Fundamental Analysis of securities
rajatjain1272010
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Sep 21, 2015
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About This Presentation
SIP Project for India Infoline Ltd titled "Fundamental Analysis of securities to suggest investment in equities"
Slide Content
A
Project Report ON
"FUNDAMENTAL ANALYSIS OF SECURITY TO SUGGEST
INVESTMENT IN EQUITY”
FOR
SUBMITTED BY
Mr. RAJAT JAIN
PGDM (SEMESTER – III) (FINANCE + MARKETING)
2014 – 2016 BATCH
UNDER THE GUIDANCE OF
“PROF. KHUSHALI OZA”
SUBMITTED TO
SURYADATTA INSTITUTE OF MANAGEMENT & MASS
COMMUNICATION, PUNE – 411021
IN PARTIAL FULFILLMENT OF POST GRADUATE DIPLOMA
IN MANAGEMT
(PGDM)
Page | 1
Project Report ON
"FUNDAMENTAL ANALYSIS OF SECURITY TO SUGGEST
INVESTMENT IN EQUITY”
FOR
SUBMITTED BY
Mr. RAJAT JAIN
PGDM (SEMESTER – III) (FINANCE + MARKETING)
2014 – 2016 BATCH
UNDER THE GUIDANCE OF
“PROF. KHUSHALI OZA”
SUBMITTED TO
SURYADATTA INSTITUTE OF MANAGEMENT & MASS
COMMUNICATION, PUNE – 411021
IN PARTIAL FULFILLMENT OF POST GRADUATE DIPLOMA
IN MANAGEMT
(PGDM)
Page | 1
DECLARATION
D E C L A R A T I O N
I, the undersigned, hereby declare that the Project Report entitled
“Fundamental Analysis of Security To suggest Investment In Equity”
written and submitted by me to SIMMC, Pune in partial fulfilment of the
requirements for the award of degree of PGDM under the guidance of
Mrs.Khushali Oza is my original work and the conclusions drawn therein
are based on the material collected by myself.
Place: Pune RAJAT JAIN
Date: Research Student
Page | 2
D E C L A R A T I O N
I, the undersigned, hereby declare that the Project Report entitled
“Fundamental Analysis of Security To suggest Investment In Equity”
written and submitted by me to SIMMC, Pune in partial fulfilment of the
requirements for the award of degree of PGDM under the guidance of
Mrs.Khushali Oza is my original work and the conclusions drawn therein
are based on the material collected by myself.
Place: Pune RAJAT JAIN
Date: Research Student
Page | 2
ACKNOWLEDGEMENT
With immense pride and gratitude I express my hearty thanks to entire India
Infoline Limited family for giving me this opportunity to learn and providing a platform to
execute, Summer Internship at, India Infoline Ltd, Pune.
I am thankful to Mr. Hemant Kashyap (Business Development Manager) and
Mr. Vikram Katore (Relationship Manager) for providing me the opportunity to do the
Summer Internship at India Infoline & providing me the guidance and their valuable insights
while doing the projects despite of their busy schedule.
I would also like to thank you, Mrs.Khushali Oza for giving their time & inputs.
Last but not least I could complete my projects on time because of resources, guidance
provided and sparing their valuable time.
My stay here in India Infoline Ltd. here was a wonderful learning experience for me
and I am thankful to one and all.
RAJAT JAIN
SIMMC, Pune.
PGDM (Finance + Marketing)
Page | 3
With immense pride and gratitude I express my hearty thanks to entire India
Infoline Limited family for giving me this opportunity to learn and providing a platform to
execute, Summer Internship at, India Infoline Ltd, Pune.
I am thankful to Mr. Hemant Kashyap (Business Development Manager) and
Mr. Vikram Katore (Relationship Manager) for providing me the opportunity to do the
Summer Internship at India Infoline & providing me the guidance and their valuable insights
while doing the projects despite of their busy schedule.
I would also like to thank you, Mrs.Khushali Oza for giving their time & inputs.
Last but not least I could complete my projects on time because of resources, guidance
provided and sparing their valuable time.
My stay here in India Infoline Ltd. here was a wonderful learning experience for me
and I am thankful to one and all.
RAJAT JAIN
SIMMC, Pune.
PGDM (Finance + Marketing)
Page | 3
TABLE OF CONTENTS
SR. NO. PARTICULARS PAGE NO.
1 Declaration 02
2 Acknowledgement 03
3 Introduction 06
4 Objectives 07
5 Scope of Study 08
6 Fundamental Analysis 08
7 Economy Analysis 09
8 Industry Analysis 10
9 Company Analysis 14
10 Fundamental Analysis Tools 16
11 IIFL - Company Profile 23
12 Introduction – About IIFL 23
13 Corporate Structure 27
14 Top Management 28
15 Milestones 29
16 IIFL in Business 30
17 Data Presentation, Analysis &
Interpretations
33
18 Steel Sector - Introduction 33
Page | 4
SR. NO. PARTICULARS PAGE NO.
1 Declaration 02
2 Acknowledgement 03
3 Introduction 06
4 Objectives 07
5 Scope of Study 08
6 Fundamental Analysis 08
7 Economy Analysis 09
8 Industry Analysis 10
9 Company Analysis 14
10 Fundamental Analysis Tools 16
11 IIFL - Company Profile 23
12 Introduction – About IIFL 23
13 Corporate Structure 27
14 Top Management 28
15 Milestones 29
16 IIFL in Business 30
17 Data Presentation, Analysis &
Interpretations
33
18 Steel Sector - Introduction 33
Page | 4
19 Tata Steel - Introduction 34
20 Financials of Tata Steel 37
21 Interpretations – Tata Steel 44
22 IT Sector - Introduction 46
23 Wipro - Introduction 47
24 Financials of Wipro 49
25 Interpretations - Wipro 54
26 Pharma Sector - Introduction 56
27 Sun Pharma – Introduction 57
28 Financials of Sun Pharma 59
29 Interpretations – Sun Pharma 64
30 Findings & Conclusion 66
31 Suggestions 67
32 Conclusions 69
33 Bibliography 70
Page | 5
20 Financials of Tata Steel 37
21 Interpretations – Tata Steel 44
22 IT Sector - Introduction 46
23 Wipro - Introduction 47
24 Financials of Wipro 49
25 Interpretations - Wipro 54
26 Pharma Sector - Introduction 56
27 Sun Pharma – Introduction 57
28 Financials of Sun Pharma 59
29 Interpretations – Sun Pharma 64
30 Findings & Conclusion 66
31 Suggestions 67
32 Conclusions 69
33 Bibliography 70
Page | 5
FUNDAMENTAL ANALYSIS OF A SECURITY
INTRODUCTION
1.1: INTRODUCTION
Stock market analysis is crucial because it influences the choices investors make, sometimes
to very high degrees. A wide range of stock market analyses is available to investors. Not all
of them are useful, and some can be detrimental or even fatal to investors. An awareness of
the different types of analyses can help investors stay informed and make their own
monetary decisions wisely.
Fundamental Analysis
Fundamental analysis is more likely to occur on a company-to-company basis. The goal is to
determine whether the stock price is a good representation of the actual value of the
company. This is done based on the financial well-being of the company, how it is being
managed, and how consumers are receiving the company’s products and services.
Fundamental analysis asks whether the company's ability and performance are worth the
price of the stock. If the stock seems overpriced based on the company's business operations,
its price is likely to fall, and vice versa. Fundamental analysis assumes that the quality and
competence of a business model will be reflected in its stock performance.
Technical Analysis
Technical analysis uses a variety of different tools to observe, in depth, the effects of supply
and demand. Technical analysis generally discounts the underlying health of the company as
it might be reflected in a fundamental analysis, instead favoring an examination of the basic
trajectory of a company's stock.
Although this approach has its drawbacks, it offers a special perspective that might be more
relevant to stock investment, because stock prices sometimes rise and fall completely
independently of the company's operations. In general, a more detailed and extensive stock
history will produce more accurate results through technical analysis.
Fundamental analysis is the examination of the underlying forces that affect the
well being of the economy, industry groups, and companies. As with most analysis, the goal
is to derive a forecast and profit from future price movements.
At the company level, fundamental analysis may involve examination of financial
data, management, business concept and competition. At the industry level, there might be
an examination of supply and demand forces for the products offered. For the national
economy, fundamental analysis might focus on economic data to assess the present and
future growth of the economy.
Page | 6
INTRODUCTION
1.1: INTRODUCTION
Stock market analysis is crucial because it influences the choices investors make, sometimes
to very high degrees. A wide range of stock market analyses is available to investors. Not all
of them are useful, and some can be detrimental or even fatal to investors. An awareness of
the different types of analyses can help investors stay informed and make their own
monetary decisions wisely.
Fundamental Analysis
Fundamental analysis is more likely to occur on a company-to-company basis. The goal is to
determine whether the stock price is a good representation of the actual value of the
company. This is done based on the financial well-being of the company, how it is being
managed, and how consumers are receiving the company’s products and services.
Fundamental analysis asks whether the company's ability and performance are worth the
price of the stock. If the stock seems overpriced based on the company's business operations,
its price is likely to fall, and vice versa. Fundamental analysis assumes that the quality and
competence of a business model will be reflected in its stock performance.
Technical Analysis
Technical analysis uses a variety of different tools to observe, in depth, the effects of supply
and demand. Technical analysis generally discounts the underlying health of the company as
it might be reflected in a fundamental analysis, instead favoring an examination of the basic
trajectory of a company's stock.
Although this approach has its drawbacks, it offers a special perspective that might be more
relevant to stock investment, because stock prices sometimes rise and fall completely
independently of the company's operations. In general, a more detailed and extensive stock
history will produce more accurate results through technical analysis.
Fundamental analysis is the examination of the underlying forces that affect the
well being of the economy, industry groups, and companies. As with most analysis, the goal
is to derive a forecast and profit from future price movements.
At the company level, fundamental analysis may involve examination of financial
data, management, business concept and competition. At the industry level, there might be
an examination of supply and demand forces for the products offered. For the national
economy, fundamental analysis might focus on economic data to assess the present and
future growth of the economy.
Page | 6
To forecast future stock prices, fundamental analysis combines economic, industry,
and company analysis to derive a stock's current fair value and forecast future value. If fair
value is not equal to the current stock price, fundamental analysts believe that the stock is
either over or under valued and the market price will ultimately gravitate towards fair value.
Fundamentalists do not heed the advice of the random walkers and believe that markets are
weak-form efficient. By believing that prices do not accurately reflect all available
information, fundamental analysts look to capitalize on perceived price discrepancies.
Fundamental analysis serves to answer questions, such as:
·Is the company’s revenue growing?
·Is it actually making a profit?
·Is it in a strong-enough position to beat out its competitors in the future?
·Is it able to repay its debts
This all together boils down to one question that is: Is the company’s stock a good
investment?
OBJECTIVES:-
To evaluate the present and future earning capacity of a share based on the Economy,
Industry and Company fundamentals and thereby assess the intrinsic value/economic
worth of the share for investment.
To understand the performance of companies through its financials and thereby
assessing the future prospect of the company.
Compare past and current records of the company and judge its performance based
on various ratios and findings so as to track the records, find out whether the
company has meet its expectations regarding sales and profitability.
Suggest investors about some of the shares which can be purchased and can earn
return over their investments over a certain period of time.
Page | 7
and company analysis to derive a stock's current fair value and forecast future value. If fair
value is not equal to the current stock price, fundamental analysts believe that the stock is
either over or under valued and the market price will ultimately gravitate towards fair value.
Fundamentalists do not heed the advice of the random walkers and believe that markets are
weak-form efficient. By believing that prices do not accurately reflect all available
information, fundamental analysts look to capitalize on perceived price discrepancies.
Fundamental analysis serves to answer questions, such as:
·Is the company’s revenue growing?
·Is it actually making a profit?
·Is it in a strong-enough position to beat out its competitors in the future?
·Is it able to repay its debts
This all together boils down to one question that is: Is the company’s stock a good
investment?
OBJECTIVES:-
To evaluate the present and future earning capacity of a share based on the Economy,
Industry and Company fundamentals and thereby assess the intrinsic value/economic
worth of the share for investment.
To understand the performance of companies through its financials and thereby
assessing the future prospect of the company.
Compare past and current records of the company and judge its performance based
on various ratios and findings so as to track the records, find out whether the
company has meet its expectations regarding sales and profitability.
Suggest investors about some of the shares which can be purchased and can earn
return over their investments over a certain period of time.
Page | 7
SCOPE OF STUDY:-
a) Long-term Trends
Fundamental analysis is good for long-term investments based on long-term trends,
very long-term. The ability to identify and predict long-term economic, demographic,
technological or consumer trends can benefit patient investors who pick the right industry
groups or companies.
b) Value Spotting
Sound fundamental analysis will help identify companies that represent a good
value. Some of the most legendary investors think long-term and value. Graham and Dodd,
Warren Buffett and John Neff are seen as the champions of value investing. Fundamental
analysis can help uncover companies with valuable assets, a strong balance sheet, stable
earnings, and staying power.
c) Business Acumen
One of the most obvious, but less tangible, rewards of fundamental analysis is the
development of a thorough understanding of the business. After such painstaking research
and analysis, an investor will be familiar with the key revenue and profit drivers behind a
company. Earnings and earnings expectations can be potent drivers of equity prices. Even
some technicians will agree to that. A good understanding can help investors avoid
companies that are prone to shortfalls and identify those that continue to deliver. In addition
to understanding the business, fundamental analysis allows investors to develop an
understanding of the key value drivers and companies within an industry. A stock's price is
heavily influenced by its industry group. By studying these groups, investors can better
position themselves to identify opportunities that are high-risk (tech), low-risk (utilities),
growth oriented (computer), value driven (oil), non-cyclical (consumer staples), cyclical
(transportation) or income-oriented (high yield).
d) Knowing Who's Who
Stocks move as a group. By understanding a company's business, investors can
better position themselves to categorize stocks within their relevant industry group. Business
can change rapidly and with it the revenue mix of a company. This happened to many of the
pure Internet retailers, which were not really Internet companies, but plain retailers.
Knowing a company's business and being able to place it in a group can make a huge
difference in relative valuations.
FUNDAMENTAL ANALYSIS:
Fundamental Analysis involves a three-step examination, which calls for:
Understanding of the macro- economic environment and developments
(Economy Analysis)
Analyzing the prospects of the industry to which the firm belongs (Industry
Analysis)
Page | 8
a) Long-term Trends
Fundamental analysis is good for long-term investments based on long-term trends,
very long-term. The ability to identify and predict long-term economic, demographic,
technological or consumer trends can benefit patient investors who pick the right industry
groups or companies.
b) Value Spotting
Sound fundamental analysis will help identify companies that represent a good
value. Some of the most legendary investors think long-term and value. Graham and Dodd,
Warren Buffett and John Neff are seen as the champions of value investing. Fundamental
analysis can help uncover companies with valuable assets, a strong balance sheet, stable
earnings, and staying power.
c) Business Acumen
One of the most obvious, but less tangible, rewards of fundamental analysis is the
development of a thorough understanding of the business. After such painstaking research
and analysis, an investor will be familiar with the key revenue and profit drivers behind a
company. Earnings and earnings expectations can be potent drivers of equity prices. Even
some technicians will agree to that. A good understanding can help investors avoid
companies that are prone to shortfalls and identify those that continue to deliver. In addition
to understanding the business, fundamental analysis allows investors to develop an
understanding of the key value drivers and companies within an industry. A stock's price is
heavily influenced by its industry group. By studying these groups, investors can better
position themselves to identify opportunities that are high-risk (tech), low-risk (utilities),
growth oriented (computer), value driven (oil), non-cyclical (consumer staples), cyclical
(transportation) or income-oriented (high yield).
d) Knowing Who's Who
Stocks move as a group. By understanding a company's business, investors can
better position themselves to categorize stocks within their relevant industry group. Business
can change rapidly and with it the revenue mix of a company. This happened to many of the
pure Internet retailers, which were not really Internet companies, but plain retailers.
Knowing a company's business and being able to place it in a group can make a huge
difference in relative valuations.
FUNDAMENTAL ANALYSIS:
Fundamental Analysis involves a three-step examination, which calls for:
Understanding of the macro- economic environment and developments
(Economy Analysis)
Analyzing the prospects of the industry to which the firm belongs (Industry
Analysis)
Page | 8
Assessing the projected performance of the company and the intrinsic value of
its share (Company Analysis).
ECONOMY ANALYSIS:
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. It can cover a number of important economic issues that keep cropping up within
a particular economy, which is being analyzed. A study of the economic variables would
give an idea about future corporate earnings and the payment of dividends and interest to
investors
Factors to be consider in Economy Analysis
Economic indicators or business indicators are markers about an economy. Future
performance predictions and economic performances can be analyzed through these
indicators. There are economic summaries, various indices, and earnings reports like
housing, unemployment, bankruptcies, Consumer Price Index (a measure for inflation), stock
market prices, industrial production, retail sales, and money supply changes
in economic indicators.
Indicators which change about same time and in same direction with economy
are called coincident indicators. These provide information regarding present economic state.
Coincident indicators include retail sales, GDP, industrial production, and personal income.
A coincident index can be used to identify troughs and peaks in a business cycle.
These indicators are studied in a branch of macroeconomics called “business
cycles”. Economic indicators have three major attributes - relation to business cycle or an
economy, frequency of data, and timing. In relation to business cycle or economy, indicators
Page | 9
its share (Company Analysis).
ECONOMY ANALYSIS:
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. It can cover a number of important economic issues that keep cropping up within
a particular economy, which is being analyzed. A study of the economic variables would
give an idea about future corporate earnings and the payment of dividends and interest to
investors
Factors to be consider in Economy Analysis
Economic indicators or business indicators are markers about an economy. Future
performance predictions and economic performances can be analyzed through these
indicators. There are economic summaries, various indices, and earnings reports like
housing, unemployment, bankruptcies, Consumer Price Index (a measure for inflation), stock
market prices, industrial production, retail sales, and money supply changes
in economic indicators.
Indicators which change about same time and in same direction with economy
are called coincident indicators. These provide information regarding present economic state.
Coincident indicators include retail sales, GDP, industrial production, and personal income.
