CONTENTS

CHAPTER - 1

➢ Introduction
➢ Objectives of the study
➢ Scope of the Study
➢ Need for the study
➢ Methodology of the study
➢ Limitations of the study

CHAPTER – 2

➢ Industry Profile
➢ Company Profile

CHAPTER – 3

➢ Theoretical Frame Work

CHAPTER – 4

➢ Data Analysis & Interpretation

CHAPTER – 5

➢ Findings ,Suggestions & Conclusion

➢ Bibliography
 CHAPTER – 1

INTRODUCTION
 INTRODUCTION

FINANCIAL MANAGEMENT

Financial management emerged as a distinct field to study at the turn of 20 th century.

The management of the finances of a business/organization in order to achieve financial
objectives, by taking a commercial business as the most common organizational structure.

• Create wealth for the business

• General cash &
• Provide an adequate return on investment bearing in mind the risks that the
business is taking & the resources invested.
Financial management in the small firm is characterized, in many different cases, by
the need to confront a somewhat different set of problems & opportunities than those
confronted by a large corporation.

The evolution of the financial management may be divided into three broad phases.

➢ The traditional phase

➢ The transmit phase
➢ The Modern Phase

DEFINATION OF FINANCE:
Finance may be defined as the Art & Science of Managing Money. The Major areas of
finance are
1. Financial Services
2. Managerial Finance / Corporate Finance /Financial Management
Financial Services is concerned with the design and delivery of advice and financial
products to individuals, Business and Governments within the areas of Banking and related
institutions, personal Financial planning, investments, Real-estate, Insurance and so on.
FINANCIAL MANAGEMENT DEFINATION:
Financial management is concerned with the duties of the financial managers in the
Business, Namely, Financial and Non Financial, Private and public, Large and Small, profit-
Seeking and Non Profit.
 OBJECTIVES OF THE STUDY

❖ To study the nature and structure of the capital market in India

❖ To know the functioning of Kotak Securities.

❖ To evaluate the equity analysis.

❖ To provide the way of the approach for the investor to invest wisely in the
market..Analyze the impact of qualitative factors on industry’s and companies
prospects

❖ Comparative analysis of Two+ tough competitors RANBAXY-Pharmacy

formulation, VSNL-Telecommunications. Suggesting as to which company’s
shares would be best for an investor to invest.
 SCOPE OF STUDY

Investors can assess the company financial strength and factors that affect the company. Scope
of the study is limited we can say that 70% of the analysis is prove good and investors has the
30% on market sentiment.

❖ The scope of the study is identified after and during the study is conducted.

❖ The project is based on tools like fundamental analysis and ratio analysis. Further, the
study is based on information of last five years.

❖ The analysis is making by taking into consideration two companies. I.e. RANBAXY,
VSNL.

❖ The scope is limited to only the fundamental analysis of the chosen of the chosen
stocks.
 NEED OF THE STUDY

✓ To start any business capital plays major role.

✓ Capital can be acquired in two ways by issuing shares of by taking debt from financial
institutions of borrowing money from financial institutions.

✓ The owners of the company have to pay regular interest and principal amount at the
end.

✓ Stock is ownership in a company, with each shares of stock representing a tiny piece of
ownership the more you own, the more of the company you own.

✓ The more shares you own, the more dividends you earn when the company makes a
profit. In the financial world, ownership is called “ Equity”

✓ The purpose of during this project is mainly to know the facts that affect the company
performance.

✓ The access the future EPS of the company.

✓ To examine the internal and external factors affecting the future price of the company.

✓ The purpose includes assessing the future Market Strength of the company.

✓ The purpose also serves the investors to decide whether to invest in the company to
gain good returns.
 METHODOLOGY OF THE STUDY

Methodology adopted for this study is analytical and comparative in its nature in this
the following aspects covered. The three scripts which are selected belong to different
sectors.

Ranbaxy – Parma Formulations

VSNL – Telecommunications

As Trading in the above scripts is in large volumes in Kotak Securities they are selected.

Data Collection:

They require data for the study have been collected from the secondary Sources which
are the publications and performance reports of Kotak Securities, The lectures by the super
dents. The primary data collected by interviewing with the middle level managers and persons
concern to market operations of Kotak Securities.

Period Study:

The main aim of the study is to examine the changes in the trading and
dematerialization of securities in Kotak Securities. The study of this project work is confine
to 2 months, Hence in the first phase. The primary and secondary information was gathered
in the second phase, the analysis of the data has been carried out.
 LIMITATIONS OF THE STUDY

The following are the identified limitations of the study. The time period spend on the
project is not sufficient to obtain total information about the topic. The accuracy and
transparency have found at low degree in the working operations of the exchange.

• This study has been conducted purely to understand EQUITY ANALYSIS for
investors.

• This study is restricted to two companies based on fundamental analysis.

• This study is limited to the companies having equities.

• Detailed study of the topic was not possible due to limited size of the project.

• There was constraint with regard to time allocation for the research study .i.e.; for the
period of 45 days.

• Suggestions and conclusions are based on the limited data of 5 years.

 CHAPTER –2

INDUSTRY PROFILE
AN OVER VIEW OF STORK MARKET

What care should one take while investing?

Before making any investment, one must ensure to:

1. Obtain written documents explaining the investment

2. Read and understand such documents

3. Verify the legitimacy of the investment

4. Find out the costs and benefits associated with the investment

5. Assess the risk-return profile of the investment

6. Know the liquidity and safety aspects of the investment

7. Ascertain if it is appropriate for your specific goals

8. Compare these details with other investment opportunities available

9. Examine if it fits in with other investments you are considering or you

have already made

10. Deal only through an authorized intermediary

11. Seek all clarifications about the intermediary and the investment

12. Explore the options available to you if something were to go wrong,

and then, if satisfied, make the investment.

Various options available for investment

One may invest in:

Physical assets like real estate, gold/jeweler, commodities etc.

and/or

Financial assets such as fixed deposits with banks, small saving

Instruments with post offices, insurance/provident/pension fund etc.

Or securities

market related instruments like shares, bonds, debentures etc

Capital Markets:

Markets where capital, such as stocks and bonds, are traded. Companies to raise additional
funds use capital markets. The capital market (securities markets) is the market for securities,
where companies and the government can raise long-term funds. The capital market includes
the stock market and the bond market the capital markets consist of the primary market, where
new issues are distributed to investors, and the secondary market, where existing securities are
traded.

Primary Market:

The market in which investors have the first opportunity to buy a newly issued security.
The primary market is that part of the capital markets that deals with the issuance of new
securities. Companies, governments or public sector institutions can obtain funding through
the sale of a new stock or bond issue. This is typically done through a syndicate of securities
dealers. The process of selling new issues to investors is called underwriting. In the case of a
new stock issue, this sale is called an initial public offering (IPO). Dealers earn a commission
that is built.

Face Value of a share/debenture:

 The nominal or stated amount (in Rs.) assigned to a security by the issuer.

For shares, it is the original cost of the stock shown on the certificate; for

bonds, it is the amount paid to the holder at maturity. Also known as par

value or simply par. For an equity share, the face value is usually a very

small amount (Rs. 5, Rs. 10) and does not have much bearing on the price

of the share, which may quote higher in the market, at Rs. 100 or Rs. 1000?

or any other price. For a debt security, face value is the amount repaid to

the investor when the bond matures (usually, Government securities and

corporate bonds have a face value of Rs. 100). The price at which the

security trades depends on the fluctuations in the interest rates in the

economy.

Term Premium and Discount in a Security Market:

Are generally issued in denominations of 5, 10 or 100. This is

known as the Face Value or Par Value of the security as discussed earlier.

When a security is sold above its face value, it is said to be issued at a

Premium and if it is sold at less than its face value, then it is said to be

issued at a Discount.

Issue of Shares:

Most companies are usually started privately by their promoter(s). However, the
promoters’ capital and the borrowings from banks and financial

institutions may not be sufficient for setting up or running the business over

a long term. So companies invite the public to contribute towards the equity

and issue shares to individual investors. The way to invite share capital from

the public is through a ‘Public Issue’. Simply stated, a public issue is an offer

to the public to subscribe to the share capital of a company. Once this is

done, the company allots shares to the applicants as per the prescribed
rules and regulations laid down by SEBI.

Different kinds of issues:

Primarily, issues can be classified as a Public, Rights or Preferential issues (also known
as private placements). While public and rights issues involve a detailed procedure, private
placements or preferential issues are relatively simpler. The classification of issues is illustrated
below: time to the public. This paves way for listing and trading of the issuer’s securities.

A follow on public offering (Further Issue): is when an already listed

makes either a fresh issue of securities to the public or an offer for

sale to the public, through an offer document.

Rights Issue :is when a listed company which proposes to issue fresh

securities to its existing shareholders as on a record date. The rights are

normally offered in a particular ratio to the number of securities held prior to

the issue. This route is best suited for companies who would like to raise

capital without diluting stake of its existing shareholders.

A Preferential issue: is an issue of shares or of convertible securities by

listed companies to a select group of persons under Section 81 of the

Companies Act, 1956 which is neither a rights issue nor a public issue. This

is a faster way for a company to raise equity capital? The issuer company

has to comply with the Companies Act and the requirements contained in

Initial Public Offering (IPO): is when an unlisted company makes either a

fresh issue of securities or an offer for sale of its existing securities or both

for the first

Issue price:

The price at which a company's shares are offered initially in the primary
market is called as the Issue price. When they begin to be traded, the

market price may be above or below the issue price.

Market Capitalization:

The market value of a quoted company, which is calculated by multiplying

Its current share price (market price) by the number of shares in issue is

called as market capitalization. E.g. Company A has 120 million shares in

issue. The current market price is Rs. 100. The market capitalization of

Company A is Rs. 12011 million.

Issues

Preferential

Rights

Initial Public Offering

Public

Further Public Offering

Fresh Issue

Offer for Sale

Fresh Issue

Offer for Sale

Difference between public issue and private placement:

When an issue is not made to only a select set of people but is open to the

general public and any other investor at large, it is a public issue. But if the

Issue is made to a select set of people, it is called private placement. As per

Companies Act, 1956, an issue becomes public if it results in allotment to 50

persons or more. This means an issue can be privately placed where an

allotment is made to less than 50 persons.

Initial Public Offer (IPO):

An Initial Public Offer (IPO) is the selling of securities to the public in the

primary market. It is when an unlisted company makes either a fresh issue

of securities or an offer for sale of its existing securities or both for the first

time to the public. This paves way for listing and trading of the issuer’s

securities. The sale of securities can be either through book building or

through normal public issue.

Price of an issue

primary market ushered in an era of free pricing in 1992. Following this, the guidelines have
provided that the issuer in consultation with Merchant Banker shall decide the price. There is
no price formula stipulated by SEBI. SEBI does not play any role in price fixation. The
company and
merchant banker are however required to give full disclosures of the
parameters which they had considered while deciding the issue price. There
are two types of issues, one where company and Lead Merchant Banker fix a
price (called fixed price) and other, where the company and the Lead
Managers (LM) stipulate a floor price or a price band and leave it to market

forces to determine the final price (price discovery through book building

Process).

‘Price discovery through Book Building Process’:

Book Building is basically a process used in IPOs for efficient price discovery. It is a
mechanism where, during the period for which the IPO is open, bids are collected from
investors at various prices, which are above or equal to

the floor price. The offer price is determined after the bid closing date.

Book building and offer of shares through normal public issue:

 Price at which securities will be allotted is not known in case of offer of

shares through Book Building while in case of offer of shares through normal

public issue, price is known in advance to investor. Under Book Building,

investors bid for shares at the floor price or above and after the closure of

the book building process the price is determined for allotment of shares.

In case of Book Building, the demand can be known everyday as the book

is being built. But in case of the public issue the demand is known at the

close of the issue.

Cut-Off Price:

In a Book building issue, the issuer is required to indicate either the price

band or a floor price in the prospectus. The actual discovered issue price can

be any price in the price band or any price above the floor price. This issue

price is called “Cut-Off Price”. The issuer and lead manager decides this after

considering the book and the investors’ appetite for the stock.

Price Band in a book built IPO:

The prospectus may contain either the floor price for the securities or a price

band within which the investors can bid. The spread between the floor and

the cap of the price band shall not be more than 20%. In other words, it

means that the cap should not be more than 120% of the floor price. The

price band can have a revision and such a revision in the price band shall be

widely disseminated by informing the stock exchanges, by issuing a press

release and also indicating the change on the relevant website and the

terminals of the trading members participating in the book building process.

In case the price band is revised, the bidding period shall be extended for a

further period of three days, subject to the total bidding period not

exceeding ten days.

Price Band:

It may be understood that the regulatory mechanism does not play a role in

Setting the price for issues. It is up to the company to decide on the price or

the price band, in consultation with Merchant Bankers

‘Listing Agreement’:

At the time of listing securities of a company on a stock exchange, the

company is required to enter into a listing agreement with the exchange.

The listing agreement specifies the terms and conditions of listing and the

disclosures that shall be made by a company on a continuous basis to the

exchange.

‘Delisting of securities’ :

The term ‘Delisting of securities’ means permanent removal of securities of a listed

company from a stock exchange. As a consequence of delisting, the

securities of that company would no longer be traded at that stock

exchange

Secondary market:

The secondary market is the financial market for trading of securities that have already
been issued in an initial private or public offering. Alternatively, secondary market can refer to
the market for any kind of used goods. The market that exists in a new security just after the
new issue is often referred to as the aftermarket. Once a newly issued stock is listed on a stock
exchange, investors and speculators can easily trade on the exchange, as market makers provide
bids and offers in the new stock.

