Financial Analysis

BAJAJ AUTO LTD.

NMPXX Group-XIII 1. Abhya Nand Singh 2. Rajeev Kumar 3. Manoj Kumar Gupta 20-NMP-03 20-NMP-66 20-NMP-30

4. B Venkata Rao
5. Kundan Kumar

20-NMP-16
20-NMP-28
1

Financial Analysis
Directors & Auditors report Significant Accounting Policies Financial statements

Balance sheet
Profit & loss account Cash Flow Statements Ratio Analysis

Profitability
Liquidity Solvency Other Ratios including EVA

Dupont Control Chart

Industry Comparison Summary
2

DIRECTORS REPORT March 31st 2006

Annual Dividend for 2005-06 : Rs 40/share ( 400%) R & D efforts : CT100 was upgraded with ExhausTEC and SNS suspension resulting in improved performance, fuel economy and riding comfort. New plant at Pantnagar, Uttaranchal

Cordial Industrial Relations :

Statutory Disclosures :

No man-hour lost.
Made under Indian companies act 1956

Reflection on Auditors Report

The observations made in the Auditors' Report, read together with the relevant notes thereon, are self explanatory and hence do not call for any comments under section 217 of the Companies Act, 1956.
3

AUDITORS REPORT March 31st 2006

Audit :
- Conducted in accordance with standards generally accepted in India and Indian companies act 1956. - Obtained all information and explanations necessary for audit - Proper books of account as required by law have been kept by the company

Balance sheet, P& L Account and Cash flow statement :

- In agreement with books of Accounts of the company - Comply with accounting standards referred to in section 211( 3c ) of the companies act 1956

- Balance sheet as on 31st March 2006

- P & L Account for the year April 1st 2005 March 31st 2006 - Cash flow statement for the year April 1st 2005 March 31st 2006
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AUDITORS REPORT Annexure

Fixed assets : Physically verified by auditors

Inventories :

Physically verified by the management at reasonable intervals during the year

Loans - Secured or unsecured : - Not granted to any companies, firms or other parties - Not taken from any companies, firms or other parties Internal control systems : No major weakness noticed by the auditors RBI Directives : Complied by the Company

Significant Accounting Policies

System of Accounting
- Mercantile system of accounting - Income and expenditure on an accrual basis - Financial Statements under the Historical cost - Sales considered at the time of dispatch - Exchange rates prevailing on the date of the transaction - Profit/loss on sale of investments on the contract date

Depreciation and Amortisation

- Rates as specified in Schedule XIV to the companies Act 1956 - Premium on leasehold land amortised over the period of lease - Plant,Machinery and other fixed assets -Straight Line Method - Technical know-how acquired amortised over six years - Technical know-how developed amortised over three years

Inventories Valuation
- Finished stocks at cost or Net realisable value - Raw materials on weighted average basis or Net realisable value - Goods in transit are stated at actual cost
6

KEY FINANCIALS- BALANCE SHEET

As on mentioned date

SOURCES OF FUNDS Net Worth (Cr)

31/03/2006 31/03/2005 31/03/2004 4770.73 4134.35 3693.62

31/03/2003 3240.6

Loan Funds (Cr)

Current liabilities (Cr) Deferred Tax liabilities (Cr) Total Liability (Cr) APPLICATION OF FUNDS Net Fixed Assets (Cr)

1467.15
3544.76 190.21 9972.85 1114.16

1226.99
2793.97 212.80 8368.11 1114.98

1005.72
2326.07 239.04 7264.45 1206.31

840.22
1940.69 240.47 6261.98 1276.72

Investments (Cr)
Current Assets (Cr) Deferred Tax Asset (Cr) Capital work in progrs. (Cr)

5856.97
2856.07 102.63 25.52

4560.58
2589.74 72.90 12.41

3855.44
2053.04 116.22 15.94

2729.89
2155.13 68.06 14.69

Lease adjustment (Cr)

Total Assets (Cr)

17.50
9972.85

17.50
8368.11

17.50
7264.45

17.50
7 6261.98

KEY FINANCIALS- BALANCE SHEET

SOURCES OF FUNDS
(% Total Liability)

