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A
RESEARCH REPORT
ON
“EQUITY MARKETS: AN INDIAN INVESTMENT SCENARIO”
AT
KARVY STOCK BROKING LTD
SUBMITTED TO
SAVITRIBAI PHULE UNIVERSITY
In the partial fulfilment of the requirement for the award of degree of
MASTER OF BUSINESS ADMINISTRATION
UNDER THE GUIDANCE OF
Dr. Satish Inamdar
SUBMITTED BY
VIRAJ VINODBHAI KANSARA
SINHGAD INSTITUTE OF MANAGEMENT
VADGAON, PUNE-41.
(2015-2017)
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DECLARATION
I, the undersigned hereby declare that the project report entitled “EQUITY MARKETS: AN INDIAN
INVESTMENT SCENARIO” written and submitted by me to the Savitribai Phule Pune University, in
partial fulfillment of the requirements for the degree of Master of Business Administration under
the guidance of Dr.Satish Inamdar is my original work and the conclusions drawn therein based
on the material collected by myself.
Place:
Date:
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ACKNOWLEDGEMENT
I acknowledge my sincere thanks for the cooperation and involvement by the college and all
those who have helped me in preparing and presenting the report.
I take this opportunity of expressing my profound gratitude to my project guide Dr. Satish
Inamdar, whose continuous support has been a constant source of motivation for me. I am
extremely thankful to him for providing valuable guidance and attention to me.
I would like to deep sense of gratitude to Dr. Parag Kalkar sir, sinhgad institute of
management(SIOM), pune, for allowing me to carry out this project work in this prestigious
institution.
I am also grateful to Mr. Yogesh Shimpi, manager at KARVY stock broking ltd, Nashik for
sparing their valuable time and cooperation in accomplishing my task. It was great experience
and pleasure working with such a dynamic personality.
At last special thanks to all merchants and shopkeepers for their valuable support in our project.
Place-
Date- Name- Viraj Vinodbhai Kansara
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INTRODUCTION
The project is aimed at finding the business health and financial problem position of various
sectors for the purpose of doing investment in the shares of that company .fundamental analysis
is done tofor analyzing the sector’s position.
Initially 10 prominent sectors were taken into consideration (as listed below) and out of those
three important sectors were chosen for analysis.
1. Banking
2. Oil and gas
3. Infrastructure
4. Information technology
5. Pharmaceutical
6. Telecom
7. Retail
8. Power
9. FMCG
10. Automobiles
11. Mining
12. Refineries
The three sectors chosen for analysis are –
1. Pharmaceutical
2. Banking
3. Information technology
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There are two basic approaches one can use for doing the fundamental analysis, bottom up
analysis and top down analysis. This report is based on top down analysis, which means
report starts from economy analysis .Then the search narrowed to industry analysis ,and after
that analysis is done for specific companies.
The analysis of the company starts with data finding, such as company background, market
data ,share holding pattern and balance sheet and profit and loss account. It also includes
analyzing the investment rational. Then the analysis of the health is done with financial
statement analysis that includes ratios. It looks at profitability ratios, margin ratios,
performance ratios, efficiency ratios, capitalization ratios, growth ratios etc.
It is necessary to consider number of valuation tools before taking an investment decisions.
Finally the conclusion is drawn based on a result table showing all positives and negatives of
all 3 companies and comparing them. And one stock is recommended for doing investment.
This report would help the reader to get an insight on various sectors and would prove as
quick reference for those who are tracking the sector .I hope the report would prove handy
for people interested in tracking the future happening of the sector in the share market.
STATEMENTOF PROBLEM
In an industry plagued with skepticism and a stock market increasingly difficult to predict
and contend with, if one looks hard enough there may still be a genuine aid for the LONG
TERM or SHORT TERM investor.
The price of a security represents a consensus. It is the price at which one person agrees to
buy and another agrees to sell .The price at which the investor is willing to buy or sell
depends primarily on his expectations. If he expects the security price to rise ,hewill buy it;
if the investor expects the price to fall, he will sell it. These simple statements are the cause
of the major
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Challenge in forecasting security prices, because they refer to human expectations. As we all
know firsthand, humans expectations are neither easily quantifiable nor predictable.
Fundamental analysis is very important study to be done while investing in stock market. Since
all the investors in the stock market wants to make maximum profits possible, they just cannot
afford to ignore fundamental analysis. Fallowing are statements of problems in this project-
1. Which sector is most successful player to invest with?
2. Which company is most suitable to invest in the shares?
3. Which all are factors to be considered while doing analysis of the company?
OBJECTIVE
1. To find investment potential, health and financial position of the company of various
sectors for the purpose of doing investment in the shares of the company.
2. To understand each sector so that one can do analysis of his own while selecting stock
from various sectors for investment.
3. To study the background, business profile and investment rationale of the companies of
selected sector.
4. To perform a comparative analysis and check their relative position between the chosen
companies.
SIGNIFICANCE OF STUDY
In India many traditional people are very risk averse. They are not aware of investment
opportunities in stock market. They consider stock market as the game of gambling. But the
original scenario is quite different. There is no doubt that there are speculators who try to hike
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The price of the stock artificially. Investing in equities involves high risk and the return on it
totally depends on the company’s performance but investing in right stock at the right price and
holding for a longer time horizon would surely be a better investment.
For investing in various sectors company stock and to understand the business of those sectors
for the further upcoming IPO of the companies to invest in those companies which is profitable
or risky.
