability of sales should be compared with its market share and the competitor’s market share. Ratios summarize the data for easy understanding. the company's financial situation at a moment in time. liquidity position of the company can also be assessed with the information on current assets and current liabilities. The balance sheet is one of the financial statements that companies prepare every year for their shareholders. earnings do not always increase with increase in sales. Financial ratios provide numerical relationship between two relevant financial data. comparison and interpretations. It is like a financial snapshot. Financial analysis: The best source of financial information about a company is its own financial statements. Further. Financial ratios are calculated from the balance sheet and profit and loss account. listing the company's current assets and liabilities. 31 . the investor should not only depend on the sales.sales are stable. It is prepared at the year end. Earnings of the company: Sales alone do not increase the earnings but the costs and expenses of the company also influence the earnings. It is better for the investor to avoid a company with excessive debt component in its capital structure. The relationship can be either expressed as a percent or as a quotient. E. Hence. The company’s sales might have increased but its earnings per share may decline due to rise in costs. but should analyze the earnings of the company. From the balance sheet. The statement gives the historical and current information about the company’s operations. Historical financial statement helps to predict the future and the current information aids to analyze the present status of the company. This is a primary source of information for evaluating the investment prospects in the particular company’s stock. Financial statement analysis is the study of a company’s financial statement from various viewpoints. Ratio analysis: Ratio is a relationship between two figures expressed mathematically. The two main statements used in the analysis are Balance sheet and Profit and Loss Account.

and price to sales. total asset. machines. higher the ratio. increasing its market share. but how ROA rises will depend on the company's strategy.e. and leverage ratios. present value of cash flows. i. The return on shareholder’s investment should be compared with the return of other similar firms in the same industry. The most often used profitability ratios are return on assets. or product differentiation. a) Return on Assets (ROA) ROA is computed as the product of the net profit margin and the total asset turnover ratios. better are the results. price to cash flow. Companies can have one of two strategies: cost leadership. land and material is made to generate Rs. 25 lakhs of net profit. price to book value. ROA should rise with a successful cost leadership strategy because the company’s increasing operating efficiency. turnover ratios. if an investment Rs 1 crore in men. The inert-firm comparison of this ratio determines 32 .Ratios for investment purposes can be classified into profitability ratios. With a successful product differentiation strategy. b) Return on Investment (ROI) ROI is the return on capital invested in business. return on equity. The computation of return on investment is as follows: Return on Investment (ROI) = (Net profit/Equity investments) x 100 As this ratio reveals how well the resources of a firm are being used.. ROA = (Net Profit/Total income) x (Total income/Total Assets) This ratio indicates the firm's strategic success. An example is an increasing. ROA should be rising or keeping pace with the company's competitors if the company is successfully pursuing either of these strategies. dividend yield. Profitability ratios are the most popular ratios since investors prefer to measure the present profit performance and use this information to forecast the future strength of the company. ROA will rise because of a rising profit margin. turnover ratio as the company expands into new markets. price earnings multiplier. then the ROI is 25%. The company may achieve leadership by using its assets more efficiently. and profit margins.

d) Earnings per Share (EPS) This ratio determines what the company is earning for every share. The computation of return on equity is as follows: Return on equity = (Net profit to owners/value of the specific owner's Contribution to the business) x 100 The ratio is more meaningful to the equity shareholders who are invested to know profits earned by the company and those profits which can be made available to pay dividend to them. EPS is calculated by dividing the earnings (net profit) by the total number of equity shares. c) Return on Equity Return on equity measures how much an equity shareholder's investment is actually earning. The return on equity tells the investor how much the invested rupee is earning from the company. earnings are the most important tool. it gives a view of the comparative earnings or earnings power of a firm. the better is the performance of the company and suggests the usefulness of the projects the company has invested in. EPS calculated for a number of years indicates whether or not earning power of the company has increased. The computation of EPS is as follows: Earnings per share = Net profit/Number of shares outstanding The EPS is a good measure of profitability and when compared with EPS of similar other companies. The higher the number. e) Dividend per Share (DPS) The extent of payment of dividend to the shareholders is measured in the form of dividend per share. For many investors. The dividend per share gives the amount of cash flow from the company to the owners and is calculated as follows: 33 .whether the investments in the firm are attractive or not as the investors would like to invest only where the return is higher.

The payout ratio is computed as follows: Payout Ratio = (Dividend per share / Earnings per share) * 100 The percentage of payout ratio can also be used to compute the percentage of retained earnings. apart from the price differentials (capital gains) in the market. dividend payout gives the extent of inflows to the shareholders from the company. when dividends are not declared. This is the continuous stream of cash flow to the owners of shares. The price at which the share has been bought from the market is the actual cost of the investment to the shareholder. f) Dividend Payout Ratio From the profits of each company a cash flow called dividend is distributed among its shareholders. The return to the shareholders. The market price is to be taken as the cumdividend price. Dividend yield relates the actual cost to the cash flows received from the company. The computation of dividend yield is as follows Dividend yield = (Dividend per share / Market price per share) * 100 High dividend yield ratios are usually interpreted as undervalued companies in the market. The profits available for distribution are either paid as dividends or retained internally for business growth opportunities. while the dividend per share is the 34 . it could also be negatively interpreted as lack of investment opportunities.Dividend per share = Total dividend payment / Number of shares outstanding The payment of dividend can have several interpretations to the shareholder. The distribution of dividend could be thought of as the distribution of excess profits/abnormal profits by the company. In all. The market place provides opportunities for the investor to buy the company's share at any point of time. On the other hand. the entire profit is ploughed back into the business for its future investments. The market price is a measure of future discounted values. Hence. out of the company's profit is measured through the payout ratio. in the form of dividend. g) Dividend Yield Dividend yield is computed by relating the dividend per share to the market price of the share.

This is computed as follows: Price/earnings ratio = Current market price / Earnings per share This ratio is calculated to make an estimate of appreciation in the value of a share of a company and is widely used by investors to decide whether or not to buy shares in a particular company. The purpose is to get an idea of the cushion available to outsiders on the liquidation of the firm. Debt-to-equity ratio = Outsiders Funds / Shareholders Funds The debt-equity ratio is calculated to measure the extent to which debt financing has been used in a business. h) Price/Earnings Ratio (P/E) The P/E multiplier or the price earnings ratio relates the current market price of the share to the earnings per share. A very high P/E ratio on the other hand implies that the company's shares are overvalued and the investor can benefit by selling the shares at this high market price. a high dividend yield implies that the share has been under priced in the market. On the other hand a low dividend yield need not be interpreted as overvaluation of shares. Technical analysis: 35 .present return from the investment. Hence. Many investors prefer to buy the company's shares at a low P/E ratio since the general interpretation is that the market is undervaluing the share and there will be a correction in the market price sooner or later. i) Debt-to-Equity Ratio Debt-Equity ratio is used to measure the claims of outsiders and the owners against the firm’s assets. It indicates the proportionate claims of owners and the outsiders against the firm’s assets. A company that does not pay out dividends will not have a dividend yield and the real measure of the market price will be in terms of earnings per share and not through the dividend payments.

It is the tool of financial analysis. calculating and interpreting graph & chart to assess the performances & status of the price.e. It also provides the base for decision-making in investment. The Technical analysis is helpful to general investor in many ways. It is important criteria for selecting the company to invest. Technical analysis involves the use of various methods for charting. For that matter a variety of tools are used. which not only studies but also reflecting the numerical & graphical relationship between the important financial factors. 36 . i. The focus of technical analysis is mainly on the internal market data.Technical analysis refers to the study of market generated data like prices and volume to determine the future direction of prices movements. It provides important & vital information regarding the current price position of the company. Technical analysis mainly seeks to predict the short-term price travels. prices & volume data. It is the oldest approach to equity investment dating back to the late 19th century. It appeals mainly to short term traders. It is one of the most frequently used yardstick to check and analyze underlying price progress.

