MANNE DESERTATION

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Haresh swargamINTERNATIONAL BANKING AND FINANCE

STUDENT NUMBER: @00230766

Title: Fundamental analysis on leading automobile sector in India

A dissertation submitted in partial fulfilment of the requirements of the

University of Salford for the degree of MSc International Banking and

Finance

Salford Business School

University of Salford

2009-2010

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DECLARATION

I haresh swargam declare that fundamental analysis on leading automobilesector in India is my own work and all the sources that I have used or quoted

have been acknowledged by means of complete references.

Signature: ..

Date:

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ACKNOWLEDGEMENT

My dissertation would have not been so successful without the proper

guidance of my supervisor professor Rose Baker who helped me in

completing my dissertation with proper directions and advice.

I would also like to thank all my professors and lecturers at University of

Salford, who have supported me with their knowledge and guidance in

completing my research work.

I take this opportunity to thank all my family and friends who have

helped me directly or indirectly during my dissertation. I would also liketo thank different authors of various research papers and books where I

have referred during my course of work.

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Abstract

Contents

Contents ..........................................................................................................................4

........................................................................................................................................5

Chapter 1 .........................................................................................................................5

Introduction....................................................................................................................5

Chapter 2 .........................................................................................................................9

Literature Review...........................................................................................................9

Chapter 3 .......................................................................................................................11

Research Methodology.................................................................................................11

3.1 Purpose of the study and data used.....................................................................11

Chapter 4 .......................................................................................................................13

Analysis and Discussion...............................................................................................13

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Chapter 1

Introduction

This study is conducted to analyze the equity stocks of a few Indian companies in

the automobile industry. The aim of the study is to undertake the fundamental

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analysis of the stocks in order to arrive at a rational decision to make investments.

This helps the investors to meet their expected returns with minimum risk.

Continuous economic liberalization over the years by the government of India has

resulted in making India as one of the prime business destination for many global

automotive players. The automotive sector in India is growing at around 18 per

cent per annum.

The automotive industry is one of the core industries of the Indian economy. The

sector has a great influence on the Indian stock market and the equity stocks of

automobile industry are one of the most preferred stocks at present. This is one of

the main reasons why this sector is opted for the study. The study is focused on

equity performance of companies like Tata Motors, Hero Honda, Bajaj Auto, TVS

Motors and Mahindra & Mahindra Motors (M & M).

The research is based on four phases of analysis. The first phase of the research is

to analyze the financial strength of the companies through ratio analysis with

respect to the financial statements from the financial year 2002-2003 to the

financial year 2007-2008.

In the second phase, the market price of an equity share is estimated for the year

2008-2009. This is done on the basis of Price-Earnings model and Dividend

discount model.

In the third phase, sensitivity analysis is used to determine the market price of an

equity share due to the changes in macro economic factors like Beta, Market

Return and Risk free rate of return. Fluctuations in the market price are observed

by changing the values of the above mentioned macro economic factors.

Further under this phase, the correlation between the beta and the market price is

determined and a relationship between the beta factor and the market price is

observed with the help of line graph and column graph.

In the fourth and the final phase of analysis, in order to know how strong the

value of coefficient of correlation is between the beta factor and the market price,

statistical t-test is applied.

Conceptual Study:

The study is based on the most widely used concept for security analysis viz.

Fundamental Analysis. A detailed description of this concept is given below:

Fundamental Analysis:

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A method of evaluating a security by attempting to measure its

intrinsicvalue by examining related economic, financial and other

qualitative and quantitative factors. Fundamental analysts attempt to study

everything that can affect the security's value, including macroeconomic

factors (like the overall economy and industry conditions) and individually

specific factors (like the financial condition and management of companies).

The end goal of performing fundamental analysis is to produce a value

that an investor can compare with the security's current price in hopes of

figuring out what sort of position to take with that security (underpriced = buy,

overpriced = sell or short).

Fundamental analysis is about using real data to evaluate a securitys

value. Although most analysts use fundamental analysis to value stocks, this

method of valuation can be used for just about any type of security.

For example, an investor can perform fundamental analysis on a

bond's value by looking at economic factors, such as interest rates and the

overall state of the economy, and information about the bond issuer, such as

potential changes in credit ratings. For assessing stocks, this method uses

revenues, earnings, future growth, return on equity, profit margins and other

data to determine a company's underlying value and potential for future

growth. In terms of stocks, fundamental analysis focuses on the financial

statements of a company being evaluated.

One of the most famous and successful users of fundamental analysis

is the Oracle of Omaha, Warren Buffett, who has been well known for

successfully employing fundamental analysis to pick securities. His abilities

have turned him into a billionaire.

Fundamental analysis serves to answer questions, such as:

Is the companys revenue growing?

Is it actually making a profit?

Is it in a strong-enough position to beat out its competitors in the future?

Is it able to repay its debts?

Is management trying to "cook the books"?

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The various fundamental factors can be grouped into two categories:

quantitative and qualitative. In our context, quantitative fundamentals are

numeric, measurable characteristics about a business. The sources of

quantitative data are the financial statements of a company like Income

Statement, Cash flow Statement and the Balance Sheet. You can measure

revenue, profit, assets and more with great precision.

Turning to qualitative fundamentals, these are the less tangible

factors surrounding a business - things such as the quality of a companys

board members and key executives, its brand-name recognition, patents or

proprietary technology.

1Statement of the problem:

The critical task is to analyze the equity stock of a few companies

coming under automobile industry. These is to be done by analyzing the

financial reports of the companies and arrive at a fair and rational decision as

to which stock would perform better in the market in financial year 2008-

2009.

Further, correlation analysis and statistical t-test are to be applied in order

to understand the relation between the market price of equity and some macro

economic factors like Beta, Market Return and Risk free Rate of Return.

Aims of the study:

To determine the future market value of an equity.

To determine the future earnings potential of the companies coming in

automobile industry.

2.2 Objectives of the study:

To analyze the financial strength of a few automobile companies

through fundamental analysis.

To estimate the value of equity for the Financial Year 2008-2009 and

to determine if there are any changes in market prices with respect to

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macro economic factors like Beta, Expected Market Return and Risk

free rate of return.

To analyze the strength of value correlation between calculated beta

and fluctuated market prices.

Chapter 2

Literature Review

Introduction

Profile of Indian Automobile Industry:

One of the key industries propelling the Indian Economy today is the Automobile

Industry. As steel, petroleum and manufacturing industries are dependent on this

industry, it employs thousands of people directly or indirectly, and this industry grows

at around 18% p.a... This industry, therefore, has a key role to play in the economic

growth of India.

. Since, 1991 opening of the economy has changed the face of auto industry.

Today, it is amongst the main drivers of growth of Indian economy with an outputmultiplier of 2.24(for every Re.1 invested, auto sector gives back Rs.2.24 to the

economy. An increase in the disposable income of the middle class coupled with low

EMI values and friendly government policies are what have made a difference to this

sector. With an annual contribution of 4% to the GDP and accounting for about 5% of

the total industrial output, this segment clearly stands out as a significant contributor

to the economic growth.

India is the expected to overtake China as the world's fastest growing car

market in terms of the number of units sold and the automotive industry is one of the

fastest growing manufacturing sectors in India. Because of its large market (India has

a population of 1.1 billion; the second largest in the world), a low base of car

ownership (7 per 1,000 people) and a surging economy, India has become a huge

attraction for car manufacturers around the world. Though several major foreign

automakers have their manufacturing bases in India, the Indian automobile market is

dominated by domestic companies. Maruti Suzuki is the largest passenger vehicle

company; Tata Motors is the largest commercial vehicle company while Hero Honda

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is the largest motorcycle company in India. Other major Indian automobile

manufacturers include Mahindra & Mahindra, TVS Motors and Bajaj Auto.

In order to give a boost to the auto industry, the government has taken several

initiatives. The government has reduced the Excise Tax on the exports of small cars,

excise duty on raw materials which is now between 5 to 7.5% as compared to

previous level of 10%. The thrust on infrastructure development has also supported

the auto industry to a significant level.