SCOPE OF PROJECT
1. This report would give an insight on how the sector performs & what points to look into
while tracking the sector
2. This report would also prove handy for the aspirants and enthusiast to understand the
knowhow of the sector.
3. This report will prove as quick reference for those who are willing invest in specified
sector companies.
4. The study would be helpful to determine the measures to be adopted that are important
to analyze various sectors.
LIMITATIONS OF THE PROJECT
1. The study can be biased to the extent of potential perception.
2. Data has a time limit of only last five financial years.
3. Collected data is historical in nature.
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Introduction
KARVY, is a premier integrated financial services provider, and ranked amongst the leading
corporate in the country in all its business segments, servicing over millions of
individualinvestors in various capacities, and provides investor services to many corporates,
comprising the who’s who of Corporate India. KARVY covers the entire spectrum of financial
services such as Stock Broking, Depository Participants, Distribution of financial products –
mutual funds, bonds, fixed deposit, equities, Insurance Broking, Commodities Broking, Personal
Finance, Advisory Services, Merchant Banking & Corporate Finance, placement of equity, IPOs,
among others. Karvy has a professional management team and ranks among the best in
technology and operations.
KARVY Stock broking ltd
Karvy Stock Broking Limited was incorporated on 30th March 1995. Karvy Stock Broking
Limited (KSBL)is a member of – National Stock Exchange Limited, Bombay Stock Exchange
Limited and MCX Stock Exchange Limited. Karvy Stock Broking Limited has been registered as
a Depository Participant with National Securities Depository Ltd (NSDL) since December 1997
and with Central Depository Securities Ltd (CDSL) since October 1999 and offers these services
across the network.
Business Focus
KARVY covers the entire spectrum of financial services such as Stock Broking, Depository
Participants, Distribution of financial products like mutual funds, bonds, fixed deposit, equities,
Insurance Broking, Commodities Broking,Personal Finance, Advisory Services, Merchant
Banking & Corporate Finance, placement of equity, IPOs, among others. Besides this, we also
provide customized advisory services to help in making the right financial moves that are
specifically suited to portfoliorequirements of the clients.
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Vision statement
“To be pioneering financial services company. And continue to grow at a healthy pace, year after
year, decade after decade.”
Mission statement
“To Bring Industry, Finance and People together.”
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KARVY ORGANIZATION CHART
Website Management Team General Management Team
Web Information Manager Managing Director
(C. Parthasarathy)
M. Sreejith
Web Supervisor Chief Executive Officer
( V. Ganesh)
Umesh T
Technical Manager CFO, Compliance Officer & Company Secretory
N. Ratnagiri Rao & LVS Ramachandra Rao (RakeshSanthalia)
Head Issuer Interface & Operations
Technical Supervisor
I Lakshmana Murthy (M R V Subrahmanyam)
Head IT - Software Development
(T. Mallikarjunaiah)
Chief Information Security Officer
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Litreature used for this project:
In this project several websites are reviewed for best contents some of them are as fallows
Internet (Wikipedia)
NDTV profit.
Money control
Slideshare
Although the project called “Equity markets :an Indian investment scenario”
Was taken into consideration for the study.
Although the project on similar topic done by someone was also taken into consideration for
the study.
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Data collection
Data collection
Primary data Secondarydata
Observations Newspaper
Internet
Books
Brochures
Primary data:
Primary data Primary data for a project is the first hand information regarding the project being
studied. In this regard the primary data for this project would be getting the necessary
information from the company management by an interview, telephonic conversation or direct
mail.
Secondary data:
Secondary data for a project would be the collection of information that has a bearing on the
outcome of the project from secondary sources like news, press releases, internet etc. Whereas
published secondary sources will used as prime documents for the study. The major among these
is the Annual Reports of the company for the financial years 2015-16.
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The data collected for this project was from secondary sources. The data was complied with the
help of sources like News articles, Company profiles, Internet.
Fundamental Analysis:
Top to Bottom
Tools Of Economic Analysis:
The most used tools for performing economic analysis are:
1. Gross domestic product (GDP).
2. Monetary policy and liquidity.
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3. Inflation
4. Intrest rates
5. International influences
6. Fiscal policy
1. Gross domestic product ( GDP):
Gross domestic product (GDP) is a monetary measure of the market value of all final
goods and services produced in a period (quarterly or yearly). Nominal GDP estimates
are commonly used to determine the economic performance of a whole country or region,
and to make international comparisons. Nominal GDP per capita does not, however,
reflect differences in the cost of living and the inflation rates of the countries; therefore
using a GDP PPP per capita basis is arguably more useful when comparing differences in
living standards between nations.
2. Inflation:
Inflation is defined as a sustained increase in the general level of prices for goods and
services. It is measured as an annual percentage increase. As inflation rises, every dollar
you own buys a smaller percentage of a good or service. The value of a rupee does not
stay constant when there is inflation. The value of a rupee is observed in terms of
purchasing power, which is the real, tangible goods that money can buy. When inflation
goes up, there is a decline in the purchasing power of money.
3. Intrest rate:
An interest rate is the amount of interest due per period, as a proportion of the amount
lent, deposited or borrowed (called the principal sum). The total interest on an amount
lent or borrowed depends on the principal sum, the interest rate, the compounding
frequency, and the length of time over which it is lent, deposited or borrowed.
4. Fiscalpolicy:
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Fiscal policy involves the decisions that a government makes regarding collection of
revenue, through taxation and about spending that revenue. It is often contrasted with
monetary policy, in which a central bank (like the Federal Reserve in the United States)
sets interest rates and determines the level of money supply.
