Page - 1 - A Report on "Relationship of Economic Value Added, Market Value Added & Return on Capital Employed with respect to Share Price” A Dissertation Submitted In Partial Fulfilment Of The Requirement For The Award Of MBA Degree Of Bangalore University. Submitted by Mr. Vijay Kumar Agarwal (REGD. NO: 06XQCM6084) UNDER THE GUIDANCE & SUPERVISION OF Prof. Praveen Bhagawan. M M.P.BIRLA INSTITUTE OF MANAGEMENT ASSOCIATE BHARTIYA VIDYA BHAVAN 43, RACE COURSE ROAD, BANGALORE-560001 2006-2008
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Page - 1 -
A
Report on
"Relationship of Economic Value Added, Market Value Added &
Return on Capital Employed with
respect to Share Price”
A Dissertation Submitted In Partial Fulfilment
Of
The Requirement For The Award Of MBA Degree Of
Bangalore University.
Submitted by
Mr. Vijay Kumar Agarwal
(REGD. NO: 06XQCM6084)
UNDER THE GUIDANCE & SUPERVISION OF Prof. Praveen Bhagawan. M
M.P.BIRLA INSTITUTE OF MANAGEMENT ASSOCIATE BHARTIYA VIDYA BHAVAN
43, RACE COURSE ROAD, BANGALORE-560001
2006-2008
Page - 2 -
DECLARATION I, hereby, declare that this project report entitled, “Relationship of Economic Value
Added, Market Value Added, Return on Capital Employed with respect to share
prices” Submitted in partial fulfillment for the award of Master of Business
Administration of Bangalore University is a record of independent work carried out
by me under the guidance of Prof. Praveen Bhagawan faculty member, M. P. Birla
Institute of Management, Bangalore.
I, also declare that this report is a result of my own effort and has not been submitted
earlier for the award of any degree or diploma of Bangalore University or any other
University.
Place: Bangalore Vijay Kumar Agarwal
Date: (REGD. NO: 06XQCM6084)
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ACKNOWLEDGEMENT I am extremely grateful to all those who have shared their views, opinions, ideas and
experiences which have significantly improved my inputs for this Project.
I am indebted to my Internal guide Prof. Praveen Bhagawan M for his encouragement
and support for the completion of the study.
I extended my sincere gratitude to our Principal Dr. Nagesh Malavalli.
Finally I would like to extend my warm respects and regards to my family, friends and
well-wishers for their constant support and valuable suggestions.
Page - 4 -
M. P. Birla Institute of Management ASSOCIATE BHARATIYA VIDYA BHAVAN
#43, RACE COURSE ROAD, BANGALORE -560001, INDIA Prof. Praveen Bhagawan M Tel 080-22382798/9634, Fax 080-22389635 Email: [email protected], Website:www.mpbim.com
Certificate
This is to certify that this report entitled, “Relationship of Economic Value
Added, Market Value Added, Return on Capital Employed with respect
to share prices” is a compilation of the project carried out by Mr. Vijay
Kumar Agarwal (Reg. No. 06XQCM6084), a Student Executive of M.P.
Birla Institute of Management, Associate Bharatiya Vidya Bhavan,
Bangalore.
Mr. Vijay Kumar Kumar worked under my guidance and supervision.
Certificate This is to certify that this report entitled “Relationship of Economic Value
Added, Market Value Added, Return on Capital Employed with respect
to share prices” is the output of final report carried out by Mr. Vijay
Kumar Agarwal, a Student Executive of MP Birla Institute of
Management, Bangalore under the guidance and supervision of Prof
Praveen Bhagawan M , MPBIM, Bangalore (Internal Guide)
Bangalore.
Date:- ( Dr.N. S. Malavalli)
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ABSTRACT
Market prices of the shares reflect the performance of the company. Today, wealth
created by the company is more important than the profit it earns or the dividend it pays
to the shareholders. The objective of this research is to study the relationship that exists
between the wealth/value/ROCE for the shareholders created by the company and market
prices of the shares.
The hypothesis of the study is that, there is significant relationship between EVA, MVA,
ROCE and share prices .EVA is the most significant measure, which is better reflected in
the market prices of the shares as compared to other traditional measures of performance,
MVA is the present value of a series of EVA values and finally ROCE is the rate of
return a business is making on the total capital employed in the business..This is tested on
20 companies of the stock market for a period of 4years beginning from FY 2003-2004 to
FY 2006-2007. Analysis is done using the Regression tool.
