A LIVE PROJECT REPORT ON
“STOCK PRICE ANALYSIS OF DIFFERENT SECTORS” SUBMITTED BY: AVDHESH KUMAR SHARMA ROLL
NO. : 0823170010 M.B.A.
2008-2010
A Project Report Submitted in Partial Fulfilment of the Requirement for Award of M.B.A. 1 R.D. Engineering College
R.D. Engineering College
DECLARATION I hereby declare that this project report prepared in lieu of a compulsory paper for the partial fulfilment of Management of Business Administration (Finance and Marketing) is my original work which I have submitted in Gulf Bulls Securities Pvt. Ltd. to my guide Ms Anuja Shukla. No part of it has been submitted to any other university or organisation. All the information and data in my project are authentic to the best of my knowledge and taken from reliable sources.
Avdhesh Kumar Sharma
2 R.D. Engineering College
Acknowledgement Project work is never the work of an individual. It is more a combination of views, ideas, suggestions, contribution and work involving many individuals. I wish to express my deepest gratitude to Gulf Bulls Securities’ management for giving me an opportunity to be a part of their esteem organization and enhance my knowledge by granting permission to do my summer training project under their guidance. I am grateful to Ms. Anuja Shukla, my guide, for his invaluable guidance and cooperation during the course of the project. He provided me with his assistance and support whenever needed that has been instrumental in completion of this project. The project could not have completed without the guidance of Mr. Vishal Thakur, Ms. Neha Goel, Ms. Anuja Shukla and last but not the least Mr. Mandeep. Their continuous guidance helped me immensely during the project work
Avdhesh Kumar Sharma
3 R.D. Engineering College
Preface The stock market in India has been a kind of mysterious place for many people who think that the persons investing their money in the market are sort of gambling on their money. There is usual misconception in the minds of the common man that because of the volatility of the market, their hard earned money is not safe in the stock market. However, this fear can be checked by proper research on a share someone is interested to invest on. The market doesn’t behave in an arbitrate manner but certain trends are repeated over the time again and again. It is quite responsive towards the economic activities taking place in India as well as around the whole world. The broad objective of the project is to understand the behavioural pattern of the shares of IndiaBulls Financial Services Ltd. over the past one year and a half so that one can understand the movement of the share on a particular trading session as well as the impact of news coming from different quarters of the market. The project will provide a tool in the hands of the investors to take the decisions regarding their investment in the shares of IBFSL that is, when to buy or when to sell the shares. It will also give them the answer that whether it is right time to invest in this share or not, and what could be the best time to invest in this share. project deals with the analysis of different companies of different sectors.
My project is divided into different chapters and they are given as under:
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TABLE OF CONTENTS
SR. PARTICULARS NO. 1 Executive Summary 2
Objective of Study
3
Research Methodology
4
Chapter 1 • Introduction of the company
5
Chapter 3 • Research An Introduction Technical Analysis Fundamental Analysis
6
Chapter 5 • Analysis of Different Indian sectors and its leading companies IT Banking Real Estate
7
Chapter 6 • Conclusion
8
PAGE NO.
• Annexure Bibliography
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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 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
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total market capitalisation of the Top 500 Companies.
The report describes various aspects of the Stocks and focus on the various opportunities and threats that have emerged as a result of change in the regulatory environment. The objective of the project is to find out the risk and return perspective of the stocks of different sectors. In doing so I have used various selection techniques. For the purpose of selecting the company’s products we have used the main selection analysis is Technical analysis and fundamental analysis for ICICI Bank, Educomp Solutions and Unitech. The intention behind such an analysis is that to analyze the competitive advantage of the company by knowing the resistance and support level for the company’s which is particularly helpful in identifying areas of development. I have conducted a detailed study of various real economy snapshots so as to consider the growth opportunities of the economy as a whole. Then I have done the fundamental analysis to predict the stocks behaviour in future moreover the technical analysis for stocks return for the above mentioned stocks, the
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Also I have done the Financial Strength Analysis of the company’s because to know
how it is efficient in financial way .
In this section I have done the full study of the ICICI, Educomp Solutions and Unitech. I have also done swot analysis for these three companies with strengths, weakness, opportunity and threats of each of the company’s. The swot analysis would also provide an overview to an investor regarding the future certainity and uncertainity. At last I have done a analysis of these stocks and had predicted the stock prices for future and the support as well as resistance level so that it can be taken up by the investors to decide the time and date for their investment to have greater returns at their end.
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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.
•
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
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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 Gulf Bulls 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
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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 Gulf Bulls Securities aware of the highly active unorganized and organized sector present in the market. This database will help them to make a good research report.
The financial statements of the companies were studied to analyze their investments and returns. This also gave an idea about the returns on investments from this market. Hence in this project report I have tried to cover all the possible dimensions related to the study of construction sector and its returns, liquidity and future growth prospects in this market. Suggestions are also given in the end as to how Gulf Bulls Securities
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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 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.
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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.
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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 Gulf Bulls Securities with analysis of different sectors with a detailed feasibility report in respect to order growth and trend nationally and internationally. The section on parameters that affect the different sector required secondary data collection and then use of valuation ratio for the estimating the revenue which they can generate in future like steel prices to sales ratio, cement prices to sales ratio along with independent variables like inflation, interest rates etc. 14 R.D. Engineering College
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.
Limitations •
The biggest problem that I faced during this research study was that of data
collection. •
Calculation of Valuation ratios was another problem
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•
In my research it was difficult to get persons at company to give out information regarding their order of the project and value of uncompleted project.
•
Year ending period and my survey period were same, creating a problem, as people
•
were scared to give required data. They said they would have to consult their C.A regarding it.
•
During the working days my sir has to submit daily research report so during the market time he was not able to attention to me so I have to wait when I have any
query regarding the report.
CHAPTER 1 COMPANY 16 R.D. Engineering College
PROFILE
COMPANY’S PROFILE About company Gulf Bulls Securities Pvt. Ltd. is a company registered under the Companies Act, 1956 .It is a professionally managed group headed by the directors, having vast experience in the stock market. The company is serving a diverse customer base of institutional and retail investors The Company has a balanced mix of revenues from emerging markets and is well 17 R.D. Engineering College
positioned to leverage the growth potential offered by these markets. GBS provides investors a robust platform to trade in Equities in NSE and BSE, and derivatives in NSE. The company has a worldwide vision and it along with its associates is currently providing state of the art stock broking services through all the major stock exchanges, trading through NSE & BSE, depository services through CDSL and all the services are available under the one roof. With its ability to evolve with the changing environment the Company has been able to put itself to the forefront of stock broking activities. With its network spreading across various parts of India, it has made a distinct mark among the stock broking houses and high net worth corporate as well as individuals.
The company offers financial information, analysis, investment guidance, news & views, which are designed to meet the requirements of everyone from a beginner to a savvy and well-informed trader. “Our vision is to grow our business and make our presence across the world.” “Our mission is to create and introduce the new definition of investments around the globe.” 18 R.D. Engineering College
Management Team: Name
Designation
Mr. Vivek Rana
Chairman / Managing Director
Mr Rajiv Balhara
Director
Mr. Kuldeep Sharma
Director
Mr. Yajur Chaudhary
Director
Mr. Rajneesh Aggarwal
Director
Mr. Vipin Kumar
Director
Mr. Gajraj Singh
Director
Mr. Anil Kaushik
Director
Prominent feature of Gulf Bulls Securities •
Strong research department located at Faridabad office.
•
Well structured infrastructure for trading
•
Highly skilled and experience staff
•
Dedicated user friendly website for its customers, named www.monepore.com 19
R.D. Engineering College
and www.moneyporeexpress.com •
Moneypore express, software developed by Gulf Bulls Securities provides retail investors better opportunity to trade at home and that to at greater speed and convenience.
Areas of Expertise Gulf Bulls offers real time trading opportunities on 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. Gulf Bulls offers state-of –the–art online trading through its website (www.gulfbullsecurity.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 20 R.D. Engineering College
Gulf Bulls 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 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 agricommodities.
Mutual Funds Gulf Bulls 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 21 R.D. Engineering College
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, Gulf Bulls 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. Gulf Bulls’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. Gulf Bulls 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
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advisors; and an NRI advisory body, where it provides information for NRIs in helping them makes judicious investment decisions.
Loan Advisory Gulf Bulls also provides advisory services on the loan schemes of certain banks to its customers. The schemes include, home loans, adhoc loans, professional loans, educational loans, consumer loans and auto loans. Its advisory services are classified into four categories namely; Primers – giving an overview about all schemes that are available, Calculators – where it helps the customers with quick calculators, Jargon Buster – a translator and Digital Advisors – which help in making decisions easy. It has entered into partnership with many leading banks in providing this facility.
Performance The Company registered strong growth during the first 10 months of 2007. The company added 26,460 domestic customer accounts in 2007 as compared to 25,295 in 2006. Number of terminals, sub brokers and employees almost doubled during this period.
Growth Areas 23 R.D. Engineering College
Gulf Bulls 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
MEMBERSHIP Cash Market : NSE,
Products offered Currently Gulf Bulls Securities and Stockbroking is offering following product bouquet to people who wish to deal in stock market
Offline Demat : Rs. 500 Rs 100 : Stamp duty 24 R.D. Engineering College
Rs. 200 : Advance Delivery Rs.200 : AMC Online Online trading account : Rs. 750 Online trading account Online Software Moneypore Express Online package : Rs. 500 (+ Rs 5000 margin) Demat Online trading account Online Software Moneypore Express
SWOT Analysis Strength
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•
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. 26
R.D. Engineering College
Threat •
Bigger players like Reliance entering market
•
Reducing brand loyalty among clients
•
Security threat in online trading
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CHAPTER 2 LITERATURE REVIEW
Similar work that is related to Equity Research and Stock Analysis has been undertaken by several authors. Some of the thoughts I am briefing out here : 28 R.D. Engineering College
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.
