INTRODUCTION

Equity Research
The exciting world of stock markets will paying way to fortune, money and professional
challenge. In a world that is shrinking in size due to information technology and blurring
boundaries between nations, the stock market (or the equities market) is all set to grow in
size.

A quick overview of the roots

The "company" form of organization changed the way the world did business. The
company raised the capital required to do business by issuing financial instruments (or
assets) called "equity shares" to the general public. Such a purchase of shares from the
company itself is a "primary market" activity. Such a purchase did not tie the investor to
the company forever because they could sell these shares in the "secondary market" (or in
other words, the stock exchange) unlock their investments.

Purchase of equity shares in the market offered high returns to the investors. Apart from
the dividend income that they received, the investors also made capital gains when the
share prices shot up due to various reasons. Over and above these financial benefits,
equity shares also gave ownership and control of the company in the same proportion as
the number of shares held. These heavy returns do not come without associated risks.
Good amount of subjectivity and ambiguity is involved in finding the true value of an
equity share. This renders difficult, the decision regarding proper investment.
Investment Banks
Mutual funds
Financial Institutions
Stock Brokers
Financial newspapers
Financial websites

IMPORTANCE OF THE STUDY

Equitys are financial intermediaries concerned with mobilizing the savings of those who
have surplus income and canalization of these savings in those avenues where there is
demand for funds.
The main objective behind this market survey on equity to see the response of
equity fund distributors about equity fund and comparative study is done to analyze the
performance of various equity funds and rank them accordingly based on the returns and
risk involved in it and suggest the best fund for investors combined with benefits of low
risk,Steady or consistent returns, high liquidity and capital appreciation through
diversification and expert management.

SCOPE OF THE STUDY

The scope of the comparative study is combined to debt-medium term schemes

followed by a market survey of the distribution houses .
For the purpose of the comparative study various equity schemes of SAIL(Steel
authority of inida),Finolox ,Tatasteel of India limited were taken into consideration.

TECHNIQUES FOR DATA COLLECTION :

PRIMARY DATA

It is collected through survey and fact sheets.

SECONDARY DATA

It is collected from the books, journals, past

records and all other types of published data.

OBJECTIVES OF THE STUDY

1) To study the nature and role of equitys in India

2) To study the performance of different schemes based on their returns and
comparing them with other equity schemes.
3) To analyze the performance of various equitys and rank them accordingly
based on there results.
4) To perform a market survey in order to extract the distributors feedback on equity.

LIMITAITONS

1) The comparative study is only confined to few equitys.

2) The project is completed within a short span of 45 days.
3) The comparative study has not covered all types of schemes.
4)

Due to the corporate trade secrecy the information is not so exclusive

COMPANY PROFILE
The symbol of Kotak Mahindra Bank represents the vision and operations very precisely
where infinite ka reflects our global Indian personality. The ka is uniquely Indian
while its curve forms the infinite sign, which is universal. One of the basic tenants of
economics is that mans needs are unlimited. The infinite ka symbolizes that we have
an infinite number of ways to meet those needs.

GENISIS OF KOTAK MAHINDRA BANK

KMBL has come into existence in March 2004 through the conversion of

kotak

Mahindra bank limited into a Commercial Bank. Kotak Mahindra is one of India's
leading financial institutions, offering complete financial solutions that encompass every
sphere of life. From commercial banking, to stock broking, to mutual funds, to life
insurance, to investment banking, the group caters to the

financial needs of

individuals and corporate

.
The group has a net worth of over Rs.1,550 crore and employs over 3,000 employees in
its various businesses. With a presence in 60 cities in India and offices in New York,
London, Dubai and Mauritius, it services a customer base of over 5,00,000. Kotak
Mahindra is fairly big and widely based with cross border operations. In 2009, the group
had networth of over Rs 5,824 crores and employed over 20,000 people in its various
business with a presence of 100 cities in India and offers in New York, London,
Mauritius. Debit cards base increased to 5,00,000.

Kotak Mahindra owes its growth to its association with the international talent pool and
has partnership with GOLDMAN SACHS (one of the worlds largest bank and brokerage
firm) ford credit (one of the worlds largest dedicated automobile financiers) and old
mutual (a large insurance, banking and asset management conglomerate).
Kotak Mahindra bank is the flagship company of the group. The company was
incorporated in 1985 and over the years has spread its business into the entire spectrum of
financial services either directly or through subsidiaries. In February 2004, the company
reached a new milestone when it was given license to carry on banking business by the
Reserve Bank of India. It was the first company in India to convert to a bank. The
company has been in retail leading since mid 1990s. With the conversion into bank retail
liabilities, treasury and corporate banking segments have been added.

JOURNEY TO BANK: A SPECTACULAR METAMORPHOSIS

The Kotak Mahindra group was incorporated in 1985 as a Kotak Capital Management
Finance Limited. This company was promoted by UDAY KOTAK, SIDNEY, PINTO
AND KOTAK AND COMPANY
Industrialist HARISH MAHINDRA and ANAND MAHINDRA took a stake in 1986 and
thus the company changed its name to KOTAK MAHINDRA FINANCE LTD.
KOTAK MAHINDRA group chairman is Mr.KM GHERDA
KOTAK MAHINDRA vice chairman and managing director is

Mr. UDAY KOTAK

KOTAK MAHINDRA chairman of board of directors is Mr.Dr.SHANKAR ACHARYA.

OVERVIEW OF KOTAK GROUP OF COMPANIES

Kotak Group of companies has various arms to help its reach objectives. They are
1) Kotak Investment Banking.
2) Kotak Institutional Equities.
3) Kotak Securities.
4) Kotak Car Finance.
5) Kotak Life Insurance.
6) Kotak Mutual Fund.
7) Kotak International Subsidiaries.

KOTAK INVESTMENT BANKING:

10

Kotak investment banking is a Indias premier investment bank which is a strategic joint
venture between Kotak Mahindra Bank which is holding 75% and Goldman Sachs which
is holding 25%. Kotak investment banking offers a full service investment banking
solutions to its clients by combining the global reach and expertise of GOLDMAN
SACHS.
Kotak investment banking identifies structures and executes merges, acquisitions,
divestitures and issuance a debt and equity and also provides innovative solutions to
corporates and government enterprise.
In equity business, Kotak investment bank works with top rated companies in accessing
the public and private equity markets and providing innovative financing solutions. Kotak
investment banking pioneered the concept of book built equity offering in India with the
IPO of Hughes Software Systems Ltd and has raised equity through book building for
some of the largest equity deals ever done in domestic market. Kotak investment bank
has had the privileged of being the book runner to the landmark disinvestments of
Maruthi Udyog Ltd and ONGC Ltd., which are considered a watershed in Indian capital
markets.

AWARDS:
11

Kotak Investment Banking achievements are awesome and hence got crowned with
many as it deserves. Kotak investment banking has been awarded
KMB IT team got 6 awards organised by IBA.
KMB was in the top 5 for corporate governance amongst companies by technical
criteria in the IR Global rankings 2009 for the Asia pacific/ Africa region.
BEST DOMESTIC EQUITY HOUSE by Asia money in 2004, 2005, 2007 ,
2008 & 2009.
BEST DEAL IN INDIA for ONGO Limited by Asia money in 2005.
BEST INVESTMENT BANK IN INDIA by finance Asia in 2004, 2005, 2007
& 2009.
BEST ASIAN MID CAP EQUITY DEAL for Maruthi IPO in 2004 by Finance
Asia.
BEST INVESTMENT BANK IN INDIA by Global finance in 2005 and 2006.
BEST EQUITY HOUSE IN INDIA by Euro money in 2004, 2005, 2006 , 2008
& 2009.
Indias equity house of the year by IFR Asia in 2005.
BEST PERFORMANCE EQUITY BROKERAGE in India CNBC financial
advisor awarded in 2009
BEST BROKERAGE FIRM IN INDIA BY ASIA MONEY in 2010
THE LEADING EQUITY HOUSE IN INDIA as Thomas extel survey in 2011
KOTAK INSTITUTIONAL EQUITIES
Kotak institutional equities focus on catering to the institutional clients including foreign
institutional investors, banks, mutual funds and insurance companies.
Kotak research analysts were ranked top 3 in institutional investors 2005 all Asia ranking.
It caters to institutional clients of India, London, New York, Hong Kong, Singapore,
Japan and Middle east. The full service research teams sectoral analysis covers all the
major areas of the India economy and constantly delivers comprehensive high quality
research across a wide spectrum of industries.

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KOTAK SECURITIES
Kotak securities are a strategic joint venture between KOTAK MAHINDRA BANK
(holding 75%) & GOLDMAN SACHS (holding 25%) is Indias leading brokerage and
securities distribution house. Kotak securities has been ranked the largest distributor of
initial public offerings for 2007-2008 by PRIME database and has been awarded Indias
best equity house for 2009 by Finance Asia, Best broker in India for 2009 by Finance
Asia and best equities house in India for 2009 by Euro money.
The non-institutional division of Kotak securities offers both offline and online broking.
Apart from broking services, the non-institutional segment offers wide range of products
including portfolio management services, margin lending, depository services and other
fee based activities.