Induusty Analysis:
For this project we have taken three important sectors which are very important and
popular on Bombay Stock Exchange and National Stock Exchange. The companies are
selected on the basis of market capitalization. The companies with highest market cap are
selected.
1. Pharmaceutical.
2. Banking.
3. Information technology.
Pharmaceutical Sector in India:
The pharmaceutical industry in India ranks 3rd in the world terms of volume and 14th in
terms of value.
According to Department of Pharmaceuticals, Ministry of Chemicals and Fertilizers, the
total turnover of India's pharmaceuticals industry between 2008 and September 2009
was US$21.04billion.
Hyderabad, Mumbai, Bangalore and Ahmadabad are the major pharmaceutical hubs of
India. The domestic market was worth US$13.8 billion in 2013.
India's biopharmaceutical industry clocked a 17 percent growth with revenues of Rs.137
billion ($3 billion) in the 2009-10 financial year over the previous fiscal.
Bio-pharma was the biggest contributor generating 60 percent of the industry's growth at
Rs.8,829 crore, followed by bio-services at Rs.2,639 crore and bio-agri at Rs.1,936 crore.
In terms of the global market, India currently holds a modest 1–2% share, but it has been
growing at approximately 10% per year.
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India gained its foothold on the global scene with its innovatively engineered generic
drugs and active pharmaceutical ingredients (API), and it is now seeking to become a
major player in outsourced clinical research as well as contract manufacturing and
research.
Industry classificationand performance:
The Indian pharmaceutical industry can be classified into organized and unorganized sectors.
Accounting for over 70% of total sales, the organized sector has about 250 manufacturing and
formulation units. On the basis of management control, the organized sector can be further
classified into MNCs and Indian companies.
Branded formulations: They are ethical formulations prepared using a bulk drug under product
patent and are marketed by a single pharmaceutical company.
Generics: They are formulations that do not contain any patented bulk drug and can be
manufactured by more than one company.
Bio Pharma and the healthcare sector are the largest Indian Biotech Industry (USD Bn)
component of the Indian biotech industry with a market share of 62 percent. Bio Pharma has
shown a historical growth of 19 percent and is expected to continue mainly due to pharma
companies facing increasing development cost and pressure on profit margins. As per an IMS
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Report the global Bio similar market is estimated 4.3 As per an IMS Report, the global Bio
similar market is estimated to assume a size of $ 2.7 billion by 2017
Growth Drivers of Industry:
Government policies and regulatory framework:
Investment approval: Automatic investment approval upto 100% foreign equity for NRI
and overseas corporate bodies. These investments are allowed in food processing
segments such as coffee and tea.
FDI in organized retail: India currently allows upto 100 % FDI in cash and carry
segment and 51% in single brand retail, which is to be further expected to be further
expected to 100%. India is also to allow 51% FDI in multi brand retail, which will boost
the nascent organized retail market in the country.
Priority sector: The government of india recognizes food processing and agro industries
as priority sectors.
Relaxation of licence rules: Industrial licences are not required for almost all foods and
agroprocessing industries, barring certain items such as beer, potable alcohol and wines,
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sugarcane and hydrogenated animal fats and oils as well as items reserved for exclusive
manufacturing in the small scale sector.
Statutory Minimum Price: In oct 2009 government amended the Sugarcane Control
Order ,1996, and replaced the Statutory Minimum Price (SMP) of sugarcane with Fair
and Remunerative Price (FRP) and State Advised Price (SAP).
Banking sector in India :
The total assets of Indian banks, which are regulated by the Reserve Bank of India (RBI)
and the Ministry of Finance (MoF) were pegged at Rs 82,99,220 crore (US$ 1564.8
billion) during FYI2. Further, the revenues of Indian banks grew almost four-fold from
US$ 11.8 billion to US$ 46.9 billion over the decade spaning 2001-10.
Indian economy's liberalisation in the early 1990s has resulted in conception of
various private sector banks. This has sparked a boom in the country's banking
sector in the past two decades.
The revenue of Indian banks grew four-fold from US$ 11.8 billion to US$ 46.9
billion, whereas the profit after tax rose nearly nine-fold from US$ 1.4 billion to
US$ 12 billion over 2001-10.
The growth is due to two major factors. First, the influx of Foreign Direct
Investment (FDI) of up to 74 per cent with certain restrictions4. Second, the
conservative policies of the Reserve Bank of India (RBI), which have shielded
Indian banks from recession and global economic turmoil.
The Bankex is an index tracking the performance of important banking sector
stocks, and has grown at a compounded annual growth rate (CAGR) of
approximately 20 per cent over 2003-12
Competitive landscape and leading banks in India:
Banking in India is moderately consolidated, with the top 10 players accounting for
approximately 60 per cent of the total industry. The Indian banking sector is majorly dominated
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by public sector banks. Figure 5 describes the market shares of the leading players (based on
total credit portfolio), along with the respective shares of government, private and foreign banks.
Leading 3 banks in india:
1. State Bank of India: SBI undoubtedly is the leading bank in India when it comes to number
of branches, ATM’s, net profits, total assets managed, etc. With an employee base of close to
3 lakh people SBI commands 20% (approx) of the Indian banking sector. The bank has over
17,000 branches with more than 27,000 ATM’s. The bank manages assets worth more than
390 billion USD.
