1. INDUSTRIES IN INDIA
In this section of Major Industries in India we will discuss about the
leading market industries and industries products. We will discuss in
detials about textiles industry, chemicals industry, food processing
industry, steel industry, cement industry, mining, petroleum and
software.
According to some experts, it is said that the share of the US in the
world GDP is expected to fall, from 21% to 18%, and the share of India
in the world GDP is going to rise from 6% to 11% by 2025. Hence,
India is to emerge as a third pole, after the US and China, in the global
economy.
The expectation is based upon the growth in all the sectors in India.
One of them is the industry sector. It measured a growth rate of 6.2%
in October 2003 with a sharp increase of nearly 4% in October 2004,
marking 10.1%. Textile industry is the largest industry in terms of
employment.
The following discusses about the major industries in India and also
major export industry:
LIST OF MAJOR INDUSTRIES IN INDIA
Textiles
The Indian textile industry covers a wide gamut of activities. Its
production ranges from raw materials such as cotton, jute, silk and
wool to a high value-added products like fabrics and garments to
consumers. The industry make use of different varieties of fibres, be it
natural fibres, man made fibres or blends of such fibres.
In Indian economy, the textile industry plays a significant role. It
provides direct employment to approximately 35 million people and
contributes 4 per cent of GDP. It fetches 35 per cent of gross export

2. earnings and contributes 14 per cent of the value-addition in the
manufacturing sector.
Chemicals
The chemical industry in India is one of the oldest domestic industries
and it currently produces nearly 70,000 commercial products, from
cosmetics and toiletries, to plastics and pesticides. The country is the
13th largest exporter of pesticides and disinfectants globally. In terms
of volume, it figures 12th largest producer of chemicals. The
petrochemical, agrochemical, and pharmaceutical industries are some
of the fastest growing sectors in the Indian economy.
The estimated worth of chemical industry is $28 billion and it accounts
for 12.5 per cent of the total industrial production of India and 16.2 per
cent of the its total exports.
Food Processing
India is one of the major food producing country in the world but
accounts less than 1.5 per cent of international food trade. Hence,
there is a vast scope for the expansion of this industry. The food
processing industry is estimated (2004) at Rs 3,150 bn (US$ 70 bn),
including value added products of Rs 990 bn (US$ 22bn). The
estimated growth of this industry is 9-12% and on the basis of
estimated GDP, the growth rate is 6-8%, during the tenth plan period.
The industry employs 1.6 mn workers and it is projected to grow to 37
mn, direct and indirect, by 2025.
Steel
The 4000 years Indian steel industry is on the upswing. During April-
December 2004-05, the production of the finished steed recorded a
growth of 4 per cent and reached 28.3 million tonnes. In the world
scenario, Indian steel industry ranks 10th. It represents approximately
Rs. 9,000 crore of capital and provides direct employment to more than
0.5 million people.

3. Major Players: Steel Authority of India (SAIL), Bbilai Steel Plant,
Durgapur Steel Plant, Rourkela Steel Plant, Bokaro Steel Plant.
Cement
Cement industry in India comprises of 125 large cement plants and
over 300 mini cement plants having total installed capacity of 148.28
million tonnes and 11.10 million tonnes per annum respectively. In
addition to this, there are 10 large cement plants owned by various
State Governments. So, the total installed capacity of the country as a
whole stands at 159.38 million tonnes. The export of cement in 2003-
04 was 6.92 million tonnes.
Major Players: Ambuja cement, Aditya Cement, J K Cement and L & T Cement.
Mining
The mining industries share in India's GDP is from 2.2% to 2/5% only
but it contributes to 10-11% in industrial sector's GDP. The organised
mining sector employs nearly 0.7 million people. Small scale mining
approximately contributes to 6% of the total value of mineral
production.
Petroleum
The petroleum industry in India is one of the oldest industry in the
world, with oil being struck as early as 1867 at Makum near Margherita
in Assam, nine years after Col. Drake's discovery in Titusville. Since
then the industry has come a long way. Today, after over fifty years of
independence, the oil sector, has seen the growth of giant national
companies, like ONGC. India represents one of the most exciting oil
markets in the world today.
Major Players in integrated refining and marketing are HPCL, BPCL and IOC.

4. Software
The software industry in India symbolizes India's strength in the
knowledge based economy. It has witnessed a phenomenal growth in
last decade. The Compounded Annual Growth Rate (CAGR) is 42.3%.
According to NASSCOM's projection, the software industries
contribution is expected to grow to 7% by 2008 which started with
0.59% in 1994-95 and reached to 2.87% by 2001-02.
INTRODUCTION OF COMPANIES IN DIFFERNET
INDUSTREIS ggh
top 10 cement companies in India:
1. ACC Limited
2. Ambuja Cements Limited
3. UltraTech Cement Limited
4. India Cement Limited
5. Shree Cement Limited
6. Rain Cement Limited
7. Prism Cement Limited
8. Madras Cement Limited
9. Birla Cement Limited
10. JK Cement Limited

5. Comparasion between ACC Ltd. and Ambuja
Cement Ltd.
ACCLTD
ACC is the oldest cement manufacturer in the country.
ACC's total capacity for the year ended CY10 stood at
27 million tonnes per annum (MTPA) which is about
9% of total Indian capacity. ACC is the second largest
player in the Indian cement industry after UltraTech
Cement (49 MT). With 17 units and a 9,000 strong
dealer network, ACC is one of the few cement
companies to have a pan India presence. With
commissioning of the expansion project at Wadi and
Chanda during 2011, the total installed capacity would
rise to ` 30 million tonnes per annum.
AMBUJACEMENT
Ambuja Cements Ltd (previously known as Gujarat
Ambuja), with a cement capacity of 25 m tonnes per
annum (MTPA), which is approximately 8% of total
industry capacity. Ambuja is the third largest player in
the Indian cement industry following UltraTech Cement
and ACC. The company is particularly strong in the
northern and western markets. It is one of the most
cost effective producers of cement in the country and
its products enjoy strong brand equity in a commodity
business like cement.
EQUITY
SHARE DATA
ACC LTD AMBUJA ACC LTD/
CEMENT
31/12/2011 31/12/2011 AMBUJA
CEMENT
High Rs 1,233 166 742.8%
Low Rs 917 112 818.8%
Sales per share Rs 533.3 55.6 959.1%

6. Earnings per share Rs 69.3 8.0 865.8%
Cash flow per share Rs 96.4 10.9 884.0%
Dividends per share Rs 28.00 3.20 875.0%
Dividend yield (eoy) % 2.6 2.3 113.1%
Book value per share Rs 371.7 52.6 707.2%
Shares outstanding (eoy) m 187.75 1,534.37 12.2%
Bonus/Rights/Conversions - ESOS -
Price / Sales ratio x 2.0 2.5 80.6%
Avg P/E ratio x 15.5 17.4 89.3%
P/CF ratio (eoy) x 11.1 12.7 87.5%
Price / Book Value ratio x 2.9 2.6 109.4%
Dividend payout % 40.4 40.0 101.1%
Rs
Avg Mkt Cap 201,831 213,277 94.6%
m
No. of employees `000 9 0 -
Rs
Total wages/salary 5,656 4,359 129.8%
m
Rs
Avg. sales/employee 11,086.6 20.0 55,433.0%
Th
Rs
Avg. wages/employee 626.3 21.0 2,982.3%
Th
Rs
Avg. net profit/employee 1,440.4 22.0 6,547.1%
Th
INCOME DATA
Net Sales Rs m 100,123 85,312 117.4%
Other income Rs m 4,161 3,187 130.6%
Total revenues Rs m 104,284 88,499 117.8%
Gross profit Rs m 17,071 19,061 89.6%
Depreciation Rs m 5,100 4,462 114.3%
Interest Rs m 969 531 182.5%
Profit before tax Rs m 15,163 17,255 87.9%
Minority Interest Rs m 0 3 0.0%
Prior Period Items Rs m 0 673 0.0%
Extraordinary Inc
Rs m 0 -243 0.0%
(Exp)
Tax Rs m 2,155 5,410 39.8%
Profit after tax Rs m 13,008 12,278 105.9%
Gross profit margin % 17.1 22.3 76.3%
Effective tax rate % 14.2 31.4 45.3%
Net profit margin % 13.0 14.4 90.3%
BALANCE
SHEET DATA
Current assets Rs m 36,761 38,389 95.8%