From the analysis, it is found that EVA.MVA& ROCE has no significant relationship
with the Market prices and also is not a major influencing factor among the performance
metrics.
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CHAPTERS PARTICULARS PAGE NO’S
ABSTRACT 1 INTRODUCTION 1-7
1.1 Introduction 2 1.2 Background of the study 3 1.3 Purpose of the study 3 1.4 Problem statement 4 1.5 Objectives of the study 4 1.6 Significance Of the Study 4 1.7 Theoretical Framework 5-7
2 REVIEW OF LITERATUR 8-11 3 METHODOLOGY 12-19
3.1 Study Type 13 3.2 Population of the study 13 3.3 Sample Frame 13 3.4 Sampling Technique 13 3.5 Sampling Profile 13 3.6 Data Gathering Procedure 14 3.7 Hypothesis of the study 15 3.8 Testing of hypothesis 15 3.9 Description of tools used 15-17
3.10 Limitations of the study 17 3.11 Industry Profile 18-19
4 ANALYSIS AND INTERPRETATION 20-52 5 CONCLUSION 53-54
5.1 Conclusion 54 BIBLIOGRAPHY 55-56
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List of Charts
Company Particulars Particulars Page No.
Ashokleyland Chart Showing Share Price , EVA & MVA
Chart Showing ROCE 21
Eicher Motors Chart Showing Share Price , EVA & MVA
Chart Showing ROCE 22
Hero Honda Chart Showing Share Price , EVA & MVA
Chart Showing ROCE 23
Hindustan Motors Chart Showing Share Price , EVA & MVA
Chart Showing ROCE 24
kinetic Motors Chart Showing Share Price , EVA & MVA
Chart Showing ROCE 25
LML Chart Showing Share Price , EVA & MVA
Chart Showing ROCE 26
Punjab Tractors Chart Showing Share Price , EVA & MVA
Chart Showing ROCE 27
Mahindra & Mahindra
Chart Showing Share Price , EVA & MVA
Chart Showing ROCE 28
Tata Motors Chart Showing Share Price , EVA & MVA
Chart Showing ROCE 29
TVS Motors Chart Showing Share Price , EVA & MVA
Chart Showing ROCE 30
Bank Of India Chart Showing Share Price , EVA & MVA
Chart Showing ROCE 31
Canara Bank Chart Showing Share Price , EVA & MVA
Chart Showing ROCE 32
Corporation Bank Chart Showing Share Price , EVA & MVA
Chart Showing ROCE 33
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Dena Bank Chart Showing Share Price , EVA & MVA
Chart Showing ROCE 34
HDFC Bank Chart Showing Share Price , EVA & MVA
Chart Showing ROCE 35
ICICI Bank Chart Showing Share Price , EVA & MVA
Chart Showing ROCE 36
IndusInd Bank Chart Showing Share Price , EVA & MVA
Chart Showing ROCE 37
State Bank Of India
Chart Showing Share Price , EVA & MVA
Chart Showing ROCE 38
Syndicate Bank Chart Showing Share Price , EVA & MVA
Chart Showing ROCE 39
Vijaya Bank Chart Showing Share Price , EVA & MVA
Chart Showing ROCE 40
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List of Table
Tables Particulars Page No.