2. ICICI Bank: ICICI is the second in the list when it comes to quantity of assets managed
by the Bank. According to the current market cap ICICI is ahead of SBI but behind HDFC.
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ICICI Bank has about 3540 branches, 11200 ATM’s and over 82000 employees. The bank
manages assets worth 99 billion USD.
3. HDFC Bank: HDFC Bank is an Indian banking and financial services company. HDFC
Bank is the second largest private bank in India as measured by assets. It is the largest bank
in India by market capitalization as of February 2016. It was ranked 69th in 2016
BrandZTM Top 100 Most Valuable Global Brands.
What does the union budget offers the Banking sector2016:
Government to infuse 250 billion rupees capital into state-run banks in 2016/17; will find
resources for additional capital for banks if required.
First, even though Jaitley has stuck to the Rs.25,000 crore figure laid out in August 2015 as
part of a four-year road map which envisaged infusion of Rs.25,000 crore each into public
sector banks in fiscal years 2016 and 2017 and Rs.10,000 crore each in 2018 and 2019, he
has made it clear that if more money is required, the government will not shy away from its
responsibility.
Second, sticking to Rs.25,000 crore recapitalisation funds and pegging fiscal deficit at 3.5%
in 2016-17 is a smart idea (higher recapitalisation funds would have derailed the fiscal
consolidation path) as this may encourage the Reserve Bank of India (RBI) to cut its policy
rate sooner than later.
Third, the quantum of market borrowing for the next fiscal year is a big positive for the bond
market. While the expectations were for about Rs.6.4 trillion gross market borrowing by the
government to take care of its fiscal deficit in 2016-17, the actual figure is Rs.6 trillion. Net
of redemptions of old bonds, the net borrowing for the year is Rs.4.25 trillion.
Other regulatory developmentsthat impact the Indian banking sector:
The RBI. which regulates other India banks, formulated several policies and initiatives that
directly impacted the country's banking sector over the last few years. Some of these
initiatives art as follows
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1. Deregulation of savings rates for banks in India: In a move that enables banks to
decide the interest rates they offer on savings accounts, the RBI has deregulated the
savings bank deposit interest rates from an earlier norm of 4 per cent per annum to aid
product and price innovation in the long run.
2. Provision Coverage Ratio(PCR): The mandatory dire‘ti.e to maintain a PCR of 70 per
cent benefits all commercial banks. The current PCR can be used to minimise NPAs
during economic downturn.
3. Basel III guidelines: The RBI has planned the implementation of the Basel III norms,
which would require a capital infusion of approximately US $ 60 billion over the next
five years. These norms would require the systemically important banks to maintain a
higher level of capital, at a time when the credit demand in the economy is rising. This
might hamper the banking industry's short term growth. However. Dr. Subbarao. the
Governor of the Reserve Bank of India in 2012. commented that Basel III would make
Indian banks stronger in the long run, thereby enabling them to invest in the real sectors
of the economy.
4. Relaxation of branch authorization policy for tier II cities: Under the relaxation of
Branch Authorisation Policy, the domestic banks do not need the RBI approval to set up
service offices, central processing centres and administrative offices in the tier II cities,
with a population ranging between 50,000 to 99,999. Further, a similar relaxation to
expand into tier III to tier VI cities already exists. The policy will spread the organised
banking to the remote areas of the country, and aid financial inclusion.
5. Relaxation of mobile payment guidelines: Relaxation of mobile payment guidelines:
With the increasing popularity of mobile banking, the RBI removed the cap of Rs. 50,000
(US$ 942.7) for transactions through mobile phones. This relaxation allowed banks to
assess the involved risk, and place their own limits while granting customers with mobile
banking facilities. In a statement, the RBI commented that the Interbank Mobile Payment
Service (IMPS), which was developed and operated by the National Payment Corporation
of India (NPC1), also enabled real time fund transfer among different banks.
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6. Issue of financial guidelines for new bank licenses: The RBI, deviating from its
traditional policy of granting licenses to only a few private institutions, is now issuing
new bank licenses to all entities that satisfy the eligibility criteria. This move is expected
to encourage healthy competition and promote financial inclusion in the banking
industry.
7. Subsidiary route for foreign banks: The RBI is encouraging foreign players entering
the Indian banking industry to conduct business through wholly owned subsidiaries.
Further, it is promoting existing important foreign players to incorporate themselves as
wholly owned subsidiaries of foreign parent companies. This mm e is expected to benefit
foreign players by allowing them to expand their consumer base to semi urban areas
8. Expansion into rural markets: Expanding operations to rural markets has been a
concern for private and foreign banks as it prevents financial inclusion. Sonic larger
players have managed to establish their presence in rural markets either through mergers
and acquisitions, or acquiring associates. For instance, ICICI Bank merged with Bank of
Rajasthan to expand its consumer base in the rural market.
9. Intensifying competition due to homogrnrous products: Most Indian banks offer
homogeneous services, which result in high competition in the industry on finer points,
such as loan rates and interest rates. Many new entrants, especially non banking financial
corporations (NBFC), are expected to enter the industry in the coming years due to the
new Banking License. Guidelines of the RBI. High competition will benefit the industry
in the long run by driving all banks (especially public sector banks) to improve their
performance.