7. Current liabilities Rs m 38,006 27,100 140.2%
Net working cap to
% -1.2 13.2 -9.4%
sales
Current ratio x 1.0 1.4 68.3%
Inventory Turnover Days 41 40 102.2%
Debtors Turnover Days 12 11 116.6%
Net fixed assets Rs m 68,472 68,453 100.0%
Share capital Rs m 1,880 3,069 61.3%
"Free" reserves Rs m 66,906 75,884 88.2%
Net worth Rs m 69,787 80,644 86.5%
Long term debt Rs m 5,107 567 900.7%
Total assets Rs m 118,164 114,902 102.8%
Interest coverage x 16.6 33.5 49.7%
Debt to equity ratio x 0.1 0.0 1,040.8%
Sales to assets ratio x 0.8 0.7 114.1%
Return on assets % 11.8 11.1 106.1%
Return on equity % 18.6 15.2 122.4%
Return on capital % 21.5 22.4 96.0%
Exports to sales % 0.0 0.9 0.0%
Imports to sales % 4.0 7.5 53.3%
Net fx Rs m -4,329 -7,718 56.1%

8. ACC LTD Financial Summary
No. of
12 12 12
Months
31/12/2009 31/12/2010 31/12/2011
Year Ending
Net Sales Rs m 84,796 82,606 100,123
Sales Growth % - -2.6 21.2
Gross profit margin % 29.1 18.7 17.1
PAT Rs m 15,639 10,775 13,008
PAT Growth % - -31.1 20.7
Dividend per share Rs 23.00 30.50 28.00
Dividend payout % 27.6 53.1 40.4
RoCE % 36.6 21.7 21.5
RoNW % 26.7 17.2 18.7
Debt to equity ratio x 0.1 0.1 0.1
Mkt Cap Rs m 131,136 172,073 201,831
Mkt Cap / Sales x 1.4 1.9 1.8
PERFORMANCE OF ACC AND AMBUJA
CEMENT
Cement: Cautious optimism
If the mood in the stock market
is any indication, cement stocks seem to be back on the average investor's radar.
And why not! Cement is one industry that has grown consistently at around 8% in the
past decade and still shows no signs of slowing down. In fact, if one were to consider
the low per capita consumption of cement in the country, there is still a lot of potential
for the industry to capitalise on. In this article, we try to compare some key
parameters of four major cement companies in the country and also try and throw
some light on their current valuations.

9. ACC Gujarat Ambuja
Price 220 238
OPM 10.2% 27.5%
NPM 3.6% 12.8%
EPS* 9.0 18.0
P/E(x)* 24 13
*FY04 Projections
ACC
Although ACC's performance was far from impressive in FY03, where bottomline
dropped 30%, one cannot afford to ignore a company that has a pan India presence
and boasts of the largest distribution network in the country. Moreover, in the last six
years, ACC has modernized to world standards, almost 50% of its capacity and has
also raised capacity from 7 to 16 m tonnes. This will definitely help the company in
improving its operating efficiencies and as a result any improvement in the prices will
directly benefit earnings. Therefore, going forward, we expect the company's
bottomline to improve substantially on the back of improved efficiencies as well as
sales realisations. The stock is currently trading at Rs 220, a P/E of 24x its projected
FY04 earnings. Although we expect the company to grow, the growth is not expected
to be high enough to justify such high valuations.
Gujarat Ambuja
In the year, when all other cement majors reported a drop in their earnings on
account of poor sales realisations, Gujarat Ambuja managed to improve its
bottomline by almost 20%. This, more than anything else, underlines the resilience of
the company and the capabilities of its management. As seen in the table above,
Gujarat Ambuja operates at margins that are much higher than its competitors, and
as a result, is in a better position to absorb fall in prices. Gujarat Ambuja, due to
better brand recognition and awareness, also enjoys higher realisations for its
cement, despite cement being a commodity. This also to a large extent helped the
company weather the fall in realisation in the last two years. Moreover, its locational
advantages enable it to export the surplus production making sure that its capacities
are effectively utilised and hence give it the benefits of economies of scale.

10. As far as the future performance is concerned, we expect Gujarat Ambuja's operating
margins to decrease marginally, due to lower projected volume growth. The company
might also face increased competition in its major market, i.e. the western region,
particularly from Grasim who, after the acquisition of L&T's cement division, has
gained an entry in the lucrative western market. Notwithstanding these minor
glitches, Gujarat Ambuja's fundamentals still look strong and the company is well
placed to benefit from the growth in the industry. The stock is currently trading at Rs
238 a P/E of 13x its projected FY04 earnings. Gujarat Ambuja is the most cost
efficient player in the industry and therefore should command a superior valuation
than most of its competitors in the industry
AUTOMOBILE INDUSTRIES
Top Automobile Companies in India
Starting from the era when there was too slim of a variety of cars available in
Indian market, Indian automobile industry has come up a long way to have a
diverse array of cars these days. There are a number of top automobile
companies running their operations in India, which again have a range of
models in different segments of cars. However, while looking for top 10
automobile companies in India, one name that would always lead the list is
Maruti Suzuki India. Maruti Suzuki has consistently been the dominant leader
in the Indian automobile industry. However, there are also other big names
like Tata Motors, Mahindra and Mahindra, Hyundai Motors, Hindustan
Motors etc.

11. During its early days, the most of the Indian car auto manufacturers banked
upon foreign technologies. But the scenario has changed over the years and
currently, the Indian auto manufacturers are using their own technology. Due
to the growing pace of Indian automobile market, a number of car
manufacturers including the global leaders have locked their horns in the
Indian auto market.
After the recent setback due to the global recession, the Indian automobile
market has again started to grow up. Though the auto sales except commercial
vehicles started creeping up since the beginning of this financial year, it's only
the month of September 2009 when the market saw buoyant sales. It fuelled
optimism in the industry. The retail trade also started soaring up. The auto
sales saw a 9.6% rise in the month of September with a sale of 1,092,262
units. The passenger vehicle sales also grew by 20.32%. The two wheeler
market was also augmented by 7.67% during the same period with a total sale
of 838,150 units. The same trade is applicable for the three-wheeler market,
which saw a growth of 13.51% (with sale of 41,137 units) during the same
period.
List of Top Automobile Companies in India, 2011(Figures in ` Crores)
2011 ET 500 MCRP
Company Turnover PAT Assets
Rank CR
7 Tata Motors Ltd. 123222.91 9273.62 56499.77 52209.48
Mahindra &
21 37026.37 3079.73 49945.17 36926.19
Mahindra Ltd.
Maruti Suzuki
19 38140.69 2382.37 31475.63 14762.9
India Ltd.
Hero MotoCorp
41 19669.29 1927.9 40398.63 4447.22
Ltd.
46 Bajaj Auto Ltd. 17008.05 3454.89 46885.69 5154.96
Ashok Leyland
67 11133.04 631.3 6653.15 6621.16
Ltd.
Sundaram Clayton
101 7419.41 64.63 529.23 2428.87
Ltd.
TVS Motor
110 6569.99 127.94 2985 1745.06
Company Ltd.

12. 148 Eicher Motors Ltd. 5138.64 243.12 4448.27 474.14
396 Force Motors Ltd. 1574.05 58.62 730.05 583.79
Tata Motors
Tata Motors is the largest automobile company of Asia headquartered in
Mumbai, India. Annual Projected revenue for 2010-11 is US$ 27.629 billion.
It also occupies the number one position in commercial car segment. Tata
Motors enjoys 31.2% of market share in the multi-utility vehicles, which in
luxury car segment, it has 6.4% market share. Most of the Tata Motors'
vehicles are sold predominantly in India and over 4 million vehicles have been
produced domestically within India.
Tata sold 52,531 units of vehicles during September 2009, comparing to
49,647 units during September 2008 (a growth of 6%). In domestic market,
Tata Motors sold 49,650 units during the same period, comparing to 45,234
units in September 2008.
Mahindra & Mahindra Limited (M&M)
Mahindra &Mahindra Limited is another auto-giant in India. A part of the
Mahindra Group, M&M is the largest SUV maker in the country. In
September 2009, M&M registered a domestic sale of record 26,921 units,
comparing to 22,729 units in September 2008 (with an increase of 18.4%). On
the other hand, it sold 15,296 units of UV in the same period comparing to
10,641 units in September 2008 (with a whooping growth of 43.7%).