In this another study the author documents the behaviour of earnings, abnormal stock
returns, analysts' earnings forecasts, and accounting accruals following years in which
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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
30 R.D. Engineering College
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 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
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with global standards. The paper also has policy implications, as it reflects the lopsided 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�)
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CHAPTER 3 RESEARCH AN INTRODUCTION
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RESEARCH an Introduction Research in common parlance refers to a search for knowledge. One can also define research as a scientific and systematic search for pertinent information on a specific topic. Some people consider research as a movement, a movement from the known to the unknown. It is actually a voyage of discovery. We all possess the vital instinct of inquisitiveness for things. When the unknown confronts us, we wonder and our inquisitiveness make us probe and attain full understanding of the unknown. This inquisitiveness is the mother of all knowledge and the method, which a person employs for obtaining this knowledge of whatever the unknown, can be termed as research. Research is an academic activity and as such the term should be used in a technical sense. Research is an original contribution to the existing stock of knowledge made for its advancement. It is the pursuit of truth with the help of study, observation, comparison, and experiment. In short, the search for knowledge through objective and systematic method of finding solutions to a problem is research. Significance of research It is very important to understand the importance of research to perform it better and also to appreciate a research work. So I thought of stating the significance of 34 R.D. Engineering College
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.
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 emotions…fear, 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 35 R.D. Engineering College
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 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 36 R.D. Engineering College
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. volume
Stock
charts
display
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. 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 37 R.D. Engineering College
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 bearish
bias.
Some
well-known
ones
include
HEAD
a
bullish
or
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 action. Almost all indicators can be categorized as TREND-FOLLOWING or OSCILLATORS.
Popular trend-following
indicators
include
MOVING
Common
oscillators
AVERAGES, ON BALANCE VOLUME and
MACD.
include
OF CHANGE. Trend-following
STOCHASTICS,
RSI
and
RATE
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.
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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 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 39 R.D. Engineering College
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. When earnings fall short, the market may hammer the stock. Every quarter, companies report earnings. Analysts follow major companies closely and if they fall 40 R.D. Engineering College
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 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, 41 R.D. Engineering College
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. 42 R.D. Engineering College
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 43 R.D. Engineering College
•
INDUSTRY RATIOS: i.e. ratios of the industries to which the firms belongs
CLASSIFICATION OF RATIOS Ratios can be classified from various points of view .In reality; the classification depends on the objectives and available data. Ratio may be based on figures in the balance sheet .in the profit & loss account in both Thus they may be worked out on the basis of figures contained in the financial statements. In the view of the requirement of the various users (e.g. short term creditors, long term creditors, management, investors etc‌.) of the ratio may classify the ratio as follows1. 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
44 R.D. Engineering College
CHAPTER 5 ANALYSIS OF DIFFERENT INDIAN 45 R.D. Engineering College
SECTORS & ITS LEADING COMPANIES
INDIAN INFORMATION TECHNOLOGY SECTOR 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. 46 R.D. Engineering College
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 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: 47 R.D. Engineering College
•
Systems architecture
•
Database design and development
•
Networking
•
Application development
•
Testing
•
Documentation
•
Maintenance and hosting
•
Operational support
•
Security services
EDUCOMP SOLUTIONS Company description Educomp Solutions Ltd, formerly Educomp Datamatics Limited, was incorporated in 994 and is based in New Delhi, India. It is India's largest market-listed educational service provider mainly focused on the K-12 space. Educomp group serves over 19,000 schools and 9.4 million learners and educators across the world.
Company operates private schools across various
cities and also partners with various state governments.
48 R.D. Engineering College
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. 1. 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 •
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
R.D. Engineering College
such
margins
are
unsustainable in the long 49
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
Shantanu Prakash
Chairman & Managing Director
50 R.D. Engineering College
Jagdish Prakash Gomal Jain Sankalp Srivastava Shonu Chandra Sankalp Srivastava
Whole-Time Director Director Director Director AUDIT COMMITTEE Chairman, Independent & Non-Executive
Subsidiaries of the company Name of Company
Ownership Interest
Edumatics Inc. -U.S.A. 1655 Educomp Learning Private Limited –India
100% 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
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
51 R.D. Engineering College
Listed on BSE/NSE
13th January 2006
Shareholding pattern(%) Promoters
55.03%
FII's
6.97%
Public and Others
38.00%
Shareholding Pattern (%)
Public and Others 38%
P romoters
FII's 7%
Promoters 55%
FII's P ublic and Others
MONTHLY HIGH AND LOW VALUE OF SHARE PRICE OF EDUCOMP SOLUTION PVT.LTD MONTH
HIGH
LOW
MARCH
PRICE 4,309.00
DATE 3-Mar-08
PRICE 2,901.00
DATE 10-Mar-08
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
52 R.D. Engineering College
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
2,039.90
17-Mar-09
1,473.60
6-Mar-09
2009 *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
MARCH 2008
DIFFERENCE
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
53 R.D. Engineering College
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
54 R.D. Engineering College
January 2009
3,000.00 2,500.00
Resistance Level
2,000.00 1,500.00
High Low
1,000.00 500.00
Close
Support Level
02 -0 120 04 09 -0 120 06 09 -0 120 08 09 -0 120 10 09 -0 120 12 09 -0 120 14 09 -0 120 16 09 -0 120 18 09 -0 120 20 09 -0 120 22 09 -0 120 24 09 -0 120 26 09 -0 120 28 09 -0 120 30 09 -0 120 09
0.00
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. 2,500.00
F e b r u ar y 2 009
2,000.00 1,500.00 1,000.00
Hig h L ow C lose
500.00
02 -
02 -2
00 04 9 -0 220 09 06 -0 220 09 08 -0 220 09 10 -0 220 09 12 -0 220 09 14 -0 220 09 16 -0 220 09 18 -0 220 09 20 -0 220 09 22 -0 220 09 24 -0 220 09 26 -0 220 09
0.00
55 R.D. Engineering College
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 2,500.00 2,000.00
Resistance Level
1,500.00 1,000.00
High Low Close
500.00
02 -0 320 09 04 -0 320 09 06 -0 320 09 08 -0 320 09 10 -0 320 09 12 -0 320 09 14 -0 320 09 16 -0 320 09 18 -0 320 09 20 -0 320 09
0.00
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.
56 R.D. Engineering College
JANUARY EQUITY CHARTING W eeklyC h a rt5 J a n -9 J a n 3 ,0 0 0 .0 0 2 ,5 0 0 .0 0 2 ,0 0 0 .0 0 1 ,5 0 0 .0 0 1 ,0 0 0 .0 0 5 0 0 .0 0 0 .0 0 1 /5 /2 0 0 9
•
HIGH •
1 /6 /2 0 0 9
2643
LOW
1 /7 D /2 a 0 t0 e 9
1 /8 /2 0 0 9
1 /9 /2 0 0 9
5-JAN-2009
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 W eeklyC h art12Jan -16Jan
2,1 00.00 2,0 50.00 2,0 00.00 1,9 50.00
D ate
1 /1 6 /2 0 0 9
1 /1 4 /2 0 0 9 1 /1 5 /2 0 0 9
1,8 50.00
1 /1 3 /2 0 0 9
1,9 00.00 1 /1 2 /2 0 0 9
Share Price (Rs.)
•
•
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 57
R.D. Engineering College
Share Price (Rs.)
W e e k lyC h a rt1 9J a n -2 3J a n
2 ,5 0 0 .0 0 2 ,0 0 0 .0 0 1 ,5 0 0 .0 0
9
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
D a te
1 /2 3 /
2 0 0
2 0 0 9 1 /2 2 /
2 0 0 9 1 /
1 /2 0 /
•
1 /2
1 /1 9 /
0 .0 0
2 0 0 9
5 0 0 .0 0
2 0 0 9
1 ,0 0 0 .0 0
•
Resistance Level: Rs.1800
•
Support Level: Rs.1650
D E a te
2 0 0 9 1 /3 0 /
2 0 0 9 1 /2 9 /
1 /2 8 /
2 0 0 9 7 /
2 0 0 9
W eeklyC h a rt2 7J a n -3 0J a n 1 ,8 2 0 .0 0 1 ,8 0 0 .0 0 1 ,7 8 0 .0 0 1 ,7 6 0 .0 0 1 ,7 4 0 .0 0 1 ,7 2 0 .0 0 1 ,7 0 0 .0 0 1 ,6 8 0 .0 0 1 /2
Share Price (Rs.)
downside happened in the third week.