Financial inclusion and technological transformation in banking
A World Bank Survey conducted in 2015 revealed that only 38 per cent of all adults in
India had a bank account with a formal banking institution, while this figure stood at 21
per cent in the poorest income quintile. This represents a massive opening that financial
institutions in the country can leverage upon for future growth. Further, the policies of the
Reserve Bank have prioritized financial inclusion, presenting an opportunity that might
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not manifest itself again. The Indian government has advised banks to open at least one
branch in villages with a population of more than 2,000, and also cover the peripheral
villages. Banks are also required to formulate a board approved Financial Inclusion Plan
(FIP), the implementation of which will be monitored by the RBI.
Information technology sector in India
Information technology (IT) industry in India has played a key role in putting India on
the global map. IT industry in India has been one of the most significant growth
contributors for the Wharf economy. The industry has played a significant role in
transforming India's image from a slow moving bureaucratic economy to a land of
innovative entrepreneurs and a global player in providing world class technology
solutions and business services. The industry has helped India transform from a rural and
agriculture-based economy to a knowledge based economy.
1. Information Technology has made possible information access at gigabit speeds. It
has made tremendous impact on the lives of millions of people IA ho are poor.
Marginalized and living in rural and far flung topographies.
2. Internet has made revolutionary changes with possibilities of e-government measures
like e-health, e-education, e-agriculture, etc. Today whether its tiling Income Tax
returns or applying for passports online or railway e-ticketing, it just need few clicks
of the mouse.
3. India's IT potential is on a steady march towards global competitiveness improving
defense capabilities and meeting up energy and environmental challenges amongst
others.
4. IT sector in India, with the main focus on increasing technology adoption and
developing new delivery platforms, has aggregated revenues of USD 88.1 billion in
FY2014, while generating direct employment for over 2.5 million people.
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5. Out of 88.1 billion, export revenues (including Hardware) has reached USD 59.4
billion in FY2014 while domestic revenues (including Hardware) of about USD 28.8
billion.
Government initiative
Mr Ravi Shakar Prasad, Minister of Communication and Information Technology,
announced plan to increase the number of common service centres or e-Seva centres
to 250,000 from 150,000 currently to enable village level entrepreneurs to interact
with national experts for guidance, besides serving as a e-services distribution point.
The Railway Ministry plans to give a digital push to the India Railways by
introducing bar-coded tickets, Global Positioning System (GPS) based information
systems inside coaches, integration of all facilities dealing with ticketing issues, Wi-
Fi facilities at the stations, super-fast long-route train service for unreserved
passengers among other developments, which will help to increase the passenger
traffic.
Research& Development
To support Research & development in the country and promoting Start ups focused on
technology and innovation, a weighted deduction of 150% of expenditure incurred on
in-house R&D is introduced under the Income Tax Ac. In addition to the existing
scheme for funding various R&D projects have been funded through new scheme like
Support International Patent Protection in Electronics & IT Multiplier Grants Scheme
(MGS). The government has initiated the setting up of an Open Technology Center
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through NIC aimed at giving effective direction to the country on Open Technology in
the areas of Open Source Solutions, (OSS), Open Standard, Open Processes,
Regulations
After the economic reforms of 1991-92, liberalization of external trade, elimination of
duties on imports of information technology products, relaxation of controls on both
inward and outward investments and foreign exchange and the fiscal measures taken by
the Government of India and the individual State Governments specifically for IT and
ITES have been major contributory factors for the sector to flourish in India and for the
country to be able to acquire a dominant position in offshore services in the world. The
major fiscal incentives provided by the Government of India have been for the Export
Oriented Units (EOU), Software Technology Parks (STP), and Special Economic Zones
(SEZ).
Challenges
Cyber security and quality management are few key areas of concern in today's
information age. To overcome in today's global IT scenario, an increasing number of
companies in India have gradually started to emphasize on quality to adopt global
standards such as ISO 9001 (for Quality Management) and ISO 27000 (for Information
Security). Today, centers based in India account for the largest number of quality
certifications achieved by any single country. India aims to transform India into a truly
developed and empowered society by 2020.
Future prospectus
The near future of Indian IT industry sees a significant rise in share of technology spend
as more and more service providers both Indian and global target new segments and
provide low cost, flexible solutions to customers.
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Tools of company analysis
for the company analysis one company have been chosen for each sector which are as fallows
Pharmaceuticalsector- Sun pharma
Banking sector- HDFC Bank
IT Sector- TCS
1. Management
Management includes the -core competency- or -fundamental strength- of the company that puts
them ahead of all the other competing firms. 80% of money should be invested with known,
proven and robust companies. Known companies are those which have their existence past many
years. Their product is appreciated and they are qualified in their field. Proven companies are
those who have seen the economic cycle (good-had-good times) and have survived the bad times
and grown out of it. Robust companies are those which have future growth plans and the
capacity to timely execute the plans. E.g. Ambani's, Tata group, Munjal group.
2. Face value
The birth of a share takes place in a primary market during an IPO. The face value of the share is
decided at that time by the promoters. The most common face values are 1, 2, 5, 10. The face
value 10/- is mostly used. It is used for price comparison of stock of same sector. e.g. suppose
the FV of HCC is '.1/- with current market price '.110/- and the FV of HDIL is .10/-with current
market price of '.250/-. Both the companies are from the same sector. The cost of HCC share is
greater than III)IL share. If one has to only see the stock price, to start with, the face value plays
a very important role in price and people usually get mislead by the stock price when they ignore
the FV.
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3. Equity share capital
Equity Capital = FV * no of shares
Always invest in large equity companies. The equity capital has to be compared in peer group
companies only. E.g. equity capital of an auto company should be compared with the equity
capital of auto Companies only and not with equity capital of IT companies. Invest in the
company, having large equity capital compared to other companies of the same sector.