13. COMPARATIVE STUDY OF TATA MOTORS AND MAHINDRA
AND MAHINDRA
TATA MOTORS
Tata Motors is India's largest CV manufacturer, with an
overall domestic market share of 61.8% in FY11 and
the second largest producer of passenger vehicles
(13% in FY11). In 2008, the company acquired two
iconic brands, 'Jaguar' and 'Land Rover' from Ford for
a total consideration of US$ 2.3 bn and this is likely to
transform it into a global player in the passenger
vehicles space. It is also credited with the launching of
'Nano', the world's cheapest car till date. Tata Motors is
also the first company in the Indian automobile sector
to be listed on the New York Stock Exchange.
M&M
Mahindra & Mahindra (M&M) is engaged in the
manufacture of UVs, tractors, light commercial vehicles
(LCVs) and three-wheelers. While automotive division
comprising UVs, LCVs and three-wheelers contributed
to 60% of FY11 revenues, farm equipment division
accounted for 31% of revenues. Through investment in
its subsidiaries, M&M has interests in sectors like
software, hotels, real estate and financial services.
While the company had a 61% market share in the UV
segment in FY11, it had a 42% share in the tractor
market.

14. EQUITY SHARE
DATA
TATA M&M TATA
MOTORS MOTORS/
31/3/2012 31/3/2012 M&M
High Rs 289 875 33.0%
Low Rs 140 617 22.7%
Sales per share Rs 522.0 1,008.7 51.7%
Earnings per share Rs 42.6 53.1 80.2%
Cash flow per share Rs 60.3 83.7 72.1%
Dividends per share Rs 4.00 12.50 32.0%
Dividend yield (eoy) % 1.9 1.7 111.3%
Book value per share Rs 104.5 284.7 36.7%
Shares outstanding (eoy) m 3,173.54 589.03 538.8%
Bonus/Rights/Conversions FV2,BC ESOP -
Price / Sales ratio x 0.4 0.7 55.6%
Avg P/E ratio x 5.0 14.1 35.8%
P/CF ratio (eoy) x 3.6 8.9 39.9%
Price / Book Value ratio x 2.1 2.6 78.4%
Dividend payout % 9.4 23.5 39.9%
Rs
Avg Mkt Cap 680,724 439,416 154.9%
m
No. of employees `000 29 18 163.7%
Rs
Total wages/salary 122,985 65,909 186.6%
m
Rs
Avg. sales/employee 56,698.0 33,292.8 170.3%
Th
Rs
Avg. wages/employee 4,209.4 3,693.0 114.0%
Th
Rs
Avg. net profit/employee 4,626.2 1,751.9 264.1%
Th
INCOME DATA
Rs
Net Sales 1,656,545 594,176 278.8%
m
Other income Rs 6,618 3,130 211.4%

15. m
Rs
Total revenues 1,663,163 597,306 278.4%
m
Rs
Gross profit 217,586 76,088 286.0%
m
Rs
Depreciation 56,254 18,017 312.2%
m
Rs
Interest 24,047 17,499 137.4%
m
Rs
Profit before tax 143,903 43,702 329.3%
m
Rs
Minority Interest -823 667 -123.4%
m
Prior Period Rs
0 0 -
Items m
Extraordinary Rs
-8,315 973 -854.6%
Inc (Exp) m
Rs
Tax -400 14,076 -2.8%
m
Rs
Profit after tax 135,165 31,266 432.3%
m
Gross profit
% 13.1 12.8 102.6%
margin
Effective tax
% -0.3 32.2 -0.9%
rate
Net profit
% 8.2 5.3 155.1%
margin
BALANCE
SHEET DATA
Current assets Rs m 644,615 290,106 222.2%
Current liabilities Rs m 732,681 219,087 334.4%
Net working cap
% -5.3 12.0 -44.5%
to sales

16. Current ratio x 0.9 1.3 66.4%
Inventory
Days 40 44 91.3%
Turnover
Debtors Turnover Days 18 33 55.3%
Net fixed assets Rs m 562,125 186,924 300.7%
Share capital Rs m 6,348 2,945 215.6%
"Free" reserves Rs m 303,380 139,693 217.2%
Net worth Rs m 331,499 167,702 197.7%
Long term debt Rs m 279,625 160,399 174.3%
Total assets Rs m 1,403,919 635,310 221.0%
Interest coverage x 7.0 3.5 199.7%
Debt to equity
x 0.8 1.0 88.2%
ratio
Sales to assets
x 1.2 0.9 126.2%
ratio
Return on assets % 11.3 7.7 147.7%
Return on equity % 40.8 18.6 218.7%
Return on capital % 26.0 19.2 135.7%
Exports to sales % 2.2 3.0 73.0%
Imports to sales % 1.4 1.5 96.8%
Net fx Rs m -324 6,840 -4.7%

17. TATA MOTORS Financial Summary
No. of
Months 12 12 12
Year 31/03/2010 31/03/2011 31/03/2012
Ending
Net Sales Rs m 918,934 1,221,279 1,656,545
Sales Growth % - 32.9 35.6
Gross profit margin % 7.9 13.7 13.1
PAT Rs m 25,710 92,736 135,165
PAT Growth % - 260.7 45.8
Dividend per share Rs 15.00 20.00 4.00
Dividend payout % 33.3 13.7 9.4
RoCE % 16.1 41.0 26.0
RoNW % 31.6 48.5 40.8
Debt to equity ratio x 3.3 0.6 0.8
Mkt Cap Rs m 287,277 650,793 680,724
Mkt Cap / Sales x 0.3 0.5 0.4
MAHINDRA FINANCE Financial Summary
No. of
Months 12 12 12
Year 31/03/2009 31/03/2010 31/03/2011
Ending
Interest Income Rs m 13,817 15,612 20,435
Interest Income Growth % - 13.0 30.9
Net Interest Income Rs m 8,815 10,684 13,890
Net Interest Margin % 12.7 11.7 10.4
Gross profit margin % 43.9 47.2 43.6

18. PAT Rs m 2,196 3,558 4,927
PAT Growth % - 62.0 38.5
Dividend per share Rs 5.50 7.50 10.00
Dividend payout % 24.3 20.4 21.1
RoA % 3.0 3.8 3.9
RoNW % 15.2 20.6 19.6
TAXTILE INDUSTREIS IN INDIA
1. Arvind Mills
2. Raymonds
3. Reliance Textiles
4. Bombay Dyeing Ltd
5. Grasim Industrie
Arvind Mills: A
review
Arvind Mills is the flagship company of the Lalbhai Group. It is world‟s third largest
and India‟s largest denim producer and commands 70% domestic market share with
120 m meters of denim rolling out every year. The company is also into knitting and
shirting. Apart from textiles, Arvind Mills has presence in ready-to-wear, agrochemical
and telecom industry through its subsidiaries.

19. Denim segment remains the lead performer for Arvind Mils (63% of FY03 revenues).
The domestic denim business is expected to grow at a faster rate of around 6% as
compared to 4% in the global market. Internationally, this segment faces competition
from China, Indonesia and Hong Kong. In India, Arvind rules the market as small
denim manufacturers suffer from financial and capacity limitations.
Shirting contributed to around 22% to FY03 revenues. Domestically, the division
faces competition from the lower end of the market. The company expects shirting
business volumes to increase, as the global shirting business is growing at around
6% whereas domestically, this segment is growing at around 25%. Arvind Mills is
focusing on HVCS (High Value Cotton Shirting) because it commands premium in
both domestic and international markets. The major consumers of HVCS are
countries like Europe, Japan and US. But due to quota restrictions applied by
European and US markets, the company is not able to cash the opportunity.
However, prospects for this segment looks better post 2005. Arvind Mills is also
targeting key brands that are expected to improve its orderbook position and
margins.
The company has presence in the garments segment through its subsidiary. Garment
is a growth area and has low capital requirement but high value addition. The
industry is labour intensive, so the company has the opportunity to take advantage as
it has access to cheap labour.
Knitting is another key growth area for the company, as demand in the domestic and
international markets are expected to grow by 15% and 5% respectively in medium
term. The company is already supplying to domestic majors Wills and Madura
Garments. Domestically, this segment faces competition largely from unorganised
and regional players.
Raw material cost as percentage of net sales is expected to go down from the current
level of 25% because of good cotton crop this year. Debt restructuring is expected to
improve net profit margin (8.7% in FY03). To put things in perspective, interest cost
was lower by 22% YoY, in 1QFY04. However, rupee appreciation as against US
dollar can affect the margins, because company earns more than 50% revenues from
exports. Out of the total export earnings, around 70% is US dollars denominated.