Role of the Secondary Market:

For the general investor, the secondary market provides an efficient

platform for trading of his securities. For the management of the company,

Secondary equity markets serve as a monitoring and control conduit—by

facilitating value-enhancing control activities, enabling implementation of

incentive-based management contracts, and aggregating information (via

price discovery) that guides management decisions.

Primary Market (vs) Secondary Market:

In the primary market, securities are offered to public for subscription for

the purpose of raising capital or fund. Secondary market is an equity trading

venue in which already existing/pre-issued securities are traded among

investors. Secondary market could be either auction or dealer market. While

stock exchange is the part of an auction market, Over-the-Counter (OTC) is

a part of the dealer market.

Stock exchange:

A Stock Exchange is a place that provides facilities to stockbrokers to trade company stocks
and other securities. A stock may be bought or sold only if it is listed on an exchange. Thus it
is the meeting place of the stock buyers and sellers. India's premier Stock Exchanges are the
Bombay Stock Exchange and the National Stock Exchange.

Role of a Stock Exchange in buying and selling shares:

The stock exchanges in India, under the overall supervision of the regulatory

authority, the Securities and Exchange Board of India (SEBI), provide a

trading platform, where buyers and sellers can meet to transact in

Securities. The trading platform provided by NSE is an electronic one and

there is no need for buyers and sellers to meet at a physical location to

trade. They can trade through the computerized trading screens available

with the NSE trading members or the internet based trading facility provided

by the trading members of NSE

Contract Note:

Contract Note is a confirmation of trades done on a particular day on behalf

Of the client by a trading member. It imposes a legally enforceable

relationship between the client and the trading member with respect to

Purchase/saleand settlement of trades. It also helps to settle

disputes/claims between the investor and the trading member. It is a

prerequisite for filing a complaint or arbitration proceeding against the

trading member in case of a dispute. A valid contract note should be in the

prescribed form, contain the details of trades, stamped with requisite value

and duly signed by the authorized signatory. Contract notes are kept in

duplicate, the trading member and the client should keep one copy each.

After verifying the details contained therein, the client keeps one copy and returns the second
copy to the trading member duly acknowledged by him.

Products in the Secondary Markets:

Following are the main financial products/instruments dealt in the Secondary

market which may be divided broadly into Shares and Bonds:

Types of Shares:

Equity Shares: An equity share, commonly referred to as ordinary

share, represents the form of fractional ownership in a business

venture.

Rights Issue/ Rights Shares: The issue of new securities to existing

Shareholders at a ratio to those already held, at a price. For e.g. a

2:3 rights issue at Rs. 125, would entitle a shareholder to receive 2

shares for every 3 shares held at a price of Rs. 125 per share.

Bonus Shares: Shares issued by the companies to their shareholders

free of cost based on the number of shares the shareholder owns.

Preference shares: Owners of these kind of shares are entitled to a

fixed dividend or dividend calculated at a fixed rate to be paid

regularly before dividend can be paid in respect of equity share. They

also enjoy priority over the equity shareholders in payment of

surplus. But in the event of liquidation, their claims rank below the

claims of the company’s creditors, bondholders/debenture holders.

Cumulative Preference Shares: A type of preference shares on which

dividend accumulates if remained unpaid. All arrears of preference

dividends have to be paid out before paying dividend on equity

shares.

Cumulative Convertible Preference Shares: A type of preference

shares where the dividend payable on the same accumulates, if not

paid. After a specified date, these shares will be converted into equity capital of the company.

Bond: is a negotiable certificate evidencing indebtedness. It is normally

unsecured. A debt security is generally issued by a company, municipality or

government agency. A bond investor lends money to the issuer and in

exchange, the issuer promises to repay the loan amount on a specified

maturity date. The issuer usually pays the bond holder periodic interest

payments over the life of the loan. The various types of Bonds are as

follows:

Zero Coupon Bond: Bond issued at a discount and repaid at a face

value. No periodic interest is paid. The difference between the issues

price and redemption price represents the return to the holder. The

buyer of these bonds receives only one payment, at the maturity of

The bond.

Convertible Bond: A bond giving the investor the option to convert

the bond into equity at a fixed conversion price.

Treasury Bills: Short-term (up to one year) bearer discount security

Issued by government as a means of financing their cash

Requirements

Bombay Stock Exchange (BSE):-

The Bombay Stock Exchange Limited; popularly called The Bombay Stock Exchange, or
BSE) is located at Dalal Street, Mumbai. Established in 1875, it is the oldest stock exchange in
Asia. There are around 6,500 Indian companies listed with the stock exchange, and has a
significant trading volume. As of July 2016, the market capitalization of the BSE was about
Rs. 45 trillion (US $ 466 billion). The BSE SENSEX (Sensitive index), also called the BSE 30,
is a widely used market index in India and Asia. As of 2016, it is among the 5 biggest stock
exchanges in the world in terms of transactions volume. Along with the NSE, the companies
listed on the BSE have a combined market capitalization of US$ 195.5 billion.

Hours of operation

Session Timing

Beginning of the Day Session 8:00 - 9:00

pre-open trading session 9:00 - 9:15

Trading Session 9:15 - 15:30

Position Transfer Session 15:30 - 15:50

Closing Session 15:50 - 16:05

Option Exercise Session 16:05 - 16:35

Margin Session 16:35 - 16:50

Query Session 16:50 - 17:35

End of Day Session 17:30

The hours of operation for the BSE quoted above are stated in terms the local time (i.e.
GMT +5:30) in Mumbai, India. BSE's normal trading sessions are on all days of the week
except Saturdays, Sundays and holidays declared by the Exchange in advance.
Awards

• The World Council of Corporate Governance has awarded the Golden Peacock
Global CSR Award for BSE's initiatives in Corporate Social Responsibility
(CSR).

• The Annual Reports and Accounts of BSE for the year ended March 31, 2015
and March 31, 2016 have been awarded the ICAI awards for excellence in
financial reporting.

• The Human Resource Management at BSE has won the Asia - Pacific HRM
awards for its efforts in employer branding through talent management at work,
health management at work and excellence in HR through technology

National Stock Exchange (NSE)

The National Stock Exchange (NSE) is India's leading stock exchange covering various cities
and towns across the country. NSE was set up by leading institutions to provide a modern, fully
automated screen-based trading system with national reach. The Exchange has brought about
unparalleled transparency, speed & efficiency, safety and market integrity. It has set up
facilities that serve as a model for the securities industry in terms of systems, practices and
procedures.

NSE has played a catalytic role in reforming the Indian securities market in terms of
microstructure, market practices and trading volumes. The market today uses state-of-art
information technology to provide an efficient and transparent trading, clearing and settlement
mechanism, and has witnessed several innovations in products & services viz. demutualization
of stock exchange governance, screen based trading, compression of settlement cycles,
dematerialization and electronic transfer of securities, securities lending and borrowing,
professionalization of trading members, fine-tuned risk management systems, emergence of
clearing corporations to assume counter party risks, market of debt and derivative instruments
and intensive use of information technology.

Markets

Currently, NSE has the following major segments of the capital market:

• Equity

• Futures and Options

• Retail Debt Market

• Wholesale Debt Market

• Currency futures

• Mutual Fund

• Stocks lending and borrowing

August 2017 Currency derivatives were introduced in India with the launch of Currency
Futures in USD INR by NSE. Currently it has also launched currency futures in EURO,
POUND & YEN. Interest Rate Futures was introduced for the first time in India by NSE on 31
August 2018, exactly after one year of the launch of Currency Futures.

NSE became the first stock exchange to get approval for Interest rate futures as
recommended by SEBI-RBI committee, on 31 August 2018, a futures contract based on 7% 10
Year GOI bond (NOTIONAL) was launched with quarterly maturities.

Hours

NSE's normal trading sessions are conducted from 9:15 am India Time to 3:30 pm India
Time on all days of the week except Saturdays, Sundays and Official Holidays declared by the
Exchange (or by the Government of India) in advance. The exchange, in association with BSE
(Bombay Stock Exchange Ltd.), is thinking of revising its timings from 9.00 am India Time to
5.00 pm India Time.

There were System Testing going on and opinions, suggestions or feedback on the New
Proposed Timings are being invited from the brokers across India. And finally on 18 November
2018 regulator decided to drop their ambitious goal of longest Asia Trading Hours due to strong
opposition from its members.
 On 16 December 2018, NSE announced that it would advance the market opening to
9:00 am from 18 December 2018. So NSE trading hours will be from 9.00 am till 3:30 pm
India Time.

However, on 17 December 2018, after strong protests from brokers, the Exchange
decided to postpone the change in trading hours till 4 Jan 2019.

NSE new market timing from 4 Jan 2019 is 9:00 am till 3:30 pm India Time.

Certifications:

NSE also conducts online examination and awards certification, under its programmers
of NSE's Certification in Financial Markets (NCFM). Currently, certifications are available in
19 modules, covering different sectors of financial and capital markets. Branches of the NSE
are located throughout India. NSE, in collaboration with reputed colleges and institutes in
India, has been offering a short-term course called NSE Certified Capital Market Professional
(NCCMP) since August 2018, in the campuses of the respective colleges/ institut

REGULATORY AUTHORITY OF CAPITAL MARKETS

Regulates the Securities Market:

The responsibility for regulating the securities market is shared by

Department of Economic Affairs (DEA), Department of Company Affairs

(DCA), Reserve Bank of India (RBI) and Securities and Exchange Board of

India (SEBI).

Securities and Exchange Board of India - SEBI

The regulatory body for the investment market in India. The purpose of this board is to maintain
stable and efficient markets by creating and enforcing regulations in the market place.

Securities and Exchange Board of India is a board (corporate body) appointed by the
Government of India in 1992 with its head office at Mumbai.

The basic objectives of the Board were identified as:

• To protect the interests of investors in securities;

• To promote the development of Securities Market;

Its main functions are providing for:

• Regulating the business in stock exchanges and any other securities markets
 • Registering and regulating the working of stock brokers, sub-brokers, share transfer
agents, bankers to an issue, trustees of trust deeds, registrars to an issue, merchant
bankers, underwriters, portfolio managers, investment advisers and such other
intermediaries who may be associated with securities markets in any manner.

• Registering and regulating the working of the depositories, participants, custodians of

securities, foreign institutional investors, credit rating agencies and such other
intermediaries as the Board may, by notification, specify in this behalf.

• Registering and regulating the working of venture capital funds and collective
investment schemes including mutual funds;

• Promoting and regulating self-regulatory organizations;

• Prohibiting fraudulent and unfair trade practices relating to securities markets;

• Promoting investors' education and training of intermediaries of securities markets;

STOCK MARKET TRADING HISTORY OF INDIA:

Indian stock market marks to be one of the oldest stock market in Asia. It dates back to the
close of 18th century when the East India Company used to transact loan securities. In the
1830s, trading on corporate stocks and shares in Bank and Cotton presses took place in
Bombay. Though the trading was broad but the brokers were hardly half dozen during 1840

In 1860, the exchange flourished with 60 brokers. In fact the 'Share Mania' in India began
with the American Civil War broke and the cotton supply from the US to Europe stopped.
Further the brokers increased to 250.

At the end of the war in 1874, the market found a place in a street (now called Dalal Street).
In 1887, "Native Share and Stock Brokers' Association" was established. In 1895, the exchange
acquired a premise in the street, which was inaugurated in 1899.

In the earlier days, stockbrokers kept scouting for 'natural' sites to conduct their trading
activities, shifting from one set of Banyan trees to another. As the number of brokers kept
increasing and the streets kept overflowing, they simply had no choice but to relocate from one
place to another.

Finally in 1854, trading in India found a permanent address, Dalal Street, now synonymous
with the oldest stock Exchange in Asia, The Bombay Stock Exchange. With a heritage that
goes back to over 130 years, BSE was the first stock exchange in the country to be granted
permanent recognition under the Securities Contract Regulation Act, 1956.
 The exchange has played a pioneering role in the development of the Indian Securities
Market - one of the oldest in the world. After India gained independence, the BSE formulated
a comprehensive set of guidelines adopted by the Indian Capital markets. Even today, the BSE
Sensex remains one of the parameters against which the robustness of the Indian Economy and
finance is measured.

The trading scenario in India then underwent a paradigm shift in 1993, when NSE or
National Stock Exchange was recognized as a Stock Exchange. Within just a few years, trading
on both the exchanges shifted from an open outcry system to an automated trading
environment.

Today, the Indian Securities market successfully keeps pace with its global counterparts
through the use of modern day technology.

DEPOSITORY:

A depository is like a bank wherein the deposits are securities (viz. shares,

debentures, bonds, government securities, units etc.) in electronic form.

MARKET PARTICIPANTS:

Many years ago, worldwide, buyers and sellers were individual investors, such as wealthy
businessmen, with long family histories (and emotional ties) to particular corporations. Over
time, markets have become more "institutionalized"; buyers and sellers are largely institutions
(e.g., pension funds, insurance companies, mutual funds, hedge funds, investor groups, and
banks). The rise of the institutional investor has brought with it some improvements in market
operations (but not necessarily in the interest of the small investor or even of the naïve
institutions, of which there are many). Thus, the government was responsible for "fixed" (and
exorbitant) fees being markedly reduced for the 'small' investor, but only after the large
institutions had managed to break the brokers' solid front on fees (they then went to 'negotiated'
fees, but only for large institutions).

However, corporate governance (at least in the West) has been greatly affected by the rise
of institutional 'owners.'

DEMATERIALIZATION:

Dematerialization is the process by which physical certificates of an investor

are converted to an equivalent number of securities in electronic form and

Credited to the investor’s account with his Depository Participant (DP).

