havells india final report

1. HAVELLS INDIA.
Submitted by
Name Registration No. Roll Number
KASTURI NAGARAJA 11809128 04
Submitted to
RIYA MAM .
In partialfulfilment of the requirementsof award of 1stContinuous
Assignment
“BACHELOR OF COMMERCE (Hons.)”
Mittal School Of Business

2. ABOUT HAVELLS.
 Havells India Limited, is an Indian electrical
equipment company based in Noida, India.
 In business since 1958, the company has products ranging
from home and kitchen appliances, lighting for domestic,
commercial and industrial applications, LED lighting, fans,
modular switches and wiring accessories, water heaters,
industrial and domestic circuit protection switchgear,
industrial and domestic cables and wires, induction motors,
and capacitors among others.
 Havells India owns some brands like Havells, Lloyd,
Crabtree, Standard Electric and Promptech.
WHY HAVELLS ….
 Havells has been consistently growing faster than the
market in all the categories. It should be something
unique which is to be discovered.
 Havells has been positioned as a premium brand in a
price sensitive market and yet has been able to make
it niche.
 Havells has done so many innovations in the
distribution sales side which would be studied.

3. FINANCIAL ANALYSIS ..
 Return on invested capital > 25 %
 Net sales growth [CAGR for 5 years ] – 33.3%
 Eps growth [CAGR for 5 years ] -27%
 Sales and Eps grew by 16.13% and 37.86% in
2012 respectively.
 Debt to net profit ratio also showed improvement
from 58.43% in fy2009 to 2.63 in fy2012.
 D/E ratio improved from 2.01 in fy2009 to 1.07in
fy2012.
Capital structure of havells .
Period Instrument
Authorized
Capital Issued Capital - P A I D U P -
From To (Rs. cr) (Rs. cr)
Shares
(nos)
Face
Value
Capital
(Rs. Cr)
2018 2019
Equity
Share 100.0 62.5 625472910 1.0 62.5
2017 2018
Equity
Share 100.0 62.5 625148473 1.0 62.5
2016 2017
Equity
Share 100.0 62.5 624855342 1.0 62.5
2015 2016
Equity
Share 100.0 62.5 624587780 1.0 62.5

4. 2014 2015
Equity
Share 100.0 62.4 624357810 1.0 62.4
2013 2014
Equity
Share 100.0 62.4 124775098 5.0 62.4
2012 2013
Equity
Share 100.0 62.4 124774812 5.0 62.4
2011 2012
Equity
Share 100.0 62.4 124774812 5.0 62.4
2010 2011
Equity
Share 100.0 62.4 124774812 5.0 62.4
2009 2010
Equity
Share 40.0 30.1 60168406 5.0 30.1
2008 2009
Equity
Share 40.0 30.1 60168406 5.0 30.1
2007 2008
Equity
Share 40.0 29.0 57918406 5.0 29.0
2006 2007
Equity
Share 40.0 26.9 53758406 5.0 26.9
2005 2006
Equity
Share 20.0 12.4 24891398 5.0 12.4
2004 2005
Equity
Share 11.5 5.8 11591154 5.0 5.8
2003 2004
Equity
Share 11.5 5.8 11591154 5.0 5.8
2002 2003
Equity
Share 11.5 5.8 5795577 10.0 5.8
2001 2002
Equity
Share 11.5 5.8 5795577 10.0 5.8
2000 2001
Equity
Share 10.0 5.0 4982800 10.0 5.0
1997 2000
Equity
Share 10.0 4.9 4895100 10.0 4.9
1996 1997
Equity
Share 10.0 4.5 4495100 10.0 4.5

5. 1995 1996
Equity
Share 5.0 4.5 4473400 10.0 4.5
1994 1995
Equity
Share 5.0 4.5 4468700 10.0 4.5
1993 1994
Equity
Share 5.0 4.5 4495100 10.0 4.5
1992 1993
Equity
Share 5.0 2.3 2295100 10.0 2.3
COST OF CAPITAL .
 The cost of capital is the cost of using funds of the creditors and
the owners .
 The cost of capital is the rate of return that the suppliers of
capital bond-holders and owners requires as a compensation of
their contributions of capital.
 Two ways in which the company can raise the capital .
1. Equity
2. Debt
1. EQUITY :-
 The cost of equity is the return a company requires a to
decide if an investment needs an capital return
requirements; it is often used as capital budgeting
threshold for required rate of return .