20. At the current price level of Rs 52, the stock trades at P/E multiple of 7.1x FY03
earnings. The phasing out of the MFA (multi fiber arrangement) in 2005 would
provide Indian majors like Arvind Mills an opportunity to improve access to major
textile-consuming markets based in the Europe and US. However, concerns
regarding the sustainability of strength in denim prices and the past track record
remain intact
Comparison
Result
ARVIND LTD
Arvind Mills is India's largest denim
manufacturer and exporter, with a total
capacity of 120 mm. The company also
ranks among the top three denim
producers worldwide. It manufactures and
sells textiles (34 mm capacity) and ready to
wear garments. The company has also
aggressively entered the garmenting and
knits businesses. Through a GDR issue,
the company has acquired ICICI Venture's
stake in Arvind Brands. Poor performance
of the denim division and forex losses has
eroded the company's bottomline over the
past couple of quarters.
RAYMOND
Raymond is India's largest and world's
third largest integrated manufacturer of
wool and wool blended fabrics. Its fabric
capacity stood at around 33 m meters
(mm) at the end of FY10. It is also the
domestic market leader in files and tools
with around 80% market share. It has a
widespread distribution network across the
country, which it can leverage to sell some
of its well-recognised brands.

21. EQUITY
SHARE DATA
ARVIND RAYMOND ARVIND
LTD LTD/
31/3/2011 31/3/2012 RAYMOND
High Rs 75 430 17.4%
Low Rs 30 300 10.0%
Sales per share Rs 158.1 588.6 26.9%
Earnings per share Rs 6.5 25.4 25.5%
Cash flow per share Rs 13.3 52.4 25.3%
Dividends per share Rs 0.00 2.50 0.0%
Dividend yield (eoy) % 0.0 0.7 0.0%
Book value per share Rs 66.6 221.9 30.0%
Shares outstanding (eoy) m 254.40 61.38 414.5%
Bonus/Rights/Conversions ESOS - -
Price / Sales ratio x 0.3 0.6 53.6%
Avg P/E ratio x 8.1 14.4 56.3%
P/CF ratio (eoy) x 4.0 7.0 56.8%
Price / Book Value ratio x 0.8 1.6 47.9%
Dividend payout % 0.0 9.9 0.0%
Rs
Avg Mkt Cap 13,356 22,404 59.6%
m
No. of employees `000 0 0 -
Rs
Total wages/salary 3,948 4,754 83.0%
m
Rs
Avg. sales/employee 20.0 20.0 100.0%
Th
Rs
Avg. wages/employee 21.0 21.0 100.0%
Th
Rs
Avg. net profit/employee 22.0 22.0 100.0%
Th
INCOME DATA
Net Sales Rs m 40,212 36,129 111.3%
Other income Rs m 247 1,002 24.7%
Total revenues Rs m 40,459 37,131 109.0%

22. Gross profit Rs m 5,077 4,135 122.8%
Depreciation Rs m 1,725 1,658 104.0%
Interest Rs m 2,142 1,405 152.5%
Profit before tax Rs m 1,457 2,074 70.3%
Minority Interest Rs m -5 -12 41.7%
Prior Period Items Rs m 0 -1 0.0%
Extraordinary Inc
Rs m 301 109 276.1%
(Exp)
Tax Rs m 105 613 17.1%
Profit after tax Rs m 1,648 1,557 105.8%
Gross profit margin % 12.6 11.4 110.3%
Effective tax rate % 7.2 29.6 24.4%
Net profit margin % 4.1 4.3 95.1%
BALANCE
SHEET DATA
Current assets Rs m 22,791 21,699 105.0%
Current liabilities Rs m 10,639 16,241 65.5%
Net working cap to
% 30.2 15.1 200.0%
sales
Current ratio x 2.1 1.3 160.3%
Inventory Turnover Days 112 93 121.3%
Debtors Turnover Days 45 64 70.7%
Net fixed assets Rs m 26,850 14,742 182.1%
Share capital Rs m 2,544 614 414.3%
"Free" reserves Rs m 10,409 15,442 67.4%
Net worth Rs m 16,941 13,623 124.4%
Long term debt Rs m 11,905 8,843 134.6%
Total assets Rs m 50,081 39,849 125.7%
Interest coverage x 1.7 2.5 67.9%
Debt to equity ratio x 0.7 0.6 108.3%
Sales to assets ratio x 0.8 0.9 88.6%
Return on assets % 7.6 7.4 101.8%
Return on equity % 9.7 11.4 85.1%
Return on capital % 13.5 15.9 84.9%
Exports to sales % 28.3 3.9 726.9%
Imports to sales % 4.2 7.5 56.3%
Net fx Rs m 9,065 -1,606 -564.4%

23. INDIAN TELECOM INDUSTRY
At 861.48 million connections in April 2011' Indian Telecom
Industry' is the third largest and fastest growing in the world.
According to Cellular Operators' Association of India (COAI), the
GSM cellular subscriber base has reached to 590.19 million in May
2011 from 580.66 million at the end of April 2011. There were
826.93 million total wireless subscribers (including GSM and CDMA)
in the country at the end of April 2011. As per projections, wireless
telephony will continue to fuel growth in the Indian telecom
industry with mobile subscribers base in India is expected to reach
1.159 billion by 2013.
The wireless technologies currently in use in ' Indian Telecom
Industry ' are Global System for Mobile Communications (GSM) and
Code Division Multiple Access (CDMA). There are primarily 11 GSM
and 5 CDMA operators providing mobile services in 22
telecommunication circles, covering more than 2000 towns and
cities across the country. Among leading mobile operators in India
include Bharti Telecom with 19.88% market share, followed by
Reliance with 16.80%, Vodafone with 16.59%, Idea Cellular with
11.16%, state owned BSNL with 11.05%, TATA with 10.8%, Aircel
with 6.79%, and all others accounting for just about 6.93% of
market share.

24. Over the
last 5
years, nine
out of
every ten
new
telephone
connection
s have
been
wireless.
Consequently, wireless now accounts over 95% of the total
telephone subscriber base, as compared to only 40% in 2003. And
the numbers are still growing for 'Indian Telecom Industry '.
' Telecom Industry in India ' is regulated by 'Telecom Regulatory
Authority of India' (TRAI). It has earned good reputation for
transparency and competence. Three types of players exists in
' Telecom Industry in India ' community -
State owned companies like - BSNL and MTNL.
Private Indian owned companies like - Reliance Infocomm and Tata
Teleservices.
Foreign invested companies like - Hutchison-Essar, Bharti Tele-
Ventures, Escotel, Idea Cellular, BPL Mobile, Spice Communications
etc.
The ' Indian Telecom Industry ' services is not confined to basic
telephone but it also extends to internet, broadband (both wireless
and fixed), cable TV, SMS, IPTV, soft switches etc. The bottlenecks for
' Indian Telecom Industry ' are:
Slow reform process.
Low penetration. Service providers bears huge initial cost to make
inroads and achieving break-even is difficult.