The private client group (PCG) of the company provides investment advisory services to
High Net Worth individuals, Non Resident Indians (NRIs) Investor Trusts and Corporate.
The investment product range offered by PCG covers investments and trading, equity
derivatives, portfolio management, IPOs and mutual funds. In 2010 the assets under
discretionary portfolio management were in excess of Rs. 28 billion. Kotak securities
average daily volume 5,300 crores (in 2010).

13

KOTAK CAR FINANCE

During 2006, the kotak Mahindra Groups ownership in Kotak Mahindra Primus Limited
(KMPL) has gone up to 100% following the acquisition of 40% stake held by Ford Credit
International (FCI). The primary business of KMPL is to finance passenger cars, multiutility vehicles in India for retail customers and working capital and infrastructure
requirements of dealers. KMPL offers finance for both new as well as used cars.
KMPL offers car financing primarily in the form of loans. KMPL also offers inventory
funding to car dealers and has entered into strategic arrangement with various car
manufacturers in India for being their preferred financier. KMPL has established a
centralize customer services activity to ensure high quality and timely response to
customer needs.

During 2009-10 KMPs gross advances crossed Rs. 5900 crore mark recording an
increase of 44% as compared to financial year 2008.KMPL had a retail distribution
network comprising of 88 branches (including representative offices) in 18 states in the
country and had a wide network of direct marketing associates, brokers and agencies
supporting the distribution network and servicing around 117,345 customers.

14

KOTAK LIFE INSURANCE

Kotak Mahindra Old Mutual Life Insurance Ltd is a joint venture between Kotak
Mahindra Bank Ltd holding 74% and Old Mutual Plc. Holding 26% - a leading
international financial services group listed on the London stock exchange. Old mutual
plc, a UK based financial service group with 160 years of experience in insurance and
banking, is a Fortune 500 company listed in London Stock Exchange and included in the
FTSE 100 list of companies.
Kotak life insurance offers a wide range of innovative life insurance products aimed at
making the Indian consumer financially independent. Kotak life insurance has full range
of products from pure insurance to saving products and market linked products, from
childrens insurance to retirement solutions. In a survey conducted by AC Nielson ORG
MARG in march 2006, Kotak life insurance ranked 4th among insurance companies
operating in India in terms of brand awareness in urban areas. For 2005-05, Kotak life
insurance was ranked 6th amongst the private insurers in terms of premium garnered.
It currently offers 22 products, including pure risk products, return of premium products,
participating products and unit linked investment products. The Kotak safe investment
plan (KSIP) offers capital guarantee at a reasonable cost.

As a financial year 2009 first year regular premium 1,046 crores , 61 crores single
premium , 585 crores renewal premium.

15

KOTAK MUTUAL FUND

Kotak Mutual Fund was established in 1998, right from starting it has built a reputation
as a innovator among other things it has given Indian mutual fund industry its first guilt
fund, first multi-manager equity fund of funds, first theme fund dedicated to globally
competitive Indian companies, first investor loyalty scheme and first SMS-based
information service which has led the way for rest of the industry.
Kotak Mutuals goal is to offer investors a full range of products, across the risk-return
spectrum, to enable them to build wealth and achieve their financial goals. To achieve
this, it tries to make investing in mutual funds a simple and convenient process for all
investors, by constantly upgrading its service levels and relying on innovation to make
the difference.
With assets of Rs.19,739 crores under management (2009 - 2010). The number of folios
as on March 31, 2010 was about 9.40 lakhs as compared to about 5.36 lakhs as of March
31, 2009 a growth of 75%. It is a mind logging success where its success is based on
three strategies: New product development, increased geographical expansions, improved
distribution reach and penetration. Through this strategy, kotak mutual aims to be the best
among the mutual funds of choice.

16

KOTAK INTERNATIONAL SUBSIDIARIES

The international subsidiaries offer brokerage and asset management services to high net
worth individuals and institutions based outside India through its range of offshore India
funds, as well as through specific advisory and discretionary investment management
mandates from institutional investors. Kotak Mahindra International Ltd is the investment
manager to over US $375 mn in equity assets invested into India through various funds.
The international subsidiaries also dealing depository receipts and lead manage and
underwrite international issuances of securities.
Kotak Mahindra UK Ltd is the first firm of Indian origin to be regulated by securities
and futures authority in the United Kingdom. KMUK is a member of London stock
exchange and is registered with
the SEBI as a Foreign Institutional Investor (FII). KMUK as an FII has 18 sub-accounts
investing in to India as of September 30, 2010. Kotak Mahindra has financial
intermediary regulated by the NASD in United States.

KOTAK PRIVATE EQUITY FUND

During 2005-05, the Bank launched the private equity division. The private equity
division has an experienced investment management team with a successful track record
in the venture capital industry. Kotak SAFE India Fund (KSIF) is registered with SEBI as
a venture capital fund. Indian growth fund, a scheme of KSIF had its final closing in
September 2009 with commitments in excess of Rs. 7.8 bn, from domestic as well as
international investors

17

KOTAK REAL ESTATE FUND

The group has launched Kotak Mahindra Realty Fund, a SEBI registered venture capital
fund, with a focus on the Indian real estate and allied sectors. The primary objective of
the fund is to invest in and provide finance to real estate sector and allied activities in
Indian with an intention to generate superior risk adjusted returns.
.
NRI SERVICES
KOTAK MAHINDRA BANK offers a diverse set of NRI- centric financial solutions
including investments, remittances and deposits. Ranging from NRE/NRO/FCNR
accounts, Demat accounts are the value added benefits like At-par cheques, at home
services, free inward funds transfer, mandate facility etc. The investment product ranges
from mutual fund to insurance. The banks Portfolio Investment scheme (PINS) enables
to deal in equities in secondary market. We offer a platform that includes a bank account
a demat account and a broking account through Kotak securities. The tax and FEMA
advisory services of the bank give advice on taxation or regulatory matters from the best
experts in the field. The bank also offers an online remittance service for non resident
Indians called FUNDS TO HOME. It includes a range of fast, economical and secure
remittance services

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COMMERCIAL VEHICLES
This constitutes the largest part of the banks retail advances portfolio servicing a
customer base of more than 49,345 customers. The division is moving towards becoming
one stoop shop for all financing needs of transporters. Developing an efficient
distribution network, implementing risk management techniques and identification of
new products for the transport and infrastructure sectors continue to be the focus of this
business the divisions foray into funding of construction equipment to infrastructure
companies has resulted in the bank emerging as one of the key players on the sector. The
banking platform provides the right opportunity to extend its reach and services

HOME LOANS
KOTAK MAHINDRA BANK offers home finance solutions in may 2004. The home
finance business of the bank has taken the approach of developing products for specific
segments and customizing them to suit individual need. The bank now has a complete
suite of home finance offerings with home loans, loan against property, balance transfer
loans and loans for commercial property. The bank launched innovative home finance
offerings with reset period of 36 months and with fixed deposit interest rate as the interest
rate benchmark to expand its range of offerings and cater to newer segments.

AGRICULTURE FINANCE DIVISION

The agriculture finance division was launched in August 2004, to meet the priority sector
advance target of the bank. Given the vast opportunities that are coming up in agriculture
and rural sectors, the division is identifying profitable and yet risk controlled funding
opportunities. The division now has focused teams with experience who are developing
assets for the bank in the retail, SME and corporate segments. The products launched by
the division include tractor loans to individual farmers including refinancing for the
19

purchase of farm mechanization equipment, term loans for cropping activities and to high
tech and scientific agricultural products, working capital loans to dealers and distributors
of agricultural inputs and loans to farmers engaged in providing inputs under contract
farming arrangement to large corporates and direct loans to corporates engaged in
agriculture activities.

CORPORATE BANKING
KOTAK MAHINDRA BANK offers corporates and institutions a complete range of
client-centric banking solutions and services. These include working capital trade
services, transaction banking, money market and foreign exchange services and cash
management. All the services are focused on specific client needs and delivered after
factoring in industry imperatives and individual contexts. Kotaks years of experience
ensures that it truly understands the financial needs of Indian corporate sector. The focus
is on supporting supply chain and distribution. This business has gained significantly
from banking platform with ability to offer a wider range of products and services to
customers.
Profit before tax for corporate banking segment was up 99% from Rs. 101.65 crore in
2008 09 to Rs.202.64 crore in 2009 10.