6.  A firm’s cost of equity represents the compensation of
market of demands in exchange for owning the asset and
bearing the risk of ownership, the traditional formulas for
cost of equity [COE] are the dividend capitalization model
and the capital asset pricing model.
COST OF EQUITY = DIVIDEND PER SHARE [FOR NEXT
YEAR] / CURRENT VALUE OF STOCK + GROWTH RATE
OF DIVIDEND.
2. DEBT :-
 The cost of debt is one part of the company’s capital
structure which also includes the cost of equity. the measure
can also give investors an idea of riskness of the company
compared to the others because riskier companies generally
have higher cost of debt.
 The cost of debt refers to the effective rate of company pays
on it’s current debt. In most case , this phrase refers to after
tax-cost of debt , but it also refers to a company’s cost of
debt before tax into account.
The DGM is commonly expressed as formula in two
different forms.

7.  Ke – [ D1 /P0 ] + g
Or [re-arranging the formula]
 P0 – D1 / [Ke – g]
Where
P0 = current market value of equity per period.
D1 = expected future dividend at time 1 period later.
Ke = cost of equity per period.
G = constant periodic rate of growth in dividend from time
1 to infinity.
VALUATION :-
Market cap [rs.cr] 39.895.81 Market lot 1 Price /book 9.27
p/e 64.13 Industry p/e 45.96 Dividend yield {%} 0.63
Book value [rs] 68.76 Eps [ttm] 9.94 Face value[rs] 1
Dividend [%] 400.0 p/c 47.5 Deliverables[%] 11.18
EXAMPLE OF COST OF EQUITY:-
 D1 – expected future dividend at time = $10m
 P0 – current market value of equity per period = $125m
 G – constant periodic rate of growth in dividend from time 1 to
infinity = 2%
Ke –[D1/P0]+g

8. = [10/125] + 2%
= 8% + 2%
=10%
AFTER – TAX COST OF DEBT :-
 After –tax cost of debt is the net cost of debt determined by
adjusting the gross cost of debt for it’s tax benefits.
 It equals pre-tax cost of debt multiplied by [1-tax rate].
 It is the cost of debt that is included in calculation of weighted
average cost of capital. [WAAC].
 Tax laws in many countries allow deduction on account of
interest expense.
 The effect of this deduction is a reduction in taxable income
and resulting reduction in income tax.
 The reduction in income tax due to interest expense is called
interest tax shield.
 Due to this tax benefit of interest , effective cost of debt is
lower than the gross cost of debt.
FORMULA :-
 After-tax cost of debt can be determined using the
following formula.

9.  After-tax cost of debt = pre-tax cost of debt *[1-tax rate].
 The gross or pre-tax cost of debt equals yield to maturity
of the debt.
 The applicable tax rate is the marginal tax rate.
 When the debt is not marketable, pretax cost of debt can
be determined with comparison with yield on other debts
with same credit quality.
CONSOLIDATION :-
INCOME :-
Revenue from
operations [gross]
9,407.10 9,982.82 8,192.30 6,564.87 7,972.54
Less :- exercise ,
service tax , other
levies
0.00 0.00 122.69 457.20 401.79
Revenue from
operations [net]
9407.10 9,982.82 8,069.70 6,107.67 7,510.75
Total operating
revenues
9,440.26 10,073.43 8,146.41 6,155.76 7,612.56
Other income 113.41 128.65 177.90 138.18 86.64
Total income 9,553.67 10,202.08 8,264.31 6,293.94 7,699.20

