Professional Documents
Culture Documents
SUBMITTED BY:
PRIYANKA SHARMA
ENROLLMENT NO. : 4107086086
MANAGEMENT OF BUSINESS FINANCE (MBF)
2007-2009
This is to certify that the project titled “Stock Price Analysis of different sectors”
has been pursued by Priyanka, Enrollment Number 4107086086, a
student of final year Management in Business Finance (MBF 2007-
2009), under my guidance and supervision and has been submitted
in fulfillment of the requirement for the award of Management Of
Business Finance of the INDIAN INSTITUTE OF FINANCE,
GREATER NOIDA/ DELHI.
Signature……………………..
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Acknowledgement
Every nice work always begins with a systematic approach and this
project work was not an exception.
I would like to express my gratitude to the Chairman, Prof.
J.D.Agarwal, and vice Chairman, Prof. Aman Agarwal Indian Institute
of Finance, New Delhi, for encouraging me to do this project and for his
expert guidance and kind support in bringing out this project report.
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DECLARATION
This is to certify that the project on “Stock price analysis of different
I declare that the form and the content of the above mentioned project are
original and have not been submitted in part or full, for any other degree
Signature:
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PREFACE
As part of MBF programme, a student has to pursue a project approved
by Director of the Institute. I had the privilege of undertaking a project on
“Stock price analysis of different sectors” in Anagram Securities Ltd.
My project is divided into different chapters and they are given as under:
TABLE OF CONTENTS
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SR. PARTICULARS PAGE
NO. NO.
1 Executive Summary 7-9
4 Chapter 1 15-22
• Introduction of the company
Chapter 2 23-25
5 • Review of literature
6 Chapter 3 26-45
• Research An Introduction
Technical Analysis
Fundamental Analysis
7 Chapter 4 46-65
• Analysis of Current Economic Statistics
8 Chapter 5 66-151
• Analysis of Different Indian sectors and its
leading companies
IT
Banking
Real Estate
•
9 Chapter 6 152-154
• Conclusion
10 • Annexure 155-165
• Bibliography 167-190
EXECUTIVE SUMMARY
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The Indian economy remained on a high growth trajectory with renewed vigour and
greater participation from various sectors of the economy. The dynamism is expected
to gather further momentum with policy initiatives, thrust on building infrastructure,
emphasis on rural and agricultural reforms that would further stimulate demand,
growth and employment.
It seems that corporate India’s growth is likely to remain robust, given the massive
capital expenditure plans of Indian companies. 14 key manufacturing sectors reported
26.5% increase in capital work-in-progress on a y-o-y basis, thus indicating strong
business outlook and confidence.
I have introduced a new section in this year’s edition, viz., Insights. Some major
findings contained therein are as follows:
It is the PSU companies that rule the roost in terms of market capitalisation. The 54
PSU companies featured in the Top 500 list command a high share of 25.2% in the
total market capitalisation of the Top 500 Companies.
The report describes various aspects of the Stocks and focus on the various
opportunities and threats that have emerged as a result of change in the regulatory
environment. The objective of the project is to find out the risk and return
perspective of the stocks of different sectors.
In doing so I have used various selection techniques. For the purpose of selecting the
company’s products we have used the main selection analysis is Technical analysis
and fundamental analysis for ICICI Bank, Educomp Solutions and Unitech. The
intention behind such an analysis is that to analyze the competitive advantage of the
company by knowing the resistance and support level for the company’s which is
particularly helpful in identifying areas of development. I have conducted a detailed
study of various real economy snapshots so as to consider the growth opportunities of
the economy as a whole.
Then I have done the fundamental analysis to predict the stocks behaviour in future
moreover the technical analysis for stocks return for the above mentioned stocks, the
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Also I have done the Financial Strength Analysis of the company’s because to know
how it is efficient in financial way .
In this section I have done the full study of the ICICI, Educomp Solutions and
Unitech.
I have also done swot analysis for these three companies with strengths, weakness,
opportunity and threats of each of the company’s. The swot analysis would also
provide an overview to an investor regarding the future certainity and uncertainity.
At last I have done a analysis of these stocks and had predicted the stock prices for
future and the support as well as resistance level so that it can be taken up by the
investors to decide the time and date for their investment to have greater returns at
their end.
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• To track the share prices of the companies.
• To study the share price movements.
• To analyze the balance sheet and income statement in order to know the
position of the companies.
• To do the fundamental analysis of the companies taken for comparison in
order to know the financial position of the companies.
• To do the technical analysis.
• To do the swot analysis.
In this study I had to present an introduction to the Indian economy and study of
different Indian sectors Data for companies were collected and analyzed. A
Comparison of stock market index and stock prices of these companies was done and
it was clarified how much change is there with a change is Sensex. The study includes
a SWOT analysis of different companies, which points out the strength, weakness,
opportunity and threats, with a focus on the Indian market.
Need of the study was to get an incite into the different sectors and future market
prospects. This study was required because when it comes to business generation and
growth in this highly competitive world, each of such companies need to understand
the market they want to enter, the competitors, know the market potential and future
growth prospects. It becomes more complex when it comes to dealing with someone’s
hard earned money. One needs to generate trust and give better services as compared
to their competitors. This study will be of importance for Anagram as they will come
to know about the different sector, how it functions, and trends in the sector etc. Also
it is very important to know the liquidity and returns of the market one is planning to
enter. So a research was done to know the volumes they generate, the type of client
they have, the type projects they have, the type of segment they need to enter or come
out, the growth that they require for there order book so that they sustain in this
market scenario, their strategy to trade, liquidity and investments made by them. This
will provide an insight to formulate business strategies for better growth.
Another study to collect a database of the prospective clients in not only nationally
but also in global was conducted. It includes the type of project they are getting and
bid which they giving at time of tender issue by government or other corporate. On
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the basis of this analysis, a feasibility report has been prepared to make Anagram
Securities aware of the highly active unorganized and organized sector present in the
market. This database will help them to make a good research report.
The financial statements of the companies were studied to analyze their investments
and returns. This also gave an idea about the returns on investments from this market.
Hence in this project report I have tried to cover all the possible dimensions related to
the study of construction sector and its returns, liquidity and future growth prospects
in this market. Suggestions are also given in the end as to how Anagram Securities
can be benefit from these analysis for there research report.
METHODOLOGY
An Introduction
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Research in common parlance refers to a search for knowledge. One can also define
research as a scientific and systematic search for pertinent information on a specific
topic. Some people consider research as a movement, a movement from the known to
the unknown. It is actually a voyage of discovery. We all possess the vital instinct of
inquisitiveness for things. When the unknown confronts us, we wonder and our
inquisitiveness make us probe and attain full understanding of the unknown. This
inquisitiveness is the mother of all knowledge and the method, which a person
employs for obtaining this knowledge of whatever the unknown, can be termed as
research.
Research is an academic activity and as such the term should be used in a technical
sense. Research is an original contribution to the existing stock of knowledge made
for its advancement. It is the pursuit of truth with the help of study, observation,
comparison, and experiment. In short, the search for knowledge through objective and
systematic method of finding solutions to a problem is research.
Significance of research
Research Methodology
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The objective of this research project was to provide Anagram Securities with
analysis of different sectors with a detailed feasibility report in respect to order growth
and trend nationally and internationally.
The section on parameters that affect the different sector required secondary data
collection and then use of valuation ratio for the estimating the revenue which they
can generate in future like steel prices to sales ratio, cement prices to sales ratio along
with independent variables like inflation, interest rates etc.
One of the section is to establish ratio analysis and order book analysis, for which data
relating to the companies traded at sensex, nse etc was collected and spot and risk
factor has been associated. Price of raw material and sales trend were also established.
Beta factor of each company was studied.
Seasonal variations in order book for each of company was calculated from the
secondary data collected and analysis has been done as to how much are the
seasonality in each of these stocks
Limitations
• The biggest problem that I faced during this research study was that of data
collection.
• Calculation of Valuation ratios was another problem
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• In my research it was difficult to get persons at company to give out information
regarding their order of the project and value of uncompleted project.
• Year ending period and my survey period were same, creating a problem, as
people were scared to give required data. They said they would have to consult
their C.A regarding it.
• During the working days my sir has to submit daily research report so during the
market time he was not able to attention to me so I have to wait when I have any
query regarding the report.
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CHAPTER 1
COMPANY
PROFILE
COMPANY’S PROFILE
About company
Anagram Stock Broking (Anagram) is amongst the leading retail broking houses in
India. It is engaged in offering comprehensive personal finance solutions since 1994.
The company is a part of the of the Rs 20 bn Lalbhai Group. The firm has its roots in
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Western India especially Gujarat where it is the biggest player. But it has expanded
considerably. Anagram has 150+ branches and 110 franchises.
Anagram group consist of three sister firms Anagram securities, Anagram Stock
Broking, and Anagram comtrade. Everyone offer different services to their clients.
The main benefit of being anagram client is that you get the many things under one
roof. Following diagram clarify it more.
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• Vinod K Sharma head of research at Anagram is a well known and one of the
most competent technical analyst in the whole industry.
Areas of Expertise
Anagram offers real time trading opportunities on the BSE as well as the NSE. It also
offers depository and online services to clients for account accessing and information
through its online portal catering to the needs of mobile trader as well as the net savvy
investor. Anagram offers state-of –the–art online trading through its website
(www.anagram.co.in). Regular updates during trading hours, and access to
information, analysis and research, and a range of monitoring tools is available. The
company has steadily building up a comprehensive portfolio of products and services
apart from conventional broking. High speed anywhere trading through the net, online
depository services, commodities trading and retail debt products are increasingly
areas of special emphasis for the company.
Research
Anagram is a research driven organization. Daily Call is its morning newsletter that
takes a trading call on the market and gives a ringside view of the overnight national
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and international events. Customers get real time feeds on news, comments and
recommendations through instant messaging that are of utmost essence to the serious
trader. The Weekly Watch delivered to all the clients every Saturday evening is the
most comprehensive reports of its kind. The report summons developments over the
past week, major economic talking points, summary on derivatives markets, technical
outlook and trading ideas for the forthcoming week and fundamental investments with
an exhaustive research report for a medium to long term horizon. On the commodities
side, it releases daily and weekly reports providing outlook on international agri-
commodities.
Mutual Funds
Anagram provides a host of services for customers investing in mutual funds. It offers
wide range of services like, rankings of different mutual fund schemes, list of new
schemes issued in the market, interviews with fund managers, InstaNAV – a quick
search based application that enables customers to get the related information about
the desired scheme, Primer – a brief description about mutual funds, RBI procedural
guidelines and a Risk Profiler – which helps the customers in ascertaining one’s own
profile, thus minimizing risk.
Advisory Services
Apart from broking business, Anagram is also engaged in offering advisory services
of investments into mutual funds, primary market, life insurance and other small
saving products. The distribution services add up to their broking business and are
serviced by experts at each location. The business is supported by an efficient
research and back office team. Anagram’s set of diligent advisors helps its customers
plan and get more out of one’s money. The schemes include, fixed income, bank fixed
deposits, company fixed deposits, small savings schemes, tax saving schemes and
NRI deposits. Anagram also provides tax planning services – where a list of tax
saving schemes and a forum for Q&A where the queries are answered by the tax
advisors; and an NRI advisory body, where it provides information for NRIs in
helping them makes judicious investment decisions.
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Loan Advisory
Anagram also provides advisory services on the loan schemes of certain banks to its
customers. The schemes include, home loans, adhoc loans, professional loans,
educational loans, consumer loans and auto loans. Its advisory services are classified
into four categories namely; Primers – giving an overview about all schemes that are
available, Calculators – where it helps the customers with quick calculators, Jargon
Buster – a translator and Digital Advisors – which help in making decisions easy. It
has entered into partnership with many leading banks in providing this facility.
Performance
The Company registered strong growth during the first 10 months of 2007. The
company added 26,460 domestic customer accounts in 2007 as compared to 25,295 in
2006. Number of terminals, sub brokers and employees almost doubled during this
period.
Growth Areas
Anagram has diversified its business to other areas such as portfolio management
services and is looking forward at opening overseas branches. It plans to introduce
company fixed deposits and merchant banking to its current offerings. It is also
aiming at increasing their institutional client base, acquiring new business/brokerage
firms and also entering into joint venture operations in the near future.
Membership
MEMBERSHIP
Cash Market : NSE, BSE
Derivatives : NSE, BSE
Debt Market : BSE
Commodities : NCDEX, MCX
Products offered
Currently Anagram Securities and Stockbroking is offering following product bouquet
to people who wish to deal in stock market
Offline
Demat : Rs. 600
Rs 100 : Stamp duty
Rs. 200 : Advance Delivery
Rs. 300 : AMC
Online
Online trading account : Rs. 750
Online trading account
Online Software Moneypore Express
Online package : Rs. 599 (+ Rs 5000 margin)
Demat
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Online trading account
Online Software Moneypore Express
SWOT Analysis
Strength
• Highly skilled and experienced staff.
• Excellent infrastructure
• Branches all over India
• Strong research department, headed by V K Sharma
• Various investment services under one roof
Weakness
• In adequate center within the city, vis-à-vis its major competitors
• No mass marketing programme
Opportunity
• Growing investment in capital market from retail investors
• Development of online trading as the speed of communication has increased
• Tapping young investors and making them their loyal client
• Initiate awareness about stock market and initiate classes for people interested
to trade but are anxious because of their lack of knowledge.
Threat
• Bigger players like Reliance entering market
• Reducing brand loyalty among clients
• Security threat in online trading
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CHAPTER 2
LITERATURE REVIEW
Similar work that is related to Equity Research and Stock Analysis has been
undertaken by several authors. Some of the thoughts I am briefing out here :
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considered is extended. Technical analysis is considered slightly more useful in
forecasting trends than fundamental analysis, but significantly more useful in
predicting turning points. Interest rate-related news is found to be a relatively
important fundamental factor in exchange rate forecasting, while moving average
and/or other trend-following systems are the most useful technical technique.
(Yu-Hon Lui and David Mole)
In this another study the author documents the behaviour of earnings, abnormal stock
returns, analysts' earnings forecasts, and accounting accruals following years in which
companies report negative annual earnings. Changes in accounting accruals (earnings
minus operating cash flows) frequently are used as proxies for managerial
manipulation of earnings numbers. Our evidence indicates that earnings typically
increase sharply in the year following a loss. The earnings increases are due to
improved operating cash flows, not to accounting “window dressing.” However,
financial analysts expect even better earnings performance than the rebounding firms
are able to provide. Investors also appear not to understand the post-loss behaviour of
annual earnings. Therefore, the market commonly is disappointed by the earnings
increases, and the result, on average, is negative excess stock returns. The excess
returns are correlated with analysts' earnings forecast errors, which proxy for the
market's failure to understand post-loss earnings behaviour.
(Michael Ettredge Richard Toolson Steve Hall Chongkil Na, Oct 2002)
The paper seeks to estimate and analyze the Value Added Intellectual Coefficient
(VAIC) for measuring the value-based performance of the Indian banking sector for a
period of five years from 2000 to 2004. Design/methodology/approach - Annual
reports, especially the profit/loss account and balance-sheet of the banks concerned
for the relevant years, were used to obtain the data. A review is conducted of the
international literature on intellectual capital with specific reference to literature that
reviews measurement techniques and tools, and the VAIC method is applied in order
to analyze the data of Indian banks for the five-year period. The intellectual or human
capital (HC) and physical capital (CA) of the Indian banking sector is analysed and
their impact on the banks' value-based performance is discussed. Findings - The study
confirms the existence of vast differences in the performance of Indian banks in
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different segments, and there is also an improvement in the overall performance over
the study period. There is an evident bias in favour of the performance of foreign
banks compared with domestic banks. Research limitations/implications - All 98
scheduled commercial banks are studied as per the information provided by the
Reserve Bank of India (RBI)/India's Apex bank. Regional rural banks (RRBs), a
segment of the indian banking sector, are not dealt with in the study since their
number is large (more than 200), but they contribute only 3 percent of the market of
Indian banks. This paper is a landmark in Indian banking history as it approaches
performance measurement with a new dimension. Practical implications - The paper
has strong theoretical foundations, which have a proven record and applications. The
methodology adopted has been research tested. Domestic banks in India are provided
with a new dimension to understand and evaluate their performance and benchmark it
with global standards. The paper also has policy implications, as it reflects the lop-
sided growth of a few sections in the Indian banking segment. Originality/value - The
paper represents a pioneering and seminal attempt to understand the implications of
the business performance of the Indian banking sector from an intellectual resource
perspective.
CHAPTER 3
RESEARCH AN
INTRODUCTION
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RESEARCH an Introduction
Research in common parlance refers to a search for knowledge. One can also define
research as a scientific and systematic search for pertinent information on a specific
topic. Some people consider research as a movement, a movement from the known to
the unknown. It is actually a voyage of discovery. We all possess the vital instinct of
inquisitiveness for things. When the unknown confronts us, we wonder and our
inquisitiveness make us probe and attain full understanding of the unknown. This
inquisitiveness is the mother of all knowledge and the method, which a person
employs for obtaining this knowledge of whatever the unknown, can be termed as
research.
