Price-Movement-of-Shares-and-Company-Performance-With-Respect-to-Information-Technology-and-Automobile-Industries.doc

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A STUDY ON THE ANALYSIS OF PRICE MOVEMENT OF

SHARES AND COMPANY PERFORMANCE WITH

RESPECT TO INFORMATION TECHNOLOGY AND

AUTOMOBILE INDUSTRIES



CHAPTER 1

INTRODUCTION

2



1.1 INTRODUCTION

This dissertation named “A study on the correlation between price movement of the

shares and the annual performance of the company with reference to the information

technology and the automobile industry” analyses the various features the impact of price

movements of the shares of the performance of the particular companies. The IT and the

automobile companies trading in NS nifty are ta!en for my study. "or that i followed

the ma#or steps of the economy$ industry and company and also various tools and

variables used for the analy%ing the unaudited &uarterly financial reports.

REASONS FOR THE PRICE MOVEMENT OF SHARES

A specific may have a temporarily high price when for what ever reason$ there has been a

high demand for it. This demand may have nothing to do with the company it self but

may rather relate to$ for e'ample an institute investor trying to diversify out ris!. There

are various reasons for the price movement of the shares ()

• The mar!et e'pects the earnings to rise rapidly in the future. "or e'ample a gold

mining company which has #ust begun to mine may not have made money yet

but ne't &uarter it will most li!ely find the gold and ma!e a lot of money. The

same applies to pharmaceutical companies often a large amount of their revenue

comes from the best few patented products$ so when a promising new product is

approved$ investors may buy up the stoc!.

• The company was previously ma!ing a lot of money$ but in the last year or

&uarter it had a special one time e'pense *called a “charge”+ which lowered the

earnings significantly. Stoc! holders understanding *possibly incorrectly+ that

this was a one time issue$ will still buy stoc! at the same price as before$ and

only sell at the least that same price.

• ,ype for the stoc! has caused people to buy the stoc! for a higher price than

they normally would. This is called bubble. -ne of the most important uses of

the /0 metric is to decide whether a stoc! is undergoing a bubble or anti)bubble

1



by the comparing its /0 to similar companies. ,istorically$ bubbles have been

followed by crashes. As such prudent investors try to stay out of them

• The /0 ratio *price)to)earnings ratio+ of a stoc! *also called its earnings

multiple$ or simply multiple$ /0$ or 0+ is a measure of the price paid for

a share relative to the income or profit earned by the firm per share. A higher /0

ratio means that investors are paying more for each unit of income. It is a

valuation ratio included in other financial ratios. The reciprocal of the /0 ratio

is !nown as the earnings yield.

• The price per share *numerator + is the mar!et price of a single share of the

stoc!. The earnings per share *denominator + is the net income of the companyfor the most recent 32 month period$ divided by number of shares outstanding.

The 0S used can also be the diluted 0S or the comprehensive 0S.

• "or e'ample$ if stoc! A is trading at 425 and the 0arnings er Share for the most

recent 32 month period is 41$ then the /0 ratio is 25/167. Stoc! A said to have a

/0 of 7 *or a multiple of 7+. ut another way$ the purchaser is paying 47 for

every one dollar of earnings.

• 8y relating price and earnings per share for a company$ one can analy%e the

mar!et9s valuation of a company9s shares relative to the wealth the company is

actually creating.

• -ne reason to calculate /0s is for investors to compare the value of stoc!s. If

one stoc! has a /0 twice that of another stoc!$ all things being e&ual$ it is a less

attractive investment. ompanies are rarely e&ual$ however$ and comparisons

between industries$ countries$ and time periods may be misleading.

• The company has some sort of business advantage which seems to ensure that it

will continue ma!e money for a long time with very little ris!. Thus investors

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are willing to buy the stoc! even at a higher price for the piece of mind that they

all not loose their money.

• A large amount of money has been inserted into the stoc! mar!et$ out of

proportion of the growth of the companies across the same time period. Since

there are only limited amount of stoc!s to buy$ supply and demand dictate that

the price of the stoc!s must go up. This factor can ma!e comparing /0 ratios

over time difficult.

WHAT IS A PRICE?

To begin$ we must first understand what price is$ "inancial theorists define stoc!

price at the present value of all future earnings e'pectation of the company$ dividend by

tis number of shares outstanding. :hat this means is the earning capacity of the company

is what defines the price. -ften$ companies can get significant value out of a relatively

small investments in the assets because the ability for those assets to ma!e money is

significant.

0ven companies that loose money today can have a high share price because price is

based on the future earnings of the company. No enterprise is in the business to loose

money$ so the e'pectation is that every business will ma!e money some day. So long as

there is a potential for the future revenue streams to shareholders$ there will be a price

there some one will pay for the shares.

The earnings that a company could ma!e in the future$ the growth that the company could

reali%e and the time to the reali%ation of those goals are factors which affect the estimate

that mar!et ma!es on the earnings potential

T,0 ;A



any company that chooses to list its shares because the company gains li&uidity. In a

theoretical sense$ any time some one buys the shares of the company in the mar!et$ they

are effectively stating that they believe the shares of the company are undervalued. The

fact that they are buying implies a belief and e'pectation that the shares will increase in

the future. At the same time$ the person who is selling the share is e'periencing the

opposite belief. 8y selling$ they imply that the stoc! is over valued and the e'pectation

that the stoc! will go lower in the future. In this way$ the stoc! mar!et is forum for debate

on what the value of the company and its shares.

FACTORS CAUSING MOVEMENTS IN STOCK PRICE

There are four factors that cause movements in stoc! price.

3. New information

2. ?ncertainty

1. sychological factors

a+ "ear

b+ @reed

5. Supply and emand

1. New inf!"#$in

In any financial e't boo! it may only find this factor mentioned as

the determinant of share price. Information is the !ey as it gives the mar!et a reason to

value a stoc! at a particular price level. The mar!et will price the stoc! based on all the

information that the public is aware of. As new information comes into the public realm$

the mar!et will ad#ust the prices up and down based on how the mar!et perceives the

information will effect the future earnings capacity of the company.

It is important to !now how information flows from company to the public. The public is

supposed to learn new information through the insurance of news. The reality is that the

B



information usually ma!es it out before the news is released.



). P*'&+,-i, f#&$!*

,umans are behind the activities of the trading mar!et. That

means human characteristics are also factors in how share prices move.

?nderstanding human psychology is e'tremely important in evaluating investment

opportunities because human psychology creates and accentuates many of the

opportunities that investors can capitali%e on.

"or e'ample greed often causes stoc!s to go higher than they deserve to go.

8y deserve I mean that they go higher than the present value of the future earnings

potentials can #ustify. New information can cause a free%e in the mar!et that ma!es

investors loose sight of rational valuation and simply buy the for the fear of being left

behind.

"ear and greed present incorrect valuations in the mar!et that can e'ist relatively for a

short period but long enough for smart investors for capitali%ing on. 0motion in the

mar!et can be viewed for the amplification I pulled and the stoc!s moves bac! to where

it should reside based on the information of the company.

. S/00,' #n De"#n

:hile popular stoc!s li!e dell and general motors trade

millions of shares every day$ the ma#ority of the stoc!s that we can choose to invest do

not have much li&uidity. As a result stoc!s that trade smaller value of shares are

sub#ected to fluctuation because of supply and demand. If a large share holder wants to

sell a large number of shares into the mar!et with wea! li&uidity$ the share holder can

dramatically move share price.