10. Cost Of Materials
Consumed
4,379.64 4,524.15 3,626.06 3,328.62 3,211.23
Operating And
Direct Expenses
0.00 0.00 0.00 0.00 0.00
Employee Benefit
Expenses
906.71 841.72 659.54 509.01 896.00
Finance Costs 19.72 16.25 24.83 13.34 54.37
Depreciation And
Amortisation
Expenses
217.97 152.61 140.49 120.51 134.40
Other Expenses 1,671.71 1,764.83 1,473.54 1,175.36 1,583.63
Total expenses 8,649.40 9,057.94 7,268.33 5,471.44 7,043.44
Profit/loss [before
exceptional ,extra
ordinary items and
tax
904.37 1,144.14 995.94 822.50 655.87
Exceptional Items 0.00 0.00 -18.67 -106.80 862.10
Profit and loss
before tax
904.37 144.14 977.31 715.70 1517.97
TAX EXPENSES –CONTINUED OPERATIONS :-
Current Tax 198.99 270.16 209.01 234.43 218.12
Less: MAT Credit
Entitlement
0.00 0.00 43.09 0.00 0.00
Deferred Tax -30.23 88.11 137.91 -5.67 6.92
Other Direct Taxes 0.00 0.00 0.00 0.00 0.00

11. Total tax expenses 168.76 358.27 303.83 228.76 219.27
Profit/loss after tax
and before
extraordinary items
735.61 785.87 673.48 486.94 1298.70
Profit/loss from
continuing
operations
735.61 785.87 673.48 486.94 1298.70
Profit/loss for the
period
735.35 785.54 660.97 498.88 1298.70
Minority interest 0.00 0.44 1.40 0.42 -0.34
Consolidated
profit/loss after mi
and associates
735.35 785.98 662.37 494.53 1,300.11
EXAMPLE :-
 Havells company has earnings before interest and taxes of $200
million. it has interest bearing debt of $50 million carrying 8%
interest rate. Find the after tax cost of debtin dollar and in
percentage.
Cost of debt [i.e interest expense] is $4million [=$50million*8%].
 Earnings before taxes
= $200 million -$4 million
= $196 million
 Tax expense
= $196 million *35%

12. = $68.6 million
 Net income
= $196 million * [1-35%]
= $196 million - $68.6 million
= $127.4 million
 If there were no debt , there would be no interest expense , and
tax expense would be $70 million [= $200 million *35%]
 Existence of debt has reduced tax expense by $1.4 million [ = $70
million - $68.6 million] and this is the interest tax shield.
 After tax cost of debt
= total cost of debt – interest tax shield
= $4million - $1.4 million
= $2.6 million
 In percentage terms , the after tax cost of debt = 8% *[1-
35%]=5.2%. this precisely equals to the ratio of after-tax interest
expense in dollars to the principal balance of debt [i.e $2.6 million
/$50 million = 5.2 %]
COST OF DEBT :-
 The cost of debt is the effective interest rate a company pays on
its debts. It’s the cost of debt, such as bonds and loans, among
others. The cost of debt often refers to before-tax cost of debt,
which is the company's cost of debt before taking taxes into
account. However, the difference in the cost of debt before and
after taxes lies in the fact that interest expenses are deductible.

13.  The cost of debt is the rate a company pays on its debt,
such as bonds and loans.
 The key difference between the cost of debt and the after-
tax cost of debt is the fact that interest expense is tax-
deductible.
 Cost of debt is one part of a company’s capital structure,
with the other being the cost of equity.
 Calculating the cost of debt involves finding the average
interest paid on all of a company’s debts.
FORMULA :-
Cost of debt [for DCF valuation]
1. cost of debt = total interest cost incurred * 100
[pre-tax] Total debt
total interest incurred x
2.cost of debt = [1-effective tax rate *100
[post-tax] Total debt
THANK YOU