CHAPTER III .INDUSTRY PROFILE 37 .

bills. currencies and derivatives. claims and services. equities. bonds. sale of shares and so on. Generally. Financial market is a broad term describing any marketplace where buyers and sellers participate in the trade of assets such as equities. 38 . financial markets are the credit markets catering to the various needs of the individuals. purchase of debentures. costs and fees and market forces determining the prices of securities that trade. They are typically defined by having transparent pricing. deposit of money into a bank.FINANCIAL MARKETS Finance is the pre-requisite for modern business and financial institutions play a vital role in the economic system. Financial markets refer to the institutional arrangements for dealing in financial assets and credit instruments of different types such as currency. it is deemed to have taken place in the financial market. cheques. Wherever a financial transaction takes place. It is through financial markets and institutions that the financial system of an economy works. bonds. there is no specific place or location to indicate a financial market. issue of equity shares. basic regulations on trading. For instance. Hence financial markets are pervasive in nature since financial transactions are themselves very pervasive throughout the economic system. etc. In a nutshell. granting of loan by term lending institutions. firms and institutions by facilitating buying and selling of financial assets. bank deposits.

CLASSIFICATION OF FINANCIAL MARKETS Financial markets Organized markets Unorganized markets Capital Markets Money Markets Money Lenders. Indigenuos Bankers Industrial Securities Market Call Money Market Primary Market Commercial Bill Market Secondary market Treasury Bill Market Government Securities Market 39 .

In the widest sense. 40 . Capital market consists of primary market and secondary market. capital market facilitates raising of capital. Effective allocation of the mobilized financial resources. 2. The major functions performed by a capital market are: 1. it deals with long term securities which have a period of above one year. Securing the foreign capital and know-how to fill up deficit in the required resources for economic growth at a faster rate. Generally.Long-term loan market Capital Market The capital market is a market for financial assets which have a long or indefinite maturity. by directing the same to projects yielding highest yield or to the projects needed to promote balanced economic development. it consists of a series of channels through which the savings of the community are made available for industrial and commercial enterprises and public authorities. Mobilization of financial resources on a nation-wide scale. As a whole. 3.

it deals with raising of fresh capital by companies either for cash or for consideration other than cash. Generally. The derivative itself is merely a contract between two or more parties. A derivative is a security whose price is dependent upon or derived from one or more underlying assets. In other words. commercial bills market. securities which have already passed through new issue market are traded in this market. It consists of a number of sub-markets which collectively constitute the money market namely call money market. It basically deals with those securities which are issued to the public for the first time. Money Market Money markets are the markets for short-term. therefore. This market consists of all stock exchanges recognized by the government of India. which are derived from other forms of assets. Hence it is also called as New Issue Market. and Treasury bill market. makes available a new block of securities for public subscription. Its value is determined by fluctuations in the underlying asset. Primary market: Primary market is a market for new issues or new financial claims. acceptance market. financial instruments like futures contracts or options.1. The most common underlying assets include stocks. Secondary market: Secondary market is a market where existing securities are traded. Derivatives Market The derivatives market is the financial market for derivatives. The best example could be Initial Public Offering (IPO) where a firm offers shares to the public for the first time. highly liquid debt securities. 2. Money market securities are generally very safe investments which return relatively low interest rate that is most appropriate for temporary cash storage or short term time needs. such securities are quoted in the stock exchange and it provides a continuous and regular market for buying and selling of securities. The market. In other words. 41 .

Call options give the option to buy at certain price. commercial companies. so the buyer would want the stock to go up. Infact. interest rates and market indexes. Futures: Future contract is very similar to a forward contract in all respects excepting the fact that it is completely a standardized one. Options: A financial derivative that represents a contract sold by one party (option writer) to another party (option holder). Swaps: It is yet another exciting trading instrument. Foreign exchange markets are made up of banks. to buy (call) or sell (put) a security or other financial asset at an agreed-upon price (the strike price) during a certain period of time or on a specific date (exercise date). Foreign Exchange Market It is a market in which participants are able to buy. currencies. Put options give the option to sell at a certain price. investment management firms. central banks.bonds. The contract offers the buyer the right. The important financial derivatives are the following: Forwards: Forwards are the oldest of all the derivatives. commodity. It is nothing but a standardized forward contract which is legally enforceable and always traded on an organized exchange. sell. exchange and speculate on currencies. and retail forex brokers and investors. hedge funds. but not the obligation. The promised asset may be currency. The forex market is considered to be the largest financial market in the world. it is the combination of forwards by two counterparties. commodities. so the buyer would want the stock to go down. A forward contract refers to an agreement between two parties to exchange an agreed quantity of an asset for cash at a certain date in future at a predetermined price specified in that agreement. It is arranged to reap the benefits arising from the fluctuations in the market – either currency market or interest rate market or any other market for that matter. instrument etc. It is a 42 .

Ahmadabad and Kolkata were established as early as the 19th century. Delhi.) INDIAN FINANCIAL MARKETS India Financial market is one of the oldest in the world and is considered to be the fastest growing and best among all the markets of the emerging economies.worldwide decentralized over-the-counter financial market for the trading of currencies. However the stock markets in India remained 43 . pork. etc. including Mumbai. Bangalore and Pune. etc. whereas soft commodities are agricultural products or livestock (corn. wheat. Hard commodities are typically natural resources that must be mined or extracted (gold. The financial market in India today is more developed than many other sectors because it was organized long before with the securities exchanges of Mumbai. Commodities are split into two types: hard and soft commodities. Today there are 21 regional securities exchanges in India in addition to the centralized NSE (National Stock Exchange) and OTCEI (Over the Counter Exchange of India). but is constructed of a global network of computers that connects participants from all parts of the world. For investors' purposes there are currently about 50 major commodity markets worldwide that facilitate investment trade in nearly 100 primary commodities. Kanpur. rubber. coffee.). oil. selling and trading raw or primary products. It is important to realize that the foreign exchange market is not a single exchange. The history of Indian capital markets dates back 200 years toward the end of the 18th century when India was under the rule of the East India Company. By the early 1960s the total number of securities exchanges in India rose to eight. sugar. they are believed to be the most efficient financial markets. soybeans. Commodities Market It is a physical or virtual marketplace for buying. Because the currency markets are large and liquid. The development of the capital market in India concentrated around Mumbai where no less than 200 to 250 securities brokers were active during the second half of the 19th century. Ahmadabad and Kolkata apart from Madras.

the securities markets witnessed a flurry of IPO’s that were launched. During this phase in India much of the organized sector has been affected by high growth as the financial markets played an all-inclusive role in sustaining financial resource mobilization. The launch of the NSE (National Stock Exchange) and the OTCEI (Over the Counter Exchange of India) during the mid 1990s by the government of India was meant to usher in an easier and more transparent form of trading in securities. The corporate sector wasn't allowed into many industry segments. 44 . which were dominated by the state controlled public sector resulting in stagnation of the economy right up to the early 1990s. The integration of IT into the capital market infrastructure has been particularly smooth in India due to the country’s world class IT industry. A remarkable feature of the growth of the Indian economy in recent years has been the role played by its securities markets in assisting and fuelling that growth with money rose within the economy. This resulted in many new companies across different industry segments to come up with newer products and services. Thereafter when the Indian economy began liberalizing and the controls began to be dismantled or eased out. Many PSUs (Public Sector Undertakings) that decided to offload part of their equity were also helped by the well-organized securities market in India. This has pushed up the operational efficiency of the Indian stock market to global standards and as a result the country has been able to capitalize on its high growth and attract foreign capital like never before. The NSE was conceived as the market for trading in the securities of companies from the large-scale sector and the OTCEI for those from the small-scale sector. This was in marked contrast to the initial phase of growth in many of the fast growing economies of East Asia that witnessed huge doses of FDI (Foreign Direct Investment) spurring growth in their initial days of market decontrol. While the NSE has not just done well to grow and evolve into the virtual backbone of capital markets in India the OTCEI struggled and is yet to show any sign of growth and development.stagnant due to stringent controls on the market economy that allowed only a handful of monopolies to dominate their respective sectors.