A coincident index can be used to identify troughs and peaks in a business cycle.
These indicators are studied in a branch of macroeconomics called “business
cycles”. Economic indicators have three major attributes - relation to business cycle or an
economy, frequency of data, and timing. In relation to business cycle or economy, indicators
Page | 9
have one of three different economic relationships like procyclic, counter cyclic, and acyclic.
Procyclic economic indicator moves along same direction as an economy. It means that
when economy is well, this number increases. An example is gross domestic product (GDP).
Counter cyclic economic indicator moves in reverse direction of economy. Unemployment
rate increases as economy gets worse. Acyclic economic indicator doesn’t have any relation
to an economy’s health. An example would be a sports result which doesn’t have any effect
on economy.
Economy-wide Factors:
Growth rates of the economy
GDP, GNP, NNP
Inflation rate
Interest rates
Government Revenue, Expenditure and Deficits
Exchange rates
Infrastructure
Monsoon
Economic and political stability
INDUSTRY ANALYSIS:-
It refers to an evaluation of the relative strengths and weakness of industries.
Industry analysis is a type of investment research that begins by focusing on the status of an
industry or an industrial sector.
This part is divided into the four steps, that is,
Sensitivity to the Business Cycle
Industry Life Cycle Analysis
Study of the Structure and Characteristics of an Industry
Profit Potential of Industries: Porter Model.
1) Sensitivity to the Business cycle:-
a) The sensitivity of the firm’s sales to the business condition:- It shows the performance of
the business of the firm with respect to the business environment or condition.
b) The Operating Leverage
Page | 10
Procyclic economic indicator moves along same direction as an economy. It means that
when economy is well, this number increases. An example is gross domestic product (GDP).
Counter cyclic economic indicator moves in reverse direction of economy. Unemployment
rate increases as economy gets worse. Acyclic economic indicator doesn’t have any relation
to an economy’s health. An example would be a sports result which doesn’t have any effect
on economy.
Economy-wide Factors:
Growth rates of the economy
GDP, GNP, NNP
Inflation rate
Interest rates
Government Revenue, Expenditure and Deficits
Exchange rates
Infrastructure
Monsoon
Economic and political stability
INDUSTRY ANALYSIS:-
It refers to an evaluation of the relative strengths and weakness of industries.
Industry analysis is a type of investment research that begins by focusing on the status of an
industry or an industrial sector.
This part is divided into the four steps, that is,
Sensitivity to the Business Cycle
Industry Life Cycle Analysis
Study of the Structure and Characteristics of an Industry
Profit Potential of Industries: Porter Model.
1) Sensitivity to the Business cycle:-
a) The sensitivity of the firm’s sales to the business condition:- It shows the performance of
the business of the firm with respect to the business environment or condition.
b) The Operating Leverage
Page | 10
c) The Financial Leverage.
2) Industry Life Cycle Analysis:-
A form of fundamental analysis involving the process of making investment
decisions based on the different stages an industry is at during a given point in time. The
type of position taken will depend on firm specific characteristics, as well as where the
industry is at in its life cycle.
1) Under the production and market introduction phases, revenues and earnings are likely to
be very low, which makes investments during these phases more speculative in nature.
Revenues and earnings are likely to be low because there is little demand for the product, or
the product is not completed. Expenses are likely to be very large during these phases as a
company or industry spends a lot on marketing and research.
2) Through the growth phase, revenues and margins are likely to be on the rise due to an
increase in demand for a product and the pricing power the firm has due to a small number
of competitors. Stock prices are likely to rise during this phase.
3) During the maturity and stability phase, revenues and margins are likely to decline due to
lower sales demand and more competition. Stock prices are likely to decline during these
phases.
3) Study of the Structure and Characteristics of An Industries:-
The study of structure and characteristics of an industries also an important in the
process of industry analysis for the purpose of investment. This study will help us in
deciding the future of the industry whether it is good or bad. With the help of this study we
may also know about the future growth on the industry.
Following are some points which will be consider by the investor for this study
Demand and Supply Gap in Product or services
Competitive Conditions in the Industry
Permanence
Labour Conditions or Labour attitude towards the work in industries
Attitude of Government and rules & regulation of government also the facilities
and subsidies provided by government
Supply of Raw Materials
Cost Structure
4) Profit Potential of Industries – Porter Model:-
Each industry is different, and using one cookie-cutter approach to analysis is sure
to create problems. Imagine, for example, comparing the P/E ratio of a tech company to that
of a utility. Because you are, in effect, comparing apples to oranges, the analysis is next to
useless.
In each section we'll take an in-depth look at the different valuation techniques and
buzz words used in a particular industry, complete a 5-forces analysis on the state of the
market and point you in the direction of industry-specific resources.
Page | 11
2) Industry Life Cycle Analysis:-
A form of fundamental analysis involving the process of making investment
decisions based on the different stages an industry is at during a given point in time. The
type of position taken will depend on firm specific characteristics, as well as where the
industry is at in its life cycle.
1) Under the production and market introduction phases, revenues and earnings are likely to
be very low, which makes investments during these phases more speculative in nature.
Revenues and earnings are likely to be low because there is little demand for the product, or
the product is not completed. Expenses are likely to be very large during these phases as a
company or industry spends a lot on marketing and research.
2) Through the growth phase, revenues and margins are likely to be on the rise due to an
increase in demand for a product and the pricing power the firm has due to a small number
of competitors. Stock prices are likely to rise during this phase.
3) During the maturity and stability phase, revenues and margins are likely to decline due to
lower sales demand and more competition. Stock prices are likely to decline during these
phases.
3) Study of the Structure and Characteristics of An Industries:-
The study of structure and characteristics of an industries also an important in the
process of industry analysis for the purpose of investment. This study will help us in
deciding the future of the industry whether it is good or bad. With the help of this study we
may also know about the future growth on the industry.
Following are some points which will be consider by the investor for this study
Demand and Supply Gap in Product or services
Competitive Conditions in the Industry
Permanence
Labour Conditions or Labour attitude towards the work in industries
Attitude of Government and rules & regulation of government also the facilities
and subsidies provided by government
Supply of Raw Materials
Cost Structure
4) Profit Potential of Industries – Porter Model:-
Each industry is different, and using one cookie-cutter approach to analysis is sure
to create problems. Imagine, for example, comparing the P/E ratio of a tech company to that
of a utility. Because you are, in effect, comparing apples to oranges, the analysis is next to
useless.
In each section we'll take an in-depth look at the different valuation techniques and
buzz words used in a particular industry, complete a 5-forces analysis on the state of the
market and point you in the direction of industry-specific resources.
Page | 11
The model originated from Michael E. Porter's 1980 book "Competitive Strategy:
Techniques for Analyzing Industries and Competitors." Since then, it has become a
frequently used tool for analyzing a company's industry structure and its corporate strategy.
In his book, Porter identified five competitive forces that shape every single industry and
market. These forces help us to analyze everything from the intensity of competition to the
profitability and attractiveness of an industry.
Following figure shows the relationship between the different competitive forces.
1) Threat of New Entrants:
The easier it is for new companies to enter the industry, the more cutthroat competition
there will be. Factors that can limit the threat of new entrants are known as barriers to entry.
Some examples include:
· Existing loyalty to major brands
· Incentives for using a particular buyer (such as frequent shopper
programs)
· High fixed costs
· Scarcity of resources
· High costs of switching companies
· Government restrictions or legislation
2) Power of Suppliers:
This is how much pressure suppliers can place on a business. If one supplier has a
large enough impact to affect a company's margins and volumes, then it holds substantial
power. Here are a few reasons that suppliers might have power:
Page | 12
Techniques for Analyzing Industries and Competitors." Since then, it has become a
frequently used tool for analyzing a company's industry structure and its corporate strategy.
In his book, Porter identified five competitive forces that shape every single industry and
market. These forces help us to analyze everything from the intensity of competition to the
profitability and attractiveness of an industry.
Following figure shows the relationship between the different competitive forces.
1) Threat of New Entrants:
The easier it is for new companies to enter the industry, the more cutthroat competition
there will be. Factors that can limit the threat of new entrants are known as barriers to entry.
Some examples include:
· Existing loyalty to major brands
· Incentives for using a particular buyer (such as frequent shopper
programs)
· High fixed costs
· Scarcity of resources
· High costs of switching companies
· Government restrictions or legislation
2) Power of Suppliers:
This is how much pressure suppliers can place on a business. If one supplier has a
large enough impact to affect a company's margins and volumes, then it holds substantial
power. Here are a few reasons that suppliers might have power:
Page | 12
· There are very few suppliers of a particular product
· There are no substitutes
· Switching to another (competitive) product is very costly
· The product is extremely important to buyers - can't do without it
· The supplying industry has a higher profitability than the buying industry
3) Power of Buyers:
This is how much pressure customers can place on a business. If one customer has
a large enough impact to affect a company's margins and volumes, then the customer hold
substantial power. Here are a few reasons that customers might have power:
· Small number of buyers
· Purchases large volumes
· Switching to another (competitive) product is simple
· The product is not extremely important to buyers; they can do
without the product for a period of time
· Customers are price sensitive
4) Availability of Substitutes –
What is the likelihood that someone will switch to a competitive product or
service? If the cost of switching is low, then this poses a serious threat. Here are a few
factors that can affect the threat of substitutes:
· The main issue is the similarity of substitutes. For example, if
the price of coffee rises substantially, a coffee drinker may switch over
to a beverage like tea.
· If substitutes are similar, it can be viewed in the same light as a
new entrant.
5) Competitive Rivalry –
This describes the intensity of competition between existing firms in an industry.
Highly competitive industries generally earn low returns because the cost of competition is
high. A highly competitive market might result from:
· Many players of about the same size; there is no dominant firm
· Little differentiation between competitors products and services
· A mature industry with very little growth; companies can only
grow by stealing customers away from competitors
5) Cross-Sectional Analysis:-
A type of analysis an investor, analyst or portfolio manager may conduct on a
company in relation to that company's industry or industry peers. The analysis compares one
company against the industry it operates within, or directly against certain competitors
within the same industry, in an attempt to discover the best of the breed.
Page | 13
· There are no substitutes
· Switching to another (competitive) product is very costly
· The product is extremely important to buyers - can't do without it
· The supplying industry has a higher profitability than the buying industry
3) Power of Buyers:
This is how much pressure customers can place on a business. If one customer has
a large enough impact to affect a company's margins and volumes, then the customer hold
substantial power. Here are a few reasons that customers might have power:
· Small number of buyers
· Purchases large volumes
· Switching to another (competitive) product is simple
· The product is not extremely important to buyers; they can do
without the product for a period of time
· Customers are price sensitive
4) Availability of Substitutes –
What is the likelihood that someone will switch to a competitive product or
service? If the cost of switching is low, then this poses a serious threat. Here are a few
factors that can affect the threat of substitutes:
· The main issue is the similarity of substitutes. For example, if
the price of coffee rises substantially, a coffee drinker may switch over
to a beverage like tea.
· If substitutes are similar, it can be viewed in the same light as a
new entrant.
5) Competitive Rivalry –
This describes the intensity of competition between existing firms in an industry.
Highly competitive industries generally earn low returns because the cost of competition is
high. A highly competitive market might result from:
· Many players of about the same size; there is no dominant firm
· Little differentiation between competitors products and services
· A mature industry with very little growth; companies can only
grow by stealing customers away from competitors
5) Cross-Sectional Analysis:-
A type of analysis an investor, analyst or portfolio manager may conduct on a
company in relation to that company's industry or industry peers. The analysis compares one
company against the industry it operates within, or directly against certain competitors
within the same industry, in an attempt to discover the best of the breed.
Page | 13
When conducting a cross-sectional analysis, the analyst seeks to identify, by using
comparative metrics, the valuation, debt-load, future outlook and/or operational efficiency of
the target company. This allows the analyst to evaluate the target company's efficiency in
these areas, and to make the best investment choice among a group of competitors or the
industry as a whole.
When comparing the target firm to competitors, the analyst must be careful to
consider the unique operating characteristics of each company and how that will affect
any comparative metrics used.
COMPANY ANALYSIS:
Before diving into a company's financial statements, we're going to take a look at
some of the qualitative aspects of a company. Fundamental analysis seeks to determine the
intrinsic value of a company's stock. But since qualitative factors, by definition, represent
aspects of a company's business that are difficult or impossible to quantify, incorporating
that kind of information into a pricing evaluation can be quite difficult. On the flip side, as
we've demonstrated, you can't ignore the less tangible characteristics of a company.
In this section we are going to highlight some of the company-specific
qualitative factors that one should be aware of.
a) Business Model:-
Even before an investor looks at a company's financial statements or does any
research, one of the most important questions that should be asked is: What exactly does the
company do? This is referred to as a company's business model – it's how a company makes
money. You can get a good overview of a company's business model by checking out its
website or by reading the document which company submitted to the SEBI.
At the very least, you should understand the business model of any company you
invest in. The "Oracle of Omaha", Warren Buffett, rarely invests in tech stocks because most
of the time he doesn't understand them. This is not to say the technology sector is bad, but it's
not Buffett's area of expertise; he doesn't feel comfortable investing in this area. Similarly,
unless you understand a company's business model, you don't know what the drivers are for
future growth, and you leave yourself vulnerable to being blindsided like shareholders of
Boston Chicken were.
b) Competitive Advantage:
Another business consideration for investors is competitive advantage. A
company's long-term success is driven largely by its ability to maintain a competitive
advantage - and keep it. Powerful competitive advantages, such as Coca Cola's brand name
and Microsoft's domination of the personal computer operating system, create a moat around
a business allowing it to keep competitors at bay and enjoy growth and profits. When a
company can achieve competitive advantage, its shareholders can be well rewarded for
decades.
c) Management:
Page | 14
comparative metrics, the valuation, debt-load, future outlook and/or operational efficiency of
the target company. This allows the analyst to evaluate the target company's efficiency in
these areas, and to make the best investment choice among a group of competitors or the
industry as a whole.
When comparing the target firm to competitors, the analyst must be careful to
consider the unique operating characteristics of each company and how that will affect
any comparative metrics used.
COMPANY ANALYSIS:
Before diving into a company's financial statements, we're going to take a look at
some of the qualitative aspects of a company. Fundamental analysis seeks to determine the
intrinsic value of a company's stock. But since qualitative factors, by definition, represent
aspects of a company's business that are difficult or impossible to quantify, incorporating
that kind of information into a pricing evaluation can be quite difficult. On the flip side, as
we've demonstrated, you can't ignore the less tangible characteristics of a company.
In this section we are going to highlight some of the company-specific
qualitative factors that one should be aware of.
a) Business Model:-
Even before an investor looks at a company's financial statements or does any
research, one of the most important questions that should be asked is: What exactly does the
company do? This is referred to as a company's business model – it's how a company makes
money. You can get a good overview of a company's business model by checking out its
website or by reading the document which company submitted to the SEBI.
At the very least, you should understand the business model of any company you
invest in. The "Oracle of Omaha", Warren Buffett, rarely invests in tech stocks because most
of the time he doesn't understand them. This is not to say the technology sector is bad, but it's
not Buffett's area of expertise; he doesn't feel comfortable investing in this area. Similarly,
unless you understand a company's business model, you don't know what the drivers are for
future growth, and you leave yourself vulnerable to being blindsided like shareholders of
Boston Chicken were.
b) Competitive Advantage:
Another business consideration for investors is competitive advantage. A
company's long-term success is driven largely by its ability to maintain a competitive
advantage - and keep it. Powerful competitive advantages, such as Coca Cola's brand name
and Microsoft's domination of the personal computer operating system, create a moat around
a business allowing it to keep competitors at bay and enjoy growth and profits. When a
company can achieve competitive advantage, its shareholders can be well rewarded for
decades.
c) Management:
Page | 14
Just as an army needs a general to lead it to victory, a company relies upon
management to steer it towards financial success. Some believe that management is the most
important aspect for investing in a company. It makes sense - even the best business model is
doomed if the leaders of the company fail to properly execute the plan.
So how does an average investor go about evaluating the management of a
company? This is one of the areas in which individuals are truly at a disadvantage compared
to professional investors. You can't set up a meeting with management if you want to invest
a few lakhs or crore of rupee. On the other hand, if you are a fund manager interested in
investing millions of dollars, there is a good chance you can schedule a face-to-face meeting
with the upper brass of the firm.
Every public company has a corporate information section on its website. Usually
there will be a quick biography on each executive with their employment history,
educational background and any applicable achievements. Don't expect to find anything
useful here. Let's be honest: We're looking for dirt, and no company is going to put negative
information on its corporate website.
d) Corporate Governance:
Corporate governance describes the policies in place within an organization
denoting the relationships and responsibilities between management, directors
and stakeholders. These policies are defined and determined in the company charter and its
bylaws, along with corporate laws and regulations. The purpose of corporate governance
policies is to ensure that proper checks and balances are in place, making it more difficult for
anyone to conduct unethical and illegal activities.
Fortunately, corporate governance policies typically cover a few general areas:
structure of the board of directors, stakeholder rights and financial and information
transparency. With a little research and the right questions in mind, investors can get a good
idea about a company's corporate governance.
e) Financial and Information Transparency:
This aspect of governance relates to the quality and timeliness of a company's
financial disclosures and operational happenings. Sufficient transparency implies that a
company's financial releases are written in a manner that stakeholders can follow what
management is doing and therefore have a clear understanding of the company's current
financial situation.
f) Stakeholder Rights:
This aspect of corporate governance examines the extent that a company's policies are
benefiting stakeholder interests, notably shareholder interests. Ultimately, as owners of the
company, shareholders should have some access to the board of directors if they have
concerns or want something addressed. Therefore companies with good governance give
shareholders a certain amount of ownership voting rights to call meetings to discuss pressing
issues with the board.
g) Financial statement analysis:
Page | 15
management to steer it towards financial success. Some believe that management is the most
important aspect for investing in a company. It makes sense - even the best business model is
doomed if the leaders of the company fail to properly execute the plan.
So how does an average investor go about evaluating the management of a
company? This is one of the areas in which individuals are truly at a disadvantage compared
to professional investors. You can't set up a meeting with management if you want to invest
a few lakhs or crore of rupee. On the other hand, if you are a fund manager interested in
investing millions of dollars, there is a good chance you can schedule a face-to-face meeting
with the upper brass of the firm.