The economy of India is emerging. The following table shows the ranking of India

from 2002 to 2005:

Rank 2005 2004 2003 2002

1 China China China China

2 India Thailand Thailand Thailand

3 Thailand India USA USA

4 Vietnam Vietnam Vietnam Indonesia

5 USA USA India Vietnam

6 Russia Russia Indonesia India7 Korea Indonesia Korea Korea

Therefore the above facts reflect that the automobile sector in India is one the most

promising sector in the future. The government of India is also supporting this sector

in order to make it a globally competitive industry. This automobile sector is therefore

considered to a Sunrise Sector in India.

Empirical evidences

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Chapter 3

Research Methodology

3.1 Purpose of the study and data used

The critical task is to analyze the equity stock of a few companies

coming under automobile industry. These is to be done by analyzing the

financial reports of the companies and arrive at a fair and rational decision as

to which stock would perform better in the market in financial year 2008-

2009.

Further, correlation analysis and statistical t-test are to be applied in order

to understand the relation between the market price of equity and some macro

economic factors like Beta, Market Return and Risk free Rate of Return.

In order to conclude with the description of Fundamental Analysis, the

investors should focus on the following with respect to the financial statements

of a company:

Financial reports are required by law and are published both quarterly

and annually.

Management discussion and analysis (MD&A) gives investors a better

understanding of what the company does and usually points out some key

areas where it performed well.

Audited financial reports have much more credibility than unaudited

ones.

The balance sheet lists the assets, liabilities and shareholders' equity.

For all balance sheets: Assets = Liabilities + Shareholders Equity. The

two sides must always equal each other (or balance each other).

The income statement includes figures such as revenue, expenses,

earnings and earnings per share.

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For a company, the top line is revenue while the bottom line is net

income.

The income statement takes into account some non-cash items, such as

depreciation. The cash flow statement strips away all non-cash items and tells you

how much actual money the company generated.

The cash flow statement is divided into three parts: cash from

operations, financing and investing.

Always read the notes to the financial statements. They provide more

in-depth information on a wide range of figures reported in the three

financial statements.

Criticisms of Fundamental Analysis

The biggest criticisms of fundamental analysis come primarily from two groups:

proponents of technical analysis and believers of the Efficient Market

Hypothesis.

4 Hypothesis used:

HO: There is no correlation between the variables i.e, the beta and the

market price. (Here, we assume that the relationship between the beta

and the market price is not strong).

H1: There is a correlation between beta and market price. (Here, we

assume that the correlation between the beta and the market price is

strong).

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Chapter 4

Analysis and Discussion

Ratio Analysis:

Ratio Analysis of Automobile companiesTata Motors

Ltd.

Mahindra&

Mahindra

BajajAutoLtd.

HeroHonda

TVSMotors

(From 1/4/2006 to 31/3/2007)

Ratios

1) Return on Equity: 27.85% 30.07% 22.36% 34.73% 8.22%

2) Book Value Per Share (given): 177.57 148.72 546.98 123.69 34.07

3) Earnings Per Share (given): 47.1 43.1 115.55 40.07 2.68

4) Dividend Payout Ratio (given): 31.85% 27.51% 34.62% 42.42% 31.72%

5) Dividend Per Share: 15.00135 11.85 40.00341 16.99 0.85

6) Compounded Annual Growth Rate of Sales(from 31/03/2002 to 31/03/2007): 30% 24.08% 20.85% 17.20% 14.83%

7) CAGR of EPS (31/03/2002 to 31/03/2007): 51.80% 37.24% 17.53% 12.05% (-) 34.68%

8) CAGR of DPS (31/03/2002 to 31/03/2007): 39.15% 19.61% 30% 0% (-)37.61%

9) Sustainable Growth Rate (Avg of ROE*Avg ofRetention Ratio): 13.39% 12.76% 13.21% 24.26% 13.77%

10) Volatility of Return on Equity: 1.647 1.152 0.322 0.5848 1.15

11) Retrospective Price to Earnings Ratio: 15.45 18.1 20.99 17.09 22.23

12) Prospective Price to Earnings Ratio: 19.8 14.54 23.77 22.16 52.25

13) Price to Book Value Ratio (Retrospective): 4.09 5.245 4.43 5.539 1.75

Market Price Per Share at the beginning of theyear (i.e on 01/04/2006) 932.6 627.1 2746.85 888.3 140.05

Market Price Per Share at the end of the year(i.e on 31/03/2007) 727.75 780.15 2425.45 685.15 59.6

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Inter-firm comparison with respect to above Ratios:

We observe that considering the Return on Equity, Hero Honda Motors stand at first

place followed by Mahindra & Mahindra and Tata Motors respectively.

Considering Book Value per share, Earnings Per share and Dividend Per Share,

Bajaj Auto Ltd. favors the most to the investors followed by Tata Motors, Mahindra &

Mahindra and Hero Honda Motors.

As far as Compounded Annual Growth Rate of Sales, Earnings Per share and

Dividend per Share are concerned, the performance of Tata Motors is better followed

by Mahindra and Mahindra and Bajaj Auto Ltd.

The figures of Volatility of Return on Equity reveal that the fluctuation with

respect to Return on Equity is at the least in Bajaj Auto Ltd. followed by Hero Honda

Motors and TVS Motors respectively.

Considering Market Price to Earnings per share ratio, TVS Motors perform

better as the Earnings per Share is greater followed by Tata Motors, Mahindra and

Mahindra Motors and Bajaj Auto Ltd. respectively.

The figures of Market Price per share reflect that Bajaj Auto Ltd. stand at the

top followed by Tata Motors and Mahindra and Mahindra.

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3.2 EPS Estimation for 2008:

TATA Motors

Particulars 2007

2008 (As per

CAGR) Remarks

Net Sales 27061.5 35179.98 by 30%

Cost Of Goods Sold 24359.5 31375.04 by 28.8%

Operating Expenses 24008 31131.17 by 29.67%

Non-operating Surplus 698.35 843.39 by 20.77%

PBIT 2941.69 4624.33 by 57.2%

Interest 368.51 360.03 by 2.3%

PBT 2573.18 4840.66 by 88.12%

Tax 476 1051.96 by 121%

PAT 1913.46 1855.29 by 3.04%

Number of Shares 40.62

EPS 47.1 45.67

Average Retention Ratio from 2002 to 2007 is 0.6891.

So the average Payout Ratio is 1-0.6891= 0.3109

Required Rate of Return (as per Capital Asset Pricing Method):

Ri = Rf + beta (Rm - Rf)

Ri = 9% + 0.9(8%)

Ri = 16.2%

Expected Growth Rate in Dividends (i.e Sustainable Growth Rate):

Avg Retention Ratio*Average Return On Equity

0.6891*19.581 = 13.391%

The PE Ratio as per Constant Growth Model:

Avg Payout Ratio/Ri - SGR= 11.06

So the Value Anchor (i.e the Expected Market Price per share):

Expected EPS * PE Ratio=505.11 Rs

Interpretation with respect to above calculations:

We observe that the EPS is expected to come down to 45.67 (i.e decrease by 3.03%).

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With the PE ratio standing at 11.06 the market price per share of Tata Motors is expected

to come down to 505.11 Rs in the financial year 2008-2009 (decrease by 30.59%)

compared to 727.75 Rs per share in the financial year 2007-2008.

EPS Estimation for 2008

Mahindra & Mahindra

Particulars 2007

2008 (As per

CAGR) Remarks

Net Sales 9581.36 11888.55 by 24.08%

Cost Of Goods Sold 8640.48 10750.48 by 24.42%

Operating Expenses 8614.77 10716.77 by 24.40%


PBIT 1438.29 2141.03 by 48.86%

Interest 19.8 13.91 by 29.74%

PBT 1418.49 2514.13 by 77.24%

Tax 365.73 921.56 by 151.98%

PAT 1068.39 1706.53 by 59.73%


EPS 43.1 68.86





Ri = 9% + 0.9(8%)

Ri = 16.2%



20.17*0.633= 12.76%


Avg Payout Ratio/Ri - SGR=10.6686

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Avg Retention Ratio*Average Return On Equity= 13.219%

The PE Ratio as per Constant Growth Model:Avg Payout Ratio/Ri SGR =11.07


Expected EPS * PE Ratio= 1521.239 Rs


The Earnings per share is expected to increase to 137.42 Rs (i.e increase by 18.92%)

in the financial year 2008-2009 as compared to 115.55 Rs per share in the financial

year 2007-2008. The Market Price per share is expected to come down to 1521.23 Rs

in the financial year 2008-2009 (i.e decrease by 37.27%) as compared to Market price

per share of 2425.45 Rs in the financial year 2007-2008.


