avdhesh sharma live project (1).docw2003
TRANSCRIPT
A
LIVE PROJECT REPORT
ON
“STOCK PRICE ANALYSIS OF
DIFFERENT SECTORS”
SUBMITTED BY:
PRIYANKA SHARMA
ENROLLMENT NO. : 4107086086
MANAGEMENT OF BUSINESS FINANCE (MBF)
2007-2009
A Project Report Submitted in Partial Fulfilment of the Requirement
for Award of
Management of Business Finance (MBF)
INDIAN INSTITUTE OF FINANCE
Project Guide:Abhishek PatelResearch AnalystAnagram Stockbroking Ltd
Academic Guide:Prof. J.D AgarwalProf. of FinanceProf. Aman AgarwalDirectorIndian Institute of FinanceGr. Noida
Certificate
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……………………..
PROF. J.D. AGARWAL,
Professor of Finance,
Indian Institute of Finance,
Greater Noida/ Delhi.
PROF. AMAN AGARWAL
Director,
Indian Institute of Finance,
Greater Noida/ Delhi.
2
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.
Under the renowned guidance of Prof J.D Agarwal Chairman, Indian
Institute Of Finance, Greater Noida the one whose expert guidance and
kind support brought relevance on this project. I would be thankful for
this pleasing guidance and co-operation.
Mr. ABHISHEK PATEL Research Analyst, Anagram Securities was
always there to provide me the judicious judgment, logical thinking,
procedure and in nut shell everything. His inspiration and precious
guidance did play a key role to complete my work at ease and well within
time. I wish my deepest gratitude for their support throughout.
I express my profound sense of respect and deepest gratitude to each and
everyone.
I thank all my well-wishers who helped me directly or indirectly in
carrying out this work towards completion.
3
DECLARATION
This is to certify that the project on “Stock price analysis of different
sectors” was carried out by Priyanka Sharma (4107086086) as part of
requirement of Management of Business Finance (MBF): VIth semester
programme. This study is being submitted for approval to
INDIAN INSTITUTE OF FINANCE.
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
or diploma of this or any other Oganisation/Institute/University
Signature:
Name: Priyanka Sharma
Enrol No. 4107086086
PREFACE 4
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.
The project deals with the analysis of different companies of different
sectors.
My project is divided into different chapters and they are given as under:
Table of ContentsSR. NO.
PARTICULARS PAGE NO.
5
1 Executive Summary 7-9
2 Objective of Study 10-11
3 Research Methodology 12-14
4 Chapter 1 Introduction of the company
15-22
5Chapter 2
Review of literature23-25
6 Chapter 3 Research An Introduction
Technical Analysis Fundamental Analysis
26-45
7 Chapter 4 Analysis of Current Economic Statistics
46-65
8 Chapter 5 Analysis of Different Indian sectors and its
leading companies IT Banking Real Estate
66-151
9 Chapter 6 Conclusion
152-154
10 Annexure Bibliography
155-165167-190
EXECUTIVE SUMMARY
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
6
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
Also I have done the Financial Strength Analysis of the company’s because to know
how it is efficient in financial way .
7
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.
OBJECTIVE OF THE STUDY
As per the requirement of course I have prepared this report.
To track the share prices of the companies.
To study the share price movements. 8
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
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. 9
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
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
10
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.
Research Methodology
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.
11
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
Last section of my research was to do valuation ratio as a common factor indicating
the future prospectus of the companies. In this study, mainly two types of data
collection techniques were used i.e. with the help of research analyst and secondly
with the help of research report given by project guide at the company. In both the
methods, the analysis has been done for the sector. It was taken care that I refrained
from expressing my own opinion. All the data collected was made in such a way that
it acted as a structured instrument.
Limitations
The biggest problem that I faced during this research study was that of data
collection.
Calculation of Valuation ratios was another problem
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.
12
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.
13
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
Western India especially Gujarat where it is the biggest player. But it has expanded
considerably. Anagram has 150+ branches and 110 franchises.
14
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.
Prominent feature of Anagram Securities
Strong research department located at Ahmedabad office.
Well structured infrastructure for trading
Highly skilled and experience staff
Vinod K Sharma head of research at Anagram is a well known and one of the
most competent technical analyst in the whole industry.
15
Dedicated user friendly website for its customers, named www.monepore.com
and www.moneyporeexpress.com
Moneypore express, software developed by Anagram Securities provides retail
investors better opportunity to trade at home and that to at greater speed and
convenience.
Markets and Network
Anagram has membership in all the leading stock and commodities exchanges in the
country. The firm is a member in NSE, BSE, NCDEX and MCX. It is a depository
participant with NSDL. Anagram has its roots in Western India and has established
nationwide presence with 169 branches, 1,360 sub-brokers, 2,556 terminals and a
professional team of 2,000 plus employees spread across major metros and states in
the country. It also provides trading in futures and options through its online portal
www.anagram.co.in
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
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
16
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.
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 17
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
Cash Market: NSE, BSE
Derivatives: NSE, BSE
Debt Market: BSE
Commodities: NCDEX, MCX
Reach & Access
No. of Employees: 2000
No. of Offices: 169
18
No. of Sub-brokers: 1360
Terminals with Sub-brokers: 1231
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
Trading Account : Rs. 200
Rs. 100 : Stamp duty NSE
Rs. 100 : Stamp duty BSE
Online
Online trading account : Rs. 750
Online trading account
Online Software Moneypore Express
Online package : Rs. 599 (+ Rs 5000 margin)
Demat
Online trading account
Online Software Moneypore Express
SWOT Analysis
19
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
CHAPTER 2
LITERATURE REVIEW
20
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 :
In this article author reports the results of a questionnaire survey conducted in
February 1995 on the use by foreign exchange dealers in Hong Kong of fundamental
and technical analyses to form their forecasts of exchange rate movements. Our
findings reveal that>85% of respondents rely on both fundamental and technical
analyses for predicting future rate movements at different time horizons. At shorter
horizons, there exists a skew towards reliance on technical analysis as opposed to
fundamental analysis, but the skew becomes steadily reversed as the length of horizon
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. 21
(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
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 22
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.
(“Barathi Kamath Journal of Intellectual Capital”)
CHAPTER 3
RESEARCH AN
INTRODUCTION
23
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.
24
TECHNICAL ANALYSIS
Technical analysis is simply the study of prices as reflected on price charts.
Technical analysis assumes that current prices should represent all known
information about the markets. Prices not only reflect intrinsic facts, they also
represent human emotion and the pervasive mass psychology and mood of the
moment. Prices are, in the end, a function of supply and demand. However, on a
moment to moment basis, human emotionsfear, greed, panic, hysteria, elation,
etc. also dramatically effect prices. Markets may move based upon people's
expectations, not necessarily facts. A market "technician" attempts to disregard
the emotional component of trading by making his decisions based upon chart
formations, assuming that prices reflect both facts and emotion. Analysts use their
technical research to decide whether the current market is a BULL MARKET or a
BEAR MARKET.
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
25
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.
26
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.
4. PATTERNS AND INDICATORS
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.
The oldest form of interpreting charts is PATTERN ANALYSIS. This
method gained popularity through both the writings of Charles Dow and
Technical Analysis of Stock Trends, a classic book written on the subject just
after World War II. The newer form of interpretation is INDICATOR
ANALYSIS, a math-oriented examination in which the basic elements of price and
volume are run through a series of calculations in order to predict where price will go
next. Pattern analysis gains its power from the tendency of charts to repeat the same
bar formations over and over again.
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
math calculations to measure the relationship of current price to past price 27
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.
5. SUPPORT AND RESISTANCE
The concept of SUPPORT AND RESISTANCE is essential to understanding
and interpreting stock charts. Just as a ball bounces when it hits the floor or
drops after being thrown to the ceiling, support and resistance defines
natural boundaries for rising and falling prices. Buyers and sellers are constantly in
battle mode. Support defines that level where buyers are strong enough to keep
price from falling further. Resistance defines that level where sellers are too strong to
allow price to rise further. Support and resistance play different roles in uptrends and
downtrends. In an uptrend, support is where a pullback from a rally should end. In a
downtrend, resistance is where a pullback from a decline should end. Support and
resistance are created because price has memory. Those prices where significant
buyers or sellers entered the market in the past will tend to generate a similar
mix of participants when price again returns to that level. When price pushes above
resistance, it becomes a new support level. When price falls below support, that level
becomes resistance. When a level of support or resistance is penetrated, price tends to
thrust forward sharply as the crowd notices the BREAKOUT and jumps in to buy
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 28
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.
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.
29
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
find most of them already done on sites like cnn.money.com or MSN
MoneyCentral.com.
These are the most popular tools of fundamental analysis. They focus on earnings,
growth, and value in the market. The tools are given belows:-
1. Earnings per Share – EPS
2. Price to Earnings Ratio – P/E
3. Projected Earning Growth – PEG
4. Price to Sales – P/S
5. Price to Book – P/B
6. Dividend Payout Ratio
7. Dividend Yield
8. Book Value
9. Return on Equity
No single number from this list is a magic bullet that will give you a buy or sell
recommendation by itself, however as you begin developing a picture of what you
want in a stock, these numbers will become benchmarks to measure the worth of
potential investments.
Ratio analysis
Ratio analysis is a powerful tool of financial analysis. a ratio is defined as the
“indicated quotient of two mathematical expressions” and as” the relationship
between two or more things.” in financial analysis, a ratio is used as a benchmark for
30
evaluating the financial position and performance of a firm. The absolute accounting
figures reported in the financial statements do not provide a meaningful understanding
of the performance to some other relevant information. For example, Rs5 corer net
profits may look impressive, but the firm s performance can be said to be good or bad
only when the net profit figure is related to the firm s investment. The relationship
between the two accounting figures, expressed mathematically, is known as financial
ratio. Ratio helps to summarize the large quantities of financial performance.
Uses of 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
Limitations of accounting ratios:
Ratios may be worked out for insignificant and unrelated figures
Price level changes affect ratio analysis
Difficult to forecast future on the basis of the past facts
Give false result if the ratios are based on incorrect accounting
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.
31
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.
Is management generating sufficient profits from the firm’s assets?
Primary purpose for purchasing an asset is to produce profits, the analysts often seek
an indication of the adequacy of the profits being realized if the level of profits
appears insufficient in relation to the investment, an investigation into the reasons for
the inferior returns is in order.
How does the firms’ management finance its investment? These decisions
have a direct impact upon the returns provided to the common stockholders.
Are the stockholders receiving sufficient return on their investment?
The objective of financial manager is to maximize the value of the firm’s common
stock, and level of returns being received by the inventors relative to their investment
is a key factor in determining the value.
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;
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 32
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-
1. INCOME STATEMENT RATIOS:-These ratios are calculated on the basis of the terms of income statement only e.g.
gross profit ratio, stock turnover rationed
2. POSITION STATEMENT RATIOS:-These ratios are calculated on the basis of the figures of the figures of position
statement only e.g. current ratio, debt equity ratio etc.
3. INTER STATEMENT RATIO OR COMPOSITE RATIO:-
These ratios are based on the figures of income statement as well as position
statement e.g. fixed assets turnover ratios net profit to capital employed etc
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
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
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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
The ratio’s indicating the liquidity of a company:
a) Net working capital
b) Current ratio
c) Quick ratio
d) Super ratio
e) Cash ratio
f) Total liabilities ratio
a) NET WORKING CAPITAL (NWC):
NET WORKING CAPITAL
NET ASSETS
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.
34
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
CURRENT RATIO= CURRENT ASSEST
CURRENT LIABILITES
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.
c) QUICK RATIO OR ACID TEST RATIO
It measures liquidity designed to overcome the defect of current ratio that fails to
convey any information on the composition of the current assets of a firm company’s
ability to convert its current assets quickly into cash in order to meet its current
liabilities. The acid test ratio is the ratio between quick current assets and current
liabilities and is calculated by dividing the quick assets by quick liabilities.
Acid test ratio = Quick assets
Current liabilities
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.
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Being most liquid an analyst may examine cash ratio and its equivalent to current
liabilities.
CASH RATIO: CASH
CURRENT LIABILITIES
g) TOTAL LIABILITIES RATIO
This ratio is obtained by dividing total liabilities by total assets. In long term fund that
is called capitalization will include long term debt & net worth
TOTAL LIABILITIES
CAPITAL EMPLOYED
h) PRICE TO EARNING RATIO
The advantage of high price to earning ratio value is considerable com. Owner’s is
increase in proportion new form can be raised at favorable price. It influence it over
the short term by good public relation exercises
Price to earning ration = earning per share
Market value
i) MARKET TO EARNING RATIO
The market to book ratio gives the final and perhaps the most thorough assessment by
the stock market of the company’s overall status. It summarizes the investor’s view of
the company overall, its management, their liquidity & future prospect that’s why the
higher it is better it is
Market to book value share = Market value
Book value
ACTIVITY RATIO
36
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
a) INVENTORY TURNOVER RATIO
It indicates the efficiency of the firm in producing and selling its products. It shows
how rapidly the inventory is running into receivable through sales. Generally high
inventory turnover is indicative of good inventory management & vice-versa’
Inventory turnover ratio = sales
Inventory
b) DEBTORS’ TURNOVER RATIOS
It indicates the number of times debtors’ turnover each year. Generally the higher the
value of debtor’s turnover, the more efficient is the management.