4.1 Table Showing Share Price, EVA,MVA,& ROCE of Ashokleyland 21
4.2 Table Showing Share Price, EVA,MVA,& ROCE of Eicher Motors 22
4.3 Table Showing Share Price, EVA,MVA,& ROCE of Hero Honda 23
4.4 Table Showing Share Price, EVA,MVA,& ROCE of Hindustan Motors 24
4.5 Table Showing Share Price, EVA,MVA,& ROCE of Kinetic Motors 25
4.6 Table Showing Share Price, EVA,MVA,& ROCE of LML 26
4.7 Table Showing Share Price, EVA,MVA,& ROCE of Punjab Tractor 27
4.8 Table Showing Share Price, EVA,MVA,& ROCE of Mahindra & Mahindra 28
4.9 Table Showing Share Price, EVA,MVA,& ROCE of Tata Motors 29
4.10 Table Showing Share Price, EVA,MVA,& ROCE of TVS Motors 30
4.11 Table Showing Share Price, EVA,MVA,& ROCE of Bank Of India 31
4.12 Table Showing Share Price, EVA,MVA,& ROCE of Canara Bank 32
4.13 Table Showing Share Price, EVA,MVA,& ROCE of Corporation Bank 33
4.14 Table Showing Share Price, EVA,MVA,& ROCE of Dena Bank 34
4.15 Table Showing Share Price, EVA,MVA,& ROCE of HDFC Bank 35
4.16 Table Showing Share Price, EVA,MVA,& ROCE of ICICI Bank 36
4.17 Table Showing Share Price, EVA,MVA,& ROCE of IndusInd Bank 37
4.18 Table Showing Share Price, EVA,MVA,& ROCE of State Bank Of India 38
4.19 Table Showing Share Price, EVA,MVA,& ROCE of Syndicate Bank 39
4.20 Table Showing Share Price, EVA,MVA,& ROCE of Vijaya Bank 40
4.21 Table Showing Multliple R , R square, a, B1, B2, T1,T2, P1, P2, & F 41
4.22 Table Showing Multliple R , R square, a, b, t, p, F, & Observation 42
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Chapter-1
INTRODUCTION
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1.1 Introduction
Market prices of the shares reflect the performance of the company. Today, wealth
created by the company is more important than the profit it earns or the dividend it pays
to the shareholders. Creation of shareholder’s value is the core of every business. This is
natural since shareholders own the company and as rational investors they expect good
long-term yield on their investment. Commonly used accounting measures are EPS
(Earnings per Share), ROI (Return on Investment), NPR (Net Profit Ratio) etc.
Apart from this, value based metrics of performance evaluation like EVA (Economic
Value Added), MVA (Market Value Added), CVA (Cash Value Added) and CFROI
(Cash Flow Return on Investment) have come into existence. These new performance
metrics seek to measure the periodic performance in terms of change in value.
Maximizing value means maximizing long-term yield on shareholders’ investment.
(Economic Value Added): A measure of a company's financial performance based
on the residual wealth calculated by deducting cost of capital from its operating profit
(adjusted for taxes on a cash basis). (Also referred to as "economic profit".)
The formula for calculating EVA is as follows:
= Net Operating Profit after Taxes (NOPAT) - (Capital * Cost of Capital)
MVA (Market Value Added): A calculation that shows the difference between the market
value of a company and the capital contributed by investors (both bondholders and
shareholders). In other words, it is the sum of all capital claims held against the company
plus the market value of debt and equity.
Calculated as:
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Return On Capital Employed (ROCE)
A ratio that indicates the efficiency and profitability of a company's capital investments.
Calculated as:
ROCE should always be higher than the rate at which the company borrows; otherwise
any increase in borrowing will reduce shareholders' earnings.
1.2 Background of the study Investors are currently demanding Shareholder value more strongly than ever. So the
value created by the company is more linked to the market price of the shares. This study
is undertaken to show the relationship that exists between the various performance
metrics and the share prices as the performance of the company is reflected in the share
prices in the market.
1.3 Purpose of the study The purpose of the study is to show that EVA, MVA & ROCE have relationship with
share prices and this relationship is significant. This shows that value addition by the
company is also a dependant factor for the movement in the share prices. So this study is
helpful to the investors for their investment decision as the study also allows them to
easily identify companies that pursue business strategies with the goal of shareholders
value creation.
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1.4 Statement of the problem:
There are various views with respect to whether traditional measures or value-based
measures influence the share prices. Considering this, it is interesting to examine which
of the performance measures has more influence on the share prices. Question to be
addressed is whether there is relationship between EVA, MVA & ROCE with respect to
share prices and whether this relationship is significant.
1.5 Objective of study: To measure EVA, MVA & ROI for sample companies. To analyse the relationship between EVA, MVA, & ROCE with
respect to share prices. To find out which of the performance metrics is better reflected in the
share prices.
Scope of the study: The scope of the study is limited to two sectors i.e. banking & automobile industry under
which 10 companies from each industry has been taken for my study. And the analysis is
based on the last 4 year data.