to cover both development & regulation of the market. The chief capital market regulatory authority is Securities and Exchange Board of India (SEBI). and contribute in. It had to take drastic measures to plug many loopholes that were exploited by certain market forces to advance their vested interests. The regulation of a capital market involves the regulation of securities. SEBI is headquartered in the popular business district of Bandra-Kurla complex in Mumbai. and independent powers has been set up. Eastern. these rules enable the capital market to function more efficiently and impartially. After this initial phase of struggle SEBI has grown in strength as the regulator of India’s capital markets and as one of the country’s most important institutions. Chaired by C B Bhave. SEBI came into prominence in the 1990s after the capital markets experienced some turbulence. FINANCIAL MARKET REGULATIONS Regulations are an absolute necessity in the face of the growing importance of capital markets throughout the world. A well regulated market has the potential to encourage additional investors to partake. It is the apex body to develop and regulate the stock market in India It was formed officially by the Government of India in 1992 with SEBI Act 1992 being passed by the Indian Parliament. In place of Government Control.The regulating authority for capital markets in India is the SEBI (Securities and Exchange Board of India). Chennai and Ahmedabad. Southern and Western regional offices in New Delhi. and has Northern. ➢ to promote the development of Securities Market. SEBI is the regulator for the securities market in India. a statutory and autonomous regulatory board with defined responsibilities. 45 . The basic objectives of the Board were identified as: ➢ to protect the interests of investors in securities. furthering the development of the economy. Kolkata. The development of a market economy is dependent on the development of the capital market.

insurance companies. underwriters and others. brokers and subbrokers. to transact through the Exchanges. the code of obligations and the code of conduct for different intermediaries like. The improvements in the securities markets like capitalization requirements. bankers to issue. merchant bankers. prescribed registration norms. and also to diversify the trading products.➢ to regulate the securities market and ➢ For matters connected therewith or incidental thereto. 46 . which has made dealing in securities both safe and transparent to the end investor. establishment of clearing corporations etc. risk identification and risk management systems for Clearing houses of stock exchanges. In this context the introduction of derivatives trading through Indian Stock Exchanges permitted by SEBI in 2000 AD is a real landmark. Since its inception SEBI has been working targeting the securities and is attending to the fulfillment of its objectives with commendable zeal and dexterity. A market Index is a convenient and effective product because of the following reasons: ➢ It acts as a barometer for market behavior. reduced the risk of credit and also reduced the market. ➢ It can be used for passive fund management as in case of Index Funds. SEBI has introduced the comprehensive regulatory measures. Two broad approaches of SEBI is to integrate the securities market at the national level. the eligibility criteria. It has framed bye-laws. Another significant event is the approval of trading in stock indices (like S&P CNX Nifty & Sensex) in 2000. ➢ It is used to benchmark portfolio performance. registrars. credit rating agencies. mutual funds. financial institutions. surveillance system etc. portfolio managers. ➢ It is used in derivative instruments like index futures and index options. primary dealers etc. margining. so that there is an increase in number of traders including banks.

selling and dealing in securities.SEBI has enjoyed success as a regulator by pushing systemic reforms aggressively and successively (e. where members of the organization gather to trade company stocks or other securities. BSE was known as "The Native Share & Stock Brokers Association. or as principals for their own accounts. As per the Securities Contracts Regulation Act. STOCK EXCHANGES IN INDIA Stock Exchanges are an organized marketplace.g. regulating and controlling business in buying. In the early days. The members may act either as agents for their customers. established for the purpose of assisting. stands for Bombay Stock Exchange. the quick movement towards making the markets electronic and paperless rolling settlement on T+2 bases). either corporation or mutual organization. The record keeping is central but trade is linked to such physical place because modern markets are computerized." It was established in 47 . 1956 a stock exchange is an association. List of Stock Exchanges in India ➢ Bombay Stock Exchange ➢ National Stock Exchange ➢ OTC Exchange of India BOMBAY STOCK EXCHANGE A very common name for all traders in the stock market. organization or body of individuals whether incorporated or not. BSE. Stock exchanges facilitate for the issue and redemption of securities and other financial instruments including the payment of income and dividends. It is the oldest market not only in the country. SEBI has been active in setting up the regulations as required under law. The trade on an exchange is only by members and stock broker do have a seat on the exchange. but also in Asia.

pursuant to the BSE (Corporatisation and Demutualization) Scheme. 1956. This is recognized worldwide and its index. 48 . 2005 notified by the Securities and Exchange Board of India (SEBI). In the past and even now. In 1956. 1956. SENSEX. BSE obtained a permanent recognition from the Government of India under the Securities Contracts (Regulation) Act. Earlier it was an Association of Persons (AOP).the year 1875 and became the first stock exchange in the country to be recognized by the government. is also tracked worldwide. but now it is a demutualised and corporatised entity incorporated under the provisions of the Companies Act. it plays a pivotal role in the development of the country's capital market.

The framework of it has been designed to safeguard market integrity and to operate with transparency. The Board is an inclusive one and is shaped to benefit from the market intermediaries participation. popularly known as BOLT. The dayto. nationwide. It comprises of eminent professionals. It provides an efficient market for the trading in equity. is a proprietary system and it is BS 7799-2-2002 certified. The Board exercises complete control and formulates larger policy issues." BSE Management Bombay Stock Exchange is managed professionally by Board of Directors. Its online trading system. debt instruments and derivatives.day operations of BSE are managed by the Managing Director and its school of professional as a management team. in 1997. The BSE SENSEX is the benchmark equity index that reflects the robustness of the economy and finance. The BOLT network was expanded.BSE Vision The vision of the Bombay Stock Exchange is to "Emerge as the premier Indian stock exchange by establishing global benchmarks. The surveillance and clearing & settlement functions of the Exchange are ISO 9001:2000 certified. BSE Network The Exchange reaches physically to 417 cities and towns in the country. representatives of Trading Members and the Managing Director. It was the – ➢ First in India to introduce Equity Derivatives ➢ First in India to launch a Free Float Index ➢ First in India to launch US$ version of BSE Sensex 49 . BSE Facts BSE as a brand is synonymous with capital markets in India.

➢ First in India to launch Exchange Enabled Internet Trading Platform ➢ First in India to obtain ISO certification for Surveillance, Clearing & Settlement 'BSE On-Line Trading System’ (BOLT) has been awarded the globally recognized the Information Security Management System standard BS7799-2:2002.

➢ First to have an exclusive facility for financial training ➢ Moved from Open Outcry to Electronic Trading within just 50 days

BSE with its long history of capital market development is fully geared to continue its contributions to further the growth of the securities markets of the country, thus helping India increases its sphere of influence in international financial markets.

NATIONAL STOCK EXCHANGE OF INDIA LIMITED
The National Stock Exchange of India Limited has genesis in the report of the High Powered Study Group on Establishment of New Stock Exchanges, which recommended promotion of a National Stock Exchange by financial institutions (FI’s) to provide access to investors from all across the country on an equal footing. Based on the recommendations, NSE was promoted by leading Financial Institutions at the behest of the Government of India and was incorporated in November 1992 as a taxpaying company unlike other stock Exchange in the country. On its recognition as a stock exchange under the Securities Contracts (Regulation) Act, 1956 in April 1993, NSE commenced operations in the Wholesale Debt Market (WDM) segment in June 1994. The Capital Market (Equities) segment commenced operations in November 1994 and operations in Derivatives segment commenced in June 2000.