Supply and demand can ta!e the short term balance out of the mar!et and present

opportunities for investors to see that the balance is restored. Investors can anticipate

abnormal supply and demand verities can price reflects all the information which is

!nown about the company and the ability to ma!e money in the future. As information

about the companyDs prospects is made public$ prices will change. ?ncertainty of the

failure can bring added volatility which psychological factors can amplify the effect of

new information. "inally supply and demand can cause fluctuations not motivated by

new information.

7



REASONS FOR THE COMPANIES TO CARE ABOUT THEIR STOCK PRICES

ompanies live and die by their stoc! price$ yet for the most part they donDt participate

in trading their stoc!s within the mar!et. ompanies receive money from the securities

mar!et only when they first sell the security to the public in the primary mar!et$ which is

commonly referred to an initial public offer

1.T+*e in M#n#-e"en$ #!e f$en S+#!e+,e!* T

The first and most obvious reason why those in management care about the stoc! mar!et

is that they typically have a monetary interest in the company. It9s not unusual for the

founder of a public company to own a significant number the outstanding shares$ and it9s

also not unusual for the management of a company to have salary incentives or stoc!

options tied to the company9s stoc! prices. "or these two reasons$ management acts as

stoc!holders and thus pay attention to their stoc! price.

%.W!#$+ f $+e S+#!e+,e!*

Too often investors forget that stoc! means ownership. The #ob of management is to

produce gains for the shareholders. Although a manager has little or no control of share

price in the short run$ poor stoc! performance could$ over the long run$ be attributed to

mismanagement of the company. If the stoc! price consistently underperforms the

shareholders9 e'pectations$ the shareholders are going to be unhappy with the

management and loo! for changes. In e'treme cases shareholders can band together and

try to oust current management in a pro'y fight. To what e'tent shareholders can control

management is debatable. Nevertheless$ e'ecutives must always factor in the desires of

shareholders since these shareholders are part owners of the company.

2. Fin#n&in-

Another main role of the stoc! mar!et is to act as a barometer for financial health.

Analysts are constantly scrutini%ing companies and reflecting this information onto its

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traded securities. 8ecause of this$ creditors tend to loo! favorably upon companies whose

shares are performing strongly. This preferential treatment is in part due to the tie

between a company9s earnings and its share price. -ver the long term$ strong earnings are

a good indication that the company will be able to meet debt re&uirements. As a result$

the company will receive cheaper financing through a lower interest rate$ which in turn

increases the amount of value returned from a capital pro#ect.

Alternatively$ favorable mar!et performance is useful for a company see!ing additional

e&uity financing. If there is demand$ a company can always sell more shares to the public

to raise money. 0ssentially this is li!e printing money$ and it isn9t bad for the company as

long as it doesn9t dilute its e'isting share base too much$ in which case issuing more

shares can have horrible conse&uences for e'isting shareholders.

). T+e H/n$e!* #n $+e H/n$e

?nli!e private companies$ publicly traded companies$ if they allow their share price to

decline substantially$ stand vulnerable to ta!eover by another company. This e'posure is

a result of the nature of ownership in the company. rivate companies are usually

managed by the owners themselves$ and the shares are closely held. If private owners

don9t want to sell$ the company cannot be ta!en over. ublicly)traded companies$ on the

other hand$ have shares distributed over a large base of owners who can easily sell at any

time. To accumulate shares for the purpose of ta!eover$ potential bidders are better able

to ma!e offers to shareholders when they are trading at lower prices. "or this reason$

companies would want their stoc! price to remain relatively stable$ so that they remain

strong and deter interested corporations from ta!ing them.

-n the other side of the ta!eover e&uation$ a company with a hot stoc! has a great

advantage when loo!ing to buy other companies. Instead of having to buy with cash$ a

company will simply issue more shares to fund the ta!eover. In strong mar!ets this is

e'tremely common ) so much that a strong stoc! price is a matter of survival in

competitive industries.

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.E-

"inally$ a company may aim to increase share simply to increase their prestige and

e'posure to the public. ;anagers are human too$ and li!e anybody they are always

thin!ing ahead to their ne't #ob. The larger the mar!et capitali%ation of a company$ the

more analyst coverage the company will receive. 0ssentially$ analyst coverage is a form

of free publicity advertising and allows both senior managers and the company itself to

introduce them to a wider audience.

"or these reasons$ a company9s stoc! price is a matter of concern. If performance of their

stoc! is ignored$ the life of the company and its management may be threatened with

adverse conse&uences$ such as the

DETERMINING THE SHARE PRICES

Share prices in traded company are determined by mar!et supply and demand$ and thus

depend upon the e'pectations of the buyers and sellers. Among these the following are

important while investing

• The companyDs future and recent performance

• erceived ris!

• New product lines

• rospects for the companies of this type$ the “mar!et sector”

• revailing moods and fashions.

3.2 S?8G0T 8A= @



companies en#oy high price o earnings ratio and other growth measures$ while the

measure remains negligible for others$ the result is that the investor needs t be more

contingent that even before the reasons the possibility underlying abbreviations in

connections between stoc! price movements and annual performance. Investors

should consider whether the companies share is a good value$ it is not always that

the stoc! should always be purchased of good performance of companies and sold

on bad performance. This paper attempt to find the price movement of the shares

and the performance of their respective companies. It is apparently that there are

e'tremely wide day)to)day changes in the price &uote on most of the stoc!

e'changes. It is not possible to say whether it is economic or psychological realities

which are the ma#or causes of the price fluctuatons in the stoc! mar!ets. This is an

important issue$ as it brings into account the analy%ing the annual performance of

companies and the price movements of the shares of that particular companies to the

investors.

3.1 N00 "-< T,0 ST?H

• InvestorDs wealth is precious. ,ence needs to analy%e the prevailing

economic conditions of the country and also the shares of the respective

companies.

• Investment is the commitment of fund e'pectation with some positive rate o

return and is always associated with ris!$ may be diversifiable non)

diversifiable or both for reducing the ris! and increasing the return$

analy%ing the securities$ considering the price movement of the shares and

performance of the companies is a must.

• As each investor has his own preference and choice of investments$

considering the shares and the relative movement of he shares and pricemovements with companies performances enables of getting better

portfolio.

• ortfolio management is assuming importance and more and more people

are showing interest in investing in companies which are doing good.

32



CHAPTER %

RESEARCH DESIGN

31



2.3 INT



2.7 T--S -" ATA -0TI-N

There are two types of data collection method$ primary and secondary data collections.

Secondary data is collected from various boo!s$ #ournals$ annual reports of the companies

&uarterly financial results and various other articles.

2.E "I0 :-



internal management policies$ poor employer employee relationship also affect

company performance.

2.32 ,AT0< S,0;0

hapter 3( Introduction deals with the Introduction to the topic$ ;ar!et mechanism$



,AT0< 1

COMPANY PROFILE

37



1.3 8AGAG A?T-

B#3#3 A/$ is a ma#or Indian automobile manufacturer. It is India9s largest and the

world9s 5th largest two) and three)wheeler ma!er. It is based in une$ ;aharashtra$ with

plants in :alu# near Aurangabad$ A!urdi and ha!an$ near une. 8a#a# Auto ma!es and

e'ports motorscooters$ motorcycles and the auto ric!shaw. It is widely believed that 8a#a#

is headed for a de)merger into 2 separate companies( 8a#a# Auto and 8a#a# "inance. It is

e'pected that sum of the parts created$ will be worth more that the current whole$ as was

the case in the de)merger of



1.2 ,0



are in haruhera and @urgaon$ both in ,aryana$ India. It speciali%es in dual use

motorcycles that are low powered but very fuel efficient

C"0#n' P!fi,e

“,ero”$ is the brand name used by the ;un#al brothers in the year 3E>B with the flagship

company ,ero ycles. The two)wheeler manufacturing business of bicycle components

had originally started in the 3E5FDs and turned into the worldDs largest bicycle

manufacturer today. ,ero$ is a name synonymous with two)wheelers in India today. The

;un#als roll their own steel$ ma!e free wheel and other critical bicycle components and

have diversified into different ventures li!e product design. The ,ero @roup philosophy

is( “To provide e'cellent transportation to the common man at easily affordable prices

and to provide total satisfaction in all its spheres of activity”. The ,ero group vision is to

build long lasting relationships with everyone *customers$ wor!ers$ dealers and vendors+.