Continued

As on As on As on 31/03/2006 31/03/2005 31/03/2004

47.80
14.70 35.60 1.90

As on 31/03/2003
51.80
14.20 30.00 4.00

Net Worth
Loan Funds Current liabilities Deferred Tax liabilities

49.00
15.00 33.00 3.00

50.20
13.80 33.00 3.00

Total Liability
Net Fixed Assets Investments

100.00
11.20 58.70

100.00
13.36 54.50

100.00
16.71 53.03

100.00
20.66 43.60

APPLICATION OF FUNDS (% Total Asset)

Current Assets
Deferred Tax Asset Capital work in progrs. Lease adjustment

28.60
1.00 0.30 0.30

31.00
0.80 0.14 0.20

28.26
1.70 0.10 0.20

34.40
1.08 0.06 0.20

Total Assets

100.00

100.00

100.00

100.00

BALANCE SHEET
Continued

Decreasing trend of equity as % of total sources of funds. Increase in current liability and decrease in current assets, hence decreasing trend of liquidity. Decrease in fixed assets as % of total asset. Increase in investment as % of total asset Thus the company is investing its profit outside its business.

KEY FINANCIALS- P&L A/C

For the period
INCOME ( Cr) Net Sales Other income 2005-06 7469.38 636.97 2004-05 5723.96 598.82 2003-04 4755.17 515.09 2002-03 4159.08 326.65

Total Income
EXPENDITURE (Cr) Purchases Other Exp

8106.35
5324.6 1009.67

6322.78
4089.68 960.62

5270.26
3199.22 929.79

4485.73
2692.75 832.1

Depreciation
Interest Total Expenditure PBIT PBT Total taxes PAT

191
0.34 6525.61 1581.08 1580.74 479.11 1101.63

185.37
0.67 5236.34 1087.11 1086.44 319.63 766.81

179.89
0.94 4309.84 961.36 960.42 228.91 731.51

171.16
1.12 3697.13 789.72 788.60 250.2 538.4

Constant growth of income in terms of sales and other sources over the years. Profit after tax (PAT) got doubled over the span of 4 years.
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KEY FINANCIALS- P&L A/C

INCOME (%) Net Sales 2005-06 92.14 2004-05 90.53

For the period

2003-04 90.23

2002-03 92.72

Other income
Total Income EXPENDITURE (%) Purchases Other Exp Depreciation Interest Total Expenditure PBIT PBT Total taxes

7.86
100.00 81.60 15.47 2.93 0.01 100.00 1581.08 1580.74 479.11

9.47
100.00 78.10 18.35 3.54 0.01 100.00 1087.11 1086.44 319.63

9.77
100.00 74.23 21.57 4.17 0.02 100.00 961.36 960.42 228.91

7.28
100.00 72.83 22.51 4.63 0.03 100.00 789.72 788.60 250.2

PAT

1101.63

766.81

731.51
11

538.4

Cash Flow Statement

Cash Flow Summary ( Cr) Cash & Cash Equivalent (Beginning of FY) Operating Activities Investing Activities Financing Activities Cash & Cash Equivalent (End of FY ) 2005-06 108.69 1072.62 (1087.54) (11.68) 82.09 2004-05 79.37 455.49 (395.32) (30.85) 108.69 2003-04 (30.02) 837.21 (811.09) 23.23 79.37 2002-03 25.2 573.38 (640.95) 72.3 30.02

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Ratio Analysis
Ratios have been analyzed under four major heads Liquidity Solvency Profitability Others

13

LIQUIDITY RATIOS

Liquidity Ratios Current Ratio (CA/CL) Quick Ratio (CA-Inv./CL)

2005-06

2004-05

2003-04

2002-03

0.81

0.93

0.88

1.11

0.73

0.85

0.80

1.00

Decreasing Liquidity of the company, hence short of funds which may become roadblock to honor its commitments
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Liquidity Ratio

2005-06
1.20

2004-05
1.11

2003-04

2002-03

1.00
1.00

0.93 0.81

0.88 0.73

0.85

0.80

Value of Ratios

0.80

0.60

0.40

0.20

0.00

Current Ratio (CA/CL)