•
HIGH
1825
27-JAN-2009
•
LOW
1652.55
27-JAN-2009
•
Rise of Rs.53 Within a week
58 R.D. Engineering College
R E S E A R C HR E P O R T 2 ,0 0 0 .0 0 1 ,5 0 0 .0 0 1 ,0 0 0 .0 0 5 0 0 .0 0 0 .0 0
0 0 9
2 /6 /2
2 /5 /2
0 0 9
0 0 9
0 0 9
2 /4 /2
2 /3 /2
0 0 9
S e rie s1
2 /2 /2
SHRE PRICE
FEBRUARY EQUITY CHARTING
D A T E
•
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 R E S E A R C HR E P O R T
2 /1 0 /
2 0 0 9
2 /1 1 /2 0 0 2 9 /1 2 /2 0 0 2 9 /1 3 / 2 0 0 9
S erie s1 0 0 9
2 ,5 00 .00 2 ,0 00 .00 1 ,5 00 .00 1 ,0 00 .00 5 0 0.0 0 0.0 0
2 /9 /2
SHARE PRICE
•
D A T E
•
HIGH
2097
13-FEB-2009
•
LOW
1597
09-FEB-2009
•
Fall of Rs.600 within a week 59
R.D. Engineering College
•
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 R E S E A R C HR E P O R T
S e rie s1 /2 0 0 2 9 /1 7 / 2 0 0 2 9 /1 8 /2 0 0 2 9 /1 9 / 2 0 0 2 9 /2 0 /2 0 0 9
2 ,2 0 0 .0 0 2 ,1 0 0 .0 0 2 ,0 0 0 .0 0 1 ,9 0 0 .0 0 1 ,8 0 0 .0 0 1 ,7 0 0 .0 0 1 ,6 0 0 .0 0 1 ,5 0 0 .0 0
2 /1 6
SHARE PRICE
•
•
HIGH
2177.50
19-FEB-2009
•
LOW
1711.10
20-FEB-2009
•
Fall of Rs.400 within a week
•
Resistance Level: Rs.2100
•
Support Level: Rs.1700
R E S E A R C HR E P O R T 1,6 50.00 1,6 00.00 1,5 50.00 1,5 00.00
2 /2 4 /2 0 0 9 2 /2 5 /2 0 0 9 2 /2 6 /2 0 0 9 2 /2 7 /2 0 0 9
SHARE PRICE
D A T E
S eries1
D A T E
•
HIGH
1725.00
24-FEB-2009
•
LOW
1480.00
26-FEB-2009 60
R.D. Engineering College
•
Fall of Rs.120 within a week
•
Resistance Level: Rs.1630
•
Support Level: Rs.1550
0 0 9
0 0 9
S e rie s1
3 /6 /2
0 0 9
3 /5 /2
0 0 9
3 /4 /2
3 /3 /2
1 ,6 5 0 .0 0 1 ,6 0 0 .0 0 1 ,5 5 0 .0 0 1 ,5 0 0 .0 0 1 ,4 5 0 .0 0
0 0 9
R E S E A R C HR E P O R T
3 /2 /2
SHARE PRICE
MARCH EQUITY CHARTING
D A T E
HIGH
1605
2-MAR-2009
•
LOW
1530
3-MAR-2009
•
Fall of Rs.75 within a week
•
Resistance Level:Rs.1600
•
Support Level: Rs.1550
1,800.00 1,700.00 1,600.00 1,500.00 1,400.00 1,300.00
0 0 3 9 /1 0 /2 0 0 3 9 /1 1 /2 0 0 3 9 /1 2 /2 0 0 3 9 /1 3 /2 0 0 9
R E S E A R C HR E P O R T
S e ries1
3 /9 /2
SHARE PRICE
•
D A T E
•
HIGH
1762
13-MAR-2009 61
R.D. Engineering College
LOW
•
Rise of Rs.249 within a week
•
Resistance Level: Rs.1750
•
Support Level: Rs.1500
1513
09-MAR-2009
2 0 0 3 9 /1 8 /2 0 0 3 9 /1 9 / 2 0 0 3 9 /2 0 / 2 0 0 9
S e rie s1
3 /1 7 /
2 ,0 0 0 .0 0 1 ,9 5 0 .0 0 1 ,9 0 0 .0 0 1 ,8 5 0 .0 0
2 0 0 9
R E S E A R C HR E P O R T
3 /1 6 /
SHARE PRICE
•
D A T E
•
HIGH
2039.90
17-MAR-2009
•
LOW
1826.00
20-MAR-2009
•
Rise of Rs.200 within a week
•
Resistance Level:Rs.2000
•
Support Level: Rs.1900
R esearchR eport 2 ,2 5 0 .0 0 2 ,2 0 0 .0 0 2 ,1 5 0 .0 0 2 ,1 0 0 .0 0
Se rie s1
2 ,0 5 0 .0 0 2 ,0 0 0 .0 0 1 ,9 5 0 .0 0 1 ,9 0 0 .0 0 3 /2 3 /2 0 0 9
3 /2 4 /2 0 0 9
3 /2 5 /2 0 0 9
3 /2 6 /2 0 0 9
3 /2 7 /2 0 0 9
D ate
62 R.D. Engineering College
•
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.
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.
63 R.D. Engineering College
RATIO ANALYSIS: Profitability Ratios % Operating Profit margin Gross profit Margin Net Profit Margin Turnover Ratios Inventory Turnover Ratio Debtor Turnover Ratio Fixed Asset Turnover Ratio Solvency Ratio Current Ratio Debt Equity Ratio Interest Covering Ratio Valuation Ratio P/E adjusted P/BV
Mar-08
Mar-07
Mar-06
48.2
48.12
50.58
35.87 25.51
39.31 25.54
40.44 25.89
185.88
32.75
30.1
2.29
2.16
2.08
1.27
1.67
2.76
5.41 1.28 21.69
4.5 1.09 25.81
5.33 0.11 37.13
35 18
110 24
na 31
VALUATION RATIOS AS ON 31ST 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)
64 R.D. Engineering College
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%.
•
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.
65 R.D. Engineering College
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 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
66 R.D. Engineering College
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 15th May, 2009) and this share price is highly correlated with market so for next 1 month Educomp share price is expected to achieve a new support level of 2670 points but looking at the international market we can say that international investors are bit optimistic so market can sustain at this high for some more time.
67 R.D. Engineering College
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.
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“Looking at the above given information I projected that the new Support Level for the Month of June will be 2700* points and Resistance level will be 3500* points”.
Why Buy: Valuations at 22x FY09E, 12.25x FY2010E and 8.5x FY2011E, on the lower side look cheap. More over company is expected to post CAGR of 50%+ in revenues for next four years. EBITDA margins for 2QFY09 excluding extraordinary forex losses were around 60%. Earnings have been forecasted keeping EBITDA on the lower side at 45-50%.Higher EBITDA will lead to further revision in Earnings Estimate. Continue recessionary conditions will make this stock more attractive relatively as Education segment remains recession proof. Downside Risks: 1. Short Term Market sentiments (High beta of 1.4) 2. Lower Earnings than market expectations 3. Execution/Regulatory/Key Man Risks 4. Tight credit conditions will pose difficulty for company to raise more cash at cheaper interest rates.
SWOT ANALYSIS OF EDUCOMP Strengths: •
Global R&D facility.
•
Retention of the man-power is the best in the industry.
•
Impressive list of clientele.
69 R.D. Engineering College
•
Relatively lower receivable compared to the industry average.
Weaknesses: •
Low operating margin of the other group companies.
•
Free floating stock is very less.
Opportunities: •
In the branded product category.
•
In the consultancy area.
•
In the emerging technology areas like Blue Tooth, WAP etc.
Threats: •
Increasing cost of human capital.
•
Slowdown in the US economy.
•
Appreciation of Indian Currency
•
Will face fierce competition in the areas of e-business and ASP services.
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 sector was a critical source. The next wave of reforms saw the nationalization of 6 more
70 R.D. Engineering College
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
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has dwindled in the wake of the successful Voluntary Retirement Schemes (VRS) schemes. The private players however cannot match the PSB’s great reach, great size and access to low cost deposits. Therefore one of the means for them to combat the PSBs has been through the merger and acquisition (M& A) route. Over the last two years, the industry has witnessed several such instances. For instance, Hdfc Bank’s merger with Times Bank Icici Bank’s acquisition of ITC Classic, Gulf Bulls 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.
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Aggregate Performance of the Banking Industry 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 riskweighted assets is maintained at the stipulated rate. While the IPO route was a muchfancied 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
73 R.D. Engineering College
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 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
74 R.D. Engineering College
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 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.
75 R.D. Engineering College
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 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
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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 of technology introduction in the domestic scenario. The outlook for the private sector banks indeed looks to be more promising vis-Ă -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.
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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 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.
78 R.D. Engineering College
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 transactionbanking 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 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
79 R.D. Engineering College
•
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 ➢ 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 80 R.D. Engineering College
➢ 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
0.79
(R^2) Free-float adj. factor as on
1
31/04/09 Index
BSE 100 ,BSE Mid Cap
Group
A
81 R.D. Engineering College
MFs invested in this company Scheme
% of scheme asset size
Templeton Fixed Horizon Fund 99.95 Series 1 - 13 M - Institutional Plan - Dividend Grindlays Fixed Maturity Plan - 99.35 7 - A - Growth Grindlays Fixed Maturity Plan - 99.35 7 - B - Growth Grindlays Fixed Maturity Plan - 99.35 7 - A - Dividend Grindlays Fixed Maturity Plan - 99.35 7-B-
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
82 R.D. Engineering College
•
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
Share Holding Pattern
Share holding pattern
7.68, 12% 0.41, 1%
11.52, 18%
Banks, Fin insti & insurance FII's
6.49, 10%
Pvt Corporate bodies NRI's,OCB's& foreign others General Public 39.01, 59%
83 R.D. Engineering College
MONTHWISE HIGH AND LOW VALUE OF SHARE Month
Monthly High in (Rs.) Date
Monthly Lowin (Rs.)