25. Huge initial investments.
Limited spectrum availability and interconnection charges between
the private and state operators.
The Government Broadband Policy 2004, had a target to create 9
million broadband connections and 18 million internet connections
in 2007. Broadband subscription reached 12.01 million in April
2011.' Indian Telecom Industry ' is currently expected to contribute
nearly 1% to India's GDP which is heartening and estimated to grow
further and brighten the ' Scenario of Indian Telecom Industry '.
The Communication Industry in India is one of the fastest
developing sectors in the country and is estimated to become the
second biggest international telecom market in the next few years.
As per the report published by the Telecom Regulatory Authority of
India (TRAI), the total number of telephone users in India crossed
806.13 million in January 2011 as compared to 787.28 million in the
previous year during the same period. The Indian communication
industry has thereby registered a growth of 2.39 %. The wireless
telephone subscribers touched 771.18 million in January 2011 as
against 752.19 million during the same period in 2010.
The growth in communication industry was triggered by an increase
in the revenues generated from both landline and mobile facilities.
As per the Business Monitor International report, the nation is all set
to include 8 to 10 million cellular phone subscribers on monthly
basis. At this pace the communication industry is expected to
encompass more than half of India's population i.e. 612 million
cellular phone subscribers by mid 2012.
In addition, as per a research carried out by Nokia, the
communications sector is estimated to surface as the biggest driving
component in India's GDP with a contribution of about 15.4% by the
FY2014.

26. Key Players in Indian Communication Industry
With the coming in of several new players the level of competition
has increased, tremendously in the telecom industry in India.
Currently the industry is witnessing as many as 15 players.
According to the latest data by Telecom Regulatory Authority of
India of September 30, 2010, it is Bharti Airtel that is leading the
communication sector in India with 20.8 per cent market share,
followed by Reliance Communication which holds 17.1 per cent
market share, Vodafone with 16.8 per cent market share, BSNL with
11.4 per cent market share, Tata with11.5 per cent, Idea with 10.8
per cent and Aircel holding 6.8 per cent. The remaining market
share is held by the other small players that are relatively new in the
industry.
Revenue and Profit of Top Company for year 2010
Company Revenue Profit
Bharti Airtel $9.290 billion $2.079 billion
Reliance $ 45.25 billion $ 99 million
BSNL 32,045 crore 78.06 crores
Tata Communications 11,025.56 crore 538.80 crore
India as an emerging Value-Added Services Market
As per a research conducted by KPMG, the Indian mobile value-
added services (MVAS) reached US$ 2.45 billion in FY December
2010. Value-Added Services account for almost 10 percent of the
total revenues earned by the wireless industry. Furthermore the
revenues earned by VAS are going to increase by almost 12-13 per
cent by the end of 2011. To benefit from the emerging MVAS
market in India, Reliance Communications and Bharti Airtel Limited
are all set to introduce online cellular phone applications in Indian
retail stores.

27. India as an emerging telecom equipment manufacturing Market
The manufacturing of Cellular phone in India is predicted to expand
at an annual rate of 28.3% till the FY 2011. The production would
automatically generate profits and is predicted to increase at an
annual rate of 26.6% till 2011, reaching the target of USD13.7
billion.
Chief Investments in the Communication Industry in India
Over the past one decade, the flourishing Indian Communication
industry has been successful in drawing the attention of
conglomerates that have invested and are willing to invest more in
the sector. With the influx of new telecom giants in Indian market,
the investments are likely to gain immense momentum:
As per data published by the Department of Industrial Policy
and Promotion (DIPP), the communications industry in India
received foreign direct investment (FDI) of about US$ 1.33
billion in January 2011. The total foreign direct investment
received by the sector from April 2010 to January 2011 is
around US$ 10.26 billion.
Investment of USD 6 bn by Vodafone Essar for the next 3
fiscal years in order to expand its list of cellular phone
subscribers to 100 million against the existing 40 million.
Telenor, Norway based telecom giant has purchased 7% of
shares in Unitech Wireless and now possesses 67.25% by
bringing in an investment of USD 431.70 million.
Indian government owned telecom player, BSNL will invest
USD1.17 billion in its WiMax scheme.
A proposal of foreign direct investment worth USD 660.1
million by Federal Agency for State Property Management of
the Russian Federation has been recently approved by the
Indian government. The Agency would be acquiring 20%
stake in Sistema-Shyam after bringing in the investment.

28. A USD 1 billion investment will be brought in by Tata
Teleservices in its newly introduced GSM facility Tata
DoCoMo.
Comparison Result
BHARTI AIRTEL
Bharti Airtel is the largest mobile telephony operator in the GSM
space with 22% share of the Indian wireless market (as at the end
of June 2010). The company, apart from being the largest player in
the mobile segment with subscribers in all the 22- telecom circles
of the country, also provides varied services like fixed line,
broadband and retail internet access. Bharti's network spans over
440,023 non-census towns and villages in India. During the period
FY05 to FY10, the company grew its sales and profits at
compounded annual rates of 39% and 50% respectively.
RELIANCE COMMUNICATIONS
Reliance Communication Ltd. (RCL) is the second largest private
sector mobile telephone operator in India with a wireless (CDMA
and GSM) subscriber base of nearly 50 m. The business of the
company is spread across three segments - Global, Enterprise and
Personal. The 'Global' business caters to voice and data market. In
the voice market, RCL is the carrier of national and international
voice traffic for telecom operators, telecom service providers and
its internal customers. The data business owns the largest private
submarine cable system in the world, which carries data across six
continents. The 'Enterprise' segment serves 750 of the top 1,000
enterprises in India, by offering a wide array of products that
comprise of voice, data, Internet, and IT infrastructure management
services. The 'Personal' segment offers voice, data and value
added services for the individual consumers and enterprises, via its
CDMA and GSM-based mobile and fixed wireless services.
EQUITY SHARE
DATA
BHARTI RELIANCE BHARTI AIRTEL/
AIRTEL COMMUNICATIONS
31/3/2011 31/3/2011 RELIANCE
COMMUNICATIONS
High Rs 373 205 182.0%
Low Rs 257 75 342.7%
Sales per share Rs 156.6 108.7 144.1%
Earnings per share Rs 18.9 6.5 289.5%
Cash flow per share Rs 45.8 38.0 120.3%
Dividends per share Rs 1.00 0.50 200.0%

29. Dividend yield (eoy) % 0.3 0.4 88.9%
Book value per share Rs 128.4 196.2 65.4%
Shares outstanding (eoy) m 3,797.53 2,064.03 184.0%
Bonus/Rights/Conversions - - -
Price / Sales ratio x 2.0 1.3 156.1%
Avg P/E ratio x 16.7 21.5 77.7%
P/CF ratio (eoy) x 6.9 3.7 187.0%
Price / Book Value ratio x 2.5 0.7 343.8%
Dividend payout % 5.3 7.7 69.1%
Rs
Avg Mkt Cap 1,196,222 288,964 414.0%
m
No. of employees `000 23 28 83.3%
Rs
Total wages/salary 32,784 14,757 222.2%
m
Rs
Avg. sales/employee 25,444.9 7,992.3 318.4%
Th
Rs
Avg. wages/employee 1,402.8 525.8 266.8%
Th
Rs
Avg. net profit/employee 3,066.7 479.5 639.6%
Th
INCOME DATA
Net Sales Rs m 594,672 224,304 265.1%
Other income Rs m 4,882 6,214 78.6%
Total revenues Rs m 599,554 230,518 260.1%
Gross profit Rs m 199,315 83,943 237.4%
Depreciation Rs m 102,066 65,038 156.9%
Interest Rs m 25,349 10,163 249.4%
Profit before tax Rs m 76,782 14,956 513.4%
Minority Interest Rs m 0 -1,503 0.0%
Prior Period Items Rs m 0 0 -
Extraordinary Inc
Rs m 12,681 121 10,480.2%
(Exp)
Tax Rs m 17,790 118 15,076.3%
Profit after tax Rs m 71,673 13,456 532.6%
Gross profit margin % 33.5 37.4 89.6%
Effective tax rate % 23.2 0.8 2,936.6%
Net profit margin % 12.1 6.0 200.9%
BALANCE
SHEET DATA
Current assets Rs m 112,077 164,648 68.1%
Current liabilities Rs m 369,845 139,608 264.9%
Net working cap to
% -43.3 11.2 -388.3%
sales