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PERSONAL LOANS
KOTAKS quick easy personal loans are called Jaldi Loans which range from
Rs.50,000

to Rs.10,00,000 for salaried individuals, self-employed professional and

businessmen. It services a customer base of around 37,000. These loans can be used for
almost anything- to renovate houses, for children education, to buy a 2 wheeler, to go on
a well deserved holiday. Jaldi loans offers minimal paper work and quick process within
24 hours for salaried and 72 hours for self employed professionals and businessmen with
repayment tenures ranging from 12 to 48 hours.

21

Equity Research
The exciting world of stock markets will paying way to fortune, money and professional
challenge. In a world that is shrinking in size due to information technology and blurring
boundaries between nations, the stock market (or the equities market) is all set to grow in
size.
A quick overview of the roots
The "company" form of organization changed the way the world did business. The
company raised the capital required to do business by issuing financial instruments (or
assets) called "equity shares" to the general public. Such a purchase of shares from the
company itself is a "primary market" activity. Such a purchase did not tie the investor to
the company forever because they could sell these shares in the "secondary market" (or in
other words, the stock exchange) unlock their investments. Purchase of equity shares in
the market offered high returns to the investors. Apart from the dividend income that they
received, the investors also made capital gains when the share prices shot up due to
various reasons. Over and above these financial benefits, equity shares also gave
ownership and control of the company in the same proportion as the number of shares
held. These heavy returns do not come without associated risks. Good amount of
subjectivity and ambiguity is involved in finding the true value of an equity share. This
renders difficult, the decision regarding proper investment.

The emergence of professional research

Common man could not understand the nuances of stock market and equity valuation.
Also, the concept of pooled funds like insurance funds, retirement funds and mutual
funds required professional investment management. Consequently, the field of market
analysis emerged and gave rise to finance professionals who excelled at valuation of such
financial assets.

22

 Investment Banks
Mutual funds
Financial Institutions
Stock Brokers
Financial newspapers
Financial websites
In a market analysis one has to use various financial models, tools and techniques to
arrive at simple decisions like buying or selling or standing still regarding the particular
stock. If the research and analysis show that the stock price of a particular company may
rise, you "go long" (buy it). If you have already bought it, you "hold" it. Alternatively, if
the research indicates a possible downtrend in the stock price, you would immediately
"go short" (sell it) so that you don't incur a loss (or reduced profit) at a later date. When
once the decision is taken, there is absolutely no time to spare in implementing it.

23

FUNDAMENTAL ANALYSIS
Its a logical and systematic approach to estimating the future dividends & share price, as
these two constitute the return from investing in shares. According to this approach, the
share price of a company is determined by the fundamental factors affecting the
Economy/Industry/Company such as Earnings Per Share, D/P ratio, Competition, Market
Share, Quality of Management etc. it calculates the true worth of the share based on its
present and future earning capacity and compares it with the current market price to
identify the miss-priced securities. Fundamental Analysis helps to identify fundamentally
strong companies, whose shares are worthy to be included in the investors portfolio, by
providing an analytical framework, known as Economy Industry Company framework,
for rational investment decision making.

1. Economic Analysis:

Economic factors play major role in any investment decisional, which is made for making
a gain and better returns. Economic analysis and forecasting company performance and
of returns is necessary for making investments.
Any investment is risky and as such investment decision is difficult to make. Investment
decision is based on availability of money and information on the economy.
Companies are a part of the industrial and business sector, which in return is a part of
overall economy. Thus the performance of a company depends recession or stagnation,
the performance of the companies will be bed in general, with sum exceptions however,
on the other hand, if the economy is booming, incomes are raising and the demand is
good, then the industries and the companies is general may be prosperous, with some
exceptions however.

24

In the Indian economy, the matters to be considered in the first place all the behavior of
the monsoon and the performance of agriculture. India has a mixed economy, where the
public sector plays a vital role. The government being the biggest investor and spender,
the trends in public investment and expenditure would indicate the likely performance of
the Indian economy. Concomitant with this, the government budget policy, tone levies
and government borrowing program along with the extent of deficit financing will have a
major influence on the performance of the Indian economy. The monitory situation along
with the budgetary policy influences the movement in price inflation do have a major
influence on the economy.

The economy and political stability in the form of stable and long term economic policies
and a stable political with no uncertainty would also be necessary for a good performance
of the economy in general and of companies in particular.
All the above factor of the economy influences the corporate performance and the
industry in general. In the investment analysis, a broad picture of their factor and a
forecast of the growth of the economy and of industry would be necessary to decide when
to invest and what to invest in.

25

2. Industry Analysis:

On the economic analysis is made and the forecast of the economy is known the investor
will then have some ides of the likely growth of the economy and its trend. After that, the
analyst would look into the industry groups that are promising in the coming year or
years and then only he will be able to choose the companies in those industry groups.

At any point of time, there may be industries, which are on the up swing of the cycle
called sunshine industries and those, which are on the decline called sunset industries. In
India, there are some growth industries like electronics and Tele communications, which
are the key industries. The engineering, petrol chemicals and capital goods industries are
in the core sector. A few industries like diamonds, engineering etc. are in the export
sector. Jute and cotton textiles are the decedent industries. At present, Tele
communications, energy etc., are some examples of sunrise industries.

The key characteristics that are to be considered in the analysis, which have a bearing on
the prospects of the company are: Demand Supply Gap.
Competitive conditions in the industry.
Permanence.
Growth Rate of the Industry.
Attitude of Government towards the industry.
Labors Conditions.
Supply of Raw Materials.
Cost Structure.
Past Sales & Earnings Performance.
The gap between Demand and Supply in an industry is a fairly good indicator of its shortterm or medium-term prospects. Excess supply reduces the profitability of the industry
through a decline in the unit-price realization. On the contrary, insufficient supply tends
to improve the profitability through higher unit-price realization. In an industry where
26

supply exceeds Demand and there are many competing firms, the increased rivalry
among the firms leads to price cuts and heavy advertising. In such a situation, the
companies lose their competitive edge and their profitability gets erode.
In this age or rapid technological change, the important factor to be considered is the
permanence of an industry, which is related to the products and the technology used by
the industry. Another factor to be observed is the Cost structure of the Industry i.e., the
proportion of the fixed costs to the variable costs that determines the level of Break-even
point. The industry with lower break-even point is to be given more importance.

3. Company Analysis:

Company Analysis is the final stage of the Fundamental Analysis, which is to be done to
decide the company in which the investor should invest. The Economy Analysis provides
the investor a broad out line of the prospects of growth in the economy. The industry
analysis helps the investor to select the industry in which the investment would be
rewarding.

Company Analysis deals with the estimation of the Risks and Returns

associated with individual shares.

The stock price has been found on depend on the intrinsic value of the companys share
to the extent of about 50% as per many research studies. Graharm and Dodd in their
book on security analysis have defined the intrinsic value as that value which is
justified by the facts of assets, earnings and dividends. These facts are reflected in the
earnings potentials of the company. The analyst has to project the expected future
earnings per share and discount them to the present time, which gives the intrinsic value
of the share. Another method to use is to take the expected earnings per share and
multiplying it by the industry average price earning multiple.
27

By this method, let the analyst estimate the intrinsic value or fair value of share and
compare it with the market price to know whether the stock is over valued or under
valued. The investment decision is to buy under valued stock and sell over valued stock.

3.1. Financial Analysis:

Share price depends partly on its intrinsic worth for which financial analysis for a
company is necessary to help the investor to decide whether to buy or not the shares of
the company. The soundness and intrinsic worth of a company is known only by such
analysis. An investor needs to know the performance of the company, its intrinsic worth
as indicated by some parameters like book value, EPS, P/E multiple etc., and come to a
conclusion whether the share is rightly priced for purchase or not. This, in short is the
importance of financial analysis of a company to the investor.

Financial analysis is analysis of financial statement of a company to assess its financial

health and soundness of its management. Financial statement analysis involves a study
of the financial statement of the company to ascertain its prevailing state of affairs and
the reasons there of. Such a study would enable the public and investors to ascertain
whether one company is more profitable than the other and also to state the cause and
factors that are probably responsible for this.
3.1.1. Method or devices of Financial Analysis:
The term Financial statement is used in modern business refers to the balance sheet, or
the statement of financial position of the company at a point of time and income and
expenditure statement or the profit and loss statement over a period.
28

Interpret the financial statement; it is necessary to analyze them with the object of
formation of an opinion with respect to the financial condition of the company. The
following methods of analysis are generally used.

1. Comparative statement
2. Trend analysis
3. Common size statement
4. Fund flow analysis
5. Cash flow analysis
6. Ratio analysis
Fundamental Analysis has a very broad scope. One aspect looks at the general
(qualitative) factors of a company. The other side considers tangible and measurable
factors (quantitative). This means crunching and analyzing numbers from the financial
statements. If used in conjunction with other methods, quantitative analysis can produce
excellent

results.