SCREEN BASED TRADING:

The trading on stock exchanges in India used to take place through open Outcry with out
use of information technology for immediate matching or Recording of trades. This was time
consuming and inefficient. This imposed Limits on trading volumes and efficiency. In order to
provide efficiency, Liquidity and transparency, NSE introduced a nationwide, on-line, fully
automated screen based trading system (SBTS) where a member can punch into the computer
the quantities of a security and the price at which he Would like to transact, and the transaction
is executed as soon as a Matching sale or buy order from a counter party is found.

NEAT:

NSE is the first exchange in the world to use satellite communication technology for
trading. Its trading system, called National Exchange for Automated Trading (NEAT), is a state
of-the-art client server based application. At the server end all trading information is stored in
an in memory database to achieve minimum response time and maximum system availability
for users. It has uptime record of 99.7%. For all trades entered into NEAT system, there is
uniform response time of less than one second.

SECURITIES MARKET:

Securities market is the market for equity, debt, and derivatives. The debt market, in turn
may be divided into three parts, viz. The government securities market, the corporate debt
market, and the money market. The derivatives market, in turn, may be divided into two parts,
viz.the options market and the futures market.

‘SECURITIES’:

The definition of ‘Securities’ as per the Securities Contracts Regulation Act

(SCRA), 1956, includes instruments such as shares, bonds, scrip’s, stocks or

Other marketable securities of similar nature in or of any incorporate

Company or body corporate, government securities, derivatives of securities,

Units of collective investment scheme, interest and rights in securities,

Security receipt or any other instruments so declared by the Central

Government.

EQUITIES:

Equity capital represents ownership capital. Equity shareholders collectively own the
company. They bear the risk and enjoy the rewards of ownership

GOVERNMENT SECURITIES MARKET:

The government securities (G-sec) market is the largest segment of the long-term debt
market in India, accounting for nearly two-third of the issues in the primary and more than
four-fifths of the turnover in the secondary market.

CORPORATE DEBT MARKET:

Historically, the market for corporate debt instruments remained small and under-developed
due to the following reasons

• The block of long term the financial institutions in the form of term loans provided debt
required by the corporate.

• There were severe restrictions on the design of debt instruments as well as the interest
rates payable on them

• The principal buyers of debentures issued by companies were the investment institutions.
Typically, debenture was privately placed at a discount with them. The investment
institutions bought these debentures with a view to keeping them till maturity.

MONEY MARKET:

Money market is the market for short-term funds. It comprises the call and notice
money market, redo market, and the market for debt instruments such as treasury bills that have
an original maturity of less than one year.

CALL MARKET:

Call and notice money is the market for short term funds up to 14 days. In this market,
banks and primary dealers can lend as well as borrow while a select list of participants can only
participate as lenders. call money transactions are unsecured over – the- counter transactions
which are settled the same day. The call market is the most active segment of the debt market,
with an average daily volume of about Rs.60000 crore.

REPO MARKET:

In a repo transaction, a holder of securities sells them with an agreement to repurchase

the same after a certain period at a predetermined price which is higher than the sale price. In
essence it means that the two parties exchange securities and the cash with a simultaneous
agreement to reverse the transaction after a given period. Thus a repo represents a collateralized
short –term lending transaction.

TREASURY BILLS:

Treasury bills are short-term debt instruments of the central government. Presently 91-
day and 364-daytreasury bill are issued. Treasury bills are sold through an auction process
according to a fixed auction calendar announced by RBI.Banks and primary dealers are the
major bidders in the competitive auction process. Provident funds and other investors can make
non-competitive bids.RBI makes allocation to non-competitive bidders at a weighted average
yield arrived at on the basis of the yields quoted by accepted competitive bids.

COMMERCIAL PAPER:

Commercial paper (CP) is an instrument of short –term unsecured borrowing issued by

non-banking companies. CP’s are issued at a discount and reduced at par.CPs are meant
primarily to finance working capital needs of corporate and hence form part of the working
capital limits set by banks.

CERTIFICATED OF DEPOSITS:

Certificates of deposits (CPs) represent short-term deposits which are transferable from
one party to another. Banks and financial institutions are the major issuers of CDs. The
principal investors in CDs are banks, financial institutions, corporate, and mutual funds. CDs
are issued in bearer or registered form. They generally have a maturity of3 month to 1 year,
like CPs CDs are issued at a discount and redeemed at par. CDs are issued I physical form and
are freely transferable after an initial lock – in period.

FUTURES:
 Futures contract is an agreement between two parties to exchange an asset for cash at a
predetermined future date for a price that is specified today. The parties, which aggress to
purchase the asset, is said to have a long position and the party, which agrees to sell the asset,
is said to have a short position.

OPTIONS:

An option gives its owner the right to buy or sell an underlying asset on or before a
given date at a predetermined price. Now that options represent a special kind of financial
contract under which the option holder enjoys the right, but has no obligation, to do something.

PRESENT SCENARIO OF STOCK MARKET IN INDIA:

Markets in India are not the only ones to have crashed over the last fortnight. The
emerging markets of Russia, China, Brazil and Indonesia have also declined .

An FII is an institution established or incorporated outside India that invests in

securities in the country. A sub-account could include foreign corporate entities; institutions,
individuals, funds or portfolios established outside the country (whether incorporated or not)
on whose behalf investments are made by an FII.

In recent years, share values in India have been influenced to a considerable extent by
international brokerages. Currently, the country’s regulatory authority, the Securities and
Exchange Board of India (SEBI), has registered over 700 foreign institutional investors (FIIs).
These FIIs operate roughly 2,000 sub-accounts in India's stock exchanges.

While FIIs have been allowed to invest in Indian securities from September 1992
onwards -- as the country began opening up an economy closed for decades -- the regulations
governing the activities of FIIs were notified by the SEBI more than three years that is, in
November 1995.

Given the presence of foreign institutional investors in Sensex companies and their
active trading behavior, their role in determining share price movements must be considerable.
Indian stock markets are known to be narrow and shallow in the sense that there are few
companies whose shares are actively traded. Thus, although there are more than 6000
companies listed on the stock exchange, the BSE Sensex incorporates just 30 companies,
trading in whose shares is seen as indicative of market activity. This shallowness would also
mean that the effects of FII activity would be exaggerated by the influence their behavior has
on other retail investors, who, in herd-like fashion tend to follow the FIIs when making their
investment decisions.

REASONS FOR A HIGH DEGREE OF VOLATILITY:

• Continuing the southward journey, the Sensex and the Nifty indices fell further into the
sea of red.

• Trading sentiment was affected after foreign funds off-loaded heavily in global
markets, amid reports that these funds were withdrawing more than $5 billion from
the emerging markets.

• The opening plunge in both the indices was due to weak global markets losing ground.
The call on the market these days is a call on global investor sentiment, which in turn
is linked, to concerns on interest rates in the US.

• As the global investor sentiment remained weak, the domestic markets continue on their
downward trend.

• Shares in almost all the segments dipped to fresh lows as retail investors resorted to
panic sell in

Despite the sudden collapse in share values, not everybody is pessimistic. India remains a
growth story, they say, because its economy is growing every year by 7-8 percent, inflation is
under control at 3-4 percent, foreign currency reserves are buoyant at over 160 billion US
dollars and certain sectors such as information technology, automobiles and pharmaceuticals
are booming like never before.

"Only those investors who had parked their funds in the stock markets over the last year in
the hope of reaping windfall short-term gains are today deeply disappointed, not long-term
investors," most small and middle-class investors in the country are apprehensive of investing
hard-earned savings in equity shares or, even, mutual funds, preferring instead bank deposits
that are considered 'safer' even if returns are lower. According to the RBI, nearly forty percent
of the country's total household savings are kept in banks, against less than two percent in
stocks and shares

Debt markets call for a fundamentally different approach to investment as opposed to

equities. Pricing of debt instruments is direct function of the prevailing interest rates and the
quality of the instrument issued depends on the credentials of the issuer. To ensure that the
secondary market does not implicitly impart to junk bonds, investors must be educated to the
risks and rewards of debt.

A volume driven market, like in the case of bond, can succeed in the long-run only when
there are sufficient market makers. Market makers will in turn drive larger volumes and thus
the cycle of liquidity will set the ball rolling initially to ensure greater and indeed wider
participation. However, getting them to trade on a single unified platform is something that
only a regulator like SEBI can accomplish.

As things currently stand, India’s secondary debt market can almost be likened to
Aladdin’s lamp minus the genie nothing however, can take away its potential and the role it
deserves to play in the context of India’s emerging macroeconomic situation. Active trading
in debt instruments is an indispensable element of an efficient financial system and a critical
determinant of capital market stability.

Date Sensex closing Nifty closing

December 3, 2019 12,624.58 4,448.12

December 5, 2019 12,856.08 4,522.51

December 13, 2019 13,384.08 4,721.82

December 17, 2019 13,607.04 4,803.3

December 20, 2019 13,897.41 4,923.47

December 25, 2019 14,217.77 5,030.3

December 26, 2019 14,228.88 5,043.03

December 29, 2019 14,078.21 5,010.44

January 3, 2011 13,771.23 4,908.11

January 4, 2011 13,796.16 4,990.55

January 6, 2011 13,929.33 4,973.65

January 7, 2011 14,303.41 5,087.8

January 9, 2011 14,418.60 5,143.81

January 10, 2011 14,453.72 5,164.58

January 11, 2011 14,362.26 5,126.07

January 13, 2011 14,218.11 5,076.21

 CHAPTER -3

COMPANY PROFILE

THE KOTAK MAHINDRA GROUP:

Kotak Mahindra is one of India’s leading financial institutions offering complete

financial solutions that encompass every sphere of life.

From commercial banking to stock broking, to mutual funds, to life insurance, to investment
banking, the group caters to the financial needs of individuals and Corporate.

The group has a net worth of around Rs. 3100 crore, employs around 9,600 people in
its various business and has distribution network of branches, franchisees, representative
offices in New York, London, Dubai and Mauritius. The Group services around 2.2 million
customer accounts.

ABOUT US:-

Kotak Securities Ltd.100% subsidiary of Kotak Mahindra Bank is one of the oldest and
largest broking firms in the Industry.

Out offering include stock broking through the branch and Internet, Investments in IPO,
Mutual funds and Portfolio management service.

About the Symbol:

The symbol of the infinite Ka reflects our global Indian personality. The Ka is uniquely
Indian while its curve forms the infinite sign, which is universal. One of the basic tenets of
economists is that man’s needs are unlimited. The Infinite Ka symbolizes that we have infinite
number of ways to meet those needs.

Our Accolades include:

• UTI MF- CNBC TV18 Financial Advisor Awards- Best Performing Equity Broker
(National) for the year 2018.

• Finance Asia Award(2018)- Best Brokerage Firm In India

• Best Brokerage Firm in India by Asia money in 2017, 2016 & 2015.

• Best Performing Equity Broker in India-CNBC Financial Advisor Awards 2017

• Avaya Customer Responsiveness Awards (2016 & 2015) in Financial Services Sector.
The Leading Equity House in India in Thomson Excel Surveys Awards for the year
2016

• Euro money Award (2016 & 2017) - Best Provider of Portfolio Management: Equities.

• Euro money Award (2016)-Best Equities House In India

• Finance Asia Award (2016)-Best Broker In India

• Finance Asia Award (2015)-India’s best Equity House

 • Prime Ranking Award (2014-04)-Largest Distributor of IPO’s

We have been the first in providing many products and services which have now
become industry standards. Some of them are:

• Facility of Margin Finance to the customers

• Investing in IPO’s and Mutual Funds on the phone

• SMS alerts before execution of depository transactions.

• Mobile application to track portfolios

• Auto Invest - systematic investing plan in Equities and Mutual funds

• Provision of margin against securities automatically against shares in your DEMAT

account.

We have a full-fledged research division involved in Macro Economic studies,

Sectoral research and Company Specific Equity Research combined with a strong and
well networked sales force while helps deliver current and up to date market
information and news.

Kotak Mahindra Group

Kotak Mahindra is one of India’s leading financial organizations, offering a

wide range of financial services that encompass every sphere of life. From commercial
banking, to stock broking, to mutual funds, to life insurance, to investment banking,
the group caters to the diverse financial needs of individuals and corporate.

The group has a net worth of over Rs. 6,799 core and has a distribution network
of branches, franchisees, representative offices and satellite offices across cities and
towns in India and offices in New York, London, San Francisco, Dubai, Mauritius and
Singapore. The Group services around 6.4 million customer accounts.

In October 2016, Kotak Group acquired the 40% stake in Kotak Prime held by Ford
Credit International (FCI) and FCI acquired the stake in Ford Credit Kotak Mahindra (FCKM)
held by Kotak Group.

In May 2015, Kotak Group bought 25% stake held by Goldman Schs in Kotak Capital
and Kotak Securities.

KEY GROUP COMPANIES AND THEIR BUSINESSES:

 Kotak Mahindra Bank The Kotak Mahindra Group’s flagship company, Kotak
Mahindra Finance Ltd which was established in 1985, was converted into a bank-Kotak
Mahindra Bank Ltd in March 2014 becoming the first Indian company to convert into a Bank.
Its banking operations offer a central platform for customer relationships across the group’s
various businesses.

The bank has presence in Commercial Vehicles, Retail Finance, Corporate Banking,
Treasury and Housing Finance.

Kotak Mahindra Capital Company Limited (KMCC) is India’s premier Investment

Bank. KMCC’s core business areas include Equity Issuances, Mergers & Acquisitions,
Structured Finance and Advisory Services.