Quick Ratio

(CA-Inv./CL) 15

SOLVENCY RATIOS

Solvency ratios

2005-06 2004-05 2003-04 2002-03

Debt Equity ratio ( Debt/Equity)

0.31

0.30

0.27

0.26

Interest Coverage Ratio Times

4650.2

1622.6

1022.7

705.1
16

SOLVENCY RATIOS
Debt Equity Ratio
2006
0.32 0.31 0.3 0.29 0.307

Interest Coverage Ratio

2003

2005

2004

2006
5000 4500 4000 3500 3000 2500 2000 1500 1000 500 0

2005

2004

2003

4650.23

Value of Ratio

0.28 0.27 0.27 0.26 0.26 0.25 0.24 0.23

Valve in Times

0.29

1622.01 1022.34 704.8

Debt Equity Ratio (Debt/ Equity)

Interest Coverage Ratio (PBIT/INT)

Analysis
- Overall borrowings are low - Higher degree of protection to the lenders. - Predominantly Debt is deferred tax - Ratios increasing due to accumulation of deferred tax
17

PROFITABILITY RATIOS
Profitability Ratios
Gross Profit Margin (PBIT/Sales)*100

2005-06

2004-05

2003-04

2002-03

19.50

17.19

18.24

17.61

Net Profit Margin (PAT/Sales)*100

Return on Investment (PBIT/CE )*100 Return on Equity (PAT/Equity)*100

13.59

12.13

13.88

12.00

25.35

20.28

20.46

19.35

23.09

18.55

19.80

16.61
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PROFITABILITY RATIOS
Profitability Ratios
2005-06
30.00

Continued

2004-05

2003-04

2002-03

25.00

20.00

Ratios

15.00

10.00

5.00

0.00 Gross Profit Margin (PBIT/Sales)*100 Net Profit Margin (PAT/Sales)*100 Return on Investment (PBIT/CE )*100 Return on Equity (PAT/Equity)*100

19

PROFITABILITY RATIOS
ANALYSIS

Continued

Increasing ROI implies surplus generation of money invested (higher productivity of investment). Increasing ROE makes the equity holder to enjoy higher returns. Equity Share capital has increased over previous years due to increase of Reserve & Surplus.

20

Important Ratios-I
Turnover Ratio
Capital Employed Turnover ( Net Sales /CE) Fixed Assets Turnover ( Net Sales/Fixed Assets) Current Assets Turnover ( Net Sales/CA ) Inventory Turnover ( Cost of sales/ Ave. Inventory )

2005-06 2004-05 2003-04 2002-03

1.30

1.18

1.12

1.10

7.28

5.67

4.37

3.51

2.84

2.44

2.57

2.08

23.69

21.73

18.48

16.20
21

Important Ratios-I

Continued

22

Important Ratios-I
ANALYSIS
High degree of efficiency in asset utilizations

Continued

Increasing Inventory Turnover, hence better utilization of inventory. Increasing current asset turnover implying better utilization of funds deployed in current assets.

23

Important Ratios-II
Other Ratios Inv. Stock in no of days (365/Inv. Turnover ratio) Dividend Payout Ratio (Dividend/PAT)*100 Book Value per Share ( BV of Eq /No. Sh) Earning per Share ( PAT-Pref. share devidend/No. Sh) Dividend Per Share (Divident/No. of Shares) Avg. collection period (365*receivables/sales) 2005-06 15.41 36.74 471.42 2004-05 16.80 32.99 408.53 2003-04 19.75 34.58 364.98 2002-03 22.53 26.31 320.22

111.0 40.0 14.74

75.77 25.0 11.25

72.28 25.0 10.28

53.20 14.0 14.66

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Important Ratios-II
50 45

Continued
44. 76

2006
40 35

2005
36%

2004
34. 58% 32. 98%

2003

40 37. 04

30 26. 31% 25 25

20 15. 52 15 13. 34 14. 24

18. 19

10

I nv . S t oc k i n no of da y s ( 3 6 5 / I nv . Tur nov e r Ra t i o)

Di v i de nd P a y out Ra t i o ( Di v i de nd/ P AT) * 10 0

Di v i de nd P e r S ha r e ( Di v i de nt / No. of S ha r e s)