The ,ero @roup has a passion for setting higher standards and “0ngineering Satisfaction”

is the prime motivation$ way of life and wor! culture of the @roup.

In the year 3E75$ ;r. 8ri#mohan al ;un#al$ the hairman and ;anaging irector of

,ero ,onda ;otors *,,;+$ headed an alliance between the ;un#al family and ,onda

;otor ompany td. *,;+. ,,; ;ission Statement is( “:e$ at ,ero ,onda$ are

continuously striving for synergy between technology$ systems$ and human resources to

provide products and services that meet the &uality$ performance$ and price aspirations of

our customers. :hile doing so$ we maintain the highest standards of ethics and societal

responsibilities$ constantly innovate products and processes$ and develop teams that !eep

the momentum going to ta!e the company to e'cellence in the new millennium”. This

alliance became one of the most successful #oint ventures in India$ until the year 3EEE

when ,; had announced a 3FFK subsidiary$ ,onda ;otorcycle Scooter India

*,;SI+. This announcement caused the ,,; stoc! price to decrease by 1F percent that

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same day. ;un#al had to come up with some new strategic decisions as$ ,;SI and other

foreign new entry companies were causing increased intensity of rivalry for ,,;

1.2

1.1 ;A,IN



;; soon branched out into manufacturing agricultural tractors and light commercial

vehicles *Js+. It later e'panded its operations to secure a significant presence in many

more important sectors. The company has now transformed itself into a group that caters

to the Indian and overseas mar!ets with a presence in vehicles$ farm e&uipment$

information technology$ trade and finance related services$ as well as infrastructure

development.

8y 2FF>$ ;; had become the largest producer of S?Js in India. The company has

recently started a separate sector$ the ;ahindra Systems and Automotive Technologies

*;SAT+$ to focus on developing components and offering engineering services.

;; has two main operating divisions(

• The Automotive ivision which manufactures utility vehicles$ light commercial

vehicles and three wheelers

• The Tractor *"arm 0&uipment+ ivision ma!es agricultural tractors and

implements that are used in con#unction with tractors$ and has also ventured into

manufacturing of industrial engines

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1.5 TATA ;-T-th largest commercial vehicle manufacturer. It is part of

the Tata @roup. Tata ;otors is widely credited for putting India on the automotive map

by designing and developing its own range of cars. Tata ;otors date bac! to 3E5> when

they started ma!ing Trains. Tata ;otors was first listed on the NHS0 in 2FF5. Tata

;otors had created the wealth $ it ac&uired a 23K sta!e in ,ispano arrocera SA$ giving it controlling rights in the

company. Tata ;otors and the "iat group have signed a new memorandum of

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1.> ;A



M#!/$i U'- L$ is one of India9s leading automobile manufacturers and the mar!et

leader in the car segment$ both in terms of volume of vehicles sold and revenue earned.

37.27K of the company is owned by the government$ and >5.2K by Su%u!i of Gapan. The

Indian government held an Initial ublic -ffering of 2>K of the company in Gune of

2FF1.

;aruti ?dyog imited *;?+ was established in "ebruary 3E73$ though the actual

production commenced in 3E71. Through 2FF5$ ;aruti has produced over > ;illion

vehicles. M#!/$i* are sold in India and various several other countries$ depending upon

e'port orders. ars similar to ;arutis *but not manufactured by ;aruti ?dyog+ are sold

by Su%u!i in a!istan and other South Asian countries.

The company annually e'ports more than 1F$FFF cars and has an e'tremely large

domestic mar!et in India selling over five hundred thousand cars annually. ;aruti 7FF$

till 2FF5$ was the India9s largest selling compact car ever since it was launched in 3E71.

;ore than a million units of this car have been sold worldwide so far. urrently$ ;aruti

Alto tops the sales charts.

ue to the large number of ;aruti 7FFs sold in the Indian mar!et$ the term ;aruti is

commonly used to refer to this compact car model. Till recently the term ;aruti$ in popular Indian culture$ was associated to the ;aruti 7FF model.

2C

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1.B :I+. It

is head&uartered in 8angalore. It is the third largest IT services company in India. It has

B7$FFF employees as of Apr 2FFC$ inclusive of its 8- arm which it ac&uired in 2FF2.

:ipro Technologies has over 1FF customers across ?SA$ 0urope and Gapan including >F

of the "ortune >FF companies. Some of its customers are 8oeing$ isco$ 0ricsson$ I8;$

;icrosoft$ rudential$ Seagate$ Sony and Toshiba. It is listed on the New Hor! Stoc!

0'change and is part of its T;T *technology media telecom+ inde'.

