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The Bajaj Group is amongst the top 10 business houses in India. Its footprint stretches over a wide range of industries, spanning automobiles (two-wheelers and three-wheelers), home appliances, lighting, iron and steel, insurance, travel and finance. The group's flagship company, Bajaj Auto, is ranked as the world's fourth largest two- and three- wheeler manufacturer and the Bajaj brand is well-known across several countries in Latin America, Africa, Middle East, South and South East Asia. Founded in 1926, at the height of India's movement for independence from the British, the group has an illustrious history. relentless devotion to a common cause.

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2008 BAL(now called Bajaj Holdings Ltd) demerged into 1. BAL Closing Share price of BAL before demerger was Rs 2079 After demerger Bajaj Auto Ltd got listed for price Rs 945 € .On may 26. BHIL 3. BFSL 2.

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Beta ( ) of a stock or portfolio is a number describing the relation of its returns with that of the financial market as a whole.22 % ¾ Risk of Market = 1. € .54 F = Covariance (Rj. Rm) = 2.728 In finance.€ From our Analysis ¾ Average annual Return on security = 51. Rm) / Variance(m) = .87 % ¾ Covariance (Rj.87 % ¾ Average annual Return on Market = 11.215 per day ¾ Average Return on Market = 0.0517 per day ¾ Risk on Security = 3.42 % ¾ Average Return on security = 0.

8 13385.8 29283.Particulars Equity Share Capital Debt Capital Retained Earnings Rs ( in millions) 1446.4 Equity Share Capital Debt Capital Retained Earnings .

8 .3 34650.Hero Honda Particulars Equity Share Capital Debt Capital Retained Earnings Rs ( in millions) TVS Rs ( in millions) 399.9 8653.2 237.4 660.5 10032.

The return consists both of dividend and capital gains. € € The expected rate of return or the cost of equity in CAPM is given by the following equation: KE = Rf + j (RM .In finance.Rf ) . € The cost of equity capital for a particular company is the rate of return on investment that is required by the company's ordinary shareholders. e. and for bearing some risk. increases in the share price. the cost of equity is the minimum rate of return a firm must offer shareholders to compensate for waiting for their returns.g.

42-6.85 + .18% .728 (11.Rf ) Rf .85) = 10.42 KE = 6.728 RM . Risk free rate of interest = 6.85 j . Market Return = 11.KE = Rf + j (RM . Beta of the security = .

The effective rate that a company pays on its current debt. so this measure is useful for giving an idea as to the overall rate being paid by the company to use debt financing. € A company will use various bonds. € The cost of debt is calculated by the formula : € KD = Interest Paid (1-Tax Rate) . loans and other forms of debt.

8 million Interest paid on fixed loans from annexure 13= 21.8*100 =16.98% .64(1-.6 millions Interest = 21.6/129.Tax rate = 33.99% Secured loans = 129.3399) =10.64098613 % KD = Interest Paid (1-Tax Rate) =16.

a company·s assets are financed by either debt or equity. as such. By taking a weighted average.Broadly speaking. we can see how much interest the company has to pay for every rupee it finances. WACC is the average of the costs of these sources of financing. € . € A firm's WACC is the overall required return on the firm as a whole and. each of which is weighted by its respective use in the given situation. it is often used internally by company directors to determine the economic feasibility of expansionary opportunities and mergers.

2010 (In Millions) 29283.2 0.43% .1098) = 10.000 10.3138 1.SOURCE OF CAPITAL EQUITY SHARE CAPITAL (+ RESERVES & SURPLUS) DEBT CAPITAL BOOK VALUE AS ON 31.98% WACC = Ke*We +Kd*Wd WACC = 0.3.6862 13385.8 42669.6862(0.18% 0.1018)+ 0.4 WEIGHTS COST OF SOURCE 10.3138(0.

3399 million = 7.34 million A tax shield is the reduction in income taxes that results from taking an allowable deduction from taxable income.1(1-0.6 * 0.57068 million We can see that the value of the firm is Rs 16.734 million € € INTEREST TAX SHIELD = Interest * tax rate =21.1043 = 16009.€ VL = [EBIT( 1-t) + Interest* tax rate] / WACC = [(24171. because interest on debt is a tax-deductible expense.025.3399]/. taking on debt creates a tax shield .6*0. For example.3399)+21.

90 52.369.171.398.2007-08 2008-09 2009-10 EBIT SALES EPS 11.37 24.632.364060904 1.791.468705954 0.594004849 _ -0.90 86.00 84.085.14105747 1.02612749 _ -0.00 117.15.10 1.40 45.69 % EBIT %SALES %EPS _ -0.25 9.13167464 .

39881499 4. 2007-08 DOL 2008-09 2009-10 _ 5.Degree of Operating Leverage ² DOL Summarizes the effect a particular amount of operating leverage has on a company's earnings before interest and taxes.03423147 .

DFL A leverage ratio summarizing the affect a particular amount of financial leverage has on a company's earnings per share (EPS) 2007-08 2008-09 2009-10 DFL _ 0.085312444 .Degree of Financial Leverage .93348222 1.

2007-08 2008-09 2009-10 DCL _ 5.03969782 4. given a particular change in sales.378401617 .Degree of Combined (Total) Leverage A leverage ratio that summarizes the combined effect the degree of operating leverage (DOL). and the degree of financial leverage has on earnings per share (EPS).

7 Net Working Capital (CA CL) -1122.9 -12740.2 .2 42749.4 3586.6 20262.4 1014.CURRENT ASSETS 2008-09 2009-10 STOCK SUNDRY DEBTORS CASH & BANK BALANCES OTHER CURRENT ASSETS LOANS & ADVANCES 3388.1 1059.7 20745.7 4462.5 CURRENT LIABILITIES CURRENT LIABILITIES PROVISIONS 12134.7 1256.5 1368.5 24375.1 2728.5 22487.1 12241.2 30009.3 23252.8 13652.

WITH THE HELP OF RATIO ANALYSIS AND RISK AND RETURN .

007103 = 0.89 % per day ¾ Covariance (Rj. Rm) = 0. Rm) / Variance(m) = 0.003943/ 0.09 % per day ¾ Risk on Security = 2.003943 b = Covariance (Rj.13 % per day ¾ Average Return on Market = 0.33 % per day ¾ Risk of Market = 1.€ From our analysis: ¾ Average Return on security = 0.56 € .

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6 0.5 0.7 0.2 0.4 0.8 0.0.3 0.1 0 2009-10 2008 -09 2007-08 Hero Honda Bajaj Auto TVS Motors .

50 45 40 35 30 25 20 15 10 5 0 2009 -10 2008-09 2007-08 He ro Honda Bajaj A uto TVS Motors .

7 6 4 He o Honda Bajaj Auto TVS oto s 0 00 .0 00 -0 007 -0 .

4 1.1.8 0.2 0 2009-10 2008 -09 2007 -08 Hero Honda Bajaj Auto TVS Motors .6 0.2 1 0.4 0.

140 120 100 80 60 40 20 0 2009-10 2008-09 2007-08 Hero Honda Bajaj Motors TVS Motors .

48 13.78 20 15 10 5 17.93 0 Hero Honda Bajaj Autos TVS Motors Series1 .25 20.