Hero Honda Motors

Particulars 2007

2008 (As per

CAGR) Remarks

Net Sales 9894.52 11596.377 by 17.2%

Cost Of Goods Sold 8334.15 9870.13 by 18.43%Operating Expenses 8500.13 10087.1 by 18.67%

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PBIT 1247.71 1402.17 by 12.38%

Interest 1.61 1.63 by 1.28%

PBT 1246.1 1400.5 by 12.39%

Tax 375.81 419.25 by 11.56%PAT 857.89 970.53 by 13.13%


EPS 40.07 45.39




Ri = Rf + beta (Rm -Rf)

Ri = 9% + 0.9(8%)

Ri = 16.2%




Avg Payout Ratio/Ri - SGR= -7.0347


Expected EPS * PE Ratio= -319.3 Rs

Interpretation with respect to above calculations

The Market Price per share of Hero Honda Motors is negative because the differencebetween the required rate of return (i.e Ri) and Sustainable Growth Rate is negative.

Hence it is not satisfying the condition that required rate of return should be greater

than sustainable growth rate. So the Model of arriving at the Price to Earnings Ratio

based on Constant Growth Model cannot be applied in case of Hero Honda Motors.


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TVS Motors Ltd.

Particulars 2007 2008 (As per CAGR) Remarks

Net Sales

3854.9

6 4426.65 by 14.83%

Cost Of Goods Sold

3653.7

6 4239.09 by16.02%

Operating Expenses

3654.6

8 4235.04 by15.88%


PBIT 133.2 140.92 by 5.8%

Interest 42.35 50.27 by 18.71%

PBT 90.85 92.61 by 1.94%

Tax 9.5 8.36 by 11.9%

PAT 66.6 69.47 by 4.31%


EPS 2.68 2.79




Ri = Rf + beta (Rm - Rf)Ri = 9% + 0.9(8%)

Ri = 16.2%

Expected Growth Rate in Dividends (i.e Sustainable Growth

Rate):





Expected EPS * PE Ratio= 32.11


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The Earnings per share is expected to increase marginally to Rs 2.79 (i.e increase by

4.10%) in the financial year 2008-2009 as compared to 2.68 Rs per share in the

financial year 2007-2008. The Market Price per share is expected to come down to

32.11 Rs in the financial year 2008-2009 (i.e decrease by 46.12%) as compared to

Market price per share of 59.6 Rs in the financial year 2007-2008.

3.3Sensitivity Analysis:

TATA Motors Ltd.

Calculation of Market Price per share using actual values:



Ri = 9% + 0.9(8%)

Ri = 16.2%

Expected Growth Rate in Dividends (i.e Sustainable GrowthRate):

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0.6891*19.581 = 13.391%

Average Payout ratio = 0.3109


Avg Payout Ratio/Ri SGR = 11.06


Expected EPS * PE Ratio = 505.11Rs

Determination of Market Price of the Equity if there is adecrease in Risk free rate of return (Rf) by 25 basis points:

Rf 0.0875

beta 0.9Rm 0.17

Market risk pre 0.0825

Ri 0.16175

SGR= 13.39%



Market Price per share : 509.67 Rs


We observe that even if the banks would cut the interest rate by 25 basis points, the

investors would not be interested to invest more in Tata Motors. This is the reason of

why there is not much increase in the Market Price per share at 509.67 rs even after

the deduction in interest rate as

compared to 505.11 Rs using the

actual values.

Interpretation with respect to

above calculations

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Determination of Market Price if the MarketReturn (i.e Rm) decreases by 10%:

Rf 0.09

Beta 0.9

Rm 0.153


Ri 0.1467

SGR= 13.39%



Market Price perShare (in Rs): 1108.86


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We observe that when the Market Return decreases by 10% the Market Price per

share increases sharply to 1108.86 Rs (i.e increase by 100%) as compared to Market

Price per share of Rs 505.11 using the actual values.

This is because, if we consider the Constant Growth Model of determining the Market

Price of Equity where, Price of Equity (Po) = Expected Dividend (D1)

Cost of Equity (Ke)-Growth Rate (g)

When required market return (i.e Rm) comes down the Cost of Equity comes down

the value of the denominator comes down and hence the value of Price of Equity

increases which means increase in the Market Price per share.

Determination of Market Price with respect to fluctuations in the value of Beta:

Particulars Beta Expected Market Price

Decrease in Beta by 5% 0.855 589.14




Actual Beta 0.9 505.11

Increase in Beta by 5% 0.945 447.88




Correlation= -0.954884

Interpretation:

In the above table we observe that there is a negative correlation betweenthe beta factor and the market price of the Equity. The beta factor indicates

the risk involved in a security.

Under negative correlation between beta and market price, the beta value

at 1.08 indicates that as the index goes up by 1% the market price of the security will

go down by 1.08%. Hence the investors tend to buy the securities when the beta factor

is less as there would be less volatility, which leads to rise in market prices.

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This is also shown with the help of a Column graph below:

Relationship between Beta & Market Price

0

200

400

600

800

1000

1200

0.855 0.81 0.765 0.72 0.9 0.945 0.99 1.035 1.08

Beta Values

MarketPriceofanEquity

Series1

Series2

Determination of the values of Coefficient of Correlation and the value of t-test:

Regression Statistics

Multiple R 0.95488357R Square 0.91180262

Observations 9

CoefficientsStandardError t Stat P-value

Intercept 2220.782222 194.6546972 11.40882935 8.91812E-06

X Variable 1 -1824.755556 214.5028596 -8.506905498 6.14474E-05

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Interpretation with respect to coefficient of correlation :

With the Coefficient so calculated, the market price of equity can be derived by

putting the appropriate value for x. The correlation calculations merely tell us if two

variables move together but they do not tell if the movement of one causes the

movement of other. The causal relationship can be known only by the knowledge of

the practicalities of the situation being studied.

Having established that a causal relationship does exist between the data, we can

examine how strong is the correlation by carrying out a significance test of the

correlation using a t-test. The t-test should be based on Hypothesis which are as

follows:

HO: There is no correlation between the variables i.e, the beta and the market price.

(Here, we assume that the relationship between the beta and the market price is

not strong).

H1: There is a correlation between beta and market price. (Here, we assume that the

correlation between the beta and the market price is strong)

The calculated value of t-test is -8.50691. The values of t from statistical tables

for 5 degrees of freedom are:

At the 95% level = 2.57


Therefore, we may conclude that as the calculated t value is lesser than the

values at 95% and 99% levels, hence there is no evidence of real correlation at

both the levels.

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Sensitivity Analysis:

Mahindra & Mahindra




Required Rate of Return (as per Capital Asset PricingMethod):


Ri = 9% + 0.9(8%)

Ri = 16.2%



20.17*0.633 = 12.76%



So the Value Anchor (i.e the Expected Market Price per share ):

Expected EPS * PE Ratio = 734.63 Rs

Determination of Market Price of the Equity if there is a decrease in Riskfree rate of return ( Rf) by 25 basis points:

Rf = 0.0875

Beta = 0.9

Rm = 0.17

Market risk premium = 0.0825

Ri = 0.16175

SGR = 12.76%

The PE Ratio as per ConstantGrowth Model:


Expected EPS = 68.86 Rs

Market Price per share: 739.55 Rs


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We observe that even if the banks would cut the interest rate by 25 basis points, the

investors would not be interested to invest more in Mahindra and Mahindra Motors.

This is the reason of why there is not much increase in the Market Price per share at

739.55 Rs even after the deduction in interest rate as compared to 734.63 Rs using the

actual values.

Determination of Market Price if the Market Return (i.e Rm) decreases by 10%:

Rf 0.09

Beta 0.9

Rm 0.153


Ri 0.1467

SGR= 12.76%



Expected EPS = 68.86 Rs

Market Price per share:1322.8 Rs



share increases sharply to 1322.8 Rs (i.e increase by 80.06%) as compared to Market

Price per share of Rs 734.63 using the actual values.