Every public company has a corporate information section on its website. Usually
there will be a quick biography on each executive with their employment history,
educational background and any applicable achievements. Don't expect to find anything
useful here. Let's be honest: We're looking for dirt, and no company is going to put negative
information on its corporate website.
d) Corporate Governance:
Corporate governance describes the policies in place within an organization
denoting the relationships and responsibilities between management, directors
and stakeholders. These policies are defined and determined in the company charter and its
bylaws, along with corporate laws and regulations. The purpose of corporate governance
policies is to ensure that proper checks and balances are in place, making it more difficult for
anyone to conduct unethical and illegal activities.
Fortunately, corporate governance policies typically cover a few general areas:
structure of the board of directors, stakeholder rights and financial and information
transparency. With a little research and the right questions in mind, investors can get a good
idea about a company's corporate governance.
e) Financial and Information Transparency:
This aspect of governance relates to the quality and timeliness of a company's
financial disclosures and operational happenings. Sufficient transparency implies that a
company's financial releases are written in a manner that stakeholders can follow what
management is doing and therefore have a clear understanding of the company's current
financial situation.
f) Stakeholder Rights:
This aspect of corporate governance examines the extent that a company's policies are
benefiting stakeholder interests, notably shareholder interests. Ultimately, as owners of the
company, shareholders should have some access to the board of directors if they have
concerns or want something addressed. Therefore companies with good governance give
shareholders a certain amount of ownership voting rights to call meetings to discuss pressing
issues with the board.
g) Financial statement analysis:
Page | 15
Balance sheet walk demonstrates financial statement analysis using the relationship
of the key financial statements, the income statement, cash flow and balance sheet.
We show the financial statement links. Most business people tend to look at each of
the financial statements in turn. Our contribution is to show that all three key financial
statements are linked. The income statement shows the potential cash flows. The cash flow
statement shows the real cash flows. The balance sheet shows the cash owing or payable.
Income statement:
The income statement (or profit and loss) shows revenue, cost of sales, expenses, interest and
tax, but does not show the cash flow for a business.
Balance sheet:
The balance sheet shows the assets and liabilities for the business. On the balance sheet we
can see the cash balance at the start and end of the period. However, the details of all the
cash flows cannot be gleaned from the balance sheet.
Cash flow:
The cash flow statement shows the cash flows for the business. Here we see the operating
cash flows, financing cash flows and investing cash flows.
The income statement, cash flow and balance sheet above are not independent of each
other. Financial statements links demonstrates how they work together. This understanding
helps with financial statement analysis.
Financial Statement Links:
Where is the relationship between the key financial statements? Take a look at this
example.
1. The income statement shows revenue of 500,000.
2. The cash flow statement shows the cash received from customers is 375,000.
3. The balance sheet shows under assets the difference, i.e. accounts receivables is
125,000.
Fundamental analysis is the process of looking at a business at the basic or
fundamental financial level. This type of analysis examines key ratios of a business to
determine its financial health and gives you an idea of the value its stock. Many investors
use fundamental analysis alone or in combination with other tools to evaluate stocks for
investment purposes. The goal is to determine the current worth and, more importantly, how
the market values the stock.
Following are the key tools of fundamental analysis and what they tell you. Even if you
don’t plan to do in-depth fundamental analysis yourself, it will help you follow stocks more
closely if you understand the key ratios and terms.
Page | 16
of the key financial statements, the income statement, cash flow and balance sheet.
We show the financial statement links. Most business people tend to look at each of
the financial statements in turn. Our contribution is to show that all three key financial
statements are linked. The income statement shows the potential cash flows. The cash flow
statement shows the real cash flows. The balance sheet shows the cash owing or payable.
Income statement:
The income statement (or profit and loss) shows revenue, cost of sales, expenses, interest and
tax, but does not show the cash flow for a business.
Balance sheet:
The balance sheet shows the assets and liabilities for the business. On the balance sheet we
can see the cash balance at the start and end of the period. However, the details of all the
cash flows cannot be gleaned from the balance sheet.
Cash flow:
The cash flow statement shows the cash flows for the business. Here we see the operating
cash flows, financing cash flows and investing cash flows.
The income statement, cash flow and balance sheet above are not independent of each
other. Financial statements links demonstrates how they work together. This understanding
helps with financial statement analysis.
Financial Statement Links:
Where is the relationship between the key financial statements? Take a look at this
example.
1. The income statement shows revenue of 500,000.
2. The cash flow statement shows the cash received from customers is 375,000.
3. The balance sheet shows under assets the difference, i.e. accounts receivables is
125,000.
Fundamental analysis is the process of looking at a business at the basic or
fundamental financial level. This type of analysis examines key ratios of a business to
determine its financial health and gives you an idea of the value its stock. Many investors
use fundamental analysis alone or in combination with other tools to evaluate stocks for
investment purposes. The goal is to determine the current worth and, more importantly, how
the market values the stock.
Following are the key tools of fundamental analysis and what they tell you. Even if you
don’t plan to do in-depth fundamental analysis yourself, it will help you follow stocks more
closely if you understand the key ratios and terms.
Page | 16
FUNDAMENTAL ANALYSIS TOOLS:
These are the most popular tools of fundamental analysis. They focus on
earnings, growth, and value in the market. No single number from this list is a magic bullet
that will give you a buy or sell recommendation by itself, however as you begin developing a
picture of what you want in a stock; these numbers will become benchmarks to measure the
worth of potential investments.
Earnings:
It’s all about earnings. When you come to the bottom line, that’s what investors
want to know. How much money is the company making and how much is it going to make
in the future. Earnings are profits. It may be complicated to calculate, but that’s what buying
a company is about. Increasing earnings generally leads to a higher stock price and, in some
cases, a regular dividend. When earnings fall short, the market may hammer the stock. Every
quarter, companies report earnings. Analysts follow major companies closely and if they fall
short of projected earnings, sound the alarm.
While earnings are important, by themselves they don’t tell you anything about how
the market values the stock. To begin building a picture of how the stock is valued you need
to use some fundamental analysis tools. These ratios are easy to calculate, but you can find
most of them already done on sites like cnn.money.com or MoneyCentral.com. or on the
company’s website.
Tools For Analysis:-
·Earnings per Share – EPS
·Price to Earnings Ratio – P/E
·Projected Earnings Growth – PEG
·Price to Sales – P/S
·Price to Book – P/B
·Dividend Payout Ratio
·Dividend Yield
·Book Value
·Return on Equity
No single number from this list is a magic bullet that will give you a buy or sell
recommendation by itself, however as you begin developing a picture of what you want in a
stock, these numbers will become benchmarks to measure the worth of potential
investments.
Page | 17
These are the most popular tools of fundamental analysis. They focus on
earnings, growth, and value in the market. No single number from this list is a magic bullet
that will give you a buy or sell recommendation by itself, however as you begin developing a
picture of what you want in a stock; these numbers will become benchmarks to measure the
worth of potential investments.
Earnings:
It’s all about earnings. When you come to the bottom line, that’s what investors
want to know. How much money is the company making and how much is it going to make
in the future. Earnings are profits. It may be complicated to calculate, but that’s what buying
a company is about. Increasing earnings generally leads to a higher stock price and, in some
cases, a regular dividend. When earnings fall short, the market may hammer the stock. Every
quarter, companies report earnings. Analysts follow major companies closely and if they fall
short of projected earnings, sound the alarm.
While earnings are important, by themselves they don’t tell you anything about how
the market values the stock. To begin building a picture of how the stock is valued you need
to use some fundamental analysis tools. These ratios are easy to calculate, but you can find
most of them already done on sites like cnn.money.com or MoneyCentral.com. or on the
company’s website.
Tools For Analysis:-
·Earnings per Share – EPS
·Price to Earnings Ratio – P/E
·Projected Earnings Growth – PEG
·Price to Sales – P/S
·Price to Book – P/B
·Dividend Payout Ratio
·Dividend Yield
·Book Value
·Return on Equity
No single number from this list is a magic bullet that will give you a buy or sell
recommendation by itself, however as you begin developing a picture of what you want in a
stock, these numbers will become benchmarks to measure the worth of potential
investments.
Page | 17
1) Earning Per Share (EPS):-
One of the challenges of evaluating stocks is establishing an “apples to apples”
comparison. What I mean by this is setting up a comparison that is meaningful so that the
results help you make an investment decision. Comparing the price of two stocks is
meaningless; similarly, comparing the earnings of one company to another really doesn’t
make any sense, if you think about it. Using the raw numbers ignores the fact that the two
companies undoubtedly have a different number of outstanding shares.
For example, companies A and B both earn Rs.1000, but company A has 100 shares
outstanding, while company B has 500 shares outstanding. Which company’s stock do you
want to own?
It makes more sense to look at earnings per share (EPS) for use as a comparison tool. You
calculate earnings per share by taking the net earnings and divide by the outstanding shares
EPS = Net Earnings / Outstanding Shares
Using our example above, Company A had earnings of Rs.1000 and 100 shares outstanding,
which equals an EPS of Rs.10 (1000 / 100 = 10). Company B had earnings of 1000 and 500
shares outstanding, which equals an EPS of Rs. 2 (1000 / 500 = 2).
So, you should go buy Company A with an EPS of 10, right? May be, but not just on the
basis of its EPS. The EPS is helpful in comparing one company to another, assuming they
are in the same industry, but it doesn’t tell you whether it’s a good stock to buy or what the
market thinks of it. For that information, we need to look at some ratios.
Before we move on, you should note that there are three types of EPS numbers:
·Trailing EPS – last year’s numbers and the only actual EPS.
·Current EPS – this year’s numbers, which are still projections.
·Forward EPS – future numbers, which are obviously projections.
Don’t get hung up on the per-share price of a stock when making your evaluation. It
really doesn’t tell you much. Focus instead on the market cap to get a picture of the
company’s value in the market place
2) Price to Earnings Ratio:-
If there is one number that people look at than more any other it is the Price to
Earnings Ratio (P/E). The P/E is one of those numbers that investors throw around with great
authority as if it told the whole story. Of course, it doesn’t tell the whole story (if it did, we
wouldn’t need all the other numbers.)
The P/E looks at the relationship between the stock price and the company’s
earnings. The P/E is the most popular metric of stock analysis, although it is far from the
Page | 18
One of the challenges of evaluating stocks is establishing an “apples to apples”
comparison. What I mean by this is setting up a comparison that is meaningful so that the
results help you make an investment decision. Comparing the price of two stocks is
meaningless; similarly, comparing the earnings of one company to another really doesn’t
make any sense, if you think about it. Using the raw numbers ignores the fact that the two
companies undoubtedly have a different number of outstanding shares.
For example, companies A and B both earn Rs.1000, but company A has 100 shares
outstanding, while company B has 500 shares outstanding. Which company’s stock do you
want to own?
It makes more sense to look at earnings per share (EPS) for use as a comparison tool. You
calculate earnings per share by taking the net earnings and divide by the outstanding shares
EPS = Net Earnings / Outstanding Shares
Using our example above, Company A had earnings of Rs.1000 and 100 shares outstanding,
which equals an EPS of Rs.10 (1000 / 100 = 10). Company B had earnings of 1000 and 500
shares outstanding, which equals an EPS of Rs. 2 (1000 / 500 = 2).
So, you should go buy Company A with an EPS of 10, right? May be, but not just on the
basis of its EPS. The EPS is helpful in comparing one company to another, assuming they
are in the same industry, but it doesn’t tell you whether it’s a good stock to buy or what the
market thinks of it. For that information, we need to look at some ratios.
Before we move on, you should note that there are three types of EPS numbers:
·Trailing EPS – last year’s numbers and the only actual EPS.
·Current EPS – this year’s numbers, which are still projections.
·Forward EPS – future numbers, which are obviously projections.
Don’t get hung up on the per-share price of a stock when making your evaluation. It
really doesn’t tell you much. Focus instead on the market cap to get a picture of the
company’s value in the market place
2) Price to Earnings Ratio:-
If there is one number that people look at than more any other it is the Price to
Earnings Ratio (P/E). The P/E is one of those numbers that investors throw around with great
authority as if it told the whole story. Of course, it doesn’t tell the whole story (if it did, we
wouldn’t need all the other numbers.)
The P/E looks at the relationship between the stock price and the company’s
earnings. The P/E is the most popular metric of stock analysis, although it is far from the
Page | 18
only one you should consider. You calculate the P/E by taking the share price and dividing it
by the company’s EPS.
P/E = Stock Price / EPS
For example, a company with a share price of Rs.40 and an EPS of Rs.8 would have a
P/E of 5 (40 / 8 = 5).
What does P/E tell you? The P/E gives you an idea of what the market is willing to pay for
the company’s earnings. The higher the P/E the more the market is willing to pay for the
company’s earnings. Some investors read a high P/E as an overpriced stock and that may be
the case, however it can also indicate the market has high hopes for this stock’s future and
has bid up the price.
Conversely, a low P/E may indicate a “vote of no confidence” by the market or it could
mean this is a sleeper that the market has overlooked. Known as value stocks, many
investors made their fortunes spotting these “diamonds in the rough” before the rest of the
market discovered their true worth.
What is the “right” P/E? There is no correct answer to this question, because part of the
answer depends on your willingness to pay for earnings. The more you are willing to pay,
which means you believe the company has good long term prospects over and above its
current position, the higher the “right” P/E is for that particular stock in your decision-
making process. Another investor may not see the same value and think your “right” P/E is
all wrong.
Understanding the PEG:-
This number of PEG gave you an idea of what value the market place on a
company’s earnings. The P/E is the most popular way to compare the relative value of stocks
based on earnings because you calculate it by taking the current price of the stock and divide
it by the Earnings Per Share (EPS). This tells you whether a stock’s price is high or low
relative to its earnings.
Some investors may consider a company with a high P/E overpriced and they may be
correct. A high P/E may be a signal that traders have pushed a stock’s price beyond the point
where any reasonable near term growth is probable.
However, a high P/E may also be a strong vote of confidence that the company still has
strong growth prospects in the future, which should mean an even higher stock price.Because
the market is usually more concerned about the future than the present, it is always looking
for some way to project out.
3) Projected Earning Growth: (PEG)
Another ratio you can use will help you look at future earnings growth is called the PEG
ratio. The PEG factors in projected earnings growth rates to the P/E for another number to
remember.
Page | 19
by the company’s EPS.
P/E = Stock Price / EPS
For example, a company with a share price of Rs.40 and an EPS of Rs.8 would have a
P/E of 5 (40 / 8 = 5).
What does P/E tell you? The P/E gives you an idea of what the market is willing to pay for
the company’s earnings. The higher the P/E the more the market is willing to pay for the
company’s earnings. Some investors read a high P/E as an overpriced stock and that may be
the case, however it can also indicate the market has high hopes for this stock’s future and
has bid up the price.
Conversely, a low P/E may indicate a “vote of no confidence” by the market or it could
mean this is a sleeper that the market has overlooked. Known as value stocks, many
investors made their fortunes spotting these “diamonds in the rough” before the rest of the
market discovered their true worth.
What is the “right” P/E? There is no correct answer to this question, because part of the
answer depends on your willingness to pay for earnings. The more you are willing to pay,
which means you believe the company has good long term prospects over and above its
current position, the higher the “right” P/E is for that particular stock in your decision-
making process. Another investor may not see the same value and think your “right” P/E is
all wrong.
Understanding the PEG:-
This number of PEG gave you an idea of what value the market place on a
company’s earnings. The P/E is the most popular way to compare the relative value of stocks
based on earnings because you calculate it by taking the current price of the stock and divide
it by the Earnings Per Share (EPS). This tells you whether a stock’s price is high or low
relative to its earnings.
Some investors may consider a company with a high P/E overpriced and they may be
correct. A high P/E may be a signal that traders have pushed a stock’s price beyond the point
where any reasonable near term growth is probable.
However, a high P/E may also be a strong vote of confidence that the company still has
strong growth prospects in the future, which should mean an even higher stock price.Because
the market is usually more concerned about the future than the present, it is always looking
for some way to project out.
3) Projected Earning Growth: (PEG)
Another ratio you can use will help you look at future earnings growth is called the PEG
ratio. The PEG factors in projected earnings growth rates to the P/E for another number to
remember.
Page | 19
You calculate the PEG by taking the P/E and dividing it by the projected growth in earnings
PEG = P/E / (projected growth in earnings)
For example, a stock with a P/E of 30 and projected earning growth next year of 15% would
have a PEG of 2 (30 / 15 = 2).
What does the “2” mean? Like all ratios, it simply shows you a relationship. In this case, the
lower the number the less you pay for each unit of future earnings growth. So even a stock
with a high P/E, but high projected earning growth may be a good value.
Looking at the opposite situation; a low P/E stock with low or no projected earnings growth,
you see that what looks like a value may not work out that way. For example, a stock with a
P/E of 8 and flat earnings growth equals a PEG of 8. This could prove to be an expensive
investment. A few important things to remember about PEG:
·It is about year-to-year earnings growth
·It relies on projections, which may not always be accurate
4) Price to Sales Ratio:-
You have a number of tools available to you when it comes to evaluating
companies with earnings. Does that mean companies that don’t have any earnings are bad
investments? Not necessarily, but you should approach companies with no history of actually
making money with caution.
The Internet boom of the late 1990s was a classic example of hundreds of
companies coming to the market with no history of earning – some of them didn’t even have
products yet. Fortunately, that’s behind us. However, we still have the problem of needing
some measure of young companies with no earnings, yet worthy of consideration. After all,
Microsoft had no earnings at one point in its corporate life.
One ratio you can use is Price to Sales or P/S ratio. This metric looks at the
current stock price relative to the total sales per share. You calculate the P/S by dividing
the market cap of the stock by the total revenues of the company.
You can also calculate the P/S by dividing the current stock price by the sales per share.
P/S = Market Cap / Revenues
OR
P/S = Stock Price / Sales Price Per Share
Much like P/E, the P/S number reflects the value placed on sales by the market. The lower
the P/S, the better the value, at least that’s the conventional wisdom. However, this is
definitely not a number you want to use in isolation. When dealing with a young company,
there are many questions to answer and the P/S supplies just one answer.