25

26

Important Ratios-II
ANALYSIS

Continued

No. of days Inventory stock is decreasing over the years implies that lesser capital is block in this head. Average collection period is increasing implies money is getting blocked at sundry debtors. Dividend payout ratio is increasing over the years resulting in the higher part of profit after tax is being enjoyed by the share holders. Book value of the share is significantly higher than face value implying the high net worth of the company. Earning per share is just doubled over last four years shows handsome earning of the capital owners. The company is providing a encouraging dividend of 27 almost 4 fold of the face value to equity holders

ECONOMIC VALUE ADDED

YEAR

2005-06

2004-05 2003-04 2002-03

NET WORTH

4770.73

4134.35 3693.62

3240.6

PAT EVA = (PAT-10% of NW)

1101.63

766.81

731.51

538.4

624.557

353.375 362.148

214.34
28

29

ECONOMIC VALUE ADDED

ANALYSIS
Economic value of the company gradually increasing over the years. It has grown three fold over past 4 years and two fold from previous year. This shows the better managerial efficiency.

30

DUPONT ANALYSIS Bajaj Auto Limited (FY2005-06)

PBIT Operating Profit margin 19.5% 1581.08 Cr Sales 8106.35 Cr. Mfg. :6009.3 Cr

(+)
Admn.:

(/)
Sales 8106.35 Cr.

(-)
Total Costs 6525.61 Cr.

257.39 Cr

(+)
Mark.: 258.92 Cr

ROI= 25.35%

(x)

Turnover of Capital employed = 1.30

Sales 8106.35 Cr.

Machinery:
FA :1114.16 Cr 942.33 Cr

(/)
CE 6237.88 Cr.

(+)
Investments :5856.97Cr

(+)
Buildings 171.83 Cr CA: 2856.07 Cr

(+)
Net CA: (688.69) Cr

(-)
CL:3544.76 Cr

31

Management Achievement Ratios

Total Management Performance (PAT/NW) Operating Management Performance Financial Operations Ratio (PAT/PBIT) Financial Leverage Ratio (CE/NW) Financial Management Performance

0.23
0.25 0.70 1.31 0.91

0.19
0.20 0.71 1.30 0.91

0.20
0.20 0.76 1.27 0.97

0.17
0.19 0.68 1.26 0.86
32

CONCLUSIONS
Financial leverage ratio is influenced by debt, as a large amount of debt would increase this ration.

Operating management performance indicates the productivity of the investment. It is nothing but ROI.
Financial operation Ratio is consistent, it implies profits are consistent over the period. One can asses the tax & Interest payment also form this ratio.

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INDUSTRY ANALYSIS
Parameter (Financial Year 2005-06) Bajaj Auto Ltd. Hero Honda Motors Ltd. TVS Motors Ltd.

Debt-Equity Ratio Current Ratio

Interest Cover Ratio ROCE (%) Dividend per Share Earning Per Share

0.307 0.806
4650.23 25.34 40.0 108.86

0.092 0.525
231.38 64.60 20.0 48.24

0.502 1.117
13.84 15.77 0.70 4.92

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Comparative Analysis
120

Bajaj Auto Ltd.

100

Hero Honda Motors Ltd.

TVS Motors Ltd.

108.86

80

64.6
60

48.24 40
40

25.34
20

15.77

20 4.92 0.7

ROCE (%)

Dividend per Share

Earning Per Share

35

Comparative Analysis
Bajaj Auto Ltd.
1.2

Hero Honda M otors Ltd.

TVS M otors Ltd.

1.117

0.806
0.8

0.6

0.502

0.525

0.4

0.307

0.2

0.092
0

Debt-Equity Ratio

Current Ratio

36

CONCLUSIONS
It is found that the financial health of the company is very good. Companys growth over the years and the return enjoyed by the investors are highly appreciable. The company has been expanding its business considerably and the EVA is higher over years. Some of the particulars about company are as follows: - Sales and Profits consistently Increasing over the years - Low debt company

- Short term low liquidity.

- High fixed asset utilization. - Low interest burden, predominantly utilizing Owners capital - Return on Investment although Improving still less than Hero Honda. - High EPS - Best in Industry. - Highest dividend per share in industry.
37

Thank you
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