Debtors turnover ratio = net credit sales
Average Debtors
Debt collection period measures the quality of debtors since it indicate the speed of
their collection.
c) NET ASSETS TURNOVER RATIO
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The firm can compute met assets turnover simply by dividing sales by net assets.
Net assets turnover ratio = sales
Net asset
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.
d) AVERAGE COLLECTION PERIOD
It measures how quickly the customer pays their bills. So the shorter the average
collection period the better the quality of the debtors.
Average collection period = 365
Debtor’s turnover ratio
e) TOTAL ASSETS TURNOVER RATIO
It indicates that how hard the firm’s assets are being put to use. a high ratio shows that
the firms working close to capacity.
Total assets turnover ratio = sales
Total assets
PROFITABILITY RATIO
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.
a) GROSS PROFIT MARGIN
THE PROFIT margin measures the relationship between profit and sales. As the
profit may be gross or net there are two types of profit margins.
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Gross profit margin = gross profit
Sales
b) NET PROFIT MARGIN
Depending upon the concepts of the net profit employed this ratio can also be
computed in two ways.
i) Operating profit = earning before interest and taxes
Sales
ii) Net profit ratio = earning after interest &taxes
Sales
It is computed by dividing expenses by sales. The term expenses includes
Cost of goods sold
Administrative expenses
Selling and distribution expenses
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
Return on assets ratio = Earning before Int. & Tax
Average fixed assets
d) Return on capital employed
It is similar to the return of assets expected in one respect here the profit are related to
their total capital employed. The term capital employed refers to long term funds
supplied by the creditors and the owners of the firm the return on capital employed
can be computed in different concepts of profit and capital employed .thus
Return on capital employed = net profit after tax
39
Average total capital employed
e) RETURN ON SHARE HOLDER EQUITY
This profitability ratio carries the relationship of returns to the sources of funds yet
other steps further.
The return on shareholders equity measures exclusively the return on the owner’s
funds.
Return on total equity = net profit after tax
Average total share holders equity
f) RETURN ON INVESTMENT
It reflect that what is the return on capital employed it also indicates that how much
assets are capable to increase ROI is higher it means company is following right
strategy and also indicate that company s assets are helpful to generate good sale .
Return on investment after tax = EBIT (1-TAX)
NET ASSETS
g) RETURN ON E QUITY
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
Has used the resources of the owner. Excellent return is most desirable objective of
the business.
Return on equity = profit after tax
Net worth
h) EARNING PER SHARE
40
This indicates that the company gives higher amount of e p s a company gives higher
amount of profit during the year. the higher it is , the better because of good rate of
EPS gives satisfaction to the shareholder they get return on what they have invested .
Earning per share = profit after tax
Number of common share
i) Dividend per share
The dividend are pay out only from the retained earning of the company, the company
may give higher dividend on low retain earning or may not pay anything having more
retain earnings.
Dividend per share = total dividend
Number of share
j) Dividend pay out
This ratio completely depend upon the company s own policy taken during that
particular year. The company may give higher dividend with lower profitability and
May not give any dividend with higher profit margin .the first aspect tells that the
company is aiming for further growth and the second tells about the safety margin of
the company. That is why it is totally depending upon the management that wants
policy they will take for the current year.
Dividend pay out = dividend per share
Earning per share
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
41
unnecessarily damaging its credits in the market. This ratio can be calculated as
follows.
CHAPTER 4
ANALYSIS
OF
42
CURRENT ECONOMIC
STATISTICS
ANALYSIS OF CURRENT ECONOMIC
STATISTICS
WORLD ECONOMY
“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
RECENT GROWTH TRENDS IN GLOBAL ECONOMY
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
43
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
The industrial output expanded for a fourth straight month.
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 Overview:
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.
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.
44
A number of leading indicators, such as increase in hiring, freight movement at major
ports and encouraging data from a number of key manufacturing segments, such as
steel and cement, indicate that the downturn has bottomed out and highlight the Indian
economy's resilience. Recent indicators from leading indices, such as Nomura's
Composite Leading Index (CLI), UBS' Lead Economic Indicator (LEI) and ABN
Amro' Purchasing Managers' Index (PMI), too bear out this optimism in the Indian
economy.
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.
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%.
A higher deficit and consequent borrowing by the Government will crowd
the private sector out and make an interest rate cut tough.
The government on an average has been borrowing Rs 838.56 crore daily
from the open market to fund its fiscal deficit.
10 year government security shot up by 7 Bps to 6.36% on budget day
itself.
The movement in bond prices shows that the market is not comfortable
with the Govt borrowing.
45
The change in bond prices both short and long term is indicative of the
cost of funds in the banking system.
Year Fiscal Deficit Revenue Deficit
2004-05 125202 78338
D2005-06 146435 92299
2006-07 142573 80222
2007-08 126912 52569
2008-09 326515 241273
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.
46
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)
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.
BANKING CASH TRANSACTION TAX (BCTT)
Banking cash transaction Tax being withdrawn with effect from Apr 1, 2009.
47
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.
DATE REPO RATE RE REPO
RATE
CRR SLR
26.04.08 7.75
10.05.08 8.00
24.05.08 8.25
11.06.08 8.00 6.00
23.06.08 8.50 6.00
05.07.08 8.50
19.07.08 8.75
29.07.08 9.00 6.00
03.08.08 9.00
11.10.08 6.50
20.10.08 8.00 6.00
25.10.08 6.00
01.11.08 24.00
03.11.08 7.50 6.00
08.11.08 5.50
06.12.08 6.50 5.50
02.01.09 5.50 4.00
17.01.09 5.00
05.03.09 5.00 3.50
21.04.09 4.75 3.25
BALANCE OF PAYMENT (BOP)
48
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.
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.
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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.
FOREIGN EXCHANGE RESERVES (FER)
In the wake of surge in capital flows and build up of current account surpluses , FER
comprising external assets like Foreign currency assets ( FCA) , gold, SDRS and
reserve Tranche position in the IMF that are readily available to and controlled by
monetary authorities of management of BOP , scaled new highs in recent years.
FER have recorded their highest growth in more than a year in the week following the
general elections results. The Forex reserves which include foreign currency assets,
gold and drawing rights with IMF rose to $ 6.4 billion to touch $260.6 billion during
week ended May 22 09 the highest weekly rise since April 2008.
Source: The Economic Times DT 30.05.09.
FOREIGN INSTITUTIONAL INVESTORS (FII)
The net investment of foreign investors in the stock of Indian companies stood at $
4.2 billion (around Rs 20,473 crore) with most of the inflows coming in the month of
May 09.
So far in 2009, FIIS have bought share worth Rs 1,96,021 crore while they sold
equities values at Rs 1,75,547 crore resulting in a net inflow of Rs 20,472 crore.
Source: The Economic Times 31.05.09
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
SPECIAL ECONOMIC ZONES
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 changeNo. April - December April – December 2007-08 2008-09 2007-08 2008-09Real Sector1 GDP at factor cost (Rs. thousand crore) Fa) At current prices 4320.8 QE 4989.8 AE 14.3 15.5b) At 1999-2000 prices 3129.7 QE 3351.6 AE 9.0 7.12 Index of industrial production (1) 258.6 268.7 9.2 3.93 Wholesale price index (Base 1993-94=100)(2) 219.0 230.1 4.8 5.14 Consumer price index (2001=100)(3) 134.0 147 5.5 9.75 Money Supply (M3) (Rs. hundred crore)(4) 3892.7 4235.1 11.7 10.66 Imports at current prices*a) In Rs. Crore 693445 1003947 13.0 44.8b) In US $ million 171718 225809 27.8 31.57 Exports at current prices*a) In Rs. crore 454997 585594 9.2 28.7b) In US $ million 112737 131990 23.5 17.18 Trade Deficit (in US$ million)* -58981 -93819 9 Foreign currency assetsa) In Rs. crore 1050485 1194790 39.6 13.7b) In US $ million 266553 246603 56.6 -7.510 Current Account Balance (In US$ mill)@ -17034 -22332Government Finances (in Rs. crore) #1 Revenue receipts 355,646 375,937 26.6 5.72 Tax revenue (Net) 295,994 309,927 27.5 4.73 Non-tax revenue 59,652 66,010 22.4 10.74 Capital receipts (5+6+7) 118,607 221,279 15.4 86.65 Recovery of loans 3,304 2,974 -58.5 -106 Other receipts 37,725 437 Borrowings and other liabilities 77,578 218,262 -18.2 181.38 Total receipts (1+4) 474,253 597,216 23.6 25.99 Non-Plan expenditure 337,090 426,419 23.8 26.510 Revenue Account 280,050 403,758 10.3 44.2Of which:11 Interest payments 111,764 123,735 20.7 10.712 Capital Account 57,040 22,661 209.8 -60.313 Plan expenditure 137,163 170,797 23.0 24.514 Revenue Account 114,806 146,009 22.3 27.215 Capital Account 22,357 24,788 26.9 10.916 Total expenditure (9+13) 474,253 597,216 23.6 25.917 Revenue expenditure (10+14) 394,856 549,767 13.6 39.218 Capital expenditure (12+15) 79,397 47,449 120.4 -40.219 Revenue deficit (17-1) 39,210 173,830 -41.3 343.320 Fiscal deficit {16-(1+5+6)} 77,578 218,262 -18.2 181.321 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.
Source: The Economic Times DT 30.05.09.
GROSS DOMESTIC PRODUCT (GDP)
During the year 2008-09 annual real GDP growth (at constant 1999-2000 prices) is
6.7 per cent as compared to the growth rate of 9.1 per cent during 2007-08. The
nominal growth rates of GDP at current market prices during the respective years are
14.9 per cent and 14.4 per cent. As such the GDP at current market prices for the year
2008-09 stands at Rs.54,26,277 crore as against Rs.47,23,400 crore in 2007-08. Due
to the prevailing uncertainty in the world economy, the real GDP growth has been
assumed at 7 per cent in 2009-10. After factoring in inflation expectation, the GDP
growth (at current market prices) for 2009-10 is assumed at 11 per cent. Thus the
GDP for the year 2009-10 (at current market prices) is set at Rs.60, 21,426 crore. In
the following two years, with the assumption that economy will start showing signs of
revival, the real GDP growth has been assumed at 8 and 9 per cent respectively. After
factoring in medium term inflation expectation, the GDP growth at current market
prices is projected at 13 per cent and 13.4 per cent respectively for 2010-11 and 2011-
12.
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
57
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
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
investment to GDP
04-05 05-06 06-07 Ave
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
INDEX OF INDUSTRIAL PRODUCTION (IIP)
Index of Industrial Production (IIP) is one of the Prime indicators of the economic
development for the measurement of trend in the behavior of the Industrial Production
over a period of time with reference to a chosen base year.
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
58
Description Weight 2007-08 2008-09
Food Products 90.8 198.2 179.2
Beverages, Tobacco 23.8 498 575.9
Cotton Textiles 55.2 164 159.4
Wool, Silk and fibre 22.6 281.2 280.4
Jute 5.9 120.7 108.6
Textile Products 25.4 295.5 306.4
Wood , Furniture and Fixtures 27 127.9 114.7
Paper & Paper and Printing 26.5 255.3 258.6
Leather 11.4 167.8 156.1
Basic Chemicals 140 313.4 322.5
Rubber, Plastic, Petroleum and
Coal
57.3 246.4 242.6
Non-Metallic Mineral 44 323.2 326.5
Metal and Alloy 74.5 312.7 325.1
Metal 28.1 172.9 166
Machinery and Equipment 95.7 394.4 428.7
Transport Equipment and Parts 39.8 378.4 386.7
Other Manufacturing Industries 25.6 357.4 359.2
Mining 104.7 171.6 175.6
Manufacturing 793.6 287.2 293.8
Electricity 101.7 217.7 223.7
General Index 1000 268 274.3
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
59
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.
YEAR UNEMPLOYMENT RATE (%)
2002 8.8
2003 8.8
2004 9.5
2005 9.2
2006 8.9
2007 7.8
2008 7.2
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
60
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.
61
CHAPTER 5
ANALYSIS OF
DIFFERENT INDIAN
SECTORS & ITS
LEADING COMPANIES
INDIAN INFORMATION TECHNOLOGY SECTOR
62
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.
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.
Features of the IT Industry at a Glance
Economies of scale for the information technology industry are high. The
marginal cost of each unit of additional software or hardware is insignificant
compared to the value addition that results from it.
Unlike other common industries, the IT industry is knowledge-based.