Page | 20
PEG = P/E / (projected growth in earnings)
For example, a stock with a P/E of 30 and projected earning growth next year of 15% would
have a PEG of 2 (30 / 15 = 2).
What does the “2” mean? Like all ratios, it simply shows you a relationship. In this case, the
lower the number the less you pay for each unit of future earnings growth. So even a stock
with a high P/E, but high projected earning growth may be a good value.
Looking at the opposite situation; a low P/E stock with low or no projected earnings growth,
you see that what looks like a value may not work out that way. For example, a stock with a
P/E of 8 and flat earnings growth equals a PEG of 8. This could prove to be an expensive
investment. A few important things to remember about PEG:
·It is about year-to-year earnings growth
·It relies on projections, which may not always be accurate
4) Price to Sales Ratio:-
You have a number of tools available to you when it comes to evaluating
companies with earnings. Does that mean companies that don’t have any earnings are bad
investments? Not necessarily, but you should approach companies with no history of actually
making money with caution.
The Internet boom of the late 1990s was a classic example of hundreds of
companies coming to the market with no history of earning – some of them didn’t even have
products yet. Fortunately, that’s behind us. However, we still have the problem of needing
some measure of young companies with no earnings, yet worthy of consideration. After all,
Microsoft had no earnings at one point in its corporate life.
One ratio you can use is Price to Sales or P/S ratio. This metric looks at the
current stock price relative to the total sales per share. You calculate the P/S by dividing
the market cap of the stock by the total revenues of the company.
You can also calculate the P/S by dividing the current stock price by the sales per share.
P/S = Market Cap / Revenues
OR
P/S = Stock Price / Sales Price Per Share
Much like P/E, the P/S number reflects the value placed on sales by the market. The lower
the P/S, the better the value, at least that’s the conventional wisdom. However, this is
definitely not a number you want to use in isolation. When dealing with a young company,
there are many questions to answer and the P/S supplies just one answer.
Page | 20
5) Price to Book Ratio:
Investors looking for hot stocks aren’t the only ones trolling the markets. A quiet
group of folks called value investors go about their business looking for companies that the
market has passed by.
Some of these investors become quite wealthy finding sleepers, holding on to
them for the long term as the companies go about their business without much attention from
the market, until one day they pop up on the screen, and some analyst “discovers” them and
bids up the stock. Meanwhile, the value investor pockets a hefty profit.
Value investors look for some other indicators besides earnings growth and so on.
One of the metrics they look for is the Price to Book ratio or P/B. This measurement looks at
the value the market places on the book value of the company.
You calculate the P/B by taking the current price per share and dividing by the book value
per share.
P/B = Share Price / Book Value Per Share
Like the P/E, the lower the P/B, the better the value. Value investors would use a low P/B is
stock screens, for instance, to identify potential candidates.
6) Dividend Payout Ratio:
The Dividend Payout Ratio (DPR) is one of those numbers. It almost seems like a
measurement invented because it looked like it was important, but nobody can really agree
on why. The DPR (it usually doesn’t even warrant a capitalized abbreviation) measures what
a company’s pays out to investors in the form of dividends.
You calculate the DPR by dividing the annual dividends per share by the Earnings Per Share.
DPR = Dividends Per Share / EPS
For example, if a company paid out Rs.10 per share in annual dividends and had Rs.40 in
EPS, the DPR would be 25%. (10 / 40 = 25%)
The real question is whether 25% is good or bad and that is subject to interpretation.
Growing companies will typically retain more profits to fund growth and pay lower or no
dividends.
Companies that pay higher dividends may be in mature industries where there is little room
for growth and paying higher dividends is the best use of profits (utilities used to fall into
this group, although in recent years many of them have been diversifying).
Either way, you must view the whole DPR issue in the context of the company and its
industry. By itself, it tells you very little.
7) Dividend Yield:
Page | 21
Investors looking for hot stocks aren’t the only ones trolling the markets. A quiet
group of folks called value investors go about their business looking for companies that the
market has passed by.
Some of these investors become quite wealthy finding sleepers, holding on to
them for the long term as the companies go about their business without much attention from
the market, until one day they pop up on the screen, and some analyst “discovers” them and
bids up the stock. Meanwhile, the value investor pockets a hefty profit.
Value investors look for some other indicators besides earnings growth and so on.
One of the metrics they look for is the Price to Book ratio or P/B. This measurement looks at
the value the market places on the book value of the company.
You calculate the P/B by taking the current price per share and dividing by the book value
per share.
P/B = Share Price / Book Value Per Share
Like the P/E, the lower the P/B, the better the value. Value investors would use a low P/B is
stock screens, for instance, to identify potential candidates.
6) Dividend Payout Ratio:
The Dividend Payout Ratio (DPR) is one of those numbers. It almost seems like a
measurement invented because it looked like it was important, but nobody can really agree
on why. The DPR (it usually doesn’t even warrant a capitalized abbreviation) measures what
a company’s pays out to investors in the form of dividends.
You calculate the DPR by dividing the annual dividends per share by the Earnings Per Share.
DPR = Dividends Per Share / EPS
For example, if a company paid out Rs.10 per share in annual dividends and had Rs.40 in
EPS, the DPR would be 25%. (10 / 40 = 25%)
The real question is whether 25% is good or bad and that is subject to interpretation.
Growing companies will typically retain more profits to fund growth and pay lower or no
dividends.
Companies that pay higher dividends may be in mature industries where there is little room
for growth and paying higher dividends is the best use of profits (utilities used to fall into
this group, although in recent years many of them have been diversifying).
Either way, you must view the whole DPR issue in the context of the company and its
industry. By itself, it tells you very little.
7) Dividend Yield:
Page | 21
Not all of the tools of fundamental analysis work for every investor on every
stock. If you are looking for high growth technology stocks, they are unlikely to turn up in
any stock screens you run looking for dividend paying characteristics.
However, if you are a value investor or looking for dividend income then there are a couple
of measurements that are specific to you. For dividend investors, one of the telling metrics is
Dividend Yield. This measurement tells you what percentage return a company pays out to
shareholders in the form of dividends. Older, well-established companies tend to payout a
higher percentage then do younger companies and their dividend history can be more
consistent.
You calculate the Dividend Yield by taking the annual dividend per share and divide by the
stock’s price.
Dividend Yield = annual dividend per share / stock's price per share
For example, if a company’s annual dividend is Rs.5 and the stock trades at Rs.60, the
Dividend Yield is 12.5%. (5 / 60 = .125)
8) Book Value:
How much is a company worth and is that value reflected in the stock price?
There are several ways to define a company’s worth or value. One of the ways you define
value is market cap or how much money would you need to buy every single share of stock
at the current price. Another way to determine a company’s value is to go to the balance
statement and look at the Book Value. The Book Value is simply the company’s assets
minus its liabilities.
Book Value = Assets - Liabilities
In other words, if you wanted to close the doors, how much would be left after you settled all
the outstanding obligations and sold off all the assets. A company that is a viable growing
business will always be worth more than its book value for its ability to generate earnings
and growth.
Book value appeals more to value investors who look at the relationship to the
stock's price by using the Price to Book ratio.
To compare companies, you should convert to book value per share, which is simply the
book value divided by outstanding shares.
9) Return on Equity:-
If you give some management teams a couple of boards, some glue, and a ball of string, they
can build a profitable growing business, while other teams can’t make a profit with several
billion dollars worth of assets.
Page | 22
stock. If you are looking for high growth technology stocks, they are unlikely to turn up in
any stock screens you run looking for dividend paying characteristics.
However, if you are a value investor or looking for dividend income then there are a couple
of measurements that are specific to you. For dividend investors, one of the telling metrics is
Dividend Yield. This measurement tells you what percentage return a company pays out to
shareholders in the form of dividends. Older, well-established companies tend to payout a
higher percentage then do younger companies and their dividend history can be more
consistent.
You calculate the Dividend Yield by taking the annual dividend per share and divide by the
stock’s price.
Dividend Yield = annual dividend per share / stock's price per share
For example, if a company’s annual dividend is Rs.5 and the stock trades at Rs.60, the
Dividend Yield is 12.5%. (5 / 60 = .125)
8) Book Value:
How much is a company worth and is that value reflected in the stock price?
There are several ways to define a company’s worth or value. One of the ways you define
value is market cap or how much money would you need to buy every single share of stock
at the current price. Another way to determine a company’s value is to go to the balance
statement and look at the Book Value. The Book Value is simply the company’s assets
minus its liabilities.
Book Value = Assets - Liabilities
In other words, if you wanted to close the doors, how much would be left after you settled all
the outstanding obligations and sold off all the assets. A company that is a viable growing
business will always be worth more than its book value for its ability to generate earnings
and growth.
Book value appeals more to value investors who look at the relationship to the
stock's price by using the Price to Book ratio.
To compare companies, you should convert to book value per share, which is simply the
book value divided by outstanding shares.
9) Return on Equity:-
If you give some management teams a couple of boards, some glue, and a ball of string, they
can build a profitable growing business, while other teams can’t make a profit with several
billion dollars worth of assets.
Page | 22
Return on Equity (ROE) is one measure of how efficiently a company uses its assets to
produce earnings. You calculate ROE by dividing Net Income by Book Value. A healthy
company may produce an ROE in the 13% to 15% range. Like all metrics, compare
companies in the same industry to get a better picture.
While ROE is a useful measure, it does have some flaws that can give you a false picture, so
never rely on it alone. For example, if a company carries a large debt and raises funds
through borrowing rather than issuing stock it will reduce its book value. A lower book value
means you’re dividing by a smaller number so the ROE is artificially higher. There are other
situations such as taking write-downs, stock buy backs, or any other accounting slight of
hand that reduces book value, which will produce a higher ROE without improving profits.
It may also be more meaningful to look at the ROE over a period of the past five years,
rather than one year to average out any abnormal numbers.
Given that you must look at the total picture, ROE is a useful tool in identifying companies
with a competitive advantage. All other things roughly equal, the company that can
consistently squeeze out more profits with their assets, will be a better investment in the long
run.
Page | 23
produce earnings. You calculate ROE by dividing Net Income by Book Value. A healthy
company may produce an ROE in the 13% to 15% range. Like all metrics, compare
companies in the same industry to get a better picture.
While ROE is a useful measure, it does have some flaws that can give you a false picture, so
never rely on it alone. For example, if a company carries a large debt and raises funds
through borrowing rather than issuing stock it will reduce its book value. A lower book value
means you’re dividing by a smaller number so the ROE is artificially higher. There are other
situations such as taking write-downs, stock buy backs, or any other accounting slight of
hand that reduces book value, which will produce a higher ROE without improving profits.
It may also be more meaningful to look at the ROE over a period of the past five years,
rather than one year to average out any abnormal numbers.
Given that you must look at the total picture, ROE is a useful tool in identifying companies
with a competitive advantage. All other things roughly equal, the company that can
consistently squeeze out more profits with their assets, will be a better investment in the long
run.
Page | 23
COMPANY PROFILE
Introduction
About India Infoline
Company is one-stop financial services shop, most respected for quality of its advice,
personalized service and cutting-edge technology.
Vision
To become the most respected company in the financial services space in India
India Infoline Group
The India Infoline group, comprising the holding company, India Infoline Limited and its
wholly-owned subsidiaries, straddle the entire financial services space with offerings ranging
from Equity research, Equities and derivatives trading, Commodities trading, Portfolio
Management Services, Mutual Funds, Life Insurance, Fixed deposits, GoI bonds and other
small savings instruments to loan products and Investment banking. India Infoline also owns
and manages the websites www.indiainfoline.com and www.5paisa.com
The company has a network of 758 business locations (branches and sub-brokers) spread
across 346 cities and towns. It has more than 800,000 customers.
Page | 24
Introduction
About India Infoline
Company is one-stop financial services shop, most respected for quality of its advice,
personalized service and cutting-edge technology.
Vision
To become the most respected company in the financial services space in India
India Infoline Group
The India Infoline group, comprising the holding company, India Infoline Limited and its
wholly-owned subsidiaries, straddle the entire financial services space with offerings ranging
from Equity research, Equities and derivatives trading, Commodities trading, Portfolio
Management Services, Mutual Funds, Life Insurance, Fixed deposits, GoI bonds and other
small savings instruments to loan products and Investment banking. India Infoline also owns
and manages the websites www.indiainfoline.com and www.5paisa.com
The company has a network of 758 business locations (branches and sub-brokers) spread
across 346 cities and towns. It has more than 800,000 customers.
Page | 24
India Infoline Ltd
India Infoline Limited is listed on both the leading stock exchanges in India, viz. the Stock
Exchange, Mumbai (BSE) and the National Stock Exchange (NSE) and is also a member of
both the exchanges. It is engaged in the businesses of Equities broking, Wealth Advisory
Services and Portfolio Management Services. It offers broking services in the Cash and
Derivatives segments of the NSE as well as the Cash segment of the BSE. It is registered
with NSDL as well as CDSL as a depository participant, providing a one-stop solution for
clients trading in the equities market. It has recently launched its Investment banking and
Institutional Broking business.
Head quarters of INDIA INFOLINE:
REGISTERED OFFICE –
IIFL House ,
Sun Infotech Park
Road no.16V , Plot No.B-23,
Thane Industrial Area,
Wagle Estate, Thane - 400604
CORPORATE OFFICE –
IIFL Center,
B Wing, Trade Center,
Kamla Mills Compound,
Off Senapati Bapat Road,
Lower Parel, Mumbai - 400013
Page | 25
India Infoline Limited is listed on both the leading stock exchanges in India, viz. the Stock
Exchange, Mumbai (BSE) and the National Stock Exchange (NSE) and is also a member of
both the exchanges. It is engaged in the businesses of Equities broking, Wealth Advisory
Services and Portfolio Management Services. It offers broking services in the Cash and
Derivatives segments of the NSE as well as the Cash segment of the BSE. It is registered
with NSDL as well as CDSL as a depository participant, providing a one-stop solution for
clients trading in the equities market. It has recently launched its Investment banking and
Institutional Broking business.
Head quarters of INDIA INFOLINE:
REGISTERED OFFICE –
IIFL House ,
Sun Infotech Park
Road no.16V , Plot No.B-23,
Thane Industrial Area,
Wagle Estate, Thane - 400604
CORPORATE OFFICE –
IIFL Center,
B Wing, Trade Center,
Kamla Mills Compound,
Off Senapati Bapat Road,
Lower Parel, Mumbai - 400013
Page | 25
GLOBAL BRANCHES –
IIFL Singapore – IIFL (Asia) Pte Ltd.
IIFL Dubai – IIFL Private Wealth Management (Dubai) Ltd.
IIFL USA – IIFL Inc.
IIFL UK – IIFL Wealth (UK) Tld.
IIFL Geneva – IIFL Private Wealth (Suisse) SA.
IIFL Hong Kong – IIFL Private Wealth Hong Kong Ltd.
IIFL Mauritius – IIFL Private Waelth (Mauritius) Ltd.
Page | 26
West Zone North Zone South Zone East Zone
AHMEDABAD CHANDIGARH BANGALORE KOLKATA
RAJKOT LUDHIANA HUBLI SILIGURI
BARODA GURGAON MANGLORE BHUBANESWAR
GOA DELHI MYSORE
INDORE JAIPUR HYDERABAD
MUMBAI JAMSHEDPUR SECUNDERABAD
PUNE KANPUR VIJAYAWADA
BHOPAL VISAKHAPATNAM
CHENNAI
COIMBATORE
MADURAI
TIRUPPUR
TRICHY
IIFL Singapore – IIFL (Asia) Pte Ltd.
IIFL Dubai – IIFL Private Wealth Management (Dubai) Ltd.
IIFL USA – IIFL Inc.
IIFL UK – IIFL Wealth (UK) Tld.
IIFL Geneva – IIFL Private Wealth (Suisse) SA.
IIFL Hong Kong – IIFL Private Wealth Hong Kong Ltd.
IIFL Mauritius – IIFL Private Waelth (Mauritius) Ltd.
Page | 26
West Zone North Zone South Zone East Zone
AHMEDABAD CHANDIGARH BANGALORE KOLKATA
RAJKOT LUDHIANA HUBLI SILIGURI
BARODA GURGAON MANGLORE BHUBANESWAR
GOA DELHI MYSORE
INDORE JAIPUR HYDERABAD
MUMBAI JAMSHEDPUR SECUNDERABAD
PUNE KANPUR VIJAYAWADA
BHOPAL VISAKHAPATNAM
CHENNAI
COIMBATORE
MADURAI
TIRUPPUR
TRICHY
Page | 27
TOP MANAGEMENT:
Mr. Nirmal Jain
Chairman & Managing Director
Nirmal Jain, MBA (IIM, Ahmadabad) and a Chartered and Cost Accountant, founded India’s
leading financial services company India Infoline Ltd. in 1995, providing globally acclaimed
financial services in equities and commodities broking, life insurance and mutual funds
distribution, among others. Mr. Jain began his career in 1989 with Hindustan Lever’s
commodity export business, contributing tremendously to its growth. He was also associated
with Inquire-Indian Equity Research, which he co-founded in 1994 to set new standards in
equity research in India
Mr. R Venkataraman
Executive Director
R Venkataraman, co-promoter and Executive Director of India Infoline Ltd., is a B. Tech
(Electronics and Electrical Communications Engineering, IIT Kharagpur) and an MBA (IIM
Bangalore). He joined the India Infoline board in July 1999. He previously held senior
managerial positions in ICICI Limited, including ICICI Securities Limited, their investment
banking joint venture with J P Morgan of USA and with BZW and Taib Capital Corporation
Limited. He was also Assistant Vice President with G E Capital Services India Limited in
their private equity division, possessing a varied experience of more than 16 years in the
financial services sector.