27

http://en.wikipedia.org/wiki/Category:Types_of_companieshttp://en.wikipedia.org/wiki/NYSEhttp://www.nyse.com/about/listed/lcddata.html?ticker=WIThttp://en.wikipedia.org/wiki/Bangalorehttp://en.wikipedia.org/wiki/Indiahttp://en.wikipedia.org/wiki/Azim_Premjihttp://en.wikipedia.org/wiki/Managing_Directorhttp://en.wikipedia.org/wiki/Managing_Directorhttp://en.wikipedia.org/wiki/Industryhttp://en.wikipedia.org/wiki/Information_technologyhttp://en.wikipedia.org/wiki/Revenuehttp://en.wikipedia.org/wiki/United_States_dollarhttp://en.wikipedia.org/wiki/Net_incomehttp://en.wikipedia.org/wiki/United_States_dollarhttp://en.wikipedia.org/wiki/Employmenthttp://en.wikipedia.org/wiki/2006http://en.wikipedia.org/wiki/Sloganhttp://en.wikipedia.org/wiki/Websitehttp://www.wipro.com/http://en.wikipedia.org/wiki/New_York_Stock_Exchangehttp://www.nyse.com/about/listed/lcddata.html?ticker=WIThttp://en.wikipedia.org/wiki/Information_technologyhttp://en.wikipedia.org/wiki/1980http://en.wikipedia.org/wiki/Indiahttp://en.wikipedia.org/wiki/1946http://en.wikipedia.org/wiki/1945http://en.wikipedia.org/wiki/Bangalorehttp://en.wikipedia.org/wiki/Business_process_outsourcing_in_Indiahttp://en.wikipedia.org/wiki/Boeinghttp://en.wikipedia.org/wiki/Ciscohttp://en.wikipedia.org/wiki/Ericssonhttp://en.wikipedia.org/wiki/IBMhttp://en.wikipedia.org/wiki/Microsofthttp://en.wikipedia.org/wiki/Prudentialhttp://en.wikipedia.org/wiki/Seagatehttp://en.wikipedia.org/wiki/Sonyhttp://en.wikipedia.org/wiki/Toshibahttp://en.wikipedia.org/wiki/New_York_Stock_Exchangehttp://en.wikipedia.org/wiki/New_York_Stock_Exchangehttp://en.wikipedia.org/wiki/Image:Green_Arrow_Up_Darker.svghttp://en.wikipedia.org/wiki/Image:Green_Arrow_Up_Darker.svghttp://en.wikipedia.org/wiki/Image:Flag_of_India.svghttp://en.wikipedia.org/wiki/Category:Types_of_companieshttp://en.wikipedia.org/wiki/NYSEhttp://www.nyse.com/about/listed/lcddata.html?ticker=WIThttp://en.wikipedia.org/wiki/Bangalorehttp://en.wikipedia.org/wiki/Indiahttp://en.wikipedia.org/wiki/Azim_Premjihttp://en.wikipedia.org/wiki/Managing_Directorhttp://en.wikipedia.org/wiki/Managing_Directorhttp://en.wikipedia.org/wiki/Industryhttp://en.wikipedia.org/wiki/Information_technologyhttp://en.wikipedia.org/wiki/Revenuehttp://en.wikipedia.org/wiki/United_States_dollarhttp://en.wikipedia.org/wiki/Net_incomehttp://en.wikipedia.org/wiki/United_States_dollarhttp://en.wikipedia.org/wiki/Employmenthttp://en.wikipedia.org/wiki/2006http://en.wikipedia.org/wiki/Sloganhttp://en.wikipedia.org/wiki/Websitehttp://www.wipro.com/http://en.wikipedia.org/wiki/New_York_Stock_Exchangehttp://www.nyse.com/about/listed/lcddata.html?ticker=WIThttp://en.wikipedia.org/wiki/Information_technologyhttp://en.wikipedia.org/wiki/1980http://en.wikipedia.org/wiki/Indiahttp://en.wikipedia.org/wiki/1946http://en.wikipedia.org/wiki/1945http://en.wikipedia.org/wiki/Bangalorehttp://en.wikipedia.org/wiki/Business_process_outsourcing_in_Indiahttp://en.wikipedia.org/wiki/Boeinghttp://en.wikipedia.org/wiki/Ciscohttp://en.wikipedia.org/wiki/Ericssonhttp://en.wikipedia.org/wiki/IBMhttp://en.wikipedia.org/wiki/Microsofthttp://en.wikipedia.org/wiki/Prudentialhttp://en.wikipedia.org/wiki/Seagatehttp://en.wikipedia.org/wiki/Sonyhttp://en.wikipedia.org/wiki/Toshibahttp://en.wikipedia.org/wiki/New_York_Stock_Exchangehttp://en.wikipedia.org/wiki/New_York_Stock_Exchange



:ith revenue in the e'cess of ?S 41 billion$ :ipro is one of India9s ma#or information

technology companies. :ipro has dedicated development centers and offices across

India$ 0urope$ North America and Asia acific.

The current hairman$ ;anaging irector and ma#ority sta!e owner is A%im rem#i.

"rom inception$ the software and hardware divisions have been headed by him.

Hi*$!'

:ipro was set up in Amalner $ ;aharashtra in 3E5>. rimarily an edible oil factory$ the

chief products were Sunflower Janaspati and C7C laundry soap *a by)product of the

Janaspati operations+. The company was called Western India Vegetable P!ducts

imited$ with a minor presence in ;aharashtra and ;adhya radesh. In the 3ECFs and

3E7Fs it began to e'pand and made forays into computing. In 3EC>$ :ipro mar!eted

India9s first homegrown . :ipro was the sole representative for Sun ;icrosystems in

India$ before the Sun liaison office was set up in India$ in the early nineties.

In 3EE>$ it received IS- EFF3 &uality certification. In 3EEC$ :ipro received ;; level 1

certification from the Software 0ngineering Institute. In 3EE7$ it was certified at ;;i

level >. In 2FF3$ it was awarded the ;; level > certification. In the same year$

8usiness Today rated it as India9s most valuable company.

In Gune 2FF3$ it was ran!ed among the top 3FF best performing technology companies

globally by 8usiness:ee! . In November 2FF2$ it was ran!ed among the top 3F software

services companies in the world by the same maga%ine. As of 2FF5$ it was the 5th largest

company in the world in terms of mar!et capitali%ation in IT services.

:ipro and its success in handling outsourced information technology from ?.S.

businesses is detailed in Thomas . "riedman9s best)selling novel

2E

http://en.wikipedia.org/wiki/Chairmanhttp://en.wikipedia.org/wiki/Managing_Directorhttp://en.wikipedia.org/wiki/Azim_Premjihttp://en.wikipedia.org/wiki/Amalnerhttp://en.wikipedia.org/wiki/Maharashtrahttp://en.wikipedia.org/wiki/Vanaspatihttp://en.wikipedia.org/wiki/1970shttp://en.wikipedia.org/wiki/1980shttp://en.wikipedia.org/wiki/Sun_Microsystemshttp://en.wikipedia.org/wiki/ISO_9001http://en.wikipedia.org/wiki/CMMihttp://en.wikipedia.org/wiki/PCMMhttp://en.wikipedia.org/wiki/Business_Todayhttp://en.wikipedia.org/wiki/BusinessWeekhttp://en.wikipedia.org/wiki/Thomas_Friedmanhttp://en.wikipedia.org/wiki/Chairmanhttp://en.wikipedia.org/wiki/Managing_Directorhttp://en.wikipedia.org/wiki/Azim_Premjihttp://en.wikipedia.org/wiki/Amalnerhttp://en.wikipedia.org/wiki/Maharashtrahttp://en.wikipedia.org/wiki/Vanaspatihttp://en.wikipedia.org/wiki/1970shttp://en.wikipedia.org/wiki/1980shttp://en.wikipedia.org/wiki/Sun_Microsystemshttp://en.wikipedia.org/wiki/ISO_9001http://en.wikipedia.org/wiki/CMMihttp://en.wikipedia.org/wiki/PCMMhttp://en.wikipedia.org/wiki/Business_Todayhttp://en.wikipedia.org/wiki/BusinessWeekhttp://en.wikipedia.org/wiki/Thomas_Friedman



1.C SI0;0NS A@

Sie"en* AG

T'0e ublic *A!tiengesellschaft+*ISIN( 0FFFC21B3F3$ ":8( SI0$ NHS0( SI+

F/ne 375C in 8erlin$ @ermany

He#5/#!$e!* ;unich$ @ermany

Ke' 0e0,e =laus =leinfeld$hairman 0-

In/*$!' onglomerates

P!/&$* ommunication Systems

ower @enerationIndustrial Automation and ontrolighting;edical 0&uipmentTransportation and Automotive:ater Technologies"inancing8uilding Technologies8usiness Services,ome Appliancesonstruction

Re6en/e 7C.12> billion *2FFB+

E"0,'ee* 57F$FFF *2FFC+

S,-#n @lobal Networ! of Innovation

We7*i$e www.siemens.com

Sie"en* AG *ISIN( 0FFFC21B3F3$ ":8( SI0$ NHS0( SI+ is one of the world9s largest

technology companies. Siemens has si' ma#or business divisions( ommunication and

Information Automation and ontrol ower Transportation ;edical and ighting.