NSE GROUP
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National Securities Clearing Corporation Ltd. (NSCCL)
It is a wholly owned subsidiary, which was incorporated in August 1995 and commenced clearing operations in April 1996. It was formed to build confidence in clearing and settlement of securities, to promote and maintain the short and consistent settlement cycles, to provide a counter-party risk guarantee and to operate a tight risk containment system.

NSE.IT Ltd.
It is also a wholly owned subsidiary of NSE and is its IT arm. This arm of the NSE is uniquely positioned to provide products, services and solutions for the securities industry. NSE.IT primarily focuses on in the area of trading, broker front-end and back-office, clearing and settlement, web-based, insurance, etc. Along with this, it also provides consultancy and implementation services in Data Warehousing, Business Continuity Plans, Site Maintenance and Backups, Stratus Mainframe Facility Management, Real Time Market Analysis & Financial News.

India Index Services & Products Ltd. (IISL)
It is a joint venture between NSE and CRISIL Ltd. to provide a variety of indices and index related services and products for the Indian Capital markets. It was set up in May 1998. IISL has a consulting and licensing agreement with the Standard and Poor's (S&P), world's leading provider of investible equity indices, for co-branding equity indices.

National Securities Depository Ltd. (NSDL)
NSE joined hands with IDBI and UTI to promote dematerialization of securities. This step was taken to solve problems related to trading in physical securities. It commenced operations in November 1996.

NSE Facts

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➢ It uses satellite communication technology to energize participation from around 400 cities in India. ➢ NSE can handle up to 1 million trades per day. ➢ It is one of the largest interactive VSAT based stock exchanges in the world. ➢ The NSE- network is the largest private wide area network in India and the first extended C- Band VSAT network in the world. ➢ Presently more than 9000 users are trading on the real time-online NSE application. Today, NSE is one of the largest exchanges in the world and still forging ahead. At NSE, we are constantly working towards creating a more transparent, vibrant and innovative capital market.

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are unable to raise funds through the traditional financing methods. As a measure of success of these efforts. The exchange was set up to aid enterprising promotes in raising finance for new projects in a cost effective manner and to provide investors with a transparent and efficient mode of trading Modeled along the lines of the NASDAQ market of USA. 1956. OTCEI introduced many novel concepts to the Indian capital markets such as screen-based nationwide trading. With their abilities to generate employment opportunities and contribute to the economy. The key issue for these companies is raising timely. market making and scrip less trading. Sonora Tiles & Brilliant mineral water. cost effective and long term capital to sustain their operations and enhance growth. the Exchange today has 115 listings and has assisted in providing capital for enterprises that have gone on to build successful brands for themselves like VIP Advanta. software technology parks of India. Such companies. Need for OTCEI: Studies by NASSCOM. as well as rising interest in IT. 53 . Pharmaceutical. it is essential that these companies not only expand existing operations but also set up new units. particularly those that have been in operation for a short time. which is undergoing a major technological revolution. because they have not yet been evaluated by the financial world. etc. sponsorship of companies. the venture capitals funds and the government’s IT tasks Force. Innovative companies are critical to developing economics like India.OVER THE COUNTER EXCHANGE OF INDIA OTCEI was incorporated in 1990 as a section 25 company under the companies Act 1956 and is recognized as a stock exchange under section 4 of the securities Contracts Regulation Act. Biotechnology and Media shares have repeatedly emphasized the need for a national stock market for innovation and high growth companies.

CHAPTER IV DATA ANALYSIS & INTERPRETATIONS

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ANALYSIS OF AUTOMOBILE INDUSTRY
Over a period of more than two decades the Indian Automobile industry has been driving its own growth through phases. With comparatively higher rate of economic growth rate index against that of great global powers, India has become a hub of domestic and exports business. The automobile sector has been contributing its share to the shining economic performance of India in the recent years. To understand this industry for the purpose of investment we need to analyze it by the following approach:

Fundamental Analysis (E.I.C Approach)
a. Economy analysis b. Industry analysis c. Company analysis

Fundamental Analysis
Fundamental analysis is the study of economic, industry and company conditions in an effort to determine the value of a company s stock. Fundamental analysis typically focuses on key statistics in company s financial statements to determine if the stock price is correctly valued. Most fundamental information focuses on economic, industry and company statistics. The typical approach to analyzing a company involves three basic steps: 1. Determine the condition of the general economy. 2. Determine the condition of the industry. 3. Determine the condition of the company.

1. ECONOMY ANALYSIS
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Economic analysis is the analysis of forces operating the overall economy a country. Economic analysis is a process whereby strengths and weaknesses of an economy are analyzed. Economic analysis is important in order to understand exact condition of an economy.

56

India is 16th in the world in terms of nominal factory output.chart showing contributions of different sectors in Indian economy. 57 . The service sector is growing rapidly in the past few years. This is the pie.GDP and Automobile Industry In absolute terms.

60 percent in December of 2002.9 percent in the third quarter of 2011 over the previous quarter. As the world economy slipped into recession hitting the demand hard and the banking sector takes conservative approach towards lending to corporate sector. from 2000 until 2011. a wide range of modern industries.Today.80 percent in December of 2003 and a record low of 1. modern agriculture. India's average quarterly GDP Growth was 7. handicrafts. Directly and indirectly it employs more than 10 million people and if we add the number of people employed in the auto-component and auto ancillary industry then the number goes even higher.45 percent reaching an historical high of 11. India's diverse economy encompasses traditional village farming. Services are the major source of economic 58 . automobile sector in India is one of the key sectors of the economy in terms of the employment. Historically. and a multitude of services. The Gross Domestic Product (GDP) in India expanded 6.

7%. but growth rate in last FY2008-09 was only 0.7% with passenger car sales shows 1. These are few signs of the revolutionized auto industry after recession. Passenger Vehicles segment registered negative growth. accounting for more than half of India's output with less than one third of its labor force. Nissan Motors which is a well known Japanese car making company regarded India automobile market as a global car manufacturing hub for future and invested huge amount in our market. The automotive industry in India grew at a computed annual growth rate (CAGR) of 11. But it is in a good shape now. These companies have major plans lined up for India auto industry. Much of this optimism resulted from renewed interest being shown in India auto industry by reputed overseas car makers. Global recession has hit the Indian auto industry. There are some other automobile companies of world who have shown interest in India auto market.31% growth while Commercial Vehicles segment slumped 21. reducing poverty by about 10 percentage points.5 percent over the past five years. Major names among these are General Motors. 59 . All the major auto companies enjoyed the high growth ride till the mid 2008. industry had to face the hard truth and witnessed the fall in sales compared to last year. The economy has posted an average growth rate of more than 7% in the decade since 1997. Skoda Auto and Mercedes-Benz. overall production fell by 22 % over the same month last year. The market value of Automobile Industry is more than US$8 bl. Recession Auto industry in India had been hit hard by ongoing global financial recession. In December 2008.growth. and Contribution in Indian GDP is near about 5% and will be double by 2016. But at the end of the year. India is strong and growing industry but the impact of recession is evident now on industry as sales & growth of automobile companies have declined.