Ratio analysis isn't just comparing different numbers from the balance sheet, income
statement, and cash flow statement. It's comparing the number against previous years,
other companies, the industry, or even the economy in general. Ratios look at the
relationships between individual values and relate them to how a company has performed
in

the

past,

and

might

perform

in

the

future.

For example current assets alone don't tell us a whole lot, but when we divide them by
current liabilities we are able to determine whether the company has enough money to
cover short-term debts.

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Efficient Market Hypothesis

This theory presupposes that the Stock Markets are so competitive and efficient in
processing all the available information about the securities that there is immediate price
adjustment to the changes in the economy, industry and company. The Efficient Market
Hypothesis model is actually concerned with the speed with which information is
incorporated into the security prices.
The Efficient Market Hypothesis has three Sub-hypothesis:
Weakly Efficient: This form of Efficient Market Hypothesis states that the current
prices already fully reflect all the information contained in the past price movements
and any new price change is the result of a new piece of information and is not
related/independent of historical data. This form is a direct repudiation of technical
analysis.
Semi-Strongly Efficient: This form of Efficient Market Hypothesis states that the
stock prices not only reflect all historical information but also reflect all publicly
available information about the company as soon as it is received.
Strongly Efficient: This form of Efficient Market Hypothesis states that using both
publicly available information as well as private or insider information cannot beat
the market.
But even though the Efficient Market Hypothesis repudiates both Fundamental and
Technical analysis, the market is efficient precisely because of the organized and
systematic efforts of thousands of analysts undertaking Fundamental and Technical
analysis. Thus, the paradox of Efficient Market Hypothesis is that both the analyses are
required to make the market efficient and thereby validate the hypothesis.
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Technical Analysis
Introduction
There are two major types of analysis for predicting the performance of a company's
stock - fundamental and technical. The latter looks for peaks, bottoms, trends, patterns,
and other factors affecting a stock's price movement and then making a buy/sell decision
based on those factors. It is a technique many people attempt, though very few are truly
successful.
Today, the world of technical analysis is huge. There are literally hundreds of different
patterns and indicators investors claim to be successful. There are different types of stock
charts and the various technical analysis tools.
What is Technical Analysis?

Technical analysis is a method of evaluating securities by analyzing statistics generated

by market activity, past prices, and volume. Technical analysts do not attempt to measure
a security's intrinsic value; instead they look for patterns and indicators on stock charts
that will determine a stocks future performance.
Technical analysis has become popular over the past several years, as more and more
people believe that the historical performance of a stock is a strong indication of future
performance. The use of past performance should not come as a big surprise. People
using fundamental analysis have always looked at the past performance by comparing
fiscal data from previous quarters and years to determine future growth. The difference
lies in the technical analysts belief that securities move with very predictable trends and
patterns. These trends continue until something happens to change the trend, and until
this change occurs, price levels are predictable.
Some technical analysts claim they can be extremely accurate a majority of the time.
There are many instances of investors successfully trading securities with only the
knowledge of its chart and without even understanding what the company does. Technical
31

analysis is a terrific tool, but most agree that it is much more effective when combined
with fundamental analysis.
Let's now look at some of the major indicators technical analysts use.

The Bar Chart

Bar charts are some of the most popular type of charts
used in technical analysis. As illustrated on the left, the
top of the vertical line indicates the highest price a
security traded at during the day, and the bottom
represents the lowest price. The closing price is
displayed on the right side of the bar and the opening
price is shown on the left side of the bar. A single bar
like the one to the left represents one day of trading.

32

The advantage of using a bar chart over a straight-line graph is that it shows the high,
low, open and close for each particular day. This is the type of chart we will be using to
display various indicators throughout this explanation. There are two more types of charts
that are also frequently used for technical analysis that are similar to the bar chart. The
first we will look at is called "Candlestick Charting".

Candle Stick Charting

Candlestick charts have been around for
hundreds of years. They are often referred
to as "Japanese Candles" because the
Japanese would use them to analyze the
price of rice contracts.
Similar to a bar chart, candlestick charts
also display the open, close, daily high, and
daily low. A difference is the use of color to
show if the stock was up or down over the
day.
The chart below is an example of a candlestick chart for AT&T (T), green bars
indicate the stock price rose, red indicates a decline:

33

Candlestick charts have a "love or leave" relationship with investors. People either love
candlesticks and use them frequently, or are completely turned off by them. There are
several patterns people look for with candlestick charts, here are a few of the popular
ones and what they mean:
This is a bullish pattern, the stock opened at (or near) its low and closed near
its high.

The opposite of the pattern above, this is a bearish pattern. This indicates that
the stock opened at (or near) its high and dropped substantially to close near its
low.

Called "The Hammer", this is a bullish pattern only if it occurs after the stock
price has dropped for several days. A Hammer is identified by a small body
along with a large range. The theory is that this pattern can indicate a reversal
in the downtrend is in the works.

Called a "star". This pattern is used in others such as the "doji star". For the
most part, stars typically indicate a reversal and or indecision. There is the
possibility that after seeing a star there will be a reversal or change in the
34

current trend.

Keep in mind there are over 20 other patterns used by technical analysts for candlestick
charting.
Now, let's take a look at a more traditional style of charting stock price performance
called "Point & Figure Charting.

The Point & Figure Chart

This type of chart is somewhat rare, in fact most charting services do not even offer the
point and figure chart. This is a chart that plots day-to-day increases and declines in price.
A rising stack of Xs represents increases while a declining stack of Os represents
decreases. These types of charts were traditionally used for intra-day charting (a stock
chart for just one day), mainly because it can be long and tedious to create P&F charts
over a longer period of time manually.
The idea behind P&F charts is that they help you to filter out less-significant price
movements and let you focus more on the most important trends. Below is an
example of a Point and Figure chart for AT&T (T):

35

There are two attributes that affect the appearance of a Point & Figure chart, box size and
reversal amount. We won't get into much detail about these factors. Now that we've taken
a look at three different types of charts used by technical analysts, let's look at various
indicators.

Using the Moving Average

One of the easiest indicators to understand, the moving average shows the average value
of a security's price over a period of time. To find the 50-day moving average, you would
add up the closing prices (but not always) from the past 50 days and divide them by 50.
Because prices are constantly changing, the moving average will move as well. It should
also be noted that moving averages are most often used when compared or used in
conjunction with other indicators such as MACD and EMA. The most commonly used
moving averages are of 20, 30, 50, 100, and 200days.Each moving average provides a
different interpretation on what the stock will do,there is not one right time frame. The
36

longer the time span, the less sensitive themoving average will be to daily price changes.
Moving averages are used toemphasize the direction of a trend and smooth out price and
volume fluctuations (or "noise") that can confuse interpretation.

Notice back in September when the stock price dropped well below its 50-day average
(the green line). There has been a steady downward trend since then and no real strong
divergence, until the end of December where it rose above its 50-day average and
continued to rise for several weeks.
Typically, when a stock price moves below its moving average it is a bad sign because the
stock is moving on a negative trend. The opposite is true for stocks that protrude their
moving average - in this case, hold on for the ride.

37

Using the Relative Strength Index

When talking about the strength of a stock there are a few different interpretations,one of
which is the Relative Strength Index (RSI). The RSI is a comparison between the days
that a stock finishes up against the days it finishes down. This indicator is a big tool in
momentum trading.
The RSI is a reasonably simple model that anyone can use. It is calculated with the
following formula. ( most likely, it is never have to do manually).

RSI = 100 - [100/(1 + RS)]

Where:
RS = (Avg. of n-day up closes)/(Avg. of n-day down closes)
n= days (most analysts use 9 - 15 day RSI)
The RSI ranges from 0 to 100. A stock is considered overbought around the 70 level and
you should consider selling. This number is not written in stone, in a bull market some
believe that 80 is a better level to indicate an overbought stock since stocks often trade at
higher valuations during bull markets. Likewise, if the RSI approaches 30 a stock is
considered oversold and you should consider buying. Again, make the adjustment to 20
in a bear market.
The shorter number of days used, the more volatile the RSI is and the more often it will
hit extremes. A longer term RSI is more rolling, fluctuating a lot less. Different sectors
and industries have varying threshold levels when it come s to the RSI. Stocks in some
industries will go as high as 75-80 before dropping back and others have a tough time
breaking past 70. A good rule is to watch the RSI over the long term (1 year or more) to
determine what level the historical RSI has traded at and how the stock reacted when it
reached those levels.

38

Here, we have an RSI chart for AT&T. The RSI is the green line, its scale is the numbers
on the right hand side that go from 0 to 100. Notice the RSI was approaching the 60-70
levels in December and January and then the stock (blue line) sold off. Also, notice
around October when the RSI dropped to 25 the stock climbed up nearly 30% in just a
couple weeks.
Using the moving averages, trend lines, divergence, support, and resistance lines along
with the RSI chart can be very useful. Rising bottoms on the RSI chart can produce the
same positive trend results as it would on the stock chart. Should the general trend of the
stock price tangent from the RSI, it might spark a warning, and the stock is either
over/under bought.
The RSI is a great little indicator that can help you make some serious money. Beware
that big surges and drops in stocks will dramatically affect the RSI, resulting in false buy
or sell signals. Most investors agree that the RSI is most effective in "backing up" or
increasing confidence before making an investment decision, don't invest simply based
on the RSI numbers.