This is because, if we consider the Constant Growth Model of determining the Market

Price of Equity where, Price of Equity (Po) = Expected Dividend (D1)



due to which the value of the denominator comes down and hence the value of Price

of Equity increases which means increase in the Market Price per share.

Determination of Market Price with respect to fluctuations in the value of

Beta:

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Decrease in Beta by 20% 0.72 1263.581Actual Beta 0.9 734.63






Interpretation:

In the above table we observe that there is a negative correlation between

the beta factor and the market price of the Equity. The beta factor

indicates the risk involved in a security.


at 1.08 indicates that as the index goes up by 1% the market price of the security

will go down by 1.08%. Hence the investors tend to buy the securities when the

This is also shown with the help of a Column graph below:

Relationship between Beta & Market Price

0

200

400

600

800

1000

1200

1400

0.855 0.81 0.765 0.72 0.9 0.945 0.99 1.035 1.08

Beta Va lues

MarketPriceofanEquity

Series1

Series2


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Multiple R 0.970754404

R Square 0.942364113

Observations 9

Coefficients Standard Error t Stat P-value

Intercept 2591.014778 168.8556267 15.34456 1.20365E-06

X Variable 1 -1990.65333 186.0731609 -10.6982 1.36878E-05


With the Coefficient so calculated, the market price of equity can be derived by putting

the appropriate value for x. The correlation calculations merely tell us if two variables

move together but they do not tell if the movement of one causes the movement of

other. The causal relationship can be known only by the knowledge of the practicalities

of the situation being studied.

Having established that a causal relationship does exist between the data, we

can examine how strong is the correlation by carrying out a significance test of the

correlation using a t-test.The t-test should be based on Hypothesis which are as follows:



not strong).



The calculated value of t-test is -10.6982. The values of t from statistical tables for

5 degrees of freedom are:



Therefore, we may conclude that as the calculated t value is lesser than the value

at 95% and 99% levels, hence there is no evidence of real correlation at both the

levels.

Interpretation with respect to Regression:

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The correlation coefficient, ' r ', tells us if related two variables move together. Once we

know the relation is causal we may calculate the proportion of variation in the actual

values of ' Y ' (the dependent variable i.e the market price) that will result by changes in

the value of x (the independent variable i.e the beta factor). This may be done by

squaring the value of ' r '.

The value of r is 0.97. So r^2= 0.942 or 94.2%. This means that 94.2% of the

variations in market price may be predicted by changes in the beta value. So factors

other than beta influence

the market price to the extent of (100% - 94.2%) i.e., 5.8%.


Bajaj Auto Ltd.




Required Rate of Return (as per CAPM Method):


Ri = 9% + 0.9(8%)Ri = 16.2%

Expected Growth Rate in Dividends (i.e Sustainable GrowthRate):





Expected EPS * PE Ratio= 1521.239

Determination of Market Price of the Equity if there is a decrease in Risk free rate ofreturn (Rf) by 25 basis points:

Rf = 0.0875

Beta = 0.9

Rm = 0.17

Market Risk Premium = 0.0825

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Ri = 0.16175

Sustainable Growth Rate = 13.22%

The PE Ratio as per Constant Growth Model:Avg Payout Ratio/Ri - SGR = 11.2

Expected EPS = 137.42

Market Price per share:1539.1 Rs


We observe that even if the banks would cut the interest rate by 25 basis points,

the investors would not be interested to invest more in Bajaj Auto Ltd. This is the

reason of why there is not much increase in the Market Price per share at 1539.1 Rs

even after the deduction in interest rate as compared to 1521.23 Rs using the actual

values.

Determination of Market Price if the Market Return (i.e Rm)decreases by 10%:

Rf 0.09

beta 0.9

Rm 0.153


Ri 0.1467

SGR= 13.22%



Expected EPS = 137.42

Market Price pershare: 3135.92



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share increases sharply to 3135.92 Rs (i.e increase by 106.14%) as compared to

Market Price per share of Rs 1521.23 using the actual values.

This is because, if we consider the Constant Growth Model of determining the

Market Price of Equity where, Price of Equity (Po)= Expected Dividend (D1)



the value of the denominator comes down and hence the value of Price of Equity

increases which means increase in the Market Price per share.













Interpretation:


the beta factor and the market price of the Equity. The beta factor

indicates the risk involved in a security.


at 1.08 indicates that as the index goes up by 1% the market price of the security will go down by1.08%. Hence the investors tend to buy the securities when the

beta factor is less as there would be less volatility, which leads to rise in

market prices.

This is also shown with the help of a line graph below:

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Determination of the values of Coefficient of Correlation and the

value of t-test:



R Square 0.919900465Observations 9

CoefficientsStandard

Error t Stat P-value

Intercept 6245.577667 509.6651905 12.25428 5.52E-06

X Variable 1 -5035.674074 561.6337155 -8.96612 4.37E-05


With the Coefficient so calculated, the market price of equity can be derived by

putting the appropriate value for x. The correlation calculations merely tell us if two

variables move together but they do not tell if the movement of one causes the

movement of other. The causal relationship can be known only by the knowledge of

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the practicalities of the situation being studied.

Having established that a causal relationship does exist between the data,

we can examine how strong is the correlation by carrying out a significance test of the

correlation using a t-test

The t-test should be based on Hypothesis which are as follows:



not strong.




5 degrees of freedom are:



Therefore, we may conclude that as the calculated t value is lesser than the values at

95% and 99% levels, hence there is no evidence of real correlation at both the levels.

Interpretation with respect to regression:

The correlation coefficient, ' r ', tells us if related two variables move together. Once

we know the relation is causal we may calculate the proportion of variation in the

actual values of ' Y ' (the dependent variable i.e the market price) that will result

by changes in the value of x (the independent variable i.e the beta factor). This may be

done by squaring the value of ' r'.

The value of r is 0.956. So r^2= 0.9199 or 91.99%. This means that 91.18% of the


other than beta influence the market price to the extent of (100% - 91.99%) i.e.,8.01%.


Calculation of Market Price per share using actual values

Hero Honda Motors.

Average Retention Ratio from 2002 to 2007 is 0.433.So the average Payout Ratio is 1-0.433= 0.567

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Ri = 9% + 0.9(8%)

Ri = 16.2%




Avg Payout Ratio/Ri SGR = -7.0347

Expected EPS : 45.39

So the Value Anchor (i.e the Expected Market Price):

Expected EPS * PE Ratio = -319.3


The Market Price per share of Hero Honda Motors is negative because the

difference between the required rate of return (i.e Ri) and Sustainable Growth Rate

is negative. Hence it is not satisfying the condition that required rate of return

should be greater than sustainable growth rate.

So the Model of arriving at the Price to Earnings Ratio based on Constant Growth

Model cannot be applied in case of Hero Honda Motors. Therefore no further

interpretations are made in case of Hero Honda Motors Ltd.

Determination of Market Price of the Equity if there is a decrease in Rf by 25 basis points:

Rf 0.0875

beta 0.9

Rm 0.17


Ri 0.16175

SGR= 24.26%



Expected EPS : 45.39

Market Price: 509.67

Determination of Market Price if the Market Return (i.e Rm) decreases by10%:

Rf 0.09

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beta 0.9

Rm 0.153


Ri 0.1467

SGR= 13.39%


Market Price: 1108.86













Interpretation:

In the above table we observe that there is a negative correlation between the beta

factor and the market price of the Equity. The beta factor indicates the risk

involved in a security.


at 1.08 indicates that as the index goes up by 1% the market price of the security

will go down by 1.08%. Hence the investors tend to buy the securities when the

beta factor is less as there would be less volatility, which leads to rise in market

prices.


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being studied.

. Having established that a causal relationship does exist between the

data, we can examine how strong is the Correlation by carrying out a significance

test of the correlation using a t-test.

The t-test should be based on Hypothesis which are as follows:HO: There is no correlation between the variables i.e, the beta and the market price.


not strong).


correlation between the beta and the market price is strong).

The calculated value of t-test is -8.506. The values of t from statistical tables for 5

degrees of freedom are:

At the 95% level = 2.57At the 99% level = 4.03


at 95% and 99% levels, hence there is no evidence of real correlation at both the levels.




values of ' Y ' (the dependent variable i.e the market price) that will result by changes in

the value of x (the independent

variable i.e the beta factor). This may be done by squaring the value of ' r '.