Research is an academic activity and as such the term should be used in a technical
sense. Research is an original contribution to the existing stock of knowledge made
for its advancement. It is the pursuit of truth with the help of study, observation,
comparison, and experiment. In short, the search for knowledge through objective and
systematic method of finding solutions to a problem is research.
Significance of research
It is very important to understand the importance of research to perform it better and
also to appreciate a research work. So I thought of stating the significance of research.
“All progress is born of inquiry. Doubt is better than overconfidence, for it leads to
inquiry and inquiry leads to invention” is a famous Hudson Maxim in context of
which the significance of research can be well understood. Increased amount of
research makes progress possible. Research inculcates scientific and inductive
thinking and it promotes the development of logical habits of thinking and
organization.
The role of research in several fields of applied economics and finance, whether
related to business or to the economy as a whole, has greatly increased in modern
times. The increasingly complex nature of business and government has focused
attention on the use of research in solving operational problems. Research, as an aid to
policy formation, has gained added importance, both from the government and the
business houses.
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TECHNICAL ANALYSIS
1. STOCK CHARTS
A stock chart is a simple two-axis (X-Y) plotted graph of price and time. Each
individual equity, market and index listed on a public exchange has a chart that
illustrates this movement of price over time. Individual data plots for charts can be
made using the CLOSING price for each day. The plots are connected together in a
single line, creating the graph. Also, a combination of the OPENING,
CLOSING, HIGH and/or LOW prices for that market session can be used for the data
plots. This second type of data is called a PRICE BAR. Individual price bars are then
overlaid onto the graph, creating a dense visual display of stock movement.
Stock charts can be drawn in two different ways. An ARITHMETIC chart has
equal vertical distances between each unit of price. A LOGARITHMIC chart is
a percentage growth chart.
2. TRENDS
The stock chart is used to identify the current trend. A trend reflects the
average rate of change in a stock's price over time. Trends exist in all time frames
and all markets. Trends can be classified in three ways: UP, DOWN or
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RANGEBOUND. In an uptrend, a stock rallies often with intermediate periods of
consolidation or movement against the trend. In doing so, it draws a series of
higher highs and higher lows on the stock chart. In an uptrend, there will be a
POSITIVE rate of price change over time. In a downtrend, a stock declines
often with intermediate periods of consolidation or movement against the trend. In
doing so, it draws a series of lower highs and lower lows on the stock chart.
In a downtrend, there will be a NEGATIVE rate of price change over time.
Range bound price swings back and forth for long periods between easily seen upper
and lower limits. There is no apparent direction to the price movement on the stock
chart and there will be LITTLE or NO rate of price change. Trends tend to persist over
time. A stock in an uptrend will continue to rise until some change in value or a
condition occurs. Declining stocks will continue to fall until some change in
value or conditions occur. Chart readers try to locate TOPS and BOTTOMS,
which are those points where a rally or a decline ends. Taking a position near
a top or a bottom can be very profitable. Trends can be
measured using TRENDLINES. Very often a straight line can be drawn UNDER
three or more pullbacks from rallies or OVER pullbacks from declines. When price
bars then return to that trend line, they tend to find SUPPORT or RESISTANCE
and bounce off the line in the opposite direction.
3. VOLUME
Volume measures the participation of the crowd. Stock charts display
volume through individual HISTOGRAMS below the price pane.
Often these will show green bars for up days and red bars for down days. Investors
and traders can measure buying and selling interest by watching how many up
or down days in a row occur and how their volume compares with days in
which price moves in the opposite direction.
Stocks that are bought with greater interest than sold are said to be under
ACCUMULATION. Stocks that are sold with great interest than bought are
said to be under DISTRIBUTION. Accumulation and distribution often LEAD price
movement. In other words, stocks under accumulation often will rise some time after
the buying begins. Alternatively, stocks under distribution will often fall some time
after selling begins. It takes volume for a stock to rise but it can fall of its own weight.
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Rallies require the enthusiastic participation of the crowd.
When a rally runs out of new participants, a stock can easily fall. Investors and
traders use indicators such as ON BALANCE VOLUME to see whether
participation is lagging (behind) or leading (ahead) the price action. Stocks trade
daily with an average volume that determines their LIQUIDITY. Liquid stocks
are very easy for traders to buy and sell. Liquid stocks require very high
SPREADS (transaction costs) to buy or sell and often cannot be eliminated quickly
from a portfolio. Stock chart analysis does not work well on illiquid stocks.
How can one organize the endless stream of stock chart data into a logical
format? Charts allow investors and traders to look at past and present price
action in order to make reasonable predictions and wise choices. It is a highly visual
medium. This one fact separates it from the colder world of value-based
analysis. The stock chart activates both left-brain and right-brain functions of
logic and creativity. So it's no surprise that over the last century two forms of
analysis have developed that focus along these lines of critical examination.
These patterns have been categorized over the years as having a bullish or
bearish bias. Some well-known ones include HEAD and SHOULDERS,
TRIANGLES, RECTANGLES, DOUBLE TOPS, DOUBLE BOTTOMS and
FLAGS. Also, chart landscape features such as GAPS and TRENDLINES are said to
have great significance on the future course of price action. Indicator analysis uses
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math calculations to measure the relationship of current price to past price
action. Almost all indicators can be categorized as TREND-FOLLOWING or
OSCILLATORS. Popular trend-following indicators include MOVING
AVERAGES, ON BALANCE VOLUME and MACD. Common oscillators
include STOCHASTICS, RSI and RATE OF CHANGE. Trend-following
indicators react much more slowly than oscillators. They look deeply into the rear
view mirror to locate the future. Oscillators react very quickly to short-term changes
in price, flipping back and forth between OVERBOUGHT and OVERSOLD
levels.
Both patterns and indicators measure market psychology. The core of investors
and traders that make up the market each day tend to act with a herd mentality as price
rises and falls. This "crowd" tends to develop known characteristics that
repeat themselves over and over again. Chart interpretation using these two important
analysis tools uncovers growing stress within the crowd that should eventually
translate into price change.
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or sell. When a level is penetrated but does not attract a crowd of buyers or
sellers, it often falls back below the old support or resistance. This failure is
known as a FALSE BREAKOUT. Support and resistance come in all varieties
and strengths.
They most often manifest as horizontal price levels. But trend lines at various angles
represent support and resistance as well. The length of time that a support or
resistance level exists determines the strength or weakness of that level. The strength
or weakness determines how much buying or selling interest will be required to
break the level. Also, the greater volume traded at any level, the stronger that level
will be. Support and resistance exist in all time frames and all markets.
Levels in longer tie frames are stronger than those in shorter time frames. The ideas
of Charles Dow, the first editor of the Wall Street Journal, form the basis of technical
analysis today. The behavior patterns that he observed apply to markets throughout
the world.
FUNDAMENTAL ANALYSIS
Fundamental analysis is the process of looking at a business at the basic or
fundamental financial level. This type of analysis examines key ratios of a business to
determine its financial health and gives you an idea of the value its stock.
Many investors use fundamental analysis alone or in combination with other tools to
evaluate stocks for investment purposes. The goal is to determine the current worth
and, more importantly, how the market values the stock.
Earnings
It’s all about earnings. When you come to the bottom line, that’s what investors want
to know. How much money is the company making and how much is it going to make
in the future.
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Earnings are profits. It may be complicated to calculate, but that’s what buying a
company is about. Increasing earnings generally leads to a higher stock price and, in
some cases, a regular dividend.
When earnings fall short, the market may hammer the stock. Every quarter,
companies report earnings. Analysts follow major companies closely and if they fall
short of projected earnings, sound the alarm. For more information on earnings, see
my article: It’s the Earnings.
While earnings are important, by themselves they don’t tell you anything about how
the market values the stock. To begin building a picture of how the stock is valued
you need to use some fundamental analysis tools. These ratios are easy to calculate,
but you can
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Ratio analysis
• We can determine the ability of the firm to meet its current obligations
• We determine the overall operating efficiency and performances of the firm
• Useless in analysis of financial statements
• Useless in locating the week spots of the business
• Useless in comparison of performance
• The extent to which the firm has used its long –term solvency by borrowing
• The efficiency with which the firm is utilizing its assets in generating sales
• Useful in simplifying accounting figures
• Useful In forecasting purpose
• Weakness in financial structure on account of incorrect policies in the
present are revealed through accounting ratios
• The comparisons can be made on the basis of ratios
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• Ignore qualitative policies
• No single standard ratio for comparison
• Limited utility if based on single set of figures.
Financial ratios provide the basic for answering some important questions concerning
financial (well being) of the firm.
How liquid is the firm? Liquidity refers to the firms’ ability to meet maturing
obligating and to convert assets into cash. This factor is very important to the firms’
creditors.
How does the firms’ management finance its investment? These decisions
have a direct impact upon the returns provided to the common stockholders.
STANDARDS OF COMPARISON
The ratio analysis involves comparison for a useful interpretation of the financial
statements. Standards of comparison may consist of:
• PAST RATIOS: i.e. ratios calculated from the past financial
statements of the same firm:
• PROJECTED RATIOS: i.e. ratios developed using the projected, or
pro forma, financial statements of the same firm;
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• COMPETITORS’ RATIO: i.e. ratios of some selected firms,
especially most progressive and successful competitor, at the same
point in time, and
• INDUSTRY RATIOS: i.e. ratios of the industries to which the firms
belongs
CLASSIFICATION OF RATIOS
Ratios can be classified from various points of view .In reality; the classification
depends on the objectives and available data. Ratio may be based on figures in the
balance sheet .in the profit & loss account in both
Thus they may be worked out on the basis of figures contained in the financial
statements.
In the view of the requirement of the various users (e.g. short term creditors, long
term creditors, management, investors etc….) of the ratio may classify the ratio as
follows-
The above classifications however are rather crude and unsuitable because analysis of
position statement and income statement cannot be earned out in isolation. They have
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to be studied together to determine the profitability and the financial position of the
business anyone including the management which is interested in acquiring
knowledge about the business is concerned with these two aspects ratios are tools for
establishing true profitability and financial position of a company these ratios may be
classified as:
Liquidity ratio
Solvency ratio
Turnover ratio
Profitability ratio
LIQUIDITY RATIO
The liquidity ratio measures the ability of a firm / company to meet the short term
obligations and reflect the short term financial strength/solvency of a firm/company.
The importance of adequate liquidity in the sense of the ability of the company to
meet current liabilities/ obligations when they become due for payment can hardly be
over emphasized. Liquidity is a pre –requisite for the very survival of the company
34
It represents excess of the current assets over current liabilities. The term current
assets which in normal course of the business get converted into cash over a short
period usually not exceeding one year current liabilities are those liabilities which are
required to be paid in short term period, normally a year.
Although net working capital is not a ratio it is frequently employed as measures of
company’s liquidity positions.
A company should have sufficient revenue in meet the claims of creditors and
meeting the day to day business needs.
b) CURRENT RATIO:
It is the ratio of current assets to the total current liabilities. It is calculated by dividing
current assets by the current liabilities
The current measures the short-term solvency. i.e. the ability short term obligations. It
indicates the rupee of current assets available for each rupee of current liability. The
higher the current ratio the larger the amount of rupees available per rupee of current
liability the more the company’s ability to meet current obligations and the greater the
safety of funds of short term creditors.
35
d) SUPER QUICK RATIO
It is calculated by dividing the super current assets by the current liabilities. These are
the cash and marketable securities.
e) CASH RATIO:
Company’s most liquid assets are the holding of cash.
Being most liquid an analyst may examine cash ratio and its equivalent to current
liabilities.
TOTAL LIABILITIES
CAPITAL EMPLOYED
36
the company overall, its management, their liquidity & future prospect that’s why the
higher it is better it is
ACTIVITY RATIO
Ratios concerned with measuring the efficiency in assets management. The efficiency
in assets are used would be reflected in the speed and rapidity with which assets are
converted into sales. Turnover is the primary mode for measuring the extent of
efficient employment of assets by relating the assets to sales. An activity ratio may be
defined as a test of relationship between (more appropriately with cost of sales) and
the various assets of the firm
Depending upon the various types of assets, there are various types of activity ratio
a) Inventory turnover ratio.
b) Debtor’s turnover ratio.
c) Net assets turnover ratio.
d) Average collection period.
e) Total assets turnover ratio.
f) Creditor’s turnover ratio.
g) Creditor’s turnover ratio
Debt collection period measures the quality of debtors since it indicate the speed of
their collection.
Net assets include net fixed assets and net current assets i.e., current assets minus
current liabilities .since net capital employed, net assets turn over may also called
capital turnover/capital employed turnover.
38
Profitability is a measure of efficiency and the search for it provide an incentive to
achieve efficiency. it also indicate public acceptance of the product and shows that the
firm can produce competitively. Profitability ratios can be determined on the basis of
sales or investment.
c) RETURN ON ASSETS
Here the profitability ratio is measured in terms of relationship between net profit and
assets. The different variant of the return on assets are
g) RETURN ON EQUITY
It one of the most important ratios because it shows what is the profitability of owners
investment and this ratio also indicates how well the firm
40
Has used the resources of the owner. Excellent return is most desirable objective of
the business.
41
Average payment period:- The purpose of computing payment period is to indicate
the speed with which the payment for credit purchases are made to creditor.
The proper employment of capital has been a part of good management working
capital one as should ascertain whether the firm enjoying actually the credit promises
by the suppliers. If suppliers allow credit period of one month but if, as per
calculation, a firm is taking two months credit periods, it may mean either that the
facilities given by the creditors are not being fully utilized or that the firm is
unnecessarily damaging its credits in the market. This ratio can be calculated as
follows.
42
CHAPTER 4
ANALYSIS
OF
CURRENT ECONOMIC
STATISTICS
WORLD ECONOMY
43
“United Nations Department of Economic and Social affairs (DESA) said the world
economy is expected to shrink by 2.6% in 2009 according to the pessimistic scenario
of the forecast presented in January.” Source: The Economic Times DT 29.05.09
Improving vital signs across the globe from US GDP to Japanese factory output and
British houses prices hopes that the world economy was responding after months in
intensive care.
USA
The US economy shrank 5.7% from the first quarter of 2008, less than the previous
estimate of 6.1% and slightly worse than market expectations for a 5.5% fall.
JAPAN
The factory output rose to 5.2% in April, the biggest jump in more than half a century
and manufactures forecast further gains.
SOUTH KOREA
GERMAN
Retail sales showed a 0.5% month rise in April 09 while private consumption for the
first quarter raised a similar amount despite a 3.8% contraction in GDP.
BRITAIN
The house prices registered a surprise rise in May-09 the second time in three months.
Indian economy has been witnessing a phenomenal growth since the last decade. The
country is still holding its ground in the midst of the current global financial crisis.
44
Quarterly gross domestic product (GDP) at factor cost at constant (1999-2000) prices
for Q3 of 2008-09 is estimated at US$ 171.24 billion, as against US$ 162.57 billion in
Q3 of 2007-08, showing a growth rate of 5.3 per cent over the corresponding quarter
of previous year.
Despite the global slowdown, the Indian economy is estimated to have grown at close
to 6.7 per cent in 2008-09. The Confederation of Indian Industry (CII) pegs the GDP
growth at 6.1 per cent in 2009-10. This scenario factors in sectoral growth rates of
2.8-3 per cent, 5-5.5 per cent and 7.5-8 per cent, respectively, for agriculture, industry
and services.
Meanwhile, foreign institutional investors (FIIs) turned net buyers in the Indian
market in 2009. Direct investment inflows also remain strong, prompting official
expectations that foreign direct investment (FDI) inflows in 2009 would better the
realised inflows of US$ 33 billion in 2008 and touch US$ 40 billion.
According to the Asian Development Bank's (ADB) 'Asia Capital Markets Monitor'
report, the Indian equity market has emerged as the third biggest after China and
Hong Kong in the emerging Asian region, with a market capitalisation of nearly US$
600 billion.
FISCAL POLICY
• The union budget 2008-09 was presented with fiscal deficit estimated at
2.5% of GDP and revenue deficit at 1% of GDP.
45
• The gross market borrowings for the current fiscal year 2008-09 pegged at
Rs 3,06,000 crore, the Government has tripled its open market borrowing
from the original Rs 1,33,000 crore thus pushing up the fiscal deficit from
2.5% to 6%.
• The movement in bond prices shows that the market is not comfortable
with the Govt borrowing.
• The change in bond prices both short and long term is indicative of the
cost of funds in the banking system.
46
The fiscal policy for the year 2009-10 will continue to be guided by the objectives of
keeping the economy on the higher growth trajectory amidst global slowdown by
creating demand through increased public expenditure in identical sectors.