Kotak Securities Kotak Securities Ltd is one of India’s largest brokerage and securities
distribution houses. Over the years, Kotak Securities has been one of the leading investment
broking houses catering to the needs of both institutional and non-institutional investor
categories with presence all over the country through franchisees and coordinators. The
Kotak Securities Ltd.Offers both online (through www.kotaksecurities.com ) and offline
services based on well-researched expertise and financial products to non-institutional
investors.

Kotak Mahindra Prime Kotak Mahindra Prime Limited (KMP) (formerly known as
Kotak Mahindra Primus Limited) has been formed with the objective of financing the retail
and wholesale trade of passenger and multiutility vehicles in India. KMP offers customers retail
finance for both new as well as used cars and wholesale finance to dealers in the automobile
trade. KMP continues to be among the leading car finance companies in India.

Organizational Structure:

➢ Board of Directors

➢ Bank Board Meeting Procedure

➢ Subsidiaries

➢ Other Directorships

➢ Deed of Covenants

➢ Committees

➢ General Meetings
 ➢ Shareholders Information

➢ Code of Conduct under Clause 49

➢ Ratings of Kotak Products:

CRISIL FITCH ICRA

Short Term

Certificate of

Deposits Senior P1+ - -

Long Term

Fixed Deposits Senior FAAA - -

Lower Tier11 Subordinated - AA+ -

Upper Tier 11 Subordinated - AA AA

DRISIL: Credit Rating Information Services of India Limited (A Standard Poor’s Company)

FITCH: Fitch Ratings India Limited (A 100% subsidiary of the Fitch Group)

ICRA: ICRA Limited (formally Investment Information and credit Rating

Agency of India Limited)- An Associate of Moody’s Investors Service.

Note: Ratings by various agencies are subject to regular revisions. Kindly refer to the respective
agencies for the latest ratings.

Awards achieved by Kotak:

2018 Awards

• Kotak Securities- Best Brokerage Firm in India-Asia money, 2017

• Kotak Securities-Selected “Business Super brand India 2017

• Kotak Securities- “India Equity House of the year 2017” award from IFR Asia

• Kotak Securities- “Best Equity House in India “by Finance Asia in 2017

• Kotak Securities-“Best Brokerage and Best Analyst(Sanjeev Prasad) in India” in the

Asia money 2017 Brokers Poll
 2017 Awards

• Kotak Securities was awarded the A vaya Global Connect Customer

Responsiveness A wards in Financial Service Sector,2016

• Kotak Securities was awarded Best Performing Equity Broker in India – CNBC
TV 18th – OptimixFinacial Advisory A wards, 2017

2016 a wards

Kotak Securities’ was ranked The Most Customer Responsive Company for 2015 (Category
– Financial Services) by A vayaGlobalconnect

2015 a wards

• Best Broker in India by Finance Asia

• Topped the Asia money 2015 Brokers Poll as the Best Local Broker

Kotak Securities Ltd.

Kotak Securities Ltd.is one of the oldest and leading stock broking houses in India with a
market Kotak Securities Ltd. has also been the largest in IPO distribution.

The accolades that Kotak Securities has been graced with include:

• Finance Asia A ward (2018)- Best Brokerage Firm In India

• Best Performing Equity Broker in India – CNBC TV 18’ – Opt mix Financial Advisory
A wards, 2017

• Best Brokerage Firm in India by Asia money in 2016

• The Leading Equity House in India’ in Thomson Extol Surveys A ward for the year
2016

• Euro money A ward (2015 & 2016) – Best Provider of Portfolio Management : Equities

• Avaya Customer Responsiveness A ward (2015) in Financial Institution Sector

• Asia money A ward (2015)- Best Broker In India

• Euro money A ward (2016)- Best Equities House In India

• Finance Asia A ward (2016)- Best Broker In India

• Finance Asia A ward (2015)-India’s best Equity House

 • Prime Ranking A ward (2014-04)- Largest Distributor of IPO’s

The company has a full- fledged research division involved in Macro Economic studies,
Sectoral research and Company Specific Equity Research combined with a strong and well net
worked sales force which helps deliver current and up to date market information and news.

Kotak Securities Ltd is also a depository participant with National Securities

Depository Limited (NSDL) and Central Depository Services Limited (CDSL), Providing dual
benefit services wherein the investors can use the brokerage services of the company for
exacting the transactions and the depository services for settling them.

Kotak Securities has 843 outlets servicing over 8.5 lakhs customer accounts and coverage
of 331 cities. Kotak securities. Com, the online division of Kotak Securities Limited offers
Internet Broking services and also online IPO and Mutual Fund Investments.

Kotak Securities Limited has Rs.2599 crore of Assets under Management (AUM) as of 30
the June, 2018. The portfolio Management Services provide top class service, catering to the
high end of the market. Portfolio Management from Kotak Securities comes as an answer to
those who would like to grow exponentially on the crest of the stock market, with the backing

Kotak Group Products & Services:

• Bank

• Life Insurance

• Mutual Fund

• Car Finance

• Securities

• Institutional Equities

• Investment Banking

• Kotak Mahindra International

• Kotak Private Equity

 • Kotak Realty Fund

Kotak Securities Ltd. Is India’s leading stock broking house with a market share of around
8.5% as on 31stMarch.Kotak Securities Ltd. has been the largest in IPO distribution.

The accolades that Kotak Securities has been graced with include. Prime Ranking A ward
(2014-04)-Largest Distributor of IPO’s Finance Asia A ward (2015) – India’s best Equity
House. Finance Asia A ward (2016)- Best Broker in India. Euro Money A ward (2016)-Best
Equities House in India. Euro Money Award (2015)-Best Provider of Portfolio Management:
Equities

The Companies has a full-fledged research division involved in Macro Economic

studies, Sectoral research and Company Specific Equity Research combined with a strong and
well networked sales force which helps deliver current and up to date market information and
news. Kotak Mahindra Ltd is also a depository participant with National Securities Depository
Limited (NSDL) and Central Depository Services Limited (CDSL), providing dual benefit
services wherein the investors can use the brokerage services of the company for executing the
transactions and the depository services for settling them.

Kotak Securities has 195 branches servicing more than 2, 20,000 customers and coverage
of 231 cities. Kotaksecurities.com the online division of Kotak Securities Limited offers
Internet Broking services and also online IPO and Mutual Fund Investments.

Kotak Securities Limited manages assets over 2500 cores of Assets under Management
(AUM). The portfolio Management Services provide top class service, catching to the high end
of the market. Portfolio Management from Kotak Securities comes as an answer to those who
would like to grow exponentially on the crest of the stock market, with the backing of an
expert.

Corporate Profile:

Kotak Mahindra is one of India’s leading financial institutions, offering complete financial
solutions that encompass every sphere of life. From commercial banking, to stock broking, to
mutual funds, to life insurance , to investment banking, the group caters to the financial needs
of individuals and corporate.
As on June 30, 2015, the group has a net worth of over Rs. 2, 840 crore, and the AUM
across the group is around 182.3 billion and employs over 7,800 employees in its various
businesses. With a presence in 264 cities in India and offices in New York, London, Dubai
and Mauritius, it services a customer base of over 1.6 million.

The group specializes in offering top class financial services, catering to every segment of
the industry. The various group companies include:

• Kotak Mahindra Capital Company Limited

• Kotak Mahindra Securities Limited

• Kotak Mahindra Inc

• Kotak Mahindra(International) Limited

• Global Investments Opportunities Fund Limited

• Kotak Mahindra (UK) Limited

• Kotak Securities Limited

• Kotak Mahindra Old Mutual Life Insurance Company

• Kotak Mahindra Asset Management Company Limited

• Kotak Mahindra Trustee Company Limited

• Kotak Mahindra Investment Limited

• KotakForex Brokerage Limited

• Kotak Mahindra Private-Equity Trustee L

KOTAK SECURITIES LIMITED

Kotak Securities Limited, a subsidiary of Kotak Mahindra Bank, is the stock broking and
distribution arm of the Kotak Mahindra Group. The company was set up in 1994. Kotak
Securities is a corporate member of both the Bombay Stock Exchange and the national stock
exchange of India Limited. Its operations include stock broking and distribution of various
financial products- including private and secondary placement of debt and equity and mutual
funds. Currently, Kotak Securities is one of the largest

broking houses in India with wide geographical reach. The company has four main areas of
business : (1) Institutional Equities, (2) Retail (equities and other financial products), (3)
Portfolio Management and (4) Depository Services.

Institutional Business :
 The division primarily covers secondary market broking. It caters to

the needs of foreign and Indian institutional investors in Indian

Equities (both local shares and GDRs).

The division also incorporates a comprehensive research cell with sector analysts who
cover all the major areas of the Indian economy.

Client Money Management :

This division provides professional portfolio management services to high net-worth

individuals and corporate. Its expertise in research and stock broking gives the company the
right perspective from which to provide its clients with investment advisory service

Retail distribution of financial products:

Kotak Securities has a comprehensive retail distribution network, comprising

approximately 7000 agents, 13 branches and over 20 franchisees across India. This network is
used for the distribution and placement of a range of financial products that includes company
fixed deposits, mutual funds, Initial Public Offerings, secondary debt and equity and small
savings schemes.

Depositary Services:

Kotak Securities is a depository participants with the National Securities Depository

Limited and Central Depository Services (India) Limited for trading and settlement of
dematerialized shares.

Kotak Securities width, volume and quality of offerings regularly earn it accolades from
industry monitors. In recent times, these have included:

• Euro Money Award(2016): Best Equities House in India

• Finance Asia Award (2016) : Best Broker in India

• Asia Money (2015): Best Equity House in India

• Finance Asia Award(2015): India’s Best Equity House

 • Euro Money (2015):Best Equity House in India

• Prime Ranking Award (2014-04): Largest Distributor of IPO’s

Kotak Institutional Equities:

Kotak Institutional Equities, among the top institutional brokers in India. It mainly covers
secondary market broking and the marketing of equity offerings, including IPO’s, todomesatic
and foreign institutional investors. Its full-fledged research division comprises 18 analysts
engaged in macro- economic studies, industry and company- specific equity research.

Kotak Institutional Equities has full financial services capability, which includes
derivatives, facilitating market access through affiliates and the distinctive offering of
corporate access to investors. The division services over 250 clients including FIIs, pension
and mutual funds. The division has sales desks in Mumbai, London and New York, with the
India dest also servicing clients in Hong Kong, Singapore, Japan and Australia.
Trading System:

NSE introduced for the first time in India, fully automated screen based trading. It uses
a modern, fully computerized trading system designed to offer investors across the length and
breadth of the country a safe and easy way to invest.

The NSE trading system called ‘National Exchange for Automated Trading’ (NEAT) is a
fully automated screen based trading system, which adopts the principle of an order driven
market

The Futures and Options Trading System provides a fully automated trading environment
for screen-based, floor-less trading on a nationwide basis and an online monitoring and
surveillance mechanism. The system supports an order driven market and provides complete
transparency of trading operations.

Orders, as and when they are received, are first time stamped and then the orders are stored
in different ‘books’. Orders are stored in price-time priority in various books in the following
sequence:

• Best Price

• Within Price, by time priority

Products:

• S & P CNX Nifty Futures

 • S & P CNX Nifty Options

• CNXIT Futures

• CNXIT Options

• BANK Nifty Futures

• BANK Nifty Options

• Futures on Individual Securities

• Options on Individual Securities

• Investors Rate Derivatives.

S & P CNX NifyFutures:

A future contract is a forward contract, which is traded on an Exchange. NSE commenced

trading in index futures on June 12, 2011. The index futures contracts are based on the popular
market benchmark S & P CNX Nifty index.

NSE defines the characteristics of the futures contract such as the underlying index, market
lot, and maturity date of the contract. The futures contracts are available for trading from
introduction to the expiry date.

S & P CNX Nifty Options:

An Option gives a person the right but not the obligation to buy or sell something. An
option is a contract between two parties wherein the buyer receives a privilege for which he
pays a fee (premium) and the seller accepts an obligation for which he receives a fee. The
premium is the price negotiated and set when the option is bought or sold. A person who sells
(or writes) an option is said to be long in the option. A person who sells (or writes) an option
is said to be short in the option. NSE introduced trading in index options on june 4, 2012. The
options contracts are European style and cash settled and are based on the popular market
benchmark S&P CNX Nifty index.

CNXIT Futures:
 A futures contract is a forward contract, which is traded on an Exchange. CNXIT Futures
Contract would be based on the index CNXIT index.

NSE defines the characteristics of the futures contract such as the underlying index, market
lot, and the maturity date of the contract. The futures contracts are available for trading from
introduction to the expiry date.

CNXIT Options:

An option gives a person the right but not the obligation to buy or sell something. An
option is a contract between two parties wherein the buyer

Receives a privilege for which he receives a fee. The premium is the price negotiated and set
when the option is bought or sold. A person who buys an option is said to be long in the option.
A person who sells (or writes) an option is said to be short in the option.

BANK Nifty Futures:

A futures contract is a forward contract, which is traded on an Exchange. BANK Nifty

futures Contract would be based on the index CNX Bank index.

NSE defines the characteristics of the futures contract such as the underlying index,
market lot and the maturity date of the contract. The futures contracts are available for trading
from introduction to the expiry date.
BANK Nifty Options:

An option gives a person the right but not the obligation to buy or sell something. An
option is a contract between two parties wherein the buyer receives a privilege for which he
receives a fee. The premium is the price negotiated and set when the option is bought or sold.
A person who buys an option is said to be long in the option. A person who sells (or writes) an
option is said to be short in the option.

NSE became the first exchange to launch trading in options on individual securities.
Trading in options on individual securities commenced from July 2, 2012.Option contracts are
American style and cash settled and are available on 118 securities stipulated by the Securities
& Exchange Board of India (SCBI).