Efficient utilization of skilled labor forces in the IT sector can help an
economy achieve a rapid pace of economic growth.
The IT industry helps many other sectors in the growth process of the
economy including the services and manufacturing sectors.
The role of the IT Industry
The IT industry can serve as a medium of e-governance, as it assures easy
accessibility to information. The use of information technology in the service sector
63
improves operational efficiency and adds to transparency. It also serves as a medium
of skill formation.
MAJOR STEPS TAKEN FOR PROMTION OF IT INDUSTRY
Domain of the IT Industry
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
64
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.
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.
The company has three primary business segments :-
1. Licensing of tools that help existing education system to
Move to a higher standard of delivery.
2. Direct Intervention - running schools, pre-schools and tutoring classes,
online
delivery etc.
3. Post K-12 initiatives such as vocational and professional education.
Educomp's main business is developing and licensing digital lessons, which
are uploaded onto servers and provided to schools. It also trains teachers (75,000
in the last quarter), provides vocational training to students with courses such as
accounting and marketing, and offers online and in-person tutoring. It runs eight
K-12 schools. It has joined up in January with New Delhi real estate
developer Ansal Properties & Infrastructure to start 25 private schools in
new townships. It aims to start 150 schools over the next three years.
Educomp's big money-maker is Smartclass, a range of interactive digital lessons
with animation and graphics that's marketed mainly to private schools as they
have deeper pockets than public schools. The multimedia lessons-- 16,000 so
far--are based on the different curricula in place across the country and use
12 of the country's Languages.
Key Developments during 1HFY2009
65
Smart Class: Company has covered 27 cities with total plan of 80 cities.
EBIT margins for this business more than 50%.
Margins for ICT improved to 35% from 27%
earlier, however such margins are unsustainable in the long
run, and are likely to settle around 20%.
Educomp achieved growth rate of 700% on its education portal
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.
Important Agreements Made by the Educomp Solution Pvt.Ltd.
The first seven “Millennium Schools” (as defined below) are launched, with
Edu Manage (as defined below) acting as vendor of the Company’s products
and services.
The Company, via Edu Infra (as defined below) enters collaborative
agreements to ensure sufficient land is available for development of new
schools in accordance with its K-12 initiative.
Edumatics signs a joint development agreement with U.S. based company,
Learning.com, to provide educators with innovative, web-delivered curriculum
solutions that support student learning.
The Company enters into a partnership with Microsoft to make its multimedia
content curriculum available for use on the Xbox 360 platform, which
currently has over 50,000 users worldwide. The official launch of the product
is expected during FY 2009.
Edumatics enters into a strategic alliance and joint development agreement
with Siboney Learning Group, Inc. to create a new online test preparation
programme, leveraging IP, a software development programme, manpower
and the expertise of both parties.
In May, the Company acquires a 51% strategic stake (on a fully diluted basis)
in Learning.com.
COMPANY MANAGEMENT
66
Shantanu Prakash Chairman & Managing Director
Jagdish Prakash Whole-Time Director
Gomal Jain Director
Sankalp Srivastava Director
Shonu Chandra Director
Sankalp Srivastava AUDIT COMMITTEEChairman, Independent & Non-Executive
Subsidiaries of the company
Name of Company Ownership Interest
Edumatics Inc. -U.S.A. 1655 100%
Educomp Learning Private Limited –India 51%
Educomp Professional Private Limited –India 100%
Sikhya Solutions LLC-U.S.A. 100%
Learning.com, U.S.A. 51%
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
67
Shareholding Pattern (%)
Promoters55%
FII's7%
Public and Others38% Promoters
FII's
Public and Others
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
Listed on BSE/NSE 13th January 2006
Shareholding pattern(%)Promoters 55.03%
FII's 6.97%
Public and Others 38.00%
MONTHLY HIGH AND LOW VALUE OF SHARE PRICE OF EDUCOMP
SOLUTION PVT.LTD
MONTH HIGH LOW
PRICE DATE PRICE DATE
MARCH 4,309.00 3-Mar-08 2,901.00 10-Mar-08
68
2008
APRIL 2008 4,219.00* 28-April-08 3,380.00 3-April-08
MAY 2008 4,185.00 23-May-08 3,651.00 12-May-08
JUNE 2008 4,065.00 2-June-08 2,569.00 30-June-08
JULY 2008 3,589.00 24-Jul-08 2,320.00 1-Jul-08
AUG 2008 3,841.00 29-Aug-08 3,099.00 1-Aug-08
SEPT 2008 4,020.00 1-Sep-08 2,985.00 18-Sep-08
OCT 2008 3,449.00 1-Oct-08 1,515.00 27-Oct-08
NOV 2008 2,825.00 5-Nov-08 1,627.00 20-Nov-08
DEC 2008 2,865.00 22-Dec-08 1,982.15 2-Dec-08
JAN 2009 2,722.00 7-Jan-09 1,375.00 21-Jan-09
FEB 2009 2,177.00 19-Feb-09 1,331.00** 6-Feb-09
MARCH
2009
2,039.90 17-Mar-09 1,473.60 6-Mar-09
*Note: It was also company 52-weeks high as on 20-march-09
** It was also company 52-weeks low as on 20-march-09
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.
MONTHWISE HIGHEST DIFFERENCE BETWEEN INTRADAY
HIGH AND LOW PRICE OF EDUCOMP SOLUTION PVT.LTD
MONTH DATE HIGH LOW DIFFERENCE
69
MARCH 2008 10-Mar-08 3,504.00 2,901.00 603.00
APRIL 2008 2-Apr-08 3,950.00 3,530.00 420.00
MAY 2008 13-May-08 4,009.00 3,730.00 279.00
JUNE 2008 24-Jun-08 3,310.00 2,931.00 379.00
JULY 2008 23-Jul-08 3,579.90 3,102.00 477.90
AUG 2008 12-Aug-08 3,619.70 3,292.20 327.50
SEPT 2008 19-Sep-08 3,880.00 3,371.00 509.00
OCT 2008 29-Oct-08 2,400.10 1,830.00 570.10
NOV 2008 19-Nov-08 2,406.90 1,875.00 531.90
DEC 2008 18-Dec-08 2,674.00 2,305.25 368.75
JAN 2009 21-Jan-09 1,932.00 1,375.00 557.00
FEB 2009 10-Feb-09 1,968.00 1,595.00 373.00
MARCH 2009 13-Mar-09 1,793.00 1,585.15 207.85
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.
TECHNICAL ANALYSIS FOR THE MONTH OF JANUARY,
FEBRUARY, AND MARCH 2009
70
January 2009
0.00
500.00
1,000.00
1,500.00
2,000.00
2,500.00
3,000.00
02-0
1-20
09
04-0
1-20
09
06-0
1-20
09
08-0
1-20
09
10-0
1-20
09
12-0
1-20
09
14-0
1-20
09
16-0
1-20
09
18-0
1-20
09
20-0
1-20
09
22-0
1-20
09
24-0
1-20
09
26-0
1-20
09
28-0
1-20
09
30-0
1-20
09
High
Low
Close
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.
February 2009
0.00
500.00
1,000.00
1,500.00
2,000.00
2,500.00
High
Low
Close
71
Support Level
Resistance Level
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.
March 2009
0.00
500.00
1,000.00
1,500.00
2,000.00
2,500.00
02-0
3-20
09
04-0
3-20
09
06-0
3-20
09
08-0
3-20
09
10-0
3-20
09
12-0
3-20
09
14-0
3-20
09
16-0
3-20
09
18-0
3-20
09
20-0
3-20
09
High
Low
Close
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.
JANUARY EQUITY CHARTING
72
Resistance Level
Weekly Chart 5Jan-9Jan
0.00
500.00
1,000.00
1,500.00
2,000.00
2,500.00
3,000.00
1/5/2009 1/6/2009 1/7/2009 1/8/2009 1/9/2009Date
Weekly Chart 12 Jan-16 Jan
1,850.00
1,900.00
1,950.00
2,000.00
2,050.00
2,100.00
Date
Sh
are P
ric
e (
Rs.)
Weekly Chart 19 Jan-23 Jan
0.00
500.00
1,000.00
1,500.00
2,000.00
2,500.00
Date
Sh
are P
rice (R
s.)
HIGH 2643 5-JAN-2009
LOW 2127 9-JAN-2009
fall of Rs.516 within a week
Analyst recommendation: To be away from the stock price as it has been hit
hardly during the first week of January.
Resistance Level: Rs.2650
Support Level: Rs.2100
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
73
Weekly Chart 27 Jan-30 Jan
1,680.001,700.001,720.001,740.001,760.001,780.001,800.001,820.00
DEate
Sh
are P
ric
e (
Rs.)
HIGH 1796 29-JAN-2009
LOW 1720 17-JAN-2009
Fall of Rs.76 within a week
Analyst recommendation: Change occurred but minimal change because of the
downside happened in the third week.
Resistance Level: Rs.1800
Support Level: Rs.1650
HIGH 1825 27-JAN-2009
LOW 1652.55 27-JAN-2009
Rise of Rs.53 Within a week
FEBRUARY EQUITY CHARTING
74
RESEARCH REPORT
0.00500.00
1,000.001,500.002,000.00
DATE
SH
RE
PR
ICE
Series1
HIGH 1695 2-FEB-2009
LOW 1394 5-FEB-2009
fall of Rs.304 within a week
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
HIGH 2097 13-FEB-2009
LOW 1597 09-FEB-2009
Fall of Rs.600 within a week
Analyst recommendation: FII taking in the position of share price for the time
period of the second week.
There has been gradual increase in the the share price of the stock of educomp
solution.
Resistance Level: Rs.2100
Support Level: Rs.1900
HIGH 2177.50 19-FEB-2009
75
RESEARCH REPORT
0.00500.00
1,000.001,500.002,000.002,500.00
DATE
SH
AR
E P
RIC
E
Series1
RESEARCH REPORT
1,500.001,600.001,700.001,800.001,900.002,000.002,100.002,200.00
DATE
SH
AR
E P
RIC
E
Series1
RESEARCH REPORT
1,500.001,550.001,600.001,650.00
DATE
SH
AR
E P
RIC
E
Series1
LOW 1711.10 20-FEB-2009
Fall of Rs.400 within a week
Resistance Level: Rs.2100
Support Level: Rs.1700
HIGH 1725.00 24-FEB-2009
LOW 1480.00 26-FEB-2009
Fall of Rs.120 within a week
Resistance Level: Rs.1630
Support Level: Rs.1550
MARCH EQUITY CHARTING
HIGH 1605 2-MAR-2009
LOW 1530 3-MAR-2009
76
RESEARCH REPORT
1,450.001,500.001,550.001,600.001,650.00
DATE
SH
AR
E P
RIC
E
Series1
RESEARCH REPORT
1,850.001,900.001,950.002,000.00
DATE
SH
AR
E P
RIC
E
Series1
Fall of Rs.75 within a week
Resistance Level:Rs.1600
Support Level: Rs.1550
HIGH 1762 13-MAR-2009
LOW 1513 09-MAR-2009
Rise of Rs.249 within a week
Resistance Level: Rs.1750
Support Level: Rs.1500
HIGH 2039.90 17-MAR-2009
LOW 1826.00 20-MAR-2009
Rise of Rs.200 within a week
Resistance Level:Rs.2000
77
RESEARCH REPORT
1,300.001,400.001,500.001,600.001,700.001,800.00
DATE
SH
AR
E P
RIC
E
Series1
Research Report
1,900.00
1,950.00
2,000.00
2,050.00
2,100.00
2,150.00
2,200.00
2,250.00
3/23/2009 3/24/2009 3/25/2009 3/26/2009 3/27/2009
Date
Series1
Support Level: Rs.1900
HIGH 2255.00 27-MAR-2009
LOW 1940 13-MAR-2009
Rise of Rs.250 within a week
Resistance Level: Rs.2300
Support Level: Rs.2050
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-06Operating Profit margin 48.2 48.12 50.58Gross profit Margin 35.87 39.31 40.44Net Profit Margin 25.51 25.54 25.89Turnover Ratios 79
Inventory Turnover Ratio 185.88 32.75 30.1Debtor Turnover Ratio 2.29 2.16 2.08Fixed Asset Turnover Ratio
1.27 1.67 2.76
Solvency RatioCurrent Ratio 5.41 4.5 5.33Debt Equity Ratio 1.28 1.09 0.11Interest Covering Ratio 21.69 25.81 37.13Valuation RatioP/E adjusted 35 110 naP/BV 18 24 31
VALUATION RATIOS AS ON 31 ST march 2009
EPS 47.87
RETURN ON AVERAGE EQUITY 24.43%
DIVIDEND PAYOUT RATIO 25% (02-06-2008)
P/E RATIO 50.32 (23-03-2009)
PEG RATIO 2.625
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
Company is poised to continue perform exceeding well with more
than 70% revenue growth for period FY09-FY11 and margins staying
above 45%.