The medium term objective will be to revert to the path of fiscal consolidation at the
earliest, with improvement in the economic situation.
“India Inc can now forget about cheap credit because the cash strapped the credit
market by borrowing heavily from the banking system.”
Source: India Today DT 02.03.09 on Interim Budget.
The doubling of fiscal deficit may place pressure on interest rates unless
accommodating policy measures are taken. Even the fall in interest rates however,
will be muted due to the government massive borrowing.
Source: India Today DT 02.03.09 by Falguni Nayer, Managing Director Kotak
Investment Banking.
TAX
The net direct tax collection falls short of Rs 6,000 crore than the government revised
estimate of Rs 3.45 lakh crore for 2008-09.But the net collection grew by 8.33% over
the corresponding period previous year.
INCOME TAX
The personal income tax collection for the fiscal year ended march 31, 2009 exceeded
the revised target of Rs 1.23 lakh by more Rs 1.000 crore.
CORPORATE TAX
The corporate tax was reduced to Rs 2.13 lakh crore against the revised estimates of
Rs 2.22 lakh.
FRINGE BENEFIT TAX (FBT)
The FBT was increased to Rs 7116 crore showed a 12.38% growth over the previous
year.
SECURITIES TRANSACTION TAX (STT)
The STT was slipped by 36.95% to Rs 5408 crore.
Source: The Economic Times DT 22.05.09.
GOODS AND SERVICE TAX (GST)
47
The UPA government is planning to introduce the goods and services tax (GST) form
01.04.2010 by which the consumer will pay a single rate of tax on goods and services
sold across India.
Source: The Economic Times DT 25.05.09.
CENTRAL EXCISE
General Cenvat rate on all goods reduced from 16% to 14% to give a stimulus to the
manufacturing sector.
Excise duty reduced on small cars, two wheelers and three wheelers from 16% to
12%.
CENTRAL SALES TAX (CST)
Central sales tax rate being reduced from 3% to 2% from Apr 1, 2008.
MONATARY POLICY
The changes in the domestic and global economy, impacting the price level and
financial stability, pose serious challenges in the conduct of monetary policy. The
major thrust of the monetary policy has been to facilitate the growth of the economy
in a non- inflationary environment.
CURRENT ACCOUNT
The current account balance is deficit by 22332 cr in absolute value in the period
(Apr–Dec) 2008-09 as compared to a deficit of 17034 cr in the last year from (Apr-
Dec) 2007-08.
IMPORT
The import is increased by 225809 in US $ million in absolute value in the period
(Apr–Dec) 2008-09 as compared to 171718 in US $ million in the last year from
(Apr-Dec) 2007-08.
49
EXPORT
At a time when the world is going through a turbulent time, India's export sector has
shown a growth rate of 20.3 per cent in the first 11 months of 2008-09. India's exports
increased by 17.5 per cent during April–December 2008 as against 21.9 per cent in
April–December 2007.
Exports from special economic zones (SEZs) rose 33 per cent during the year to end-
March 2009. Exports from such tax-free manufacturing hubs totalled US$ 18.16
billion last year up from US$ 13.60 billion a year before.
The competitive advantage that India enjoys across a range of sectors has led to rapid
increase in India's exports.
• India's gems and jewellery exports posted a modest growth of 1.45 per cent
during 2008-09 at US$ 21.1 billion.
• Iron ore exports increased 17 per cent to 12.6 million tonnes in February 2009
from 10.8 million tonnes in the same month a year ago.
• Pharmaceutical exports from the country are expected to buck the downturn
and post a 13 per cent increase in overseas sales.
• Indian spices exports for the first eleven months of the current financial year
has crossed the US$ 1 billion-mark despite the slowdown in global trade.
50
• Indian apparel exports grew at 11 per cent at US$ 972 million in January 2009,
compared with US$ 871 million in December 2008, according to the Apparel
Export Promotion Council (AEPC).
The exports of passenger cars during the first 10 month of the financial year 2008-09
grew by 63.01 per cent to 2,71,999 units, compared with 1,66,859 units in the year-
ago period, according to the Society of Indian Automobile Manufacturers (SIAM).
TRADE DEFICIT
There is a Trade deficit of 93819 in US $ million in the period (Apr–Dec) 2008-09 as
compared to a deficit of 58981 in US $ million in the last year from (Apr-Dec) 2007-
08.
51
CAPITAL ACCOUNT
The capital account is increased to 24788 cr in absolute value in the period (Apr–Dec)
2008-09 as compared to 22357 cr in the last year from (Apr-Dec) 2007-08.
52
FOREIGN DIRECT INVESTMENT (FDI)
The FDI worth $11 billion flowed into the country between Oct 08 and March 09. In
the full fiscal (FY 09) FDI was almost flat at $ 13.8 billion. Out of the $33.6 billion
FDI in the FY 09 only a third was invested in the second half while a bulk of it
entered during the first half. This is the first time since 1999 fiscal which recorded
FDI at $ 2.5 billion and FII at a negative $61 million, that FDI inflows have offset FII
outflows by such a huge margin.
India achieved a stunning 85.1 per cent increase in foreign direct investment flows in
2008; the highest increase across all countries, even as global flows declined by 14.5
per cent, as per an UNCTAD study. The study estimates that the FDI investments into
India went up from US$ 25.1 billion in 2007 to US$ 46.5 billion in 2008. India's
achievement in mobilising FDI is all the more significant because the inflows into the
developed countries have declined by 25.3 per cent in 2008.
YEAR Rs in crore
2001-02 6130
2002-03 5035
2003-04 4322
2004-05 6051
2005-06 8961
2006-07 22826
2007-08 34362
2008-09 33619
53
Source: The Economic Times DT 31.05.09
Another major policy issue in the trade sector which created a lot of heat was that of
SEZs. The SEZ Act, 2005, supported by SEZ Rules, came into effect on February 10,
2006. The main objectives of the SEZ Act are generation of additional economic
activity, promotion of exports of goods and services, promotion of investment from
domestic and foreign sources, creation of employment opportunities and development
of infrastructure facilities. Various incentives and facilities are offered to both – units
in SEZs for attracting investments into SEZs (including foreign investment) as well as
for SEZ developers. These incentives and facilities are expected to trigger a large flow
of foreign and domestic investment in SEZs, particularly in infrastructure and
productive capacity, leading to generation of additional economic activity and
creation of employment opportunities. The SEZ Rules provide for different minimum
land requirements for different classes of SEZs. Every SEZ is divided into a
processing area where alone the SEZ units are set up and a non-processing area where
the supporting infrastructure is to be created. Developers of special economic zones
(SEZ) and units inside such zones can from now on claim refunds of taxes paid on all
input services, regardless of whether the services are used inside or outside tax-free
zones.
Source: The Economic Times DT 06.03.09.
54
Developers can set up 2 or more adjacent SEZs and merge them without worrying
about the area limit of 5000 hectares.
Source: The Economic Times DT 29.05.09.
MACROECONOMIC FRAMEWORK STATEMENT
(ECONOMIC PERFORMANCE AT A GLANCE)
Sl. Item Absolute value Percentage
change
No.
April - December April – December
2007-08 2008-09 2007-08 2008-09
Real Sector
1 GDP at factor cost (Rs. thousand crore) F
a) At current prices 4320.8 QE 4989.8 AE 14.3 15.5
b) At 1999-2000 prices 3129.7 QE 3351.6 AE 9.0 7.1
2 Index of industrial production (1) 258.6 268.7 9.2 3.9
3 Wholesale price index (Base 1993-94=100)(2) 219.0 230.1 4.8 5.1
4 Consumer price index (2001=100)(3) 134.0 147 5.5 9.7
5 Money Supply (M3) (Rs. hundred crore)(4) 3892.7 4235.1 11.7 10.6
6 Imports at current prices*
a) In Rs. Crore 693445 1003947 13.0 44.8
b) In US $ million 171718 225809 27.8 31.5
7 Exports at current prices*
a) In Rs. crore 454997 585594 9.2 28.7
b) In US $ million 112737 131990 23.5 17.1
8 Trade Deficit (in US$ million)* -58981 -93819
9 Foreign currency assets
a) In Rs. crore 1050485 1194790 39.6 13.7
b) In US $ million 266553 246603 56.6 -7.5
10 Current Account Balance (In US$ mill)@ -17034 -22332
Government Finances (in Rs. crore) #
1 Revenue receipts 355,646 375,937 26.6 5.7
2 Tax revenue (Net) 295,994 309,927 27.5 4.7
3 Non-tax revenue 59,652 66,010 22.4 10.7
4 Capital receipts (5+6+7) 118,607 221,279 15.4 86.6
5 Recovery of loans 3,304 2,974 -58.5 -10
6 Other receipts 37,725 43
7 Borrowings and other liabilities 77,578 218,262 -18.2 181.3
8 Total receipts (1+4) 474,253 597,216 23.6 25.9
9 Non-Plan expenditure 337,090 426,419 23.8 26.5
10 Revenue Account 280,050 403,758 10.3 44.2
Of which:
11 Interest payments 111,764 123,735 20.7 10.7
12 Capital Account 57,040 22,661 209.8 -60.3
13 Plan expenditure 137,163 170,797 23.0 24.5
14 Revenue Account 114,806 146,009 22.3 27.2
15 Capital Account 22,357 24,788 26.9 10.9
16 Total expenditure (9+13) 474,253 597,216 23.6 25.9
17 Revenue expenditure (10+14) 394,856 549,767 13.6 39.2
18 Capital expenditure (12+15) 79,397 47,449 120.4 -40.2
19 Revenue deficit (17-1) 39,210 173,830 -41.3 343.3
20 Fiscal deficit {16-(1+5+6)} 77,578 218,262 -18.2 181.3
21 Primary deficit (20-11) -34,186 94,527 -1639.9 376.5
55
INTERNATIONAL MONEYTARY FUND (IMF)
At present India has a shareholding of 1.91% in IMF with a quota of $4158.20 million
in SDRS. India may contribute $10-11 billion to the IMF as its contributions to the
$500 billion that the global institution is raising from 20 powerful nations for lending
crisis stricken countries.
Source: The Economic Times DT 09.04.09.
PER CAPITAL INCOME
The per capital monthly income of an average Indian has for the first time crossed the
Rs 3,000 mark on current price levels. The per capital figures may look a bit less
impressive when adjusted for inflation, reached only Rs 25,494 against Rs 25,661 per
annum estimated in Feb-09. The per capita income in real terms (at 1999-2000 prices)
during 2008-09 is likely to attain a level of US$ 528 as compared to the Quick
Estimate for the year 2007-08 of US$ 500. The growth rate in per capita income is
estimated at 5.6 per cent during 2008-09, as against the previous year's estimate of 7.6
per cent.
56
2007-08 2008-09
Q1 Q2 Q3 Q4 A Q1 Q2 Q3 Q4 A
Agriculture 4.3 3.9 8.1 2.2 4.62 3.0 2.7 -0.8 2.7 1.9
Mining 0.1 3.8 4.2 4.7 3.2 4.6 3.7 4.9 1.6 3.7
Mfg 10.0 8.2 8.6 6.3 8.27 5.5 5.1 0.9 -1.4 2.5
Utilities 6.9 5.9 3.8 4.6 5.3 2.7 3.8 3.5 3.6 3.4
Construction 11.0 13.4 9.7 6.9 10.2 8.4 9.6 4.2 6.8 7.2
Transport, 13.1 10.9 11.7 13.8 12.37 13.0 12.1 5.9 6.3 9.3
Finance, Real12.6 12.4 11.9 10.3 11.8 6.9 6.4 8.3 9.5 7.7
Govt & Other 4.5 7.1 5.5 9.5 6.65 8.2 9.0 22.5 12.5 13.0
GDP @ F.C. 9.2 9.0 9.3 8.6 9.02 7.8 7.7 5.8 5.8 6.77
INVESTMENT
Both private and public savings have contributed to higher overall savings. Private
savings have risen by 6.1 percent points of GDP over the Tenth five year plan period.
SAVINGS
57
The private corporate investment improved from 10.5 percent of GDP in 2004-05 to
14.5 percent of GDP in 2006-07.
Ratio of saving and 04-05 05-06 06-07 Ave
investment to GDP plan
Gross dome saving 31.8 34.3 34.8 31.4
Public sector 2.2 2.6 3.2 1.7
private sector 29.6 31.7 31.6 29.7
House hold sector 23 24.2 23.8 23.7
Financial 10.1 11.8 11.3 11
Physical 12.9 12.5 12.5 12.7
Corporate sector 6.6 7.5 7.8 6
Investment 32.2 35.5 35.9 31.4
Public sector 6.9 7.6 7.8 6.9
private sector 23.4 25.8 27 22.9
House hold sector 12.9 12.5 12.5 12.7
Corporate sector 10.5 13.3 14.5 10.1
Saving Invest Gap -0.4 -1.2 -1.1 0
Deceleration in growth was significant for manufacturing and electricity sectors, and
somewhat moderate for the mining sector. The cumulative growth during April-
March, 2008-09 over the corresponding period of 2007-08 in the three sectors i.e.
mining, manufacturing and electricity have been 2.3%, 2.3% and 2.8% respectively,
which moved the overall growth in the General Index to 2.4%.
ANNUAL AVERAGES
UNEMPLOYMENT
The Eleventh Plan envisages rapid growth in employment opportunities while
ensuring improvement in the quality of employment. The employment generation
strategy of the Eleventh Plan is also predicated on the reduction of underemployment
and the movement of surplus labour in agriculture sector to higher wage and more
gainful employment in non-agricultural sector. Employment in manufacturing is
expected to grow at 4 per cent while construction and transport and communication
are expected to grow at 8.2 per cent and 7.6 per cent, respectively. The projected
increase in total labour force during the Eleventh Plan is 45 million. As against this,
58 million employment opportunities would be created in the Eleventh Plan. This
would be greater than the projected increase in labour force leading to a reduction in
the unemployment rate to below 5 per cent.
59
India is doing a good job at keeping unemployment rate down. The actual
unemployment rate is lower because its labor force is outgrowing its employment rate
(2.5% compared to 2.3% per annum).
INFLATION
Inflation measured in terms of the WPI, were in the range of 3.8-6.9 per cent in 2003-
04, 4.3-8.7 per cent in 2004-05, 3.3-5.7 per cent in 2005-06, 3.7-6.7 per cent in 2006-
07 and 3.1-8.0 per cent during April-March 2007-08. The current fiscal year started
with inflation at close to 8 per cent and reached double digits in the first week of June.
It rose to a high of 12.9 per cent in the first week of August and continued to be over
12 per cent in September. In October 2008 it came down to below 12 per cent and
subsequently witnessed a sharp fall into single digit in the first week of November
2008. It has continued to decline since then except for a brief upswing in mid January
2009 and as of the week ending January 31, 2009 was 4.39 per Cent.
60
CHAPTER 5
61
ANALYSIS OF
DIFFERENT INDIAN
SECTORS & ITS
LEADING COMPANIES
Information technology, and the hardware and software associated with the IT
industry, are an integral part of nearly every major global industry.
The information technology (IT) industry has become of the most robust industries in
the world. IT, more than any other industry or economic facet, has an increased
productivity, particularly in the developed world, and therefore is a key driver of
global economic growth. Economies of scale and insatiable demand from both
consumers and enterprises characterize this rapidly growing sector.
62
The Information Technology Association of America (ITAA) explains the
“information technology” as encompassing all possible aspects of information
systems based on computers.
Both software development and the hardware involved in the IT industry include
everything from computer systems, to the design, implementation, study and
development of IT and management systems.
Owing to its easy accessibility and the wide range of IT products available, the
demand for IT services has increased substantially over the years. The IT sector has
emerged as a major global source of both growth and employment.
63
A wide variety of services come under the domain of the information technology
industry. Some of these services are as follows:
• Systems architecture
• Database design and development
• Networking
• Application development
• Testing
• Documentation
• Maintenance and hosting
• Operational support
• Security services
EDUCOMP SOLUTIONS
Company description
Educomp Solutions Ltd, formerly Educomp Datamatics Limited, was
incorporated in 994 and is based in New Delhi, India. It is India's largest
market-listed educational service provider mainly focused on the K-12 space.
Educomp group serves over 19,000 schools and 9.4 million learners and
educators across the world. Company operates private schools across various
cities and also partners with various state governments.
64
It has 27 offices worldwide. In addition, the Company operates through its various
subsidiaries including authorGEN, Threebrix eServices, Learning.com, USA,
AsknLearn Pte Ltd, Singapore and via its associates such as Savvica in Canada.
65
Mathguru.com on paying customers.
• Margins for retail business improved from 41% to 71%
• Received financial closure for Rs 725cr of debt for its K-12 business.
• Debtor days for company have come down from 179 days to 145 days.