39

The Money Flow Index

Now that we've taken a look at the Relative Strength Index (RSI), let's take a look at a
more stringent momentum indicator. The Money Flow Index measures the strength of
money flowing into and out of a stock. The difference between the RSI and Money Flow
is that where RSI only looks at prices, the Money Flow Index also takes volume into
account.
Calculating Money Flow is a bit more difficult than the RSI:
First we need the average price for the day:
Day high + Day Low + Close
Average Price =
3

Now we need the Money Flow:

Money Flow = (Average Price) x (Day's Volume)
Now, to calculate the money flow ratio you need to separate the money flows for a period
into positive and negative. If the price was up in a particular day, this is considered to be
"Positive Money Flow". If the price closed down it is considered to be "Negative Money
Flow".
Positive Money Flow
Money Flow Ratio =
Negative Money Flow

It is the Money Flow Ratio that is used to calculate the Money Flow.

40

The Money Flow ranges from 0 to 100. Just like the RSI, a stock is considered
Overbought in the 70- 80 range and oversold in the 20-30 range. The shorter number of
days you use, the more volatile the Money Flow is. For the example below we will use a
14-day average.

There are three key points on this chart. The blue circle is where the stock price started to
create a "base" on the lower band; it appeared that the stock was over sold. Buying at this
point would have been a wise choice, as the stock proceeded to jump 20% or more in the
next few weeks.
The two red circles are areas where the stock price was touching or breaking through the
upper red band. This is usually an indication that the stock is over bought. In both
instances, the stock dropped substantially in following weeks.
The Bollinger bands are a good tool to use, but as we've been preaching all along, never
invest solely based on what just one indicator says. Notice there were instances when the
stock touched the upper or lower band and did not react. Rather than basing their
investment decisions on Bollinger, many investors use this indicator mainly to solidify a
decision they are about to make.

41

Conclusion
Technical analysis is one of those fields where everyone has a different theory on what
works and what doesn't. If we can leave you with one last tip, it is to back test whatever
strategy you decide to pursue. Back testing means looking back at several years worth of
charts to see how a particular stock reacts. Different stocks do different things,
Here are a couple points to remember about technical analysis:
Technical analysis is a method of evaluating securities by analyzing statistics
generated by market activity, past prices, and volume.
The advantage of using a bar chart over a straight-line graph is that it shows the
high, low, open and close for each particular day.
One of the most basic and easy to use TA indicators is the moving average, which
shows the average value of a security's price over a period of time. The most
commonly used moving averages are the 20, 30, 50, 100, and 200 day.
Support and resistance levels are price levels at which movement should stop and
reverse direction. Think of Support/Resistance (S/R) as levels that act as a floor or
a ceiling to future price movements.
There are literally 100s of different price patterns and indicators.
In our humble opinion, technical analysis is a terrific tool, but much more
effective when combined with fundamental analysis.

42

FINOLEX INDUSTRIES

Registered Office
Tel:
Fax
Email
Website
CEO
Business Group
Industry

D1/10, M.I.D.C, Chinchwad, Pune Maharashtra 411019

27408200
27477217
aa@finolexind.com
www.finolex.com
Mr.K P Chhabria
Finolex Group
Petrochem Polymers

BSE Code
NSE Code
Face Value
Market Lot

500940
FINPIPEEQ
10
1
Board of Directors

Director Name
Mr. Prakash P Chhabria
Mr. K N Atmaramani
Mr. S N Inamdar
Mr. S S Marathe
Mr. M G Bhide
Dr. N A Kalyani
Mr. K P Chhabria
Mr. P P Chhabria
Mr. P Subramaniam
Mr. J S Arora
Mr. S S Dhanorkar

Designation
Deputy Managing Director
Independent Director
Independent Director
Independent Director
Independent Director
Independent Director
Managing Director
Non Executive Chairman
Whole Time Director
Whole Time Director
Whole Time Director

43

About FINOLEX
The company was incorporated on 28th March 1981, in Maharashtra as a private limited
company and was converted into a public limited company on 1st December 1988. It
manufactures PVC Pipes and fittings. It was promoted by P.P. Chhabria and his
associates. The company acquired a manufacturing plant at MIDC Chinchwad, Pune and
started commercial production of PVC pipes in May 1981. In 1983, 3,67,650 shares
issued without payment in cash to members of Finolex Plastics Pvt. Ltd. on its merger.
In 1994, the company has been granted the highest category credit rating, namely P1+
credit rating, by CRISIL for issue of commercial paper. The rating of P1 indicates that the
degree of safety regarding timely payment on the instrument is very strong. "+" (plus)
sign for rating reflects a comparatively higher standing within the category.

The

company has tied up with banks for working capital requirements of PVC resin division
In 1996, The Pipes Division of the Company has been granted Quality Systems
Certification Licence as per IS/ISO 9002 by Bureau of Indian Standards, accredited by
Raad Voor de Certificates, Netherlands.

In 1999,The Company was honoured with the Mahratta Chamber of Commerce,

Industries and Agriculture's prestigious Dr. R.J.Rathi 'Environmental Pollution Control'
award for outstanding efforts in controlling pollution and protecting the environment at
the plant. The Company signed during the year under review Tripartite Agreement with
Central Depository Services (India) Limited and MCS Limited for dematerialisation of
equity shares

44

Shareholding Pattern

Share Holding Pattern as on:

FaceValue
Share Holder

31/03/2013

31/12/2012

30/09/2012

10.00
10.00
10.00
No. Of Shares % Holding No. Of Shares % Holding No. Of Shares % Holding

PROMOTER'S HOLDING
Foreign Promoters
Indian Promoters
Person Acting in Concert
Sub Total

0
23368351
0
23368351

0.00
18.84
0.00
18.84

0
23368351
0
23368351

0.00
18.84
0.00
18.84

0
23368351
0
23368351

0.00
18.84
0.00
18.84

Institutional Investors
1369815
1.10
2223012
1578252
1.27
1037648
1372777
1.11
3859139
4320844
3.48
7119799

1.79
0.84
3.11
5.74

4193765
1288809
3672348
9154922

3.38
1.04
2.96
7.38

36.78
1.28
0.00
0.00
0.00
0.40
38.47
36.95
100.00

44290863
1569624
0
500000
0
0
46360487
45134157
124017917

35.71
1.27
0.00
0.40
0.00
0.00
37.38
36.39
100.00

NON PROMOTER'S HOLDING

Mutual Funds and UTI
Banks Fin. Inst. and Insurance
FII's
Sub Total

Other Investors
Private Corporate Bodies
NRI's/OCB's/Foreign Others
GDR/ADR
Directors/Employees
Government
Others
Sub Total
General Public
GRAND TOTAL

47265159
1853040
0
0
0
500000
49618199
46710523
124017917

38.11
1.49
0.00
0.00
0.00
0.40
40.01
37.66
100.00

45614001
1591656
0
0
0
500000
47705657
45824110
124017917

Capital History

From To Class of Shares

1994 1995 Equity Share
1995 1996 Equity Share
1996 1997 Equity Share

Auth.

Issued

Paid-up

Capital

Capital

Shares (No's)

2.00
20.00
20.00

2.00
5.68
14.19
45

201100
567650
1410569

Face
Value
(Rs)
10
10
10

Paid-up
Capital
2.00
5.68
14.11

1997 1998 Equity Share

1998 1999 Equity Share
1999 2000 Equity Share
2000 2001 Equity Share
2001 2002 Equity Share
2002 2003 Equity Share
2003 2004 Equity Share
2004 2005 Equity Share
2005 2006 Equity Share
2006 2007 Equity Share
2007 2008 Equity Share
2008 2009 Equity Share
2009 2010 Equity Share
2010 2011 Equity Share
2011 2012 Equity Share
2012 2013 Equity Share

5,500.00
900.00
900.00
1,650.00
1,650.00
2,350.00
2,350.00
2,350.00
1,500.00
1,500.00
1,500.00
1,500.00
1,500.00
1,500.00
1,500.00
1,500.00

109.13
109.55
149.80
1,297.53
1,297.53
1,475.60
1,475.52
1,487.06
1,487.06
1,487.06
1,487.06
1,445.33
1,292.39
1,265.59
1,240.26
1,240.26

10904312
10946662
14971662
129744051
129744051
147551901
147551901
148697241
148697241
148697241
148697241
144524468
129229972
126550536
124017917
124017917

10
10
10
10
10
10
10
10
10
10
10
10
10
10
10
10

109.04
109.47
149.72
1,297.44
1,297.44
1,475.52
1,475.52
1,486.97
1,486.97
1,486.97
1,486.97
1,445.24
1,292.30
1,265.51
1,240.18
1,240.18

FINANCIAL STATEMENTS

Particulars

2013

2012

2011

2010

2009

Equity Share Capital

Preference Share Capital
Total Reserve & Surplus
- Revaluation Reserve
Total Debt
Total Liabilities
Net Block
CWIP
Investments

124
0
447
0
318
889
4884
24
272

124
0
447
0
318
889
484
24
272

127
0
402
0
372
901
511
10
244

129
0
253
0
262
644
542
6
104

144
0
325
0
324
794
561
6
154

Net Current Assets

108

108

135

-8

72

Miscellaneous Expenditure
Total Assets

0
889

0
889

0
901

0
644

0
794

BALANCE SHEET

46

INCOME STATEMENT

Sales
Other Income
Total Income
Operating Profit
Interest
Depreciation
Tax
Net Profit
Dividend (Rs. Cr.)
Face Value Per Share (Rs.)
Dividend Per Share (Rs.)
Earning Per Share (Rs.)