17 million vehicles in 2008-09. Indian automobile Industry was not as much affected and experts think that Indian automobile industry will continue to grow this year despite all obstacles.oil price hike. Passenger vehicles increased marginally from 1.43 percent fall in December 2008 over the same month last year.85 % during April – December 2008. The increase in the price of fuel and the steel due to inflation has led to a slower growth rate of the car industry in India.41 million. In last FY despite of skyrocketing oil prices (crude oil price has already up to $130 compared to $20 per barrel five years back). Total number of vehicles sold including passenger vehicles. higher interest rates. while revising its inflation forecast for the FY through March to around 5% from 4%. commercial vehicles. The effect of inflation has affected every sector which is related to car manufacturing and production.72 million as compared to 9.86% over December 2007 Two Wheelers registered minor growth of 1.One of its supporting facts is that the sales in December 2008 for passenger vehicles fell by 13.85 million vehicles in 2007-08 to 11. The fall in wholesale prices from a year earlier is mainly due to a statistical base effect and doesn’t suggest contraction in demand.21% on 22-Aug-09) we saw an increasing trend of sales in auto sector. Inflation The rise in inflation will have adverse impact on the industry that will not only see interest rates getting further hardened but also a drop in demand due to the squeeze in purchasing power. A moderate amount of inflation is important for the proper growth of an economy like India because it attracts more private investment. overall production (passenger vehicles.83 million while two-wheelers increased from 8.77 million to 1. Two Wheelers sales recorded 15. Although the sector was hit by economic slowdown. commercial vehicles.65 million in 2007-08. the Reserve Bank of India said few week back. The effect of inflation has taken the rise in the 60 . Despite of negative inflation these days (-. two-wheelers and three-wheelers in 2008-09 was 9. two wheelers and three wheelers) increased from 10. However.02 million to 8.

61 . The car market and the car industry witnessed a fall of 8-9%.price rate of the cars by 3-4% which in turn suffices the need to meet the rise in price of the raw materials to build a car.

The Indian automobile sector is far from being saturated. 2. the Indian automobile market continues to perform better than most of the other industries in the economy in coming future. INDUSTRY ANALYSIS (AUTOMOBILE) The automobile industry in India is the ninth largest in the world with an annual production of over 2. Exports Despite recession. South Korea and Thailand. In 2009. The increase in the demand for cars. This has contributed largely in making India a prime destination for many international players in the automobile industry who wish to set up their businesses in India.3 million units in 2008. The Automobile Industry is one of the fastest growing sectors in India.24 percent. behind Japan. estimated rate of growth of India Auto industry is going to be 9% . India emerged as Asia's fourth largest exporter of automobiles. and other vehicles. powered by the increase in the income is the primary growth driver of the automobile industry in India. leaving ample opportunity for volume growth. more and more MNC’s coming in India to setup their ventures which clearly shows the scope of expansion. During April-January 2010.Foreign Direct Investment The automobile sector in the Indian industry is one of the high performing sectors of the Indian economy. In 2009. Segmentation of Automobile Industry 62 . Automatic approval for foreign equity investment up to 100 per cent of manufacture of automobiles and component is permitted. overall automobile exports registered a growth rate of 13.

so the automobile sector can be very well be said to be in the growth phase. Following is the segmentation that how much each sector comprises of whole Indian Automobile Industry. tempos. tractors). The industry is growing rapidly. passenger cars. buses.The automobile industry comprises of Heavy vehicles (trucks. Business strategies are developing. and there is high risk of failure. The Indian automobile sector has passed this stage quite successfully. Environmental factors internal to the firm usually can be classified as strengths (S) or weaknesses (W). Swot analysis: A scan of the internal and external environment is an important part of the strategic planning process. Indian Automotive Industry is booming with a growth rate of around 15 % annually. In the pioneer phase. maturity and decline. Two-wheelers. and Three-wheelers. However. Commercial Vehicles. and those external to the firm can be classified as opportunities (O) or 63 . Industry life cycle classification generally groups industries into one of four stages: pioneer. growth. The growth rate of the automobile industry in India is greater than the GDP growth rate of the economy. often at an accelerating rate of sales and earnings growth. the product has not been widely accepted or adopted. Industry life cycle The industrial life cycle is a term used for classifying industry life over time. successful companies can grow at extraordinary rates.

Threats ➢ Ignorance of Research & development ➢ Rising interest rates ➢ Cut throat competition 64 . ➢ Heavy mining activity ➢ Increase income level ➢ Cut in excise duties in the and thrust on construction in consumer technology and 4.threats (T). Such an analysis of the strategic environment is referred to as a SWOT analysis. development. globalization. SWOT analysis of the Indian automobile sector gives the following points: 1. Weaknesses ➢ Low labor productivity ➢ High interest costs and high overheads make the production uncompetitive ➢ Various forms of taxes push up the cost of production ➢ Low investment in Research and Development ➢ Infrastructure bottleneck 3. Opportunities ➢ Increasing challenges demands. Strengths ➢ Large domestic market ➢ Sustainable labor cost advantage ➢ Competitive auto component vendor base ➢ Government incentives for manufacturing plants ➢ Strong engineering skills in design etc 2.

25660. a decline of 60. what are the future plans of the company. 65 .3.1001. COMPANY ANALYSIS The company analysis shows the long-term strenght of the company that what is the financial position of the company in the market.47 crores in 2007-08. what are the policies of government towards the company and how the stake of the company divested among different groups of people. I have taken three companies namely TATA Motors.93 crores) in 2008-09.2576.79 crores compared to Rs. It is the leader in commercial vehicles in each segment. with consolidated revenues of Rs. Revenues (net of excise) for the year were Rs.2028. Tata Motors Limited is India’s largest automobile company.28739.41 crores in 2007-08.26 crores compared to Rs.7%. The Profit after Tax for the year was Rs.519 crores (USD 20 billion) in 2009-10. The company is the world's fourth largest truck manufacturer. Maruti Suzuki and Mahindra and Mahindra for the purpose of fundamental analysis. midsize car and utility vehicle segments.1013. a decline of 50. and the world's second largest bus manufacturer. a decline of 10. Tata Motors Limited is India's largest automobile company. midsize car and utility vehicle segments. and among the top three in passenger vehicles with winning products in the compact.27 crores (2007-08: Rs. It is the leader in commercial vehicles in each segment.92 crores. The Profit before Tax was Rs.76 crores compared to Rs.33093. a year marked by severe demand contraction in the automobile industry. reported gross revenue (standalone) of Rs. The company is the world’s fourth largest truck manufacturer.7%.7%. 92. Here. and the world’s second largest bus manufacturer. where it stands among its competitors and who are the key drivers of the company. and among the top three in passenger vehicles with winning products in the compact.28599.

66 . Total passenger car sales in August 2009 increased 30. 2007. The company's domestic sales in August 2009 increased 29. As of May 10. A star. Maruti Suzuki is one of India's leading automobile manufacturers and the market leader in the car segment. compared to 5.908 vehicles in the same period of 2008. it has produced and sold over 7. Until recently. Since inception.629 units.583 Million & Profit after Tax at Rs. of India no longer has stake in Maruti Udyog. Estillo and sedans Dzire. has sold a total of 84. Its turnover for the fiscal 2008-09 stood at Rs. and 54.847 units. both in terms of volume of vehicles sold and revenue earned.961 vehicles.28% of the company was owned by the Indian government.187 Million. With this.113 vehicles in August 2008.2% by Suzuki of Japan. 18.808 vehicles in August 2009. of India sold its complete share to Indian financial institutions.5% to 69. They offer a full range of cars – from entry level Maruti 800 & Alto to stylish hatchback Ritz. More than half the numbers of cars sold in India wear Maruti Suzuki badge.6%.3% to 69. compared to 53. Wagon R.2% to 14. compared to 59. an increase of 41.351 units in August 2008 The company's exports increased 156.795 units in August 2008. Govt. Govt. 203.Maruti Suzuki is a subsidiary of Suzuki Motor Corporation Japan. compared to 54. 12.5 million vehicles in India and exported over 500. SX4 and Sports Utility Vehicle Grand Vitara. Swift. Maruti Suzuki India Ltd.000 units to Europe and other countries.