The value of r is 0.954. So r^2= 0.9118 or 91.18%. This means that 91.18% of

the variations in market price may be predicted by changes in the beta value. So factors

other than beta influence the market price to the extent of (100% - 91.18%) i.e., 8.82%.


TVS Motors.

Calculation of Market Price per share using actual values



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Ri = 9% + 0.9(8%)

Ri = 16.2%

Expected Growth Rate in Dividends (i.e Sustainable Growth Rate):Avg Retention Ratio*Average Return On Equity = 13.77%



Expected EPS: 2.79

So the Value Anchor (i.e the Expected Market Price):

Expected EPS * PE Ratio = 32.11

Determination of Market Price of the Equity if there is adecrease in Rf by 25 basis points:

Rf 0.0875

Beta 0.9

Rm 0.17


Ri 0.16175

SGR= 13.77%



Expected EPS = 2.79

Market Price per share=32.5 Rs


We observe that inspite of Risk free rate of return been reduced by 25 basis points the market price

TVS Motors is expected to come down to 32.5 rs per share in the financial year 2008-2009

(i.e decrease by 45.46%) as compared to market price of 59.6 in the beginning of financial year

2007-2008.

Hence, even though the banks reduce the interest rates by 0.25% the investors will not be

interested to invest their money in TVS Motors.

Determination of Market Price if the Market Return (i.e Rm) decreases by 10%:

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Rf 0.09

beta 0.9

Rm 0.153


Ri 0.1467

SGR= 13.77%



Expected EPS = 2.79

Market Price: 86.71 Rs


We observe that when the Market Return decreases by 10% the Market Price per share

increases sharply to 86.71 Rs (i.e increase by 170.04%) as compared to Market Price per

share of Rs 32.11 using the actual values.

This is because, if we consider the Constant Growth Model of determining the

Market Price of Equity where, Price of Equity (Po)= Expected Dividend (D1)


When required market return (i.e Rm) comes down the Cost of Equity comes down thevalue of the denominator comes down and hence the value of Price of Equity increases

which means increase in the Market Price per share.

Determination of Market Price with respect to fluctuations in the value of

Beta:











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Interpretation:


the beta factor and the market price of the Equity. The beta factor indicates

the risk involved in a security.


at 1.08 indicates that as the index goes up by 1% the market price of the security will

go down by 1.08%. Hence the investors tend to buy the securities when the beta factor

is less as there would be less volatility, which leads to rise in market prices.





R Square 0.76016114

Observations 9

CoefficientsStandard

Error t Stat P-value

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Intercept 152.7055556 24.77668512 6.163276274 0.000461502

X Variable 1 -128.6037037 27.3030648 -4.71022959 0.002182285


With the Coefficient so calculated, the market price of equity can be derived by putting

the appropriate value for x. The correlation calculations merely tell us if two variables

move together but they do not tell if the movement of one causes the movement of other.

The causal relationship can be known only by the knowledge of the

practicalities of the situation being studied. Having established that a causal relationship

does exist between the data, we can examine how strong is the correlation by carrying

out a significance test of the correlation using a t-test.The t-test should be based on Hypothesis which are as follows:


(Here, we assume that the relationship between the beta and the market price is not

strong).


correlation between the beta and the market price is strong).


5 degrees of freedom are:At the 95% level = 2.57



at 95% and 99% levels, hence there is no evidence of real correlation at both the levels.




values of ' Y ' (the dependent variable i.e the market price) that will result by changesin the value of x (the independent variable i.e the beta factor). This may be done by

squaring the value of ' r '.

The value of r is 0.872. So r^2= 0.760 or 76%. This means that 76% of the


other than beta influence the market price to the extent of (100% - 76%) i.e., 24%.

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4.Findings of the study:

On the basis of the above analysis, the following the summary on findings:

Considering the ratio analysis, Tata Motors, Bajaj Auto Ltd., and Mahindra

and Mahindra Motors perform better. Tata Motors and Bajaj Auto Ltd. top

the list as they go neck to neck in the various parameters like Compounded

Annual Growth Rate of Sales, EPS and Dividend per share.

Considering the volatility of return on equity, Bajaj Auto looks to be less

risky with the value of 0.322 as compared to 0.5848 of Hero Honda Motors

and 1.15 of TVS Motors.

The Price to Earnings Ratio looks more attractive in case of Tata Motors at

15.45 as compared to the ratios at 17.09 and 18.1 of Hero Honda and

Mahindra and Mahindra Motors respectively.

The expected market price per share in the financial year 2008-2009 are

likely to be as follows:

Tata Motors=505.11 Rs, Mahindra and Mahindra=734.63 Rs, Bajaj

Auto=1521.239 Rs and TVS Motors =32.11 Rs.

On the basis of sensitivity analysis using t-test, TVS Motors is the

least affected by the beta factor (i.e by 76%) and Mahindra and Mahindra

Motors is highly affected by the beta factor (i.e by 94.2%).

5.Conclusions and Suggestions:


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On the basis of the above research study, the conclusions and suggestions are:

The auto industry in India is a sunrise industry as

other major companies like Oil and Petrol, Steel Industry rely

heavily on the auto sector. Hence there is a significant impact of

auto industry on the Indian Economy.

With the favorable economic conditions like GDP

growth, improving standard of living of the Indian population, the auto industry in

India aims to become a world class industry by 2015.

The fluctuations in auto industry with respect to

government policies are less as compared to petroleum, oil and IT industry. So the

auto sector is less risky compared to the above mentioned industries.

With the introduction of Nano Car, the profits of the

Tata Motors are likely to rise significantly in the financial year

2008-2009. Moreover the Tatas are looking forward to acquire the two

recognized brands in Car i.e Jaguar and Land Rover from Ford Motors,

this reflects good sign of expansion plans of Tata Motors.

Continuous up gradation of the products is the main

reason for the success of Bajaj Auto.Bajaj Auto Ltd. by making the best use of thetechnology are able to lead the two wheeler market in India. Hence Bajaj Auto can

be referred as a good stock for investments.

The performance of TVS Motors and Hero Honda

Motors is moderate from past few years. These companies in order to

compete with Bajaj Auto have to come up with new products using the state-of-art

technology.

From the above findings and conclusions if an

investor is looking towards auto industry then his maximum investments should be

in Tata Motors, Bajaj Auto, and Mahindra and Mahindra Motors as these

companies look strong in terms of fundamentals.

The investors have to be careful if they are looking to

invest in Hero Honda Motors and TVS Motors.

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ANNEXUREThe financial statements of companies from 2002 to 2007 used for the study are

as follows:

Financial Overview of TATA MOTORS

SOURCES OF FUNDS :

200703 200603 200503 200403 200303 200203

Share Capital 385.41 382.87 361.79 353 319.83 319.82

Reserves Total 6484.34 5154.2 3749.6 3236.77 2277.33 2145.24

Total Shareholders Funds 6869.75 5537.07 4111.39 3589.77 2597.16 2465.06

Secured Loans 2022.04 822.76 489.81 942.65 1037.32 1344.78Unsecured Loans 1987.1 2114.08 2005.61 317.12 420.99 960.18

Total Debt 4009.14 2936.84 2495.42 1259.77 1458.31 2304.96

Total Liabilities 10878.89 8473.91 6606.81 4849.54 4055.47 4770.02

APPLICATION OF FUNDS :

Gross Block 8775.8 7971.55 6611.95 5985.4 5888.99 5769.5

Less : AccumulatedDepreciation 4894.54 4401.51 3454.28 3023.69 2713.07 2431.72

Less:Impairment of Assets 0 0 0 0 0 0

Net Block 3881.26 3570.04 3157.67 2961.71 3175.92 3337.78

Lease Adjustment 0 0 0 0 0 0

Capital Work in Progress 2513.32 951.19 538.84 286.09 192.15 140.56

Investments 2477 2015.15 2912.06 3056.77 1271.8 1189.92Current Assets, Loans &

Advances

Inventories 2500.95 2012.24 1601.36 1147.44 1159.29 987.51

Sundry Debtors 782.18 716.6 798.58 614.99 946.1 785.62

Cash and Bank 826.76 1119.43 2005.04 770.49 245.35 326.63

Loans and Advances 6031.93 5639.54 2681.05 1162.78 631.27 595.87

Total Current Assets 10141.82 9487.81 7086.03 3695.7 2982.01 2695.63

Less : Current Liabilities andProvisions

Current Liabilities 5993.45 5726.82 5414.61 4228.13 3175.26 2528.81

Provisions 1364.32 1215.04 1126.06 430.64 315.91 160.06

Total Current Liabilities 7357.77 6941.86 6540.67 4658.77 3491.17 2688.87Net Current Assets 2784.05 2545.95 545.36 -963.07 -509.16 6.76