Page | 28
Mr. Nirmal Jain
Chairman & Managing Director
Nirmal Jain, MBA (IIM, Ahmadabad) and a Chartered and Cost Accountant, founded India’s
leading financial services company India Infoline Ltd. in 1995, providing globally acclaimed
financial services in equities and commodities broking, life insurance and mutual funds
distribution, among others. Mr. Jain began his career in 1989 with Hindustan Lever’s
commodity export business, contributing tremendously to its growth. He was also associated
with Inquire-Indian Equity Research, which he co-founded in 1994 to set new standards in
equity research in India
Mr. R Venkataraman
Executive Director
R Venkataraman, co-promoter and Executive Director of India Infoline Ltd., is a B. Tech
(Electronics and Electrical Communications Engineering, IIT Kharagpur) and an MBA (IIM
Bangalore). He joined the India Infoline board in July 1999. He previously held senior
managerial positions in ICICI Limited, including ICICI Securities Limited, their investment
banking joint venture with J P Morgan of USA and with BZW and Taib Capital Corporation
Limited. He was also Assistant Vice President with G E Capital Services India Limited in
their private equity division, possessing a varied experience of more than 16 years in the
financial services sector.
Page | 28
MILESTONES:
1995 :- Commenced operations as an Equity Research firm
1997 :- Launched research products of leading Indian companies, key sectors and the
economy Client included leading FIIs, banks and companies
1999 :- Launched www.indiainfoline.com
2000 :- Launched online trading through www.5paisa.com.
Started distribution of life insurance and mutual fund
2003 :- Launched proprietary trading platform Trader Terminal for retail customers
2004 :- Acquired commodities broking license.
Launched Portfolio Management Service
2005 :- Maiden IPO and listed on NSE, BSE
2006 :- Acquired membership of DGCX.
Commenced the lending business
2007 :- Commenced institutional equities business under IIFL.
Formed Singapore subsidiary, IIFL (Asia) Pte Ltd
2008 :- Launched IIFL Wealth.
Transitioned to insurance broking model
2009 :- Acquired registration for Housing Finance.
SEBI in-principle approval for Mutual Fund.
Obtained Venture Capital license
2010 :- Received in-principle approval for membership of the Singapore Stock Exchange.
Received membership of the Colombo Stock Exchange
2011 :- Launch of IIFL Mutual Fund.
2012 :- Announced IIFL Real Estate Fund.
2013 :- Launched the largest AIF Fund in India.
Page | 29
1995 :- Commenced operations as an Equity Research firm
1997 :- Launched research products of leading Indian companies, key sectors and the
economy Client included leading FIIs, banks and companies
1999 :- Launched www.indiainfoline.com
2000 :- Launched online trading through www.5paisa.com.
Started distribution of life insurance and mutual fund
2003 :- Launched proprietary trading platform Trader Terminal for retail customers
2004 :- Acquired commodities broking license.
Launched Portfolio Management Service
2005 :- Maiden IPO and listed on NSE, BSE
2006 :- Acquired membership of DGCX.
Commenced the lending business
2007 :- Commenced institutional equities business under IIFL.
Formed Singapore subsidiary, IIFL (Asia) Pte Ltd
2008 :- Launched IIFL Wealth.
Transitioned to insurance broking model
2009 :- Acquired registration for Housing Finance.
SEBI in-principle approval for Mutual Fund.
Obtained Venture Capital license
2010 :- Received in-principle approval for membership of the Singapore Stock Exchange.
Received membership of the Colombo Stock Exchange
2011 :- Launch of IIFL Mutual Fund.
2012 :- Announced IIFL Real Estate Fund.
2013 :- Launched the largest AIF Fund in India.
Page | 29
INDIA INFOLINE IN BUSINESS:
The India Infoline group comprising the holding company, India Infoline
Ltd, and its wholly owned subsidiaries, offers the entire gamut of financial services ranging
from Equities and Derivatives Trading, Commodities Trading, Portfolio management
services, Mutual Fund, Life Insurance, Fixed deposits, GOI Bonds, Loan products, and other
small savings instruments. It also owns and operates the websites, www.indiainfoline.com
and www.5paisa.com.
India Infoline Ltd is listed on both the leading stock exchanges in India namely the Bombay
stock exchange (BSE) and the National stock exchange (NSE).
Its main objective is to achieve customer satisfaction with proper advice and helping them to
get maximum returns on their Investment.
Indiainfoline offers perfect product mix of tools to understand the stock market with
dedicated relationship manager to manage the portfolios. Indiainfoline also provide Trader
terminal which is designed to make online trading with minimum and hassle free service.
PROFILE:
Products and Services:
Company is a one-stop financial services shop, most respected for quality of its advice,
personalized service and cutting-edge technology.
Equity:
Indiainfoline provided the prospect of researched investing to its clients, which was hitherto
restricted only to the institutions. Research for the retail investor did not exist prior to
Indiainfoline. Indiainfoline leveraged technology to bring the convenience of trading to the
investor’s location of preference (residence or office) through computerized access.
Indiainfoline made it possible for clients to view transaction costs and ledger updates in real
time.
Online Software – TT Advance:
TT-ADV is for the dedicated day traders, who churn their portfolio on minor movements in
the market, sometimes several times a day. Their rapid and high volume trading requires a
powerful interface for lightning fast order execution. It monitors marked to market positions
on a minute-to-minute basis, with facilities for panic exit. It provides all the analysis -
fundamental and technical, market gossip, price and volume information and much more - all
at one click
Page | 30
The India Infoline group comprising the holding company, India Infoline
Ltd, and its wholly owned subsidiaries, offers the entire gamut of financial services ranging
from Equities and Derivatives Trading, Commodities Trading, Portfolio management
services, Mutual Fund, Life Insurance, Fixed deposits, GOI Bonds, Loan products, and other
small savings instruments. It also owns and operates the websites, www.indiainfoline.com
and www.5paisa.com.
India Infoline Ltd is listed on both the leading stock exchanges in India namely the Bombay
stock exchange (BSE) and the National stock exchange (NSE).
Its main objective is to achieve customer satisfaction with proper advice and helping them to
get maximum returns on their Investment.
Indiainfoline offers perfect product mix of tools to understand the stock market with
dedicated relationship manager to manage the portfolios. Indiainfoline also provide Trader
terminal which is designed to make online trading with minimum and hassle free service.
PROFILE:
Products and Services:
Company is a one-stop financial services shop, most respected for quality of its advice,
personalized service and cutting-edge technology.
Equity:
Indiainfoline provided the prospect of researched investing to its clients, which was hitherto
restricted only to the institutions. Research for the retail investor did not exist prior to
Indiainfoline. Indiainfoline leveraged technology to bring the convenience of trading to the
investor’s location of preference (residence or office) through computerized access.
Indiainfoline made it possible for clients to view transaction costs and ledger updates in real
time.
Online Software – TT Advance:
TT-ADV is for the dedicated day traders, who churn their portfolio on minor movements in
the market, sometimes several times a day. Their rapid and high volume trading requires a
powerful interface for lightning fast order execution. It monitors marked to market positions
on a minute-to-minute basis, with facilities for panic exit. It provides all the analysis -
fundamental and technical, market gossip, price and volume information and much more - all
at one click
Page | 30
Trader Terminal is almost a substitute for NSE NEAT terminal. In fact, it has many more
powerful features those are:
·Trade execution in a fraction of a second!
·Live streaming quotes. Price watch on any number of scripts.
·Intra day charts, updated live, tick-by-tick.
·Live margin, position, marked to market profit & loss report.
·The Lowest Brokerage on the face of the earth!
·Set any number of price alerts on any number of scripts.
·Flexibility to customize screen layout and setting.
·Facility to customize any number of portfolios & watch lists.
·Facility to cancel all pending orders at one click.
·Facility to square off all transactions at one click.
·Top Gainers, Top Losers, Most Active, updated live.
·Index information; index chart, index stock information live.
·Market depth, i.e. Best 5 bids and offers, updated live for all scripts
·Instant trade confirmation.
·Online access to both accounts and DP.
·Live updated Order and Trade Book.
·Details of pending executed and rejected orders.
·Online access to Customer Service.
·128 - bit super safe encryption.
·Facility to place orders on the phone in all major cities.
·Facility to place after market orders
·Online fund transfer facility from leading Banks
·Online intra-day technical calls.
·Exhaustive database of over 5000 companies
·Historical charts and technical analysis tools.
·India Infoline's world - acclaimed news service and research.
·Lots more… Last but not the least, ideas that help you to make money!
Page | 31
powerful features those are:
·Trade execution in a fraction of a second!
·Live streaming quotes. Price watch on any number of scripts.
·Intra day charts, updated live, tick-by-tick.
·Live margin, position, marked to market profit & loss report.
·The Lowest Brokerage on the face of the earth!
·Set any number of price alerts on any number of scripts.
·Flexibility to customize screen layout and setting.
·Facility to customize any number of portfolios & watch lists.
·Facility to cancel all pending orders at one click.
·Facility to square off all transactions at one click.
·Top Gainers, Top Losers, Most Active, updated live.
·Index information; index chart, index stock information live.
·Market depth, i.e. Best 5 bids and offers, updated live for all scripts
·Instant trade confirmation.
·Online access to both accounts and DP.
·Live updated Order and Trade Book.
·Details of pending executed and rejected orders.
·Online access to Customer Service.
·128 - bit super safe encryption.
·Facility to place orders on the phone in all major cities.
·Facility to place after market orders
·Online fund transfer facility from leading Banks
·Online intra-day technical calls.
·Exhaustive database of over 5000 companies
·Historical charts and technical analysis tools.
·India Infoline's world - acclaimed news service and research.
·Lots more… Last but not the least, ideas that help you to make money!
Page | 31
Corporate Plan:
Registration Fee Rs 750
Brokerage [Cash]
Intra-Day 0.05 %
Delivery(Normal Settlement) 0.50 %
Futures 0.05 %
Options 1% of Premium or Rs. 100/- per lot
Minimum per share Brokerage Rs 0.05
Documents Required:
1. 1 passport size Colour Photograph.
2. 1 copy of PAN card.
3. 1 copy of Address Proof (driving license, electricity bill, telephone bill, passport,
ration card, rent agreement).
4. 2 cheques(one cancelled cheque and one margin amount cheque)
Commodity:
Commodity is worldwide one of the largest market in terms of volumes; second only to
Currency trading. It can be used like a Hedge against odds of Stock Market. To make IIL one
stop shop for the customer by adding new financial service to our existing structure. IIL is a
member of both the leading exchanges – MCX / NCDEX
Market timing for Bullion/ Metals Trading is from 10.00am to 11.55pm and for Agro
Commodities 10.00am to 5.00pm.
We provide online (Diet Odin) and offline trading on both MCX and NCDEX.
Advantages of trading through IIL:
Online/ Offline solutions for trading in Commodities market (MCX/NCDEX)
·Online Back office
·Round the clock service for Commodities
·Commodity wise Research
·Exclusive RMs for Commodities
·Trading calls for all commodities during market hours
·Daily Market Strategy
·Demat Facility for both the exchanges – NSDL
Page | 32
Registration Fee Rs 750
Brokerage [Cash]
Intra-Day 0.05 %
Delivery(Normal Settlement) 0.50 %
Futures 0.05 %
Options 1% of Premium or Rs. 100/- per lot
Minimum per share Brokerage Rs 0.05
Documents Required:
1. 1 passport size Colour Photograph.
2. 1 copy of PAN card.
3. 1 copy of Address Proof (driving license, electricity bill, telephone bill, passport,
ration card, rent agreement).
4. 2 cheques(one cancelled cheque and one margin amount cheque)
Commodity:
Commodity is worldwide one of the largest market in terms of volumes; second only to
Currency trading. It can be used like a Hedge against odds of Stock Market. To make IIL one
stop shop for the customer by adding new financial service to our existing structure. IIL is a
member of both the leading exchanges – MCX / NCDEX
Market timing for Bullion/ Metals Trading is from 10.00am to 11.55pm and for Agro
Commodities 10.00am to 5.00pm.
We provide online (Diet Odin) and offline trading on both MCX and NCDEX.
Advantages of trading through IIL:
Online/ Offline solutions for trading in Commodities market (MCX/NCDEX)
·Online Back office
·Round the clock service for Commodities
·Commodity wise Research
·Exclusive RMs for Commodities
·Trading calls for all commodities during market hours
·Daily Market Strategy
·Demat Facility for both the exchanges – NSDL
Page | 32
·Real Time Risk Management
Invest in MF
Indiainfoline offers you a host of mutual fund choices under one roof, backed by in-depth
research and advice from research house and tools configured as investor friendly.
Insurance
An entry into this segment helped complete the client’s product basket; concurrently, it
graduated the Company into a one-stop retail financial solutions provider. To ensure
maximum reach to customers across India, we have employed a multi pronged approach and
reach out to customers via our Network, Direct and Affiliate channels. Following the
opening of the sector in 1999-2000, a number of private sector insurance service providers
commenced operations aggressively and helped grow the market. The Company’s entry into
the insurance sector derisked the Company from a predominant dependence on broking and
equity-linked revenues. The annuity based income generated from insurance intermediation
result in solid core revenues across the tenure of the policy.
DATA PRESENTATION, ANALYSIS &
INTERPRETATION
STEEL SECTOR :
INTRODUCTION
·The steel industry in India has been moving from strength to strength and according
to the Annual Report 2009-10 by the Ministry of Steel, India has emerged as the fifth
largest producer of steel in the world and is likely to become the second largest
producer of crude steel by 2015-16
·India’s steel sector has a competitive advantage vis-à-vis the availability of raw
material and workforce, both skilled and unskilled. Iron ore and coal constitute the
primary raw materials for steel production
·The construction sector is a major consumer of long-products such as rods, bars/coil
sections, wire and reinforcing.
·The construction industry is expected to regain momentum over the next few years,
with the Indian Government laying emphasis on infrastructure development and
increasing expenditure on development activities across sectors.
Page | 33
Invest in MF
Indiainfoline offers you a host of mutual fund choices under one roof, backed by in-depth
research and advice from research house and tools configured as investor friendly.
Insurance
An entry into this segment helped complete the client’s product basket; concurrently, it
graduated the Company into a one-stop retail financial solutions provider. To ensure
maximum reach to customers across India, we have employed a multi pronged approach and
reach out to customers via our Network, Direct and Affiliate channels. Following the
opening of the sector in 1999-2000, a number of private sector insurance service providers
commenced operations aggressively and helped grow the market. The Company’s entry into
the insurance sector derisked the Company from a predominant dependence on broking and
equity-linked revenues. The annuity based income generated from insurance intermediation
result in solid core revenues across the tenure of the policy.
DATA PRESENTATION, ANALYSIS &
INTERPRETATION
STEEL SECTOR :
INTRODUCTION
·The steel industry in India has been moving from strength to strength and according
to the Annual Report 2009-10 by the Ministry of Steel, India has emerged as the fifth
largest producer of steel in the world and is likely to become the second largest
producer of crude steel by 2015-16
·India’s steel sector has a competitive advantage vis-à-vis the availability of raw
material and workforce, both skilled and unskilled. Iron ore and coal constitute the
primary raw materials for steel production
·The construction sector is a major consumer of long-products such as rods, bars/coil
sections, wire and reinforcing.
·The construction industry is expected to regain momentum over the next few years,
with the Indian Government laying emphasis on infrastructure development and
increasing expenditure on development activities across sectors.
Page | 33
·The Eleventh Five Year Plan (2007–2012) has allocated investments worth US$ 490
billion for the core infrastructure sector, comprising power, roads, highways,
railways, ports, airports, mining and irrigation.
·The emphasis on infrastructure development is expected to enable a surge in demand
for structural steel components, primarily used for construction purposes.
·The setting up of refineries requires investment in pipe networks to transport crude
oil and refined products, resulting in heightened demand for steel pipes and tubes.
COMPANY NAME:
TATA STEEL
“Steel has been and will be, the basic foundation material for
national growth and the industry will continue to be an important
ingredient in a global economic recovery”.
Page | 34
billion for the core infrastructure sector, comprising power, roads, highways,
railways, ports, airports, mining and irrigation.
·The emphasis on infrastructure development is expected to enable a surge in demand
for structural steel components, primarily used for construction purposes.
·The setting up of refineries requires investment in pipe networks to transport crude
oil and refined products, resulting in heightened demand for steel pipes and tubes.
COMPANY NAME:
TATA STEEL
“Steel has been and will be, the basic foundation material for
national growth and the industry will continue to be an important
ingredient in a global economic recovery”.
Page | 34
Tata Steel Limited (formerly Tata Iron and Steel Company Limited (TISCO)) is
an Indian multinational steel-making company headquartered in Mumbai, Maharashtra,
India, and a subsidiary of the Tata Group. It was the 11th largest steel producing company in
the world in 2013, with an annual crude steel capacity of 25.3 million tonnes, and the second
largest steel company in India (measured by domestic production) with an annual capacity of
9.7 million tonnes after SAIL.
Tata Steel has manufacturing operations in 26 countries, including Australia, China, India,
the Netherlands, Singapore, Thailand and the United Kingdom, and employs around 80,500
people. Its largest plant is located in Jamshedpur,Jharkhand. In 2007 Tata Steel acquired the
UK-based steel maker Corus which was the largest international acquisition by an Indian
company till that date.
It was ranked 486th in the 2014 Fortune Global 500 ranking of the world's biggest
corporations. It was the seventh most valuable Indian brand of 2013 as per Brand Finance.
On 16 February 2012 Tata Steel completed 100 years of steel making in India.
Tata Steel is headquartered in Mumbai, Maharashtra, India and has its marketing
headquarters at the Tata Centre in Kolkata, West Bengal. It has a presence in around 50
countries with manufacturing operations in 26 countries including: India, Malaysia, Vietnam,
Thailand, UAE, Ivory Coast, Mozambique, South Africa, Australia, United Kingdom, The
Netherlands, France and Canada.
Tata Steel primarily serves customers in the automotive, construction, consumer goods,
engineering, packaging, lifting and excavating, energy and power, aerospace, shipbuilding,
rail and defence and security sectors.
Expansion plans
Tata Steel has set a target of achieving an annual production capacity of 100 million tons by
2015; it is planning for capacity expansion to be balanced roughly 50:50 between greenfield
developments and acquisitions. Overseas acquisitions have already added an additional 21.4
million tonnes of capacity, including Corus (18.2 million tonnes), NatSteel (2 million tonnes)
and Millennium Steel (1.2 million tonnes). Tata plans to add another 29 million tonnes of
capacity through acquisitions.