1073
42
1115
199
12
44
51
91
37
10
3
7

47

818
59
877
197
13
43
50
90
37
10
3
7

744
17
761
180
16
42
41
80
25
10
2
6

654
5
659
174
21
41
22
89
39
10
2
7

649
11
660
119
38
41
3
37
21
10
1.50
3

RATIO ANALYSIS
Ratios

2013

2012

2011

2010

2009

Dividend per Share

Earning per Share
Pay out Ratio
Book value per Share
Return on Net Worth(%)
Operating Profit Margin(%)
Total Assets Turnover Ratio
Gross Profit Margin(%)
Net Profit Margin(%)
Inventory Turnover Ratio
Exports as % of Total Sales
Share Price/31Mar(BSE)
Share Price/31Mar(NSE)

3
7
42.85
40.76
16.2
23.4
1.2
15.2
11.31
6.71
14.03
70.5
70.70

3
7
41.26
37.46
16.4
29
0.92
12.63
10.49
8.16
15.28
50.40
49.75

2
6
33.33
33.64
17.6
24.2
0.83
16.36
10.71
6.39
8.94
33.75
33.50

2
7
28.57
29.57
20.9
26.5
1.02
19.14
13.12
6.9
11.22
28.4
28.45

1.5
3
50
32.5
7.9
18.4
0.82
10.33
5.31
11.19
12.32
18.15

FINANCIAL ANALYSIS
Financial highlights
Results
Finolex Industries Ltd (FIL), a major supplier of PVC resin and PVC pipes and
fittings, reported a 30.5% yoy rise in gross turnover to Rs3.4bn in Q4 FY09.
However, a 43.8% yoy rise in inter divisional transfer resulted into net sales
growth being restricted to 28.1% yoy. Net sale for Q4 FY10 was at Rs2.4bn as
against Rs1.9bn in Q4 FY10. The companys PVC plant operated at 113%
capacity utilization.
In Q3 FY10 operating profit declined significantly by 33.8% to Rs318mn and
OPM slumped by 12.5 percentage points (pps) yoy to 13.3%. The fall was driven
by 20.4pps increase in raw material cost as a percentage of net sales mainly on
account of surging crude oil prices. However, 180bps yoy

48

Ratio Analysis
In the above table, the dividend per share has increased over the years. Pay out rate is
also increasing, EPS is more or less constant and BPS showing an increasing trend.
Return on net worth is showing a decreasing trend from 2010.Operating margin also got
down in 2011, Total asset turnover ratio is ok, and exports came down when compared to
last year.
Trend Analysis :
YEAR
2007
2008
2009
2010
2011
2012
2013

SALES
Amt (Rs)
Trend %
560
100
737
132
649
116
654
117
744
133
818
121
1073
146

PROFITABILITY
Amt (Rs)
Trend %
48
100
56
117
37
77
89
185
80
167
90
188
91
200

Interpretation : The above table and graph shows the Sales and Profitability of the
company for seven years. Finolex Inds stands 22 nd and 17th position respectfully this
FY2010; both its sales and profits are volatile.

49

STEEL AUTHORITY OF INDIA Ltd

Registered Office
Tel:
Fax
Email
Website
CEO
Business Group
Industry

Ispat Bhawan, Lodi Road New Delhi Delhi 110003

24367481
24367015
secy.sail@sailex.com
http://www.sail.co.in
Dr.S K Bhattacharyya
Public Sector
Steel

BSE Code
NSE Code
Face Value
Market Lot

500113
SAILEQ
10
1
Board of Directors
Director Name

Designation
Chairman / Chair Person
Director
Director
Director
Director
Director
Director
Director
Director
Director
Director (Technical)
Managing Director
Managing Director
Managing Director
Managing Director
Nominee Director

Mr. V S Jain
Mr. S K Roongta
Mr. D V Singh
Dr. P K Sengupta
Dr. S Y Quraishi
Mr. V K Agarwal
Mr. G C Daga
Mr. Ashis Das
Dr. Amit Mitra
Mr. Arun Kumar Rath
Mr. K K Khanna
Mr. R P Singh
Dr. S K Bhattacharyya
Dr. Sanak Mishra
Mr. U P Singh
Mr. Ajoy Kumar

50

About SAIL
In 1973, Pursuant to a decision taken by the Government of India in January the Steel
Authority of India, Ltd. was formed on 24th January, as a holding company for Steel and
Associated input industries. CEDB was converted into a separate company in the name
of Metallurgical Engineering & Consultants (India), Ltd., Bolani Ores Ltd., Metal Scrap
Trade Corporation and Mysore Iron & Steel Co. Ltd. became subsidiaries of SAIL.
Maharashtra Eleckrosmelt Ltd., Visvesvaraya Iron and Steel Ltd., Indian Iron & Steel
Co., Ltd., IISCO-Ujjain Pipe & Foundry Co., Ltd. are all subsidiaries of the Company. In
1974, SAIL International Ltd., was incorporated to coordinate the export and import
business
In 1978, The Indian Iron & Steel Co. Ltd. became a subsidiary of SAIL. The Kulti Works
of this company, with an annual capacity of 1.57 lakh tonnes is the largest producer of
cast iron and spun pipes. In1980, 273,32,471 shares allotted to the President of India
(124,43,829 shares allotted for consideration other than cash). In1981, 44,39,100 No. of
shares allotted to the President of India
In 1992, The Company's R&D unit at Ranchi was set up with a view to promote
continuous improvement in critical performance indices of the steel plant in order to
increase productivity, reduce production cost and improve quality by production
optimisation or by introduction of new technologies. The centre undertook various
collaborative ventures with agencies both in India and abroad. In 1997, SAIL is already
the lowest quoted scrip (Rs.21) on the Mumbai Stock Exchange's 30-share Sensex.

51

Share Holding Pattern as on :

31/03/2012
31/12/2012
30/09/2012
FaceValue
10.00
10.00
10.00
Share Holder
No. Of Shares % Holding No. Of Shares % Holding No. Of Shares % Holding

PROMOTER'S HOLDING
Foreign Promoters
Indian Promoters
Person Acting in Concert
Sub Total

0
3544690285
0
3544690285

0.00
85.82
0.00
85.82

0
3544690285
0
3544690285

0.00
85.82
0.00
85.82

0
3544690285
0
3544690285

0.00
85.82
0.00
85.82

Institutional Investors
30349182
0.73
110486753
170909383
4.14
253779060
174521151
4.23
0
375779716
9.10
364265813

2.67
6.14
0.00
8.82

138330213
122850250
77650042
338830505

3.35
2.97
1.88
8.20

1.39
0.05
0.00
0.00
0.00
0.05
1.49
3.87
100.00

63353646
1889524
2545585
0
0
0
67788755
179091000
4130400545

1.53
0.05
0.06
0.00
0.00
0.00
1.64
4.34
100.00

NON PROMOTER'S HOLDING

Mutual Funds and UTI
Banks Fin. Inst. and Insurance
FII's
Sub Total

Other Investors
Private Corporate Bodies
NRI's/OCB's/Foreign Others
GDR/ADR
Directors/Employees
Government
Others
Sub Total
General Public
GRAND TOTAL

48392877
2240625
1946735
0
0
0
52580237
157350307
4130400545

1.17
0.05
0.05
0.00
0.00
0.00
1.27
3.81
100.00

Capital History
52

57318263
2054172
0
0
0
2153735
61526170
159918277
4130400545

From To Class of Shares

2008
2009
2010
2011
2012

2009 Equity Share

2010 Equity Share
2011 Equity Share
2012 Equity Share
2013 Equity Share

Auth.