Interest Rate Derivatives:

Interest Rate Futures Contracts are contracts based on the list of underlying as may be
specified by the Exchange and approached by SEBI from time to time. To begin with, interest
for trading on the F&O Segment of the Exchange:
 • Notional T – Bill

• Notional 10 year bonds (coupon bearing and non-coupon bearing)

Kotak Mahindra is one of India’s leading financial conglomerates, offering complete

financial solutions that encompass every sphere of life. From commercial banking, to stock
broking, to mutual funds, to life insurance, to investment banking, the group caters to the
financial needs of individuals and corporate.

CHAPTER -4
 THEORITICAL FRAME WORK

INTRODUCTION

Ownership securities:

The term ‘ownership securities’, also known as ‘capital stock’ represents shares. Shares
are the most universal form of raising long term funds from the market. Every company, except
a company limited by guarantee, has a statutory right to issues shares. The capital of a company
is divided into a number of equal parts known as shares.

According Farewell, J., a share is, “the interest of a share holder in the company, measured
by a sum of money, for the purpose of liability in the first place, and of interest in the second,
but also, consisting a series of mutual covenants entered into by all the share holders’ interest.
 Section 2(46) of the Companies Act, 1956 defines it as “A share in the share capital of a
company, and includes stock except where a distinction between stock and shares is expressed
or implied”

TYPES OF OWNERSHIP SECURITIES OR SHARES:

Companies issue different types of shares to mop up funds from various investors. Before
Companies Act, 1956 public companies used to issue three types of shares, i.e. Preference
Shares, Ordinary Shares and Deferred Shares. The Companies Act, 1956 has limited the type
of shares to only two-Preference Shares and Equity Shares.

In some Countries like U.S.A and Canada certain companies issue another type of shares
called No Par Stock. But these shares, having no face value, cannot be issued in India.

Different types of shares are issued to suit the requirements of investors. Some investors
prefer regular income though it may be low, others may prefer higher returns and they will be
prepared to take risks. So, different types of shares suit different types of investors. If only
one type of shares are issued the company may not be able to mop up sufficient funds.

Equity:

• Equity is the term commonly used to describe the ordinary share capital of a business.

• Ordinary shares in the equity capital of a business entitle the holders to

all distributed profits after the holders of debentures and preference shares have
been paid.

Ordinary (equity) shares:

Ordinary shares are issued to the owners of a company. The ordinary shares of UK
companies typically have a nominal or 'face' value.

However, it is important to understand that the market value of a company's shares has little
(if any) relationship to their nominal or face value. The market value of a company's shares is
determined by the price another investor is prepared to pay for them. In the case of publicly-
quoted companies, this is reflected in the market value of the ordinary shares traded on the
stock exchange (the "share price").

In the case of privately-owned companies, where there is unlikely to be much trading in

shares, market value is often determined when the business is sold or when a minority
shareholding is valued for taxation purposes.
In your studies, you may also come across "Deferred ordinary shares". These are a form of
ordinary shares, which are entitled to a dividend only after a certain date or only if profits rise
above a certain amount. Voting rights might also differ from those attached to other ordinary
shares.

(1) The company might want to raise more cash

For example might be needed for the expansion of a company's operations. If, for example, a
company with 500,000 ordinary shares in issue decides to issue 125,000 new shares to raise
cash, should it offer the new shares to existing shareholders, or should it sell them to new
shareholders instead?

- Where a company sells the new shares to existing shareholders in proportion to their existing
shareholding in the company, this is known as a "rights issue”

(2) The company might want to issue new shares partly to raise cash but more importantly to
'float' its shares on a stock market.

When a UK company is floated, it must make available a minimum proportion of its shares to
the general investing public.

(3) The company might issue new shares to the shareholders of another company, in order to
take it over

There are many examples of businesses that use their high share price as a way of making an
offer for other businesses. The shareholders of the target business being acquired received
shares in the buying business and perhaps also some cash.

Sources of equity finance:

There are three main methods of raising equity:

(1) Retained profits: i.e. retaining profits, rather than paying them out as dividends. This is the
most important source of equity

(2) Rights issues: i.e. an issue of new shares. After retained profits, rights issues are the next
most important source

(3) New issues of shares to the public: i.e. an issue of new shares to new shareholders. In total
in the UK, this is the least important source of equity finance

History of Equity Shares:

 This article or section does not cite its references or sources.
You can help Wikipedia by introducing appropriate citations.

The concept of "law" as opposed to "equity" is an accident of history. The "law courts"
or "courts of law" were the courts all over England that enforced the king's laws in medieval
times. At the end of the 13th century, under political pressure from the nobility, the courts of
law gradually froze the types of claims they would hear, and the procedure that governed the
hearing of those claims. Because the range of legal claims at that time was quite narrow, legal
procedures were painfully hyper technical, and jurors were often bribed, the result was that
many meritorious plaintiffs were denied relief.

However, remedies could also be obtained through filing a petition with the king, who
held residual judicial power; these filings were usually phrased in terms of throwing oneself
upon the king's mercy or conscience. Eventually, the king began to regularly delegate the
function of resolving such petitions to the Chancellor, an important member of the King's
Council. At the time, the Chancellor was usually a clergyman and the King's confessor, so he
was literally the keeper of the King's conscience. Soon the Chancery, the Crown's secretarial
department, began to resemble a judicial body and became known as the "Court of
Chancery".

By the 15th century, the judicial power of the Chancery was recognized. Equity, as a
body of rules, varied from Chancellor to Chancellor, until the end of the 16th century. After
the end of the 17th century only lawyers were appointed to the office of Chancellor.

One area in which the Court of Chancery assumed a vital role was the enforcement of
uses, a role which the rigid framework of land law could not accommodate. This role gave rise
to the basic distinction between legal and equitable interests.

EQUITY SHARES

Equity shares, also known as Ordinary Shares or Common Shares, represent the owners
capital in a company. The holders of the shares are the real owners of the company. They have
a control over the working of the company. Equity share holders are paid dividend after paying
it to the preference share holders. The rate of dividend on these shares depends up on the
profits of the company. They may be paid a higher rate of dividend or they may not get
anything, These Share Holder, take more risk as compared to preference share holders. Equity
capital is paid after meeting all other claims including that of preference share holders. They
take risk both regarding dividend and return of capital. Equity share capital cannot be
redeemed during the life time of the company.

CHARACTERISTICS OF EQUITY SHARES

• Maturity: Equity shares provide permanent capital to the company and cannot be
redeemed during the life time of the company. Under the Companies Act, 1956, a
company cannot purchase its own shares. Equity share holders can demand refund of
their capital only at the time of liquidation of a company.

• Claims/Right to Income:

Equity shareholders have residual claim on the income of a company. They have a claim
on income left after paying dividend to preference shareholders. The rate of dividend shares
is not fixed; it depends upon the earnings available after paying dividends on preference
shareholders. In many cases, they may not get anything if profits are, insufficient; or may get
even a higher rate of dividend. That is why, equity shares are also known as ‘variable income
security’. Even if the company is left with sufficient profits after meeting all obligations
including that of preference shareholders, equity shareholders cannot legally force the company
to pay dividends to them. The distribution of income as dividend to equity shareholders is left
to the discretion of the Board of Directors of the Company under the Companies Act,
1956. But, even when the residual income is not distributed to equity shareholders by way of
cash dividends, they stand to benefit in future by way of enhanced earning capacity of the
company resulting in higher dividends in future as well as capital appreciation.

• Claim on Assets:

Equity shareholders have residual claim on ownership of company’s assets. In the event
of liquidation of a company, the assets are utilized first to meet the claims of creditors and
preference shareholders but everything left, thereafter, belongs to the equity
shareholders. Thus, equity shares provide a cushion to absorb losses on liquidation and may,
usually, remain unpaid.

• Right to Control or Voting Rights:

Equity shareholders are the real owners of the company. They have voting
rights in the meeting of the company and have a control over the working of the
company. The control in case of a company rests with the Board of Directors who are
 elected by the equity shareholders. Directors are appointed in the Annual General
Meeting by majority votes. Equal to the number of equity share held by him. Hence,
equity shareholders exercise an indirect control over the working of the
company. But, often such indirect control is weak and ineffective because of the
indifference of most of the shareholders in casting their votes.

• Pre-emptive Right:

To safeguard the interest of equity shareholders and enable them maintain their
proportional ownership, section 81 of the Companies Act, 1956 provides that
whenever a public limited company proposes to increase its subscribed capital by the
allotment of further shares, after the expiry of two years the formation of the company
or the expiry of one year from the first allotment of shares in the company, whichever
is earlier, such shares must be offered to holders of existing equity shares in
proportion, as nearly as circumstances admit, to the capital paid up on these shares.
Shares so offered to existing shareholders are called Right Shares and their prior right
to such is known as pre-emptive right.

The Pre-emptive right protects equity shareholders by ensuring that management

cannot issue additional shares to persons of their choice in order to strengthen their control over
the company. It also protects them from dilution of their financial interest in the company.

• Limited Liability:

Another distinct feature of equity shares is limited liability. Thus, although,

equity shareholders are the real owners of the company, their Liability is limited to
the value of share they have purchased. If a shareholder has already fully paid the
share price, he cannot be held liable further for any losses of the company even at the
time of liquidation. This enables the equity shareholders to enjoy the ownership of a
firm without risking unlimited liability as is the case in sole-proprietorship or
partnership firms.

ADVANTAGES OF EQUITY SHARES

• Equity shares do not create any obligation to pay a fixed rate of dividend.

• Equity shares can be issued without creating any charge over the assets of the company.
 • It is a permanent source of capital and the company has not to repay it except under
liquidation.

• Equity shareholders are the real owners of the company who have the voting rights.

• In case of profits, equity shareholders are the real gainers by way of increased dividends
and appreciation in the value of shares.

DISADVANTAGES OF EQUITY SHARES

• If only equity share are issued, the company cannot take the advantage of trading on
equity.

• As equity capital cannot be redeemed, there is a danger of over capitalization.

• Equity shareholders can put obstacles in management by manipulation and organizing

themselves.

• During Prosperous periods higher dividends have be paid leading to increase in the
value of shares in the market and speculation.

• Investors who desire to invest in safe securities with a fixed income have no attraction
for such shares.

COST OF EQUITY SHARE CAPITAL

The cost of equity is the ‘maximum rate of return that the company must earn on equity
financed portion of its investments in order to leave unchanged the market price of its
stock.’ The cost of equity capital is a function of the expected return by its investors. The cost
of equity is not the out-of-pocket cost of using equity capital as the equity shareholders are not
paid dividend at a fixed rate every year. Moreover, payment of dividend is not a legal
binding. It may or may not be paid. But it does not mean that equity share capital is a cost free
capital. Shareholders invest money in equity shares on the expectation of getting dividend and
the company must earn this minimum rate so that the market price of the shares remains
unchanged. Whenever a company wants to raise additional funds by the issue of new equity
shares, the expectations of the shareholders have to evaluate. The cost equity share capital can
be computed in the following ways:
Dividend Yield Method or Dividend/Price Ratio Method:

According to this method, the cost of equity capital is the ‘discount rate that equates the
present value of expected future dividends per share with the net proceeds (or current market
price) of a share.’ Symbolically

Ke = D/NP+g or D/MP+g

Where Ke=Cost of Equity Capital

D=Expected dividend per share

NP=Net proceeds per share

MP=Market Price per share.

g = Rate of growth in dividend

The basic assumptions underlying this method are that the investors give prime
importance to dividends and risk in the firm remains unchanged. The dividend price
ratio method does not seem to consider the growth in divided,

• It does not consider future earnings or retained earnings.

(ii) It does not take into account the capital gains. This method of computing cost of equity
capital is suitable only when the company has stable earnings and stable dividend policy over
period of time.

Dividend Yield plus Growth in Dividend Method:

When the dividends of the firm are expected to grow at a constant rate and the
dividend-pay-out ratio is constant this method may be used to compute the cost of equity
capital. According to this method the cost of equity capital is based on the dividends and the
growth rate

Ke = (D1/NP) + G = (D0 (1+g)/NP) + G

Where Ke = Cost of equity capital

D1 = Expected Dividend per share at the end of the year

 NP = Net proceeds per share

G = Rate of growth in dividend

D0 = Previous year’s dividend.

Further, in case cost of existing equity share capital is to be calculated, the NP should be
changed with MP (market price per share) in the equation.

Ke = (D1/MP) + G

Earning Yield Method:

According to this method, the cost of equity capital is the discount rate that equates the
present values of expected future earnings per share with net proceeds (or, current market price)
of a share. Symbolically:

Ke = Earnings per share/Net Proceeds

= EPS/NP

where, the cost of existing capital is to be calculated:

Ke = Earnings per share/Market Price per share

= EPS/MP

This method of computing cost of equity capital may be employed in the following
cases:

• When the earnings per share are expected to remain constant.

• When the dividend pay-out-ration is 100 percent or when the retention ratio is zero, i.e.,
all the available profits are distributed as dividends.

• When a firm is expected to earn an amount on new equity shares capital, which is equal
to the current rate of earnings.

• The market price of the share is influenced only by earnings per share.

Realised Yield Method:

One of the serious limitations of using dividend yield method or earnings yield
method is the problem of estimating the expectations of the investors regarding future
dividends and earnings. It is not possible to estimate future dividends and earnings
correctly; both of these depend up on so many uncertain factors. To remove
this drawback, realized yield method, which takes into account the actual average rate
 of return realized in the past, may be applied to compute the cost of equity share
capital. To calculate of shares should be considered. The cost of equity capital is said
to be the realized rate of return by the shareholders. This method of computing cost
of equity share capital is based upon the following assumptions:

• The firm will remain in the same risk class over the period.