Siemens9 international head&uarters are in 8erlin and ;unich$ @ermany. Siemens A@ is

listed on the "ran!furt Stoc! 0'change and also on the New Hor! Stoc! 0'change since

;arch 32$ 2FF3. :orldwide$ Siemens and its subsidiaries employ 57F$FFF people in 3EF

countries and reported global sales of 7C.12> billion in fiscal year 2FFB. O2P

1F

http://en.wikipedia.org/wiki/Category:Types_of_companieshttp://en.wikipedia.org/wiki/Aktiengesellschafthttp://en.wikipedia.org/wiki/International_Securities_Identifying_Numberhttp://deutsche-boerse.com/dbag/dispatch/en/isg/gdb_navigation/investor_relations/20_The_Share/10_Price?module=InOverview_Equi&wp=DE0007236101&foldertype=_Equi&wplist=DE0007236101&active=overview&wpbpl=http://en.wikipedia.org/wiki/Frankfurt_Stock_Exchangehttp://deutsche-boerse.com/dbag/dispatch/en/isg/gdb_navigation/home/Content_Files/20_overview_pages/cp_sp_overview_xetra.htm?action=ISGFormProcessingAction&eventSubmit_doSimplestocksearch=true&wp=SIE&x=0&y=0http://en.wikipedia.org/wiki/New_York_Stock_Exchangehttp://www.nyse.com/about/listed/lcddata.html?ticker=SIhttp://en.wikipedia.org/wiki/1847http://en.wikipedia.org/wiki/Berlinhttp://en.wikipedia.org/wiki/Germanyhttp://en.wikipedia.org/wiki/Munichhttp://en.wikipedia.org/wiki/Germanyhttp://en.wikipedia.org/wiki/Klaus_Kleinfeldhttp://en.wikipedia.org/wiki/Industryhttp://en.wikipedia.org/wiki/Conglomerate_(company)http://en.wikipedia.org/wiki/Product_(business)http://en.wikipedia.org/w/index.php?title=Telephone_and_Telephone_Systems&action=edithttp://en.wikipedia.org/wiki/Electrical_generatorhttp://en.wikipedia.org/wiki/Automationhttp://en.wikipedia.org/wiki/Lightinghttp://en.wikipedia.org/wiki/Ct_scanhttp://en.wikipedia.org/wiki/Transporthttp://en.wikipedia.org/wiki/Water_purificationhttp://en.wikipedia.org/wiki/Financinghttp://en.wikipedia.org/w/index.php?title=Building_Technologies&action=edithttp://en.wikipedia.org/wiki/IT_Service_Managementhttp://en.wikipedia.org/wiki/Domestic_technologyhttp://en.wikipedia.org/wiki/Constructionhttp://en.wikipedia.org/wiki/Revenuehttp://en.wikipedia.org/wiki/Eurohttp://en.wikipedia.org/wiki/1000000000_(number)http://en.wikipedia.org/wiki/2006http://en.wikipedia.org/wiki/Employmenthttp://en.wikipedia.org/wiki/2007http://en.wikipedia.org/wiki/Sloganhttp://en.wikipedia.org/wiki/Websitehttp://www.siemens.com/http://en.wikipedia.org/wiki/Aktiengesellschafthttp://en.wikipedia.org/wiki/International_Securities_Identifying_Numberhttp://deutsche-boerse.com/dbag/dispatch/en/isg/gdb_navigation/investor_relations/20_The_Share/10_Price?module=InOverview_Equi&wp=DE0007236101&foldertype=_Equi&wplist=DE0007236101&active=overview&wpbpl=http://en.wikipedia.org/wiki/Frankfurt_Stock_Exchangehttp://deutsche-boerse.com/dbag/dispatch/en/isg/gdb_navigation/home/Content_Files/20_overview_pages/cp_sp_overview_xetra.htm?action=ISGFormProcessingAction&eventSubmit_doSimplestocksearch=true&wp=SIE&x=0&y=0http://en.wikipedia.org/wiki/New_York_Stock_Exchangehttp://www.nyse.com/about/listed/lcddata.html?ticker=SIhttp://en.wikipedia.org/wiki/Berlinhttp://en.wikipedia.org/wiki/Munichhttp://en.wikipedia.org/wiki/Germanyhttp://en.wikipedia.org/wiki/Frankfurt_Stock_Exchangehttp://en.wikipedia.org/wiki/New_York_Stock_Exchangehttp://en.wikipedia.org/wiki/Siemens_AG#_note-1%23_note-1http://en.wikipedia.org/wiki/Image:Green_up.pnghttp://en.wikipedia.org/wiki/Image:Flag_of_Germany.svghttp://en.wikipedia.org/wiki/Image:Flag_of_Germany.svghttp://en.wikipedia.org/wiki/Category:Types_of_companieshttp://en.wikipedia.org/wiki/Aktiengesellschafthttp://en.wikipedia.org/wiki/International_Securities_Identifying_Numberhttp://deutsche-boerse.com/dbag/dispatch/en/isg/gdb_navigation/investor_relations/20_The_Share/10_Price?module=InOverview_Equi&wp=DE0007236101&foldertype=_Equi&wplist=DE0007236101&active=overview&wpbpl=http://en.wikipedia.org/wiki/Frankfurt_Stock_Exchangehttp://deutsche-boerse.com/dbag/dispatch/en/isg/gdb_navigation/home/Content_Files/20_overview_pages/cp_sp_overview_xetra.htm?action=ISGFormProcessingAction&eventSubmit_doSimplestocksearch=true&wp=SIE&x=0&y=0http://en.wikipedia.org/wiki/New_York_Stock_Exchangehttp://www.nyse.com/about/listed/lcddata.html?ticker=SIhttp://en.wikipedia.org/wiki/1847http://en.wikipedia.org/wiki/Berlinhttp://en.wikipedia.org/wiki/Germanyhttp://en.wikipedia.org/wiki/Munichhttp://en.wikipedia.org/wiki/Germanyhttp://en.wikipedia.org/wiki/Klaus_Kleinfeldhttp://en.wikipedia.org/wiki/Industryhttp://en.wikipedia.org/wiki/Conglomerate_(company)http://en.wikipedia.org/wiki/Product_(business)http://en.wikipedia.org/w/index.php?title=Telephone_and_Telephone_Systems&action=edithttp://en.wikipedia.org/wiki/Electrical_generatorhttp://en.wikipedia.org/wiki/Automationhttp://en.wikipedia.org/wiki/Lightinghttp://en.wikipedia.org/wiki/Ct_scanhttp://en.wikipedia.org/wiki/Transporthttp://en.wikipedia.org/wiki/Water_purificationhttp://en.wikipedia.org/wiki/Financinghttp://en.wikipedia.org/w/index.php?title=Building_Technologies&action=edithttp://en.wikipedia.org/wiki/IT_Service_Managementhttp://en.wikipedia.org/wiki/Domestic_technologyhttp://en.wikipedia.org/wiki/Constructionhttp://en.wikipedia.org/wiki/Revenuehttp://en.wikipedia.org/wiki/Eurohttp://en.wikipedia.org/wiki/1000000000_(number)http://en.wikipedia.org/wiki/2006http://en.wikipedia.org/wiki/Employmenthttp://en.wikipedia.org/wiki/2007http://en.wikipedia.org/wiki/Sloganhttp://en.wikipedia.org/wiki/Websitehttp://www.siemens.com/http://en.wikipedia.org/wiki/Aktiengesellschafthttp://en.wikipedia.org/wiki/International_Securities_Identifying_Numberhttp://deutsche-boerse.com/dbag/dispatch/en/isg/gdb_navigation/investor_relations/20_The_Share/10_Price?module=InOverview_Equi&wp=DE0007236101&foldertype=_Equi&wplist=DE0007236101&active=overview&wpbpl=http://en.wikipedia.org/wiki/Frankfurt_Stock_Exchangehttp://deutsche-boerse.com/dbag/dispatch/en/isg/gdb_navigation/home/Content_Files/20_overview_pages/cp_sp_overview_xetra.htm?action=ISGFormProcessingAction&eventSubmit_doSimplestocksearch=true&wp=SIE&x=0&y=0http://en.wikipedia.org/wiki/New_York_Stock_Exchangehttp://www.nyse.com/about/listed/lcddata.html?ticker=SIhttp://en.wikipedia.org/wiki/Berlinhttp://en.wikipedia.org/wiki/Munichhttp://en.wikipedia.org/wiki/Germanyhttp://en.wikipedia.org/wiki/Frankfurt_Stock_Exchangehttp://en.wikipedia.org/wiki/New_York_Stock_Exchangehttp://en.wikipedia.org/wiki/Siemens_AG#_note-1%23_note-1



Hi*$!'