During the fiscal year ended March 31. 67 . The Company operates in nine segments: automotive segment comprises of sales of automobiles. aftermarket. information technology (IT) services comprises of services rendered for IT and telecom. the Company acquired a 70% stake in Ssangyong Motor Company Limited. spare parts and related services. The Automotive Sector continues to be a leader in the utility vehicle segment with a diverse portfolio that includes mass transport as well as new generation vehicles like Scorpio. hospitality segment comprises of sale of timeshare. leasing and hire purchase of automobiles and tractors. and currently accounts for about half of India’s market for utility vehicles. Systech segment comprises of automotive components and other related products and services. It is the market leader in utility vehicles in India since inception. 2011. farm equipment segment comprises of sales of tractors. and its others segment comprise of logistics.The Mahindra Group’s Automotive Sector is in the business of manufacturing and marketing utility vehicles and light commercial vehicles. spare parts and related services. including three-wheelers. financial services comprise of services relating to financing. steel trading and processing comprises of trading and processing of steel. infrastructure comprise of operating of commercial complexes. Bolero and the recently launched Xylo. two wheelers and investment. project management and development.

351.869.05 514.65 634.013.742.65 7.54 0.00 385.78 12.898.818.75 2.00 0.04 1.0 5 16.912.07 25.05 0.251.120.41 0.60 0.69 25.461.60 8.839.TATA MOTORS Balance Sheet of Tata Motors ------------------.39 25.95 6.766.625.06 0.14 10.7 5 35.00 0.19 20.02 68 .987.70 8.50 5.45 24.63 25.91 13.65 3.00 0.00 385.883.559. Cr.00 6.165.3 0 570.53 7.208.60 570.54 385.83 14.280.878.00 19.022.56 6.00 0.91 2.00 Mar '09 Mar '08 Mar '07 514.05 7.009.428.99 3.15 7.51 14.in Rs.41 385.8 9 14.27 7.855.913.429.803.55 11.394.458.4 0 24.52 Total Liabilities 31.132.31 15. ------------------- Mar '11 Mar '10 Sources Of Funds Total Share Capital Equity Share Capital Share Application Money Preference Share Capital Reserves Revaluation Reserves Networth Secured Loans Unsecured Loans Total Debt 634.10 4.

909.96 4.203.48 10.647.443.39 2.00 0.968.98 10.229.58 10. Depreciation Net Block Capital Work in Progress Investments Inventories Sundry Debtors Cash and Bank Balance Total Current Assets Loans and Advances Fixed Deposits Total CA.416.775.21 12.672.81 1.555.27 2.910.65 2.4 19.04 4.80 6.421.92 638.88 2.00 16.831.15 22.70 4.891.740.318.13 4.13 1.2 1 22.20 69 .43 18.90 12.6 9 12.20 638.364.830.26 2.058.956.935.064.133.17 10.852.029.329.477.466.954.513.83 1.883. Loans & Advances Deffered Credit Current Liabilities Provisions Total CL & Provisions 21.846.248.645.90 5.040.16 7.18 5.18 535.624.963.391.17 3.89 7.52 5.95 10.83 8.14 4.4 2 0.91 6.00 15.208.73 750.23 0.232.80 8.88 1.53 290.06 5.763.10 14.130.00 2.42 5.32 3.79 612.775.56 5.00 8.75 503.36 1.67 5.781.17 4.37 6.302.00 0.818.423.95 782.Application Of Funds Gross Block Less: Accum.43 1.989.54 3.31 5.417.222.32 2.0 7 11.59 2.968.71 1.73 12.881.92 13.3 2 18.905.500.790.836.30 10.81 13.78 3.259.909.939.602.6 1 0.25 7.321.27 6.71 2.894.141.212.387.26 1.336.877.

93 259.798.912.25 0.83 202.07 240.343.69 25.196.433.997.878.22 10.02 -1.248.708.8 9 31.590.83 14.83 3.57 6.120.0 Net Current Assets Miscellaneous Expenses Total Assets -4.187.07 177.429.05 1.59 70 .33 314.79 -7.63 2.02 Contingent Liabilities Book Value (Rs) 4.09 10.0 5 0.559.03 5.64 5.70 5.00 -2.00 35.009.

289.62 52.53 25.69 4.94 1.92 33.54 4.42 1.63 37.355.86 606.197.39 866.10 47.438.95 1.19 2.2 4 341.879.67 921.65 1.753.13 1.089.49 964.790.63 28.41 1. ------------------- Mar '11 Mar '10 Income Sales Turnover Excise Duty Net Sales Other Income Stock Adjustments Total Income Expenditure Raw Materials Power & Fuel Cost Employee Cost Other Manufacturing Expenses Selling and Admin Expenses Miscellaneous Expenses 35.373.110.19 1.44 26.957.31 1.10 2.367.20 2.173.126.53 354.9 9 35.664. Cr.29 1.29 -238.801.891.31 4.551.39 Mar '09 Mar '08 Mar '07 28.60 31.02 1.38 349.220.56 327.652.Profit & Loss account of Tata Motors ------------------.91 734.23 1.660.28 25.366.067.707.17 -40.425.57 904.12 362.505.544.37 304.89 20.48 29.200.128.877.067.800.78 18.836.0 5 471.95 2.49 2.78 19.06 71 .8 7 38.25 1.33 325.343.46 1.461.652.63 2.in Rs.051.114.68 28.047.123.294.538.04 26.22 48.60 2.767.83 872.

047.53 Mar '09 1.764.05 12.829.586.44 1.25 -577.79 1.25 Mar '11 Mar '10 Operating Profit PBDIT Interest PBDT Depreciation Other Written Off Profit Before Tax Extra-ordinary items PBT (Post Extra-ord Items) Tax Reported Net Profit Total Value Addition Preference Dividend Equity Dividend Corporate Dividend Tax Per share data (annualised) 4.576.7 4 -740.70 589.26 4.75 3.68 43.80 132.00 578.97 0.700.54 51.032.92 4.56 3.29 85.14 586.13 652.427.23 859.028.013.196.00 311.52 3.89 72 .196.10 2.007.383.54 384.723.829.811.705.46 1.253.274.83 5.37 1.939.Preoperative Exp Capitalised Total Expenses -817.00 0.91 Mar '08 3.52 2.46 4.547.35 2.40 25.09 -916.030.05 192.77 1.89 455.42 Mar '07 2.29 1.558.82 2.25 5.360.17 144.00 0.240.72 4.54 31.39 704.55 2.76 15.913.02 2.05 24.696.898.47 0.69 1.033.00 1.573.001.46 4.25 3.47 874.76 660.245.16 0.293.605.86 0.644.47 547.699.07 98.02 23.69 6.246.43 81.87 106.663.576.17 1.131.00 578.09 -1.69 471.51 3.947.00 2.54 0.31 64.805.08 8.00 2.83 -0.50 1.029.58 0.92 1.03 2.07 2.61 34.580.52 2.573.

70 3.00 9.50 144.50 144.00 177.90 73 .74 49.00 0.08 19.415.00 0.00 0.64 3.9 0 63.20 26.00 144.867 11.10 900.55 200.14 5.65 150.30 13.00 6.705.80 8.50 144.00 144.690.855.00 8.90 6. 11.00 0.00 240.50 0.40 0.in Rs.50 0.00 0.00 0.200. Cr.853.4 0 0.00 314.1 .10 794.50 144.50 567.709.50 0.90 0.40 00 0.60 9.00 0.346.50 144.00 144.04 52.00 259.10 0.50 0 31.723.50 0.03 5.26 150.853.63 150.50 278.50 144.835.00 202.140.58 28.270. ------------------- Mar '11 Sources Of Funds Total Share Capital Equity Share Capital Share Application Money Preference Share Capital Reserves Revaluation Reserves Networth Secured Loans Unsecured Loans Mar '10 Mar '09 Mar '08 Mar '07 144.Shares in issue (lakhs) Earning Per Share (Rs) Equity Dividend (%) Book Value (Rs) MARUTI SUZUKI 6.10 698.93 39.00 0.00 13.344.59 Balance Sheet of Maruti Suzuki India ------------------.48 60.