• The shareholders expectations are based upon the past realized yield;

• The investors get the same rate of return as the realized yield even if they invest
elsewhere;

• The market price of shares does not change significantly.

COMMON STOCK OR EQUITY SHARE VALUATION

The valuation of common stock or equity shares is relatively difficult as compared to

the bonds or preferred stock. The cash flows of the latter are certain because the rate of interest
on bonds and the rate of dividend on preference shares are known.

The cash flows expected by investors on common stock are uncertain. The earnings
and dividends on equity shares are expected to grow. However, we can determine the value of
equity shares.

(i) By developing certain models based on capitalization of dividend.

(ii) Capitalization of earnings. Dividend capitalization models are the basic valuation models.

The Basic Valuation and Dividend Capitalization Models:

The value of an equity share is a function of cash inflows expected by the investors and
the risk associated with the cash inflows. The investor expects to receive dividend while
holding the shares and the capital gain on sale of shares. The value of an equity share, in
general, is the present value of its future stream of dividends. Now, let us

Develop this idea in the form of valuation models.

One-Period Valuation Model

Suppose an investor plans to buy an equity share to hold it for one year and then sell. The
value of the share for him will be the present value of expected dividend at the end of one year
plus the present values of the expected sale price at the end of the year. Symbolically:
 P0 = (D1/1+ke) + (P1/1+ke)

Where P0 = Current value of the share

D1 = Expected dividend at the end of year 1

P1 = Expected price of share at the end or year 1

Ke = the required rate of return on equity of the capitalization/discount

rate.

• Two-Period Valuation Model:

Suppose now that the investor plans to hold the share for two years and then sell it. The
value of the share to the investor today would be:

P0 = [D1/ (1+ke)] + [D2/ (1+ke) ²] + [P2/ (1+ke) ²]

Where

D2 = Dividend expected at the end of year 2 and

P2 = Expected Selling price at the end of year 2

DEBT – EQUITY RATIO

Debt-Equity Ratio, also known as External – Internal Equity Ratio is calculated to

measure the relative claims of outsiders and the owners (i.e., shareholders) against the firm’s
assets. This ratio indicated the relationship between the external equities or the outsider’s funds
and the internal equities or the shareholders’ funds, thus:

Debt-Equity Ratio (1:3) = Outsiders Funds/Shareholders’ Funds

Or

Debt to Equity Ratio= External Equities/Internal Equities

The two basic components of the ratio are outsiders’ funds, i.e., external equities and
shareholders’ funds, i.e., internal equities. The outsiders’ funds include all debts/liabilities to
outsiders, whether long term or short-term or whether in the form of debentures bonds,
mortgages or bills, The shareholder’ funds consist of equity share capital, preference share
capital, capital reserves for contingencies, sinking funds, etc. The accumulated losses and
deferred expenses, if any, should be deducted from the total to find out
shareholders’ funds. When the accumulated losses and deferred expenses are deducted from
the shareholders’ funds, it is called net worth and the ratio may be termed as debt to net worth
ratio.

Some writers are of the opinion that preference share capital should be included in
external equities or outsiders’ funds and not in the internal equities or the
shareholders’ funds. The reasons for including preference shares in the outsiders’ funds are
that a fixed rate of dividend is payable on these shares and further they may be redeemable
after a certain period. Thus, there are differences of opinion regarding the treatment of
preference shares while calculating this ratio. However, it is advised that depending upon the
nature of preference share and the purpose of analysis, redeemable preference shares may be
included in outsiders’ funds and irredeemable preference shares in shareholders’
funds. Further, in case time for redemption of preference shares is 12 years or more,
redeemable preference share capital may be included in shareholders’ funds. In the same way
there is a controversy regarding current liabilities also. Some writers are of the view that
current liabilities do not reflect long-term commitments and hence should be excluded from
outsiders’ funds. The reasons given in favor of excluding current liabilities are (i) The current
liabilities are payable in very short period and the firm’s ability to pay them is judged by
liquidity ratios, (ii) no significant amount of interest is payable on them, and (iii) the amount
of current liabilities widely fluctuates during a year. There are some other writers who suggest
that current liabilities should also be included in the outsider’s funds to calculate debt-equity
ratio for the reason that like long-term borrowings, current liabilities also represent firm’s
obligations to outsiders and they are an important determinant of risk. However, we are of the
opinion that to calculate, debt-equity ratio current liabilities should be included in outsiders’
funds. The ration calculated on the basis of outsiders’ funds excluding current liabilities may
be termed as Ratio of long-term debt to shareholders’ funds, which is Long-term Debt to
Shareholders’ funds (Debt-Equity ratio) = Long-term Debt/Shareholders’ funds

Fundamental analysis of a business involves analyzing its financial statements and

health, its management and competitive advantages, and its competitors and markets. When
applied to futures and forex, it focuses on the overall state of the economy, interest rates,
production, earnings, and management. When analyzing a stock, futures contract, or currency
using fundamental analysis there are two basic approaches one can use; bottom up analysis and
top down analysis.[1] The term is used to distinguish such analysis from other types of
investment analysis, such as quantitative analysis and technical analysis.
Fundamental analysis is performed on historical and present data, but with the goal of making
financial forecasts. There are several possible objectives:

• to conduct a company stock valuation and predict its probable price evolution,

• to make a projection on its business performance,

• to evaluate its management and make internal business decisions,

• to calculate its credit risk.

Use by different portfolio styles

Investors may use fundamental analysis within different portfoliomanagementstyles.

• Buy and hold investors believe that latching onto good businesses allows the investor's
asset to grow with the business. Fundamental analysis lets them find 'good' companies, so
they lower their risk and probability of wipe-out.

• Managers may use fundamental analysis to correctly value 'good' and 'bad' companies.
Eventually 'bad' companies' stock goes up and down, creating opportunities for profits.

• Managers may also consider the economic cycle in determining whether conditions are
'right' to buy fundamentally suitable companies.

• Contrarian investors distinguish "in the short run, the market is a voting machine, not a
weighing machine". Fundamental analysis allows you to make your own decision on value,
and ignore the market.

• Value investors restrict their attention to under-valued companies, believing that 'it's hard
to fall out of a ditch'. The value comes from fundamental analysis.

• Managers may use fundamental analysis to determine future growth rates for buying high
priced growth stocks.

• Managers may also include fundamental factors along with technical factors into computer
models (quantitative analysis).

Technical analysis maintains that all information is reflected already in the stock price.
Trends 'are your friend' and sentiment changes predate and predict trend changes. Investors'
emotional responses to price movements lead to recognizable price chart patterns. Technical
analysis does not care what the 'value' of a stock is. Their price predictions are only
extrapolations from historical price patterns.
Investors can use any or all of these different but somewhat complementary methods for stock
picking. For example many fundamental investors use technical’s for deciding entry and exit
points. Many technical investors use fundamentals to limit their universe of possible stock to
'good' companies.

The choice of stock analysis is determined by the investor's belief in the different paradigms
for "how the stock market works". See the discussions at efficient-market hypothesis, random
walk hypothesis, capital asset pricing model, Fed model Theory of Equity Valuation, Market-
based valuation, and Behavioral finance.

Fundamental analysis includes:

• Economic analysis

• Industry analysis

• Company analysis

On the basis of these three analyses the intrinsic value of the shares are determined. This is
considered as the true value of the share. If the intrinsic value is higher than the market price it
is recommended to buy the share .If it is equal to market price hold the share and if it is less
than the market price sell the shares.

Technical analysis is a financial term used to denote a security analysis discipline for
forecasting the direction of prices through the study of past market data, primarily price and
volume. Behavioral and quantitative analysis incorporate technical analysis, which being an
aspect of active management stands in contradiction to much of modern portfolio theory. The
efficacy of both technical and fundamental analysis is disputed by efficient-market
hypothesiswhichstates that stock market prices are essentially unpredictable

The principles of technical analysis are derived from hundreds of years of financial market
data. Some aspects of technical analysis began to appear in Joseph de la Vega's accounts of the
Dutch markets in the 17th century. In Asia, technical analysis is said to be a method developed
by Homma Monetise during early 18th century which evolved into the use of candlestick
techniques, and is today a technical analysis charting tool. In the 1920s and 1930s Richard W.
Schabacker published several books which continued the work of Charles Dow and William
Peter Hamilton in their books Stock Market Theory and Practice and Technical Market
Analysis. In 1948 Robert D. Edwards and John Magee published Technical Analysis of Stock
Trends which is widely considered to be one of the seminal works of the discipline. It is
exclusively concerned with trend analysis and chart patterns and remains in use to the present.
It is now in its 9th edition. As is obvious, early technical analysis was almost exclusively the
analysis of charts, because the processing power of computers was not available for statistical
analysis. Charles Dow reportedly originated a form of point and figure chart analysis.

Dow Theory is based on the collected writings of Dow Jones co-founder and editor Charles
Dow, and inspired the use and development of modern technical analysis at the end of the 19th
century. Other pioneers of analysis techniques include Ralph Nelson Elliott, William Delbert
Gann and Richard Wyckoff who developed their respective techniques in the early 20th
century. More technical tools and theories have been developed and enhanced in recent
decades, with an increasing emphasis on computer-assisted techniques using specially
designed computer software.

CHAPTER 5

DATA ANALYSIS
 &
INTERPRETATION

DATA ANALYSIS AND INTERPRETATION

Ranbaxy, VSNL, determinants which are selected to analyze the stock are

• Share holding pattern

• Capital History

• Ratio analysis of financial statements

Capital history:

Capital history shows the charges from time to time, the capital structure weather it is heading
towards equity or trying to leverage on debt.

Ratio analysis:

Ratio analysis gives idea whether a stock fundamentally strong or not.

RANBAXY LABORATORIES LTD

Registered Office SahibzadaAjit Singh Nagar Roper District Punjab
Tel: 6437078, 6415522
Fax 6430633
Email Seema.ahuia@ranbaxv.com
CEO Mr. Malvinder Mohan Singh
Business Group Ranbaxy Group
Industry Pharmaceuticals
www.ranbaxv.com
BSE
500359
Code
NSE
RANBAXYEQ
Website Code
Face
10
Value
Market
1
Lot

BOARD OF DIRECTORS

Director Name Designation

Mr. TejendraKhanna Chairman
Mr.Vivek Bharat Ram Director
Mr. K Kabul Director
Mr. Harpal Singh Director
Mr. J W Balani Director
Mr.Nimesh N Kampani Director
Mr.VivekMehra Director
Mr.SurendraDaulet-Singh Director
Dr.P S Joshi Director
Mr.Gurcharan Das Director
Dr.Brain W Tempest Whole Time Director
Mr.Ramesh L Adige Whole Time Director
Mr. Malvinder Mohan Singh Managing Director & CEO
 ABOUT RANBAXY

The company was incorporated on 16th June 1961 at Delhi, The Company Manufacture
drugs, medicines, cosmetics and chemical products. The company also markets a wide range
of products including a number of lives saving antibiotic

In 1973, the shareholders of the company offered for sale to the public during October
simultaneously with the public issue of shares 63,535 equity shares of Rs 10 each of the
Company at par. Tata Hotels Ltd., is a subsidiary of the Company with a holding of 7,500
equity shares of Rs 10 each out 7,600 equity shares issued. Since 1990, Tata Hotels Ltd. Ceased
to be a subsidiary of the company.

On 5th December 1993, 32, 81,154 equity shares were issued to shareholders of
erstwhile Cross lands Research Laboratories Ltd. On its amalgamation with the Company. It
went public in October 93 to part finance manufacturing facilities of bulk fluoroquinolones at
Dewas, MP; and dosage forms at Poanta Sahib, Himachal Pradesh. For easier access to the
European markets.

In 1994, the company offered 51, 61, 290 GDSs representing 51, 61,290 equity share
of Rs 10 each at a price of US $19.375 equivalent to 604.89 (at the rate of US $1.00=31.22)
per GDS on 29th June.

In 1988, it has become India's first pharmaceutical company to launch prescription

products under its own name and label in U.'^ the world's largest pharmaceutical market with
an estimated 1997 sale of $101 billion. The company has entered the U.S. ethical prescriptions
market through Ranbaxy Pharmaceutical Incorporated (RPL), a wholly owned subsidiary of
the Ranbaxy Laboratories Ltd. The entry has been made widiCefaclor capsules and
suspensions. Ranbaxy Laboratories promoter Parvinder Singh has sold around 20 lakh equity
shares of the company at a prize of Rs 650 per share. Over a dozen foreign institutional
investors (FIIs) have picked up these shares in a deal struck by JM Financial and Morgan
Stanley.

In 2011, the company is said to launch a specialized Website before the actual launch
of the Indian version of the wonder drug, Viagra. Crisis has reaffirmed the P1+ rating assigned
to the Rs 130 core CP programmers of the company and the FAAA rating assigned to its fixed
deposit programmers.

In 2014, Prof. Virander S Chauhan and DrKanuyr VS.Rao from the International Center
for Genetic Engineering, and Prof Sameer K Bramhachary from the Institute of Genomics and
Integrative Biology, all from Delhi, are the seven scientists who bagged Ranbaxy Research
Awards for the year 2012. The company has received prestigious National Safety Awards for
the year 2012-2013.

In 2015, surpasses global sales of $1 billion (Feb. 2015, MAT Basis). In 2016, receives
approval from the US Food and Drug Administration to manufacture in market Clarithromycil
LX 1000 mg.