Siemens was founded by :erner von Siemens on -ctober 3$ 375C$ based on the telegraph

he had invented that used a needle to point to the se&uence of letters$ instead of using the

;orse code. The company U then called Telegraphen)8auanstalt von Siemens ,als!e U

too! occupation of its wor!shop on -ctober 32.

In 3757$ the company built the first long)distance telegraph line in 0urope$ spanning >FF

!m from 8erlin to "ran!furt am ;ain. In 37>F the founder9s younger brother$ Sir :illiam

Siemens *born arl :ilhelm Siemens+$ started to represent the company in ondon. In

the 37>Fs$ the company was involved in building long distance telegraph networ!s in

>$ a company branch opened in St etersburg$ headed by another brother$

arl von Siemens.

In 3773$ a Siemens A Alternator $ driven by a watermill$ was used to power the world9s

first electric street lighting in the town of @odalming$ ?nited =ingdom. The company

continued to grow and diversified into electric trains and light bulbs. In 37EF$ the founder

retired and left the company to his brother arl and sons Arnold and :ilhelm. Siemens

,als!e *S,+ was incorporated in 37EC.

In 3E3E$ S, and two other companies #ointly formed the -sram lightbulb company. A

Gapanese subsidiary was established in 3E21.

uring the 3E2Fs and 3E1Fs$ S, started to manufacture radios$ television sets$ and

electron microscopes. 8efore :orld :ar II Siemens was involved in the secret

rearmament of @ermany.

uring the Second :orld :ar$ li!e many big companies in @ermany at the time$ Siemens

supported ,itler and participated in the Aryani%ing of businesses. Siemens used slave

labor from concentration camps to build electric switches for military uses. Siemens had

many factories in and around famous e'termination camps such as Auschwit%. In one

e'ample$ almost 3FF$FFF men and women from Auschwit% wor!ed in a Siemens factory

inside the e'termination camp$ supplying the electricity to the camp.

13

http://en.wikipedia.org/wiki/Ernst_Werner_von_Siemenshttp://en.wikipedia.org/wiki/October_1http://en.wikipedia.org/wiki/1847http://en.wikipedia.org/wiki/Telegraphhttp://en.wikipedia.org/wiki/Measuring_instrumenthttp://en.wikipedia.org/wiki/Letterhttp://en.wikipedia.org/wiki/Morse_codehttp://en.wikipedia.org/wiki/October_12http://en.wikipedia.org/wiki/1848http://en.wikipedia.org/wiki/Europehttp://en.wikipedia.org/wiki/Berlinhttp://en.wikipedia.org/wiki/Frankfurt_am_Mainhttp://en.wikipedia.org/wiki/1850http://en.wikipedia.org/wiki/Carl_Wilhelm_Siemenshttp://en.wikipedia.org/wiki/Londonhttp://en.wikipedia.org/wiki/Russiahttp://en.wikipedia.org/wiki/1855http://en.wikipedia.org/wiki/St_Petersburghttp://en.wikipedia.org/wiki/Carl_Heinrich_von_Siemenshttp://en.wikipedia.org/wiki/Alternating_currenthttp://en.wikipedia.org/wiki/Alternatorhttp://en.wikipedia.org/wiki/Godalminghttp://en.wikipedia.org/wiki/United_Kingdomhttp://en.wikipedia.org/wiki/1890http://en.wikipedia.org/wiki/1897http://en.wikipedia.org/wiki/1919http://en.wikipedia.org/wiki/Osramhttp://en.wikipedia.org/wiki/Lightbulbhttp://en.wikipedia.org/wiki/Japanhttp://en.wikipedia.org/wiki/1923http://en.wikipedia.org/wiki/World_War_IIhttp://en.wikipedia.org/wiki/Ernst_Werner_von_Siemenshttp://en.wikipedia.org/wiki/October_1http://en.wikipedia.org/wiki/1847http://en.wikipedia.org/wiki/Telegraphhttp://en.wikipedia.org/wiki/Measuring_instrumenthttp://en.wikipedia.org/wiki/Letterhttp://en.wikipedia.org/wiki/Morse_codehttp://en.wikipedia.org/wiki/October_12http://en.wikipedia.org/wiki/1848http://en.wikipedia.org/wiki/Europehttp://en.wikipedia.org/wiki/Berlinhttp://en.wikipedia.org/wiki/Frankfurt_am_Mainhttp://en.wikipedia.org/wiki/1850http://en.wikipedia.org/wiki/Carl_Wilhelm_Siemenshttp://en.wikipedia.org/wiki/Londonhttp://en.wikipedia.org/wiki/Russiahttp://en.wikipedia.org/wiki/1855http://en.wikipedia.org/wiki/St_Petersburghttp://en.wikipedia.org/wiki/Carl_Heinrich_von_Siemenshttp://en.wikipedia.org/wiki/Alternating_currenthttp://en.wikipedia.org/wiki/Alternatorhttp://en.wikipedia.org/wiki/Godalminghttp://en.wikipedia.org/wiki/United_Kingdomhttp://en.wikipedia.org/wiki/1890http://en.wikipedia.org/wiki/1897http://en.wikipedia.org/wiki/1919http://en.wikipedia.org/wiki/Osramhttp://en.wikipedia.org/wiki/Lightbulbhttp://en.wikipedia.org/wiki/Japanhttp://en.wikipedia.org/wiki/1923http://en.wikipedia.org/wiki/World_War_II



1.7 SATHA; -;?T0< S0



T'0e ublic * NHS0( SAH+

F/ne *3E7C+

He#5/#!$e!* ,yderabad$ Andhra radesh$ India

Ke' 0e0,e



• -ctober 3E$ 2FFB ) Satyam M2



F/ne Guly 2$ 3E73

He#5/#!$e!* 0lectronics ity$ ,osur



Sudha ;urthy. The company was incorporated as Infosys onsultants vt td.$ with

ran!ing and became the first Indian

company to be listed on NASAM. In 2FF3 it was rated 8est 0mployer in India by

8usiness Today$ and in 2FF2 8usiness :orld named Infosys India9s ;ost



F/ne 3EB7

He#5/#!$e!* ;umbai$ India

Ke' 0e0,e *Gan 2FFC+

S,-#n 0'perience ertainty

We7*i$e http(//www.tcs.com

T#$# Cn*/,$#n&' Se!6i&e* Li"i$e *TS imited+ is an Indian information technology$

consulting$ services and business)process outsourcing organi%ation which commenced

operations in 3EB7. As of 2FFB$ it is Asia9s largest IT services firm with annualised

revenues of over ?S 45 billion *estimated for "H 2FFB)FC+ and has the largest number of

employees among all the Indian IT companies with strength of over 7C$FFF. "or fiscal

year 2FF>)FB$ it posted a net profit of



1E



,AT0< 5

DATA ANALYSIS AND INTERPRETATION

5.3 I;-



predicted with certainty. These values are primarily determined by the performance of the

company$ which in turn is influenced by the performance of the industry to which the

company belongs and the general economic and socio political scenario of the country.