IssuedPaid-up Shares

Capital

Capital

(No's)

50,000.00
50,000.00
50,000.00
50,000.00
50,000.00

41,304.01
41,304.01
41,304.01
41,304.01
41,304.01

4130400545
4130400545
4130400545
4130400545
4130400545

Face
Value
(Rs)
10
10
10
10
10

Paid-up
Capital
41,304.01
41,304.01
41,304.01
41,304.01
41,304.01

FINANCIAL STATEMENTS

Particulars

2013

2012
53

2011

2010

2009

BALANCE SHEET

Equity Share Capital

Preference Share Capital
Total Reserve & Surplus
- Revaluation Reserve
Total Debt
Total Liabilities
Net Block
CWIP
Investments
Net Current Assets
Miscellaneous Expenditure
Total Assets

4130
0
907
0
8689
13726
13154
382
543
-731
378
13726

4130
0
907
0
8689
13726
13154
382
543
-731
378
13726

4130
0
-1605
0
12970
15495
14036
379
543
1
536
15495

4130
0
-1301
0
13928
16758
14798
556
539
287
578
16758

4130
0
406
0
14251
18788
15177
1221
435
1582
372
18788

27004
1353
28357
9373
597
1124
2133
5519
0
10
0
13

24178
447
24625
4704
954
1123
116
2512
0
10
0
6

19207
417
19624
2213
1382
1147
-12
-304
0
10
0
-1

15208
1182
16390
1037
1588
1156
0
-1707
0
10
0
-4

16233
885
17117
2167
1752
1144
0
-729
0
10
0
-2

INCOME STATEMENT

Sales
Other Income
Total Income
Operating Profit
Interest
Depreciation
Tax
Net Profit
Dividend (Rs. Cr.)
Face Value Per Share (Rs.)
Dividend Per Share (Rs.)
Earning Per Share (Rs.)

RATIO ANALYSIS

54

Ratios

2013

2012

2011

2010

2009

Dividend per Share

Earning per Share
Pay out Ratio
Book value per Share
Return on Net Worth(%)
Operating Profit Margin(%)
Total Assets Turnover Ratio
Gross Profit Margin(%)
Net Profit Margin(%)
Inventory Turnover Ratio
Exports as % of Total Sales
Share Price/31-Mar(BSE)
Share Price/31-Mar(NSE)

0
13
0
12.19
146.3
37.5
1.96
36.03
22.5
N/A
N/A
62.95
63.25

0
6
0
11.28
75.6
19.5
1.76
15.53
11.39
11.23
7.79
32.30
32.25

0
-1
0
4.82
-14.4
11.5
1.24
5.17
-1.73
6.81
6.28
8.80
8.85

0
-4
0
5.45
-53.2
6.8
0.91
-6.71
-12.04
4.98
3.89
4.90
4.8

0
-2
0
10.08
-16.3
13.3
0.86
4.63
-5
4.54
3.88
5.70
5.65

FINANCIAL ANALYSIS
Financial highlights
55

Highlights
1. Better product mix drives sales growth
Company recorded a 38% yoy growth in sales turnover in Q4 FY12, highest among all
the quarters in FY12. The same surged from Rs68bn to Rs94bn in Q4 FY12. Steel prices
remained stable throughout the year. Increase in demand for steel and better product mix
helped company register an all time high sales of steel at 10.7MT. Sales revenue for
FY12 grew by 32.4% yoy from Rs220bn to Rs291bn. SAIL focused on domestic market
where the sales grew 8% over the previous year to reach a level of 10.3 MT. It also
reported strong production growth in value added products such as plates (15%), rails
(7%) and wheels & axles (34%).

2.PM soars to 42.5% in Q4 FY12

While sales grew by 38% yoy, the rise in operating expenditure was only 2% yoy in Q4
FY12. This led to a whopping 165.7% yoy growth in operating profit, which rose from
Rs15bn to Rs40bn in Q4 FY12. Cost control efforts taken by the company at all
operational levels helped it achieve an OPM of 42.5% for Q4 FY12, which rose by
2040bps over the same quarter previous year.

Trend Analysis
YEAR

SALES

PROFITABILITY
56

2007
2008
2009
2010
2011
2012
2013

Amt (Rs)
15060
16250
16233
15208
19207
24178
27004

Trend %
100
108
108
101
128
161
179

Amt (Rs)
-1574
-1720
-729
-1707
-304
2512
5519

Trend %
-100
-109
-46
-108
-19
160
350

The above table and graph shows the trend of sales and profitability of the company for
over seven years. Sail is standing 20th and 14th position in sales and profit respectfully in
the industry in this FY2012.This company is running in losses from past 5years, but its
profits shooted up in FY 2012&2013 which may be an impressive move of the company.

57

IRON & STEEL COMPANY Ltd

Bombay House, 24 Homi Mody

Street, Fort Mumbai Maharashtra 400001
Tel:
56658282
Fax
56658113 / 56658118
Email
tatasteelho@tata.com
Website
www.tatasteel.com
CEO
Mr.B Muthuraman
Business Group Tata Group
Industry
Steel
Registered Office

BSE Code
NSE Code
Face Value
Market Lot

500470
TISCOEQ
10
1
Board of Directors
Director Name

Designation

Mr. R N Tata
Mr. Kumar Mangalam Birla
Mr. Suresh Krishna
Mr. Ishaat Hussain
Mr. Keshub Mahindra
Mr. Nusli N Wadia
Mr. S M Palia
Dr. Jamshed J Irani
Mr. B Muthuraman
Mr. P K Kaul
Mr. B Jitender
Mr. A N Singh
Dr. T Mukherjee

Chairman / Chair Person

Director
Director
Director
Director
Director
Director
Director
Managing Director
Nominee Director
Nominee Director
Whole Time Director
Whole Time Director

58

About TISCO
The Tata Iron and Steel Company Limited was formed in 1907 at Mumbai. The Company
manufactures rails, fishplates, bars, light structural, heavy structural, plates, black sheets,
galvanised sheets, tin bars, sleeper bars, sleepers, blooms, billets, sheet bars, wheels, tyres
and axles, skelp and strip, and special steels tools such as picks, beaters, hammers and
shovels and red-oxide, coal tar, sulphate of ammonia, etc. Iron and steel are made by the
open hearth, duplex electric and a combination of these processes, and the steel is rolled
into finished products.
During the year 1917, 1,50,000 equity shares issued at par and 26,250 deferred shares
issued at a premium of Rs.370 per share. With effect from 1st April 1973, the wholly
owned subsidiary, West Bokaro Ltd., was amalgamated with the company. In 1985 with
effect from 1st October, Indian Tube Co. Ltd was amalgamated with TISCO.
In October 1986, higher recovery of iron-bearing materials from waste materials viz., an
Rs.18.5 crores waste-recycling plant, was commissioned. During the year 1991 Company
acquired a 100% export-oriented ferro-chrome manufacturing unit of OMC Alloys Ltd.
from the Orissa State Government at a total cost of 156 crores. It is located at Bammpal,
Orissa, and has a capacity to produce 50,000 tonnes per annum of ferro-chrome.

59

Shareholding Pattern
Share Holding Pattern
as on :
FaceValue
Share Holder
Foreign Promoters
Indian Promoters
Person Acting in Concert
Sub Total

Mutual Funds and UTI

Banks Fin. Inst. and
Insurance
FII's
Sub Total
Private Corporate Bodies
NRI's/OCB's/Foreign
Others
GDR/ADR
Directors/Employees
Government
Others
Sub Total

31/03/2013

31/12/2012

10.00

30/09/2012

10.00

10.00

No. Of
Shares

%
No. Of
%
No. Of
%
Holding Shares
Holding Shares
Holding
PROMOTER'S HOLDING
0
0.00
0
0.00
0
0.00
147009416
26.56 146971495
26.55 145572691
26.30
0
0.00
0
0.00
0
0.00
147009416
26.56 146971495
26.55 145572691
26.30
NON PROMOTER'S HOLDING
Institutional Investors
23041936
4.16 28531556
5.16 28948492
5.23
100535483

18.16 103432319

18.69 108290486

19.57

15.36 76808298
37.68 208772173
Other Investors
41236156
7.45 38176564

13.88 66306238
37.72 203545216

11.98
36.78

84993869
208571288

6.90

37756753

6.82

2293731

0.41

2291362

0.41

2352479

0.43

3867
119544
0
0
43653298

0.00
0.02
0.00
0.00
7.89

3867
118816
0
0
40590609

0.00
0.02
0.00
0.00
7.33

3867
118816
0
0
40231915

0.00
0.02
0.00
0.00
7.27

Capital History
60

From To Class of Shares

2007
2008
2009
2010
2011
2012

2008 Equity Share

2009 Equity Share
2010 Equity Share
2011 Equity Share
2012 Equity Share
2013 Equity Share

Auth.
Issued
Paid-up
Face
Capital Capital Shares (No's) Value (Rs)
4,400.00 3,683.74
367771512
10
4,400.00 3,683.74
367771880
10
4,400.00 3,683.74
367771901
10
4,400.00 3,683.74
367771901
10
4,400.00 3,683.74
367771901
10
4,400.00 3,683.74
367771901
10