Major greenfield steel plant expansion projects planned by Tata Steel include:
· a 6 million tonne per annum capacity plant in Kalinganagar, Odisha, India;
· an expansion of the capacity of its plant in Jharkhand, India from 6.8 to 10 million
tonnes per annum;
Page | 35
an Indian multinational steel-making company headquartered in Mumbai, Maharashtra,
India, and a subsidiary of the Tata Group. It was the 11th largest steel producing company in
the world in 2013, with an annual crude steel capacity of 25.3 million tonnes, and the second
largest steel company in India (measured by domestic production) with an annual capacity of
9.7 million tonnes after SAIL.
Tata Steel has manufacturing operations in 26 countries, including Australia, China, India,
the Netherlands, Singapore, Thailand and the United Kingdom, and employs around 80,500
people. Its largest plant is located in Jamshedpur,Jharkhand. In 2007 Tata Steel acquired the
UK-based steel maker Corus which was the largest international acquisition by an Indian
company till that date.
It was ranked 486th in the 2014 Fortune Global 500 ranking of the world's biggest
corporations. It was the seventh most valuable Indian brand of 2013 as per Brand Finance.
On 16 February 2012 Tata Steel completed 100 years of steel making in India.
Tata Steel is headquartered in Mumbai, Maharashtra, India and has its marketing
headquarters at the Tata Centre in Kolkata, West Bengal. It has a presence in around 50
countries with manufacturing operations in 26 countries including: India, Malaysia, Vietnam,
Thailand, UAE, Ivory Coast, Mozambique, South Africa, Australia, United Kingdom, The
Netherlands, France and Canada.
Tata Steel primarily serves customers in the automotive, construction, consumer goods,
engineering, packaging, lifting and excavating, energy and power, aerospace, shipbuilding,
rail and defence and security sectors.
Expansion plans
Tata Steel has set a target of achieving an annual production capacity of 100 million tons by
2015; it is planning for capacity expansion to be balanced roughly 50:50 between greenfield
developments and acquisitions. Overseas acquisitions have already added an additional 21.4
million tonnes of capacity, including Corus (18.2 million tonnes), NatSteel (2 million tonnes)
and Millennium Steel (1.2 million tonnes). Tata plans to add another 29 million tonnes of
capacity through acquisitions.
Major greenfield steel plant expansion projects planned by Tata Steel include:
· a 6 million tonne per annum capacity plant in Kalinganagar, Odisha, India;
· an expansion of the capacity of its plant in Jharkhand, India from 6.8 to 10 million
tonnes per annum;
Page | 35
· a 5 million tonne per annum capacity plant in Chhattisgarh, India (Tata Steel signed a
memorandum of understanding with the Chhattisgarh government in 2005; the plant is
facing strong protest from tribal people);
· a 3 million tonne per annum capacity plant in Iran;
· a 2.4 million tonne per annum capacity plant in Bangladesh;
· a 10.5 million tonne per annum capacity plant in Vietnam (feasibility studies are
underway); and
· a 6 million tonne per annum capacity plant in Haveri, Karnataka.
Product:-
TOP MANAGEMENT OF TATA STEEL LTD
Cyrus Mistry – Chairman
B Muthuraman – Vice Chairman
T V Narendran – Managing Director
Page | 36
memorandum of understanding with the Chhattisgarh government in 2005; the plant is
facing strong protest from tribal people);
· a 3 million tonne per annum capacity plant in Iran;
· a 2.4 million tonne per annum capacity plant in Bangladesh;
· a 10.5 million tonne per annum capacity plant in Vietnam (feasibility studies are
underway); and
· a 6 million tonne per annum capacity plant in Haveri, Karnataka.
Product:-
TOP MANAGEMENT OF TATA STEEL LTD
Cyrus Mistry – Chairman
B Muthuraman – Vice Chairman
T V Narendran – Managing Director
Page | 36
Koushik Chatterjee – Executive Director
FINANCIALS OF TATA STEEL LTD.
PROFIT & LOSS A/C
Page | 37
FINANCIALS OF TATA STEEL LTD.
PROFIT & LOSS A/C
Page | 37
Page | 38
Page | 39
0.00
5,000.00
10,000.00
15,000.00
20,000.00
25,000.00
30,000.00
35,000.00
40,000.00
45,000.00
50,000.00
Mar'15Mar'14Mar'13Mar'12Mar'11
NET SALES
PBDIT
PBT
NET
PROFIT
BALANCE SHEET OF TATA STEEL LTD.
Page | 40
5,000.00
10,000.00
15,000.00
20,000.00
25,000.00
30,000.00
35,000.00
40,000.00
45,000.00
50,000.00
Mar'15Mar'14Mar'13Mar'12Mar'11
NET SALES
PBDIT
PBT
NET
PROFIT
BALANCE SHEET OF TATA STEEL LTD.
Page | 40
Page | 41
CASH FLOW STATEMENT OF TATA STEEL LTD.
DIVIDEND SUMMARY OF TATA STEEL LTD.
Page | 42
DIVIDEND SUMMARY OF TATA STEEL LTD.
Page | 42
SHARE HOLDING PATTERN
CATEGORY OF
SHARE
HOLDER
TOTAL NO. OF
SHARE
HOLDERS
TOTAL NO. OF
SHARES
TOTAL SHARE
HOLDING AS
% OF TOTAL
SHARES
Promoter &
Promoters
Group
24 304,514,362 31.99%
Institutional
Shareholders
1,225 399,220,362 41.94%
Non Institutional
Shareholders
1,000,608 248,194,286 26.07%
TOTAL 1,001,857 951,929,010 100%
COMPETITION
COMPANY
NAME
CMP MARKET
CAP
SALES NET
PROFIT
TOTAL
ASSETS
TATA
STEEL
262.30 25,474.9841,758 6,439.1292.874.14
SAIL 60.40 24,948.3745,710 2,092.6866,933.05
JSW STEEL886.25 21.422.6246,087 2,166.4851,485.83
KALYANI
STEEL
155.25 679.68 922.16 83.31 808.74
VISA
STEEL
16.70 6.55 922.16 -241.442,690.73
Page | 43
CATEGORY OF
SHARE
HOLDER
TOTAL NO. OF
SHARE
HOLDERS
TOTAL NO. OF
SHARES
TOTAL SHARE
HOLDING AS
% OF TOTAL
SHARES
Promoter &
Promoters
Group
24 304,514,362 31.99%
Institutional
Shareholders
1,225 399,220,362 41.94%
Non Institutional
Shareholders
1,000,608 248,194,286 26.07%
TOTAL 1,001,857 951,929,010 100%
COMPETITION
COMPANY
NAME
CMP MARKET
CAP
SALES NET
PROFIT
TOTAL
ASSETS
TATA
STEEL
262.30 25,474.9841,758 6,439.1292.874.14
SAIL 60.40 24,948.3745,710 2,092.6866,933.05
JSW STEEL886.25 21.422.6246,087 2,166.4851,485.83
KALYANI
STEEL
155.25 679.68 922.16 83.31 808.74
VISA
STEEL
16.70 6.55 922.16 -241.442,690.73
Page | 43
FINANCIAL RATIOS & INTERPRETATION:
(For last three years)
Sr.Ratio 2014-15 2013-142012-13
1 EBITDA/ Turnover 8.98 % 11.04 %9.14 %
2 PBT/ Turnover 4.69 % 7.08% 4.98 %
3 Return on Avg. Capital Employed 7.17 % 9.96 % 7.90 %
4 Return on Avg. Net Worth -12.52% 8.86 % -20.65 %
5 Asset Turnover 1.28 % 1.44 % 1.42 %
6 Inventory Turnover (in days) 5.74 5.70 5.76
7 Debtors Turnover (in days) 9.52 9.91 9.93
8 Current Ratio 1.01 0.86 0.99
9 Earnings per Share 66.30 66.02 52.13
10Dividend Payout ratio 46.63 % 11.14 %-67.68 %
1. EBITDA/Turnover: Earnings Before Interest Depreciation Tax and Exceptional
Items/Turnover.
(EBITDA: PAT after minority & share of associates + Taxes +(-) Exceptional Items + Net
Finance Charges + Depreciation).
(Turnover: Sales & Other Operating Income less Excise Duty).
2. PBT/Turnover: Profit Before Tax/Turnover.
( PAT after minority & share of associates + Taxes +(-) Exceptional Items).
3. Return on Average Capital Employed: EBIT/Average Capital Employed.
(Capital Employed: Total Funds Employed – Miscellaneous Expenses to the extent not
written off or adjusted - Foreign Currency Monetary
Translation Diff Account)).
(EBIT: PAT after minority & share of associates + Taxes + (-) Exceptional Items + Net
Finance Charges).
4. Return on Average Net Worth: PAT after minority & share of associates/Average Net
Worth.
(Net Worth: Equity Share Capital + Preference Share Capital + Reserves & Surplus –
Miscellaneous Expenses to the extent not written off or
Adjusted - Foreign Currency Monetary Translation Diff Account).
5. Asset Turnover: Net Sales/(Total Assets - Investments - Misc Expenses to the extent not
written off or adjusted - Foreign Currency Monetary
Translation Diff Account - Advance Against Equity + Current Liabilities & Provisions).
6. Inventory Turnover: Average Inventory/Sale of Products in days.
7. Debtors Turnover: Average Debtors/Turnover in days.
Page | 44
(For last three years)
Sr.Ratio 2014-15 2013-142012-13
1 EBITDA/ Turnover 8.98 % 11.04 %9.14 %
2 PBT/ Turnover 4.69 % 7.08% 4.98 %
3 Return on Avg. Capital Employed 7.17 % 9.96 % 7.90 %
4 Return on Avg. Net Worth -12.52% 8.86 % -20.65 %
5 Asset Turnover 1.28 % 1.44 % 1.42 %
6 Inventory Turnover (in days) 5.74 5.70 5.76
7 Debtors Turnover (in days) 9.52 9.91 9.93
8 Current Ratio 1.01 0.86 0.99
9 Earnings per Share 66.30 66.02 52.13
10Dividend Payout ratio 46.63 % 11.14 %-67.68 %
1. EBITDA/Turnover: Earnings Before Interest Depreciation Tax and Exceptional
Items/Turnover.
(EBITDA: PAT after minority & share of associates + Taxes +(-) Exceptional Items + Net
Finance Charges + Depreciation).
(Turnover: Sales & Other Operating Income less Excise Duty).
2. PBT/Turnover: Profit Before Tax/Turnover.
( PAT after minority & share of associates + Taxes +(-) Exceptional Items).
3. Return on Average Capital Employed: EBIT/Average Capital Employed.
(Capital Employed: Total Funds Employed – Miscellaneous Expenses to the extent not
written off or adjusted - Foreign Currency Monetary
Translation Diff Account)).
(EBIT: PAT after minority & share of associates + Taxes + (-) Exceptional Items + Net
Finance Charges).
4. Return on Average Net Worth: PAT after minority & share of associates/Average Net
Worth.
(Net Worth: Equity Share Capital + Preference Share Capital + Reserves & Surplus –
Miscellaneous Expenses to the extent not written off or
Adjusted - Foreign Currency Monetary Translation Diff Account).
5. Asset Turnover: Net Sales/(Total Assets - Investments - Misc Expenses to the extent not
written off or adjusted - Foreign Currency Monetary
Translation Diff Account - Advance Against Equity + Current Liabilities & Provisions).
6. Inventory Turnover: Average Inventory/Sale of Products in days.
7. Debtors Turnover: Average Debtors/Turnover in days.
Page | 44
8. Current Ratio: Current Assets (excluding advance against equity)/Current Liabilities.
9. Earnings per share (Basic) : Pro? t attributable to Ordinary Shareholders/Weighted
average number of ordinary shares.
10. Dividend Payout: Dividend/PAT after minority & share of associates.
Interpretation:-
1) EBITDA/turnover and PBT/Turnover: -
The EBITDA/Turnover ratio decline to 8.98% in the financial year ended March 2015 as
against 11.04% during the year ended March 2014. Also the PBT/Turnover ratio is decline to
4.69% in the financial year 2014-15 as against 7.08 during the year ended March 2014. The
reason behind the decrease in profitability is due to the increase of overall cost of raw
material, less demand as compare to expectation and high financial charges on borrowing.
2) Return on average capital employed and return on average net worth:-
The return on capital employed is decline to 7.17% in the financial year ended March 2015
as against 9.96% and 7.90% during the year ended March 2014 and March 2013
respectively. The reason behind these decline is that the decline in the profitability of the
company and its performance.
3) Asset turnover ratio remained intact for the year ending 2015 and 2014 i.e. 1.59 %.
Although it was 1.75% for the financial year 2013-13
4) Inventory turnover ratio:-
Inventory turnover ratio is increased by .04 bps going to 5.74 % which was 5.70%
during the year ended March 2015 because of the low demand and sale of product as
compare to the actual production.
5) Debtors Turnover Ratio:-
Debtors’ turnover ratio is reduced 9.52% in the financial year ended March 2015 as
against 9.91% and 9.33% during the year ended March 2014 and 2013 respectively. This
shows that debtors are taking more time to repay the amount of debt or the credit period
allow to the debtors were increase and also the volume of credit sales were increase.
6) Current Ratio:-
Current ratio jumped to 1.01 times in the financial year ended March 2015 as against
0.86 and 0.99 times during the year ended March 2014 & 2013 respectively. This increase in
ratio shows that the firm’s ability to meet current obligation is increased by 0.15 and 0.02
times as compare to the year ended 2014 & 2013 respectively. This also indicates that the
firm is able to manage its routine expenses in less fund which leads to reduction in financial
expenses of firm.
Page | 45
9. Earnings per share (Basic) : Pro? t attributable to Ordinary Shareholders/Weighted
average number of ordinary shares.
10. Dividend Payout: Dividend/PAT after minority & share of associates.
Interpretation:-
1) EBITDA/turnover and PBT/Turnover: -
The EBITDA/Turnover ratio decline to 8.98% in the financial year ended March 2015 as
against 11.04% during the year ended March 2014. Also the PBT/Turnover ratio is decline to
4.69% in the financial year 2014-15 as against 7.08 during the year ended March 2014. The
reason behind the decrease in profitability is due to the increase of overall cost of raw
material, less demand as compare to expectation and high financial charges on borrowing.
2) Return on average capital employed and return on average net worth:-
The return on capital employed is decline to 7.17% in the financial year ended March 2015
as against 9.96% and 7.90% during the year ended March 2014 and March 2013
respectively. The reason behind these decline is that the decline in the profitability of the
company and its performance.
3) Asset turnover ratio remained intact for the year ending 2015 and 2014 i.e. 1.59 %.
Although it was 1.75% for the financial year 2013-13
4) Inventory turnover ratio:-
Inventory turnover ratio is increased by .04 bps going to 5.74 % which was 5.70%
during the year ended March 2015 because of the low demand and sale of product as
compare to the actual production.
5) Debtors Turnover Ratio:-
Debtors’ turnover ratio is reduced 9.52% in the financial year ended March 2015 as
against 9.91% and 9.33% during the year ended March 2014 and 2013 respectively. This
shows that debtors are taking more time to repay the amount of debt or the credit period
allow to the debtors were increase and also the volume of credit sales were increase.
6) Current Ratio:-
Current ratio jumped to 1.01 times in the financial year ended March 2015 as against
0.86 and 0.99 times during the year ended March 2014 & 2013 respectively. This increase in
ratio shows that the firm’s ability to meet current obligation is increased by 0.15 and 0.02
times as compare to the year ended 2014 & 2013 respectively. This also indicates that the
firm is able to manage its routine expenses in less fund which leads to reduction in financial
expenses of firm.
Page | 45
8) EPS:-
The EPS of the company increased to Rs 66.30 because of increase in profit in the
financial year ended March 2015 as against Rs 66.02 and Rs 52.13 during the year ended
March 2014 & 2013 respectively.
Page | 46
The EPS of the company increased to Rs 66.30 because of increase in profit in the
financial year ended March 2015 as against Rs 66.02 and Rs 52.13 during the year ended
March 2014 & 2013 respectively.
Page | 46
I.T SECTOR
INTRODUCTION
Information technology in India is an industry consisting of two major
components: IT services and business process outsourcing (BPO). The sector has increased
its contribution to India's GDP from 1.2% in 1998 to 7.5% in 2012. According
to NASSCOM, the sector aggregated revenues of US$147 billion in 2015, where export
revenue stood at US$99 billion and domestic at US$48 billion, growing by over 13%.India's
prime minister Narendra Modi has started 'Digital india' project to give IT a secured position
inside & outside India.
The Indian IT market currently focuses on providing low cost solution in the services
business of global IT. Presence of Indian companies in the product development business of
global IT is very meagre, however, this number is slowly on the raise. US giants that
outsource work to India, do not allocate the high end SDLC (Software Development Life
Cycle) processes like requirement analysis, high level design and architectural design,
although some Indian IT players have enough competency to take up and successfully
complete these high level software jobs.
The other prominent trend is, IT jobs, that were earlier confined to Bangalore, are slowly
starting to experience a geographical diffuse into other cities like Chennai, Hyderabad and
Pune. The growth is not fast paced, this, can be largely attributed to the lethargic attitude of
the government in providing proper telecommunication infrastructure. The penetration levels
are higher for mobile, but, the speed at which the backbone infrastructure works (network
speed) and the coverage it offers are far below what other countries of the world have
currently in offer.
Page | 47
INTRODUCTION
Information technology in India is an industry consisting of two major
components: IT services and business process outsourcing (BPO). The sector has increased
its contribution to India's GDP from 1.2% in 1998 to 7.5% in 2012. According
to NASSCOM, the sector aggregated revenues of US$147 billion in 2015, where export
revenue stood at US$99 billion and domestic at US$48 billion, growing by over 13%.India's
prime minister Narendra Modi has started 'Digital india' project to give IT a secured position
inside & outside India.
The Indian IT market currently focuses on providing low cost solution in the services
business of global IT. Presence of Indian companies in the product development business of
global IT is very meagre, however, this number is slowly on the raise. US giants that
outsource work to India, do not allocate the high end SDLC (Software Development Life
Cycle) processes like requirement analysis, high level design and architectural design,
although some Indian IT players have enough competency to take up and successfully
complete these high level software jobs.