1.6 Significance of the study:
The Purpose of the study is to show that EVA, MVA & ROI have relationship with share
prices and this relationship is significant. This shows that value addition by the company
is also a dependant factor for the movement in the share prices.
So this study is helpful to the investors for their investment decision as the study also
allows them to easily identify companies that pursue business strategies with the goal of
shareholders value creation.
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1.7 Theoretical framework
Investors analyze and interpret the financial statements so that they can get an insight into
the firm’s performance. Ratio analysis is one of the tools of financial analysis. It shows
the relationship between two figures in the financial statements. There are various types
of ratios used. Investors of more interested in profitability ratios like Net profit ratio,
Return on capital employed, Return on Equity, etc., and valuation ratios like Price-
Earnings ratio, Earnings per share, Yield, etc
Earnings Before Interest & Tax (EBIT) An indicator of a company's profitability, calculated as revenue minus expenses,
excluding tax and interest. EBIT is also referred to as "operating earnings", "operating
profit" and "operating income", as you can re-arrange the formula to be calculated as
follows:
EBIT = Revenue - Operating Expenses
Return On Assets (ROA)
An indicator of how profitable a company is relative to its total assets. ROA gives an
idea as to how efficient management is at using its assets to generate earnings. Calculated
by dividing a company's annual earnings by its total assets, ROA is displayed as a
percentage. Sometimes this is referred to as "return on investment".
ROA
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Return On Equity (ROE)
A measure of a corporation's profitability that reveals how much profit a company
generates with the money shareholders have invested.
Calculated as:
Also known as "return on net worth" (RONW).
ROI (Return on Investment):
A performance measure used to evaluate the efficiency of an investment or to compare
the efficiency of a number of different investments. To calculate ROI, the benefit (return)
of an investment is divided by the cost of the investment; the result is expressed as a
percentage or a ratio.
Net profit ratio NPR shows the earnings left for the shareholders as a percentage of net sales. It measures
the overall efficiency of production, administration, selling, financing, pricing and
provides a valuable understanding of the cost profit structure of the company. It enables
the analysts to identify the sources of business efficiency/inefficiency.
NPR= Net Profit *100 Sales
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Earnings per share EPS is also a measure of the profitability of the firm. It indicates the
Profitability on a per-share basis.
EPS = Earnings for Equity shareholders * 100
No. of equity shares
Economic Value Added: A measure of a company's financial performance based on the residual wealth calculated
by deducting cost of capital from its operating profit (adjusted for taxes on a cash basis).
The formula for calculating EVA is as follows:
= Net Operating Profit after Taxes (NOPAT) - (Capital * Cost of Capital)
MVA (Market Value Added):
A calculation that shows the difference between the market value of a company and the
capital contributed by investors (both bondholders and shareholders). In other words, it
is the sum of all capital claims held against the company plus the market value of debt
and equity.
Calculated as:
Return On Capital Employed (ROCE)
A ratio that indicates the efficiency and profitability of a company's capital investments. Calculated as:
Page - 18 -
Chapter-2
LITERATURE REVIEW
Review of literature:
Page - 19 -
My preliminary review of the current literature indicates that the application of perceptual
mapping of Relationship of Economic Value Added, Market Value Added & Return on
Investment with respect to Share Price has not been adequately researched. The available
research data is sketchy and scanty. Thus, there is a vital gap in the current research. This
has prompted me to take up this research investigation.
The share prices in the market can be measured by the MVA-Market value added for the
company which is the total market value of the company. This relationship between EVA
and MVA has been studied in the recent years in many studies with many methods - and
with different results
Purpose : Lehn and Makhija
Lehn and Makhija (1996) first studied this relationship with market data of 618 U.S.
companies i.e. relationship between MVA & EVA.
Methodology The data consists of 241 U.S.companies and cover years 1987, 1988, 1992 and 1993. The
researchers first find out that both measures correlate positively with stock returns and
that the correlation is slightly better than with traditional performance measures like
return on assets (ROA), return on equity (ROE) and return on sales (ROS).
Conclusion Lehn and Makhija conclude that their results suggest EVA and MVA to be effective
performance measures that contain information about the quality of strategic decisions
and serve as signals of strategic change.