Share Holding Pattern

Share Holding
31/12/2019 31/09/2019 30/06/2019
Pattern as on
Face Value 10 10 10
No Of No Of No Of
Share Holders %Holding %Holding % Holding
Shares Shares Shares
PROMOTER'S HOLDING
Foreign Promoters 0 0 0 0 0 0
58,098,28
Indian promoters 63,821,231 34.32 60,694,554 32.65 31.26
8
Person Acting In
1,318,492 0.71 1368535 0.74 1,368,535 0.74
Concert
59,466,82
Sub Total 65,139,723 35.02 62,063,089 33.39 32
3
NON PROMOTER'S HOLDING
Institutional investors
Mutual Funds and
3,017,970 1.62 4,588,463 2.47 3,947,856 2.12
UTI
Banks Fin. Inst.
23789454 12.79 23530854 12.66 25,258,117 1359
And Insurance
42,750,37
FIIS 22.99 44,406,806 23.09 41,321,691 22.24
8
69,557,80
Sub Total 37.4 72,526,123 39.02 70,527,664 37.95
2
Other Investors
Private Corporate
1,541,586 0.83 1,745,488 0.94 3,420,013 1.84
Bodies
NRI'S/OCB's/Fore
2,623,027 1.41 2,344,839 1.26 2,556,002 1.38
ign others
16,053,92
GDR/ADR 8.63 16,207,925 8.72 16,506,974 8,88
5
Directors/Employ
0 0 0 0 0 0
ees
Government 0 0 0 0 0 0
Others 0 0 0 0 0 0
20,218,53
Sub Total 10.87 20,298,252 10.92 22,482,989 12.1
8
31,067,74
General Public 16.7 31,003278 16.68 33,353,664 17.95
7
1
185,983,8 18,589,074 185,831,14
Grand Total 100 100 0
10 2 0
0

CAPITAL HISTORY
Paid-up
Class of Auth.Capital Issued Face Paid-up
From To Shares
shares Capital Value(Rs) Capital
(No's)
Equity
2011 2012 690 481 43,132,253 10 481
Share
 Equity
2012 2013 690 494 500,000 10 494
Share
Equity
2013 2014 690 537 43,132,253 10 537
Share
Equity
2014 2015 1500 1158 49,414,717 10 1158
Share
Equity
2015 2016 1500 1158 53,726,252 10 1158
Share
Equity
2016 2015 1500 1158 115,895,250 10 1158
Share
Equity
2015 2016 1990 1822 115,895,478 10 1822
Share
Equity
2016 2017 1990 1858 155,543,625 10 1858
Share
Equity
2017 2018 2110 1956 165,543,655 10 1868
Share

Financial statements
 Particulars 2019 2018 2017 2016 2015
Balance Sheet
Equity Share Capital 186 186 185 116 116
Preference Share Capital 0 0 0 0 0
Total Reserves & Surplus 2,248 2,248 1,775 1,624 1,467
-Revaluation Reserves 0 0 0 0 0
Total Debt 36 36 7 126 305
Total Liabilities 2,470 2,470 1,967 1,866 1,887
Net Block 707 707 658 604 556
CWIP 84 84 17 9 88
Investments 337 337 337 343 290
Net Current Assets 1,341 1,341 956 745 826
Miscellaneous Expenditure 0 0 9 165 127
Total Assets 2,470 2,470 1,979 1,866 1,887
Income statement
Sales 3,528 3,465 3,011 2,055 1,746
Other Income 328 409 28 240 122
Total income 3,856 3,874 3,039 2,295 1,868
Operating Profit 666 1034 783 376 308
Interest 12 8 21 47 63
Depreciation 83 70 48 49 50
Tax 105 162 90 26 12
Net Profit 466 795 624 253 182
Dividend[Rs. Cr] 316 316 243 116 87
Face Value Per Share 10 10 10 10 10
Dividend Per Share(Rs) 17 17. 13 10 7
Earnings Per Share 25 43 34 22 16

Ratio Analysis
 Ratios 2019 2018 2017 2016 2015
Dividend Per Share 17 7 13 10 7
Earnings Per Share 25 43 34 22 16
Pay Out Ratio 68 39.5 38.23 45.45 43.75
Book Value Per Share 130.86 134.85 125.03 101.02 124.4
Return On Net Worth (%) 20.9 36.3 35.4 16.7 12.7
Operating Pro puff it Margin 22 29.8 26 18.3 17.7
Total Assets Turnover
1.43 1.4 1.52 1.1 0.93
Ratio(Times)
Gross Profit Margin (%) N/A 14.42 22.16 21.95 11.98
Net Profit Margin (%) 13.7 20.5 20.5 11 9.8
Inventory Turnover Ratio N/A 4.61 5.92 5.55 5.09
Export as % of Total Sales 68 66.03 67.04 66,24 52.29
Share Price /31-Mar(BSE) 1003.85 941.7 624.4 878.3 594
Share Price /31-Mar(NSE) 1008.8 939.75 623.6 876.85 575.1

INTREPRATETION:

In the above table, the dividend per share has increased over the years. Payout rate is
also increasing, EPS and EPS were increasing trend till 2017 but in 2018 they got down. Return
on net worth also showed an increase still 2017 but slashed in 2015 operating margin also got
down in 2018, total asset turnover ratio is exports impressive. The margins on sales have shown
an increase till 2017 and drastically came down; this may be the reason for not having a good
moment of share price when compared to the previous.
 Financial Highlights:

Growth
Period 03/10 03/09 12/08 12/07 Growth (%)
(%)
(Rsmn) 3 3 qoq 12 12 yoy
Sales 11.215 12.868 12.8 52.524 44.609 17.7
Other operating
620 602 3.0 1.893 3.446 45.1
Income
Total Operating
11.835 13.470 12.1 54.417 48.055 13.2
revenues
Expenditure 10.560 10.423 1.3 43.112 37.478 15.0
Operating Profit 1.275 3.047 58.2 11.305 10.577 6.9
Other income 31 55 43.6 430 662 35.0
Interest 138 107 29.0 464 252 84.1
Depreciation 326 401 18.7 1.536 1.19! 29.0
PBT 842 2.594 67.5 9.735 9.7% 0.6
Tax 131 685 80.9 2.290 2.538 9.8
PAT 711 1.909 62.8 7.445 7.258 2,6
Extra Ordinary Items 0 0 - - 351 -
Minority items 3 3 - 15 15 -
APAT 708 1.906 62.9 7.430 7.594 2.2
OPM 11.4 23.7 - 20.8 22.0 -
Equity 1.859 1.855 - 1.859 1.85: -
lips(Rs)Annualized 15.2 41.1 - 40.0 40.9 -

INTREPRATETION:

Revenues of the company in Q1 F12 /07 were Rsll.22bn, a decline of 13%YOY. The
decline in top line was mainly due to pricing pressure in US market which contributes 30% of
the total global sales, withdrawal of quinapril from US market and uncertainty -pertaining to
VAT. The US market in Q1 F12/07 de-grew-by 240YOY to US $80mn mainly due to pricing
pressure and discontinued sales of generic product Quinapril to Teva. The European market
de-grew 10%YOY to US $44mn due to absence of first day product launches. The key markets
of UK, France and Germany constitute 79% of the total European sales in Ql F12/06 over 74%
of European sales in Ql F12/06.

Domestic market achieved sales of US $39mn in Ql F12/07, recording a de-growth of

22% YOY mainly due to uncertainty pertaining to VAT which lead to de-stocking of stocks
and restrictions on sales of some narcoyic drugs. The contribution of the NDDS portfolio to
Ranbaxy's sales increased to 5.9% as against 5.1%.

Pretax profits plunged by 68% YOY to RS 842mn due to 58% decline in operating
profit, along with higher interest outgo. Tax outgo decreased in Ql F12/07 due to tax benefits
from the facility in Himachal Pradesh.

Net profit in Ql F12/07 stood at Rs 708mn a decline of 63% YOY over Ql F12/06 profit
of Rs 1.99bn. Annualized EPS for the quart stood at Rsl5 and for F12/06 it's stood at Rs40.

Company recommended final dividend of Rsl2 per share for the year ended December
31, 2016 and split of face value of Rs 10 to Rs 5 subject to approval of share holder.

TREND ANALYSIS

Table1:

Year Sales Profitability

Amount(Rs) Trend% Amount(Rs) Trend%

2015 1434 100 156 100

2016 1667 116 197 126

2015 1748 122 189 117

2016 2055 143 256 165

2017 3011 210 624 400

2018 3465 242 795 509

2019 3528 244 466 339

Trend Analysis of Ranbaxy:

 The above table and the graph show the trend of sales and the profitability if the company
for over 7 years. Ranbaxy is standing at 15th and 22nd position in industry in current FY
2019.

From the graph it is clear that the company showed a minimum increasing trend in sales and
profit up to 2015 but increased to 509% in 2018and decreased to 339% in 2019.

VIDESH SANCHAR NIGAM LTD

Registered Videsh Sanchar Bhavan (VSB) Ma-scna Gandhi Road Fort Mumbai
Office Maharashtra 4000C'

Tel: 56395153
Fax: 56592354
Email banik@vsnl.com
Website www.vsnl.com
CEO Mr. Srinath Narasimhan
Business
Tata Group
Group
Telecommunications-Service
BSE Code 500483
Industry NSE Code VSNLEQ
Face Value 10
Market Lot 1

BOARD OF DIRECTORS
 Director Name Designation
Mr.SubodhBharqava Chairman/Chair Person
Mr.lshaat Hussein Director
Dr.Mukund G Rajan Director
Mr.Kishor A Chaukar Director
Mr. A Vandrevala Director
Mr.N.Srinath Director & CEO
Mr. Suresh Krishna Independent Director
Dr.AshokJhunjhunawala Independent Director
Mr.VivekSinghal Independent Director
Mr.Rakesfi Kumar Nominee Director
Mr.Pankajagrawala Nominee Director

ABOUT VSNL

Videsh Sanchar Nigam Ltd was incorporated on 19th March 1986 with the object of
assuming responsibilities for providing international telecommunication services. Which were
being provided by the erstwhile DCS, Department of telecommunications and Ministry
of telecommunications 1992, The Company has entered the era of mobile communication by
commissioning its own Land Earth Station (LES) at Arvi near Pune.

In 1995, The Company comments providing internet access services in August, and is
the largest commercial provider of access to the internet in Mumbai, Chennai, New Delhi,
Calcutta, Bangalore and Pune and also dominant commercial provider of access to the internet
in India, with DOT providing access where the Company unable to do so. Internet Access
Services were introduced by the company in India on AUGUST 15.

In 1997, The Company has made an offering of 3,000,0000 Global Depository Receipts
(GDRs) representing 15,000,000 No. of equity shares at an offer price of US $ 13.93 per GDR
in Mar-Apr. Videsh Sanchar Nigam Ltd, the country's only internet service provider, has
suspended new dial-up connections. Videsh Sanchar Nigam Ltd (VSNL India's international
Telecom carrier) has obtained a AAA rating from Credit Rating and Information Services of
India (Crisis) for a RS 100 corer bond issue. This is the first time the VSNL has gone in for a
credit rating.
 In 2011, Videsh Sanchar Nigam Ltd (VSNL) is planning to set up an internet
consultancy division, which will offer technical consultancy to start-up Internet Service
Provider (ISPs). The Company has recommended a 1:1 bonus to its shareholders and proposed
increasing the authorized share capital to Rs 250 cores from the existing Rs 100 corers.

The Company has become the first Indian Public Sector under taking to list on the New
York Stock Exchange as it began trading its American depository receipts under the ticker
symbol VSL. The Company revised the ratio of bonus shares to 2:1 ratio two new shares for
each existing share from the earlier recommended ratio of 1:1

In 2012, the company has issued Bonus Shares at the rate of 2: L the race for the 25%
stake in Videsh Sanchar Nigham Ltd is hooting up with telecom majors France Telecomm,
Essar and Singapore Telecomm joining the likely-bidders list along with Reliance and Concert-
joint venture between AT &T and British Telecom.

In February 2013, The Company has informed the Tata Group has been decided the
successful bidder in the disinvestments process initiated by the Government (A India (GOI).
Accordingly GOI has entered into share purchase agreement with M/s. PanatoneFinvest, has
"investing vehicle for the' four Tata Group Companies as its principles viz. Tata Sons, Tata
Power, Tata Iron& Steel Company and Tata Industries transfer of 25% stake in VSNL at Rs
202 per share.

• Videsh Sanchar Nigam Ltd (VSNL) has informed BSE that the chairman Mr. R N Tata
informed that Mr. S K Gupta the present Managing Director of the Company on his
Super annotation on September 30 2013, from VSNL will be appointed by Tata’s as
their senior executive for a period of five years and will be deputed to VSNL for a
period of up to two years as its Managing Director.

In 2015, Videsh Sanchar Nigam Ltd (VSNL) has signed an agreement with Dish net DSL
to acquire the internet businesses of the Sterling InfoTech group company for Rs 270 cores.
VSNL floats wholly owned subsidiary in Singapore. VSNL Singapore PTE Ltd, to facilitate
the landing of cable in that country. VSNL has achieved the distention of being the first
Telecom Service provider globally to achieve the TL 9000 Quality Management System
Certification.
 In 2016, Delist equity shares of the Company from the Calcutta Stock Exchange
Association Ltd (CSA). VSNL American joints Comptel/ ASCEN.