Miscellaneous Expenses notwritten off 10.09 14.12 18.16 22.19 30.06 0

Deferred Tax Assets 176.6 150.75 102.69 135.06 548 708.17

Deferred Tax Liability 963.43 773.29 667.97 649.21 653.3 613.17

Net Deferred Tax -786.83 -622.54 -565.28 -514.15 -105.3 95

Total Assets 10878.89 8473.91 6606.81 4849.54 4055.47 4770.02

Contingent Liabilities 2527.78 1558.65 1102.68 839.45 914.05 1434.07

Balance Sheet of Tata Motors from 31/03/2002 to 31/03/2007

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200703 200603 200503 200403 200303 200203

SOURCES OF FUNDS :

Share Capital 385.41 382.87 361.79 353 319.83 319.82

Reserves Total 6484.34 5154.2 3749.6 3236.77 2277.33 2145.24


Secured Loans 2022.04 822.76 489.81 942.65 1037.32 1344.78

Unsecured Loans 1987.1 2114.08 2005.61 317.12 420.99 960.18

Total Debt 4009.14 2936.84 2495.42 1259.77 1458.31 2304.96



Gross Block 8775.8 7971.55 6611.95 5985.4 5888.99 5769.5



Net Block 3881.26 3570.04 3157.67 2961.71 3175.92 3337.78

Lease Adjustment 0 0 0 0 0 0Capital Work in Progress 2513.32 951.19 538.84 286.09 192.15 140.56

Investments 2477 2015.15 2912.06 3056.77 1271.8 1189.92

Current Assets, Loans &Advances

Inventories 2500.95 2012.24 1601.36 1147.44 1159.29 987.51

Sundry Debtors 782.18 716.6 798.58 614.99 946.1 785.62

Cash and Bank 826.76 1119.43 2005.04 770.49 245.35 326.63




Current Liabilities 5993.45 5726.82 5414.61 4228.13 3175.26 2528.81Provisions 1364.32 1215.04 1126.06 430.64 315.91 160.06

Total Current Liabilities 7357.77 6941.86 6540.67 4658.77 3491.17 2688.87

Net Current Assets 2784.05 2545.95 545.36 -963.07 -509.16 6.76

Miscellaneous Expenses notwritten off 10.09 14.12 18.16 22.19 30.06 0

Deferred Tax Assets 176.6 150.75 102.69 135.06 548 708.17


Net Deferred Tax -786.83 -622.54 -565.28 -514.15 -105.3 95

Total Assets 10878.89 8473.91 6606.81 4849.54 4055.47 4770.02


Profit & Loss Account of Tata Motors from 31/03/2002 to 31/03/2007

INCOME : 200703 200603 200503 200403 200303 200203

Sales Turnover 31486.97 23673.43 20152.03 15165.85 10585.43 8676.86

Excise Duty 4425.44 3380.13 3063.44 2270.3 1743.79 1389.29

Net Sales 27061.53 20293.3 17088.59 12895.55 8841.64 7287.57

Other Income 698.35 693.92 560.29 427.79 323.65 271.67

Stock Adjustments 349.68 256.91 144 -141.98 119.74 -49.03

Total Income 28109.56 21244.13 17792.88 13181.36 9285.03 7510.21 EXPENDITURE :

Raw Materials 19374.93 14263.86 11929.48 8341.39 5699.58 4716.47

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Power & Fuel Cost 327.41 258.51 237.81 214.52 193.51 184.78

Employee Cost 1361.2 1141.48 1037.93 879.49 720.37 716.07

Other ManufacturingExpenses 1618.68 1251.02 1017.11 722.95 510.39 639.15

Selling and AdministrationExpenses 1325.82 985.74 795.03 645.73 606.25 290.12

Miscellaneous Expenses 1150.59 784.56 673.78 644.75 529.6 447.23Less: Pre-operative

Expenses Capitalised 577.05 308.85 218.13 144.89 156.46 144.63

Total Expenditure 24581.58 18376.32 15473.01 11303.94 8103.24 6849.19

Operating Profit 3527.98 2867.81 2319.87 1877.42 1181.79 661.02

Interest 368.51 293.49 217.81 202.48 309.29 415.55

Gross Profit 3159.47 2574.32 2102.06 1674.94 872.5 245.47

Depreciation 586.29 520.94 450.16 382.6 362.13 354.68

Profit Before Tax 2573.18 2053.38 1651.9 1292.34 510.37 -109.21

Tax 476 363.35 363.82 96 19.71 0

Fringe Benefit tax 6.5 19 0 0 0 0

Deferred Tax 177.22 142.15 51.13 386 190.55 -55.48

Reported Net Profit 1913.46 1528.88 1236.95 810.34 300.11 -53.73

Extraordinary Items 36.39 145.42 24.77 -29.95 4.94 -45.46

Adjusted Net Profit 1877.07 1383.46 1212.18 840.29 295.17 -8.27

Adjst. below Net Profit 0 0 0 0 0 0

P & L Balance broughtforward 776.76 585.6 365.8 123.71 0 0

Statutory Appropriations 0 0 0 0 0 0

Appropriations 1676.39 1337.72 1017.15 568.25 176.4 -53.73

P & L Balance carrieddown 1013.83 776.76 585.6 365.8 123.71 0

Dividend 578.07 497.94 452.19 282.11 127.91 0

Preference Dividend 0 19.94 0 0 0 0

Equity Dividend % 150 130 125 80 40 0

Earnings Per Share-UnitCurr 47.1 37.59 32.44 21.93 8.87 0

Book Value-Unit Curr 177.57 143.93 113.64 101.69 81.2 77.08

Financial Overview of Mahindra and Mahindra Motors from 31/03/02 to

31/03/07

200703 200603 200503 200403 200303 200203

Equity Paid Up 238.03 233.4 111.65 116.01 116.01 116.01

Networth 3540.05 2895.54 1972.21 1760.15 1554.32 1487.9

Capital Employed 5176.05 3778.92 3024.83 2489.96 2694.17 2864.97

Gross Block 3216.83 2872.19 2685.39 2505.98 2421.31 2051.92

Net Working Capital ( Incl. Def.Tax) 1062.73 550.67 350.1 -7.55 341.6 543.73

Current Assets ( Incl. Def. Tax) 3916.94 2792.7 2338.59 1554.42 1673.78 1808.13

Current Liabilities andProvisions ( Incl. Def. Tax) 2854.21 2242.03 1988.49 1561.97 1332.18 1264.4

Total Assets/Liabilities (exclReval & W.off) 8012.71 6002.9 4988.94 4042.29 3986.63 4129.37

Gross Sales 10892.01 9082.3 7564.07 5828.46 4450.18 3933.19

Net Sales 9581.36 7945.8 6509.25 4873.03 3665.17 3256.75

Other Income 881.62 652.65 310.28 263.05 233.27 96.54

Value Of Output 9587.77 8049 6683.3 4894.46 3641.59 3192.34

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Cost of Production 8007.97 6792.36 5606.33 4101.5 3160.64 2697.66