The other prominent trend is, IT jobs, that were earlier confined to Bangalore, are slowly
starting to experience a geographical diffuse into other cities like Chennai, Hyderabad and
Pune. The growth is not fast paced, this, can be largely attributed to the lethargic attitude of
the government in providing proper telecommunication infrastructure. The penetration levels
are higher for mobile, but, the speed at which the backbone infrastructure works (network
speed) and the coverage it offers are far below what other countries of the world have
currently in offer.
Page | 47
COMPANY NAME
WIPRO
Wipro Limited (Western India Products Limited) is an Indian multinational IT
Consulting and System Integration services company headquartered in Bangalore, India. As
of March 2015, the company has 158,200 employees servicing over 900 of the Fortune 1000
corporations with a presence in 67 countries. On 31 March 2015, its market
capitalization was approximately $ 35 Billion, making it one of India's largest publicly
traded companies and seventh largest IT Services firm in the World.
To focus on core IT Business, it demerged its non-IT businesses into a separate company
named Wipro Enterprises Limited with effect from 31 March 2013. The demerged
companies are consumer care, lighting, healthcare and infrastructure engineering which
contributed approximately 10% of the revenues of Wipro Limited in previous financial year.
Wipro Limited is a global company provider of comprehensive IT solutions and services,
including Systems Integration, Consulting, Information Systems outsourcing, IT-enabled
services, and R&D services.
It is also a value added reseller of desktops, servers, notebooks, storage products, networking
solutions and packaged software for international brands.
Wipro entered into the technology business in 1981 and has over 140,000 employees and
clients across 54 countries today. IT revenues stood at $6.2 billion for the year ended 31
March 2013, with a repeat business ratio of over 95%.
The business model at Wipro Technologies Ltd is an industry-aligned customer-facing
model which gives greater understanding of customers’ businesses to build industry specific
solutions.
Page | 48
WIPRO
Wipro Limited (Western India Products Limited) is an Indian multinational IT
Consulting and System Integration services company headquartered in Bangalore, India. As
of March 2015, the company has 158,200 employees servicing over 900 of the Fortune 1000
corporations with a presence in 67 countries. On 31 March 2015, its market
capitalization was approximately $ 35 Billion, making it one of India's largest publicly
traded companies and seventh largest IT Services firm in the World.
To focus on core IT Business, it demerged its non-IT businesses into a separate company
named Wipro Enterprises Limited with effect from 31 March 2013. The demerged
companies are consumer care, lighting, healthcare and infrastructure engineering which
contributed approximately 10% of the revenues of Wipro Limited in previous financial year.
Wipro Limited is a global company provider of comprehensive IT solutions and services,
including Systems Integration, Consulting, Information Systems outsourcing, IT-enabled
services, and R&D services.
It is also a value added reseller of desktops, servers, notebooks, storage products, networking
solutions and packaged software for international brands.
Wipro entered into the technology business in 1981 and has over 140,000 employees and
clients across 54 countries today. IT revenues stood at $6.2 billion for the year ended 31
March 2013, with a repeat business ratio of over 95%.
The business model at Wipro Technologies Ltd is an industry-aligned customer-facing
model which gives greater understanding of customers’ businesses to build industry specific
solutions.
Page | 48
Wipro Limited is a global company provider of comprehensive IT solutions and services,
including Systems Integration, Consulting, Information Systems outsourcing, IT-enabled
services, and R&D services.
It is also a value added reseller of desktops, servers, notebooks, storage products, networking
solutions and packaged software for international brands.
Wipro entered into the technology business in 1981 and has over 140,000 employees and
clients across 54 countries today. IT revenues stood at $6.2 billion for the year ended 31
March 2013, with a repeat business ratio of over 95%.
The business model at Wipro Technologies Ltd is an industry-aligned customer-facing
model which gives greater understanding of customers’ businesses to build industry specific
solutions.
TOP MANAGEMENT OF WIPRO LTD.
Azim H Premji – Chairman
Suresh Senapaty – Executive Director & CFO
T K Kurien – CEO
Page | 49
including Systems Integration, Consulting, Information Systems outsourcing, IT-enabled
services, and R&D services.
It is also a value added reseller of desktops, servers, notebooks, storage products, networking
solutions and packaged software for international brands.
Wipro entered into the technology business in 1981 and has over 140,000 employees and
clients across 54 countries today. IT revenues stood at $6.2 billion for the year ended 31
March 2013, with a repeat business ratio of over 95%.
The business model at Wipro Technologies Ltd is an industry-aligned customer-facing
model which gives greater understanding of customers’ businesses to build industry specific
solutions.
TOP MANAGEMENT OF WIPRO LTD.
Azim H Premji – Chairman
Suresh Senapaty – Executive Director & CFO
T K Kurien – CEO
Page | 49
FINANCIALS OF WIPRO LTD.
PROFIT & LOSS A/C
Page | 50
PROFIT & LOSS A/C
Page | 50
Page | 51
0.00
2,000.00
4,000.00
6,000.00
8,000.00
10,000.00
12,000.00
Mar'
15
Mar'
14
Mar'13Mar'
12
Mar'
11
PBDIT
PBDT
PBT
NET PROFIT
BALANCE SHEET OF WIPRO LTD.
Page | 52
2,000.00
4,000.00
6,000.00
8,000.00
10,000.00
12,000.00
Mar'
15
Mar'
14
Mar'13Mar'
12
Mar'
11
PBDIT
PBDT
PBT
NET PROFIT
BALANCE SHEET OF WIPRO LTD.
Page | 52
CASH FLOW STATEMENT OF WIPRO LTD.
Page | 53
Page | 53
DIVIDEND SUMMARY OF WIPRO LTD.
SHARE HOLDING PATTERN
Page | 54
SHARE HOLDING PATTERN
Page | 54
CATEGORY OF
SHARE
HOLDER
TOTAL NO. OF
SHARE
HOLDERS
TOTAL NO. OF
SHARES
TOTAL SHARE
HOLDING AS
% OF TOTAL
SHARES
Promoter &
Promoters
Group
12 1,818,022,46474.85%
Institutional
Shareholders
754 373,478,502 15.43%
Non Institutional
Shareholders
226,877 235,459,077 9.73%
TOTAL 227,643 2,420,90,043 100%
75%
15%
10%
Promoter
Institutional
Non Istitutional
COMPETITION
Page | 55
SHARE
HOLDER
TOTAL NO. OF
SHARE
HOLDERS
TOTAL NO. OF
SHARES
TOTAL SHARE
HOLDING AS
% OF TOTAL
SHARES
Promoter &
Promoters
Group
12 1,818,022,46474.85%
Institutional
Shareholders
754 373,478,502 15.43%
Non Institutional
Shareholders
226,877 235,459,077 9.73%
TOTAL 227,643 2,420,90,043 100%
75%
15%
10%
Promoter
Institutional
Non Istitutional
COMPETITION
Page | 55
COMPANY
NAME
CMP MARKET
CAP
SALES NET
PROFIT
TOTAL
ASSETS
TCS 2547.15498,917.4073,578.0619,256.9645,666.71
INFOSYS 1,086.35249,528.5847,300.0012,164.0048,068.00
WIPRO 575.35 142,081.2241,635.008,193.1040,655.20
HCL TECH 937.40 131,796.4217,153.446,345.9515,809.96
TECH
MAHINDRA
550.60 52,953.3819,162.652,256.2312,486.50
FINANCIAL RATIO & INTERPRETATION:
(For last three years)
Sr.Ratio 2014-15 2013-142012-13
1 EBITDA/ Turnover 22.32 % 23.50 %20.86 %
2 PBT/ Turnover 20.43 % 21.60 %18.75 %
3 Return on Avg. Capital Employed 26.85 % 29.47 %26.72 %
4 Return on Avg. Net Worth 23.66 % 25.16 %23.31 %
5 Asset Turnover 1.11 1.25 1.15
6 Inventory Turnover (in days) 85.96 169.80 103.68
7 Debtors Turnover (in days) 4.94 4.55 4.04
8 Current Ratio 2.16 1.98 1.55
9 Earnings per Share 33.18 29.95 22.94
10Dividend Payout ratio 36.17 26.71 30.52
Interpretation of Graphs:- (Ratio)
1) The net sales of the company rose by 1.06% to Rs. 41,209.80 crore in the financial year
ended March 2015 as against Rs. 38,757.20 crore during the year ended March 2009. And
the sale rose by 1.70% to Rs 41,209.80 crore in FY ended March 2015 as against Rs
26.300.50 during the FY ended March 2011.
2) The EBIDTA of the company increased to Rs. 11,698.30 crore in the financial year ended
March 2015 as against Rs. 10,719.60 crore during the year ended March 2014. Also the PBT
of the company is rose to Rs. 10,557.00 crore in the financial year ended March 2015 as
against Rs. 9,608.20 crore during the year ended March 2014. And the Net Profit of the
company is rose by 0.90% to Rs. 8,193.10 crore in the financial year ended March 2015 as
against Rs. 7,387.40 crore during the year ended March 2014.
3)Though the figures of EBIDATA & PBT shows increase as compared to previous years
figures, the ratios have seen a decline from 23.50% to 22.32% and from 20.73% to 19.26%
respectively. This is due to the increase in miscellaneous cost as compared to previous years.
Page | 56
NAME
CMP MARKET
CAP
SALES NET
PROFIT
TOTAL
ASSETS
TCS 2547.15498,917.4073,578.0619,256.9645,666.71
INFOSYS 1,086.35249,528.5847,300.0012,164.0048,068.00
WIPRO 575.35 142,081.2241,635.008,193.1040,655.20
HCL TECH 937.40 131,796.4217,153.446,345.9515,809.96
TECH
MAHINDRA
550.60 52,953.3819,162.652,256.2312,486.50
FINANCIAL RATIO & INTERPRETATION:
(For last three years)
Sr.Ratio 2014-15 2013-142012-13
1 EBITDA/ Turnover 22.32 % 23.50 %20.86 %
2 PBT/ Turnover 20.43 % 21.60 %18.75 %
3 Return on Avg. Capital Employed 26.85 % 29.47 %26.72 %
4 Return on Avg. Net Worth 23.66 % 25.16 %23.31 %
5 Asset Turnover 1.11 1.25 1.15
6 Inventory Turnover (in days) 85.96 169.80 103.68
7 Debtors Turnover (in days) 4.94 4.55 4.04
8 Current Ratio 2.16 1.98 1.55
9 Earnings per Share 33.18 29.95 22.94
10Dividend Payout ratio 36.17 26.71 30.52
Interpretation of Graphs:- (Ratio)
1) The net sales of the company rose by 1.06% to Rs. 41,209.80 crore in the financial year
ended March 2015 as against Rs. 38,757.20 crore during the year ended March 2009. And
the sale rose by 1.70% to Rs 41,209.80 crore in FY ended March 2015 as against Rs
26.300.50 during the FY ended March 2011.
2) The EBIDTA of the company increased to Rs. 11,698.30 crore in the financial year ended
March 2015 as against Rs. 10,719.60 crore during the year ended March 2014. Also the PBT
of the company is rose to Rs. 10,557.00 crore in the financial year ended March 2015 as
against Rs. 9,608.20 crore during the year ended March 2014. And the Net Profit of the
company is rose by 0.90% to Rs. 8,193.10 crore in the financial year ended March 2015 as
against Rs. 7,387.40 crore during the year ended March 2014.
3)Though the figures of EBIDATA & PBT shows increase as compared to previous years
figures, the ratios have seen a decline from 23.50% to 22.32% and from 20.73% to 19.26%
respectively. This is due to the increase in miscellaneous cost as compared to previous years.
Page | 56
4) The EPS of the company is rose to Rs.33.18 per share in the financial year ended March
2015 as against Rs. 29.95 per share during the year ended March 2014 which shows positive
financial result.
5) The Dividend of the company is rose to 600% in the financial year 2015 as against 400%
during the year ended March 2014.
6) Asset turnover ratio came down to 1.11% in the year ended March 2015 from 1.25% and
1.15% for the year ended March 2014 and March 2013 respectively.
7) The Current ratio saw an increase of 0.18 bps from 1.98 and 2.16, which shows that the
company is ready with 2.16 time liquid assets to pay off its liquid liabilities.
PHARMA SECTOR
INTRODUCTION
Page | 57
2015 as against Rs. 29.95 per share during the year ended March 2014 which shows positive
financial result.
5) The Dividend of the company is rose to 600% in the financial year 2015 as against 400%
during the year ended March 2014.
6) Asset turnover ratio came down to 1.11% in the year ended March 2015 from 1.25% and
1.15% for the year ended March 2014 and March 2013 respectively.
7) The Current ratio saw an increase of 0.18 bps from 1.98 and 2.16, which shows that the
company is ready with 2.16 time liquid assets to pay off its liquid liabilities.
PHARMA SECTOR
INTRODUCTION
Page | 57
·The Indian pharmaceuticals market is third largest in terms of volume and thirteen
largest in terms of value, as per a pharmaceuticals sector analysis report by equity
master. The market is dominated majorly by branded generics which constitute
nearly 70 to 80 per cent of the market. Considered to be a highly fragmented
industry,consolidation has increasingly become an important feature of the Indian
pharmaceutical market.
·The government started to encourage the growth of drug manufacturing by Indian
companies in the early 1960s, and with the Patents Act in 1970. However, economic
liberalization in 90s by the former Prime Minister P.V. Narasimha Rao and the
then Finance Minister, Dr. Manmohan Singh enabled the industry to become what it
is today.
·The Indian pharmaceutical industry is estimated to grow at 20 per cent compound
annual growth rate (CAGR) over the next five years, as per India Ratings, a Fitch
Group company. Indian pharmaceutical manufacturing facilities registered with US
Food and Drug Administration (FDA) as on March 2014 was the highest at 523 for
any country outside the US
·Also, growing at an average rate of about 20 per cent, India's biotechnology industry
comprising bio-pharmaceuticals, bio-services, bio-agriculture, bio-industry and
bioinformatics may reach the US$ 7 billion mark by the end of FY15, according to an
industry body. Biopharma is the largest sector contributing about 62 per cent of the
total revenue, with revenue generation to the tune of over Rs 12,600 crore (US$ 2.03
billion). The bio-pharma sector comprises vaccines, therapeutics and diagnostics.
·Moreover, the government has been taking several cost effective measures in order to
bring down healthcare expenses. Thus, governments are focusing on speedy
introduction of generic drugs into the market. This too will benefit Indian pharma
companies. In addition, the thrust on rural health programmes, life saving drugs and
preventive vaccines also augurs well for the pharma companies.
Page | 58
largest in terms of value, as per a pharmaceuticals sector analysis report by equity
master. The market is dominated majorly by branded generics which constitute
nearly 70 to 80 per cent of the market. Considered to be a highly fragmented
industry,consolidation has increasingly become an important feature of the Indian
pharmaceutical market.
·The government started to encourage the growth of drug manufacturing by Indian
companies in the early 1960s, and with the Patents Act in 1970. However, economic
liberalization in 90s by the former Prime Minister P.V. Narasimha Rao and the
then Finance Minister, Dr. Manmohan Singh enabled the industry to become what it
is today.
·The Indian pharmaceutical industry is estimated to grow at 20 per cent compound
annual growth rate (CAGR) over the next five years, as per India Ratings, a Fitch
Group company. Indian pharmaceutical manufacturing facilities registered with US
Food and Drug Administration (FDA) as on March 2014 was the highest at 523 for
any country outside the US
·Also, growing at an average rate of about 20 per cent, India's biotechnology industry
comprising bio-pharmaceuticals, bio-services, bio-agriculture, bio-industry and
bioinformatics may reach the US$ 7 billion mark by the end of FY15, according to an
industry body. Biopharma is the largest sector contributing about 62 per cent of the
total revenue, with revenue generation to the tune of over Rs 12,600 crore (US$ 2.03
billion). The bio-pharma sector comprises vaccines, therapeutics and diagnostics.
·Moreover, the government has been taking several cost effective measures in order to
bring down healthcare expenses. Thus, governments are focusing on speedy
introduction of generic drugs into the market. This too will benefit Indian pharma
companies. In addition, the thrust on rural health programmes, life saving drugs and
preventive vaccines also augurs well for the pharma companies.
Page | 58
COMPANY NAME
SUN PHARMACEUTICALS
Sun Pharmaceutical Industries Limited is a multinational pharmaceutical company
headquartered in Mumbai, Maharashtra that manufactures and sells pharmaceutical
formulations and active pharmaceutical ingredients (APIs) primarily in India and the United
States. The company offers formulations in various therapeutic areas, such
as cardiology, psychiatry, neurology, gastroenterology and diabetology. It also provides
APIs such as warfarin, carbamazepine, etodolac, and clorazepate, as well as anticancers,
steroids, peptides, sex hormones, and controlled substances.
Sun Pharmaceuticals was established by Mr. Dilip Shanghvi in 1983 in Vapi with five
products to treat psychiatry ailments. Cardiology products were introduced in 1987 followed
by gastroenterology products in 1989. Today it is the largest chronic prescription company in
India and a market leader in psychiatry, neurology, cardiology, orthopedics, ophthalmology,
gastroenterology and nephrology.
The 2014 acquisition of Ranbaxy will make the company the largest pharma company in
India, the largest Indian pharma company in the US, and the 5th largest specialty generic
company globally.
Over 72% of Sun Pharma sales are from markets outside India, primarily in the US. The US
is the single largest market, accounting for about 60% turnover; in all, formulations or
finished dosage forms, account for 93% of the turnover. Manufacturing is across 26
locations, including plants in the US, Canada, Brazil, Mexico and Israel. In the US, the
company markets a large basket of generics, with a strong pipeline awaiting approval from
the U.S. Food and Drug Administration (FDA).
Sun Pharma was listed on the stock exchange in 1994 in an issue oversubscribed 55 times.
The founding family continues to hold a majority stake in the company. Today Sun Pharma
Page | 59
SUN PHARMACEUTICALS
Sun Pharmaceutical Industries Limited is a multinational pharmaceutical company
headquartered in Mumbai, Maharashtra that manufactures and sells pharmaceutical
formulations and active pharmaceutical ingredients (APIs) primarily in India and the United
States. The company offers formulations in various therapeutic areas, such
as cardiology, psychiatry, neurology, gastroenterology and diabetology. It also provides
APIs such as warfarin, carbamazepine, etodolac, and clorazepate, as well as anticancers,
steroids, peptides, sex hormones, and controlled substances.