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
PRICE OF ICICI BANK LTD. 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
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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%
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%
85 R.D. Engineering College
Sep-08
45.074
7.452%
Oct-08
46.538
11.595%
Nov-08
34.183
8.763%
Dec-08
29.074
7.184%
Jan-09
30.163
7.009%
Feb-09
20.392
5.368%
Mar-09
21.093
6.963%
Technical Analysis : Performance of ICICI Bank Ltd. In last 1 year Performance of ICICI Bank in last 1 year
1,600.00 1,400.00 1,200.00 1,000.00 800.00
Close
600.00 400.00
3/1/2009
2/1/2009
1/1/2009
12/1/2008
11/1/2008
10/1/2008
9/1/2008
8/1/2008
7/1/2008
6/1/2008
5/1/2008
4/1/2008
3/1/2008
2/1/2008
0.00
1/1/2008
200.00
Resistance level: Rs.760
Support Level: Rs.300
86 R.D. Engineering College
•
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. Resistance Level:Rs93 0
Support Level:Rs 790
Monthly Data : ICICI Bank's Performance On May'08 1000 Share Price
950
Resistance Level:Rs 940
900 850
Series1
Support Level: Rs. 805
800 750
5/ 2/ 20 5/ 08 4/ 20 5/ 0 8 6/ 20 5/ 08 8/ 2 5/ 00 10 8 /2 5/ 0 0 12 8 /2 5/ 0 0 14 8 /2 5/ 00 16 8 /2 5/ 0 0 18 8 /2 5/ 0 0 20 8 /2 5/ 0 0 22 8 /2 5/ 0 0 24 8 /2 5/ 00 26 8 /2 5/ 0 0 28 8 /2 5/ 0 0 30 8 /2 00 8
700
Date
➢ Reason-
As we could see the downturn of the stock in the month of May’08 the reason was allotment of Equity shares under the ESOS, 2000. They allotted around 2.5lakh equity shares of face value of Rs10.
87 R.D. Engineering College
ICICI Bank's Performance On June'08 RESISTANCE LEVELRs.780 SUPPORT LEVEL: Rs. 730 Series1
6/ 2/ 20 6/ 0 8 4/ 20 6/ 0 8 6/ 20 6/ 0 8 8/ 2 6/ 00 10 8 /2 6/ 0 0 12 8 /2 6/ 0 0 14 8 /2 6/ 0 0 16 8 /2 6/ 0 0 18 8 /2 6/ 0 0 20 8 /2 6/ 0 0 22 8 /2 6/ 0 0 24 8 /2 6/ 0 0 26 8 /2 6/ 0 0 28 8 /2 6/ 0 0 30 8 /2 00 8
Share Price
900 800 700 600 500 400 300 200 100 0
Date
➢ Reason- ICICI Bank informed about the payment of dividend & 14th Annual General Meeting of the bank to be held in July 26, 2008, so we can say that the share price would move up in July.
Resistance Level: Rs. 750
800 700 600 500 400 300 200 100 0
Support Level : Rs. 505 Series1
7/ 1/ 20 7/ 0 8 3/ 20 7/ 0 8 5/ 20 7/ 0 8 7/ 20 7/ 0 8 9/ 2 7/ 00 11 8 /2 7/ 0 0 13 8 /2 7/ 0 0 15 8 /2 7/ 0 0 17 8 /2 7/ 0 0 19 8 /2 7/ 0 0 21 8 /2 7/ 0 0 23 8 /2 7/ 0 0 25 8 /2 7/ 0 0 27 8 /2 7/ 0 0 29 8 /2 7/ 0 0 31 8 /2 00 8
Share Price
ICICI Bank's Performance On July'08
Date
➢ Reason- As we could see the rise in share price after the mid of July due to bank income increased by 1485.6 as compared to quarter ended June 30, 2008. ➢ Second thing was increase in Interest rates for various tenors of retail Fixed
➢ Deposits by 0.75% to 1.00% w.e.f from Aug 1st, 2008.
88 R.D. Engineering College
Resistance Level:Rs 790 Support level:Rs630.
900 800 700 600 500 400 300 200 100 0
Series1
8/ 1/ 20 8/ 0 8 3/ 20 8/ 0 8 5/ 20 8/ 0 8 7/ 20 8/ 0 8 9/ 2 8/ 00 11 8 /2 8/ 0 0 13 8 /2 8/ 0 0 15 8 /2 8/ 0 0 17 8 /2 8/ 0 0 19 8 /2 8/ 0 0 21 8 /2 8/ 0 0 23 8 /2 8/ 0 0 25 8 /2 8/ 0 0 27 8 /2 8/ 0 0 29 8 /2 00 8
Share Price
ICICI Bank's performance On Aug'09
Date
➢ Reason- ICICI had benefit from their Quarter 1st results, that’s why its price was increased than they allotted equity shares to ESOS, 2000. But because of results IC had manage some how.
800 700 600 500 400 300 200 100 0
Resistance Level:Rs. 725 Support Level: Rs. 550 Series1
9/ 1/ 20 9/ 0 8 3/ 20 9/ 0 8 5/ 20 9/ 0 8 7/ 20 9/ 0 8 9/ 2 9/ 00 11 8 /2 9/ 0 0 13 8 /2 9/ 0 0 15 8 /2 9/ 0 0 17 8 /2 9/ 0 0 19 8 /2 9/ 0 0 21 8 /2 9/ 0 0 23 8 /2 9/ 0 0 25 8 /2 9/ 0 0 27 8 /2 9/ 0 0 29 8 /2 00 8
Share Price
ICICI Bank's Performance On Sept'08
Date
➢ 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.
89 R.D. Engineering College
11 /3 /2 11 0 08 /5 /2 00 11 8 /7 /2 0 0 11 /9 8 /2 11 0 0 8 /1 1/ 11 2 00 8 /1 3/ 11 2 00 8 /1 5/ 20 11 08 /1 7/ 2 0 11 /1 08 9/ 11 2 00 8 /2 1/ 11 2 00 8 /2 3/ 20 11 08 /2 5/ 11 2 00 8 /2 7/ 20 08
Share Price 10 /1 /2 10 0 0 /3 8 /2 10 0 0 /5 8 /2 10 0 0 /7 8 /2 10 0 0 /9 8 10 /20 /1 08 1 10 /2 0 /1 08 3 10 /2 0 /1 08 5 10 /2 0 /1 08 7 10 /2 0 /1 08 9 10 /2 0 /2 08 1 10 /2 0 /2 08 3 10 /2 0 /2 08 5 10 /2 0 /2 08 7 10 /2 0 /2 08 9 10 /2 0 /3 08 1/ 20 08
Share Price
ICICI Bank's Performance On Oct'08
600
500
400
Resistance Level:Rs. 470
300 Series1
500 450 400 350 300 250 200 150 100 50 0
R.D. Engineering College Support Level: Rs. 305
200
100
0
Date
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 Resistance Level:Rs. 455 Support Level: Rs. 310
Series1
Da te
90
500 450 400 350 300 250 200 150 100 50 0
Resistance Level: Rs 455 Support Level: Rs. 400
Series1
12 /1/ 12 20 0 /3/ 8 12 20 0 /5/ 8 12 20 0 /7 8 / 12 20 0 /9/ 8 12 20 /1 08 1 12 /2 0 /13 08 12 /2 0 /15 08 12 /2 0 /17 08 12 /2 0 /19 08 12 /2 0 /21 08 12 /2 0 /2 08 3 12 /2 0 /25 08 12 /2 0 /27 08 12 /2 0 /29 08 12 /2 0 /31 08 /2 00 8
Share price
ICIC I B ank's Performance On Dec'08
Date
➢ 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'09 600 Share Price
500
Resistance Level: Rs. 440 Support level: Rs. 370
400 300
Series1
200 100
1/ 1/ 20 1/ 0 9 3/ 20 1/ 0 9 5/ 20 1/ 0 9 7/ 20 1/ 0 9 9/ 2 1/ 00 11 9 /2 1/ 0 0 13 9 /2 1/ 0 0 15 9 /2 1/ 0 0 17 9 /2 1/ 0 0 19 9 /2 1/ 0 0 21 9 /2 1/ 0 0 23 9 /2 1/ 0 0 25 9 /2 1/ 0 0 27 9 /2 1/ 0 0 29 9 /2 00 9
0
Date
➢ 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.
91 R.D. Engineering College
Resistance Level: Rs445
500 450 400 350 300 250 200 150 100 50 0
Support Level: Rs342 S eries 1
2/2 /
20 2/4 0 9 /2 0 2/6 0 9 /2 0 2/8 0 9 / 20 2/1 0 9 0/2 2/1 0 09 2/ 2 2/1 0 09 4/2 2/1 0 09 6/2 2/1 0 09 8/2 2/2 0 09 0/2 2/ 0 09 22 /2 2/2 0 09 4/2 2/2 0 09 6/ 20 09
Share Price
IC IC I B a n k's P erfo rm a n c e O n F e b '09
D a te
➢ Reasons: There was a decline in the share prices at the end of the month because of the news that the bank tops the list of credit cards frauds & it amounts to losses of around 11.47 cr.
450 400 350 300 250 200 150 100 50 0
Resistance Level: Rs.349 Support Level: Rs255
c los ing pric e
3/ 2/ 20 3/ 0 9 4/ 20 3/ 0 9 6/ 20 3/ 0 9 8/ 2 3/ 00 9 10 /2 3/ 0 09 12 /2 3/ 0 09 14 /2 3/ 0 09 16 /2 3/ 0 09 18 /2 3/ 0 09 20 /2 3/ 0 09 22 /2 3/ 0 09 24 /2 3/ 0 09 26 /2 00 9
share Price
IC IC I B a n k 's P erfo rm an c e o n M arch '09
Da te
An upward movement of the stock prices has been seen in the month of March because in a ceremony held in Hong Kong, ICICI Bank has been awarded the following titles under The Asset Triple A country awards for 2009:-
•
Best Transaction Bank in India
•
Best Trade Finance Bank in India
•
Best Cash Management Bank in India
92 R.D. Engineering College
•
Best Domestic Custodian in India
JANUARY EQUITY CHARTING Weekly charts of Jan’09:
Share Price in (Rs.)