80
Net Profits are expected to rise 5 fold from Rs.700 million in 2008 to
3566 million in FY11giving a CAGR of 70%.
Company’s P/E to growth ratio is highly discounted for FY10 and
FY11, as company is expected to continue its growth trajectory of 30% for
several more years.
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
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
81
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:
1. Large market opportunity(scale)
2. Create barriers of entry for other players through strong IP and
product differentiation.
3. High operating margins (50%+)
4. Experience and ability to execute
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.
If government reduces spending on education, earnings and growth potential are
likely to taper down.
Company faces huge execution risks in its Edu-Infra business. Also
company has been very aggressive in its growth plans, both
Organic and Inorganic, and it would be very difficult to manage such
growth plans under unforeseen circumstances (E.g.-Key
Man Risk, Death of MD/Promoter).
SUPPORT AND RESISTANCE LEVEL FOR JUNE MONTH
Market is at the resistant level (SENSEX 10,300 points as on 15 th 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
82
market we can say that international investors are bit optimistic so market can sustain at
this high for some more time.
News from India
Reserve Bank of India is expected to relax further Repo Rate and CRR, which can keep
market interest for some more time. Inflation is all time Low (As on 14 th May 2009) etc.
Further stimulus announced made by the govt. of India can uplift the market to 15000, but
4th quarters result and annual result would be the major focus for the investor and it
would also decide the direction of the market in the upcoming months.
“Looking at the above given information we can project the
new Support Level at 2770* points and Resistance Level at
3540* points for the Second and third week of May”.
SUPPORT AND RESISTANCE LEVEL FOR THE COMING MONTHS OF
2009
Beginning of June 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:
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.
“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”.
83
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.
SWOT ANALYSIS OF EDUCOMP
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.
Weaknesses:
Low operating margin of the other group companies.
Free floating stock is very less.
Opportunities:
84
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.
INDIAN BANKING SECTOR
The Indian Banking industry, which is governed by the Banking Regulation Act of India,
1949 can be broadly classified into two major categories, non-scheduled banks and
scheduled banks. Scheduled banks comprise commercial banks and the co-operative
banks. In terms of ownership, commercial banks can be further grouped into nationalized
banks, the State Bank of India and its group banks, regional rural banks and private sector
banks (the old/ new domestic and foreign). These banks have over 67,000 branches
spread across the country.
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
85
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
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.
86
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.
Talks of government diluting their equity from 51 percent to 33 percent in November
2000 has also opened up a new opportunity for the takeover of even the PSBs. The FDI
rules being more rationalized in Q1FY02 may also pave the way for foreign banks taking
the M& A route to acquire willing Indian partners.
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
insurance company for providing infrastructure and services support and set up of a
separate joint-venture insurance company with risk participation.
Aggregate Performance of the Banking Industry
87
Aggregate deposits of scheduled commercial banks increased at a compounded annual
average growth rate (Cagr) of 17.8 percent during 1969-99, while bank credit expanded at
a Cagr of 16.3 percent per annum. Banks’ investments in government and other approved
securities recorded a Cagr of 18.8 percent per annum during the same period.
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
the M& A route. Many are also going in for right issues at prices considerably lower than
the market prices to woo the investors.
Interest Rate Scene
The two years, post the East Asian crises in 1997-98 saw a climb in the global interest
88
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
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.
Implications Of Some Recent Policy Measures 89
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
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
90
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
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 91
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
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 92
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.
After consideration of various corporate structuring alternatives in the context of the
emerging competitive scenario in the Indian banking industry, and the move towards
universal banking, the managements of ICICI and ICICI Bank formed the view that the
merger of ICICI with ICICI Bank would be the optimal strategic alternative for both
entities, and would create the optimal legal structure for the ICICI group's universal
banking strategy. The merger would enhance value for ICICI shareholders through the
merged entity's access to low-cost deposits, greater opportunities for earning fee-based
income and the ability to participate in the payments system and provide transaction-
banking services. The merger would enhance value for ICICI Bank shareholders through
a large capital base and scale of operations, seamless access to ICICI's strong corporate
relationships built up over five decades, entry into new business segments, higher market
share in various business segments, particularly fee-based services, and access to the vast
talent pool of ICICI and its subsidiaries.
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
93
merger, the ICICI group's financing and banking operations, both wholesale and retail,
have been integrated in a single entity.
SUBSIDIARY COMPANIES
At March 31, 2008, ICICI Bank had 17 subsidiaries as listed below:
Domestic Subsidiaries International Subsidiaries
ICICI Securities Limited ICICI Bank UK PLC
ICICI Securities Primary Dealership Limited ICICI Bank Canada
ICICI Prudential Life Insurance Company Limited ICICI Wealth Management
Inc.1
ICICI Lombard General Insurance Company Limited ICICI Bank Eurasia Limited
Liability Company
ICICI Prudential Asset Management Company Limited ICICI Securities Holdings
Inc.2
ICICI Prudential Trust Limited ICICI Securities Inc.3
ICICI Venture Funds Management Company Limited ICICI International Limited
ICICI Home Finance Company Limited
ICICI Investment Management Company Limited
ICICI Trusteeship Services Limited
Recent developments
Completed Rs200b follow on offering
Amalgamated Sangli Bank with itself
Board Members
Mr. N. Vaghul, Chairman
Mr. Sridar Iyengar
Mr. Lakshmi N. Mittal
Mr. Narendra Murkumbi
Dr. Anup K. Pujari
94
Mr. Anupam Puri
Mr. M.K. Sharma
Mr. P.M. Sinha
Prof. Marti G. Subrahmanyam
Mr. T.S. Vijayan
Mr. V. Prem Watsa
Mr. K.V. Kamath, Managing Director & CEO
Ms. Chanda Kochhar, Joint Managing Director & Chief Financial Officer
Mr. V. Vaidyanathan, Executive Director
Mr. Sonjoy Chatterjee, Executive Director
Mr. K. Ramkumar, Executive Director
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
Returns1 Year -56.81 %
Weightage in SENSEX 5.32
Co-efficient of Determination (R^2) 0.79
Free-float adj. factor as on 31/04/09 1
Index BSE 100 ,BSE Mid Cap
Group A
95
MFs invested in this company
Scheme % of scheme asset size
Templeton Fixed Horizon Fund Series
1 - 13 M - Institutional Plan - Dividend
99.95
Grindlays Fixed Maturity Plan - 7 - A -
Growth
99.35
Grindlays Fixed Maturity Plan - 7 - B -
Growth
99.35
Grindlays Fixed Maturity Plan - 7 - A -
Dividend
99.35
Grindlays Fixed Maturity Plan - 7 - B - 99.35
Q3-2009: Key highlights
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
Net NPA ratio of 1.95% at December 31, 2008
96
Share Holding Pattern
Share holding pattern
11.52, 18%
39.01, 59%
6.49, 10%
0.41, 1%7.68, 12% Banks, Fin insti &
insurance
FII's
Pvt Corporate bodies
NRI's,OCB's& foreignothers
General Public
97
MONTHWISE HIGH AND LOW VALUE OF SHARE PRICE OF ICICI BANK LTD.
Month Monthly High in (Rs.) Monthly Lowin (Rs.)
Date Value Date Value
Jan-08 14-Jan-08 1465.00 22-Jan-08 1005.55
Feb-08 4-Feb-08 1245.20 11-Feb-08 996.00
Mar-08 3-Mar-08 1065.00 18-Mar-08 720.00
Apr-08 28-Apr-08 947.00 1-Apr-08 732.00
May-08 5-May-08 960.90 30-May-08 778.10
Jun-08 18-Jun-08 826.00 30-Jun-08 611.50
Jul-08 24-Jul-08 779.70 16-Jul-08 515.10
Aug-08 12-Aug-08 779.70 1-Aug-08 610.00
Sep-08 4-Sep-08 729.90 30-Sep-08 458.00
Oct-08 1-Oct-08 565.00 27-Oct-08 282.15
Nov-08 5-Nov-08 491.00 21-Nov-08 308.10
Dec-08 18-Dec-08 480.90 2-Dec-08 305.00
Jan-09 7-Jan-09 537.95 27-Jan-09 358.10
Feb-09 10-Feb-09 441.95 27-Feb-09 311.25
Mar-09 27-Mar-09 387.40 6-Mar-09 252.75
Major Gain And Lose For ICICI BANK LTD. From Jan-08 To March-09
Five Major Gains For ICICI BANK in (%) terms
Date Prev.Close Day Close Change % Change
13-Oct-08 364.1 425.3 61.20 16.81%
31-Oct-08 345.75 399.35 53.60 15.50%
18-Jul-08 551.2 617.6 66.40 12.05%
23-Jul-08 661.3 738.25 76.95 11.64%
98
25-Jan-08 1,134.00 1,259.25 125.25 11.04%
Five Major Loses For ICICI BANK in (%) terms
Date Prev.Close Day Close Change % Change
10-Oct-08 453.5 364.1 -89.40 -19.71%
24-Oct-08 365.45 310 -55.55 -15.20%
17-Mar-08 878.2 757.4 -120.80 -13.76%
29-Sep-08 561.25 493.3 -67.95 -12.11%
7-Jan-09 523.15 468.05 -55.10 -10.53%
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%
99
ICICI Bank's Performance On May'08
700
750
800
850
900
950
1000
Date
Sh
are
Pri
ce
Series1
Technical Analysis :
Performance of ICICI Bank Ltd. In last 1 year
Performance of ICICI Bank in last 1 year
0.00
200.00
400.00
600.00
800.00
1,000.00
1,200.00
1,400.00
1,600.00
1/1
/20
08
2/1
/20
08
3/1
/20
08
4/1
/20
08
5/1
/20
08
6/1
/20
08
7/1
/20
08
8/1
/20
08
9/1
/20
08
10
/1/2
00
8
11
/1/2
00
8
12
/1/2
00
8
1/1
/20
09
2/1
/20
09
3/1
/20
09
Close
Rumours started surfacing about the bank’s overseas exposure and a run on its
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 :
100
Support Level: Rs.300
Resistance level: Rs.760
Resistance Level:Rs930
Support Level:Rs 790
Resistance Level:Rs 940
Support Level: Rs. 805
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.
ICICI Bank's Performance On June'08
0100200300400500600700800900
6/2/
2008
6/4/
2008
6/6/
2008
6/8/
2008
6/10
/2008
6/12
/2008
6/14
/2008
6/16
/2008
6/18
/2008
6/20
/2008
6/22
/2008
6/24
/2008
6/26
/2008
6/28
/2008
6/30
/2008
Date
Sh
are
Pri
ce
Series1
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.
ICICI Bank's Performance On July'08
0100200300400500600700800
7/1/
2008
7/3/
2008
7/5/
2008
7/7/
2008
7/9/
2008
7/11
/2008
7/13
/2008
7/15
/2008
7/17
/2008
7/19
/2008
7/21
/2008
7/23
/2008
7/25
/2008
7/27
/2008
7/29
/2008
7/31
/2008
Date
Sh
are
Pri
ce
Series1
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.
101
RESISTANCE LEVELRs.780
SUPPORT LEVEL: Rs. 730
Resistance Level: Rs. 750
Support Level : Rs. 505
ICICI Bank's performance On Aug'09
0100200300400500600700800900
8/1/
2008
8/3/
2008
8/5/
2008
8/7/
2008
8/9/
2008
8/11
/2008
8/13
/2008
8/15
/2008
8/17
/2008
8/19
/2008
8/21
/2008
8/23
/2008
8/25
/2008
8/27
/2008
8/29
/2008
Date
Sh
are
Pri
ce
Series1
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.
ICICI Bank's Performance On Sept'08
0100200300400500600700800
9/1/
2008
9/3/
2008
9/5/
2008
9/7/
2008
9/9/
2008
9/11
/2008
9/13
/2008
9/15
/2008
9/17
/2008
9/19
/2008
9/21
/2008
9/23
/2008
9/25
/2008
9/27
/2008
9/29
/2008
Date
Sh
are
Pri
ce
Series1
REASON:-The Graph shows a downward trend in the month of September. The
vital reason for this is the financial crisis and a sudden downturn in the banking
sector.
There were rumours of Insider trading that some of the person’s in the top
management selling their shares.
102
Resistance Level:Rs 790Support level:Rs630.
Resistance Level:Rs. 725Support Level: Rs. 550
ICICI Bank's Performance On Oct'08
0
100
200
300
400
500
600
10/1/
2008
10/3/
2008
10/5/
2008
10/7/
2008
10/9/
2008
10/11
/200
8
10/13
/200
8
10/15
/200
8
10/17
/200
8
10/19
/200
8
10/21
/200
8
10/23
/200
8
10/25
/200
8
10/27
/200
8
10/29
/200
8
10/31
/200
8
Date
Sh
are
Pri
ce
Series1
REASON:-There was a downfall in the prices because of the announcement of new BOD
of the organization.