61

Paid-up
Capital
3,677.72
3,677.72
3,677.72
3,677.72
3,677.72
3,677.72

FINANCIAL STATEMENTS
2013

2012

2011

2010

2009

Equity Share Capital

Preference Share Capital
Total Reserve & Surplus
- Revaluation Reserve

554
0
4987
0

369
0
4987
0

369
0
3657
1

368
0
5458
0

368
140
4380
0

Total Debt

3373

3373

4226

4708

4672

Total Liabilities
Net Block
CWIP
Investments
Net Current Assets
Miscellaneous Expenditure
Total Assets

8729
7858
0
2194
-1479
156
8729

8729
7858
0
2194
-1479
156
8729

8252
7544
0
1195
-486
0
8252

10534
7544
0
913
1088
989
10534

9561
7042
496
847
255
920
9561

14658
717
15375
6225
236
622
1945
3421
369
10
7
62

11921
232
12153
3432
141
625
920
1746
369
10
10
47

9793
-142
9652
2163
342
558
250
1012
259
10
8
27

7607
119
7727
1179
403
525
46
205
149
10
4
6

7703
55
7758
1507
412
492
49
553
196
10
5
15

Particulars
BALANCE SHEET

INCOME STATEMENT

Sales
Other Income
Total Income
Operating Profit
Interest
Depreciation
Tax
Net Profit
Dividend (Rs. Cr.)
Face Value Per Share (Rs.)
Dividend Per Share (Rs.)
Earning Per Share (Rs.)

62

RATIO ANALYSIS

Ratios
Dividend per Share
Earning per Share
Pay out Ratio
Book value per Share
Return on Net Worth(%)
Operating Profit Margin(%)
Total Assets Turnover Ratio
Gross Profit Margin(%)
Net Profit Margin(%)
Inventory Turnover Ratio
Exports as % of Total Sales
Share Price/31-Mar(BSE)
Share Price/31-Mar(NSE)

2013

2012

2011

2010

2009

7
62
11.29
100
66.8
41.1
1.68
41.43
29.2
N/A
N/A
400.90
401.05

10
47
21.27
118.55
37.9
28.8
1.36
26.63
14.4
12.91
14.03
383.50
383.65

8
27
29.62
86.6
22.8
22.1
1.18
17.33
10.5
11.74
15.28
133.75
133.70

4
6
66.66
66.81
4.7
15.5
0.72
7.86
2.7
11.22
8.94
97.65
97.75

5
15
33.33
104.09
13.5
19.6
0.81
18.66
7.1
11.37
11.22
154.50
122.35

63

FINANCIAL ANALYSIS
Financial highlights :
Topline growth in the quarter and full year FY12 were driven by higher realization as
sales volumes were marginally lower on yoy basis in respective periods. The lower
volumes were a result of the planned shut down of G blast furnace, which has led to an
estimated production loss of about 10% during the year (~350000 tons). Higher steel
prices have enabled the company to double growth in net profit in FY12.
Volumes & Realization :
The 1mn ton expansion at Jamshedpur works has been completed since the 2nd week of
May. As a part of this expansion, the main G blast furnace was shut from December 3,
2012 to April 6, 2013 thereby suppressing production in Q3 and Q4 FY08 (major effect
in this quarter). The G blast furnace capacity has now been enhanced from 1 mtpa to 1.8
mtpa Tiscos steel making capacity now stands increased at 5mtpa at this location. The
company would further increase the capacity to 7.4mtpa by August 2013 at the cost of
Rs25bn.
Ratio Analysis
In the above table, dividends are fluctuating, EPS is showing an increasing trend and BPS
is not constant. Return on net worth is showing an increasing trend from 2007.Operating
margin is showing an increasing trend from 2009, Total asset turnover ratio is good, and
exports have increased 2012 and decreased in 2013. The margin on sales is very good.
The movement of share price is good because of the high margin due to price hikes in
long term contracts, which showed future prospects.

64

Trend Analysis
YEAR
2007
2008
2009
2010
2011
2012
2013

SALES
Amt (Rs)
Trend %
6275
100
6891
110
7703
123
7607
121
9793
156
11921
190
14658
237

PROFITABILITY
Amt (Rs)
Trend %
282
100
423
150
553
196
205
73
1012
359
1746
619
3421
1213

The above table explains the trend of the growth of sales and the profitability of the
company for over seven years. Here TISCO stands in 10 th and 13th positions in
Profitability and Sales when compared to all other companies in the industry in current
FY2013.
We can see an increasing trend both in sales and profitability.

65

FINDINGS CONCLUSIONS AND SUGGESTIONS

FINOLEX Industries Ltd

Net sales increase by 28.2% yoy in Q4 FY12 to Rs2.4bn
OPM in Q4 FY12 slumps by 1.25 percentage points 13.3%, driven by rise in raw
materials cost, especially so of crude oil
54.9% yoy fall in other income converts into to a 51.1% yoy fall in PBT
Steel Authority of India Ltd (SAIL)
Record quarterly PAT in Q4 FY12 of Rs27bn, an increase of 164% yoy.
Better prices, product mix and productivity improve realization.
Turnover at an all time high of Rs291bn for FY12, growth of 32% .

Outlook

SAIL has laid down plans to spend about Rs250bn in stages to increase its hot metal
capacity by 7mn tpa to 20mn tpa by FY12, and to take advantage of the strong expected
domestic demand growth of 7-8% p.a. over the next few years. The gradual capacity
expansion would translate into consistent volume growth for the company in the future
years. The company's capex was Rs30bn in FY12 and it is expected to spend a similar
amount in FY13 as well.

66

Tata Iron and Steel Co. Ltd

Revenue and profitability growth in Q4 commendable, considering 3 month

planned shut down of its largest blast furnace.
15-20% price hikes on long-term contracts undertaken in March should enable
company to maintain earnings growth momentum in FY12.

Outlook

Original estimates for FY12 factored a 35% revenue growth driven by a 22% volume
increase and a 9% rise in average realizations. We had estimated standalone profits to
grow 43% yoy and an EPS of Rs83 for FY12. With the management indicating that a 1520% price hikes take in long term contracts, we would be revising our forecasts for FY10
upwards to factor in a sharper than expected realization growth.

67

Calculation of Intrinsic Value

COMPANY 2013 2012 2011 2010 2009 AVERAGE

C/Y
EPS

Ave*EPS

C/Y SP

Intrinsic Value (NSE)

Finolex
SAIL
TISCO

10.1 7.11 5.58 4.06 6.05

4.87 5.38 -8.85 -1.2 2.83
6.47 8.16 4.95 16.29 8.16

6.58
0.606
8.806

7
13
62

46.06
7.878
545.972

70.7
63.25
401.05

The true economic worth of the share is its intrinsic value. The following formula is used
to find out the intrinsic value of a share.
Intrinsic Value = (Average P/E ratio over the years) x (Present earnings per share)
The above calculation is based on the assumptions that:

The trend of the profitability of the immediate past and the present will continue
to be the same.

The average P/E and the average earnings to Equity ratio remain constant over a
period of time.

68

CONCLUSION

FINOLEX INDS
1. Net sales increase by 28.2% yoy in Q4 FY12 to Rs2.4bn
2. OPM in Q4 FY12 slumps by 1.25 percentage points 13.3%, driven by rise in raw
materials cost, especially so of crude oil 54.9% yoy fall in other income converts
into to a 51.1% fall in PBT

SAIL
1. Record quarterly PAT in Q4 FY12 of Rs27bn, an increase of 164% yoy.
2. Better prices, product mix and productivity improve realization.
3. Turnover at an all time high of Rs291bn for FY12, growth of 32% yoy.

TISCO
1. Revenue and profitability growth in Q4 commendable, considering 3 month
planned shut down of its largest blast furnace.
2. 15-20% price hikes on long-term contracts undertaken in March should enable
company to maintain earnings growth momentum in FY12.

69

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70

BIBILIOGRAPHY

WEB SITES
1.WWW.AMFIINDIA.COM
2. WWW.BSEINDIA.COM
3. WWW.YAHOO.FINANCE.COM
NEWS PAPERS
1. BUSINESS LINE
2. ECONOMICS TIMES
3. BUSINESS STANDARD
4. THE HINDU
BOOKS
1. THE SECURITY ANALYSIS AND PORTFOLIO MANAGEMENT
- DONALD.E.FISHER AND RONALD. J. JORDAN
2. FUNDAMENTALS OF STATISTICS - S.C GUPTA.

71

72