Purpose : Dodd and Chen
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Dodd and Chen (1996) study the correlation between stock returns and different
profitability measures
Methodology: The study was based on 566 U.S. companies from 1983-1992. In the study ROA
explained stock returns best with R squared of 24.5%. The R squared for other metrics
are: EVA 20.2%, residual income 19.4% and EPS, ROE approximately 5-7%.
Conclusion The writers concluded that firms adopting EVA might as adopt simple residual income
concept, while residual income correlates with share prices almost as well as its adjusted
version called EVA.
Purpose : David M. Szymanski, Sundar G. Bharadwaj and P. Rajan Varadarajan
David M. Szymanski, Sundar G. Bharadwaj and P. Rajan Varadarajan studied
relationship between market share price and profitability.
Methodology: David M. Szymanski, Sundar G. Bharadwaj and P. Rajan Varadarajan, performed a meta-
analysis on 276 market share profitability findings from forty-eight studies to address
whether market share and profitability are possibility related and to examine the factors
that moderate the magnitude of that relationship.
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Conclusion The authors found that, on average, market share has a positive effect on business profitability.
Purpose: Nikil Varaiya and Roger A. Kerin and David Weeks
Nikil Varaiya and Roger A. Kerin and David Weeks research on “The relationship
between growth, profitability and firm value examined predictions drawn from value-
based planning models
Result indicates that profitability and growth do influence shareholder value in the
manner predicated; however the relationships are conditional. This study also shows that,
the market to book value of equity ratio and Tobin’s q ratio are theoretically &
empirically equivalent measures of value creation.
Benefits derived from literature review: � Provide a context for the research
� Justify the research
� Ensure the research hasn't been done before
� Show where the research fits into the existing body of knowledge
� Enable the researcher to learn from previous theory on the subject
� Illustrate how the subject has been studied previously
� Highlight flaws in previous research
� Outline gaps in previous research
� Show that the work is adding to the understanding and knowledge of the field
� Help refine, refocus or even change the topic
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Chapter-3
METHODOLOGY
Page - 23 -
Methodology
3.1 Study type
The study type is analytical, quantitative and historical.
Analytical as facts and existing information is used for the analysis.
Quantitative as EVA & MVA is calculated and the variables are expressed in
measurable terms.
Historical as the historical information is used for analysis and interpretation.
3.2 Study population Population includes all the domestic companies.
3.3 Sampling frame
Sampling frame includes all those companies that are listed in the stock Exchange
i.e. banking & automobile sector
3.4 Sampling technique
Simple Random sampling is used because only particular units are selected from the
sampling frame. Such a selection is undertaken as these units represent the population in
a better way. The companies listed in the stock exchange are considered since the market
prices can be obtained.
3.5 Sample Profile
Sample includes 20 companies in the Stock market (for which relevant data was
available), for a period of 5 years starting from FY 2002-2003 to 2006-2007
The following are the sample 20 companies:
1. Tata motors.
2. AshokLeyland
3. Punjab Tractors.
4. Mahindra & Mahindra.
5. Eicher Motors.
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6. Hindustan motors.
7. TVS Motors.
8. Hero Honda Motors
9. LML.
10. Kinetic Motors.
11. Canara Bank.
12. Corporation Bank
13. ICICI Bank
14. SBI Bank
15. Vijaya Bank.
16. HDFC Bank
17. Dena Bank.
18. Syndicate Bank.
19. Bank of India.
20. IndusInd Bank.
3.6 Data gathering procedure and instrumentation Data type: Secondary data
Data:
Historical share prices of the sample companies.
Index values of BSE Sensex
Financial Information of the sample companies.
Data Source:
Historical share prices of the sample companies and the index points for the period has
been taken from the database of Capital Market Publishers (India) Ltd., Capitaline.
Financial statements of the sample companies have also been taken from the same source.
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3.7 Hypothesis :
Hypothesis 1
H0: There is no significant relationship between EVA and Share prices. H1: There is significant relationship between EVA and Share prices.
Hypothesis 2
H0: There is no significant relationship between MVA and Share prices. H1: There is significant relationship between MVA and Share prices.
Hypothesis 3
H0: There is no significant relationship between RO CE and Share prices. H1: There is significant relationship between ROCE and Share prices.
3.8 Testing of Hypothesis The hypothesis is tested using Multliple regression and F statistic.
Regression is the process of predicting one variable from another by statistical means
using previous data.