ICICI Bank's Performance On Nov'08
050
100150200250300350400450500
Date
Sh
are
Pri
ce
Series1
ICICI Bank's Performance On Dec'08
050
100150200250300350400450500
Date
Sha
re p
rice
Series1
103
Resistance Level:Rs. 470
Support Level: Rs. 305
Resistance Level:Rs. 455Support Level: Rs. 310
Resistance Level: Rs 455
Support Level: Rs. 400
Reasons- There was uptrend in prices due to Repurchase & subsequent
Extinguished of Bonds and cuts in lending & deposit rates.
ICICI Bank's Performance On Jan'09
0
100
200
300
400
500
600
1/1/
2009
1/3/
2009
1/5/
2009
1/7/
2009
1/9/
2009
1/11
/2009
1/13
/2009
1/15
/2009
1/17
/2009
1/19
/2009
1/21
/2009
1/23
/2009
1/25
/2009
1/27
/2009
1/29
/2009
Date
Sh
are
Pri
ce
Series1
Reason- ICICI announced Quarter 3 Results and posted a net profit of Rs
15597.60 million for the quarter ended December 31, 2008 as compared to Rs
11198.20 million for the quarter ended December 31, 2007.
ICICI Bank's Performance On Feb'09
050
100150200250300350400450500
Date
Sha
re P
rice
Series1
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.
104
Resistance Level: Rs. 440Support level: Rs. 370
Resistance Level: Rs445
Support Level: Rs342
ICICI Bank's Performance on March'09
050
100150200250300350400450
Date
shar
e P
rice
closing price
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
JANUARY EQUITY CHARTING
Weekly charts of Jan’09:
Weekly Chart
420
440
460
480
500
520
540
1/5/2009 1/6/2009 1/7/2009 1/8/2009 1/9/2009
Date
Sh
are
Pri
ce i
n (
Rs.)
Reason: ICICI Bank Ltd has informed BSE regarding a Press Release dated
December 31, 2008, titled "ICICI Bank cuts lending and deposit rates".
105
Resistance Level: Rs.349
Support Level: Rs255
Resistance Level: Rs.525
Support Level: Rs.465
Weekly Chart(12 Jan-16 Jan)
390
400
410
420
430
440
450
1/12/2009 1/13/2009 1/14/2009 1/15/2009 1/16/2009
Date
Sh
are
Pri
ce i
n (
Rs.)
Weekly Chart(19 Jan-23 Jan)
330340350360370380390400410420
1/19/2009 1/20/2009 1/21/2009 1/22/2009 1/23/2009
Date
Sh
are
Pri
ce i
n (
Rs.)
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).
Interest rates to come down which will benefit SME’s.
The prices are more towards stability because of increase in Q3 profit by 3.4 %.
106
Resistance Level: Rs.442
Support Level: Rs408
Resistance Level: Rs380
Support Level: Rs368
Weekly Chart (27Jan-30 Jan)
360
370
380
390
400
410
420
1/27/2009 1/28/2009 1/29/2009 1/30/2009Date
Sh
are
Pri
ce
in
(R
s.)
Reasons-Rise in share price of ICICI Bank due to announcement of Q3
Results .ICICI posted a net profit of Rs 15597.60 million for the quarter ended
December 31, 2008 as compared to Rs 11198.20 million for the quarter ended
December 31, 2007.
FEBRUARY EQUITY CHARTING
Weekly Chart For the month of Feb:
Performane Of ICICI Bank from 2nd Feb to 6th Feb
370
375
380
385
390
395
400
405
410
2/2/2009 2/3/2009 2/4/2009 2/5/2009 2/6/2009
Date
Sh
are
Pri
ce
Series1
Reasons- Change in directorate with effect from 27 Jan, 2009.
ICICI Bank Ltd has informed BSE regarding a Press Release dated January 24, 2009
titled "Performance Review - Quarter ended December 31, 2008".
107
Resistance Level’s. 402
Support Level: Rs. 390
Performance of ICICI Bank from 9th feb to 13th feb'09
410
415
420
425
430
435
440
2/9/2009 2/10/2009 2/11/2009 2/12/2009 2/13/2009
Date
Sh
are
pri
ce
Series1
Reasons- Volatility is higher due to Repurchase & subsequent Extinguishment of Bonds.
Performance of ICICI bank from 16th Feb to 20th Feb'09
0
50
100
150
200
250
300
350
400
450
2/16/2009 2/17/2009 2/18/2009 2/19/2009 2/20/2009
Date
Sh
are
Pri
ce
Series1
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.
108
Resistance Level: Rs. 435.5
Support Level; Rs. 421.5
Resistance Level: Rs. 408Support Level: Rs. 300
Performance of ICICI Bank from 24th feb to 27th feb '09
315
320
325
330
335
340
345
2/24/2009 2/25/2009 2/26/2009 2/27/2009
date
Sh
are
Pri
ce
Series1
Reason: There was an increase in prices after 25 th Feb because the bank was
awarded Dun & Bradstreet Banking Award 2009.
MARCH EQUITY CHARTING
Weekly Performance of ICICI Bank in March’09
Performance from 2nd March to 6th March
250
260
270
280
290
300
310
3/2/2009 3/3/2009 3/4/2009 3/5/2009 3/6/2009
Date
Sh
are
pri
ce
Series1
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-
designate, ICICI Bank, said. The RBI has sought to create conditions conducive 109
Resistance Level; Rs. 340.5
Support Level: Rs. 325
Resistance Level: Rs. 300Support Level: Rs. 270
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.
Performance from 9th March to 13th March
240
250
260
270
280
290
300
310
320
3/9/2009 3/10/2009 3/11/2009 3/12/2009 3/13/2009
date
Sh
are
Pri
ce
Series1
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.
Performance From 16th March to 20th March'09
310
315
320
325
330
335
340
3/16/2009 3/17/2009 3/18/2009 3/19/2009 3/20/2009
Date
Sh
are
Pri
ce
Series1
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.
110
Resistance Level: Rs. 310
Support Level: Rs 283
Resistance Level: Rs. 338Support Level: Rs. 324
Performance from 23rd March to 27th March'09
320
330
340
350
360
370
380
390
3/23/2009 3/24/2009 3/25/2009 3/26/2009 3/27/2009
date
Sh
are
pri
ce
Series1
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.
Asset quality deterioration continues
Reported gross NPAs declined 6% QoQ to Rs96b as management wrote off Rs16b of
gross NPAs during the quarter and sold off Rs2b of NPAs. NPA generation during the
quarter was Rs12b (stable for last 4-5 quarter). Due to the write off decision; provision
coverage declined to 54% from 58% a quarter ago. Net NPAs increased 4% QoQ despite
Rs10b of fresh provision during the quarter. Net NPAs now stand at 9% of net
111
Resistance Level: Rs. 382
Support level: 350
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 Prudential Life impacted severely
ICICI Pru Life’s retail WNRP and NBAP declined 33% QoQ in 3QFY09. ICICI Prudential
Life NBAP declined by 5% YoY in 9MFY09 to Rs7.12b. NBAP decline was 40% YoY in
3QFY09. NBAP margin contracted to 18.9% in 9MFY09 from 19.3% in 9MFY08 –
however was stable QoQ.
Overseas subsidiaries a mixed bag
ICICI UK’s total assets declined QoQ from USD8.7b to USD7.6. Loan book however
improved marginally from USD2.5b in September 2008 to USD2.7b in December 2008.
ICICI UK earned profit of ~USD37m during 3QFY09. However due to large MTMs in
1HFY09, 9MFY09 PAT is merely USD 1.4m. MTM taken through reserves during 3QFY09
was a substantial USD71m v/s USD42m booked in 1HFY09.
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.
Reducing target price to Rs446 - upside of 23%
We expect ICICI Bank to report EPS of Rs34 in FY09 and Rs39 in FY10. BV
would be Rs439 in FY09 and Rs463 in FY10. ABV (adjusted for 50% investment in
subs and 65% net NPAs) would be Rs364 in FY09 and Rs384 in FY10. We reduce
our target price from Rs497 to Rs446 mainly due to a) applying 0.8x multiple to BV
adjusted for 50% investments in subsidiaries and 65% net NPAs (earlier not adjusted
for NPAs) and b) reducing the value of ICICI Pru Life from Rs116/share to
Rs82/share.
Quarterly Results in brief:
Particulars Dec’08 (Rs Sept’08 Absolute %
112
crore) (Rs crore) Change change
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 2011ESpreads Analysis(%)Avg. Yield-Earning Assets
7.9 8.9 8.7 8.3 8.3
Avg.Cost-Int.Bear,Liab. 6.4 7.4 7.2 6.4 6.2Interest Spread 1.6 1.4 1.4 1.9 2Net Interest Margin 2 2.1 2.3 2.7 2.8
Pofitability Ratios(%)ROE 13.4 11.7 7.9 8.6 10.6Adjusted ROE 13.4 12.9 8.8 9.7 12.1Int. Expended/int.Earned
74.4 76.3 73.6 67.9 66.1
Other Inc./Net Income 55.1 54.7 48.1 45.6 44.9
Efficiency Ratios(%)Op. Exps./Net Income 57.9 53.3 45.6 44.1 43.6Empl. Cost/Op. Exps. 24.2 25.5 28.7 27.9 28.4Busi. Per Empl.(Rs m) 110.7 110.7 112.8 99.9 104.4NP per Empl.(Rs. lac) 9.3 10.3 9.4 9.5 11.9 113
Asset-Liability Profile(%)Adv./Deposit Ratio 85 92.3 100.9 101 100.3CASA Ratio % 21.8 26.1 28 31.5 33.5Invest/Deposit Ratio 39.6 45.6 49.7 50.7 49.3G-Sec/Invest Ratio 73.8 67.6 62.3 59.2 60.8Gross NPAs to Adv. 2.1 3.3 4.3 4.6 4.1Net NPAs to Adv. 1 1.5 1.9 1.7 1.3CAR 11.7 14 14.9 14 12.9Tier 1 7.4 11.8 11.5 10.7 9.7
ValuationBook Value(Rs.) 270 418 439 463 500Price-BV (x) 0.9 0.8 0.8 0.7ABV(for Subs Invst. And NPAs)
256 397 415 440 480
EPS(Rs.) 34.6 37.4 33.8 38.6 51.2EPS Growth(%) 21.2 8 -9.7 14.3 32.6Price-Earning (x) 10.5 9.7 10.8 9.4 7.1Adj.Price-Earnings(x) 6.9 6.4 7.1 5.9 4.4
COMPARATIVE VALUATIONS:-
ICICI BANK HDFC BANK AXIS BANKP/E(x) FY09E 7.4 18.5 17.8
FY010E 6.4 14.8 13.4P/BV(x) FY09E 0.7 2.8 2.6
FY010E 0.6 2.1 2.2ROE(%) FY09E 8.5 15.6 15.4
FY10E 9 16.6 17.9ROA(%) FY09E 0.9 1.3 1.1
114
FY010E 1 1.4 1.1
RESULT ANALYSIS:-
3QFY09 3QFY08 YOY GR.%
2QFY09 QOQ GR.%
FY08 FY09E FY10E
Interest Income 78,361 79,118 78,350 0 3,07,883 3,13,142 3,01,685Interest Expense 58,457 59,521 56,874 3 2,34,842 2,30,621 2,04,790Net Interest Income(NII)
19,904 19,597 2 21,476 73,041 82,521 96,895
Other Income 25,150 24,266 4 18,773 34 88,108 76,615 81,244 - Fees 13,470 17,850 18,760 -28 66,270 66,270 69,584 - Treasury Income(Including MTM)
9,760 2,820 246 -1,530 -738 8,150 4,000 5,000
- Others 1,920 3,596 1,543 24 13,688 6,345 6,660Net Income 45,054 43,863 3 40,250 12 1,61,149 1,59,135 1,78,139Total Operating Costs
17,341 21,276 -18 17,400 0 81,542 70,704 76,359
- Staff Costs 5,030 5,705 -12 4,881 3 20,789 20,276 21,290 - Other Opex 12,311 15,571 -21 12,520 -2 60,753 50,428 55,069Operating Profit 27,713 22,587 23 22,849 21 79,607 88,431 1,01,780Provisions 10,080 7,600 33 9,235 9 29,046 37,684 42,990PBT 17,633 14,987 18 13,614 30 50,561 50,747 58,790Tax 4,910 2,681 83 3,472 41 8,984 13,194 15,873Tax Payout % 28 18 3 26 18 26 27PAT 12,723 12,306 3 10,142 25 41,577 37,553 42,916EPS 7 9 -24 10 -37 37 34 39Deposits 20,90,650 22,97,790 -9 22,34,020 -6 24,44,311 21,50,993 23,23,073Advances 21,25,210 21,55,170 -1 22,19,850 -4 22,56,161 21,69,423 23,46,198 - Retail Advances
11,45,000 13,23,110 -13 12,25,000 -7 13,16,630 11,45,468 969
115
- International Advances
5,52,555 4,52,586 22 5,77,161 -4 4,77,460 5,68,177 992
Net NPA% 2 2 2 2 2 2Yields On Advances %
10.4 10.9 10.2 10.7 10.3 9.8
Cost of Funds % 7.5 7.8 7.0 7.4 7.2 6.4NIM% 2.4 2.3 2.4 2.2 2.4 2.7Tier I CAR % 12.1 12.1 11.0 11.8 11.5 10.7Tier II CAR % 3.5 3.7 3.0 2.2 3.4 3.3Branches# 1416.0 955.0 1400.0 1262.0 1425.0 2005.0ATMs NA 3687.0 4530.0 3950.0
INCOME STATEMENTY/E MARCH 2,007 2,008 2009E 2010E 2011EInterest Income 2,19,956 3,07,883 3,13,142 3,01,685 3,33,116Interest Expended 1,63,585 2,34,842 2,30,621 2,04,790 2,20,213Net Interest Income 56,371 73,041 82,521 96,895 1,12,904Change (%) 44.3 29.4 13.0 17.4 16.5Other Income 66,279 88,108 76,615 81,244 92,098Net Income 1,25,650 1,61,149 1,59,135 1,78,139 2,05,002Change (%) 41.3 28.3 -1.2 11.9 15.1Operating Exp. 66,906 81,542 70,704 76,359 87,910Operating Income 58,744 79,607 88,431 1,01,780 1,17,092Change (%) 51.1 35.5 11.1 15.1 15.0Provisions & Cont. 22,294 29,046 37,684 42,990 39,114PBT 36,450 50,561 50,747 58,790 77,978Tax 5,348 8,984 13,194 15,873 21,054Tax Rate (%) 14.7 17.8 26.0 27.0 27.0PAT 31,102 41,577 37,553 42,916 56,924Change (%) 22.4 33.7 -9.7 14.3 32.6Proposed Dividend 8,993 12,239 12,239 13,352 13,352
BALANCE SHEETY/E MARCH 2,007 2,008 2009E 2010E 2011ECapital 8,993 11,127 11,127 11,127 11,127Preference Capital 3,500 3,500 3,500 3,500 3,500Reserve & Surplus 2,34,139 4,53,575 4,76,808 5,04,103 5,45,404Net worth 2,46,633 4,68,202 4,91,435 5,18,730 5,60,031Deposits 23,05,100 24,44,311 21,50,993 23,23,073 26,71,534Change (%) 39.6 6.0 -12.0 8.0 15.0Borrowings 7,06,613 8,63,986 9,11,719 9,87,038 10,73,485Other Liabilities & Prov.