Selling Cost 632.51 456.44 367.11 288.05 194.88 199.33

PBIDT 1647.88 1326.47 928.46 680.32 478.38 336.11

PBDT 1628.08 1299.51 898.22 603.39 362.48 220.47

PBIT 1438.29 1126.46 744.41 515.12 312.94 196.73

PBT 1418.49 1099.5 714.17 438.19 197.04 81.09

PAT 1068.39 857.1 512.67 348.54 145.54 102.69

CP 1277.98 1057.11 696.72 513.74 310.98 242.07

Revenue earnings in forex 712.87 508.08 339.06 228.42 214.07 122.43

Revenue expenses in forex 223.24 203.41 150.95 115.54 105.69 65.6

Capital earnings in forex 0 0 0 0 0 0

Capital expenses in forex 82.72 29.07 42.06 3.11 24.96 27.06

Book Value (Unit Curr) 148.72 124.06 176.64 151.72 133.98 128.26

Market Capitalisation 19142.54 15106.84 5767.44 5389.24 1154.3 1317.87

CEPS (annualised) (Unit Curr) 51.9 43.83 60.51 43.13 26.1 20.87

EPS (annualised) (Unit Curr) 43.1 35.26 44.02 28.89 11.84 8.85

Dividend (annualised%) 115 100 130 90 55 50

Payout (%) 27.51 29.65 30.68 31.15 46.45 54.74Cash Flow From OperatingActivities 1168.95 686.9 414.04 737.87 543.78 91.44

Cash Flow From InvestingActivities -950.39 -502.66 -209.13 -104.33 -54.59 -144.04

Cash Flow From FinancingActivities 418.08 -89.78 192.45 -643.93 -438.39 99.75

Balance Sheet of Mahindra and Mahindra Motors from 31/03/2002 to 31/03/2007200703 200603 200503 200403 200303 200203

SOURCES OF FUNDS :

Share Capital 238.03 233.4 111.65 116.01 116.01 116.01

Reserves Total 3314.88 2675.47 1874.88 1659.02 1453.82 1388.01


Secured Loans 106.65 216.67 336.82 485.23 924.16 1155.1

Unsecured Loans 1529.35 666.71 715.8 244.58 215.69 221.97

Total Debt 1636 883.38 1052.62 729.81 1139.85 1377.07



Gross Block 3229.69 2885.52 2699.71 2520.86 2436.82 2068.04



Net Block 1590.57 1375.26 1364.15 1353.19 1413.78 1188.5

Lease Adjustment 0 0 0 0 0 0

Capital Work in Progress 280.6 179.19 110.73 38.41 52.31 348.73

Investments 2237.46 1669.08 1189.79 1111.15 862.27 800.13


Inventories 878.48 878.74 759.97 500.13 457.05 469.34Sundry Debtors 700.89 637.97 511.53 400.48 517.08 647.78

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Cash and Bank 1326.07 730.31 623.98 233.32 240.87 190.59





Provisions 715.43 530.8 499.7 319.38 203.3 217.24

Total Current Liabilities 2665.66 2051.64 1759.71 1329.24 1094.78 1050.74

Net Current Assets 1082.51 697.42 539.85 195.7 518.7 681.63

Miscellaneous Expensesnot written off 17.55 18.05 24.38 9.64 39.72 0

Deferred Tax Assets 168.77 43.64 39.03 29.48 60.3 75.76


Net Deferred Tax -19.78 -146.75 -189.75 -203.25 -177.1 -137.9

Total Assets 5188.91 3792.25 3039.15 2504.84 2709.68 2881.09


Profit & Loss Account of Tata Motors from 31/03/2002 to 31/03/2007

200703(12)

200603(12)

200503(12)

200403(12)

200303(12)

200203(12)

INCOME :

Sales Turnover 10892.01 9082.3 7564.07 5828.46 4450.18 3933.19

Excise Duty 1310.65 1136.5 1054.82 955.43 785.01 676.44

Net Sales 9581.36 7945.8 6509.25 4873.03 3665.17 3256.75

Other Income 881.62 652.65 310.28 263.05 233.27 96.54Stock Adjustments 6.41 103.2 174.05 21.43 -23.58 -64.41

Total Income 10469.39 8701.65 6993.58 5157.51 3874.86 3288.88

EXPENDITURE :

Raw Materials 6858.32 5816.97 4776.69 3374.3 2476.64 2052.82

Power & Fuel Cost 65.19 57.46 52.64 45.64 44.01 40.83

Employee Cost 660.11 544.99 457.41 412.43 378.03 367.2

Other ManufacturingExpenses 186.86 156.65 134.45 99.95 86.44 81.13

Selling and AdministrationExpenses 844.29 633.83 417.6 332.63 233.92 235.2

Miscellaneous Expenses 253.84 191.81 258.17 228.02 196.61 193.08

Less: Pre-operativeExpenses Capitalised 47.1 26.53 31.84 15.78 19.17 17.49

Total Expenditure 8821.51 7375.18 6065.12 4477.19 3396.48 2952.77

Operating Profit 1647.88 1326.47 928.46 680.32 478.38 336.11

Interest 19.8 26.96 30.24 76.93 115.9 115.64

Gross Profit 1628.08 1299.51 898.22 603.39 362.48 220.47

Depreciation 209.59 200.01 184.05 165.2 165.44 139.38

Profit Before Tax 1418.49 1099.5 714.17 438.19 197.04 81.09

Tax 365.73 285.4 215 63.5 12.3 3.6

Fringe Benefit tax 0 0 0 0 0 0

Deferred Tax -15.63 -43 -13.5 26.15 39.2 -25.2

Reported Net Profit 1068.39 857.1 512.67 348.54 145.54 102.69Extraordinary Items 93.42 174.87 8.96 24.39 1.68 -14.84

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Adjusted Net Profit 974.97 682.23 503.71 324.15 143.86 117.53

Adjst. below Net Profit 0 0 0 0 0 -5.77

P & L Balance broughtforward 1475.74 996.4 742.84 423.94 333.06 334.1

Statutory Appropriations 0 0 0 0 0 0

Appropriations 419.06 377.76 259.11 29.64 54.66 97.96

P & L Balance carrieddown 2125.07 1475.74 996.4 742.84 423.94 333.06

Dividend 282.23 243.97 150.81 104.41 63.81 56.21

Preference Dividend 0 0 0 0 0 0

Equity Dividend % 115 100 130 90 55 50

Earnings Per Share-UnitCurr 43.1 35.26 44.02 28.89 11.84 8.85

Book Value-Unit Curr 148.72 124.06 176.64 151.72 133.98 128.26

Financial Overview of Bajaj Auto from 31/03/02 to 31/03/07

200703 200603 200503 200403 200303 200203

Equity Paid Up 101.18 101.18 101.18 101.18 101.18 101.18Networth 5534.32 4770.73 4134.35 3693.62 3240.6 2865.77

Capital Employed 7159.75 6237.88 5361.34 4699.34 4080.82 3491.87

Gross Block 3178.54 2894.22 2747.68 2710.66 2632.86 2548.93

Net Working Capital ( Incl. Def.Tax) -588.3 -776.27 -344.13 -395.85 42.03 144.7

Current Assets ( Incl. Def. Tax) 3928.95 2958.7 2662.64 2169.26 2223.19 2035.29

Current Liabilities and Provisions (Incl. Def. Tax) 4517.25 3734.97 3006.77 2565.11 2181.16 1890.59

Total Assets/Liabilities (excl Reval& W.off) 11677 9972.85 8368.11 7264.45 6261.98 5382.46

Gross Sales 10639.14 8569.81 6566.54 5444.87 4774.48 4146.75

Net Sales 9317.47 7488.11 5747.56 4764.21 4173.68 3614.5Other Income 751.71 617.24 573.88 488.71 296.53 372.95

Value Of Output 9316.57 7537.12 5736.46 4774.8 4206.25 3584.1


Selling Cost 479.19 337.91 337.5 311.38 277.52 237.43

PBIDT 1923.15 1771.53 1272.12 1140.89 960.54 887.49

PBDT 1917.81 1771.19 1271.45 1139.95 959.42 884.11

PBIT 1732.89 1580.53 1086.75 961 789.38 707.79

PBT 1727.55 1580.19 1086.08 960.06 788.26 704.41

PAT 1237.96 1101.63 766.81 731.51 538.42 521.09

CP 1428.22 1292.63 952.18 911.4 709.58 700.79


Revenue expenses in forex 512.65 288.05 178.03 118.3 116.61 145.62Capital earnings in forex 0 0 0 0 0 0




CEPS (annualised) (Unit Curr) 134.36 122.15 90.6 86.87 68.34 69.26

EPS (annualised) (Unit Curr) 115.55 103.27 72.28 69.09 51.42 51.5


Payout (%) 34.62 38.74 34.59 36.18 27.23 27.19

Cash Flow From OperatingActivities 681.73 1072.62 455.49 837.21 573.38 660.67

Cash Flow From Investing

Activities -429.99 -1087.54 -395.32 -811.09 -640.95 -686.81Cash Flow From Financing -250.35 -11.68 -30.85 23.23 72.39 30