4. Market capitalization
Market Capitalization = current market price * no of shares
According to market capitalization companies are divided as follows Large cap companies:
having market capital greater than 7500Cr. Mid cap companies: having market capital between
500Cr & 7500Cr. Small cap companies: having market capital less than 500 Cr. More than 80%
should be invested in large cap companies.
5. Earning per share (EPS)
EPS = Net profit/ No of Shares
It is a self comparative tool. EPS of one company should not be compared with the EPS of
another company even if they are from same sector.
6. Price to Earning ratio (P/E) ratio
P/E = Market Price/ EPS , Hence, share price = P/E * EPS
This means share price is always P/E times of EPS, which also means an investor is P/E times
the earnings to buy the share. If P/E is low, share price will also be less. Thus, always go for
Companies having less P/E multiple. Always compare P/E multiple of companies from same
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sector. P/E is the number of times of the company's earning to buy the share. Every sector carries
different demand premium (P/E), but in every sector stocks should trade in similar P/E multiples.
7. Return On Equity
Return on Equity (ROE) measures the rate of return on ownership interest (shareholder's equity)
of common stock owners. It measures firm's efficiency at generating profits from every unit of
shareholder's equity. ROE shows how well company uses investment funds to generate earnings
growth. ROE between 15 % to 20 % are generally considered good.
ROE = Net Income (after payment of interest and taxes)/ Shareholder's Equity
8. Dividend
Dividend is the small portion of the net profits, what company decides to distribute to its
shareholders. It is always calculated on FV in terms of percentage. It shows goodwill of the
company towards it shareholders.
9. Bonus
A company gives bonus in the form of shares only. It is given in some ratio of what share holders
are holding. It is in the ratio of free: holdings, 1:2 means the company will give 1 bonus share for
every 2 holdings.
10. 52 week H/L
It is the highest and the lowest value of the stocks during the trailing 52 weeks. If the stock is
trading near to its high price be cautious. Buy when the stock is trading 30-40% low than the
high price.
11. Future growth plan
33. 33
This is one of the most important tools of fundamental analysis. If the company has a good future
growth plan invest in that company as the profits of such companies would increase and this in
turn would increase the share price of that company.
Chapter 5
Data Interpretataion
34. 34
Sun Pharmaceutical
Introduction:
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 speciality 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 50% 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.
SWOT Analysis
Strenth-
Strong growth in emerging market business
Introduction of Pantoprazole & Eloxatin in US market has very limited competition
They have strong marketing & sales force of over 12,000 employees
They have successfully acquired Taro pharma which has further consolidated their
position in Indian markets
35. 35
Strong brand presence in India and US markets
Weakness-
Stiff competition from many Indian and other global brands means limited market share
growth
Limited presence in emerging markets and European countries
Opportunity-
They can leverage their acquisitions to further increase the growth
They can increase their presence in contract manufacturing
Increasing healthcare awareness in India
Threats-
There is growing competition in generics market
Stringent patent regulations
High price sensitivity of consumers
Management at Sun Pharmaceutical
Israel Makov: Chairman
Dilip Shanghvi: Managing Director
Sudhir V. Valia: Executive Director
Sailesh T. Desai: Executive Director
Hasmukh S. Shah: Non Executive Independent Director
Keki M Mistry: Non Executive Independent Director
Ashwin Dani: Non Executive Independent Director
S. Mohanchand Dadha: Non Executive Independent Director
36. 36
Rekha Sethi: Non Executive Independent Director
Vijay Patel: Non Executive Independent Director
Sun Pharmaceuticals future growth plans
Though the Rs 1,400-crore (Rs 14 billion) Sun Pharmaceuticals has made substantial
investments in R&D over the past five to six years, the corporate decision to convert this
intellectual asset into a future growth-driver by demerging the innovative research arm
come only now.
The company had invested $23.15 million in the R&D assets and two manufacturing
units of Able Labs, which were auctioned recently, and another $10 million in Valeant
Pharma's facilities in Ohio and Hungary. They would be required to invest another $15
million over the next three years in these assets to start operations.
About 35-40 per cent of R&D spend - this roughly 10 to 11 per cent of our sales - had
been on innovative R&D. This will now shift to the new company.
Sun Pharmaceutical shares information
Face value - Re1/Share
No of shares - 240.66 cr
Total equity share capital - 240.66 cr
52 week high/low - Low- 750
High- 758
Sun Pharmaceutical Dividend Policy
Annoucement Date Effective Date Details
Rate(%) Type
30 May 16 08 Sep 16 100.00 Final
11 Aug 15 21 Oct 15 300.00 Final
13 Aug 14 11 Sep 14 150.00 Final
28 May 13 19 Sep 13 250.00 Final
29 May 12 14 Aug 12 425.00 Interim
37. 37
Sun Pharmaceutical market capitalization:
Market capitalization = Current maket price* Number of shares
= 754.35 * 240.66
= 181541.87 cr
Key Ratios:
Ratios 2016 2015
Liquidity ratios:
Current ratio 0 0
Quick ratio 0 0
Leverage ratios:
Debt equity ratio 0.26 0.24
Profitability ratios:
Net profit margin -14.09 -18.38
EPS -4.46 -7.12
DPS 1 3
ROA -2.91 -5.55
ROE -4.86 -9.78
38. 38
ROCE -1.89 -5.11
P/E -213.76 -
HDFC Bank
Introduction:
HDFC Bank is an Indian banking and financial services company headquartered
in Mumbai maharashtra. It has about 87,555 employees and has a presence in Bahrain, Hong
Kong and Dubai. HDFC Bank is the second largest private bank in India as measured by
assets. It is the largest bank in India by market capitalization as of February 2016. It was ranked
69th in 2016 BrandZTM Top 100 Most Valuable Global Brands.