1,88,235 2,21,452 2,81,244 3,57,180 4,53,619
Total Liabilities 34,46,581 39,97,951 38,35,391 41,86,020 47,58,668
116
Current Assets 3,71,213 3,80,411 3,04,722 3,19,200 3,54,349Investments 9,12,578 11,14,543 10,69,962 11,76,958 13,18,193Change (%) 27.5 22.1 -4.0 10.0 12.0Loans 19,58,656 22,56,161 21,69,423 23,46,198 26,80,708Change (%) 34.0 15.2 -3.8 8.1 14.3Net Fixed Assets 39,234 41,089 44,389 47,389 49,889Other Assets 1,64,899 2,05,746 2,46,896 2,96,275 3,55,530Total Assets 34,46,581 39,97,951 38,35,391 41,86,020 47,58,668
SUPPORT AND RESISTANCE LEVEL FOR JUNE MONTH
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.
News from India
Reserve Bank of India is expected to relax further Repo Rate, CRR,
and SBI already had followed the move by cutting the lending rate
and home loan rate to all segments and it is expected that all others
banks can also follow the same ,which can impact the profitability of
the banking sector.
“Looking at the above given information we can project the
new Support Level at 650* points and Resistance Level at
750* points for the Second and third week of June”.
SUPPORT AND RESISTANCE LEVEL FOR THE COMING MONTHS
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.
117
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.
“Looking at the above given information I projected that the
new Support Level for the Month of June will be 670* points
and Resistance level will be 810* points”.
Key investment arguments :-
Modest loan growth with improving margin would result
in significant net interest income growth; fee income is
expected to remain buoyant
Subsidiaries hold significant values
Valuation and view:-
Improvement in CASA and margins, and reduction in
net NPAs will be the key triggers to watch out for.
Adjusted for subs value at Rs139/share (reduced from
Rs169); stock trades at 0.6x FY10E ABV (adjusted
for 50% investment in subs and 65% net NPAs).
We value ICICIBC at Rs446/share (0.8x FY10E ABV
+ Rs139/share for subs value).
Sector view:-
YTD loan growth of 24% and deposit growth of 21%. Concerns on
slowing economic growth.
Selective buying favoring banks with higher earnings 118
visibility and reasonable valuations.
Key investment risks:-
NPAs have been increasing over the last few quarters and have reached 2%
(net) as on December 2008 .
NIM and CASA ratio continue to be one of the lowest in the industry.
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.
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.
119
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.
2) Increase in percentage of Returns on increase: The bank should provide higher
returns on deposits in comparison of the present situation. This will also upto large
extent help the bank earn profits & popularity.
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.
120
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.
3) Decentralized Management: Each branch manager is given the authority of taking
decisions in their respective branches. The decisions made by different managers are
diverse and any one wrong decision can laid to heavy losses to the bank.
4) No Proper Facilities To Uneducated customers: ICICI Bank provides all services
through electronic computerized machines. This creates problems to the less educated
people. But this threat falls in the 4th quadrant so its negligible. The company can
avoid this threat.
121
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.
122
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 incorporated on 9th February1971 as United Technical Consultants
Pvt. Ltd., and was converted into a public Limited Company on 3rd October1985.
The company carries on construction of industrial projects on a turnkey basis and
execution of Housing Projects and export orders.
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.
Unitech has the most diversified product mix comprising residential,
commercial/Information Technology (IT) parks, Retail, Amusement parks, Hotels and
Special Economic Zones. It is known for the quality of its product and is the first real
estate developer to have been certified ISO 9001:2000 certificate in North India.
SHAREHOLDING PATTERN DEC 31, 2008Category of shareholder
Number of shareholders
Total number of shares % of shares
Shareholding of Promoter and Promoter GroupA) Indian 38 1091232375 67.22B) Foreign 1 3822000 0.24
Public shareholdingA) Institutions 193 127446588 7.86B) Non-institutions 499315 400874037 24.69
Total 499547 1623375000 100.01
123
Unitech Share Price from 01-Jan-08 to 31-Mar-09
Unitech Share Price from 01-Jan-08 to 31-Mar-09
0
100
200
300
400
500
600
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
10/1
/2008
11/1
/2008
12/1
/2008
1/1
/2009
2/1
/2009
3/1
/2009
Date
Price
SHARE PERFORMANCE CHART ON BSE
0
50
100
150
200
250
300
350
400
4/1/
2008
5/1/
2008
6/1/
2008
7/1/
2008
8/1/
2008
9/1/
2008
10/1
/200
8
11/1
/200
8
12/1
/200
8
1/1/
2009
2/1/
2009
3/1/
2009
High Price
Low Price
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
124
Resistance level 400
Support Level 36
OCTOBER 2008 Unitech Share Price of Oct-08
0
50
100
150
10/1
/08
10/3
/08
10/5
/08
10/7
/08
10/9
/08
10/1
1/08
10/1
3/08
10/1
5/08
10/1
7/08
10/1
9/08
10/2
1/08
10/2
3/08
10/2
5/08
10/2
7/08
10/2
9/08
10/3
1/08
Date
Pric
e
HIGH 115.40 01-OCT-2008
LOW 31.00 24-OCT-2008
Fall of rs.84.40 within a month
Sale is decrease by 75%.
Rate was down because Net Profit Decrease by 62%. & Expenditure increased
by 62% .
NOVEMBER 2008 Unitech Share Price of Nov-08
0
2040
60
11/3
/08
11/5
/08
11/7
/08
11/9
/08
11/1
1/08
11/1
3/08
11/1
5/08
11/1
7/08
11/1
9/08
11/2
1/08
11/2
3/08
11/2
5/08
11/2
7/08
Date
Pric
e
HIGH 56.55 10-NOV-2008
LOW 23.15 28-NOV-2008
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%
125
Resistance level 101.0
Support level 30.00
Resistance level 56.00
Support level 23.00
DECEMBER 2008 Unitech Share Price of Dec-08
01020304050
Date
Pric
e
HIGH 45.75 22-DEC-2008
LOW 24.00 01-DEC-2008
Fall of rs.21.75 within a month
Sale is decrease by 75%.
Rate was down because Net Profit Decrease by 62%. & Expenditure increased
by 62%
Inflation is decrease by 2 % from last month.
JANUARY 2009 Unitech Share Price of Jan-09
01020304050
Date
Pri
ce
HIGH 47.60 05-JAN-2009
LOW 26.95 23-JAN-2009
Fall of rs. 20.75 within a month.
Inflation is decrease by 1 % from last month.
126
Resistance level 45.00
Support level 32.00
Resistance level 47.00
Support level 26.50
FEBRUARY 2009 Unitech Share Price of Feb-09
252627282930313233
2/2/
2009
2/4/
2009
2/6/
2009
2/8/
2009
2/10
/200
9
2/12
/200
9
2/14
/200
9
2/16
/200
9
2/18
/200
9
2/20
/200
9
2/22
/200
9
2/24
/200
9
2/26
/200
9
Date
Pri
ce
HIGH 32.15 11-FEB-2009
LOW 27.75 05-FEB-2009
Fall of rs. 04.40 within a month
Inflation is decrease by 2.10 % from last month.
MARCH 2009 Unitech Share Price of Mar-09
0
10
20
30
40
Date
Pri
ce
HIGH 36.50 26-MAR-2009
LOW 24.80 09-MAR-2009
Fall of rs. 11.70 within a month
Inflation is decrease by .2.80 % from last month.
127
Resistance level 32.10
Support level 27.65
Resistance level 36.40
Support level 24.70
First Week of Jan'09
0
10
20
30
40
50
1/5/2009 1/6/2009 1/7/2009 1/8/2009 1/9/2009
Date
Second Week of Jan'09
26
28
30
32
34
36
1/12/2009 1/13/2009 1/14/2009 1/15/2009 1/16/2009
Date
Pri
ce
JANUARY EQUITY CHARTING
HIGH 47.60 05-JAN-2009
LOW 36.00 09-JAN-2009
Fall of rs. 11.60 within a week
HIGH 34.95 14-JAN-2009
LOW 29.45 16-JAN-2009
Fall of rs. 05.50 within a week
128
Resistance level 47.50
Resistance level 34.80
Support level 29.40
Resistance level 31.90
Support level 26.50
Third Week Of Jan'09
24
26
28
30
32
34
1/19/2009 1/20/2009 1/21/2009 1/22/2009 1/23/2009
DAte
Pric
e
HIGH 31.95 19-JAN-2009
LOW 26.95 23-JAN-2009
Fall of rs. 05.00 within a week
Forth Week of Jan'09
24252627282930313233
1/27/2009 1/28/2009 1/29/2009 1/30/2009
Date
Pri
ce
HIGH 32.50 30-JAN-2009
LOW 27.15 27-JAN-2009
Fall of rs. 05.35 within a week
FEBRUARY EQUITY CHARTING 129
Support level 26.80
Resistance level 32.50
Support level 27.15
First Week of Feb'09
26.5
27
27.5
28
28.5
29
29.5
2/2/2009 2/3/2009 2/4/2009 2/5/2009 2/6/2009
Date
Pri
ce
HIGH 29.30 02-FEB-2009
LOW 27.75 05-FEB-2009
Fall of rs. 01.55 within a week
Second Week of Feb'09
27
28
29
30
31
32
33
2/9/2009 2/10/2009 2/11/2009 2/12/2009 2/13/2009
Date
Pri
ce
HIGH 32.15 11-FEB-2009
LOW 29.05 09-FEB-2009
Fall of rs. 03.10 within a week
130
Resistance level 29.30
Support level 27.75
Resistance level 32.10
Support level 31.10
Third Week of Feb'09
26.5
27
27.5
28
28.5
29
29.5
30
30.5
2/16/2009 2/17/2009 2/18/2009 2/19/2009 2/20/2009
Date
Pri
ce
HIGH 30.20 16-FEB-2009
LOW 28.05 20-FEB-2009
Fall of rs. 02.15 within a week
Fourth Week of Feb'09
27.6
27.8
28
28.2
28.4
28.6
28.8
29
2/24/2009 2/25/2009 2/26/2009 2/27/2009
Date
Pric
e
HIGH 28.90 26-FEB-2009
LOW 28.10 25-FEB-2009
Fall of rs. 00.80 within a week
MARCH EQUITY CHARTING
131
Resistance level 29.25
Support level 28.30
Resistance level 28.90
Support level 28.10
First Week of Mar'09
24.5
25
25.5
26
26.5
27
27.5
3/2/2009 3/3/2009 3/4/2009 3/5/2009 3/6/2009
Date
Pri
ce
HIGH 26.95 02-MAR-2009
LOW 25.55 05-MAR-2009
Fall of rs. 01.40 within a week
Second Week of Mar'09
23.5
24
24.5
25
25.5
26
26.5
27
3/9/2009 3/10/2009 3/11/2009 3/12/2009 3/13/2009
Date
Pri
ce
HIGH 26.50 13-MAR-2009
LOW 25.05 12-MAR-2009
Fall of rs. 01.45 within a week
132
Resistance level 26.60
Support level 25.60
Resistance level 26.50
Support level 25.00
Third week of Mar'09
25
25.5
26
26.5
27
27.5
3/16/2009 3/17/2009 3/18/2009 3/19/2009 3/20/2009
Date
Pri
ce
HIGH 27.15 19-MAR-2009
LOW 25.95 17-MAR-2009
Fall of rs. 01.20 within a week
Fourth Week of Mar'09
0
10
20
30
40
3/23/2009 3/24/2009 3/25/2009 3/26/2009 3/27/2009
Date
Pric
e
HIGH 36.50 26-MAR-2009
LOW 28.00 23-MAR-2009
Fall of rs. 08.50 within a week
YEARLY MARGIN FOR UNITCH LTD. 133
Resistance level 27.10
Support level 25.95
Resistance level 36.00
Support level 29.00
YEAR Avg. Margin Avg. Margin (%)2008 15.931 8.935%TILL MAR-09 2.747 8.666%
MONTHLY MARGIN FOR UNITECH LTD.Month Monthly Avg. Margin Monthly Avg. Margin (%)Jan-08 39.441 9.033%Feb-08 28.867 7.764%Mar-08 24.897 8.828%Apr-08 13.305 4.748%May-08 13.955 5.015%Jun-08 14.098 7.320%Jul-08 12.974 8.084%
Aug-08 8.935 5.249%Sep-08 10.467 7.850%Oct-08 11.745 19.132%Nov-08 5.578 13.489%Dec-08 4.007 11.342%Jan-09 4.41 12.739%Feb-09 1.953 6.629%Mar-09 1.537 5.816%
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.