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Activities

Balance Sheet of Bajaj Auto from 31/03/2002 to 31/03/2007

200703 200603 200503 200403 200303 200203

SOURCES OF FUNDS :

Share Capital 101.18 101.18 101.18 101.18 101.18 101.18

Reserves Total 5433.14 4669.55 4033.17 3592.44 3139.42 2764.59


Secured Loans 22.46 0.02 0 0 53.91 31.83

Unsecured Loans 1602.97 1467.13 1226.99 1005.72 786.31 594.27

Total Debt 1625.43 1467.15 1226.99 1005.72 840.22 626.1


APPLICATION OFFUNDS :

Gross Block 3178.54 2894.22 2747.68 2710.66 2632.86 2548.93


Less:Impairment ofAssets 0 0 0 0 0 0

Net Block 1256.1 1115.5 1119.04 1213.98 1287.39 1359.64

Lease Adjustment 17.5 17.5 17.5 17.5 17.5 17.5

Capital Work in Progress 26.92 24.18 8.35 8.27 4.01 3.96Investments 6447.53 5856.97 4560.58 3855.44 2729.89 1966.07


Inventories 309.7 272.93 224.17 202.56 207.98 179.1

Sundry Debtors 529.83 301.55 176.35 133.95 167.04 198.17

Cash and Bank 83.48 82.09 108.69 79.37 30.03 25.2



Less : Current Liabilitiesand Provisions


Provisions 2833.79 2315.89 2008.9 1653.47 1485.79 1199.6Total Current Liabilities 4332.76 3544.76 2793.97 2326.07 1940.69 1654.54

Net Current Assets -514.13 -688.69 -204.23 -273.03 214.44 335.27

Miscellaneous Expensesnot written off 0 0 0 0 0 0

Deferred Tax Assets 110.32 102.63 72.9 116.22 68.06 45.48


Net Deferred Tax -74.17 -87.58 -139.9 -122.82 -172.41 -190.57

Total Assets 7159.75 6237.88 5361.34 4699.34 4080.82 3491.87


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Profit & Loss Account of Bajaj Auto from 31/03/2003 to 31/03/2007

ParticularsMar

07(12)Mar

06(12)Mar

05(12)Mar

04(12)Mar

03(12)

INCOME :

Sales Turnover + 10,639.14 8,569.81 6,566.54 5,444.87 4,774.48

Excise Duty 1,321.67 1,081.70 818.98 680.66 600.80

Net Sales 9,317.47 7,488.11 5,747.56 4,764.21 4,173.68

Other Income + 751.71 617.24 573.88 488.71 296.53

Stock Adjustments + -0.90 49.01 -11.10 10.59 32.57

Total Income 10,068.28 8,154.36 6,310.34 5,263.51 4,502.78

EXPENDITURE :

Raw Materials + 6,892.30 5,372.39 4,077.24 3,192.47 2,709.78

Power & Fuel Cost+ 79.34 59.09 54.79 62.51 61.12

Employee Cost + 340.09 296.77 298.08 264.02 283.84

Other Manufacturing Expenses + 169.73 151.51 121.27 102.29 97.77

Selling and Administration Expenses + 549.80 410.41 392.45 348.42 307.43

Miscellaneous Expenses + 145.92 117.47 114.22 176.73 102.81

Less: Pre-operative ExpensesCapitalised+

32.05 24.81 19.83 23.82 20.51

Total Expenditure 8,145.13 6,382.83 5,038.22 4,122.62 3,542.24

Operating Profit 1,923.15 1,771.53 1,272.12 1,140.89 960.54

Interest + 5.34 0.34 0.67 0.94 1.12

Gross Profit 1,917.81 1,771.19 1,271.45 1,139.95 959.42

Depreciation+ 190.26 191.00 185.37 179.89 171.16

Profit Before Tax 1,727.55 1,580.19 1,086.08 960.06 788.26

Tax+ 503.00 518.00 338.00 278.14 268.00 Deferred Tax+ -13.41 -39.44 -18.73 -49.59 -18.16

Reported Net Profit 1,237.96 1,101.63 766.81 731.51 538.42

Extraordinary Items + 150.56 57.93 65.36 30.30 -18.20

Adjusted Net Profit 1,087.40 1,043.70 701.45 701.21 556.62

Adjst. below Net Profit + -0.86 21.64 -37.65 6.88 -3.78

P & L Balance brought forward 0.00 0.00 0.00 0.00 0.00

Statutory Appropriations + 0.00 0.00 0.00 0.00 0.00

Appropriations + 1,237.10 1,123.27 729.16 738.39 534.64

P & L Balance carried down 0.00 0.00 0.00 0.00 0.00

Dividend 404.73 404.74 252.96 252.96 141.66

Preference Dividend 0.00 0.00 0.00 0.00 0.00

Equity Dividend % 400.00 400.00 250.00 250.00 140.00

Earnings Per Share-Unit Curr 115.55 103.27 72.28 69.09 51.42

Book Value-Unit Curr 546.98 471.51 408.61 365.05 320.28

Financial Overview of Hero Honda Motors from 31/03/02 to 31/03/07

200703 200603 200503 200403 200303 200203

Equity Paid Up 39.94 39.94 39.94 39.94 39.94 39.94

Networth 2470.06 2009.33 1493.38 1138.81 861.03 685.76

Capital Employed 2635.23 2195.11 1695.14 1313.51 995.31 802.2Gross Block 1800.63 1471.97 1104.19 916.91 786.29 704.52

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Net Working Capital ( Incl.Def. Tax) -694.09 -860.34 -1046.84 -840.4 -715.45 -424.53

Current Assets ( Incl. Def.Tax) 914.65 822.56 555.16 509.67 477.4 526.65

Current Liabilities andProvisions ( Incl. Def. Tax) 1608.74 1682.9 1602 1350.07 1192.85 951.18

Total Assets/Liabilities (exclReval & W.off) 4243.97 3878.01 3297.14 2663.58 2187.46 1743.16

Gross Sales 11542.04 10086.16 8596.81 6747.35 5101.71 4465.43

Net Sales 9894.52 8711.26 7418.59 5831.02 5097.56 4462.65

Other Income 234.07 167.6 149.42 180.86 108.15 85.17

Value Of Output 9897.72 8726.23 7433.54 5809.43 5118.64 4456.84


Selling Cost 507.1 404.46 316.69 248.74 245.93 179.12

PBIDT 1387.49 1529.78 1308.56 1147.51 949.68 746.9

PBDT 1385.88 1526.86 1306.63 1145.79 947.95 745.39

PBIT 1247.71 1415.16 1219.18 1074.18 886.29 695.89

PBT 1246.1 1412.24 1217.25 1072.46 884.56 694.38

PAT 857.89 971.34 810.47 728.32 580.76 462.93

CP 997.67 1085.96 899.85 801.65 644.15 513.94


Revenue expenses in forex 545.55 502.39 489.7 452.18 405.34 339.81

Capital earnings in forex 0 0 0 0 0 0




CEPS (annualised) (UnitCurr) 47.07 51.57 42.23 37.58 29.95 25.23

EPS (annualised) (UnitCurr) 40.07 45.84 37.75 33.91 26.78 22.67


Payout (%) 42.42 43.63 52.97 58.98 67.22 74.98

Cash Flow From OperatingActivities 625.05 936.08 746.83 972.93 619.01 653.79

Cash Flow From InvestingActivities -273.13 -323.49 -562.85 -376.38 -484.67 -466.55

Cash Flow From FinancingActivities -474.34 -471.23 -203.51 -583.63 -218.94 -123.46

Balance Sheet of Hero Honda Motors from 31/03/2002 to 31/03/2007200703 200603 200503 200403 200303 200203

SOURCES OF FUNDS :

Share Capital 39.94 39.94 39.94 39.94 39.94 39.94

Reserves Total 2430.12 1969.39 1453.44 1098.87 821.09 645.82


Secured Loans 0 0 0 0 0 0

Unsecured Loans 165.17 185.78 201.76 174.7 134.28 116.44

Total D

MANNE DESERTATION

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