An investor who would li!e to be rational and scientific in his investment

activity has to evaluate a lot of information about the past performance and e'pected

future performance of companies$ industry and economy as a whole. Such valuation or

analysis is called fundamental analysis.

FUNDAMANAL ANALYSIS ;MEANING

"undamental analysis is really a logical and systematic approach to estimate the

future dividends and share price. It is based on the basic premise that share price is

determined by a number of fundamentals industry fundamentals$ company fundamentals

have to be considered while analy%ing a security for investment purpose. "undamental

analysis is in other words a detailed analysis of the fundamental factors affecting the

performance of the companies.

The intrinsic value of an e&uity share depends on a multiple factors. The earning

of the company$ the growth rate and ris! factor e'posure of the company has a direct

bearing on the price of shares. These factors in turn rely on the host of other factors li!e

economic environment in which they function$ the industry they belong to$ and finally the

companyDs own performance. So$ it is mandatory to the investor to analy%e broadly the

economic$ industry factors before investment. K

Industry factors 3>)2FK

ompany factors 1F)1>K

-ther factors 3>)2>K

53



ECONOMY ; INDUSTRY ; COMPANY ANALYSIS FRAMEWORK

The multiple factors affecting the performance of a company can be classified

as(

*A+ 0conomic wide factors such as growth rate of economy$ inflation rate$ foreign

e'change rate X.etc which affects all companies.

*8+ Industry wide factors such as demand and supply gap of industry$ hr emergence

of substitute product$ changes in government policy relating to the

industryX..etc.

*+ ompany specific factors such as the age of its plant the management$ brand

image of its products$ the labour management relations XXetc. These factors

are li!ely to ma!e a companyDs performance &uite different from that of its

compatriots in the same industry.

52



ECONOMIC ANALYSIS

5.2 0-N-;I ANAHSIS

51



The level of economic activity has as impact on price movement of share and

company performance in many ways. If the company grows rapidly$ the industry can be

e'pected to show rapid growth and vice)versa. :hen the level of economic activity is

high stoc! prices are high reflecting the prosperous outloo! for sales and profits of the

firms.

SECTORS OF INDIAN ECONOMY

There are three ma#or sectors of Indian 0conomy. They are

3+ Agriculture

2+ Industry

1+ Services

Since IT and Automobile industry are ta!en for my study only that industries are

studied in detail.

5.2.3 -NT



here holds the te'tile industry. Automobile sector has also demonstrated the inherent

strength of Indian labour and capital.

8elow table and graph shows the contribution from industry to @ over the

years.

Table No( 5.3

Table showing the contribution of industry to @ over the years.

Hears Share in @

2FF1)2FF5 2C 2FF5)2FF> 2C.1

2FF>)2FFB 2E.>

2FFB)2FFC 13.3

Source( ) entral statistical organi%ation

@raph 5.3 showing the contribution of industry to @ over the years.

5>

27 27.3

29.5

31.1

24

25

26

27

28

29

30

31

32

2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07

growth rate



omment

ontribution to @ from the industrial sector is increasing slowly over the years.

This is the second largest contribution to @.

5.2.2 -NT



Hears Share in @

2FF1)2FF5 >3.7

2FF5)2FF> >2.2

2FF>)2FFB >5

2FFB)2FFC >B.1

Source( ) entral statistical organi%ation

@raph( 5.2 @raph showing contribution of services sector to @ over the years.

omment

5C



Service sector contribution is increasing in rapid speed. 8ecause performance of IT

companies in India ban!s is good over the years. This has been reflecting in growth of

service sector.

INDUSTRY ANALYSIS

57



5.1 IN?ST



CLASSIFICATION OF SECTORS < INDUSTRIES

A+ ;anufacturing Sectors

3+ Auto and ancillary industry

2+ ement industry

1+ -il and Natural @as industry

5+ harmaceutical industry

>+ Steel industry

8+ Service sectors

3+ omputer and Information Technology Industry

5.1.3 A?T-;-8I0 IN?STF



5+ Tata ;otors

>+ ;aruti ?dyog

B+ Asho! eyland

Table 5(1

Table below showing the total production of automobiles over the years.

Ye#!* T$#, 0!/&$in

2FFF)2FF3 5C>E1E2

2FF3)2FF2 >13B1F2

2FF2)2FF1 BC>E1E2

2FF1)2FF5 C22E551

2FF5)2FF> 75B3FFF

2FF>)2FFB E7F2E3>

2FFB)2FFC 3FCE23F7

Table 5(5

Table below showing the growth rate of Automobile industry over the years.

Ye#!* G!w$+ !#$e =

2FFF)2FF3 2.F

2FF3)2FF2 33.C

2FF2)2FF1 37.3

2FF1)2FF5 3>.3

2FF5)2FF> 3B.7

2FF>)2FFB 3>.7B

@raph 5(1

@raph below showing the growth rate of automobile industry.

>3



omment(

Automobile Industry is growing over the years. 8ut in the year 2FF> U 2FFB the Industry

recorded a growth rate of 3>.7BK which is lower than the previous year 2FF5 U 2FF>

which recorded a growth rate of 3B.7K.

5.1.2 IT IN?ST2



India sustained leadership over other competing offshore sourcing destination is

driven by strong fundamentals comprising a large and growing pool of &ualified

manpower$ !een focus on defining and adhering to global e&uity standards$ the

demonstrated emphasis on information security$ the improving level and strong

government support focused on improving basic infrastructure and developing policies

and as effective regulatory regime that favor the growth of the industry.

Indian ITS)8- sector industry continues to grow from strength to strength$

witnessing high level of activity both onshore as well as offshore. Attribution level last

years remained high$ between 2>)5FK as demand for trained talent out spaced supply.

Indian IT to be >>4 billion industry by 2FF7. The Indian IT industry witness a

A@< of 21.3K between 2FF1 and 2FF7 with e'ports growing 2>.1K and domestic

mar!et 37.>K. The Indian IT industry will grow to 2>.5

2FF>)2FFB 17.2

2FFB)2FFC 1E.F

@raph( 5.5

@raph showing the growth rate of IT industry over the years.

>1



omments(

The performance of IT industry is growing high. 8y 2FF7 the revenues is

e'pected to be at 4 3F)7F billion.

COMPANY ANALYSIS

>5



5.5 -;ANH ANAHSIS

ompany analysis is a study of the variable that influences the future of a firm

both &ualitatively and &uantitatively. It is a method of assessing the comparative position

of a firm$ its earning and profitability$ the efficiency with which it operates its financial position and its future with respect to the earning of its shareholders. The fundamental

nature of this analysis is that each share of a company has as intrinsic value which is

dependent on the companyDs financial performance$ &uality of management and record of

its earning and dividend. They believe that the mar!et price of a in a period of time will

move towards its intrinsic value. If the mar!et price of a share is lower than the intrinsic

value$ as evaluated by the fundamental analysis$ then the share is supported to be

undervalued and it should be purchased$ but its current mar!et price shows that it is more

than the intrinsic value$ then a according to the theory $ the share should be sold.