Weekly Chart 540 520
Resistance Level: Rs.525
500 480
Support Level: Rs.465
460 440 420 1/5/2009
1/6/2009
1/7/2009
1/8/2009
1/9/2009
Date
➢ Reason: ICICI Bank Ltd has informed BSE regarding a Press Release dated December 31, 2008, titled "ICICI Bank cuts lending and deposit rates".
Weekly Chart(12 Jan-16 Jan)
Share Price in (Rs.)
450 440
Resistance Level: Rs.442
430 420 410
Support Level: Rs408
400 390 1/12/2009
1/13/2009
1/14/2009
1/15/2009
1/16/2009
Date
➢ Reason: ICICI Bank Ltd has informed BSE that a meeting of the Board of Directors of the Bank will be held on January 24, 2009, inter alia, to consider the approval of audited accounts for the quarter ended December 31, 2008 (Q3).
93 R.D. Engineering College
Share Price in (Rs.)
Weekly Chart(19 Jan-23 Jan) 420 410 400 390 380 370 360 350 340 330
Resistance Level: Rs380 Support Level: Rs368
1/19/2009
1/20/2009
1/21/2009
1/22/2009
1/23/2009
Date
➢ 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 %.
Weekly Chart (27Jan-30 Jan)
Share Price in (Rs.)
420 410 400 390 380 370 360 1/27/2009
1/28/2009 Date 1/29/2009
1/30/2009
➢ 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.
94 R.D. Engineering College
FEBRUARY EQUITY CHARTING Weekly Chart For the month of Feb:
Performane Of ICICI Bank from 2nd Feb to 6th Feb 410 405
Resistance Level’s. 402
Share Price
400 395
Support Level: Rs. 390
390
Series1
385 380 375 370 2/2/2009
2/3/2009
2/4/2009
2/5/2009
2/6/2009
Date
➢ 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".
Performance of ICICI Bank from 9th feb to 13th feb'09
Share price
440 435
Resistance Level: Rs. 435.5
430
Support Level; Rs. 421.5
425
Series1
420 415 410 2/9/2009
2/10/2009
2/11/2009
2/12/2009
2/13/2009
Date
➢ Reasons- Volatility is higher due to Repurchase & subsequent Extinguishment of Bonds. 95 R.D. Engineering College
Performance of ICICI bank from 16th Feb to 20th Feb'09
Share Price
450 400
Resistance Level: Rs. 408 Support Level: Rs. 300
350 300 250 200
Series1
150 100 50 0 2/16/2009
2/17/2009
2/18/2009
2/19/2009
2/20/2009
Date
➢ Reason: ICICI Bank has decided to follow the slow-moving pace in disbursing auto loans, unless there is clarity on the repossession norms for vehicles. The lack of clarity is the direct result of a Supreme Court judgment, which requires lenders to follow the due process of law for recovering vehicles from defaulters.
96 R.D. Engineering College
Performance of ICICI Bank from 24th feb to 27th feb '09
Share Price
345 340
Resistance Level; Rs. 340.5
335
Support Level: Rs. 325
330
Series1
325 320 315 2/24/2009
2/25/2009
2/26/2009
2/27/2009
date
➢ Reason: There was an increase in prices after 25th 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 310
Share price
300
Resistance Level: Rs. 300 Support Level: Rs. 270
290 280
Series1
270 260 250 3/2/2009
3/3/2009
3/4/2009
3/5/2009
3/6/2009
Date
➢ Reason: The RBI has taken a positive step by announcing the cut of 50 basis points in repo as well as reverse repo rate, said Ms Chanda Kochhar, CEO-
97 R.D. Engineering College
designate, ICICI Bank, said. The RBI has sought to create conditions conducive to the consumption and investment, taking into account the global developments and their impact on India: slowdown in growth on one hand and decline in inflation on the other. Performance from 9th March to 13th March
Share Price
320 310
Resistance Level: Rs. 310
300
Support Level: Rs 283
290 280
Series1
270 260 250 240 3/9/2009
3/10/2009
3/11/2009
3/12/2009
3/13/2009
date
➢ Reason: ICICI BANK made a recovery in this week after falling of more than 12% in the previous week due to positive global news and the effect of stimulus package announced by the Govt. of India.
Performance From 16th March to 20th March'09 340
Resistance Level: Rs. 338 Support Level: Rs. 324
Share Price
335 330 325
Series1
320 315 310 3/16/2009
3/17/2009
3/18/2009
3/19/2009
3/20/2009
Date
➢ Reason: ICICI Bank is planning to set up a new entity to house its automated teller machines (ATMs) as well as the point-of-sale (PoS) terminals, which
98 R.D. Engineering College
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.
Performance from 23rd March to 27th March'09
Share price
390 380
Resistance Level: Rs. 382
370
Support level: 350
360
Series1
350 340 330 320 3/23/2009
3/24/2009
3/25/2009
3/26/2009
3/27/2009
date
➢ Reason: "Banks should start considering 0.50 per cent cut in interest rate ... Possibly in a week or few weeks," Kamath said. He also said "Clearly, inflation is nearing zero, but we are not able to bring down lending rate to single digit. So there is a need to look at more policy action,".
Financials ➢ Operating profit ex-treasury is down 10% YoY and 26% QoQ NII grew 2% YoY but declined 7% QoQ to Rs19.9b. Loans declined 1% YoY and 4% QoQ to Rs2.1t. Reported margins were stable at 2.4%. Fee income at Rs13.5b was down 25% YoY and 28% QoQ. Treasury income rose from Rs2.8b in 3QFY08 to Rs9.8b in 3QFY09 - driving PAT. Treasury Income during the quarter includes Rs2.5b on MTM reversal. Opex declined 18% YoY and was stable QoQ. Operating profit ex-treasury is down 10% YoY and 26% QoQ in 3QFY09. Total deposits declined by 9% YoY and 6% QoQ to Rs2. This is partly due to strategic slowdown and mainly due to flight of retail deposits.
99 R.D. Engineering College
➢ 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 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 10 R.D. Engineering College 0
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
Sales Operating profit Interest Gross profit EPS(Rs)
Dec’08
Sept’08
Absolute
%
(Rs crore)
(Rs crore)
Change
chang
1.1 -77.14 157.91 485.93 2.32
e 0.014 -1.4 2.77 21.26 25.46
7,836.08 5,094.27 5,845.67 2,770.84 11.43
7,834.98 5,171.41 5,687.36 2,284.91 9.11
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 Spreads Analysis(%) Avg. Yield-Earning Assets Avg.CostInt.Bear,Liab. Interest Spread Net Interest Margin R.D. Engineering College
2007
2008
2009E
2010E
2011E
7.9
8.9
8.7
8.3
8.3
6.4
7.4
7.2
6.4
6.2
1.6 2
1.4 2.1
1.4 2.3
1.9 2.7
2 2.8
10 1
Pofitability Ratios(%) ROE Adjusted ROE Int. Expended/int.Earne d Other Inc./Net Income Efficiency Ratios(%) Op. Exps./Net Income Empl. Cost/Op. Exps. Busi. Per Empl.(Rs m) NP per Empl.(Rs. lac) Asset-Liability Profile(%) Adv./Deposit Ratio CASA Ratio % Invest/Deposit Ratio G-Sec/Invest Ratio Gross NPAs to Adv. Net NPAs to Adv. CAR Tier 1
Valuation Book Value(Rs.)