COMPANY MANAGEMENT
The Company has seventeen subsidiaries, one associate and two planned joint
ventures. The subsidiaries focus mainly on providing services and products directly to
the individual consumer as part of the Company’s Direct initiatives. In Fiscal 2008,
Direct Initiatives contributes 14.09% of the total consolidated revenues of Educomp.
SHARE DATA
Market Cap Rs.3647.25 Crs
Price Rs.1898.00
BSE Sensex 9459.34
BSE Code 532696
NSE Code INE216H01019
Face Value Rs.10
52-Week High/Low Rs.4219/1331
Index BSE 100 ,BSE Mid Cap
Group A
67
Listed on BSE/NSE 13th January 2006
Shareholding pattern(%)
Promoters 55.03%
FII's 6.97%
Public and Others 38.00%
Public and
Others
P romoters
38%
FII's
Promoters P ublic and Others
55%
FII's
7%
68
SEPT 2008 4,020.00 1-Sep-08 2,985.00 18-Sep-08
As the high/low for every month is specified here, we can determine the
difference which is highest in percentage for the particular month.
In the month of October 2008, we can see the kind of volatility present in
share price of Educomp as it is having the difference of 48.85% within high
and low in the equity report for the month.
69
AUG 2008 12-Aug-08 3,619.70 3,292.20 327.50
Margin
Average Difference between the day High and day Low in the last one year for
Educomp Solution is at Rs.230 and for last three month is Rs.120 .If on an average
we take 10-12% of this as a risk free return then it comes out anywhere between Rs.
14-16 which is margin at 0% risk.
January 2009
3,000.00
2,500.00
09
09
09
09
09
09
09
09
09
9
09
09
09
09
00
00
20
20
20
20
20
20
20
20
20
20
20
20
20
-2
-2
1-
1-
1-
1-
1-
1-
1-
1-
1-
1-
1-
1-
1-
1
1
-0
-0
-0
-0
-0
-0
-0
-0
-0
-0
-0
-0
-0
-0
-0
02
04
06
08
10
12
14
16
18
20
22
24
26
28
30
70
The stock has seen a downtrend for past few months, we have taken Share High, Low
and closing price into consideration in order to determine the difference between Day
high and day low which is significantly.
During January the Support level was 1750, and the Resistance level was 2105, and
each time it has broken the resistance or support we have reported a move of 30-40
point downside or upside.
Fe bruary 2009
2,500.00
2,000.00
1,500.00
High
1,000.00 Low
Close
500.00
0.00
09
09
09
09
09
09
09
09
09
09
09
09
09
0
20
20
20
20
20
20
20
20
20
20
20
20
-2
2-
2-
2-
2-
2-
2-
2-
2-
2-
2-
2-
2-
02
-0
-0
-0
-0
-0
-0
-0
-0
-0
-0
-0
-0
-
02
06
10
14
18
22
26
04
08
12
16
20
24
For the month of February, the stock declined due to some of the rumours about the
company accounting fudging case, but was resolved very well by the Management . It
has been able to break the previous month support level.
So it has attained new its 52 week low price level. Support level was 1500 points and
the Resistance level was 2050 points. Even the market sentiments were not going
with the stock.
71
March 2009
2,500.00
2,000.00
Resistance Level
1,500.00
High
1,000.00 Low
Close
500.00
0.00
09
09
09
09
09
09
09
09
09
09
20
20
20
20
20
20
20
20
20
20
3-
3-
3-
3-
3-
3-
3-
3-
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-0
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02
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14
16
18
20
08
10
12
March month remained positive for the market as a result this script continues to
achieve new high in this time frame. The gap between Low and High was
significantly low and closing price was closer to the highest price on all the trading
day. Support level was 1680 points and resistant level was 1900 points.
Looking at this data we have come to the conclusion that Educomp Solution followed
market trend and investors were optimistic and Profit booking was reasonably low.
2,5
00.00
2,000.00
1
,5
00.00
1
,000.00
5
00.00
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1
/5/2009 1
/6/2009 1
/7
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/8/2009 1
/9/2009
WeeklyChart12Jan-16Jan
2,100.00
2,050.00
2,000.00
1,950.00
1,900.00
9
9
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0
0
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D
ate
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1
• HIGH 2088 15 -JAN-2009
• LOW 1535 16-JAN-2009
• Fall of Rs.553 with in a week
• Analyst recommendation: Accounts fudging allegation has made the share
price to move in the negative way.
• Resistance Level: Rs.2050
• Support Level: Rs.1500
Share Price (Rs.)
W
eeklyC
hart1
9Ja
n -2
3Ja
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2
,50
0.0
0
2
,00
0.0
0
1
,50
0.0
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1
,00
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5
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2
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3
/1
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D
ate
1
73
Share Price (Rs.) • Support Level: Rs.1650
W
eeklyChart27Jan-30Jan
1,820.00
1,800.00
1,780.00
1,760.00
1,740.00
1,720.00
1,700.00
9
9
0
0
1,680.00
0
0
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2
2
/2
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/
7
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D
Eate
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• HIGH 1825 27-JAN-2009
• LOW 1652.55 27-JAN-2009
• Rise of Rs.53 Within a week
R
ESE
ARCHR
EPOR
T
2,000.00
1,500.00
1,000.00 Series1
50 0.00
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D
ATE
74
• Analyst recommendation: Allegation from ministry has pressurized and had
hit hardly during the first week of February.
• Resistance Level: Rs.1550
• Support Level: Rs.1400
SHARE PRICE
R
ESE
A R
C HR
EPOR
T
2,500.00
2,000.00
1,500.00 Series1
1,000.00
50 0.00
9
9
9
9
0
0.00
0
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/2
/2
2
/2
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0
3
/9
/1
/1
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2
2
D
A TE
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A R
CHR
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2,200.00
2,100.00
2,000.00
1,900.00 Series1
1,800.00
1,700.00
9
1,600.00
0
1,500.00
0
0
0
0
2
2
/2
/2
/2
/
/
7
0
6
/1
/1
/2
/1
/1
2
D
ATE
75
• Support Level: Rs.1700
SHARE PRICE
R
ESE
A R
C HR
EPOR
T
1,650.00
1,600.00
1,550.00 Series1
9
9
1,500.00
0
0
0
0
/2
/2
/2
/2
4
7
/2
/2
/2
/2
2
2
D
A TE
R
ESE
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EPOR
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1,650.00
1,600.00
1,550.00 S
eries1
1,500.00
9
1,450.00
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0
0
0
/2
/2
/2
/2
/2
/2
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/5
/6
/4
3
D
ATE
76
• Support Level: Rs.1550
SHARE PRICE
R
ESE
A R
C HR
EPOR
T
1,800.00
1,700.00
1,600.00 Series1
1,500.00
9
1,400.00
9
1,300.00
0
0
0
0
0
0
/2
/2
/2
/2
/2
3
/9
/1
/1
/1
/1
3
3
D
A TE
R
ESE
ARCHR
EPOR
T
2,000.0
0
1,950.0
0
S
eries1
1,900.0
0
9
9
0
1,850.0
0
0
0
0
0
2
/2
2
/
/
7
0
6
/1
/1
/1
/1
/2
3
D
ATE
77
• Support Level: Rs.1900
ResearchReport
2,250.00
2,200.00
2
,150.00
2
,100.00
Series
1
2,050.00
2,000.00
1
,950.00
1
,900.00
3/23/2009 3/24/2009 3/25/2009 3/26/2009 3/27/2009
Date
Financials
Good 2QFY09 results: %age share of revenue among various segments has
changed significantly.
78
2nd quarter saw huge increase in contribution from SmartClass and Retail
line of business, going forward SmartClass, will continue to remain main driver
for growth for next three financial years.
RATIO ANALYSIS:
Profitability Ratios Mar-08 Mar-07 Mar-06
%
Operating Profit 48.2 48.12 50.58
margin
Gross profit Margin 35.87 39.31 40.44
79
Net Profit Margin 25.51 25.54 25.89
Turnover Ratios
Inventory Turnover 185.88 32.75 30.1
Ratio
Debtor Turnover 2.29 2.16 2.08
Ratio
Fixed Asset Turnover 1.27 1.67 2.76
Ratio
Solvency Ratio
Current Ratio 5.41 4.5 5.33
Debt Equity Ratio 1.28 1.09 0.11
Interest Covering 21.69 25.81 37.13
Ratio
Valuation Ratio
P/E adjusted 35 110 na
P/BV 18 24 31
Analysis of Ratios:-
Company’s Debt Equity Ratio has increased significantly from 0.11 in 2006 to
1.27 in 2008. Company has already made financial closure of secured debt for
capital expenditure requirement for K-12 business up to the year 2011. Company’
Interest coverage ratio remains comfortable as most of the debt of the company is in
the form of FCCB maturing in 2012. Company had high inventory turnover ratio as
company has built up inventory of installing computers for its SmartClass and ICT
business.
Future Outlook
80
• Company is poised to continue perform exceeding well with more
than 70% revenue growth for period FY09-FY11 and margins staying above
45%.
• Net Profits are expected to rise 5 fold from Rs.700 million in 2008 to
3566 million in FY11giving a CAGR of 70%.
Growth Outlook
Company is likely to post very high growth rate for a long time. Revenue figures are
expected to show a CAGR of 70% for the period 2009-2011, 35% for the period
2011-2014 and 20% for the period 2014-2016.
We forecast strong 65% CAGR in Net Profits over FY09-FY11E and see limited risks to
81
estimates given.EBITDA margins are likely to improve as revenue share of high margin
retail and online business is likely to improve considerably. We expect ROE to double and
settle in the range between 30-35%.
Company has forward P/E of 7.5 for FY-2011 on constant prices while growth rate is
expected to be upwards of 30% for year FY11-FY14. Company will continue to shine
even in downturn as spending on Education and price levels are highly resilient to
economic downturns.Another positive for this company is its short payback period on
its investment as significant business comes from long term contracts of 5
years.Company understands its strengths and challenges ahead to deal with these
challenges. Company has recognized four areas of opportunities/ strengths as under:
Risks:
• Due to high margins and nature of business, company might face competition
from new entrants.
• Company is in high growth phase; PEG (P/E to Growth) ratio will be an
important consideration for the stock. Any disappointment
on Earnings Growth numbers will see a downward price movement.
• Free cash flows to remain negative for a while; if credit market tightens or
company fails to deliver on expectation, raising fresh
funds will be a problem.
82
SUPPORT AND RESISTANCE LEVEL FOR JUNE MONTH
Market is at the resistant level (SENSEX 10,300 points as on 15th May, 2009) and
this share price is highly correlated with market so for next 1 month Educomp share price
is expected to achieve a new support level of 2670 points but looking at the international
market we can say that international investors are bit optimistic so market can sustain at
this high for some more time.
REASONS:
1- Market fall is expected because it cannot sustain at this level for longer time
(Market as on 2nd April, 2009).
2- Company 35-40% Revenue of total revenue comes in this quarter alone.
3- 4th Quarter Results are expected in the month of April and it may be good news
for the investors, particular for education sector.
4- General Election is not far away and market will take some rest during this time
frame.
83
“Looking at the above given information I projected that the
new Support Level for the Month of June will be 2700* points
and Resistance level will be 3500* points”.
Why Buy: Valuations at 22x FY09E, 12.25x FY2010E and 8.5x FY2011E, on the
lower side look cheap. More over company is expected to post CAGR of 50%+ in
revenues for next four years. EBITDA margins for 2QFY09 excluding extraordinary
forex losses were around 60%. Earnings have been forecasted keeping EBITDA on the
lower side at 45-50%.Higher EBITDA will lead to further revision in Earnings Estimate.
Continue recessionary conditions will make this stock more attractive relatively as
Education segment remains recession proof.
Downside Risks:
1. Short Term Market sentiments (High beta of 1.4)
2. Lower Earnings than market expectations
3. Execution/Regulatory/Key Man Risks
4. Tight credit conditions will pose difficulty for company to raise
more cash at cheaper interest rates.
Strengths:
• Global R&D facility.
• Retention of the man-power is the best in the industry.
• Impressive list of clientele.
• Relatively lower receivable compared to the industry average.
84
Weaknesses:
• Low operating margin of the other group companies.
• Free floating stock is very less.
Opportunities:
• In the branded product category.
• In the consultancy area.
• In the emerging technology areas like Blue Tooth, WAP etc.
Threats:
• Increasing cost of human capital.
• Slowdown in the US economy.
• Appreciation of Indian Currency
• Will face fierce competition in the areas of e-business and ASP services.
85
The first phase of financial reforms resulted in the nationalization of 14 major banks in
1969 and resulted in a shift from Class banking to Mass banking. This in turn resulted in a
significant growth in the geographical coverage of banks. Every bank had to earmark a
minimum percentage of their loan portfolio to sectors identified as “priority sectors”. The
manufacturing sector also grew during the 1970s in protected environs and the banking
sector was a critical source. The next wave of reforms saw the nationalization of 6 more
commercial banks in 1980. Since then the number of scheduled commercial banks
increased four-fold and the number of bank branches increased eight-fold.
After the second phase of financial sector reforms and liberalization of the sector in the
early nineties, the Public Sector Banks (PSB) s found it extremely difficult to compete
with the new private sector banks and the foreign banks. The new private sector banks
first made their appearance after the guidelines permitting them were issued in January
1993. Eight new private sector banks are presently in operation. These banks due to their
late start have access to state-of-the-art technology, which in turn helps them to save on
manpower costs and provide better services.
During the year 2000, the State Bank Of India (SBI) and its 7 associates accounted for a
25 percent share in deposits and 28.1 percent share in credit. The 20 nationalized banks
accounted for 53.2 percent of the deposits and 47.5 percent of credit during the same
period. The share of foreign banks (numbering 42), regional rural banks and other
scheduled commercial banks accounted for 5.7 percent, 3.9 percent and 12.2 percent
respectively in deposits and 8.41 percent, 3.14 percent and 12.85 percent respectively in
credit during the year 2000.
Current Scenario
The industry is currently in a transition phase. On the one hand, the PSBs, which are the
mainstay of the Indian Banking system are in the process of shedding their flab in terms
of excessive manpower, excessive non Performing Assets (Npas) and excessive
governmental equity, while on the other hand the private sector banks are consolidating
themselves through mergers and acquisitions.
PSBs, which currently account for more than 78 percent of total banking industry assets
are saddled with NPAs (a mind-boggling Rs 830 billion in 2000), falling revenues from
86
traditional sources, lack of modern technology and a massive workforce while the new
private sector banks are forging ahead and rewriting the traditional banking business
model by way of their sheer innovation and service. The PSBs are of course currently
working out challenging strategies even as 20 percent of their massive employee strength
has dwindled in the wake of the successful Voluntary Retirement Schemes (VRS)
schemes.
The private players however cannot match the PSB’s great reach, great size and access to
low cost deposits. Therefore one of the means for them to combat the PSBs has been
through the merger and acquisition (M& A) route. Over the last two years, the industry
has witnessed several such instances. For instance, Hdfc Bank’s merger with Times Bank
Icici Bank’s acquisition of ITC Classic, Anagram Finance and Bank of Madura.
Centurion Bank, Indusind Bank, Bank of Punjab, Vysya Bank are said to be on the
lookout. The UTI bank- Global Trust Bank merger however opened a pandora’s box and
brought about the realization that all was not well in the functioning of many of the
private sector banks.
Private sector Banks have pioneered internet banking, phone banking, anywhere banking,
mobile banking, debit cards, Automatic Teller Machines (ATMs) and combined various
other services and integrated them into the mainstream banking arena, while the PSBs are
still grappling with disgruntled employees in the aftermath of successful VRS schemes.
Also, following India’s commitment to the W To agreement in respect of the services
sector, foreign banks, including both new and the existing ones, have been permitted to
open up to 12 branches a year with effect from 1998-99 as against the earlier stipulation
of 8 branches.
Meanwhile the economic and corporate sector slowdown has led to an increasing number
of banks focusing on the retail segment. Many of them are also entering the new vistas of
Insurance. Banks with their phenomenal reach and a regular interface with the retail
investor are the best placed to enter into the insurance sector. Banks in India have been
allowed to provide fee-based insurance services without risk participation, invest in an
87
insurance company for providing infrastructure and services support and set up of a
separate joint-venture insurance company with risk participation.
In FY01 the economic slowdown resulted in a Gross Domestic Product (GDP) growth of
only 6.0 percent as against the previous year’s 6.4 percent. The WPI Index (a measure of
inflation) increased by 7.1 percent as against 3.3 percent in FY00. Similarly, money
supply (M3) grew by around 16.2 percent as against 14.6 percent a year ago.
The growth in aggregate deposits of the scheduled commercial banks at 15.4 percent in
FY01 percent was lower than that of 19.3 percent in the previous year, while the growth
in credit by SCBs slowed down to 15.6 percent in FY01 against 23 percent a year ago.