1995 HDFC Bank was incorporated, with its registered office in Mumbai, India. Its first
corporate office and a full service branch at Sandoz House, Worli was inaugurated by the then
Union Finance Minister, Dr. Manmohan Singh.
As of June 30, 2016, the Bank’s distribution network was at 4,541 branches and 12,013 ATMs.
HDFC Bank provides a series of digital offerings like - 10 second personal loan, Chillr,
PayZapp, SME Bank, Watch Banking, 30-Minute Auto Loan, 15-minute Two-Wheeler Loan, e-
payment gateways, Digital Wallet, etc.
HDFC Bank provides a number of products and services which includes Wholesale banking,
Retail banking, Treasury, Auto (car) Loans, Two Wheeler Loans, Personal loans, Loan Against
Property and Credit Cards.
SWOT Analysis:
Strengths:
HDFC bank is the second largest private banking sector in India having 2,201 branches
and 7,110 ATM’s
The bank’s ATM card is compatible with all domestic and international Visa/Master
card, Visa Electron/ Maestro, Plus/cirus and American Express.
39. 39
HDFC bank has the high degree of customer satisfaction when compared to other private
banks.
Weakness:
HDFC bank doesn’t have strong presence in Rural areas, where as ICICI bank its direct
competitor is expanding in rural market.
HDFC lacks in aggressive marketing strategies like ICICI.
The bank focuses mostly on high end clients.
The share prices of HDFC are often fluctuating causing uncertainty for the investor
Opportunities:
HDFC bank has better asset quality parameters over government banks, hence the profit
growth is likely to increase.
The companies in large and SME are growing at very fast pace. HDFC has good
reputation in terms of maintaining corporate salary accounts.
HDFC bank has improved it’s bad debts portfolio and the recovery of bad debts are high
when compared to government banks.
Greater scope for acquisitions and strategic alliances due to strong financial position.
Threats:
HDFC’s nonperforming assets (NPA) increased from 0.18 % to 0.20%.
Though it is a slight variation it’s not a good sign for the financial health of the bank.
The non banking financial companies and new age banks are increasing in India.
The government banks are trying to modernize to compete with private banks.
RBI has opened up to 74% for foreign banks to invest in Indian market.
40. 40
Management at HDFC Bank:
NAME DESIGNATION
Shyamala Gopinath Chairperson
Paresh Sukthankar Deputy Managing Director
A N Roy Director
Keki Mistry Director
Renu Karnad Director
Umesh Chandra Sarangi Additional Director
Aditya Puri Managing Director
Kaizad Bharucha Executive Director
Bobby Parikh Director
Partho Datta Director
Malay Patel Director
Srikanth Nadhamuni Additional Directior
HDFC Banks future plans:
41. 41
HDFC bank will will raise infrastructure bonds worth Rs.4,500 crore before the end of
March, following up on its jumbo share sale earlier this month, as the bank braces itself
to take advantage of increased lending opportunities to both companies as well as
individuals over the next two fiscal years.
HDFC Bank could also look at increasing lending to the infrastructure sector, which
currently accounts for about 15% of the bank’s book, after it raises funds via the long-
term infrastructure bonds.
HDFC bank will follow the likes of Axis Bank Ltd, ICICI Bank Ltd, Kotak Mahindra
Bank Ltd and Andhra Bank in raising infrastructure bonds this fiscal. Axis Bank was the
last bank to sell these bonds when it raised Rs.5,700 crore in December.
HDFC Bank share price information:
Face value - Rs 2
No of shares - 2055183108 shares
Total equity share capital - 550 cr
52 week High/Low - High - 1318.45
Low - 928
Dividend Policy:
2015-2016 475%
2014-2015 400%
2013-2014 342.5%
2012-2013 275%
2011-2012 215%
2010-2011 165%
42. 42
2009-2010 120%
Market capitalization:
Market capitalization = current maket price * no of shares
= 1284.35 * 2055.18
= 326,961.19
Key ratios:
Ratios 2016 2015
Liquidity ratios:
Current ratio 0.07 0.04
Quick ratio 14.51 12.69
Leverage ratios:
Debt equity ratio 18.62
Profitability ratios:
EPS 50.63 42.54
DPS 9.50 8
ROA 1.92 1.93
ROE 18.65 19.94
ROCE 18.18 18.36
P/E 25.10 -
43. 43
TATA Consultuncy services (TCS):
Introduction
Tata Consultancy Services Limited (TCS) is an Indian multinational information
technology (IT) service, consulting and business solutions company. It is a subsidiary of
the Tata Group and operates in 46 countries. TCS is one of the largest Indian companies
by market capitalization ($80 billion).
TCS and its 67 subsidiaries provide a wide range of information technology-related products and
services including application development, business process outsourcing, capacity planning,
consulting, enterprise software, hardware sizing, payment processing, software management and
technology education services. firm's established software products are TCS BaNCS and TCS
MasterCraft .
Swot analysis:
Strength
High command on local and domestic market(India).
Strong brand backing (TATA)
Strong Ethics
Brand Image is quite strong in markets it serves
Employee strength of over 300000
Weakness
Not very strong in product segment.