13.4 13.4 74.4
11.7 12.9 76.3
7.9 8.8 73.6
8.6 9.7 67.9
10.6 12.1 66.1
55.1
54.7
48.1
45.6
44.9
57.9
53.3
45.6
44.1
43.6
24.2
25.5
28.7
27.9
28.4
110.7
110.7
112.8
99.9
104.4
9.3
10.3
9.4
9.5
11.9
85 21.8 39.6
92.3 26.1 45.6
100.9 28 49.7
101 31.5 50.7
100.3 33.5 49.3
73.8 2.1 1 11.7 7.4
67.6 3.3 1.5 14 11.8
62.3 4.3 1.9 14.9 11.5
59.2 4.6 1.7 14 10.7
60.8 4.1 1.3 12.9 9.7
270
R.D. Engineering College
418
439
463
500
10 2
Price-BV (x) ABV(for Subs Invst. And NPAs) EPS(Rs.) EPS Growth(%) Price-Earning (x) Adj.PriceEarnings(x)
256
0.9 397
0.8 415
0.8 440
0.7 480
34.6 21.2 10.5 6.9
37.4 8 9.7 6.4
33.8 -9.7 10.8 7.1
38.6 14.3 9.4 5.9
51.2 32.6 7.1 4.4
COMPARATIVE VALUATIONS:-
P/E(x)
P/BV( x)
ROE( %) ROA( %)
ICICI BANK 7.4 6.4
HDFC BANK 18.5 14.8
AXIS BANK 17.8 13.4
0.7
2.8
2.6
FY010 E FY09E
0.6
2.1
2.2
8.5
15.6
15.4
FY10E FY09E
9 0.9
16.6 1.3
17.9 1.1
FY010 E
1
1.4
1.1
FY09E FY010 E FY09E
RESULT ANALYSIS:-
R.D. Engineering College
10 3
R.D. Engineering College
10 4
Interest Income Interest Expense Net Interest Income(NII) Other Income - Fees - Treasury Income(Incl uding MTM) - Others Net Income Total Operating Costs - Staff Costs - Other Opex Operating Profit Provisions PBT Tax Tax Payout % PAT EPS Deposits Advances - Retail Advances Internationa l Advances Net NPA% Yields On Advances % Cost of Funds %
3QFY0 9
3QFY0 8
78,361
79,118
78,350
QOQ GR. % 0
FY08
FY09E
FY10E
3
3,07,88 3 2,34,84 2 73,041
3,13,14 2 2,30,62 1 82,521
3,01,68 5 2,04,79 0 96,895
58,457
59,521
56,874
19,904
19,597
2
21,476
25,150
24,266
4
18,773
34
88,108
76,615
81,244
13,470 9,760
17,850 2,820
246
18,760 -1,530
-28 -738
66,270 8,150
66,270 4,000
69,584 5,000
1,920 45,054
3,596 43,863
3
1,543 40,250
24 12
17,341
21,276
-18
17,400
0
13,688 1,61,1 49 81,542
6,345 1,59,1 35 70,704
6,660 1,78,1 39 76,359
5,030
5,705
-12
4,881
3
20,789
20,276
21,290
12,311
15,571
-21
12,520
-2
60,753
50,428
55,069
27,713
22,587
23
22,849
21
79,607
88,431
10,080 17,633 4,910 28
7,600 14,987 2,681 18
33 18 83 3
9,235 13,614 3,472 26
9 30 41
29,046 50,561 8,984 18
37,684 50,747 13,194 26
1,01,7 80 42,990 58,790 15,873 27
12,723 7 20,90, 650 21,25, 210 11,45,0 00 5,52,55 5
12,306 9 22,97, 790 21,55, 170 13,23,1 10 4,52,58 6
3 -24 -9
10,142 10 22,34, 020 22,19, 850 12,25,0 00 5,77,16 1
25 -37 -6
41,577 37 24,44, 311 22,56, 161 13,16,6 30 4,77,46 0
37,553 34 21,50, 993 21,69, 423 11,45,4 68 5,68,17 7
42,916 39 23,23, 073 23,46, 198 969
2 10.4
2 10.9
2 10.2
2 10.7
2 10.3
2 9.8
7.5
7.8
7.0
7.4
7.2
6.4
R.D. Engineering College
YOY GR. %
-1 -13 22
2QFY0 9
-4 -7 -4
10 5
992
INCOME STATEMENT Y/E MARCH Interest Income Interest Expended Net Interest Income Change (%) Other Income Net Income Change (%) Operating Exp. Operating Income Change (%) Provisions & Cont. PBT Tax Tax Rate (%) PAT Change (%) Proposed Dividend
BALANCE SHEET Y/E MARCH Capital Preference Capital Reserve & Surplus Net worth Deposits Change (%) Borrowings
2,007 2,19,95 6 1,63,58 5 56,371
2,008 3,07,88 3 2,34,84 2 73,041
2009E 3,13,14 2 2,30,62 1 82,521
2010E 3,01,68 5 2,04,7 90 96,895
44.3 66,279 1,25,65 0 41.3 66,906 58,744
29.4 88,108 1,61,14 9 28.3 81,542 79,607
13.0 76,615 1,59,13 5 -1.2 70,704 88,431
16.5 92,098 2,05,002
51.1 22,294
35.5 29,046
11.1 37,684
17.4 81,244 1,78,1 39 11.9 76,359 1,01,7 80 15.1 42,990
36,450 5,348 14.7 31,102 22.4 8,993
50,561 8,984 17.8 41,577 33.7 12,239
50,747 13,194 26.0 37,553 -9.7 12,239
58,790 15,873 27.0 42,916 14.3 13,352
77,978 21,054 27.0 56,924 32.6 13,352
2,007 8,993 3,500 2,34,13 9 2,46,6 33 23,05, 100 39.6 7,06,61 3
R.D. Engineering College
2011E 3,33,116 2,20,213 1,12,904
15.1 87,910 1,17,092 15.0 39,114
2,008 2009E 2010E 2011E 11,127 11,127 11,127 11,127 3,500 3,500 3,500 3,500 4,53,57 5 4,68,20 2 24,44,3 11 6.0 8,63,98 6
4,76,808
5,04,103
5,45,404
4,91,43 5 21,50,9 93 -12.0 9,11,719
5,18,730
5,60,03 1 26,71,5 34 15.0 10,73,48 5
23,23,07 3 8.0 9,87,038
10 6
Other Liabilities & Prov. Total Liabilities Current Assets Investments Change (%) Loans Change (%) Net Fixed Assets Other Assets Total Assets
1,88,23 5
2,21,45 2
2,81,244
3,57,180
4,53,619
34,46, 581 3,71,21 3 9,12,5 78 27.5 19,58, 656 34.0 39,234
39,97,9 51 3,80,41 1 11,14,5 43 22.1 22,56,1 61 15.2 41,089
38,35,3 91 3,04,722
41,86,02 0 3,19,200
47,58,6 68 3,54,349
10,69,9 62 -4.0 21,69,4 23 -3.8 44,389
11,76,95 8 10.0 23,46,19 8 8.1 47,389
13,18,1 93 12.0 26,80,7 08 14.3 49,889
1,64,89 9 34,46, 581
2,05,74 6 39,97,9 51
2,46,896
2,96,275
3,55,530
38,35,3 91
41,86,02 0
47,58,6 68
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.
R.D. Engineering College
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“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. 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:R.D. Engineering College
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•
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 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.]
R.D. Engineering College
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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. 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.
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筐｢ OPPORTUNITIES: 1) Bank 窶的nsurance 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. 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.
筐｢ 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.
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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.
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 R.D. Engineering College
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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.
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.
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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, 2008 Category of shareholder A) B) A) B)
Number of shareholders
Total number of shares
% of shares
Shareholding of Promoter and Promoter Group Indian 38 1091232375 Foreign 1 3822000 Public shareholding Institutions 193 127446588 Non-institutions 499315 400874037 Total 499547 1623375000
67.22 0.24 7.86 24.69 100.01
Unitech Share Price from 01-Jan-08 to 31-Mar-09
R.D. Engineering College
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UnitechSharePrice from01-Jan-08 to31-Mar-09
Resistanc e level 400
3/1/2009
2/1/2009
1/1/2009
12/1/2008
11/1/2008
10/1/2008
9/1/2008
8/1/2008
7/1/2008
6/1/2008
5/1/2008
4/1/2008
3/1/2008
Support Level 36 2/1/2008
300 200 100 0
1/1/2008
Price
600 500 400
Date
SHARE PERFORMANCE CHART ON BSE 400 350 300 250 200 150 100
• • • •
52 Week High 52 Week Low All Time High All Time Low
338.00 21.80
3/1/2009
2/1/2009
1/1/2009
12/1/2008
11/1/2008
10/1/2008
9/1/2008
8/1/2008
7/1/2008
6/1/2008
5/1/2008
Low Price 4/1/2008
50 0
High Price
05-May-2008 28-Nov-2008 21.80
28-Nov-2008
OCTOBER 2008 R.D. Engineering College
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U n it e c h S h a r e P r ic e o f O c t - 0 8 150
Resistance level 101.0
Price
100 50
10/1/08 10/3/08 10/5/08 10/7/08 10/9/08 10/11/08 10/13/08 10/15/08 10/17/08 10/19/08 10/21/08 10/23/08 10/25/08 10/27/08 10/29/08 10/31/08
0
Da te
Support level 30.00
•
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 Resistance level 56.00
11/25/08 11/27/08
Da t e
11/19/08 11/21/08 11/23/08
11/11/08 11/13/08 11/15/08 11/17/08
11/5/08 11/7/08 11/9/08
11/3/08
Price
U ni t e c h S ha r e P r i c e o f N o v - 0 8
60 40 20 0
Support level 23.00
•
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%
R.D. Engineering College
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DECEMBER 2008
Da t e
12 /29 /20 08
12 /22 /20 08
/20 08 12 /15
12 /8/ 20 08
12 /1/ 20 08
Price
U ni t ec h S ha r e P r i c e o f D ec - 0 8
50 40 30 20 10 0
Resistance level 45.00
Support level 32.00
•
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.
Date
Resistance level 47.00
1/ 29 /2 00 9
1/ 22 /2 00 9
1/ 15 /2 00 9
Unite ch Share Price of Jan-09
1/ 8/ 20 09
50 40 30 20 10 0
1/ 1/ 20 09
Price
JANUARY 2009
•
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.
R.D. Engineering College
Support level 26.50
11 7
FEBRUARY 2009 Resistance level 32.10
Unite ch Share Price of Fe b-09
2/26/2009
2/24/2009
2/22/2009
2/20/2009
Date
2/18/2009
2/16/2009
2/14/2009
2/12/2009
2/8/2009
2/10/2009
2/6/2009
2/4/2009
2/2/2009
Price
33 32 31 30 29 28 27 26 25
•
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.
Support level 27.65
MARCH 2009 Unite ch Share Price of M ar-09
Resistance level 36.40
40 Price
30 20 10
•
HIGH
36.50
26-MAR-2009
•
LOW
24.80
09-MAR-2009
•
Fall of rs. 11.70 within a month
20 09 3/ 30 /
3/ 23 /
Date
R.D. Engineering College
20 09
00 9 3/ 16 /2
00 9 3/ 9/ 2
3/ 2/ 2
00 9
0
Support level 24.70
11 8
•
Inflation is decrease by .2.80 % from last month.