F statistic is used to test the significance of the regression as a whole.
If the Fcal < Ftab, then the null hypothesis is accepted.
The hypothesis is tested using multiple regression tool and F statistic.
Multiple regressions are a statistical process by which several independent variables are
used to predict one dependant variable.
3.9 Description about the analysis tools used
Simple Regression Y=a+bx Where, Y is the dependant variable – market price of shares a is the constant x is the independent variable ROCE b is the coefficient of the independent variable
Multiple Regression
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Y=a+b1x1+b2x2+b3x3
Where,
Y is the dependant variable – market price of shares
a is the constant
xi are the independent variables – performance metrics like NOCE,
MVA and EVA
bi are the coefficient of the independent variables
Method adopted to calculate EVA is as follows
EVA = NOPAT – WACC* WACC
where-
1. NOPAT is net operating profit after taxes.
2. WACC is weighted average cost of capital (equity and debt)
It is calculated as follows:
WACC = Kd (1-T)*W1+Ke *W2+Kp*W3
W1 is weight of debt
W2 is weight of equity
W3 is weight of preference
Kd is the effective cost of Debt, which is calculated by dividing the total interest by the
total debt.
Ke is calculated using the Capital Asset Pricing Model developed by Modigliani and
Miller.
Ke=Rf+Beta (Rm-Rf)
Kp is the effective cost of preference, which is calculated by dividing the total Dividend
Prefernce by the total preference capital.
Rf is the risk free rate, i.e., the rate of interest for 1-year government securities. These
rates are obtained from the website of Reserve Bank of India.
Rm is the return for the market. It is calculated by using the formula
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given below for the index values. Rm=Average of return on market for all the 4 years
Return = Closing index value-opening index value * 100
Opening index value
Beta values for all the sample companies for all the 4 years are calculated by finding the
slope between log normal of share prices of all the companies and log normal of the
index values. Log normal of the values is considered to remove abnormalities if any and
convert them into normal distribution.
3. Invested Capital is the total long term funds and includes equity shares and the total
debt as at the end of the year.
MVA (Market Value Added): A calculation that shows the difference between the
market value of a company and the capital contributed by investors (both bondholders
and shareholders). In other words, it is the sum of all capital claims held against the
company plus the market value of debt and equity.
Calculated as:
Return On Capital Employed (ROCE)
A ratio that indicates the efficiency and profitability of a company's capital investments.
Calculated as:
ROCE
3.10 Limitations of the study
The Study is limited to the 20 companies that are included in BSE-SENSEX.
Availability of dressed data with respect to the financial statements of companies
3.11 Industry Profile
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Banking sector
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 are
estimated at Rs 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 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 massive manpower and lack of modern
technology. On the other hand the Private Sector Banks are making progress. They are
leaders in Internet banking, mobile 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, 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.
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Automobile sector
A well developed transport network indicates a well developed economy. For rapid
development a well-developed and well-knit transportation system is essential. As India's
transport network is developing at a fast pace, Indian Automobile Industry is growing
too. Also, the Automobile industry has strong backward and forward linkages and hence
provides employment to a large section of the population. Thus the role of Automobile
Industry cannot be overlooked in Indian Economy. All kinds of vehicles are produced by
the Automobile Industry. India Automobile Industry includes the manufacture of trucks,
buses, passenger cars, defense vehicles, two-wheelers, etc. The industry can be broadly
divided into the Car manufacturing, two-wheeler manufacturing and heavy vehicle
manufacturing units.
The major Car manufacturer are Hindustan Motors, Maruti Udyog, Fiat India Private
Ltd., Ford India Ltd ., General Motors India Pvt. Ltd., Honda Siel Cars India
Ltd.,Hyundai Motors India Ltd., Skoda India Private Ltd., Toyota Kirloskar Motor Ltd.,
to name a few.
The two-wheeler manufacturing is dominated by companies like TVS, Honda Motorcycle
& Scooter India (Pvt.) Ltd., Hero Honda, Yamaha, Bajaj, etc. The heavy motors like
buses, trucks, defence vehicles, auto rickshaws and other multi-utility vehicles are
manufactured by Tata-Telco, Ashok Leyland, Eicher Motors, Bajaj, Mahindra and