SHARE HOLDING PATTERN

Share Holding
31/12/2019 31/09/2019 30/09/2019
Pattern as on
Face Value 10 10 10
 % % %
No Of No Of No Of
Share Holders Holdin Holdin Holdin
Shares Shares Shares
g g g
PROMOTER'S HOLDING

Foreign Promoters 0 72.72 0

0 0 0
207,247,38 72.7 20,724,738
Indian promoters 0 20,724,7382 72.72
2 2 2
Person Acting In
0 46.47 0 0 0 0
Concert
207,247,38 72.7 207,247,38
Sub Total 207,247,382 72.72
2 2 2
NON PROMOTOR'S HOLDINGS
Institutional investors 0.48
Mutual Funds and
1,366,927 8.81 881,425 544,237 0.19
UTI
Banks Fin. Inst. And
25,110,194 2.35 26,180,838 26,798,910 9.4
Insurance
FIIS 6,696,329 11.64 3,263,721 1,118,304 0.39
Sub Total 33,173,450 31,325,984 28,461,451 9.99
Other Investors 0.72
Private Corporate
2,045,992 0.06 1,979,538 1,149,093 0.4
Bodies
NRI'S/OCB's/Foreig
1,78,508 0 36,125,021 38,043,291 13,35
n others
GDR/ADR 0 0 0 0 0
Directors/
0 0 0 0 0
Employees
Government 0 11.25 0 0 0
Others 32,074,092 12.03 2,235 2,235 0
Sub Total 34,298,592 3.61 38,106,795 3,919,419 13.75
General Public 10,280,576 9,319,840 10,096,548 3.54
 285,000,00 285,000,00 285,000,00
Grand Total 100 100
0 0 0

CAPITAL HISTORY
 Class Face
Auth. Issued Paid-up Paid-up
From To of Value
capital Capital Shares(No's) Capital
shares (Rs)

Equity
2013 2014 1,000.00 950 9500000 10 950
Share
Equity
2014 2015 1,000.00 950 9500000 10 950
Share
Equity
2015 2016 1,000.00 2,850,00 28500000 10 2,850.00
Share
Equity
2016 2015 3,000.00 2,850.00 28500000 10 2,850.00
Share
Equity
2015 2016 3,000.00 2,850.00 28500000 10 2,850.00
Share
Equity
2016 2017 3,000.00 2,850.00 28500000 10 2,850.00
Share
Equity
2017 2018 3,500.00 2,950.00 29500000 10 2,950.00
Share
Equity
2018 2019 3,500.00 2,950.00 29500000 10 2,950.00
Share

FINANCIAL STATEMENTS
 Particulars 2019 2018 2017 2016 2015
Balance Sheet
Equity Share Capital 285 285 285 285 285
Preference Share Capital 0 0 0 0 0
Total Reserves & Surplus 4889 4889 5586 5040 6304
-Revaluation Reserves 0 0 0 0 0
Total Debt 63 63 354 575 0
Total Liabilities 5237 5237 6225 5900 6589
Net Block 1974 1974 2389 1973 1916
CWIP 0 0 0 298 497
Investments 2089 2089 656 366
111 4065
Net Current Assets 1174 1174 3180 3262

0 0 0 0 0
Miscellaneous Expenditure
Total Assets 5237 5237 6225 5900 6589
Sales 3200 3164 4538 6508 7298
Other Income 102 208 274 604 668
Total income 3302 3371 4812 7112 7966
Operating Profit 933 716 1401 2228 2684
Interest 0 0 0 ' 23 0
Depreciation 226 172 147 131 116
Tax 231 166 474 667 789
Net Profit 476 378 780 1407 1779
Dividend (Rs. Cr) 128 128 242 2493 1425
Face Value Per Share 10 10 10 10 10
Dividend Per Share(Rs) 4 4.5 8.5 87.5 50
Earnings Per Share 17 13 27 49 62

EARNINGS PER SHARE IN VSNL :

 YEARS 2015 2016 2017 2018 2019

EARNING PER SHARE 62 49 27 13 17

EARNING PER SHARE = SHARE HOLDERS NETWORTH

NO. OF EQUITY SHARES

Graph

YEARS EARNING PER SHARE

2015 2016 2017 2018 2019

62 49 27 13 17

1 2 3 4 5

INTERPRETATION:

The above graph shows that earning per share for five years VSNL
standings. In the year 2019 it shows 17, in the year 2018 it shows 13, in the year 2017 it shows
27, in the year 2016 it shows 49, and in the year 2015 it shows 62 earning per share.

Ratio Analysis
 Ratios 2019 2018 2017 2016 2015

Dividend Per Share 4 405 805 8705 50

Earnings Per Share 17 13 27 49 62

Pay Out Ratio 23.52 34.61 31.48 178.57 80.64

Book Value Per Share 181.54 181.3 194.75 176.98 231.18

Return On Net Worth (%) 9.2 6.8 13.9 23.6 27.9

Operating Profit Margin 29.2 22.6 30.9 34.2 36.8

Total Assets Turnover Ratio(Times) 0.61 0.6 0.72 1.1 1.1

Gross Profit Margin (%) 26.53 11.33 22.77 23,23 25.27

Net Profit Margin (%) 14.4 11.24 16.12 20.18 21.8

Interest Coverage Ratio N/a 1590.6 N/A 97.9 29820.7

Share Price /31-Mar(BSE) 187.15 204.9 73.5 186.95 290

Share Price /31-Mar(NSE) 183.8 205.1 73.15 187.6 293.3

INTREPRATETION:

In the above table a dividend showing a decreasing trend. EPS is fluctuating. Return
on net worth increase -when compared to 2016. Operating margin is very impressive 2019.
Due to its reduction in costs; Total asset turnover ratio is ok. The margin sales is showing an
increasing trend; due to the decrease other segments of the business the share price might come
down as compared to last year or may be due to different Government ceilings in industry.
Financial Highlights
Period 03/10 03/09 Growth (%) 03/09 03/08 Growth (%)
{Rsmn) 3 3 qoq 12 12 Yoy
Revenues 9017 7783 15.9 33030 31642 4.4
Expenditure 6994 6.116 14.4 25339 26340 3.8
Operating Profit 2.023 1.667 21.4 7691 5302 45.1
Other income 323 349 7.4 1074 2069 48.1
Interest - - - - - -
Depreciation 742 503 47.5 2439 1724 41.5
PBT 1.604 1.513 6.0 3626 5647 12.0
Tax 1245 642 93.9 2976 1656 79.7
PAT 359 871 58.8 3350 3991 16.5
Extra Ordinary Items 473 75 530.7 473 1030 54.1
Prior Period Time 3 26 - 4687 16 -
Profit on sale of
4109 - - - 800 -
Investments
APAT 3.992 822 385.6 7564 3.777 100.6
OPM(%) 22.4 21.4 1.0 23.3 16.8 6.5
Equity 2850. 2850 - 2850 2850 -
EPS(Rs)Annualized 56.0 11.5 - 26.5 13.3 -
P/E 3,93 - - 8.29 - -

INTREPRATETION:

For the full year ended March 31st 2019, VSNL witnessed a moderate top line growth of
4.4% to Rs 33bn. The sluggish growth was on account of lower tariff despite higher volumes
in the voice business. The core business of the Company witnessed a growth of 5.3% to RS
32.4bn were as the other services saw a decline of 27% to Rs. 630mn. Various ceilings on
international long distance Telephony and broadband have impacted the Companies top
line.
 Operating margin improved by 650bps to 23.3%. This expansion in OPM was due to the
focus of the Company on reducing the costs. The Company underwent a VRS programmed and
the benefit of which is visible in the year. Operation and other expenditure increased by 260bps
for the financial year.

EBIT margins for the international Telephony and services improved by 820 bps, where as
margins for other services declined by 220bps. This is largely due to severe competition which
is evident in the sector today.

PAT increased by 100% to Rs 7.5bn. This was largely due to profit from sale of long term
investment in New Skies Satellite N.VG. And Intelsat for Rs 4.1bn. EPS for the year stood at
Rs 26.5from Rs 13.3 hi FY 05.

Revenues increased by a modest 15.9% to Ruston. This sluggish growth in top line is
attributed to lower tariffs despite growth in volumes in the voice business. Data business saw
strong performance. Internet Telephonic segment, which includes voice data and internet
services grew by 18% to Rs 8.8bn, whereas the other services declined by 44.8% to Rs 138mn.

Segmental Analysis
Growt Growt
03/0 03/0
Period h 03/10 03/09 h
6 5
(%) (%)
RsinMin 3 3 Qoq 12 12 Yoy
Internationa1teIephone&relatedservice 3240 3077
8879 7533 17.9 5.3
s 0 5
Other Services 138 250 44.8 630 867 27.3
3303 3164
Total 9017 7783 15.9 4.4
0 2

Operating Margins remained flat at a 22.4% has compared to 28.4% in Q4 FY05.

Margins remained flat largely due to sluggish top line growth and a 150bps increased in
operations and other expenditures. Further decline in OPM was stemmed by a 270 bps
improvement in network operation cost

Cost Analysis
 As% of Net sales 03/10 03/09 Inc/Dec 03/10 03/09 Inc/Dec
Period 3 3 qoq 12 12 yoy
Network Operations Costs 56.1 58.9 2.8 60.6 69.7 9.1
Operations and Other
17.4 15.9 1.5 11.8 9.2 2.6
Expenses
Salaries And Related Cost 4.0 3.7 0.3 4.3 4.3 --
Total expenditure 77.6 78.6 1.0 76.7 83.2 6.5

EBIT margins improved by 360bps for the international telephony business were as
margins declined for other services. The other service business has witnessed a decline in
margins due to falling tariffs and competition.

Period 03/10 03/09 Inc/Dec 03/10 03/09 Inc/Dec

As% of sales 3 3 qoq 12 12 yoy
International telephone
45.2 41.6 3.6 40.2 31.9 8.3
& related services
Other Services 12.3 44.0 31.7 6.2 8.4 2.2
Total 44.3 41.7 2.6 39.5 31.3 8.2

PAT increased by a 386% to Rs 3.9bn. This huge increase was largely due to profit from sale
of long term investment in New Skies Satellites N V and Intelsat Ltd for Rs 4.1bn exceptional
terms include provision for recoverable pension obligation of Rs 473mn. This has translated
into an analyzed EPS of Rs 56. Stripping these items; PAT would have increased by 49% YOY.

• An amount of Rs 547mn was recoverable form the Government on account of

proportionate share of pension obligation and payments erstwhile OCS employees in
relation to past services. Out of which the Government has offered Rs 74mn as
settlement as the matter is disputed. As a result a provision of Rs 473 million has been
made in the year ended March 31st 2019.

• The Board of Directors has recommended a dividend of 45% and a special dividend of
15% for the financial years.

Trend Analysis
 YEAR Sales Profitability
Trend% Amount(Rs) Trend %
Amount(Rs)
2015 6831 100 1325 100
2016 6894 101 840 63
2015 7298 107 1779 134
2016 6508 95 1407 106
2017 4538 66 780 59
2018 3164 46 378 29
2019 3200 47 476 36

The above table and the graph shows the trend of sales and profitability for seven years VSNL
standing at 17th and 24 the position in the industry in current FY 2019.

TREND ANALYSIS

YEARS 2015 2016 2015 2016 2017 2018 2019

SALES 100 101 107 95 66 46 47

PROFIT 100 63 134 106 59 29 36

Graph
 SALES PROFIT

134

107 106
100 100 101
95

63 66
59
46 47
36
29

2013 2014 2016 2016 2017 2018 2019

INTERPRETATION:

The above table and the graph shows the trend of sales and profitability for seven years
VSNL standing at 17 th and 18 th position in the industry in current FY2019

From the graph it is clear that the company showed a minimum increasing trend in sales
and profit upto 2019.
 CHAPTER-6

FINDINGS
SUGGESTIONS
&
BIBLIOGRAPHY
 FINDINGS

• Future selling or buying time by this analysis.

• This analysis is very much the investor is able to know the risk and return of the shares
by using the Analysis.

• This analysis is useful to each and every investor who wants long and short term
investments.

• Estimating future EPS in this way may give good result in future.

• Investors must have a basic idea about the factors which belongs to a particular share
when he goes through this analysis.

• The investor is able to know useful to investors to avoid big future loss than when be
invest I shares without any analysis.

• By technical analysis investor is able to know the growth of a share (steady growth, fast
growth, etc.)

• If the investor is not able to understand the factors he can able to know the factors from
technical analysis easily.
 SUGGESTIONS

• Before the buying the shares it is essential that investor must check the position of
Liquidity ((ALL ‘A’ group shares has high liquidity). The source of information about
can get from brokers.

• Avoid buying share of a company with an equity capital of less than Rs.1 core.

• Avoid buying shares of a company with a number of share holders less than 5000.

• Avoid buying share a company which are traded in frequently.

• Investor must show interest in steady and fast growth sharers only.

• Avoid buying turn around (making loss continuously) cyclical (cycles of good and bad
performance) Dog shares (very inactive or passive).

• Avoid companies with low P/E ratio. The P/E ratio is relative to the market as always.

• If the investor is confident of EPS moving up and expects the P/E to increase as Well
stick to the shares and be patients.

• Another side of the analysis is that investor must also know the two factors.

Is the market be in a “good mood “or not at that time?

How will the market feel about the share?

These suggestions are given after studying the share movement in the market. These
are very use full to the individual investor to get good results.
 BIBLIOGRAPHY

BOOKS:

1. INVESTMENTS

- William F.Sharpe, Gordon J.Alexander& Jeffery V.Baily

2. Security Analysis and Portfolio Management

-PunithavathyPandian

3. Financial Management

-M Y Khan& P K Jain

WEBSITES:

Http: / / www.nseindia.com

Http: / / www.bseindia.com

Http: / / www.investopedia.com

Http: / / www.hseindia.com

Http; / / www.economictimes.com

Http: / / www.business-standard.com