The industrial slowdown also affected the earnings of listed banks. The net profits of 20
listed banks dropped by 34.43 percent in the quarter ended March 2001. Net profits grew
by 40.75 percent in the first quarter of 2000-2001, but dropped to 4.56 percent in the
fourth quarter of 2000-2001.
On the Capital Adequacy Ratio (CAR) front while most banks managed to fulfill the
norms, it was a feat achieved with its own share of difficulties. The CAR, which at
present is 9.0 percent, is likely to be hiked to 12.0 percent by the year 2004 based on the
Basle Committee recommendations. Any bank that wishes to grow its assets needs to also
shore up its capital at the same time so that its capital as a percentage of the risk-weighted
assets is maintained at the stipulated rate. While the IPO route was a much-fancied one in
the early ‘90s, the current scenario doesn’t look too attractive for bank majors.
Consequently, banks have been forced to explore other avenues to shore up their capital
base. While some are wooing foreign partners to add to the capital others are employing
88
the M& A route. Many are also going in for right issues at prices considerably lower than
the market prices to woo the investors.
The two years, post the East Asian crises in 1997-98 saw a climb in the global interest
rates. It was only in the later half of FY01 that the US Fed cut interest rates. India has
however remained more or less insulated. The past 2 years in our country was
characterized by a mounting intention of the Reserve Bank Of India (RBI) to steadily
reduce interest rates resulting in a narrowing differential between global and domestic
rates.
The RBI has been affecting bank rate and CRR cuts at regular intervals to improve
liquidity and reduce rates. The only exception was in July 2000 when the RBI increased
the Cash Reserve Ratio (CRR) to stem the fall in the rupee against the dollar. The steady
fall in the interest rates resulted in squeezed margins for the banks in general.
Governmental Policy
After the first phase and second phase of financial reforms, in the 1980s commercial
banks began to function in a highly regulated environment, with administered interest rate
structure, quantitative restrictions on credit flows, high reserve requirements and
reservation of a significant proportion of lendable resources for the priority and the
government sectors. The restrictive regulatory norms led to the credit rationing for the
private sector and the interest rate controls led to the unproductive use of credit and low
levels of investment and growth. The resultant ‘financial repression’ led to decline in
productivity and efficiency and erosion of profitability of the banking sector in general.
This was when the need to develop a sound commercial banking system was felt. This
was worked out mainly with the help of the recommendations of the Committee on the
Financial System (Chairman: Shri M. Narasimham), 1991. The resultant financial sector
reforms called for interest rate flexibility for banks, reduction in reserve requirements,
and a number of structural measures. Interest rates have thus been steadily deregulated in
the past few years with banks being free to fix their Prime Lending Rates(PLRs) and
deposit rates for most banking products. Credit market reforms included introduction of
89
new instruments of credit, changes in the credit delivery system and integration of
functional roles of diverse players, such as, banks, financial institutions and non-banking
financial companies (Nbfcs). Domestic Private Sector Banks were allowed to be set up,
PSBs were allowed to access the markets to shore up their Cars.
The allowing of PSBs to shed manpower and dilution of equity are moves that will lend
greater autonomy to the industry. In order to lend more depth to the capital markets the
RBI had in November 2000 also changed the capital market exposure norms from 5
percent of bank’s incremental deposits of the previous year to 5 percent of the bank’s total
domestic credit in the previous year. But this move did not have the desired effect, as in,
while most banks kept away almost completely from the capital markets, a few private
sector banks went overboard and exceeded limits and indulged in dubious stock market
deals. The chances of seeing banks making a comeback to the stock markets are therefore
quite unlikely in the near future.
The move to increase Foreign Direct Investment FDI limits to 49 percent from 20 percent
during the first quarter of this fiscal came as a welcome announcement to foreign players
wanting to get a foot hold in the Indian Markets by investing in willing Indian partners
who are starved of networth to meet CAR norms. Ceiling for FII investment in companies
was also increased from 24.0 percent to 49.0 percent and have been included within the
ambit of FDI investment.
The abolishment of interest tax of 2.0 percent in budget 2001-02 will help banks pass on
the benefit to the borrowers on new loans leading to reduced costs and easier lending
rates. Banks will also benefit on the existing loans wherever the interest tax cost element
has already been built into the terms of the loan. The reduction of interest rates on various
small savings schemes from 11 percent to 9.5 percent in Budget 2001-02 was a much
awaited move for the banking industry and in keeping with the reducing interest rate
scenario, however the small investor is not very happy with the move.
Some of the not so good measures however like reducing the limit for tax deducted at
source (TDS) on interest income from deposits to Rs 2,500 from the earlier level of Rs
10,000, in Budget 2001-02, had met with disapproval from the banking fraternity who
90
feared that the move would prove counterproductive and lead to increased fragmentation
of deposits, increased volumes and transaction costs. The limit was thankfully partially
restored to Rs 5000 at the time of passing the Finance Bill in the Parliament.
April 2001-Credit Policy Implications The rationalization of export credit norms in will
bestow greater operational flexibility on banks, and also reduce the borrowing costs for
exporters. Thus this move could trigger exports growth in the future. Banks can also hope
to earn increased revenue with the interest paid by RBI on CRR balances being increased
from 4.0 percent to 6.0 percent.
The stock market scam brought out the unholy nexus between the Cooperative banks and
stockbrokers. In order to usher in greater prudence in their operations, the RBI has barred
Urban Cooperative Banks from financing the stock market operations and is also in the
process of setting up of a new apex supervisory body for them. Meanwhile the foreign
banks have a bone to pick with the RBI. The RBI had announced that forex loans are not
to be calculated as a part of Tier-1 Capital for drawing up exposure limits to companies
effective 1 April 2002. This will force foreign banks either to infuse fresh capital to
maintain the capital adequacy ratio (CAR) or pare their asset base. Further, the RBI has
also sought to keep foreign competition away from the nascent net banking segment in
India by allowing only Indian banks with a local physical presence, to offer Internet
banking
On the macro economic front, GDP is expected to grow by 6.0 to 6.5 percent while the
projected expansion in broad money (M3) for 2001-02 is about 14.5 percent. Credit and
deposits are both expected to grow by 15-16 percent in FY02. India's foreign exchange
reserves should reach US$50.0 billion in FY02 and the Indian rupee should hold steady.
The interest rates are likely to remain stable this fiscal based on an expected downward
trend in inflation rate, sluggish pace of non-oil imports and likelihood of declining global
interest rates. The domestic banking industry is forecasted to witness a higher degree of
mergers and acquisitions in the future. Banks are likely to opt for the universal banking
approach with a stronger retail approach. Technology and superior customer service will
continue to be the imperatives for success in this industry.
Public Sector banks that imbibe new concepts in banking, turn tech savvy, leaner and
meaner post VRS and obtain more autonomy by keeping governmental stake to the
91
minimum can succeed in effectively taking on the private sector banks by virtue of their
sheer size. Weaker PSU banks are unlikely to survive in the long run. Consequently, they
are likely to be either acquired by stronger players or will be forced to look out for other
strategies to infuse greater capital and optimize their operations.
Foreign banks are likely to succeed in their niche markets and be the innovators in terms
of technology introduction in the domestic scenario. The outlook for the private sector
banks indeed looks to be more promising vis-à-vis other banks. While their focused
operations, lower but more productive employee force etc will stand them good, possible
acquisitions of PSU banks will definitely give them the much needed scale of operations
and access to lower cost of funds. These banks will continue to be the early technology
adopters in the industry, thus increasing their efficiencies. Also, they have been amongst
the first movers in the lucrative insurance segment. Already, banks such as Icici Bank and
Hdfc Bank have forged alliances with Prudential Life and Standard Life respectively.
This is one segment that is likely to witness a greater deal of action in the future. In the
near term, the low interest rate scenario is likely to affect the spreads of majors. This is
likely to result in a greater focus on better asset-liability management procedures.
Consequently, only banks that strive hard to increase their share of fee-based revenues are
likely to do better in the future.
ICICI BANK:
ICICI Bank is India's second-largest bank with total assets of Rs. 3,744.10 billion (US$
77 billion) at December 31, 2008 and profit after tax Rs. 30.14 billion for the nine
months ended December 31, 2008. The Bank has a network of 1,419 branches and about
4,644 ATMs in India and presence in 18 countries. ICICI Bank offers a wide range of
banking products and financial services to corporate and retail customers through a
variety of delivery channels and through its specialized
subsidiaries and affiliates in the areas of investment banking, life and non-life insurance,
venture capital and asset management. The Bank currently has subsidiaries in the United
Kingdom, Russia and Canada, branches in United States, Singapore, Bahrain, Hong
Kong, Sri Lanka, Qatar and Dubai International Finance Centre and representative offices
92
in United Arab Emirates, China, South Africa, Bangladesh, Thailand, Malaysia and
Indonesia. Our UK subsidiary has established branches in Belgium and Germany.
ICICI Bank's equity shares are listed in India on Bombay Stock Exchange and the
National Stock Exchange of India Limited and its American Depositary Receipts (ADRs)
are listed on the New York Stock Exchange (NYSE).
History
ICICI Bank was originally promoted in 1994 by ICICI Limited, an Indian financial
institution, and was its wholly-owned subsidiary. ICICI's shareholding in ICICI Bank was
reduced to 46% through a public offering of shares in India in fiscal 1998, an equity
offering in the form of ADRs listed on the NYSE in fiscal 2000, ICICI Bank's acquisition
of Bank of Madura Limited in an all-stock amalgamation in fiscal 2001, and secondary
market sales by ICICI to institutional investors in fiscal 2001 and fiscal 2002. ICICI was
formed in 1955 at the initiative of the World Bank, the Government of India and
representatives of Indian industry. The principal objective was to create a development
financial institution for providing medium-term and long-term project financing to Indian
businesses. In the 1990s, ICICI transformed its business from a development financial
institution offering only project finance to a diversified financial services group offering a
wide variety of products and services, both directly and through a number of subsidiaries
and affiliates like ICICI Bank. In 1999, ICICI become the first Indian company and the
first bank or financial institution from non-Japan Asia to be listed on the NYSE.
93
In October 2001, the Boards of Directors of ICICI and ICICI Bank approved
the merger of ICICI and two of its wholly-owned retail finance subsidiaries, ICICI
Personal Financial Services Limited and ICICI Capital Services Limited, with ICICI
Bank. The merger was approved by shareholders of ICICI and ICICI Bank in January
2002, by the High Court of Gujarat at Ahmedabad in March 2002, and by the High Court
of Judicature at Mumbai and the Reserve Bank of India in April 2002. Consequent to the
merger, the ICICI group's financing and banking operations, both wholesale and retail,
have been integrated in a single entity.
SUBSIDIARY COMPANIES
Recent developments
• Completed Rs200b follow on offering
• Amalgamated Sangli Bank with itself
Board Members
94
Mr. Sridar Iyengar
Ms. Chanda Kochhar, Joint Managing Director & Chief Financial Officer
SHARE DATA
Company Name ICICI BANK
Market Cap Rs. 389.03B
Price Rs.349.45
BSE Sensex 9459.34
BSE Code 532174
NSE Code INE090A01013
Face Value Rs.10
52-Week High/Low Rs. 960.90/252.75
Beta of the Company 1.60
95
Returns1 Year -56.81 %
Weightage in SENSEX 5.32
Co-efficient of Determination 0.79
(R^2)
Free-float adj. factor as on 1
31/04/09
Index BSE 100 ,BSE Mid Cap
Group A
• 25% quarter-on-quarter increase in profit after tax to Rs. 12.72 billion in Q3 2009
from Rs. 10.14 billion in Q2-2009.
• Profit after tax of Rs. 12.30 billion in Q3-2008
• Capitalized on opportunities in declining interest rate scenario: treasury gains of
Rs. 9.76 billion in Q3-2009
• 19% year-on-year decrease in operating & direct marketing agency expenses
despite substantial increase in branches
• Net interest margin maintained at 2.4%
• Strategy of conscious moderation in credit growth
• Contraction in standalone loan book during the year to Rs. 2,125.21 billion at
December 31, 2008
96
• Net NPA ratio of 1.95% at December 31, 2008
97
Share holding pattern
NRI's,OCB's& foreign
others
General Public
39.01, 59%
98
Major Gain And Lose For ICICI BANK LTD. From Jan-08 To March-09
99
MONTHLY MARGIN FOR ICICI BANK LTD.
Month Monthly Avg. Margin % Monthly Avg. Margin
Jan-08 92.985 7.449%
Feb-08 56.919 5.064%
Mar-08 63.986 7.528%
Apr-08 43.393 5.204%
May-08 32.278 3.677%
Jun-08 35.779 4.859%
Jul-08 45.559 7.359%
Aug-08 37.250 5.451%
Sep-08 45.074 7.452%
Oct-08 46.538 11.595%
Nov-08 34.183 8.763%
Dec-08 29.074 7.184%
Jan-09 30.163 7.009%
Feb-09 20.392 5.368%
Mar-09 21.093 6.963%
Technical Analysis :
Performance of ICICI Bank Ltd. In last 1 year
100
Performance of ICICI Bank in last 1 year
1,600.00
1,400.00
1,200.00
1,000.00
800.00 Close
600.00
400.00
200.00
0.00
11/1/2008
10/1/2008
12/1/2008
1/1/2008
2/1/2008
3/1/2008
4/1/2008
5/1/2008
6/1/2008
7/1/2008
8/1/2008
9/1/2008
1/1/2009
2/1/2009
3/1/2009
Resistance level: Rs.760
Resistance
Level:Rs93
0
Support Level: Rs.300
• Rumours started surfacing about the bank’s overseas exposure and a run on its Support
Level:Rs 790
deposits as on Oct’08
• Such rumours prompted some depositors to withdraw money
• The rescue mission helped ICICI Bank’s stocks to recoup heavy losses.
Monthly Data :
1000
950 Resistance Level:Rs 940
Share Price
900
850 Series1
Support Level: Rs. 805
800
750
700
5/ 08
5/ 0 8
5/ 08
10 8
20 8
12 8
14 8
16 8
18 8
22 8
24 8
26 8
28 8
30 8
8
5/ 0 0
5/ 0 0
5/ 0 0
5/ 0 0
5/ 00
5/ 0 0
5/ 0 0
5/ 0 0
5/ 00
5/ 0 0
00
5/ 00
20
20
20
2
/2
/2
/2
/2
/2
/2
/2
/2
/2
/2
/2
2/
4/
6/
8/
5/
Date
Reason-
As we could see the downturn of the stock in the month of May’08 the reason was
allotment of Equity shares under the ESOS, 2000. They allotted around 2.5lakh
equity shares of face value of Rs10.
101
ICICI Bank's Performance On June'08
RESISTANCE LEVELRs.780
900
800
SUPPORT LEVEL: Rs. 730
700
Share Price
600
500
Series1
400
300
200
100
0
6/ 0 8
6/ 0 8
22 8
28 8
6/ 0 8
10 8
12 8
14 8
16 8
18 8
20 8
24 8
26 8
30 8
8
6/ 0 0
6/ 0 0
6/ 0 0
6/ 0 0
6/ 00
6/ 0 0
6/ 00
6/ 0 0
6/ 0 0
6/ 00
00
6/ 00
20
20
20
/2
/2
/2
/2
/2
/2
/2
/2
/2
/2
/2
2/
4/
6/
8/
6/
Date
Reason- ICICI Bank informed about the payment of dividend & 14th Annual
General Meeting of the bank to be held in July 26, 2008, so we can say that the
share price would move up in July.
7/ 0 8
7/ 0 8
7/ 0 8
11 8
13 8
17 8
21 8
23 8
27 8
31 8
8
15 8
19 8
25 8
29 8
7/ 0 0
7/ 0 0
7/ 0 0
7/ 0 0
7/ 0 0
7/ 0 0
7/ 0 0
7/ 0 0
7/ 0 0
00
7/ 0 0
7/ 00
20
20
20
20
/2
/2
/2
2
/2
/2
/2
/2
/2
/2
/2
/2
1/
3/
5/
9/
7/
7/
Date
Reason- As we could see the rise in share price after the mid of July due to bank
income increased by 1485.6 as compared to quarter ended June 30, 2008.
Second thing was increase in Interest rates for various tenors of retail Fixed
Deposits by 0.75% to 1.00% w.e.f from Aug 1st, 2008.
102
ICICI Bank's performance On Aug'09
900 Resistance
800 Level:Rs 790
700 Support
Share Price
600 level:Rs630.
500
Series1
400
300
200
100
0
8/ 0 8
8/ 0 8
11 8
13 8
15 8
19 8
25 8
27 8
8
8/ 0 8
8/ 0 8
17 8
21 8
23 8
29 8
8/ 0 0
8/ 0 0
8/ 0 0
8/ 0 0
8/ 0 0
8/ 0 0
8/ 0 0
8/ 0 0
00
8/ 0 0
8/ 00
20
20
20
20
/2
/2
/2
/2
/2
/2
/2
/2
/2
/2
1/
3/
5/
7/
9/
8/
Date
Reason- ICICI had benefit from their Quarter 1st results, that’s why its price was
increased than they allotted equity shares to ESOS, 2000. But because of results
IC had manage some how.