296.382.529.00 2.7 0 238.0 0.024.30 5. 10.2 0 Net Block 4.5 0 736.20 655.20 1.30 821.00 747.737.30 Investments 3.146.285.700.315.484.308.00 1. Depreciation 3.50 1.50 98.070.5 .80 7.Total Debt Total Liabilities 309.30 918.116.176 12.415.3 5.8 0 Mar '09 900.80 2.487.0 1.173.7 0 2.90 95.40 14.00 0.90 3.80 0 893.659.3 1. 5.428.40 Loans and Advances 1.038.7 0 Mar '07 Application Of Funds Gross Block 11.90 10.406.739.6 387.720.072.180.80 Less: Accum.575.60 0 5.6 0 Mar '08 630.413.043.626. 7.10 0 2.20 4.70 40 1.00 74 .208.60 70 1.00 0 2.90 0 1.00 0 5.656.649.208.70 8.00 713.10 3.20 9.80 0 Mar '11 Mar '10 698.40 114.50 324.30 6.017.8 2.176.60 70 6.30 Inventories Sundry Debtors Cash and Bank Balance Total Current Assets 902.90 239.80 3.809.80 Capital Work in Progress 861.30 809.80 7.060.106.173.409.00 1.403.988.80 1.60 Fixed Deposits 1.

788.40 0 2.805.70 323.315.60 369.5 .856.80 0 Contingent Liabilities Book Value (Rs) 5.00 0.331.00 5.9 0 0.90 2.20 0 479.00 3.631.40 0.288.160.484.250.50 490.0 3.60 3.734. 67.10 0.190.956.00 0.99 409.8 0 102.00 10.938.65 1.00 0.043.00 0 525. Loans & Advances Deffered Credit Current Liabilities Provisions Total CL & Provisions 6.6 3.70 3.779.00 2.00 0 0.10 1.28 237.50 3.00 0.00 7.112.40 2.570.657.20 2.176 12.443.00 9.901.60 10 0.1 3.40 4.094.23 75 .2 3.Total CA.450.90 380.718.656.00 3.60 291.45 2.6 0 14.50 3.088.7 0 Net Current Assets Miscellaneous Expenses Total Assets 1.176.00 0.80 628.

20 523.60 1.856.70 .10 0 147.26 239.87 289.00 36.4 17.30 Preoperative Exp Capitalised -25.30 Mar '10 Mar '09 Mar '08 Mar '07 32.Profit & Loss account of Maruti Suzuki India ------------------.729.304.70 -356.066. Cr.60 73.0 0 216.1 14.358.60 2.17 817.1 23.2 13.949.10 1.958.30 356.381.80 0 97.44 -14.5 18.60 0 494.200.40 483.70 30.552.636.50 4.00 29.00 200.66 201.561.3 15.00 210.317.20 703.864.00 336.5 21.7 20.73 0.897.00 236.in Rs.3 10.60 716.40 1.30 76 1.10 -200.30 521.40 2.50 784.806.865.4 18.60 471.032.10 3.983.419.30 0 338.60 545.60 0 193.62 -19.90 0 491.8 0 0 0 0 22.40 392.8 14.40 288.863.153.84 -22.880.6 20.4 0 662.73 40.20 37. ------------------- Mar '11 Income Sales Turnover Excise Duty Net Sales Other Income Stock Adjustments Total Income Expenditure Raw Materials Power & Fuel Cost Employee Cost Other Expenses Selling and Admin Expenses Miscellaneous Expenses Manufacturing 28.4 0 0 0 0 2.180.133.174.652.061.943.48 287.

55 79.45 36.07 44.63 59.33 Mar '10 39.65 54.88 Interpretations EPS measures the profit available to the equity shareholders per share. 77 . MARUTI SUZUKI AND MAHINDRA & MAHINDRA EARNINGS PER SHARE Mar '11 Tata Motors Maruti Mahindra 28. Till 2010 TATA and Maruti had a rising EPS but in 2011 both of them fall and the effect is more on Tata motors because of the slump in domestic and international markets and sharp fall in sales and net profits which resulted in low EPS.RATIO ANALYSIS OF TATA MOTORS. Mahindra is not much affected as its sales have increased from the previous year.48 42.21 45. that is the amount that they can get on every share held.18 30.26 86.15 Mar '07 49.69 Mar '08 52.89 Mar '09 19. But as trend shows Mahindra motors has potential so a shareholder can expect better in future.91 46.

668. Maruti and Mahindra are going swiftly.94 Mar '07 31.55 Mar '10 38.20 23.200.865.10 20. Though slowdown in the economy brought hurdles but these companies have potential to grow in future as lots of products are still to add in their portfolio.089.87 Maruti Mahindra 40.50 14. TATA has witnessed a decline in sales of each segment.40 12.99 Interpretations Maruti and Mahindra show a positive trend in sales over the past five years.123.13 Mar '08 33.358.323.SALES Mar '11 Tata Motors 52.69 17. Moreover increased demand in foreign market also seems to be a positive signal for better future.63 Mar '09 28.067.381.231.40 11.50 25. 78 .569.174.54 21.538.894.39 32.173.

5 10 15 5 11. RETURN ON INVESTMENT (ROI) 79 . Therefore Mahindra would be the best option for an investor. but the scenario changed in 2009 as both the company’s dividend per share fell but again raised from 2010 .5 15 6 9.10 per share this year.DIVIDEND PER SHARE Mar '11 Mar '10 Mar '09 Mar '08 Mar '07 Tata Motors Maruti Mahindra 20 7.5 per share in 2008 to rs.5 6 3. According to graph Tata’s dividend has fallen drastically while Maruti stick to below 5 per share.11.5 Interpretations Tata motors and Maruti Suzuki both the companies showed a positive trend in paying dividends till 2008. Mahindra has made a slight reduction from rs.5 11.5 11.5 15 4.

18 Interpretations ROI is one of the most important ratios used for measuring the overall efficiency of a firm and determines whether the investments in the firms are attractive or not.Mar '11 Mar '10 Mar '09 Mar '08 Mar '07 Tata Motors Maruti 9.03 25.04 25.92 26. Maruti’s ROI has also declined but Mahindra’s ROI is showing a higher rate compared to TATA and Maruti in 2009.15 21.1 8.06 16. ROI of TATA has declined to a large extent in 2009.5 15.79 Mahindra 25. According the graph.56 28 22. making it a quite risky investment.74 16. 80 . Mahindra would be attractive for investment. As the investors would like to invest only where the return is higher.51 30.98 20.09 13.

09 29.39 Mahindra 30.96 11 44.51 9.87 34.78 29.29 32.7 37. Both TATA and Mahindra have increased their payout ratio in which Mahindra shows a higher payout ratio.52 9. 81 .72 30.DIVIDEND PAYOUT RATIO Mar '11 Mar '10 Mar '09 Mar '08 Mar '07 Tata Motors Maruti 80. Maruti has maintained a stable payout ratio.28 8.15 Interpretations Dividend payout ratio is the percentage of earnings paid to shareholders in dividends.1 35. It provides an idea to an investor of how well earnings support the dividend payments.34 9.

SUGGESTIONS & CONCLUSION 82 .CHAPTER V FINDINGS.