JANUARY EQUITY CHARTING Resistance level 47.50
Fir s t We e k of Jan'09 50 40 30 20 10 0 1/5/2009
1/6/2009
1/ 7/2009
1/8/2009
1/9/ 2009
D ate
Support level 26.50
•
HIGH
47.60
05-JAN-2009
•
LOW
36.00
09-JAN-2009
•
Fall of rs. 11.60 within a week
Resistance level 34.80
Se cond We e k of Jan'09 36
Price
34 32 30 28 26 1/12/2009
1/13/2009
1/14/2009
1/15/2009
1/16/2009
Support level 29.40
Date
•
HIGH
34.95
14-JAN-2009
•
LOW
29.45
16-JAN-2009
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•
Fall of rs. 05.50 within a week
Resistance level 31.90
T h ir d W e e k Of Ja n '09 34
Price
32 30 28 26 24 1 /1 9/20 09 1 /20/20 09 1/21/20 0 9 1/22 /20 09 1/23/20 09 DA t e
•
HIGH
31.95
19-JAN-2009
•
LOW
26.95
23-JAN-2009
•
Fall of rs. 05.00 within a week
Price
Forth We e k of Jan'09
Resistance level 32.50
33 32 31 30 29 28 27 26 25 24 1/27/2009
1/28/2009
1/29/2009
Support level 26.80
1/30/2009
Support level 27.15
Date
R.D. Engineering College
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•
HIGH
32.50
30-JAN-2009
•
LOW
27.15
27-JAN-2009
•
Fall of rs. 05.35 within a week
FEBRUARY EQUITY CHARTING Resistance level 29.30
Fir s t We e k o f Fe b'09 29.5 29 Price
28.5 28 27.5 27 26.5 2/2/2009
2/3/2009
2/4/2009
2/5/2009
2/6/2009
Support level 27.75
Date
•
HIGH
29.30
02-FEB-2009
•
LOW
27.75
05-FEB-2009
•
Fall of rs. 01.55 within a week
R.D. Engineering College
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Se cond We e k of Fe b'09 33
Resistance level 32.10
32 Price
31 30 29 28 27 2/9/2009
2/10/2009
2/11/2009
2/12/2009
Support level 31.10
2/13/2009
Date
•
HIGH
32.15
11-FEB-2009
•
LOW
29.05
09-FEB-2009
•
Fall of rs. 03.10 within a week
Third Week of Feb'09 30.5 30
Resistance level 29.25
Price
29.5 29 28.5 28 27.5 27 26.5 2/16/2009
2/17/2009
2/18/2009
2/19/2009
Date
•
HIGH
30.20
16-FEB-2009
•
LOW
28.05
20-FEB-2009
•
Fall of rs. 02.15 within a week
R.D. Engineering College
2/20/2009
Support level 28.30
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Fo u r th W e e k o f Fe b '09
Resistance level 28.90
29 28.8
Price
28.6 28.4 28.2 28 27.8 27.6 2/24/200 9
2/2 5/2 009
2 /2 6 /2 0 09
2/2 7/2 009
Da te
•
HIGH
28.90
26-FEB-2009
•
LOW
28.10
25-FEB-2009
•
Fall of rs. 00.80 within a week
Support level 28.10
MARCH EQUITY CHARTING First Week of Mar'09
Resistance level 26.60
27.5 27
Price
26.5 26 25.5 25 24.5 3/2/2009
3/3/2009
3/4/2009
3/5/2009
3/6/2009
Date
•
HIGH
26.95
Support level 25.60
02-MAR-2009
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•
LOW
•
Fall of rs. 01.40 within a week
25.55
05-MAR-2009
Second Week of Mar'09
Resistance level 26.50
27 26.5
Price
26 25.5 25 24.5 24 23.5 3/9/2009
3/10/2009
3/11/2009
3/12/2009
3/13/2009
Date
•
HIGH
26.50
13-MAR-2009
•
LOW
25.05
12-MAR-2009
•
Fall of rs. 01.45 within a week
Support level 25.00
T hir d w e e k o f M ar '09
Resistance level 27.10
27.5
Price
27 26.5 26 25.5 25 3/16/2009 3/17/2009 3/18/2009 3/19/2009 3/20/2009 Date
•
HIGH
27.15
19-MAR-2009
•
LOW
25.95
17-MAR-2009
•
Fall of rs. 01.20 within a week
R.D. Engineering College
Support level 25.95
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Fo u r t h W e e k o f M ar '09
Resistance level 36.00
40
Price
30 20 10 0 3/23/2009
3/24/2009
3/25/2009
3/26/2009
3/27/2009
Date
•
HIGH
36.50
26-MAR-2009
•
LOW
28.00
23-MAR-2009
•
Fall of rs. 08.50 within a week
Support level 29.00
YEARLY MARGIN FOR UNITCH LTD. YEAR 2008 TILL MAR-09
Avg. Margin Avg. Margin (%) 15.931 8.935% 2.747 8.666%
MONTHLY MARGIN FOR UNITECH LTD. Month
Monthly Avg. Margin
R.D. Engineering College
Monthly Avg. Margin (%) 12 5
Jan-08 Feb-08 Mar-08 Apr-08 May-08 Jun-08 Jul-08 Aug-08 Sep-08 Oct-08 Nov-08 Dec-08 Jan-09 Feb-09 Mar-09
39.441 28.867 24.897 13.305 13.955 14.098 12.974 8.935 10.467 11.745 5.578 4.007 4.41 1.953 1.537
9.033% 7.764% 8.828% 4.748% 5.015% 7.320% 8.084% 5.249% 7.850% 19.132% 13.489% 11.342% 12.739% 6.629% 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 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:
R.D. Engineering College
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•
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 shortterm 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 land bank at diversified locations, a strong asset base, and the
ahuge
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%
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Margins(%) EBITDA
50.00%
NPM
40.50%
Per Share Data (Rs.) EPS
2.5
59.00 % 41.00 %
62.00%
2.6
2.2
36.50%
-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
Q2'08
Q1'09
R.D. Engineering College
Q2'09
YOY%
QOQ
TTM
TTM
YOY%
12 8
Data ( Rs. mn,except per share data Revenue Real 8303 9140 Estate
8077
2.70%
%
ENDED Q2'08
ENDEDQ 2'09
11.60 % 40.90 % 294.30 % 4.90%
39242
37331
4.90%
2338
1739
1131
1883
103
132
1.30%
720
790
25.60 % 66.50 % 28.30 % 9.70%
9.90%
792
1294
63.30 %
27249
24769
9.10%
116
156
34.90 %
733
1789
10
-4
144.10 % 135.00 % 33.90 % 44.40 %
Construc tion
518
316
187
-64%
Consultin g Hospitali ty Electrical
772
251
990
26
31
32
140
206
208
Others
377
373
336
28.30 % 26.70 % 49.10 % 10.90 %
Total EBIT Real Estate
10135
10317
9831
6049
6049
5257
Construc tion
42
42
37
Consultin g Hospitali ty
251
251
984
2
2
0
Electrical
8
8
-22
NM
NM
45
30
24
24
7
72.40 %
72.40 %
96
139
6376
6376
6264
28250
26880
72.90 % 8.00%
66.20 % 13.10 % 99.90 %
65.10 % 19.90 % 99.40 %
69.40%
66.30%
5.00%
9.00%
64.80%
95.00%
Others Total EBIT Margins Real Estate Construc tion Consultin g
32.50 %
R.D. Engineering College
44326 13.10 13.10 % % 10.60 10.60 % % 292.10 292.10 % % 89.50 89.50 % %
12 9
Hospitali ty Electrical
7.50%
6.20%
0.60%
10.00%
-2.70%
5.60%
3.80%
6.20%
3.70%
Others
6.40%
6.50%
10.40 % 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.
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
R.D. Engineering College
13 0
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. Year To March Rs.mn,except share data Net Sales EBITDA Net Profit Margins(%) EBITDA
FY05
FY06
FY07
FY08
6452 779 335
9266 1806 925
32883 20109 12667
41404 23687 16619
12.10
19.50
61.20
57.20
FY09 E
FY10E
CAGR( %)
per
R.D. Engineering College
15.40% 23.70% 30.20% 54.00
46.50%
13 1
NPM
% 5.20%
Per Share Data (Rs.) EPS 0.2 PER(x) 14.2x
% 10.00 %
% 38.50 %
% 40.10 %
% 30.70 %
27.30%
0.6 40.7x
7.8 62.6x
10.2 2.6x
5.8 4.5x
5 5.3x
30.20%
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.
R.D. Engineering College
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“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”. R.D. Engineering College
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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.
1.
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.
2. It provides engineering and construction services in diverse industries as follows
R.D. Engineering College
13 4
Oil and gas projects including pipelines, storage tanks and terminals and process facilities •
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
1. Its core capabilities lie in process and plant engineering, heavy civil engineering and building. 2. 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. 3.
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.
4.
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.
R.D. Engineering College
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5.
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 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 prequalification 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.
R.D. Engineering College
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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.
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.
R.D. Engineering College
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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 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.
R.D. Engineering College
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CHAPTER 6 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.
R.D. Engineering College
13 9
The strength, resilience and stability of the country’s external sector are reflected by various indicators. These include a steady accretion to reserves, moderate levels of current account deficit, changing composition of capital inflows, flexibility in exchange rates, sustainable external debt levels with elongated maturity profile and an increase in capital inflows. The current account has followed an inverted “U” shaped pattern during the period from 2001-02 to 2006-07, rising to a surplus of over 2 per cent of GDP in 2003-04. Thereafter it has returned close to its post-1990s reform average, with a current account deficit of 1.2 per cent in 2005-06 and 1.1 per cent of GDP in 2006-07. For the Educomp solutions Company is likely to post very high growth rate for a long time. Revenue figures are expected to show a CAGR of 70% for the period 2009-2011, 35% for the period
2011-2014 and 20% for the period 2014-2016.