30. Current ratio x 0.3 1.2 25.7%
Inventory Turnover Days 1 8 15.6%
Debtors Turnover Days 34 65 52.0%
Net fixed assets Rs m 651,426 729,409 89.3%
Share capital Rs m 18,988 10,320 184.0%
"Free" reserves Rs m 413,945 380,980 108.7%
Net worth Rs m 487,668 404,992 120.4%
Long term debt Rs m 532,338 216,928 245.4%
Total assets Rs m 1,420,003 947,227 149.9%
Interest coverage x 4.0 2.5 163.0%
Debt to equity ratio x 1.1 0.5 203.8%
Sales to assets ratio x 0.4 0.2 176.9%
Return on assets % 6.8 2.5 274.0%
Return on equity % 14.7 3.3 442.3%
Return on capital % 11.3 3.8 294.9%
Exports to sales % 0.0 0.0 -
Imports to sales % 3.2 5.1 62.6%
Net fx Rs m -20,574 -13,397 153.6%

31. BANKING INDUSTRY IN INDIA
The growth in the Indian Banking Industry has been more qualitative than
quantitative and it is expected to remain the same in the coming years. Based on
the projections made in the "India Vision 2020" prepared by the Planning
Commission and the Draft 10th Plan, the report forecasts that the pace of expansion
in the balance-sheets of banks is likely to decelerate.
The total assets of all scheduled commercial banks by end-March 2010 is estimated
at ` 40,90,000 crores. That will comprise about 65 per cent of GDP at current market
prices as compared to 67 per cent in 2002-03. Bank assets are expected to grow at
an annual composite rate of 13.4 per cent during the rest of the decade as against
the growth rate of 16.7 per cent that existed between 1994-95 and 2002-03. It is
expected that there will be large additions to the capital base and reserves on the
liability side.
The Indian Banking Industry can be categorized into non-scheduled banks and
scheduled banks. Scheduled banks constitute of commercial banks and co-operative
banks. There are about 67,000 branches of Scheduled banks spread across India. As
far as the present scenario is concerned the Banking Industry in India is going
through a transitional phase.
The Public Sector Banks(PSBs), which are the base of the Banking sector in India
account for more than 78 per cent of the total banking industry assets.
Unfortunately they are burdened with excessive Non Performing assets (NPAs),
massive manpower and lack of modern technology. On the other hand the Private
Sector Banks are making tremendous progress. They are leaders in Internet banking,
mobile banking, phone banking, ATMs. As far as foreign banks are concerned they
are likely to succeed in the Indian Banking Industry.
In the Indian Banking Industry some of the Private Sector Banks operating are IDBI
Bank,ING Vyasa Bank, SBI Commercial and International Bank Ltd, Bank of Rajasthan
Ltd. and banks from the Public Sector include Punjab National bank, Vijaya Bank,
UCO Bank, Oriental Bank, Allahabad Bank among others. ANZ Grindlays Bank, ABN-
AMRO Bank, American Express Bank Ltd, Citibank are some of the foreign banks
operating in the Indian Banking Industry

32. TOP BANKS IN INDIA
1. SBI
2. HDFC
3. AXIS
4. BANK OF INDIA
5. PNB
6. BANK OF BARODA
7. ICICI BANK
8. UNION BANK OF INDIA
9. CITY BANK
10. CANARA BANK
ICICI BANK
ICICI Bank is the largest private sector bank in India in terms of market
capitalization. It is also the second largest bank in India in terms of assets with a
total asset of ` 3,674.19 billion (US$ 77 billion) as on June 30, 2009. For the
quarter ended on June 30, 2009, the total profit after tax has been ` 8.78 billion.
Formerly known as Industrial Credit and Investment Corporation of India, ICICI
Bank has an extensive network of 1,544 branches with about 4,816 ATMS
located across India and in 18 other countries. ICICI Bank serves over 24 Million
customers throughout the world. It is considered as one of the „Big Four Banks‟ in
India along with State Bank of India, HDFC Bank and Axis Bank.
ICICI Bank provides a wide array of banking products and financial services to its
retail and corporate customers. It has a wide variety of delivery channels and
specialized affiliates and subsidiaries that ensure the flow of its offerings in the
areas like investment banking, venture capital, life and non-life insurance and
asset management. This bank is also India's largest credit card issuer. The
equity share of ICICI Bank is listed on various stock exchanges like NSE, BSE,
Kolkata Stock Exchange and Vadodara Stock Exchange etc. Its AD ` are also
listed on the New York Stock Exchange.

33. HDFC BANK
The Housing Development Finance Corporation Limited, popularly called HDFC
Bank, was set up in India in the month of August in the year 1994 with the name
“HDFC Bank Limited”. This was the 1st organization to be approved by R. B. I.
(Reserve Bank of India) to establish a private sector bank. This happened as a
part of the liberalization of the banking industry in the country by R. B. I. in the
same year
However, this scheduled business bank started its operations mainly from
January, 1995. Headquartered in the city of Mumbai, this is one of the main
companies involved in housing finance. With an aim to be a world class bank,
this bank in India holds a good track record of performance in both national as
well as global markets. Post completion of the last quarter on 30th September,
2011, the total income of the bank increased by 37.4 % as compared to this
same quarter of 2010
Balance Sheet of ICICI Bank ------------------- in Rs. Cr. --------------
Mar '12 Mar '11 Mar '10
12 mths 12 mths 12 mths
Capital and Liabilities:
Total Share Capital 1,152.77 1,151.82 1,114.89
Equity Share Capital 1,152.77 1,151.82 1,114.89
Share Application Money 2.39 0.29 0.00
Preference Share Capital 0.00 0.00 0.00
Reserves 59,250.09 53,938.82 50,503.48
Revaluation Reserves 0.00 0.00 0.00
Net Worth 60,405.25 55,090.93 51,618.37
Deposits 255,499.96 225,602.11 202,016.60
Borrowings 140,164.91 109,554.28 94,263.57
Total Debt 395,664.87 335,156.39 296,280.17
Other Liabilities & Provisions 17,576.98 15,986.35 15,501.18
Total Liabilities 473,647.10 406,233.67 363,399.72
Mar '12 Mar '11 Mar '10
12 mths 12 mths 12 mths
Assets
Cash & Balances with RBI 20,461.29 20,906.97 27,514.29
Balance with Banks, Money at Call 15,768.02 13,183.11 11,359.40
Advances 253,727.66 216,365.90 181,205.60

34. Investments 159,560.04 134,685.96 120,892.80
Gross Block 9,424.39 9,107.47 7,114.12
Accumulated Depreciation 4,809.70 4,363.21 3,901.43
Net Block 4,614.69 4,744.26 3,212.69
Capital Work In Progress 0.00 0.00 0.00
Other Assets 19,515.39 16,347.47 19,214.93
Total Assets 473,647.09 406,233.67 363,399.71
Contingent Liabilities 858,566.64 883,774.77 694,948.84
Bills for collection 64,457.72 47,864.06 38,597.36
Book Value (Rs) 524.01 478.31 463.01
HDFC Bank Balance Sheet
Particular 201203 201103 201003
Capital & Liabilties
Share Capital 465.23 457.74 425.38
Reserves & Surplus 24914.04 21064.75 14226.43
Shareholders Funds 25379.27 21522.49 14651.82
Deposits 208586.41 167404.44 142811.58
Borrowings 14394.06 12915.69 9163.64
Loan Funds 222980.47 180320.13 151975.22
Total Liabilities 248359.73 201842.63 166627.03
Assets
Fixed Assets
Gross Block 5244.21 4707.97 3956.63

35. Less: Accumulated Depreciation 3029.32 2540.92 2205.65
Lease Terminal Adjustments 44.25 44.25 44.25
Net Fixed Assets 2170.65 2122.81 1706.73
Capital Work In Progress 0.00 0.00 0.00
Total Fixed Assets 2170.65 2122.81 1706.73
Investments 70929.37 58607.62 58817.55
Advances 159982.67 125830.59 98883.05
Current Assets
Cash & Bank Balances 29668.83 29942.40 17506.62
Loans & Advances 13412.37 5111.64 5494.01
Total Current Assets 43081.20 35054.04 23000.63
Current Liabilities & Provisions
Current Liabilities 27340.42 19215.13 15385.77
Provisions 1652.44 1400.81 1257.97
Other Liabilities & Provisions 28992.86 20615.94 16643.74
Net Current Assets 14088.35 14438.09 6356.89
Total Assets 248359.73 201842.63 166627.03