Sun Pharmaceuticals was established by Mr. Dilip Shanghvi in 1983 in Vapi with five
products to treat psychiatry ailments. Cardiology products were introduced in 1987 followed
by gastroenterology products in 1989. Today it is the largest chronic prescription company in
India and a market leader in psychiatry, neurology, cardiology, orthopedics, ophthalmology,
gastroenterology and nephrology.
The 2014 acquisition of Ranbaxy will make the company the largest pharma company in
India, the largest Indian pharma company in the US, and the 5th largest specialty generic
company globally.
Over 72% of Sun Pharma sales are from markets outside India, primarily in the US. The US
is the single largest market, accounting for about 60% turnover; in all, formulations or
finished dosage forms, account for 93% of the turnover. Manufacturing is across 26
locations, including plants in the US, Canada, Brazil, Mexico and Israel. In the US, the
company markets a large basket of generics, with a strong pipeline awaiting approval from
the U.S. Food and Drug Administration (FDA).
Sun Pharma was listed on the stock exchange in 1994 in an issue oversubscribed 55 times.
The founding family continues to hold a majority stake in the company. Today Sun Pharma
Page | 59
is the second largest and the most profitable pharmaceutical company in India, as well as the
largest pharmaceutical company by market capitalization on the Indian exchanges.
The Indian pharmaceutical industry has become the third largest producer in the world in
terms of volumes and is poised to grow into an industry of $20 billion in 2015 from the
current turnover of $12 billion. In terms of value India still stands at number 14 in the world.
TOP MANAGEMENT OF SUN PHARMA
Israel Makov: Chairman
Dilip Shanghvi: Managing Director
Sudhir V. Valia: Executive Director
Sailesh T. Desai: Executive Director
Page | 60
largest pharmaceutical company by market capitalization on the Indian exchanges.
The Indian pharmaceutical industry has become the third largest producer in the world in
terms of volumes and is poised to grow into an industry of $20 billion in 2015 from the
current turnover of $12 billion. In terms of value India still stands at number 14 in the world.
TOP MANAGEMENT OF SUN PHARMA
Israel Makov: Chairman
Dilip Shanghvi: Managing Director
Sudhir V. Valia: Executive Director
Sailesh T. Desai: Executive Director
Page | 60
FINANCIALS OF SUN PHARMA
PROFIT & LOSS A/C
Page | 61
PROFIT & LOSS A/C
Page | 61
Page | 62
BALANCE SHEET OF SUN PHARMA
Page | 63
Page | 63
CASH FLOW STATEMENT OF SUN PHARMA
DIVIDEND SUMMARY OF SUN PHARMA
Page | 64
DIVIDEND SUMMARY OF SUN PHARMA
Page | 64
SHARE HOLING PATTERN
CATEGORY OF
SHARE
HOLDER
TOTAL NO. OF
SHARE
HOLDERS
TOTAL NO. OF
SHARES
TOTAL SHARE
HOLDING AS
% OF TOTAL
SHARES
Promoter &
Promoters
Group
28 1,316,496,40054.71%
Institutional
Shareholders
1,370 758,237,921 31.51%
Non Institutional
Shareholders
382,958 331,689,027 13.78%
TOTAL 384,356 2,406,423,348100%
COMPETETION
NAME CMP MARKET
CAP
SALES NET
PROFIT
ASSETS
SUN
PHARMA
936 225,4048,017 -1,472 9,816
LUPIN 1,890 85,061 9,752 2,397 9,067
Dr REDDYS 4,295 73,264 10,010 1,679 13,758
CIPLA 691 55,542 10,131 1,181 12,470
AUROBINDO
PHARMA
798 46,650 8,095 1,516 8,256
Page | 65
CATEGORY OF
SHARE
HOLDER
TOTAL NO. OF
SHARE
HOLDERS
TOTAL NO. OF
SHARES
TOTAL SHARE
HOLDING AS
% OF TOTAL
SHARES
Promoter &
Promoters
Group
28 1,316,496,40054.71%
Institutional
Shareholders
1,370 758,237,921 31.51%
Non Institutional
Shareholders
382,958 331,689,027 13.78%
TOTAL 384,356 2,406,423,348100%
COMPETETION
NAME CMP MARKET
CAP
SALES NET
PROFIT
ASSETS
SUN
PHARMA
936 225,4048,017 -1,472 9,816
LUPIN 1,890 85,061 9,752 2,397 9,067
Dr REDDYS 4,295 73,264 10,010 1,679 13,758
CIPLA 691 55,542 10,131 1,181 12,470
AUROBINDO
PHARMA
798 46,650 8,095 1,516 8,256
Page | 65
FINANCIAL RATIO AND INTERPRETATION:
Sr.Ratio 2013-14 2012-132011-12
1 EBITDA/ Turnover 0.60 % 21.07 %43.79 %
2 PBT/ Turnover -2.82 %15.99 %38.60 %
3 Return on Avg. Capital Employed 0.94 % 8.47 % 25.58 %
4 Return on Avg. Net Worth -38.18 %6.63 % 21.54 %
5 Asset Turnover 0.32 % 0.31 % 0.55 %
6 Inventory Turnover (in days) 3.08 2.80 6.27
7 Debtors Turnover (in days) 4.75 3.35 6.39
8 Current Ratio 0.79 2.31 2.68
9 Earnings per Share -13.66 4.99 16.39
10Dividend Payout ratio -11.39 %85.95 %24.82 %
Interpretation:-
From the above data we see that the profitability ratio, per share data and the
Gearing ratios have fallen dramatically due to the loss incurred by the organization because
of acquisition of Ranbaxy by Sun Pharma.
Sales :-
In FY 14 the net sales of the company rose by 0.90% to Rs. 2,828.79 cr as compared
to Rs. 2,432.14 Cr in the FY 13. The exports to US also increased to a substantial level.
Per share data:-
EPS of the company went down to negative figure of -13.66 for the year ended
March’14 as compared to the EPS of Rs.4.99 for the year ended March’13
Current Ratio:-
The current ratio measures companies short term solvency, that is, its ability to meet short
term obligation. As measures of short term / current financial liquidity, it indicates the rupee
of current asset available for each rupee of current liability/ obligation payable. The more is
the ratio it shows the firm’s ability to meet current obligation and greeter is the safety of
funds of short term creditors.
In our case the ratio of company is decline to 0.79 in the financial year ended March
2014 as against 2.31 during the year ended March 2013. It means that the firms ability to
meet current obligation is reduces by 1.52, but from the investors point of view its good
Page | 66
Sr.Ratio 2013-14 2012-132011-12
1 EBITDA/ Turnover 0.60 % 21.07 %43.79 %
2 PBT/ Turnover -2.82 %15.99 %38.60 %
3 Return on Avg. Capital Employed 0.94 % 8.47 % 25.58 %
4 Return on Avg. Net Worth -38.18 %6.63 % 21.54 %
5 Asset Turnover 0.32 % 0.31 % 0.55 %
6 Inventory Turnover (in days) 3.08 2.80 6.27
7 Debtors Turnover (in days) 4.75 3.35 6.39
8 Current Ratio 0.79 2.31 2.68
9 Earnings per Share -13.66 4.99 16.39
10Dividend Payout ratio -11.39 %85.95 %24.82 %
Interpretation:-
From the above data we see that the profitability ratio, per share data and the
Gearing ratios have fallen dramatically due to the loss incurred by the organization because
of acquisition of Ranbaxy by Sun Pharma.
Sales :-
In FY 14 the net sales of the company rose by 0.90% to Rs. 2,828.79 cr as compared
to Rs. 2,432.14 Cr in the FY 13. The exports to US also increased to a substantial level.
Per share data:-
EPS of the company went down to negative figure of -13.66 for the year ended
March’14 as compared to the EPS of Rs.4.99 for the year ended March’13
Current Ratio:-
The current ratio measures companies short term solvency, that is, its ability to meet short
term obligation. As measures of short term / current financial liquidity, it indicates the rupee
of current asset available for each rupee of current liability/ obligation payable. The more is
the ratio it shows the firm’s ability to meet current obligation and greeter is the safety of
funds of short term creditors.
In our case the ratio of company is decline to 0.79 in the financial year ended March
2014 as against 2.31 during the year ended March 2013. It means that the firms ability to
meet current obligation is reduces by 1.52, but from the investors point of view its good
Page | 66
because the investment of current asset is reduces as compare to last year with reference to
its obligation. This also indicates that the firm is able to manage its routine expenses in less
fund which leads to reduction in financial expenses of firm.
Returns:-
Return on networth and return on capital employed also came down as compared to last two
years data. This is again due to low returns as compared to the capital investment which has
been done by the company for carrying out the business.
Page | 67
its obligation. This also indicates that the firm is able to manage its routine expenses in less
fund which leads to reduction in financial expenses of firm.
Returns:-
Return on networth and return on capital employed also came down as compared to last two
years data. This is again due to low returns as compared to the capital investment which has
been done by the company for carrying out the business.
Page | 67
FINDINGS AND CONCLUSION
FINDINGS:
1)WIPRO:
The sales figure of Wipro saw a good increase from 38,765.10 Cr. In FY 14 to
Rs.41,210 Cr. In FY 15. This increase can been seen in each yea. The company is
consistently out performing its past record thereby leading to increase in sales and thus
profitability.
The net profit figures of the company have almost doubled since 2011 where it was
around Rs. 4,843.70 Cr. which is now Rs. 8,193.10 Cr. Company also takes care of its
investors and has a good track record in terms of dividend. Fr the year 2015 the company has
declared the dividend of 600% for its investors.
.
2) TATA STEEL:
Tata Steel Group consistently showed a good performance in terms of its net sales
turn over which have almost doubled since 2010. It is increasing on YoY basis, though we
get to see some ups and down on QoQ basis. The EBIDTA saw a decline due to increase in
miscellaneous expenses in increase in cost of employees.
Groups net profit saw a small increase from 6,412.19 cr in FY 14 to Rs. 6,439.12
Cr. In FY 15, but as compared to FY 13’s financials the profit grew surprisingly well from
5,062.97 cr. If compared on QoQ basis according to Quartely results for the quarter ended
June 15, the net profit of the group increased from Rs. 814.09 Cr. In March 15 quarter to Rs.
1,248.61 Cr. Which was more than the projected gains.
3) SUN PHARMA:
The sales of the company keeps on rising on continuous YoY basis. Though the current
financials of the company doesn’t looks so well, the company has a true potential to
outperform its old data and increases revenues.
Moreover the current negative earnings were due to the acquisition of Ranbaxy by the
company which again in long term will lead the company to new highs.
The company has a huge market base in US markets thereby increasing its net turnover ad
huge increase in exports which result in increase in profitability.
Page | 68
FINDINGS:
1)WIPRO:
The sales figure of Wipro saw a good increase from 38,765.10 Cr. In FY 14 to
Rs.41,210 Cr. In FY 15. This increase can been seen in each yea. The company is
consistently out performing its past record thereby leading to increase in sales and thus
profitability.
The net profit figures of the company have almost doubled since 2011 where it was
around Rs. 4,843.70 Cr. which is now Rs. 8,193.10 Cr. Company also takes care of its
investors and has a good track record in terms of dividend. Fr the year 2015 the company has
declared the dividend of 600% for its investors.
.
2) TATA STEEL:
Tata Steel Group consistently showed a good performance in terms of its net sales
turn over which have almost doubled since 2010. It is increasing on YoY basis, though we
get to see some ups and down on QoQ basis. The EBIDTA saw a decline due to increase in
miscellaneous expenses in increase in cost of employees.
Groups net profit saw a small increase from 6,412.19 cr in FY 14 to Rs. 6,439.12
Cr. In FY 15, but as compared to FY 13’s financials the profit grew surprisingly well from
5,062.97 cr. If compared on QoQ basis according to Quartely results for the quarter ended
June 15, the net profit of the group increased from Rs. 814.09 Cr. In March 15 quarter to Rs.
1,248.61 Cr. Which was more than the projected gains.
3) SUN PHARMA:
The sales of the company keeps on rising on continuous YoY basis. Though the current
financials of the company doesn’t looks so well, the company has a true potential to
outperform its old data and increases revenues.
Moreover the current negative earnings were due to the acquisition of Ranbaxy by the
company which again in long term will lead the company to new highs.
The company has a huge market base in US markets thereby increasing its net turnover ad
huge increase in exports which result in increase in profitability.
Page | 68
SUGGESTION:
(For investors)
All the three companies are strong as per there fundamentals. These all are able to
compete with their competitors and generating the profits for achieving the higher rate of
growth and are able to make the profits from their business. My suggestions are
1) Investor should prefer Wipro for their investment first and then Tata steel & Sun pharma
respectively.
2) On the basis of duration of investment:-
·For short term investment: - Sun Pharma.
Reasons: - As the company is pharma based company, and a huge part of the income
comes from U.S, there may be chances that the regulatory may any time come up
with new technology and make stop distribution of the current products.
·For medium term investment:- Tata Steel
Reason:- Based on the fundamental study of the company, it has registered positive
growth for 1
st
Quarter this year as against negative growth in previous year.
Furthermore steel industry is currently at 5
th
position in terms of production and is
expected to be 2
nd
largest producer by 2015. As Tata steel hold a 10% market share of
Indian steel industry it is definitely bound to show aggressive growth in near future.
·For long term investment: -Tata Steel limited
Reason: - IT is one of the most promising sector in todays Indian economy.
Consistent good performance of Wipro Ltd makes it a favourite blue chip stock for
safe players. For long term perspective the company is a great pick as it seems to be
under valued.
3) On the basis of risk:- Investor should prefer Wipro Ltd. (low risk)
TATA STEEL LTD.
CMP (As on 21/08/2015) – Rs. 237/-
52 week high - Rs. 542
52 week low- Rs. 229
Target 1 - Rs. 350 (1 year)
Target 2- Rs. 450 (1.5 – 2 Years)
Page | 69
(For investors)
All the three companies are strong as per there fundamentals. These all are able to
compete with their competitors and generating the profits for achieving the higher rate of
growth and are able to make the profits from their business. My suggestions are
1) Investor should prefer Wipro for their investment first and then Tata steel & Sun pharma
respectively.
2) On the basis of duration of investment:-
·For short term investment: - Sun Pharma.
Reasons: - As the company is pharma based company, and a huge part of the income
comes from U.S, there may be chances that the regulatory may any time come up
with new technology and make stop distribution of the current products.
·For medium term investment:- Tata Steel
Reason:- Based on the fundamental study of the company, it has registered positive
growth for 1
st
Quarter this year as against negative growth in previous year.
Furthermore steel industry is currently at 5
th
position in terms of production and is
expected to be 2
nd
largest producer by 2015. As Tata steel hold a 10% market share of
Indian steel industry it is definitely bound to show aggressive growth in near future.
·For long term investment: -Tata Steel limited
Reason: - IT is one of the most promising sector in todays Indian economy.
Consistent good performance of Wipro Ltd makes it a favourite blue chip stock for
safe players. For long term perspective the company is a great pick as it seems to be
under valued.
3) On the basis of risk:- Investor should prefer Wipro Ltd. (low risk)
TATA STEEL LTD.
CMP (As on 21/08/2015) – Rs. 237/-
52 week high - Rs. 542
52 week low- Rs. 229
Target 1 - Rs. 350 (1 year)
Target 2- Rs. 450 (1.5 – 2 Years)
Page | 69
WIPRO
CMP (As on 21/08/2015) – Rs. 576
52 week high - Rs. 677
52 week low- Rs. 512
Target 1 - Rs. 650 (6 months)
Target 2- Rs. 700 (1 Year)
SUN PHARMA
CMP (As on 21/08/2015) – Rs. 937
52 week high - Rs. 1200
52 week low- Rs. 748
Target 1 - Rs. 1000 (3 months)
Target 2- Rs. 1100 (1 Year)
Page | 70
CMP (As on 21/08/2015) – Rs. 576
52 week high - Rs. 677
52 week low- Rs. 512
Target 1 - Rs. 650 (6 months)
Target 2- Rs. 700 (1 Year)
SUN PHARMA
CMP (As on 21/08/2015) – Rs. 937
52 week high - Rs. 1200
52 week low- Rs. 748
Target 1 - Rs. 1000 (3 months)
Target 2- Rs. 1100 (1 Year)
Page | 70
CONCLUSION:
·Fundamental analysis can be valuable, but it should be approached with caution. If
you are reading research written by a sell-side analyst, it is important to be familiar
with the analyst behind the report.
·We all have personal biases, and every analyst has some sort of bias. There is nothing
wrong with this, and the research can still be of great value. Learn what the ratings
mean and the track record of an analyst before jumping off the deep end.
·Corporate statements and press releases offer good information, but they should be
read with a healthy degree of scepticism to separate the facts from the spin.
·Press releases don't happen by accident; they are an important PR (Public relation)
tool for companies. Investors should become skilled readers to weed out the
important information and ignore the hype.
Page | 71
·Fundamental analysis can be valuable, but it should be approached with caution. If
you are reading research written by a sell-side analyst, it is important to be familiar
with the analyst behind the report.
·We all have personal biases, and every analyst has some sort of bias. There is nothing
wrong with this, and the research can still be of great value. Learn what the ratings
mean and the track record of an analyst before jumping off the deep end.
·Corporate statements and press releases offer good information, but they should be
read with a healthy degree of scepticism to separate the facts from the spin.
·Press releases don't happen by accident; they are an important PR (Public relation)
tool for companies. Investors should become skilled readers to weed out the
important information and ignore the hype.
Page | 71
BIBLIOGRAPHY
Books:-
·Financial Management by: I M Pandey.
·Financial Management by Khan & Jain.
Websites:-
·www.indiainfoline.com
·www.moneycontrol.com
·www.tatasteel.com
·www.wipro.com
·www.sunpharma.com
·www.wikipedia.com
Page | 72
Books:-
·Financial Management by: I M Pandey.
·Financial Management by Khan & Jain.
Websites:-
·www.indiainfoline.com
·www.moneycontrol.com
·www.tatasteel.com
·www.wipro.com
·www.sunpharma.com
·www.wikipedia.com
Page | 72
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