We forecast strong 65% CAGR in Net Profits over FY09-FY11E and see limited risks to estimates given.EBITDA margins are likely to improve as revenue share of high margin retail and online business is likely to improve considerably. We expect ROE to double and settle in the range between 30-35%. For the Icici Bank NII grew 2% YoY but declined 7% QoQ to Rs19.9b. Loans declined 1% YoY and 4% QoQ to Rs2.1t. The sales have increased by 0.014% in Q3.Operating profit has decreased on the assumption that either operating expenses have increased 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. R.D. Engineering College
14 0
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.
ANNEXURE R.D. Engineering College
14 1
ANNEXURE EDUCOMP SOLUTIONS BALANCE SHEET In Rs. Cr.
Educomp Solutions Balance Sheet Mar '04
Mar '05
Mar '06
Mar '07
Mar '08
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
0
0
0
0
0
0
0
0
0
0
12.59
18.92
74.35
98.71
269.57
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
0
0
0
107.14
314.94
Sources Of Funds
Share Application Money Preference Share Capital Reserves Revaluation Reserves
Unsecured Loans Total Debt
2.93
4.37
9.92
124.69
367.24
19.99
27.76
100.23
239.39
654.06
R.D. Engineering College
14 2
Total Liabilities Application Of Funds Gross 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 Investments
0.28
2
6.65
7.59
20.08
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 Total Current Assets
1.3
3.06
28.6
30.77
54.34
15.3
23.2
55.5
83.37
170.21
Loans and Advances
1.69
1.99
6.03
21.93
36.44
0
0
31.06
64.19
224.69
16.99
25.19
92.59
169.49
431.34
0
0
0
0
0
8.22
12.74
6.63
23.73
70.11
Fixed Deposits Total CA, Loans & Advances Deffered Credit Current Liabilities 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
0
0
0.08
0.06
0.04
19.99
27.77
100.23
239.38
654.08
0
0
17.44
17.95
29.24
38.15
52.3
56.59
71.75
166.31
Miscellaneous Expenses Total Assets Contingent Liabilities Book Value (Rs)
PROFIT AND LOSS In Rs. Cr.
Educomp Solutions Profit & Loss account Mar '04
Mar '05
Mar '06
Mar '07
Mar '08
24.75
29.82
52.3
106.57
262.1
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
0
0
0
0
0
26.01
32.11
53.37
111.64
276.9
Income Sales Turnover Excise Duty
Stock Adjustments Total Income Expenditure
R.D. Engineering College
14 3
Raw Materials
6.86
3.37
0
0
0
0
0
0
0
0
Power & Fuel Cost Employee Cost
5.49
6.35
7.5
10.51
25.58
Other Manufacturing Expenses
0
0
9.54
30.42
79.73
Selling and Admin Expenses
0
0
7.63
12.15
18.83
Miscellaneous Expenses Preoperative Exp Capitalised
6.06
6.74
1.17
2.2
11.62
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) Tax
3.07
10.15
21.47
44.22
103
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 Per share data (annualised)
0
0
0.34
0.56
0.73
Shares in issue (lakhs)
44.73
44.73
159.6
159.85
172.47
Earning Per Share (Rs) Equity Dividend (%)
4.22
14.15
8.72
17.92
40.62
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
Net Profit Before Tax Net Cash From Operating Activities
R.D. Engineering College
Mar '05
Mar '06
Mar '07
Mar '08
10.16
21.47
44.9
103
8.46
11.24
18.04
68.1
14 4
Net Cash (used in)/from
-8.27
-14.61
-88.46
-215.72
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
Investing Activities
ICICI BANK BALANCE SHEET In Rs. Cr.
ICICI Bank Balance Sheet Mar '05
Mar '06
Mar '07
Mar '08
Mar '09
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
11,813.20
21,316.16
23,413.92
45,357.53
48,419.73
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
Borrowings
33,544.50
1,65,083.1 7 38,521.91
2,30,510.1 9 51,256.03
2,44,431.0 5 65,648.43
2,18,347.8 2 67,323.69
Total Debt
1,33,363.2 8
2,03,605.0 8
2,81,766.2 2
3,10,079.4 8
2,85,671.5 1
Capital and Liabilities:
Reserves Revaluation Reserves
R.D. Engineering College
14 5
Other Liabilities & Provisions
21,396.17
25,227.88
38,228.64
42,895.39
43,746.43
Total Liabilities
1,67,659.4 2
2,51,388.9 5
3,44,658.1 2
3,99,795.0 8
3,79,300.9 6
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
Investments
50,487.35
1,46,163.1 1 71,547.39
1,95,865.6 0 91,257.84
Gross Block
5,525.65
5,968.57
6,298.56
2,25,616.0 8 1,11,454.3 4 7,036.00
2,18,310.8 5 1,03,058.3 1 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
Assets
Capital Work In Progress
96.3
147.94
189.66
0
0
8,702.59
12,509.57
16,300.26
20,574.63
24,163.62
1,67,659.4 0
2,51,388.9 5
3,44,658.1 1
3,99,795.0 7
3,79,300.9 6
97,507.79
1,77,054.1 8 22,717.23
3,71,737.3 6 29,377.55
8,03,991.9 2 36,678.71
270.37
417.64
445.17
Other Assets
Total Assets Contingent Liabilities Bills for collection
9,803.67
1,19,895.7 8 15,025.21
Book Value (Rs)
170.35
249.55
PROFIT AND LOSS In Rs. Cr.
ICICI Bank Profit & Loss account Mar '05
Mar '06
Mar '07
Mar '08
Mar '09
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
6,570.89
9,597.45
16,358.50
23,484.24
22,725.93
737.41
1,082.29
1,616.75
2,078.90
1,971.70
1,040.49
2,360.72
4,900.67
5,834.95
5,977.72
590.36
623.79
544.78
578.35
678.6
Income
Expenditure Interest expended Employee Cost Selling and Admin Expenses Depreciation
R.D. Engineering College
14 6
Miscellaneous Expenses
1,881.77
2,616.78
3,426.32
3,533.03
4,098.22
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
10,820.92
16,281.03
26,847.02
35,509.47
35,452.17
2,005.20
2,540.07
3,110.22
4,157.73
3,758.13
0
0
0
0
-0.58
Preoperative Exp Capitalised
Total Expenses Net Profit for the Year Extraordionary Items Profit brought forward
53.09
188.22
293.44
998.27
2,436.32
2,058.29
2,728.29
3,403.66
5,156.00
6,193.87
0
0
0
0
0
632.96
759.33
901.17
1,227.70
1,224.58
90.1
106.5
153.1
149.67
151.21
27.22
28.55
34.59
37.37
33.78
85
85
100
110
110
170.35
249.55
270.37
417.64
445.17
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
2,058.29
2,728.30
3,403.66
5,156.01
6,193.87
Total Preference Dividend Equity Dividend Corporate Dividend Tax Per share data (annualised) Earning Per Share (Rs) Equity Dividend (%) Book Value (Rs) Appropriations Transfer to Statutory Reserves
Total
CASH FLOW STATEMENT In Rs. Cr.
ICICI Bank Cash Flow Mar '05
Mar '06
Mar '07
Mar '08
Mar '09
2527.2
3096.61
3648.04
5056.1
5116.97
Net Profit Before Tax 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
R.D. Engineering College
14 7
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
UNITECH BALANCE SHEET Top of Form Bottom of Form
Unitech In Rs. Cr.
Balance Sheet Mar '04
Mar '05
Mar '06
Mar '07
Mar '08
Sources Of Funds
R.D. Engineering College
14 8
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
138.2
161.42
212.05
998.66
1,819.14
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
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
Reserves Revaluation Reserves
Application Of Funds
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
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
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
0
0
0
0
0
282.33
497.73
911.3
4,766.06
10,261.35
59.87
376.88
434.87
1,640.51
2,325.69
120.67
139.27
179.81
14.3
13.21
Deffered Credit
Miscellaneous Expenses Total Assets
Contingent Liabilities Book Value (Rs)
R.D. Engineering College
14 9
PROFIT AND LOSS In Rs. Cr.
Unitech Profit & Loss account Mar '04
Mar '05
Mar '06
Mar '07
Mar '08
373.95
509.33
653.13
2,441.74
2,486.79
0
0
0
0
0
Income Sales Turnover Excise Duty 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
387.41
529.84
679.03
2,598.69
2,950.04
27.41
58.33
65.45
80.53
26.46
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
0
0
0
0
0
355.68
462.4
530.67
1,053.74
1,182.54
Total Expenses 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
Total Income Expenditure Raw Materials Power & Fuel Cost
Preoperative Exp Capitalised
R.D. Engineering College
15 0
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
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
120.67
139.27
179.81
14.3
13.21
Per share data (annualised)
Book Value (Rs)
R.D. Engineering College
15 1
CASH FLOW STATEMENT In Rs Cr.
Unitech 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
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 Opening Cash & Cash Equivalents
34.23
110.92
-34.26
635.19
-424.64
49.73
83.96
194.89
160.63
795.82
Closing Cash & Cash Equivalents
83.96
194.89
160.63
795.82
371.18
Investing Activities
R.D. Engineering College
15 2
BIBLIOGRAPHY The books referred for the project work are:
Books •
Agarwal J.D., “Securities Analysis & Portfolio Management”
•
Agarwal J.D., “Advance Financials Risk Analysis”
•
Agarwal, J.D., “Readings for Financial Management”; IIF Publication.
•
Brigham & Erhardt’s “Corporate Finance”, Thomson Publishers Websites
•
www.economictimes.com
•
www.fmc.gov.in
•
www.rbi.gov.in
•
www.sebi.gov.in
•
www.moneycontrol.com
•
www.nseindia.com
•
www.bseindia.com
•
www.yahoofinance.com
R.D. Engineering College
15 3