800
700 Resistance Level:Rs. 725
600 Support Level: Rs. 550
Share Price
500
400 Series1
300
200
100
0
9/ 0 8
9/ 0 8
9/ 0 8
9/ 0 8
11 8
13 8
15 8
17 8
19 8
21 8
23 8
25 8
27 8
29 8
8
9/ 0 0
9/ 0 0
9/ 0 0
9/ 0 0
9/ 0 0
9/ 0 0
9/ 0 0
9/ 0 0
9/ 0 0
00
9/ 00
20
20
20
20
2
/2
/2
/2
/2
/2
/2
/2
/2
/2
/2
1/
3/
5/
7/
9/
9/
Date
103
Share price Share Price Share Price
12 11 10
/1
/1/ /3 /2
100
200
300
400
500
600
0
/2 10 0 0
0
50
50
100
150
200
250
300
350
400
450
500
100
150
200
250
300
350
400
450
500
12 20 0 11 0 08 /3 8
/3 8 /2
/ /5
/2 10 0 0
12 20 0 /5 8
00 /2
/5/ 8 11 8 10 0 0
12 20 0 /7 /7 8
/2 /2
of the organization.
/7/ 8 11 0 08 10 0 0
12 20 0 /9 /9 8
/9 8 / 10 /20
11 20 0 /1 08
12 /20 /1 8 1
/11 08 1/ 10 /2 0
/1 08
12 /2 0 11 2 00 3
/13 08 /1 8 10 /2 0
3/ /1 08
12 /2 0 2 0
5/
11 10 2 0
/15 08 /1 08 /1 08
7
12 /2 0 5/
20 10 /2 0
/1 08 11 /1 08
7 08 9
Date
12 /2 0 /1 10 /2 0
7/
2 0 /2 08
1
/19 08 11
Da te
Da te
12 /2 0 /1 08 10 /2 0
9/
2 /2 08
/21 08
0 3
12 /2 0 11 10 /2 0
/2 08 /2 08
/2 08
3 1/ 5
12 /2 0 11 2 00 10 /2 0
8 /2 08
/25 08 /2 7
3/ 10 /2 0
ICICI Bank's Performance On Oct'08
12 /2 0 20 /2 08
11 08 9
/27 08 /2 10 /2 0
5/ /3 08
12 /2 0 2 0 1/
/2 08 11
9 /2 08
20
08
ICICI Bank's Performance On Nov'08
12 /2 0 7/
Series1
Series1
Support Level: Rs. 310
REASON:-There was a downfall in the prices because of the announcement of new BOD
104
Resistance Level:Rs. 455
Support Level: Rs. 305
600
500 Resistance Level: Rs. 440
Share Price
1/ 0 9
1/ 0 9
13 9
15 9
17 9
19 9
21 9
23 9
25 9
27 9
29 9
9
1/ 0 9
11 9
1/ 0 0
1/ 0 0
1/ 0 0
1/ 0 0
1/ 0 0
1/ 0 0
1/ 0 0
1/ 0 0
1/ 0 0
00
1/ 00
20
20
20
20
2
/2
/2
/2
/2
/2
/2
/2
/2
/2
/2
1/
3/
5/
7/
9/
1/
Date
300
250 S eries 1
200
150
100
50
0
2/4 0 9
2/6 0 9
2/8 0 9
2/1 00 9
2/1 0 09
2/2 0 09
2/2 0 09
2/1 0 09
2/1 0 09
2/1 0 09
2/2 0 09
2/2 0 09
9
00
20
/20
/20
/2
2
2
2
4/2
6/2
8/2
0/2
2/2
6/2
/
4/
0/
2/
2/2
D a te
Reasons: There was a decline in the share prices at the end of the month because
of the news that the bank tops the list of credit cards frauds & it amounts to losses
of around 11.47 cr.
105
IC IC I B a n k 's P erfo rm an ce o n M a rch '09
250
c los ing pric e
200
150
100
50
0
3/ 00 9
3/ 0 9
3/ 0 9
3/ 09
3/ 0 09
9
3/ 0 09
3/ 0 09
3/ 0 09
3/ 0 09
3/ 0 09
3/ 0 09
3/ 0 09
00
20
20
20
/2
/2
/2
/2
/2
/2
/2
/2
/2
2/
4/
6/
8/
10
12
14
16
18
20
22
24
26
3/
Da te
An upward movement of the stock prices has been seen in the month of March because in
a ceremony held in Hong Kong, ICICI Bank has been awarded the following titles under
The Asset Triple A country awards for 2009:-
• Best Transaction Bank in India
• Best Trade Finance Bank in India
• Best Cash Management Bank in India
• Best Domestic Custodian in India
Weekly Chart
540
Share Price in (Rs.)
520
500
Resistance Level: Rs.525
480
420
1/5/2009 1/6/2009 1/7/2009 1/8/2009 1/9/2009
Date
Reason: ICICI Bank Ltd has informed BSE regarding a Press Release dated
December 31, 2008, titled "ICICI Bank cuts lending and deposit rates".
106
Weekly Chart(12 Jan-16 Jan)
450
Share Price in (Rs.)
440
Resistance Level: Rs.442
430
420
Support Level: Rs408
410
400
390
1/12/2009 1/13/2009 1/14/2009 1/15/2009 1/16/2009
Date
Reason: ICICI Bank Ltd has informed BSE that a meeting of the Board of
Directors of the Bank will be held on January 24, 2009, inter alia, to consider the
approval of audited accounts for the quarter ended December 31, 2008 (Q3).
420
410
Share Price in (Rs.)
400
390
Resistance Level: Rs380
380
370
360
350 Support Level: Rs368
340
330
1/19/2009 1/20/2009 1/21/2009 1/22/2009 1/23/2009
Date
107
Weekly Chart (27Jan-30 Jan)
420
410
Share Price in (Rs.)
400
390
380
370
360
1/27/2009 1/28/2009 Date 1/29/2009 1/30/2009
410
405
Resistance Level’s. 402
400
Share Price
108
Performance of ICICI Bank from 9th feb to 13th feb'09
440
420
415
410
2/9/2009 2/10/2009 2/11/2009 2/12/2009 2/13/2009
Date
450
400 Resistance Level: Rs. 408
350 Support Level: Rs. 300
300
Share Price
250
Series1
200
150
100
50
0
2/16/2009 2/17/2009 2/18/2009 2/19/2009 2/20/2009
Date
Reason: ICICI Bank has decided to follow the slow-moving pace in disbursing
auto loans, unless there is clarity on the repossession norms for vehicles. The lack
of clarity is the direct result of a Supreme Court judgment, which requires lenders
to follow the due process of law for recovering vehicles from defaulters.
109
Performance of ICICI Bank from 24th feb to 27th feb '09
345
330 Series1
325
320
315
2/24/2009 2/25/2009 2/26/2009 2/27/2009
date
Reason: There was an increase in prices after 25 th Feb because the bank was
awarded Dun & Bradstreet Banking Award 2009.
310
300
Resistance Level: Rs. 300
290 Support Level: Rs. 270
Share price
280 Series1
270
260
250
3/2/2009 3/3/2009 3/4/2009 3/5/2009 3/6/2009
Date
Reason: The RBI has taken a positive step by announcing the cut of 50 basis
points in repo as well as reverse repo rate, said Ms Chanda Kochhar, CEO-
110
designate, ICICI Bank, said. The RBI has sought to create conditions conducive
to the consumption and investment, taking into account the global developments
and their impact on India: slowdown in growth on one hand and decline in
inflation on the other.
320
310
Resistance Level: Rs. 310
290
280 Series1
270
260
250
240
3/9/2009 3/10/2009 3/11/2009 3/12/2009 3/13/2009
date
Reason: ICICI BANK made a recovery in this week after falling of more than
12% in the previous week due to positive global news and the effect of stimulus
package announced by the Govt. of India.
340
Resistance Level: Rs. 338
335 Support Level: Rs. 324
330
Share Price
325 Series1
320
315
310
3/16/2009 3/17/2009 3/18/2009 3/19/2009 3/20/2009
Date
Reason: ICICI Bank is planning to set up a new entity to house its automated
teller machines (ATMs) as well as the point-of-sale (PoS) terminals, which accept
credit and debit card payments. This is the first time that an Indian bank is
planning to transfer its ATM as well as PoS assets to a separate company.
111
Performance from 23rd March to 27th March'09
390
380 Resistance Level: Rs. 382
370 Support level: 350
Share price
360
Series1
350
340
330
320
3/23/2009 3/24/2009 3/25/2009 3/26/2009 3/27/2009
date
Reason: "Banks should start considering 0.50 per cent cut in interest rate ...
Possibly in a week or few weeks," Kamath said. He also said "Clearly, inflation is
nearing zero, but we are not able to bring down lending rate to single digit. So
there is a need to look at more policy action,".
Financials
Operating profit ex-treasury is down 10% YoY and 26% QoQ
NII grew 2% YoY but declined 7% QoQ to Rs19.9b. Loans declined 1% YoY and 4%
QoQ to Rs2.1t. Reported margins were stable at 2.4%. Fee income at Rs13.5b was down
25% YoY and 28% QoQ. Treasury income rose from Rs2.8b in 3QFY08 to Rs9.8b in
3QFY09 - driving PAT. Treasury Income during the quarter includes Rs2.5b on MTM
reversal. Opex declined 18% YoY and was stable QoQ. Operating profit ex-treasury is
down 10% YoY and 26% QoQ in 3QFY09. Total deposits declined by 9% YoY and 6%
QoQ to Rs2. This is partly due to strategic slowdown and mainly due to flight of retail
deposits.
112
Rs10b of fresh provision during the quarter. Net NPAs now stand at 9% of net
worth.Management expects gross NPA build up to continue driven by rising defaults in
unsecure portfolios and CVs (account for 16% of total loan book). While so far the
corporate book is not showing any signs of weakness, it could throw up NPAs in FY10.
We have modelled NPA cost rising to 1.7% in FY09 and 1.9% in FY10 (from 1.3% in
FY08) and then falling
to 1.5% in FY11.
ICICI Canada’s total assets increased QoQ from USD5.5b to USD6.5b. Loan book
grew sharply 40% QoQ to USD3.6b. Earnings were CAD11m in 3QFY09 and CAD33m
in 9MFY09.
113
Particulars Dec’08 Sept’08 Absolute %
(Rs crore) (Rs crore) Change chang
e
Sales 7,836.08 7,834.98 1.1 0.014
Operating profit 5,094.27 5,171.41 -77.14 -1.4
Interest 5,845.67 5,687.36 157.91 2.77
Gross profit 2,770.84 2,284.91 485.93 21.26
EPS(Rs) 11.43 9.11 2.32 25.46
Analysis:
• The sales have increased by 0.014% in Q3.
• Operating profit has decreased on the assumption that either operating
expenses have increased or there is an increase in NPA’s.
• As there is an increase in gross profit & EPS, it shows that the demand of the
share will increase in the future.
RATIO ANALYSIS:-
Y/E MARCH 2007 2008 2009E 2010E 2011E
Spreads
Analysis(%)
Avg. Yield-Earning 7.9 8.9 8.7 8.3 8.3
Assets
Avg.Cost- 6.4 7.4 7.2 6.4 6.2
Int.Bear,Liab.
Interest Spread 1.6 1.4 1.4 1.9 2
Net Interest Margin 2 2.1 2.3 2.7 2.8
Pofitability
Ratios(%)
ROE 13.4 11.7 7.9 8.6 10.6
Adjusted ROE 13.4 12.9 8.8 9.7 12.1
Int. 74.4 76.3 73.6 67.9 66.1
Expended/int.Earne
d
Other Inc./Net 55.1 54.7 48.1 45.6 44.9
Income
Efficiency
114
Ratios(%)
Op. Exps./Net 57.9 53.3 45.6 44.1 43.6
Income
Empl. Cost/Op. 24.2 25.5 28.7 27.9 28.4
Exps.
Busi. Per Empl.(Rs 110.7 110.7 112.8 99.9 104.4
m)
NP per Empl.(Rs. 9.3 10.3 9.4 9.5 11.9
lac)
Asset-Liability
Profile(%)
Adv./Deposit Ratio 85 92.3 100.9 101 100.3
CASA Ratio % 21.8 26.1 28 31.5 33.5
Invest/Deposit 39.6 45.6 49.7 50.7 49.3
Ratio
G-Sec/Invest Ratio 73.8 67.6 62.3 59.2 60.8
Gross NPAs to Adv. 2.1 3.3 4.3 4.6 4.1
Net NPAs to Adv. 1 1.5 1.9 1.7 1.3
CAR 11.7 14 14.9 14 12.9
Tier 1 7.4 11.8 11.5 10.7 9.7
Valuation
Book Value(Rs.) 270 418 439 463 500
Price-BV (x) 0.9 0.8 0.8 0.7
ABV(for Subs 256 397 415 440 480
Invst. And NPAs)
EPS(Rs.) 34.6 37.4 33.8 38.6 51.2
EPS Growth(%) 21.2 8 -9.7 14.3 32.6
Price-Earning (x) 10.5 9.7 10.8 9.4 7.1
Adj.Price- 6.9 6.4 7.1 5.9 4.4
Earnings(x)
COMPARATIVE VALUATIONS:-
115
ICICI BANK HDFC BANK AXIS BANK
P/E(x) FY09E 7.4 18.5 17.8
FY010 6.4 14.8 13.4
E
P/BV( FY09E 0.7 2.8 2.6
x)
FY010 0.6 2.1 2.2
E
ROE( FY09E 8.5 15.6 15.4
%)
FY10E 9 16.6 17.9
ROA( FY09E 0.9 1.3 1.1
%)
FY010 1 1.4 1.1
E
RESULT ANALYSIS:-
116
117
3QFY0 3QFY0 YOY 2QFY0 QOQ FY08 FY09E FY10E
9 8 GR. 9 GR.
% %
Interest 78,361 79,118 78,350 0 3,07,88 3,13,14 3,01,68
Income 3 2 5
Interest 58,457 59,521 56,874 3 2,34,84 2,30,62 2,04,79
Expense 2 1 0
Net Interest 19,904 19,597 2 21,476 73,041 82,521 96,895
Income(NII)
Other 25,150 24,266 4 18,773 34 88,108 76,615 81,244
Income
- Fees 13,470 17,850 18,760 -28 66,270 66,270 69,584
- Treasury 9,760 2,820 246 -1,530 -738 8,150 4,000 5,000
Income(Incl
uding MTM)
- Others 1,920 3,596 1,543 24 13,688 6,345 6,660
Net Income 45,054 43,863 3 40,250 12 1,61,1 1,59,1 1,78,1
49 35 39
Total 17,341 21,276 -18 17,400 0 81,542 70,704 76,359
Operating
Costs
- Staff 5,030 5,705 -12 4,881 3 20,789 20,276 21,290
Costs
- Other 12,311 15,571 -21 12,520 -2 60,753 50,428 55,069
Opex
Operating 27,713 22,587 23 22,849 21 79,607 88,431 1,01,7
Profit 80
Provisions 10,080 7,600 33 9,235 9 29,046 37,684 42,990
PBT 17,633 14,987 18 13,614 30 50,561 50,747 58,790
Tax 4,910 2,681 83 3,472 41 8,984 13,194 15,873
Tax Payout 28 18 3 26 18 26 27
%
PAT 12,723 12,306 3 10,142 25 41,577 37,553 42,916
EPS 7 9 -24 10 -37 37 34 39
Deposits 20,90, 22,97, -9 22,34, -6 24,44, 21,50, 23,23,
650 790 020 311 993 073
Advances 21,25, 21,55, -1 22,19, -4 22,56, 21,69, 23,46,
210 170 850 161 423 198
- Retail 11,45,0 13,23,1 -13 12,25,0 -7 13,16,6 11,45,4 969
Advances 00 10 00 30 68
- 5,52,55 4,52,58 22 5,77,16 -4 4,77,46 5,68,17 992
Internationa 5 6 1 0 7
l Advances
Net NPA% 2 2 2 2 2 2
Yields On 10.4 10.9 10.2 10.7 10.3 9.8
Advances %
Cost of 7.5 7.8 7.0 7.4 7.2 6.4
Funds %
NIM% 2.4 2.3 2.4 2.2 2.4 2.7
Tier I CAR % 12.1 12.1 11.0 11.8 11.5 10.7
Tier II CAR 3.5 3.7 3.0 2.2 3.4 3.3
% 118
Branches# 1416.0 955.0 1400.0 1262.0 1425.0 2005.0
ATMs NA 3687.0 4530.0 3950.0
INCOME
STATEMENT
Y/E MARCH 2,007 2,008 2009E 2010E 2011E
Interest Income 2,19,95 3,07,88 3,13,14 3,01,68 3,33,116
6 3 2 5
Interest 1,63,58 2,34,84 2,30,62 2,04,7 2,20,213
Expended 5 2 1 90
Net Interest 56,371 73,041 82,521 96,895 1,12,904
Income
Change (%) 44.3 29.4 13.0 17.4 16.5
Other Income 66,279 88,108 76,615 81,244 92,098
Net Income 1,25,65 1,61,14 1,59,13 1,78,1 2,05,002
0 9 5 39
Change (%) 41.3 28.3 -1.2 11.9 15.1
Operating Exp. 66,906 81,542 70,704 76,359 87,910
Operating 58,744 79,607 88,431 1,01,7 1,17,092
Income 80
Change (%) 51.1 35.5 11.1 15.1 15.0
Provisions & 22,294 29,046 37,684 42,990 39,114
Cont.