36. PERFORMANCE OF ICICI
BANK AND HDFC BANK
ICICI, HDFC banks battle for mkt share
The stage is set for the country's top two private banks to test their
skills in pursuit of market share. After consolidating its balance sheet
for 18 months, ICICI Bank now plans to be more aggressive, while
HDFC Bank is in no mood to allow its bigger rival regain lost market
share.
The current macro-economic situation is similar to the economic crisis
of 2008. If it was the collapse of US' fourth-largest investment bank,
Lehman Brothers, which triggered the biggest financial crisis of the
decade three years back, Standard & Poor's decision to downgrade
US' sovereign rating by a notch last week has intensified fears of
another economic storm now.
Unlike the last time, the country's largest private lender, ICICI Bank, is
now firm on growing its deposits and advances. While most Indian
banks say their loan books narrowed sequentially for the quarter
ended June 30, ICICI was one of the few lenders that reported growth
in advances.
"We will continue to improve the quality of our earnings and balance
sheet. While the industry is expected to face headwinds on margins,
we expect to maintain our net interest margin at the current 2.6 per
cent this year," Managing Director and Chief Executive Officer Chanda
Kochhar said, while announcing the bank's earnings last month. For
2011-12, the bank has set a target of 18-20 per cent credit growth.
HDFC Bank, the second-largest private lender in the country, also has
no plan to take its step off the gas in expanding its business. The
bank, known for its consistent earnings performance, aims to grow its
balance sheet at a higher rate than the industry.
"Fortunately, the bank is in a situation in which demand exceeds

37. supply. If GDP (gross domestic product) grows at eight per cent and
the credit multiplier is two and half times the GDP, credit growth for the
system would be 19-20 per cent. We will gain a couple of hundred
percentage points more than the system. We have been gaining
market share continuously," Aditya Puri, managing director of HDFC
Bank, told Business Standard in an interview in May.
There is, however, dissimilarity in the growth ambitions of the two
banking giants. For ICICI Bank, balance sheet expansion would
primarily be on the corporate segment, as the bank is still selective in
offering unsecured loans to its retail clients. HDFC Bank, on the other
hand, has chalked out its growth targets mostly around its retail
customer base. The lender has been disbursing Rs 5,000 crore of
retail loans every month in the April-June period, which it claims is the
highest in the industry.
The bank has also moved away from its traditional practice of offering
credit cards to its existing clients. Currently, HDFC Bank's first-time
clients who have been offered credit cards, account for 25 per cent of
the card base, compared with 10 per cent a year ago. The lender also
aims to compete with American Express Card and has launched the
'Infinia' credit card for the ultra rich high networth community in India.
Despite their divergent focus, both banks are not willing to give each
other space in other businesses. Kochhar, in a recent newspaper
interview, had said ICICI Bank was not ceding its leadership position in
retail. HDFC Bank, on its part, has strengthened its investment
banking business and managed its first ever equity issuance as the co-
book running lead manager for Muthoot Finance's Rs 900-crore initial
public offer.
In the mobilisation of deposits, the duo has decided to bank on a
similar strategy of opening more branches to increase the share of
low-cost current account and savings account deposits. While none of
the banks were willing to comment on the rival's business plan, both
felt the market was big enough for both the banks to grow their
businesses. "I wish ICICI Bank well, but they don't really affect our
growth rate. There is enough business for everybody," Puri said in an
interview with Business Standard

38. FINDINGS OF HDFC AND ICICI
Return and risk in non-convertible debentures
Sbi, icici bank raise base rates by 50 bps to 10%
Markets end lower, icici bak slips 2%]
5 stocks investros can bet on
Debt-laden companies push indian banks to limits
Time for strategic investors to get back to the street
FINDINGS IN INDUSRTRY RESEARCH
(a) In cement industries
The Indian cement industry is the 2nd largest market after China.
It had a total capacity of about 300 m tonnes (MT) as of financial
year ended 2010-11. Consolidation has taken place with the top
three players alone controlling almost 35% of the capacity.
However, the balance capacity still remains quite fragmented.
Despite the fact that the Indian cement industry has grown at a
commendable rate in the last decade, registering a growth of
nearly 9% to 10%, the per capita consumption still remains
substantially poor when compared with the world average. While
China registered the highest per capita cement consumption in
2010 of about 1,380 kg, India stood much lower at 230 kg. This
underlines the tremendous scope for growth in the Indian cement
industry in the long term.
Cement, being a bulk commodity, is a freight intensive industry
and transporting it over long distances can prove to be
uneconomical. This has resulted in cement being largely a
regional play with the industry divided into five main regions viz.
north, south, west, east and the central region. With capacity
addition taking place at a faster rate as compared to demand,
prices have remained southbound, especially in the last one year.
Nevertheless, considering the government‟s thrust on
infrastructure, long term demand remains intact.

39. Given the high potential for growth, quite a few foreign
transnational companies have displayed their interest in
the Indian markets. Already, while companies like Lafarge,
Heidelberg and Italicementi have made a couple of acquisitions,
Holcim has increased its stake in domestic companies Ambuja
Cements and ACC to gain full control. Considering the long term
growth story, fair valuations, fragmented structure of the industry
and low gearing, another wave of consolidation would not come
as a surprise.
Key pointers to balance sheet and
profit and loss statements:
A profit and loss account represents the summary of financial
transactions during a particular period and depicts the profit or
loss for the period along with income tax paid on the profit and
how the profit has been allocated (appropriated).
Usually, debentures, bonds and loans for fixed assets are secured
by fixed assets, while loans from banks for working capital, i.e.,
current assets are secured by current assets. These loans enjoy
priority over unsecured loans for settlement of claims against the
company.
Such unsecured loans rank second and subsequent to secured
loans for settlement of claims against the company. There are
other unsecured creditors also, forming part of current liabilities,
like, creditors for purchase of materials, provisions etc.

40. Let us see some of the important types of ratios and their significance:
¨ Liquidity ratios;
¨ Turnover ratios;
¨ Profitability ratios;
¨ Investment on capital/return ratios;
¨ Leverage ratios and
¨ Coverage ratios.
Liquidity ratios:
Current ratio: Formula =
Min. Expected even for a new unit in India = 1.33:1.
Significance = Net working capital should always be positive. In short,
the higher the net working capital, the greater is the degree of overall
short-term liquidity. Means current ratio does indicate liquidity of the
enterprise.
Too much liquidity is also not good, as opportunity cost is very high of
holding such liquidity. This means that we are carrying either cash in
large quantities or inventory in large quantities or receivables are getting
delayed. All these indicate higher costs. Hence, if you are too liquid, you
compromise with profits and if your liquidity is very thin, you run the risk
of inadequacy of working capital.
Range – No fixed range is possible. Unless the activity is very profitable
and there are no immediate means of reinvesting the excess profits in
fixed assets, any current ratio above 2.5:1 calls for an examination of the
profitability of the operations and the need for high level of current
assets. Reason = net working capital could mean that external borrowing
is involved in this and hence cost goes up in maintaining the net working
capital. It is only a broad indication of the liquidity of the company, as all
assets cannot be exchanged for cash easily and hence for a more accurate
measure of liquidity, we see “quick asset ratio” or “acid test ratio”.

41. Acid test ratio or quick asset ratio:
Quick assets = Current assets (-) Inventories which cannot be easily
converted into cash. This assumes that all other current assets like
receivables can be converted into cash easily. This ratio examines
whether the quick assets are sufficient to cover all the current liabilities.
Some of the authors indicate that the entire current liabilities should not
be considered for this purpose and only quick liabilities should be
considered by deducting from the current liabilities the short-term bank
borrowing, as usually for an on going company, there is no need to pay
back this amount, unlike the other current liabilities.
Significance = coverage of current liabilities by quick assets. As quick
assets are a part of current assets, this ratio would obviously be less than
current ratio. This directly indicates the degree of excess liquidity or
absence of liquidity in the system and hence for proper measure of
liquidity, this ratio is preferred. The minimum should be 1:1. This should
not be too high as the opportunity cost associated with high level of
liquidity could also be high.
What is working capital gap? The difference between all the current
assets known as “Gross working capital” and all the current liabilities other
than “bank borrowing”. This gap is met from one of the two sources,
namely, net working capital and bank borrowing. Net working capital is
hence defined as medium and long-term funds invested in current assets.
Turn over ratios:
Generally, turn over ratios indicate the operating efficiency. The higher
the ratio, the higher the degree of efficiency and hence these assume
significance. Further, depending upon the type of turn over ratio,
indication would either be about liquidity or profitability also. For
example, inventory or stocks turn over would give us a measure of the
profitability of the operations, while receivables turn over ratio would
indicate the liquidity in the system.