➢ The sales trend has been upward and positive in case of all the three companies. ➢ In case of dividend per share. the dividends per share have declined in all the three companies. Maruti Suzuki and Mahindra and Mahindra. TATA and Mahindra have increased their payout ratio in which Mahindra shows a higher payout ratio. Increase in income level. globalization. But there was a downward trend in 2009 but again from 2010 it was upward. Mahindra has the highest ROI in 2009. the following findings have been given: ➢ The three companies were performing well till 2008 with a positive trend in the earnings per share. Due to recession. technology development. By analyzing the current trend of Indian Economy and Automobile Industry I have found that being a developing economy there is lot of scope for growth and this industry still has to cross many levels so there are huge opportunities to invest in and this is being proved as more and more foreign companies are setting up there ventures in India. TATA has witnessed a steep fall in the year 2009. Tata’s dividend has fallen drastically while Maruti stick to below 5 per share. ➢ Maruti had a stable dividend payout ratio since 2007. Tata Motors.5 per share in 2008 to rs. foreign 83 .11.FINDINGS From the data analysis and interpretations of the ratios of three companies’ viz. there were fluctuations during the period 2007.10 per share this year.2011. Mahindra has made a slight reduction from rs. The sales growth looks positive but in the year 2009. Compared to the three companies. TATA’s sales have declined whereas Maruti and Mahindra have maintained the same upward positive trend. increase in consumer demand. ➢ The return on investment has been fluctuating since 2007 and the year 2011 witnessed low returns in case of all the companies amongst which TATA has the least rate of return. Especially.

investments are few of the opportunities which the industry has to explore for developing the economy. 84 .

as it already went on high side in a very short period of time and is experiencing a downfall from 2008. the sales of Maruti Suzuki increased from Rs 21200 Crore to Rs 23381 Crore. we can know that Mahindra would be a better option for an investor compared to TATA and Maruti. Maruti Suzuki and Mahindra and Mahindra have outperformed in the industry. TATA Motors. Its Return on Investment is much higher compared to TATA and Maruti. Its Earnings per share has also declined drastically. So recommending investing in Automobile industry with no doubt is going to be a good and smart option because this industry is booming like never before not only in India but all over the world. Holding the shares for long time could be a wrong step and at this point of time those 85 . From the company analysis. In view of the slump in the domestic and international market.10 which is higher amongst the three companies. In view of all these. TATA has recorded a slowdown in sales and income level. it can be recommended that for now Maruti share price shows that it’s a time to hold the position or buy more shares as there is scope of further rise in share prices. The dividend per share is rs. Mahindra has maintained its upward sales level. The company has potential to grow.6 in 2009. TATA is not a better option for an investor. Investing in Maruti Suzuki for long time could be a good option whereas in TATA motors there is a chance of getting correction.15 in the previous year to rs. it has been revealed that this industry has a lot of potential to grow.SUGGESTIONS By analyzing the automobile industry with the help of fundamental analysis. Despite the challenging business environment. The three giants of Indian Automobile industry viz. It has reduced its dividend per share from rs. The return on investment is also very low. Inspite of the general economic slowdown. Its sales have grown over past five years. The company is maintaining a stable position. The global turmoil in financial markets has affected Maruti also. As it is maintaining a stable position. It would be the best option for the investor.

As Mahindra’s shares are undervalued. This is because a relatively lower P/E would save investors from paying a very high price that does not justify the value of an investment.who invested earlier can book their profits. 86 . the investor can buy these shares.

Recommendation By analyzing the industry on various parameters Automobile Industry have no doubt is going to be a good and smart option because this industry is booming like never before not only in India but all around the world. ➢ Disciplined investment during market volatility helps attains profits. capital needs of the company for expansion etc. An investor needs to choose valuation parameters which suit its business. Knowledge and Discipline are very crucial for investment. ➢ Long term goals should be the objective of equity investment. Balance Sheet: The investor must focus on its key financial ratios such as earnings per share. Investment rules ➢ Invest for long term in equity markets ➢ Align your thought process with the business cycle of the company. Bargaining: This is the most important factor which shows the true worth of the company. its past track record. ➢ Set the purpose for investment. visibility of the business. price-earning ratio. debt-equity ratio.Few Suggestions for “Right Stock Selection” There are three factors which an investor must consider for selecting the right stocks. dividends per share etc and he must also check whether the company is generating cash flows. Business: An investor must look into what kind of business the company is doing. The numbers which came out in the end of financial year 2009 prove that even in the period of recession the overall sales went up is sufficient to 87 . ➢ Planning.

so at this point of time those who invested earlier can book their profit or new investors can buy now and sell with in short period of time by earning profit in short period of time.support to this fact. as it already went on high side in a very short period of time so holding the shares for long time could be a wrong step. Investing in Maruti Suzuki for long time could be a good option whereas in TATA motors there is a chance of getting correction. 88 .

the tight monetary policies followed by the authorities for most of the year to control inflation with the consequent high interest rates and weak consumer demand. The analysis gives an optimistic view about the industry and its growth which recommends the investors to keep a good watch on the major players to benefit in terms of returns on their investments. Acquiring JLR saddled Tata with some tough losses. A runaway inflation touching a high point of 12% early in the year. At present its shares are undervalued giving it a potential for growth. The downfall of net profit during the financial year 2008-09 is 29. have collectively had a devastating effect on the automotive sector. Inspite of it being a tough year for all the companies across the globe and in India. Amid the crippling economic crisis. 89 . which was trying to consolidate its leadership position in the market. also had to face the impact of global meltdown. A continuous effort at cost cutting and improving productivity will help the companies in making reasonable profits despite the impact of higher commodity prices and weaker rupee. Dividends and earnings remain low. During the financial year 2008-09 the there is downfall in the growth of the company. Mahindra has given a satisfactory performance.6% over the financial year 2007-2008. lots of new car and vehicle model launches at regular intervals keeps the Indian auto sector moving. Global recession had a dampener effect on the growth of automobile industry but it was a short term phenomenon. The main reason behind this downfall is because of the global recession. TATA Motors. Tata purchased Britain’s Jaguar Land Rover (JLR) from Ford Motor Company.CONCLUSION The collapse in market place witnessed unprecedented turbulence in the wake of global financial meltdown. The industry is bouncing back. Cut throat competition among top companies. One factor favoring this point is that India has become a hot destination for companies of diverse nature to invest in.

According to Indian Statistical Organization the per capita income (Rs. moreover in two wheeler segment many companies like Mahindra and Mahindra grow even more than expectations. Indian Automobile has a lot of scope for both two wheelers and four wheelers due to development in infrastructure of the country and especially the rural sector in which demand of two wheeler has increased even in recession. 90 . By analyzing the current trend of Indian Economy and Automobile Industry we can say that being a developing economy there is lot of scope for growth and this industry still have to cross many levels so there is huge opportunities to invest in and this is proving as more and more foreign Companies setting up there ventures in India.38000) is increasing and national income at the rate of 14. Like TATA has launch NANO the people’s car and now TATA motors is also planning to come out with an electric car as well as hybrid car.7% and the above facts and figures in our study also support this truth. The growth rate of Indian Automobile is so fast that by 2016 Indian Industry will be world 7 largest manufacturer in all sections.4% which shows potential to buy vehicle in auto industry. The Indian auto market is still untapped the majority of the people in country don’t own a four wheeler and all the major auto companies are trying to increase their sales by several moves.Indian Automobile Industry is in the growth phase and the expected growth rate is 9-10% for FY2009-10 compare to last year growth rate which was just 0.

bseindia.com www.com 91 .com www.moneycontrol.mahindra.gov.com www.com www.nseindia.in www.sebi.BIBLIOGRAPHY ➢ ➢ ➢ ➢ ➢ ➢ ➢ ➢ ➢ ➢ www.com www.com www.investopedia.tatamotors.indiainfoline.com www.marutisuzuki.yahoofinance.com www.

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