PBT 36,450 50,561 50,747 58,790 77,978
Tax 5,348 8,984 13,194 15,873 21,054
Tax Rate (%) 14.7 17.8 26.0 27.0 27.0
PAT 31,102 41,577 37,553 42,916 56,924
Change (%) 22.4 33.7 -9.7 14.3 32.6
Proposed 8,993 12,239 12,239 13,352 13,352
Dividend
BALANCE
SHEET
Y/E MARCH 2,007 2,008 2009E 2010E 2011E
Capital 8,993 11,127 11,127 11,127 11,127
Preference 3,500 3,500 3,500 3,500 3,500
Capital
Reserve & 2,34,13 4,53,57 4,76,808 5,04,103 5,45,404
Surplus 9 5
Net worth 2,46,6 4,68,20 4,91,43 5,18,730 5,60,03
33 2 5 1
Deposits 23,05, 24,44,3 21,50,9 23,23,07 26,71,5
100 11 93 3 34
Change (%) 39.6 6.0 -12.0 8.0 15.0
Borrowings 7,06,61 8,63,98 9,11,719 9,87,038 10,73,48
3 6 5
Other 1,88,23 2,21,45 2,81,244 3,57,180 4,53,619
Liabilities & 5 2
Prov.
Total Liabilities 34,46, 39,97,9 38,35,3 41,86,02 47,58,6
581 51 91 0 68
119
Current Assets 3,71,21 3,80,41 3,04,722 3,19,200 3,54,349
3 1
Investments 9,12,5 11,14,5 10,69,9 11,76,95 13,18,1
78 43 62 8 93
Change (%) 27.5 22.1 -4.0 10.0 12.0
Loans 19,58, 22,56,1 21,69,4 23,46,19 26,80,7
656 61 23 8 08
Change (%) 34.0 15.2 -3.8 8.1 14.3
Net Fixed 39,234 41,089 44,389 47,389 49,889
Assets
Other Assets 1,64,89 2,05,74 2,46,896 2,96,275 3,55,530
9 6
Total Assets 34,46, 39,97,9 38,35,3 41,86,02 47,58,6
581 51 91 0 68
Market is at the resistant level (SENSEX 14,500 points as on 20th Mayl, 2009)
and ICICI BANK share price is highly correlated with market so for next 10 days
ICICI BANK share price is expected to achieve a new support level of 650 points.
120
Beginning of June the news could be favorable but will the same Support and
Resistance Level maintain for the rest of the weeks; our team have done research on it
and made the conclusion that it will not be maintaining the same levels.
REASONS:
• Market fall is expected because it cannot sustain at this level for longer time
(Market as on 2nd April, 2009).
• 4th Quarter Result would the deciding point for the share price of ICICI
BANK.
• General Election is not far away and market will take some rest during this
time frame.
• Loss from the overseas market by having exposure to foreign exchange may
be crucial point for the ICICI BANK share price.
SWOT ANALYSIS
STRENGHTS:
1) Online Services: ICICI Bank provides online services of all it’s banking facilities.
It also provides D-Mart account facilities on-line, so a person can access his account
from anywhere he is.
[D-Mart is a dematerialized account opened by a salaried person for purchase & sale
of shares of different companies.]
2) Advanced Infrastructure: Branches of ICICI Bank are well equipped with advanced
technology to provide the customers with taster banking services. All the
computerized machines are located in suitable manner & are very useful to the
customers & staff of the bank.
3) Friendly Staff: The staff of ICICI Bank in all branches is very friendly & help the
customers in all cases. They provide faster services along with bonding & personal
relationship with the customers.
122
4) 12 hrs. Banking services: Compared to other bank ICICI bank provides long hrs. of
services i.e. 8-8 services to the customers. This service is one of it’s kind & is very
helpful for the customers who are in urgent need of money.
5) Other Facilities to the Customers & Employees: ICICI Bank also provides other
facilities like drinking water facilities, proper sitting arrangements to the customers.
And there are also proper Ventilation & sanitary facilities for the employees of the
bank.
6) Late night ATM services: ICICI bank provides late night ATM services to the
customers. The ATM centers of ICICI bank works even after 11:00pm. at night in
certain branches.
Weakness:
1) High Bank Service Charges: ICICI bank charges highly to customers for the
services provided by them when compared to other bank & that is why it is only in
the reach of higher class of society.
2) Less Credit Period: ICICI bank provides credit facilities but only upto limited
period. Even when the credit period is not over it sends reminder letters to the
customers which may annoy them.
OPPORTUNITIES:
1) Bank –Insurance services: The bank should also provide insurance services. That
means the bank can have a tie-up with a insurance company. The bank will advertise
& promote the different policies introduced by the insurance company & convince
their customers to buy insurance policies.
123
3) Recruit professionally guided students: Bank & Insurance is a special non-aid
course where the students specialize in the functioning & services of the bank & also
are knowledge about various tax policies. The bank can recruit these students through
tie-ups with colleges. Such students will surely prove as an asset to the bank.
4) Associate with social cause: The bank can also associate itself with social causes
like providing relief aid patients, funding towards natural calamities. But this falls in
the 4th quadrant so the bank should neglect it.
THREATS
1) Competition: ICICI Bank is facing tight competition locally as well as internationally.
Bank like CITI Bank, HSBC, ABM, Standered Chartered, HDFC also provide
equivalent facilities like ICICI do and also ICICI do not have consistency in its
international operation.
2) Net Services: ICICI Bank provides all kind of services on-line. There can be easy
access to the e-mail ids of the customers through wrong people. The confidential
information of the customers can be leaked easily through the e-mail ids.
124
Indian Realty Sector
Till a few months back, the real estate industry in India was witnessing a boom, it is
only sometime back the industry is facing a downturn. But one cannot deny that the
real estate market of India is still unorganized, fairly fragmented, mostly characterized
by small players with a local presence. Earlier, real estate developers were viewed
with an element of doubt. Realty players and developers were quite often identified as
people dealing with large amounts of unaccounted money and lacking transparency.
One felt that they would use unscrupulous means to acquire a variety of regulatory
approvals. The tremendous growth of the real estate sector and the change of belief of
people can be attributed to various fundamental factors such as growing economy,
growing business needs, etc. However, this boom in the Indian real estate sector is
restricted to areas such as commercial office space, retail and housing sectors.
Currently, the sector is facing a major resource crunch. There is an obvious lack of
qualified skilled people/workers in construction firms, PMC firms, etc. Along with
this, the manpower shortage is the shortage of availability of relevant statistics which
has raised an ambiguity in the minds of people as to how much construction activity is
actually taking place and one can not actually gauge the demand and supply trends
accurately. As a majority of developers are concerned about developing up-market
and high-class apartments/villas and penthouses, the opportunities and issues of
affordable, low cost housing in India have been ignored so far, as a result there is a
dearth of low cost affordable units. Also, one of the negative versions of Indian real
estate industry is that there is not much respect for sustainability so the concept of
green buildings, proper waste disposal methods and the longevity of the product are
often ignored.
125
UNITECH
COMPANY PROFILE:-
Unitech Ltd. Established in 1971 by a group of technocrats led by Mr. Ramesh
Chandra, Unitech has over the last three decades emerged as one of the leading
business houses in India. Apart from the fl agship business of real estate development,
the group has interests in varied businesses such as Fund management, Infrastructure
development and Transmission tower manufacturing. The Group has recently
ventured into mobile telecom business.
The Group’s fl agship company Unitech Limited is a leading real estate
developer in India with a market capitalization of around USD 6 billion. Unitech has
been at the forefront of the rapid transformation of Indian real estate sector in the
recent years.
The Company was promoted by a group of technocrats, proficient in the field of soil
and foundation engineering and managed By Professionals. The Company undertakes
projects both in India and Abroad.
UnitechSharePricefrom01-Jan-08to31-Mar-09
Resistanc
600 e level
500 400
Price
400
300
200
Support
100 Level 36
10/1/2008
11/1/2008
12/1/2008
1/1/2008
4/1/2008
6/1/2008
7/1/2008
8/1/2008
1/1/2009
2/1/2009
2/1/2008
3/1/2008
5/1/2008
9/1/2008
3/1/2009
0
Date
11/1/2008
12/1/2008
4/1/2008
7/1/2008
8/1/2008
5/1/2008
6/1/2008
9/1/2008
1/1/2009
2/1/2009
3/1/2009
127
• 52 Week High 338.00 05-May-2008
• 52 Week Low 21.80 28-Nov-2008
• All Time High
• All Time Low 21.80 28-Nov-2008
OCTOBER 2008
U n it e c h S h a r e P r ic e o f O c t - 0 8
150
100 Resistance
level 101.0
Price
50
0
10/1/08
10/5/08
10/7/08
10/9/08
10/3/08
10/13/08
10/15/08
10/21/08
10/23/08
10/29/08
10/31/08
10/11/08
10/17/08
10/19/08
10/25/08
10/27/08 Da te Support
level 30.00
NOVEMBER 2008
U n i t e c h S ha r e P r i c e o f N o v - 0 8 Resistance
60 level 56.00
40
Price
20
0
11/7/08
11/9/08
11/3/08
11/5/08
11/15/08
11/11/08
11/13/08
11/17/08
11/19/08
11/21/08
11/23/08
11/25/08
11/27/08
Support
Da t e
level 23.00
128
• Fall of rs.33.40 within a month
• Sale is decrease by 75%.
• Rate was down because Net Profit Decrease by 62%. & Expenditure increased
by 62%
DECEMBER 2008
U ni t e c h S ha r e P r i c e o f D e c - 0 8
Resistance
50 level 45.00
40
30
Price
20
10
0
08
08
08
Support
00
00
20
20
/20
/2
/2
/8/
/1/
/15
/22
/29
Da t e level 32.00
12
12
12
12
12
JANUARY 2009
Unitech Share Price of Jan-09
50 Resistance
40
30
level 47.00
Price
20
10
0
09
09
9
00
00
00
20
20
Support
/2
/2
/2
1/
8/
15
22
29
1/
1/
Date
1/
1/
1/
level 26.50
FEBRUARY 2009
Unite ch Share Price of Fe b-09 Resistance
33
32
31
level 32.10
30
Price
29
28
27
26
25
2/4/2009
2/2/2009
2/6/2009
2/8/2009
2/12/2009
2/14/2009
2/20/2009
2/22/2009
2/24/2009
2/26/2009
2/10/2009
2/16/2009
2/18/2009
Support
Date level 27.65
MARCH 2009
Unite ch Share Price of M ar-09
40 Resistance
30 level 36.40
Price
20
10
0
9
09
09
00
00
00
20
20
2
/2
2/
9/
/
23
16
30
3/
3/
Support
3/
3/
3/
Date
level 24.70
30
20
10
0
1/ 5/2009 1/6/2009 1/7/2009 1/8/2009 1/9/2009
D ate Support
level 26.50
Se cond We e k of Jan'09
Resistance
36 level 34.80
34
32
Price
30
28
Support
26
1/12/2009 1/13/2009 1/14/2009 1/15/2009 1/16/2009 level 29.40
Date
131
Resistance
level 31.90
T h ir d W e e k Of Ja n '09
34
32
30
Price
28
26
24
1 /1 9/20 09 1/20/20 0 9 1/21/20 09 1/2 2/20 09 1 /23/20 09
Support
DA te
level 26.80
Forth We e k of Jan'09
Resistance
33 level 32.50
32
31
30
29
Price
28
27
26
25 Support
24
1/27/2009 1/28/2009 1/29/2009 1/30/2009 level 27.15
Date
28
27.5
27
26.5 Support
2/2/2009 2/3/2009 2/4/2009 2/5/2009 2/6/2009 level 27.75
Date
33
32 Resistance
31 level 32.10
Price
30
29
28
27
2/9/2009 2/10/2009 2/11/2009 2/12/2009 2/13/2009 Support
Date level 31.10
133
• Fall of rs. 03.10 within a week
30.5
30
29.5 Resistance
29
level 29.25
Price
28.5
28
27.5
27
26.5
2/16/2009 2/17/2009 2/18/2009 2/19/2009 2/20/2009
Date Support
level 28.30
Fo u r th W e e k o f Fe b '09
Resistance
29 level 28.90
28.8
28.6
28.4
Price
28.2
28
27.8
27.6
2 /24 /200 9 2/25 /20 09 2/2 6/2 009 2/2 7/2 009
Support
Da te
level 28.10
27.5 Resistance
27
level 26.60
26.5
Price
26
25.5
25
24.5
3/2/2009 3/3/2009 3/4/2009 3/5/2009 3/6/2009
Date
Support
level 25.60
Resistance
27
26.5
level 26.50
26
25.5
Price
25
24.5
24
23.5
3/9/2009 3/10/2009 3/11/2009 3/12/2009 3/13/2009 Support
Date level 25.00
135
T hir d w e e k o f M ar '09
Resistance
27.5
level 27.10
27
26.5
Price
26
25.5
25
3/16/2009 3/17/2009 3/18/2009 3/19/2009 3/20/2009
Support
Date
level 25.95
Fo u r t h W e e k o f M a r '0 9
Resistance
40 level 36.00
30
Price
20
10
0
3 /2 3 /2 0 0 9 3 /2 4 /2 0 0 9 3 /2 5 /2 0 0 9 3 /2 6 /2 0 0 9 3 /2 7 /2 0 0 9
Da te
Support
level 29.00
136
YEARLY MARGIN FOR UNITCH LTD.
YEAR Avg. Margin Avg. Margin (%)
2008 15.931 8.935%
TILL MAR-09 2.747 8.666%
Margin:-The Average Margin for UNITECH LTD. In the last one year and 3 months
is 8.75% and Monthly Margin Range from 4-19%. The Margin at 0% Risk comes out
1.5% or Paisa 41 relating to current market price, considering 15% as the Risk free
margin for UNITECH LTD.
137
Financials:
138
Quarterly Data Q2'08 Q1'09 Q2'09 YOY% QOQ%
(Rs. mn,except per share data)
Net Sales 10135 10317 9831 -3.00% -4.70%
EBITDA 5071 6084 6092 20.20% 0.10%
Net Profit 4101 4233 3589 -12.50% 15.20%
Margins(%)
EBITDA 50.00% 59.00 62.00%
%
NPM 40.50% 41.00 36.50%
%
Result Highlights
Unitech’s second quarter net profit declined 12.5% yoy to Rs. 3.6 bn (Rs.
2.2 per share) in Q2’09, from Rs. 4.1 bn (Rs. 2.5 per share) in Q2’08. Net
profit margin declined by 396 bps from 40.5% in Q2’08 to 36.5% in Q2’09.
This was mainly driven by a 69.8% yoy rise in interest expenses, from
Rs.0.79 bn in Q2’08 to Rs.1.3 bn in Q2’09. We believe that the net profit
margin will drop further because of the high interest cost and the shift towards
low-margined middle income housing.
139
Quarterly Q2'08 Q1'09 Q2'09 YOY% QOQ TTM TTM YOY%
Data % ENDED ENDEDQ
Q2'08 2'09
( Rs. mn,except per
share data
Revenue
Real 8303 9140 8077 - - 39242 37331 -4.90%
Estate 2.70% 11.60
%
Construc 518 316 187 -64% - 2338 1739 -
tion 40.90 25.60
% %
Consultin 772 251 990 28.30 294.30 1131 1883 66.50
g % % %
Hospitali 26 31 32 26.70 4.90% 103 132 28.30
ty % %
Electrical 140 206 208 49.10 1.30% 720 790 9.70%
%
Others 377 373 336 - - 792 1294 63.30
10.90 9.90% %
%
Total 10135 10317 9831 44326
EBIT
Real 6049 6049 5257 - - 27249 24769 -9.10%
Estate 13.10 13.10
% %
Construc 42 42 37 - - 116 156 34.90
tion 10.60 10.60 %
% %
Consultin 251 251 984 292.10 292.10 733 1789 144.10
g % % %
Hospitali 2 2 0 89.50 89.50 10 -4 -
ty % % 135.00
%
Electrical 8 8 -22 NM NM 45 30 -
33.90
%
Others 24 24 7 - - 96 139 44.40
72.40 72.40 %
% %
Total 6376 6376 6264 28250 26880
EBIT
Margins
Real 72.90 66.20 65.10 69.40% 66.30%
Estate % % %
Construc 8.00% 13.10 19.90 5.00% 9.00%
tion % %
Consultin 32.50 99.90 99.40 64.80% 95.00%
g % % %
Hospitali 7.50% 6.20% 0.60% 10.00% -2.70%
ty
140
Electrical 5.60% 3.80% - 6.20% 3.70%
10.40
%
Others 6.40% 6.50% 2.00% 12.20% 10.80%
Outlook
We believe that in the prevailing low liquidity environment, the Company may
not be able to mobilise funds from commercial banks as the latter have stopped
lending to realty firms due to the high-risk weightage of the sector.