Financials:
Strong asset base offsets short-term liquidity concerns:Unitech reported a
moderate financial performance in Q2’09 due to the
134
liquidity crisis and a slowdown in the real estate sector. The EBIDTA
margin improved considerably because of a drop in the construction cost.We
upgrade our rating from Hold to Buy due to the following reasons:
Huge land bank spread across the country: Unitech has 13,923 acres
of land spread across all major cities of the country. Nearly 70% of the
land has been purchased from the government with clear titles.
Approximately 70% of the land bank spreads across the four cities of
Kolkata (35%), NCR (14%), Chennai (12%), and Vizag (9%).
Operating margins likely to fall but remain at higher levels: The
operating margin is likely to decline from the current 59.9% due to the
expected fall in property prices and a shift in focus towards low-margined
middle income housing. However, lower steel and cement prices are
expected to partially offset the decline in the margins.
Short-term liquidity likely to improve: Unitech is struggling with short-
term liquidity concerns due to its high leverage and debt obligation of
Rs. 27 bn due by the end of FY09. We believe that it can tide over thecurrent
situation through the sale and monetization of its assets.
Attractive valuation: Unitech’s stock currently trades at a
43.4%discount to our fair value estimate of Rs. 46, which incorporates the
substantial decline in real estate prices across all segments. We believe
that the stock has a long-term upside potential as the Company has ahuge
land bank at diversified locations, a strong asset base, and the expertise and
execution skills.
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(%)
135
EBITDA 50.00% 59.00% 62.00%NPM 40.50% 41.00% 36.50%
Per Share Data (Rs.)EPS 2.5 2.6 2.2 -12.60% -15.20%
Result Highlights
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. Construction revenue declined 64% yoy, from Rs. 517.9
mn in Q2’08 to Rs. 186.7 mn in Q2’09. However, revenue increased 6.9%
yoy in H1’09. We expect revenue to fall at a CAGR of 15.4% between
2008 and 2010, due to the liquidity crisis and the slowdown in demand.
In spite of the decline in revenue, the EBIDTA margin increased
considerably to 62% in Q2’09, from 50% in Q2’08, due to a drop in cement
and steel prices, resulting in a significant 28.3% drop in the real estate
construction cost. The margin for H1’09 increased 6.5 pts on a yoy basis,
from 53.4% in H1’08 to 59.9% in H1’09. We believe that the margin will
come under pressure due to the expected fall in property prices.
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.
Quarterly Data
Q2'08 Q1'09 Q2'09 YOY% QOQ% TTM ENDED Q2'08
TTM ENDEDQ2'09
YOY%
( Rs. mn,except per share dataRevenueReal Estate 8303 9140 8077 -2.70% -11.60% 39242 37331 -4.90%Construction 518 316 187 -64% -40.90% 2338 1739 -25.60%
136
Consulting 772 251 990 28.30% 294.30% 1131 1883 66.50%Hospitality 26 31 32 26.70% 4.90% 103 132 28.30%Electrical 140 206 208 49.10% 1.30% 720 790 9.70%Others 377 373 336 -10.90% -9.90% 792 1294 63.30%Total 10135 10317 9831 44326EBITReal Estate 6049 6049 5257 -13.10% -13.10% 27249 24769 -9.10%Construction 42 42 37 -10.60% -10.60% 116 156 34.90%Consulting 251 251 984 292.10% 292.10% 733 1789 144.10%Hospitality 2 2 0 89.50% 89.50% 10 -4 -
135.00%Electrical 8 8 -22 NM NM 45 30 -33.90%Others 24 24 7 -72.40% -72.40% 96 139 44.40%Total 6376 6376 6264 28250 26880EBIT MarginsReal Estate 72.90% 66.20% 65.10% 69.40% 66.30%Construction 8.00% 13.10% 19.90% 5.00% 9.00%Consulting 32.50% 99.90% 99.40% 64.80% 95.00%Hospitality 7.50% 6.20% 0.60% 10.00% -2.70%Electrical 5.60% 3.80% -10.40% 6.20% 3.70%Others 6.40% 6.50% 2.00% 12.20% 10.80%
Outlook
The real estate market is facing a deep-rooted slowdown due to the
combination of the liquidity crisis and the high interest rates. Residential prices have
declined up to 25% from their peaks in the last few months, while commercial and
retail rentals have declined nearly 20% in some major metropolitan areas. Besides,
banks have tightened the credit and reduced the loan-to-value amount for home
loans. Therefore, we expect the real estate market to respond with reduced demand
and a significant price downswing over the next 12-24 months.
Unitech’s second quarter financial performance was adversely affected
due to the liquidty crisis and the slump in real estate demand. The
Company is highly leveraged with a debt-equity ratio of 2.4x and a trailing
6-month interest coverage ratio of 5.0. Its debt stood at Rs. 85.5 bn as of March 31,
2008. The Company has a debt obligation of Rs. 27 bn, due by March 2009. The
recent deal with Telenor, a Norwegian-based telecom company, to divest a 60%
stake in its telecom venture for Rs 61 bn will act as a small breather, allowing the
Company to partially reduce its debt burden on its balace sheet.
137
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
(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. 138
Year To March FY05 FY06 FY07 FY08 FY09E FY10E CAGR(%)Rs.mn,except per share dataNet 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:-
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.
139
“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”.
SUPPORT AND RESISTANCE LEVEL FOR THE COMING MONTHS OF
2009
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 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”.
140
Key Risks :-
Failure to secure private equity deals in projects may result in a lack of
funding and could lead to delays in execution. This may also exert
pressure on funding costs, thereby negatively affecting the net margins.
Delays in project completion and a slowdown in residential demand
due to high interest rates would hurt the Company’s growth prospects.
SWOT Analysis of Unitech
Strengths
1. Unitech is the second largest engineering and construction companies in India
with a strong international presence in regions of South Asia, the Asia Pacific,
the Middle East, the Caspian, Africa and the United Kingdom. It has over 40
subsidiaries spread across the globe who have engaged with over 200 clients
implementing over 250 projects in over 40 countries.
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.
3. Unitech is one of the few companies to have a in-house comprehensive
mechanical, civil and insulation work capability for cryogenic LPG and LNG
tanks and terminals.
4. It provides engineering and construction services in diverse industries as
follows
Oil and gas projects including pipelines, storage tanks and terminals and
process facilities 141
Infrastructure projects
Power plants projects
Civil construction projects including highways, flyovers, bridges,
elevated railroads, ports, MRTs and LRTs
Specialty sectors like health care and industrial civil infrastructure
Plant and facility management projects
5. Its core capabilities lie in process and plant engineering, heavy civil
engineering and building.
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.
9. Unitech has over 9000 pieces of construction and engineering equipment
which includes pipe laying equipment, recently added horizontal directional
drilling rigs, swamp excavators, pilling rigs. It also includes 15 spreads of
pipeline equipment capable of laying pipelines up to 56 inches in diameter. It
has potential to simultaneously execute several projects. It also has two
workshops and yards to maximize peak performance functioning, one in 142
Banmore which is in Madhya Pradesh and other which serves as base camp
and yard in Sungaipuran, Indonesia. Another advantage it sees owning and
managing a large fleet of sophisticated engineering equipment is that it helps
in maintain higher EBITDA margins.
Weakness
1. Unitech is exposed to uncertain political and economic environments,
government instability and legal systems, law and regulations of 18 different
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.
3. Major projects are subject to pre-qualified based on several criteria like
experience, technology capacity and performance, safe record, financial
strength and size of previous projects. Recently in the energy and petroleum
sector major emphasis on increasing developing larger, more technically
complex projects and awarding to a fully integrated project contractor. Though
contracts are obtained through competitive bidding process but pre-
qualification plays a key role.
4. Unitech ability to qualify only to a certain value and high concentration on
projects with potential high margins may hinder from taking up such large
complex projects.
5. Unitech is entering into a number of new businesses which require significant
expense and financial and operational resources. Its entry into real estate
development in India and providing onshore integrated drilling services in the
oil and gas sector may not prove unprofitable because of limited experience.
Unitech Investment in Pipavav Shipyard is exposed to execution risk since it is
yet to commence commercial operations.
143
6. Due to its presence in pipelines it has helped it to record highest operating
margins in the industry buts increasing level of exposure to road projects has
led to declining margins.
7. Moreover, the company is into capital-intensive segments and the higher
depreciation costs and interest’s costs keep its net margins at the same level
other prominent competitors.
Opportunities
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
1. International contracts are usually fixed price contract .Therefore business is
exposed to commodity price volatility as a sharp increase in raw material
prices may impact margins
144
2. Corporate capital expenditure and infrastructure investments are interest rate
sensitive. Therefore significant increase in interest rate may reduce the
investments
3. Global and domestic hydrocarbon capital expenditure are prone to oil prices.
Any reduction in oil prices may reduce investment in hydrocarbon industry
4. As a major portion of revenue of the company is from outside India. Sharp
fluctuation in currency may impact profitability.
5. The business activities of the company are sensitive to weather conditions
especially its operation in the Caspian region and the Middle East. During
extreme high temperature or difficult working condition may hamper
construction activities and lead to inadequate use of resources.
CHAPTER 6 145
CONCLUSION
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. 146
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
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.
147
ANNEXURE
148
ANNEXURE
EDUCOMP SOLUTIONS
BALANCE SHEET
Educomp Solutions
In Rs. 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 Money
0 0 0 0 0
Preference Share Capital
0 0 0 0 0
Reserves 12.59 18.92 74.35 98.71 269.57
Revaluation Reserves 0 0 0 0 0
Networth 17.06 23.39 90.31 114.7 286.82
Secured Loans 2.93 4.37 9.92 17.55 52.3
Unsecured Loans 0 0 0 107.14 314.94
Total Debt 2.93 4.37 9.92 124.69 367.24
Total Liabilities
19.99 27.76 100.23 239.39 654.06
149
Application Of FundsGross Block 18.7 24.62 35.08 93.62 264.53
Less: Accum. Depreciation
8.86 13.04 18.34 21.82 53.18
Net Block 9.84 11.58 16.74 71.8 211.35
Capital Work in Progress
0.28 2 6.65 7.59 20.08
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 Balance
1.3 3.06 28.6 30.77 54.34
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 & Advances
16.99 25.19 92.59 169.49 431.34
Deffered Credit 0 0 0 0 0
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 Expenses
0 0 0.08 0.06 0.04
Total Assets
19.99 27.77 100.23 239.38 654.08
Contingent Liabilities 0 0 17.44 17.95 29.24
Book Value (Rs) 38.15 52.3 56.59 71.75 166.31
PROFIT AND LOSS
Educomp Solutions
In Rs. Cr.