44. 44
Opportunities:
Emerging markets
Product market e.g. domain targeted offerings
Repeat Business from existing clients
Threats:
Attrition and Employee loyalty.
Bigger MNC's entering India and competing for global clients.
Focussing on organic growth.
Management at TCS:
Name Designation
Cyrus Mistry Chairman
Arthi Subramanian Executive Director
V Thayagarajan Director
Ron Sommer Director
Isshat Hussain Director
N Chandrashekhera Managing Director & CEO
Aman Mehta Director
45. 45
Clayton Christenson Director
Vijay Kelkar Director
O P Bhatt Director
TCS fu[ture plans:
*source: Economic times
Mistry wants 25 Tata companies to crack this test by 2025. Tata Steel had cracked this
way back in 2004, touching even 700, but has not been assessed since.
46. 46
And '25' is a recurring theme in that vision. By 2025, Mistry wants the group to be in the
top 25 globally by market capitalisation (currently it would be in the late 70s); and he
wants the conglomerate to reach out to 25% of the global population in some way (it
reaches 900 million today, it must reach 2 billion in 2025 to be 25% of the estimated
global population of 8 billion).
TCS Share price information:
No of Shares - 1,970,427,941
Face Value - Rs 1
Total Equity Share Capital - 197.04
52 Week High/Low - High - 2740
Low – 2119
Dividend policy:
Fiscal
Year
Quarter Type of
Dividend
Dividend
Amount per
share (INR)
*
Record
Date
Actual
Payment Date
2016-17 Q1 Interim 6.50 26-Jul-16 2-Aug-16
2015-16 Q4 Final 27.00 7-Jun-16 24-Jun-16
2015-16 Q3 Interim 5.50 22-Jan-16 29-Jan-16
2015-16 Q2 Interim 5.50 26-Oct-15 30-Oct-15
2015-16 Q1 Interim 5.50 21-Jul-15 03-Aug-15
2014-15 Q4 Final 24.00 08-Jun-15 07-Jul-15
2014-15 Q3 Interim 5.00 28-Jan-15 9-Feb-15
47. 47
Market capitalization:
Market capitalization = current market price * no of shares
= 2335.45 * 1970427941
= Rs 468,981.55 cr.
Key Ratios:
Ratios 2016 2015
Liquidity ratios
Current ratio 2.24 2.78
Quick Ratio 2.24 2.80
Leverage ratios
Debt equity ratio - 0.01
Profitability ratios
EPS 116.13 98.31
DPS 43.50 79
ROA 29.46 30.53
ROE 38.87 42.40
ROCE 49.34 52.77
P/E 19.95 -
49. 49
Market capitalization:
Observation:
All above three companies are the large cap companies in their respective sector Among the
three TCS has the highest market capitalization.
19%
33%
48%
Market Capitalization
Sun Pharma
HDFC
TCS
50. 50
P/E Ratio:
Observation:
From the above companies only HDFC Bank AND TCS has satisfactory P/E Ratio
-84%
10%
8%
P/E Ratio
Sun Pharma
HDFC
TCS
51. 51
Earning per share (EPS):
Observation:
From above companies TCS has good EPS also HDFC has an average EPS.
-3%
29%
68%
EPS
Sun Pharma
HDFC
TCS
52. 52
Return on Equity (ROE):
Observation:
Above Diagram shows that TCS has the highest ROE fallowed by HDFC Bank.
-8%
30%
62%
ROE
Sun Pharma
HDFC
TCS
53. 53
Conclusion:
After the detail data analysis and observation it was found that TCS company from the IT sector
is a most suitable company to invest with because of the following reasons-
1 . TCS has highest rate on equity and highest share in Market Capitalization.
2. Company has good' EPS and P/E ratio.
3. Management of TCS is very efficient which is headed by famous businessmen Mr. Narayan
Murthy and Infosys has global exposure.
4. TCS is consistently paying higher rate of dividend every year and has liberal dividend policy.
5. As the Infosys belongs to pr's ate sector, there is less government interventions in the company
affairs. IT sector growing tremendously since last one decade in India.
Suggestion:
There are many important things you need to know to trade and invest successfully in the stock
market or any other market. If you should go back to the olden days, you would realize that
trading was never such a complicated and difficult-to-grasp business as it is today! Terminology
like stocks and securities, stock market day trading, currency trading and so on, did not even
exist in those days Stock market day trading can "make" you or "break" you within just one clay!
So it demands a lot of self-discipline. Returns on your investment can be unpredictable, for there
are risks involved. However, if you have a good trading system in place, you may just end up
with 50% or even 100% of profits, provided you hold stocks for a longer period of time! Also, it
is not possible to win every day. There will be days in stock market day trading when the
54. 54
situation seems to be totally out of your control. So "pitfalls" can occur. The best way to avoid
these pitfalls and learn how to minimize risks, is to spend sonic time in acquiting knowledge
about stock market day trading. The Stock Market is always right and price is the only reality in
trading. if you want to make money in any market, you need to mirror what the market is doing.
If the market is going down and you are long, the Market is right and you are wrong and vice
versa. Other things being equal, the longer you stay right with the market, the more money you
will make.
Chapter 7
Learning
55. 55
Learning:
Market observation: Day to day market observation to understand the PROS and
CONS of the market.
News effect on market: How the news affect the share market as well as a particular
company share.
Investor’s perception towards market : Investors want profits, so whenever they get
desired profit they exit immediately. And when the share price falls the investor will try
to purchase it.