The accuracy of a financial statement is usually identified if a &ualified charted

accountant has certified the statements. In India$ all firms have to get their documents

legally audited by a charted accountant before they are made available for public

>>



presentation. are must be ta!en to see that a responsible auditor has certified the

accounts of the firm.

0very investor in his own interest should see that the financial statement ate

complete in all the aspect. A standard should be such that it can assist financial analysis

and it also ta!en into consideration as many factor as possible. -ne of the changes is

price level change. "inancial statement$ which ta!en into$ account as many changes as

possible to give account to the investor$ should be considered a good statement$ but it is

rather difficult to find out whether statement is complete because it wor!s within the

framewor! of the rules that have been established for it.

:hen income is one of the best method of finding out the future of the firm. It

gives the past records of the firm and this becomes a base for ma!ing predictions for

ma!ing savings and its significance is to asses the earning of the firm.

ANALYSIS USING GROWTH RATIOS

>B



INT



company is re&uired t advertise the details within 57 hours of disclosure. The

advertisement must be published at least in one of the national level news paper

published from the registered office of the company is located. The &uarterly financial

report include

• Net sales / income from operations

• -ther income

• Total e'penditure

• Interest

• @ross profit / loss after interest but before depreciation and ta'.

• rovision for ta'ation

• Net profit / loss

• aid U up e&uity capital and reserves e'cluding revaluation results * as per the

balance sheet of the previous accounting year+

The pro)forma re&uires a company to give the financial results for the &uarters

ended$ for the corresponding &uarter of the previous accounting year. The listing

agreement stipulated certain conditions to maintain the &uality of such disclosures.

>7



5.> JA



2. /0 ) rice U to U 0arnings .3 A@



ompound annual growth rate is an average growth rate over a period of several years. It

is a geometric average of annual growth rates. It measres the rate of change of a value

between two points in time

A@< is used to describe the growth over a period of time of some element of the

business$ usually revenue$ although other measures. A@< is widely used in growth

industry.

5.>.2 0A



The most important item which the investors must ta!e care to evaluate the earning that a

shareholder receives on his hare. The investor should also analy%e the no( of e&uity shares

which have the privilege of conversions or options. ,e may also calculate the price of

convertible securities from the income statement may be used.

5.>.1 M?AITH -" 0A



companies management can choose from a variety of accounting principles. In #udging

the &uality of earnings the financial analysts should consider whether the accounting

principles selected by the management leads to a conservative measurement of earnings.

5.>.5



This measure involves an amount not directly controlled by the company( the mar!et

price of its common stoc!. Thus the /0 ratio is the best indicator of how investors #udge

the performance of different companies and mar!et mechanism.

ANAHSIS ?SIN@ @



Tata ;otors .2B7

Infosys 33.F3

Satyam omputers >.1B

Siemens .375

TS >.3C

:ipro >.EE

Source( Secondary ata

C""en$(

Infosys recorded a high A@< of 33.F3 K while Siemens recorded A@< of .375 K

which is the lowest of 3F companies.

A@< should be used because Arithmetic averaging of growth numbers gives incorrect

results. Although no historical data is a substitute for a forecast the A@< is the better

indication of the trend. ?sing this formula an investor can calculate what is the annual

rate of rate of return was for any particular investment. A@< is used in business to

describe the growth over a period of time of some element of the business$ revenue$ sales

etcX

Thus A@< of Infosys represents the smoothed annuali%ed gained over the investment

hori%on. ;aruthi udyog also recorded a A@< of E.33 K over the year 2FFB and 2FFC.

B>



). T#7,e *+win- EPS f &"0#nie* f! $+e Ye#! % %

ompany Name 0S

8a#a# Auto CB.>1

,ero ,onda ;otors 57.1B

;ahindra and ;ahindra 13.>7

;aruthi ?dyog 21.77

Tata ;otors 1>.22

Infosys B5.>F

Satyam omputers 1>.2B

Siemens 7B.B2

BB



TS E>.F1

:ipro >C.17

Source( Secondary ata

C""en$(

0arnings er Share is generally consider to be the single most important variable in

determining the share price. ,ere the table shows that TS has the high 0S of E>.F1

/#,i$' f e#!nin-* f $+e &"0#nie* f! $+e 'e#! %%

ompany Name Muality of

0arnings

8a#a# Auto .1CF

,ero ,onda ;otors .1B>

;ahindra and ;ahindra .117

;aruthi ?dyog .1>1

Tata ;otors .13>

Infosys .C7E

BC



Satyam omputers .51B

Siemens .1C>

TS .>17

:ipro .523Source( Secondary ata

C""en$(

Infosys recorded a high &uality of earnings of .C7E while Tata ;otors has the lowest

&uality of earnings of .13>.

The &uality of earnings helps to !now what are the profits a company is generating and

operating cash flows helps to determine the percentage of cash generated from operating

activity. An investor should always go for a firm with good earning &uality. 0arnings are

set to be of high &uality if they can be distributed in cash and are derived primarily from

continuing operation that are not volatile and the methods used in measuring profits are

conservative. onversely earnings are said to be of low &uality if they have only a small

percentage of distributable cash$ are derived from non operating sources and are

computed using accounting methods.

B7



Infosys 13.F2

Satyam omputers 32.7C

Siemens 35.35

TS 31.37

:ipro E.>32Source( Secondary ata

C""en$(

:ipro has the lowest /0 ratio of E.>32 while 8a#a# Auto recorded a /0 of 1>.>

The lowest /0 stoc!s dramatically outperform the higher /0 ratio stoc!s. ortfolio with

the lowest /0 ratio is having the higher return than the mar!et return. A higher /0 ratio

means that investors are paying more for each unit of income. It is better to analy%e the

industry and the company performance before going for investment.

,AT0< >

CF



SUMMARY OF FINDINGS CONCLUSION AND

RECOMMENDATIONS

>.3 "ININ@S(

• Infosys recorded a high A@< while Siemens recorded A@< which is the

lowest of 3F companies for the year 2FFB)2FFC.

• TS has the high 0S for the year 2FFB )2FFC while ;aruthi ?dyog recorded the

lowest 0S for the year 2FFB)2FFC .

C3



• Infosys recorded a high &uality of earnings while Tata ;otors has the lowest

&uality of earnings for the year 2FFB)2FFC.

• :ipro has the lowest /0 ratio while 8a#a# Auto recorded a /0 for the year 2FFB)

2FFC.

• Since the share prices are moving over the month it is impossible to predict a

generali%ed value for the variables.

• "rom the industry analysis it is clear that the growth rate of IT and Automobile

industry is increasing.

• 8esides the factors used for analysis there are several other factors li!e labour

stri!es management$ employee employer relationship which #udge the

performance of companies.

>.2 -N?SI-N(

C2



• 8esides loo!ing at the company performance the investor should analyse the

economy and the industry as a whole.

• It is better to invest in companies with good mar!et value$ good performance in

revenue and should consider the various factors affecting the performance before

investing.

• I would recommend Infosys as good for investment because as it has high &uality

of earnings and high compounded annual growth rate.

• 0ven though the industry may perform well$ several ratios li!e$ financial ratios$

growth ratios$ sales etc.. should be properly analy%ed with reference to that

company and also with the industry.

• As /0 ratio is directly related to mar!et price per share and the 0arnings per

share while loo!ing at the /0 ratio one should analy%e the return and go for

better portfolio.

• A higher /0 ratio indicates that the stoc!s are e'tremely overvalued. If the firm

does not earn a huge growth of earnings it will increase the amount paid by each

investor to the share.

C5



BIBLIOGRAPHY

C>



8oo!s(

• Gain

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