42. Debtors turn over ratio
Conditions of the market – monopolistic or competitive – monopolistic,
this would be higher and competitive it would be less as you are forced to
give credit;
Whether new enterprise or established – new enterprise would be required
to give higher credit in the initial stages while an existing business would
have a more fixed credit policy evolved over the years of business;
Hence any deterioration over a period of time assumes significance for an
existing business – this indicates change in the market conditions to the
business and this could happen due to general recession in the economy
or the industry specifically due to very high capacity or could be this unit
employs outmoded technology, which is forcing them to dump stocks on
its distributors and hence realisation is coming in late etc.
Average collection period
Inventory turn over ratio
Current assets turn over ratio
Fixed assets turn over ratio
Not much of significance as fixed assets cannot contribute directly either
to liquidity or profitability. This is used as a very broad parameter to
compare two units in the same industry and especially when the scales of
operations are quite significant. Formula = Cost of goods sold/Average
value of fixed assets in the period (book value).

43. Investment on capital ratios/Earnings ratios:
Return on net worth
Profit After Tax (PAT) / Net worth. This is the return on the shareholders’
funds including Preference Share capital. Hence Preference Share capital
is not deducted. There is no standard range for this ratio. If it reduces it
indicates less return on the net worth.
Return on equity
Profit After Tax (PAT) – Dividend on Preference Share Capital / Net worth
– Preference share capital. Although reference is equity here, all equity
shareholders’ funds are taken in the denominator. Hence Preference
dividend and Preference share capital are excluded. There is no standard
range for this ratio. If it comes down over a period it means that the
profitability of the organisation is suffering a setback.
Return on capital employed (pre-tax)
Earnings Before Interest and Tax (EBIT) / Net worth + Medium and long-
term liabilities. This gives return on long-term funds employed in business
in pre-tax terms. Again there is no standard range for this ratio. If it
reduces, it is a cause for concern.
Earning per share (EPS)
Dividend per share (DPS) + Retained earnings per share (REPS). Here the
share refers to equity share and not preference share. The formula is =
Profit after tax (-) Preference dividend (-) Dividend tax both on preference
and equity dividend / number of equity shares. This is an important
indicator about the return to equity shareholder. In fact P/E ratio is related
to this, as P/E ratio is the relationship between “Market value” of the
share and the EPS. The higher the PE the stronger is the recommendation
to sell the share and the lower the PE, the stronger is the recommendation
to buy the share.

44. This is only indicative and by and large followed. There is something
known as industry average EPS. If the P/E ratio of the unit whose shares
we contemplate to purchase is less than industry average and growth
prospects are quite good, it is the time for buying the shares, unless we
know for certain that the price is going to come down further. If on the
other hand, the P/E ratio of the unit is more than industry average P/E, it
is time for us to sell unless we expect further increase in the near future.
Leverage ratios
Leverages are of two kinds, operating leverage and financial leverage.
However, we are concerned more with financial leverage. Financial
leverage is the advantage of debt over equity in a capital structure.
Capital structure indicates the relationship between medium and long-
term debt on the one hand and equity on the other hand. Equity in the
beginning is the equity share capital. Over a period of time it is net worth
(-) redeemable preference share capital.
It is well known that EPS increases with increased dose of debt capital
within the same capital structure. Given the advantage of debt also, as
even risk of default, i.e., non-payment of interest and non-repayment of
principal amount increases with increase in debt capital component, the
market accepts a maximum of 2:1 at present. It can be less. Formula for
debt/equity ratio = Medium and long-term loans + redeemable preference
share capital / Net worth (-) Redeemable preference share capital.
From the working capital lending banks’ point of view, all liabilities are to
be included in debt. Hence all external liabilities including current liabilities
are taken into account for this ratio. We have to add redeemable
preference share capital and reduce from the net worth the same as in the
previous formula.

45. Coverage ratios
Interest coverage ratio
This indicates the number of times interest is covered by EBIT. Formula =
EBIT / Interest payment on all loans including short-term liabilities.
Minimum acceptable is 2 to 2.5:1. Less than that is not desirable, as after
paying interest, tax has to be paid and afterwards dividend and dividend
tax.
Asset coverage ratio
This indicates the number of times the medium and long-term liabilities
are covered by the book value of fixed assets.
Formula = Book value of Fixed assets / Outstanding medium and long-
term liabilities. Accepted ratio is minimum 1.5:1. Less than that indicates
inadequate coverage of the liabilities.
Debt Service coverage ratio
This indicates the ability of the business enterprise to service its
borrowing, especially medium and long-term. Servicing consists of two
aspects namely, payment of interest and repayment of principal amount.
As interest is paid out of income and booked as an expense, in the
formula it gets added back to profit after tax. The assumption here is that
dividend is ignored. In case dividend is paid out, the formula gets
amended to deduct from PAT dividend paid and dividend tax.
Formula is:
(Numerator) Profit After Tax (+) Depreciation (+) Deferred
Revenue Expenditure written off (+) Interest on medium and long-term
borrowing
(Denominator) Interest on medium and long-term borrowing (+)
Installment on medium and long-term borrowing.

46. This is assuming that dividend is not paid. In the case of an existing
company dividend will have to be paid and hence in the numerator,
instead of PAT, retained earnings would appear. The above ratio is
calculated for the entire period of the loan with the bank/financial
institution. The minimum acceptable average for the entire period is
1.75:1. This means that in one year this could be less but it has to be
made up in the other years to get an average of 1.75:1.
OBJECTIVES OF THE STUDY
1. To know the financial position of the company
Net worth share capital, reserve and unallocated surplus in
balancesheet carried down from profit and loss
appropriation account. For a healty company, its is
necessary that a there is a balance struck betyween
divident paid and profit retainied in business so mucj the
net worth keeps on increasing.
2. Has the company defaulted in providing for bonous liability,
P.F liability, E.S.I liability, gratuity liability etc?
3. Whether the company is holding very huge cash, as it is not
desirable and increases the opportunity cost?
4. How much earning has our share made? (EPS)
Profit after tax divident on preference share capital/number
of equity share. In terms of percentage anything less than

47. 40 to 50% of the face value of the share would not go well
whth the market sentiments.
5. Wheather the redues its divident payout in camparison with
last year or other compaititors.
Relationship between amount of divdnent payoutn and
proefit after lasty year and this year. Is there any reason for
this like liquity crunch that the company is experiencing or
the need for conserving cash for buriness activity, like
purchase of the fixed assets in the immediate future?
6. To Know that what is the proportion of marketable
investment to total investment and wheather this has
decvreased in comparision with the other compititors?
7. Relationship between the net worht of the company and its
external liabilities (both short-term and long-term) what
about only medium and long-term debts?
8. To know about the current ratio of the companies and
liquidity position of the companies.
9. To find out the debt equity ratio of the major companies
and analysis the finacial position the companies. And find
out which company better.

48. The principal tools of analysis are:
¨ Ratio analysis – i.e. to determine the relationship between any set of
two parameters and compare it with the past trend. In the statements of
accounts, there are several such pairs of parameters and hence ratio
analysis assumes great significance. The most important thing to
remember in the case of ratio analysis is that you can compare two units
in the same industry only and other factors like the relative ages of the
units, the scales of operation etc. come into play.
¨ Comparison with past trend within the same company is one type of
analysis and comparison with the industrial average is another analysis
While one can derive a lot of useful information from analysis of the
financial statements, we have to keep in mind some of the limitations of
the financial statements. Analysis of financial statements does indicate a
definite trend, though not accurately, due to the intrinsic nature of the
data itself.
Some of the limitations of the study
Analysis and understanding of financial statements is only one of
the tools in understanding of the company
The annual statements do have great limitations in their value, as
they do not speak about the following-
Notwithstanding all the above, continuous study of financial statements
relating to an industry can provide the reader and analyst with an in-
depth knowledge of the industry and the trend over a period of time. This
may prove invaluable as a tool in investment decision or sale decision of
shares/debentures/fixed deposits etc.