Profit & Loss account
Mar '04 Mar '05 Mar '06 Mar '07 Mar '08
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 Expenses
0 0 9.54 30.42 79.73
150
Selling and Admin Expenses
0 0 7.63 12.15 18.83
Miscellaneous Expenses
6.06 6.74 1.17 2.2 11.62
Preoperative Exp Capitalised
0 0 0 0 0
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 Items)
3.07 10.15 21.47 44.22 103
Tax 1.61 3.83 7.57 15.64 32.94
Reported Net Profit 1.89 6.33 13.92 28.65 70.06
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 Tax
0 0 0.34 0.56 0.73
Per share data (annualised)
Shares in issue (lakhs) 44.73 44.73 159.6 159.85 172.47
Earning Per Share (Rs)
4.22 14.15 8.72 17.92 40.62
Equity Dividend (%) 0 0 15 20 25
Book Value (Rs) 38.15 52.3 56.59 71.75 166.31
CASH FLOW STATEMENT
Educomp Solutions In Rs. Cr.Cash Flow
Mar '05 Mar '06 Mar '07 Mar '08
Net Profit Before Tax
10.16 21.47 44.9 103
Net Cash From Operating Activities
8.46 11.24 18.04 68.1
Net Cash (used in)/from -8.27 -14.61 -88.46 -215.72
Investing Activities
Net Cash (used in)/from Financing Activities
1.09 60.8 109.07 330.66
Net (decrease)/increase In Cash and Cash Equivalents
1.27 57.43 35.3 183.04
Opening Cash & Cash Equivalents
1.05 2.23 59.66 94.96
Closing Cash & Cash Equivalents
2.32 59.66 94.96 279.03
151
ICICI BANK
BALANCE SHEET
ICICI Bank In Rs. Cr.Balance Sheet
Mar '05 Mar '06 Mar '07 Mar '08 Mar '09
Capital and Liabilities:
Total Share Capital 1,086.75 1,239.83 1,249.34 1,462.68 1,463.29
Equity Share Capital 736.75 889.83 899.34 1,112.68 1,113.29
Share Application Money 0.02 0 0 0 0
Preference Share Capital 350 350 350 350 350
Reserves 11,813.20 21,316.16 23,413.92 45,357.53 48,419.73
Revaluation Reserves 0 0 0 0 0
Net Worth 12,899.97 22,555.99 24,663.26 46,820.21 49,883.02
Deposits 99,818.78 1,65,083.17
2,30,510.19
2,44,431.05
2,18,347.82
Borrowings 33,544.50 38,521.91 51,256.03 65,648.43 67,323.69
Total Debt 1,33,363.28
2,03,605.08
2,81,766.22
3,10,079.48
2,85,671.51
Other Liabilities & Provisions
21,396.17 25,227.88 38,228.64 42,895.39 43,746.43
Total Liabilities 1,67,659.42
2,51,388.95
3,44,658.12
3,99,795.08
3,79,300.96
Assets
Cash & Balances with RBI 6,344.90 8,934.37 18,706.88 29,377.53 17,536.33
Balance with Banks, Money at Call
6,585.07 8,105.85 18,414.45 8,663.60 12,430.23
Advances 91,405.15 1,46,163.11
1,95,865.60
2,25,616.08
2,18,310.85
Investments 50,487.35 71,547.39 91,257.84 1,11,454.34
1,03,058.31
Gross Block 5,525.65 5,968.57 6,298.56 7,036.00 7,443.71
Accumulated Depreciation 1,487.61 1,987.85 2,375.14 2,927.11 3,642.09
Net Block 4,038.04 3,980.72 3,923.42 4,108.89 3,801.62
Capital Work In Progress 96.3 147.94 189.66 0 0
Other Assets 8,702.59 12,509.57 16,300.26 20,574.63 24,163.62
152
Total Assets
1,67,659.40
2,51,388.95
3,44,658.11
3,99,795.07
3,79,300.96
Contingent Liabilities 97,507.79 1,19,895.78
1,77,054.18
3,71,737.36
8,03,991.92
Bills for collection 9,803.67 15,025.21 22,717.23 29,377.55 36,678.71
Book Value (Rs) 170.35 249.55 270.37 417.64 445.17
PROFIT AND LOSS
ICICI Bank In Rs. Cr.Profit & Loss account Mar '05 Mar '06 Mar '07 Mar '08 Mar '09
Income
Interest Earned 9,409.89 13,784.50 22,994.29 30,788.34 31,092.55
Other Income 3,416.23 5,036.62 6,962.95 8,878.85 8,117.76
Total Income 12,826.12 18,821.12 29,957.24 39,667.19 39,210.31
Expenditure
Interest expended 6,570.89 9,597.45 16,358.50 23,484.24 22,725.93
Employee Cost 737.41 1,082.29 1,616.75 2,078.90 1,971.70
Selling and Admin Expenses
1,040.49 2,360.72 4,900.67 5,834.95 5,977.72
Depreciation 590.36 623.79 544.78 578.35 678.6
Miscellaneous Expenses 1,881.77 2,616.78 3,426.32 3,533.03 4,098.22
Preoperative Exp Capitalised
0 0 0 0 0
Operating Expenses 3,177.78 5,274.23 8,849.86 10,855.18 10,795.14
Provisions & Contingencies
1,072.25 1,409.35 1,638.66 1,170.05 1,931.10
Total Expenses
10,820.92 16,281.03 26,847.02 35,509.47 35,452.17
Net Profit for the Year
2,005.20 2,540.07 3,110.22 4,157.73 3,758.13
Extraordionary Items 0 0 0 0 -0.58
Profit brought forward 53.09 188.22 293.44 998.27 2,436.32
Total 2,058.29 2,728.29 3,403.66 5,156.00 6,193.87
Preference Dividend 0 0 0 0 0
Equity Dividend 632.96 759.33 901.17 1,227.70 1,224.58
Corporate Dividend Tax 90.1 106.5 153.1 149.67 151.21
Per share data (annualised)
Earning Per Share (Rs) 27.22 28.55 34.59 37.37 33.78
Equity Dividend (%) 85 85 100 110 110
153
Book Value (Rs) 170.35 249.55 270.37 417.64 445.17
Appropriations
Transfer to Statutory Reserves
547 248.69 1,351.12 1,342.31 2,008.42
Transfer to Other Reserves
600.01 1,320.34 0 0.01 0.01
Proposed Dividend/Transfer to Govt
723.06 865.83 1,054.27 1,377.37 1,375.79
Balance c/f to Balance Sheet
188.22 293.44 998.27 2,436.32 2,809.65
Total 2,058.29 2,728.30 3,403.66 5,156.01 6,193.87
CASH FLOW STATEMENT
ICICI Bank In Rs. Cr.Cash Flow
Mar '05 Mar '06 Mar '07 Mar '08 Mar '09
Net Profit Before Tax
2527.2 3096.61 3648.04 5056.1 5116.97
Net Cash From Operating Activities
9131.72 4652.93 23061.95 -11631.15 -14188.49
Net Cash (used in)/from -3445.24 -7893.98 -18362.67 -17561.11 3857.88
Investing Activities
Net Cash (used in)/from Financing Activities
-1227.13 7350.9 15414.58 29964.82 1625.36
Net (decrease)/increase In Cash and Cash Equivalents
4459.34 4110.25 20081.1 683.55 -8074.57
Opening Cash & Cash Equivalents
8470.63 12929.97 17040.22 37357.58 38041.13
Closing Cash & Cash Equivalents
12929.97 17040.22 37121.32 38041.13 29966.56
154
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
Equity Share Capital 12.49 12.49 12.49 162.34 324.68
Share Application Money
0 0 0 0 0
Preference Share Capital
0 0 0 0 0
Reserves 138.2 161.42 212.05 998.66 1,819.14
Revaluation Reserves 0 0 0 0 0
Networth 150.69 173.91 224.54 1,161.00 2,143.82
Secured Loans 60.32 280.19 632.57 2,839.67 5,506.45
Unsecured Loans 71.33 43.63 54.2 765.39 2,611.08
Total Debt 131.65 323.82 686.77 3,605.06 8,117.53
Total Liabilities 282.34 497.73 911.31 4,766.06 10,261.35
Application Of Funds
Gross Block 41.34 50.86 83.17 99.87 132.05
Less: Accum. Depreciation
23.55 25.51 28.44 30.24 35.96
Net Block 17.79 25.35 54.73 69.63 96.09
Capital Work in Progress
622.09 1,106.14 1,824.66 4,408.59 7,083.41
Investments 83.39 166.57 282.39 518.93 1,397.99
Inventories 26.66 29.3 32.26 32.77 13.66
Sundry Debtors 61.92 57.14 76.54 97.55 739.74
Cash and Bank Balance
26.65 56.56 74.73 128.62 236.01
Total Current Assets 115.23 143 183.53 258.94 989.41
Loans and Advances 168.5 310.77 866.97 3,090.88 7,624.58
Fixed Deposits 57.31 138.32 85.9 667.19 135.17
Total CA, Loans & Advances
341.04 592.09 1,136.40 4,017.01 8,749.16
Deffered Credit 0 0 0 0 0
Current Liabilities 770.19 1,364.74 2,314.33 3,798.30 6,316.27
Provisions 11.79 27.68 72.55 449.8 749.03
155
Total CL & Provisions 781.98 1,392.42 2,386.88 4,248.10 7,065.30
Net Current Assets -440.94 -800.33 -1,250.48 -231.09 1,683.86
Miscellaneous Expenses
0 0 0 0 0
Total Assets 282.33 497.73 911.3 4,766.06 10,261.35
Contingent Liabilities 59.87 376.88 434.87 1,640.51 2,325.69
Book Value (Rs) 120.67 139.27 179.81 14.3 13.21
PROFIT AND LOSS
Unitech In Rs. Cr.Profit & Loss account
Mar '04 Mar '05 Mar '06 Mar '07 Mar '08
Income
Sales Turnover 373.95 509.33 653.13 2,441.74 2,486.79
Excise Duty 0 0 0 0 0
Net Sales 373.95 509.33 653.13 2,441.74 2,486.79
Other Income 6.19 17.86 21.52 155.38 482.36
Stock Adjustments 7.27 2.65 4.38 1.57 -19.11
Total Income 387.41 529.84 679.03 2,598.69 2,950.04
Expenditure
Raw Materials 27.41 58.33 65.45 80.53 26.46
Power & Fuel Cost 0 0 0 0 0
Employee Cost 10.38 15.95 31.11 65.62 98.43
Other Manufacturing Expenses
298.87 359.62 396.1 853.98 981.25
Selling and Admin Expenses
14.81 22.6 30.84 38.06 52.7
Miscellaneous Expenses
4.21 5.9 7.17 15.55 23.7
Preoperative Exp Capitalised
0 0 0 0 0
Total Expenses
355.68 462.4 530.67 1,053.74 1,182.54
156
Operating Profit 25.54 49.58 126.84 1,389.57 1,285.14
PBDIT 31.73 67.44 148.36 1,544.95 1,767.50
Interest 9.54 21.92 37.14 193.71 393.38
PBDT 22.19 45.52 111.22 1,351.24 1,374.12
Depreciation 1.69 2.14 3.1 4.54 8.58
Other Written Off 0 0 0 0 0
Profit Before Tax 20.5 43.38 108.12 1,346.70 1,365.54
Extra-ordinary items 2.5 -1.05 -0.51 0.44 -0.38
PBT (Post Extra-ord Items)
23 42.33 107.61 1,347.14 1,365.16
Tax 6.46 13.46 38.48 361.27 334.83
Reported Net Profit 14.07 29.92 69.64 983.56 1,030.68
Total Value Addition 328.26 404.07 465.22 973.2 1,156.09
Preference Dividend 0 0 0 0 0
Equity Dividend 3.75 5 16.23 40.58 40.58
Corporate Dividend Tax
0.48 0.65 2.28 6.9 6.9
Per share data (annualised)
Shares in issue (lakhs)
124.88 124.88 124.88 8,116.88 16,233.75
Earning Per Share (Rs)
11.27 23.96 55.77 12.12 6.35
Equity Dividend (%) 30 40 10 25 12.5
Book Value (Rs) 120.67 139.27 179.81 14.3 13.21
CASH FLOW STATEMENT
157
Unitech In Rs Cr.Cash Flow
Mar '04 Mar '05 Mar '06 Mar '07 Mar '08
Net Profit Before Tax 20.84 43.37 108.13 1344.83 1365.51
Net Cash From Operating Activities
60.35 87.66 -260.46 -1755.68 -3686.44
Net Cash (used in)/from -26.08 -93.24 -121.05 -117.32 -771.21
Investing Activities
Net Cash (used in)/from Financing Activities
-0.04 116.5 347.25 2508.19 4033.01
Net (decrease)/increase In Cash and Cash Equivalents
34.23 110.92 -34.26 635.19 -424.64
Opening Cash & Cash Equivalents
49.73 83.96 194.89 160.63 795.82
Closing Cash & Cash Equivalents
83.96 194.89 160.63 795.82 371.18
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