Therefore, the Company is actively looking to raise debt through private equity in
the current financial year to fund the ongoing development projects. Further, it is
also planning to reduce its debt burden through the the sale of office space, land,
and a hotel in the next 3-4 months. We expect that the aggressive
capitalstructure may force it to monetize some of its projects before they become
economically optimal, thereby sacrificing some returns.
We believe that the Company’s operating margin will fall from the present 59.9% due
to its strategic shift of focus towards the low-margined middle income housing
141
(affordable homes) and the expected fall in property prices. In addition, housing
projects in locations such as Vizag will further pressurise the margin. However,
construction costs are falling due to the decline in cement and steel prices. We
expect these costs to come down further as commodity prices are decreasing because
of the expected global recession. Hence, the fall in property prices is likely to
offset the gains expected from the lower raw material costs. As a result, the
operating margin is expected to fall from the current levels.
We have arrived at the NAV per share of Rs. 96, which incorporates the
substantial decline in real estate prices and a 15% dilution of Unitech’s
stake at the project level. We have used a 17.2% cost of equity to value the
Company and have arrived at a WACC of 15.4%.
Unitech is one the large listed companies that does not disclose its
quarterly balance sheet and cash flow statement to the investors. As a
result, I have limited visibility of the Company’s earnings growth and
current liquidity situation. Considering the weak demand scenario and the limited
financial information available, I believe the stock will trade at a discount to its
NAV, which we have assumed at 25%.
My fair value estimate for the Company is therefore Rs. 46 per share, which
represents a 76.6% upside to the current share price. Hence, I upgrade our rating on
the stock from Hold to Buy.
Year To FY05 FY06 FY07 FY08 FY09 FY10E CAGR(
March E %)
Rs.mn,except per
share data
Net Sales 6452 9266 32883 41404 15.40%
EBITDA 779 1806 20109 23687 23.70%
Net Profit 335 925 12667 16619 30.20%
Margins(%)
EBITDA 12.10 19.50 61.20 57.20 54.00 46.50%
% % % % %
NPM 5.20% 10.00 38.50 40.10 30.70 27.30%
% % % %
Per Share Data (Rs.)
EPS 0.2 0.6 7.8 10.2 5.8 5 30.20%
PER(x) 14.2x 40.7x 62.6x 2.6x 4.5x 5.3x
RATIO ANALYSIS:-
142
SUPPORT AND RESISTANCE LEVEL FOR JUNE MONTH
Market is showing uptrend in the last two weeks and SENSEX is now at 14500.
Unitech share price is also showing uptrend due to highly correlation with market so
for next 1 month Unitech share price is expected to achieve a new support level of
Rs.77 points but looking at the international market we can say that international
investors are bit optimistic so market can sustain at this high for some more time.
Domestic News
Reserve Bank of India is expected to relax further Repo rate and CRR,
which can keep market interest for some more time. Inflation is also
under control and it is now at all time Low (As on 15th May 2009) etc.
“Looking at the above given information we can project the new Support Level
at 77* points and Resistance Level at 107* points for the Second week of June”.
Beginning of June the news could be favorable but will the same Support
and Resistance Level maintain for the rest of the weeks; our team have
143
done research on it and made the conclusion that it will not be
maintaining the same levels.
REASONS:
• Market fall is expected because it can’t sustain at this level for longer time
(Market as on 2nd April, 2009).
• As it can be noticed from the 3rd quarter result of 2008 that the net profit is just
13% of the total sales. So its effect will definitely be seen in the share price of
the company. The share price of the company can reduce in the coming weeks
due to this negative news.
• This is also one of our prediction for the coming weeks that the support level
of the share price will be at Rs77 and the resistance level of the share will be at
Rs107 due to the reason that the support and resistance level of the shares in
the past 15 weeks remain at a level below Rs77 and Rs 107.
• 4th Quarter Results are expected in the month of April and it is expected that
the result will be better in comparison to the last quarter. Price of the share can
move a little bit upward but it will remain in the support and resistance level
given above.
• Inflation data is going negative for the market, so it can affect the share price
of the company.
“Looking at the above given information our Team has projected new
Support Level for the week of 3rd and 4th will be Rs.75 and Resistance level
will be Rs.110 points”.
Key Risks :-
144
Strengths
2. Unitech has significant experience and very strong track record. Some of its
achievement are as follows
• It has constructed more than 8000 kilometers of pipelines
• It has constructed six million cubic meters of storage tanks and terminal
capacity
• It has executed 12 refinery modernization projects.
• It has executed onshore and offshore pipelines under extreme climatic
condition and difficult terrain including swampy and marshy terrain.
5. Its core capabilities lie in process and plant engineering, heavy civil
engineering and building.
145
6. Its diverse nature of businesses allows avoiding dependency on any one
industry or nature of projects. Also its operation is spread across several
geographic which enable it to decrease dependence on any one economy or
project activity.
7. Unitech enjoys long term relationship with its reputed clients which reward it
with repeat orders from several of its domestic and international clients despite
increasing competitions. With this is in good position to capitalize on ever
increasing global demand for energy, infrastructure development and building
projects. Its acquisition of Sembawang and Simon carves which increases its
geographic reach of operations and providing a wider range of services.
8. Unitech has a highly qualified and motivated employee base with a strong
proven management team. As on 31 March 2007, It employs directly or
indirectly over 3600 full time employees and 6,200 strong temporary contract
labor for their projects. There promoters has more than 25 years of experience
in the construction industry.
Weakness
146
countries it operates around the world which may be very different from what
is prevailing in India.
2. The company has grown by leaps and bounds in last few years which may
create obstacles to manage growth and reduce profitability and operations.
Opportunities
147
1. High level of investments expected in the existing areas of specialization
2. Has vast international presence in pipeline projects related to oil and gas sector
3. Increase in the level of road investments and BOT road projects will help in
booking more infrastructure orders.
4. Around the world like United States and whole of Europe has opted for 10%
blending of bio-ethanol take place in diesel and petrol within a period of 4 to 5
years. Brazil,
5. Unitech can take up to 100 meter water depth in offshore pipeline. There is a
large opportunity on account of the replacement of the old lines in Bombay
high and south basin sea
6. As oil has crossed $100 mark there will be large quantum of money coming
into oil producing nations mainly Middle East countries which will translate
into multiple increases in its own capex in Oil and Gas sector.
7. There are huge opportunities in power with a ambitious target growth of 12%
in the eleventh plan. Also with Indo-US nuclear deal in the pipeline. Unitech is
in a good position to capitalize in this especially in hydel and nuclear which
are constructive intense projects.
Threats
148
CHAPTER 6
CONCLUSION
149
CONCLUSION
The growing influence of global developments on the Indian economy was manifest
in the surge in capital inflows in 2007-08, a phenomenon observed earlier in other
emerging market economies. This is a natural concomitant of the robust
macroeconomic fundamentals like high growth, relative stability in prices, healthy
financial sector and high returns on investment. Sometimes, it also reflects the
rigidities in the economy, particularly the interest differentials.
The strength, resilience and stability of the country’s external sector are reflected by
various indicators. These include a steady accretion to reserves, moderate levels of
current account deficit, changing composition of capital inflows, flexibility in
exchange rates, sustainable external debt levels with elongated maturity profile and an
increase in capital inflows.
The current account has followed an inverted “U” shaped pattern during the period
from 2001-02 to 2006-07, rising to a surplus of over 2 per cent of GDP in 2003-04.
Thereafter it has returned close to its post-1990s reform average, with a current
account deficit of 1.2 per cent in 2005-06 and 1.1 per cent of GDP in 2006-07.
For the Educomp solutions Company is likely to post very high growth rate for a long
time. Revenue figures are expected to show a CAGR of 70% for the period 2009-2011,
35% for the period 2011-2014 and 20% for the period 2014-2016.
We forecast strong 65% CAGR in Net Profits over FY09-FY11E and see limited risks
to estimates given.EBITDA margins are likely to improve as revenue share of high
margin retail and online business is likely to improve considerably. We expect ROE
to double and settle in the range between 30-35%.
For the Icici Bank NII grew 2% YoY but declined 7% QoQ to Rs19.9b. Loans declined
1% YoY and 4% QoQ to Rs2.1t. The sales have increased by 0.014% in Q3.Operating
profit has decreased on the assumption that either operating expenses have increased
150
or there is an increase in NPA’s.As there is an increase in gross profit & EPS, it shows
that the demand of the share will increase in the future.
And for the Unitech Unitech’s consolidated revenue declined 3% yoy, from Rs.
10.1 bn in Q2’08 to Rs. 9.8 bn in Q2’09, due to the slowdown in the construction and
real estate sales. Short-term liquidity likely to improve. Operating margins likely to
fall but remain at higher levels. Huge land bank spread across the country. Strong
asset base offsets short-term liquidity concerns.
Total Income has increased from Rs 14562.20 million for the quarter ended December
31, 2007 to Rs 18228.70 million for the quarter ended December 31, 2008.Tata Power
will hold 74% equity and IOCL will hold 26% equity in the proposed Joint Venture
Company.
So with this we find that market sentiments and the announcements effects the share
prices of the companies. and equity research helps to find out the support and
resistence level of the share prices and help us to predict the future prices of the
stocks.
151
ANNEXURE
152
ANNEXURE
EDUCOMP SOLUTIONS
BALANCE SHEET
Educomp In Rs.
Solutions Cr.
Balance Sheet
Mar '04 Mar '05 Mar '06 Mar '07 Mar '08
Sources Of Funds
Total Share Capital 4.47 4.47 15.96 15.99 17.25
Equity Share Capital 4.47 4.47 15.96 15.99 17.25
Share Application 0 0 0 0 0
Money
Preference Share 0 0 0 0 0
Capital
Reserves 12.59 18.92 74.35 98.71 269.57
Revaluation Reserves 0 0 0 0 0
Application Of Funds
Gross Block 18.7 24.62 35.08 93.62 264.53
Less: Accum. 8.86 13.04 18.34 21.82 53.18
Depreciation
Net Block 9.84 11.58 16.74 71.8 211.35
Capital Work in 0.28 2 6.65 7.59 20.08
Progress
Investments 1.1 1.74 1.55 28.11 70.98
Inventories 0.85 1.01 1.74 3.25 1.41
Sundry Debtors 13.15 19.13 25.16 49.35 114.46
Cash and Bank 1.3 3.06 28.6 30.77 54.34
Balance
Total Current Assets 15.3 23.2 55.5 83.37 170.21
Loans and Advances 1.69 1.99 6.03 21.93 36.44
Fixed Deposits 0 0 31.06 64.19 224.69
Total CA, Loans & 16.99 25.19 92.59 169.49 431.34
Advances
Deffered Credit 0 0 0 0 0
153
Current Liabilities 8.22 12.74 6.63 23.73 70.11
Provisions 0 0 10.75 13.94 9.6
Total CL & Provisions 8.22 12.74 17.38 37.67 79.71
Net Current Assets 8.77 12.45 75.21 131.82 351.63
Miscellaneous 0 0 0.08 0.06 0.04
Expenses
19.99 27.77 100.23 239.38 654.08
Total Assets
Contingent Liabilities 0 0 17.44 17.95 29.24
Book Value (Rs) 38.15 52.3 56.59 71.75 166.31
Income
Sales Turnover 24.75 29.82 52.3 106.57 262.1
Excise Duty 0 0 0 0 0
Net Sales 24.75 29.82 52.3 106.57 262.1
Other Income 1.26 2.29 1.07 5.07 14.8
Stock Adjustments 0 0 0 0 0
Total Income 26.01 32.11 53.37 111.64 276.9
Expenditure
Raw Materials 6.86 3.37 0 0 0
Power & Fuel Cost 0 0 0 0 0
Employee Cost 5.49 6.35 7.5 10.51 25.58
Other Manufacturing 0 0 9.54 30.42 79.73
Expenses
Selling and Admin 0 0 7.63 12.15 18.83
Expenses
Miscellaneous 6.06 6.74 1.17 2.2 11.62
Expenses
Preoperative Exp 0 0 0 0 0
Capitalised
Total Expenses 18.41 16.46 25.84 55.28 135.76
Operating Profit 6.34 13.36 26.46 51.29 126.34
PBDIT 7.6 15.65 27.53 56.36 141.14
Interest 0.38 0.55 0.71 1.99 5.82
PBDT 7.22 15.1 26.82 54.37 135.32
Depreciation 3.73 4.89 5.31 9.39 32.3
Other Written Off 0 0 0.02 0.02 0.02
Profit Before Tax 3.49 10.21 21.49 44.96 103
Extra-ordinary items -0.42 -0.06 -0.02 -0.74 0
PBT (Post Extra-ord 3.07 10.15 21.47 44.22 103
Items)
Tax 1.61 3.83 7.57 15.64 32.94
Reported Net Profit 1.89 6.33 13.92 28.65 70.06
154
Total Value Addition 11.55 13.09 25.85 55.28 135.76
Preference Dividend 0 0 0 0 0
Equity Dividend 0 0 2.39 3.31 4.32
Corporate Dividend 0 0 0.34 0.56 0.73
Tax
Per share data (annualised)
Shares in issue (lakhs) 44.73 44.73 159.6 159.85 172.47
Earning Per Share 4.22 14.15 8.72 17.92 40.62
(Rs)
Equity Dividend (%) 0 0 15 20 25
Book Value (Rs) 38.15 52.3 56.59 71.75 166.31
ICICI BANK
BALANCE SHEET
155
ICICI Bank In Rs.
Cr.
Balance Sheet
Mar '05 Mar '06 Mar '07 Mar '08 Mar '09
157
2527.2 3096.61 3648.04 5056.1 5116.97
Net Profit Before Tax
Net Cash From Operating 9131.72 4652.93 23061.95 -11631.15 -14188.49
Activities
Net Cash (used in)/from -3445.24 -7893.98 -18362.67 -17561.11 3857.88
Investing Activities
Net Cash (used in)/from -1227.13 7350.9 15414.58 29964.82 1625.36
Financing Activities
Net (decrease)/increase 4459.34 4110.25 20081.1 683.55 -8074.57
In Cash and Cash
Equivalents
Opening Cash & Cash 8470.63 12929.97 17040.22 37357.58 38041.13
Equivalents
Closing Cash & Cash 12929.97 17040.22 37121.32 38041.13 29966.56
Equivalents
UNITECH
BALANCE SHEET
Unitech
Balance Sheet In Rs. Cr.
Mar '04 Mar '05 Mar '06 Mar '07 Mar '08
Sources Of Funds
Total Share Capital 12.49 12.49 12.49 162.34 324.68
158
Share Application 0 0 0 0 0
Money
Preference Share 0 0 0 0 0
Capital
Reserves 138.2 161.42 212.05 998.66 1,819.14
Revaluation Reserves 0 0 0 0 0
Miscellaneous 0 0 0 0 0
Expenses
Total Assets 282.33 497.73 911.3 4,766.06 10,261.35
59.87 376.88 434.87 1,640.51 2,325.69
Contingent Liabilities
Book Value (Rs) 120.67 139.27 179.81 14.3 13.21
159
Income
Sales Turnover 373.95 509.33 653.13 2,441.74 2,486.79
Excise Duty 0 0 0 0 0
Expenditure
Raw Materials 27.41 58.33 65.45 80.53 26.46
Preoperative Exp 0 0 0 0 0
Capitalised
160
PBT (Post Extra-ord 23 42.33 107.61 1,347.14 1,365.16
Items)
Preference Dividend 0 0 0 0 0
Investing Activities
Net Cash (used in)/from -0.04 116.5 347.25 2508.19 4033.01
Financing Activities
161
Net 34.23 110.92 -34.26 635.19 -424.64
(decrease)/increase In
Cash and Cash
Equivalents
Opening Cash & Cash 49.73 83.96 194.89 160.63 795.82
Equivalents
Closing Cash & Cash 83.96 194.89 160.63 795.82 371.18
Equivalents
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Accounting,” The Washington Post, Monday, January 8: p. A01.
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