Project Report Swati

7/31/2019 Project Report Swati

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INSTITUTE OF PROFESSINAL EDUCATION AND RESEARCH- WINTER PROJECT

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ACKNOWLEDGEMENT

I express my gratitude to those who assisted me in accomplishing this challenging project onCAPITAL STRUCTURE OF DIFFERENT COMPANIES

I am extremely thankful and mention my deepest sense of gratitude to my guide PROF. PARULSHRIVASATVA (FACULTY FINANCE), who motivated me to receive enormous amount ofinput and inspiration at the various stages during my project preparation and assisted me inbringing out my project in the present form.

I thankfully acknowledge an active support by my Project Guide who overwhelmingly shared hisknowledge with me and strengthened my conceptual framework.

I am also thankful to all the Finance Faculties of INSTITUTE OF PROFESSIONALEDUCATION AND RESEARCH (IPER), BHOPAL who supported me in various ways andenlightened me about the valuable information pertaining to my research work.


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DECLARATION

I hereby declare that the project titled To study ofCAPITAL STRUCTURE OF

DIFFERENT COMPANIESdone in Bhopal. This is submitted by me as a part of our

curriculum in partial fulfillment for the award of the Post Graduate Diploma in Management

(PGDM) fromINSTITUTE OF PROFESSIONAL EDUCATION AND RESEARCHapproved

by A.I.C.T.E.

Date:

Place: SWATI TIWARI


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CAPITAL STRUCTURE OF DIFFERENT COMPANIES

CHAPTERISATION

1.) Conceptual Overview

2.) Research Methodology

2.1 Objective

2.2 Method

2.3 Significance

2.4 Limitations

3.) Theoretical Data

3.1 What is capital structure?

3.2 Types of capital structure theories.3.3 Types of finance (capital structure).

4.) Data analysis

5.) Findings

6.) Conclusion

BIBLIOGRAPHY


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RESEARCH METHODOLGY

TitleCAPITAL STRUCTURE OF THE COMPANIES

2.1) Objectives

1) To know how the capital structure is formed in different companies

2) To know that how earnings of the company is related to the capital structure the company

has.

2.2) Methodology

1) A sample of 5 sectors is taken and 5 companies from each sector.

Banking

IT

Pharmacy

Capital goods

FMCG

2) The time period is for 5 years

3) Different ratios so as to know the capital structure of the company.

2.3) Significance

Analyzing the debts and equity of the company so as to know the better or optimum

capital structure for the company.

2.4) Hypothesis

1) Null Hypothesis- Capital structure has no relationship with firm value that is Capital

structure changes do not affect firm value.

2) Alternate Hypothesis- It affects the earnings of the company.

Limitations:-

The sample size and time period is limited for this research. It can not give a

proper idea about the capital structure of the companies.


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CONCEPTUAL OVERVIEW

Capital Structure:

The term capital structure refers to the percentage of capital (money) at work in a business by

type. Broadly speaking, there are two forms of capital: equity capital and debt capital. Each has

its own benefits and drawbacks and a substantial part of wise corporate stewardship and

management is attempting to find the perfect capital structure in terms of risk / reward payoff for

shareholders. This is true for Fortune 500 companies and for small business owners trying to

determine how much of their startup money should come from a bank loan without endangering

the business. Capital structure describes how a corporation has organized its capitalhow it

obtains the financial resources with which it operates its business. Businesses adopt various

capital structures to meet both internal needs for capital and external requirements for returns on

shareholders investments.

Equity Capital:

This refers to money put up and owned by the shareholders (owners). Typically, equity capital

consists of two types:

1.) Contributed capital, which is the money that was originally invested in the business in

exchange for shares of stock or ownership and

2.) Retained earnings, which represents profits from past years that have been kept by the

company and used to strengthen the balance sheet or fund growth, acquisitions, or expansion.

Many consider equity capital to be the most expensive type of capital a company can utilizebecause its "cost" is the return the firm must earn to attract investment. A speculative miningcompany that is looking for silver in a remote region of Africa may require a much higher returnon equity to get investors to purchase the stock than a firm such as Procter & Gamble, whichsells everything from toothpaste and shampoo to detergent and beauty products.

Debt Capital:

The debt capital in a company's capital structure refers to borrowed money that is at work in thebusiness. The safest type is generally considered long-term bonds because the company hasyears, if not decades, to come up with the principal, while paying interest only in the meantime.Other types of debt capital can include short-term commercial paper utilized by giants such asWal-Mart and General Electric that amount to billions of dollars in 24-hour loans from thecapital markets to meet day-to-day working capital requirements such as payroll and utility bills.The cost of debt capital in the capital structure depends on the health of the company's balance
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sheet - a triple AAA rated firm is going to be able to borrow at extremely low rates versus aspeculative company with tons of debt, which may have to pay 15% or more in exchange fordebt capital.

Other Forms of Capital:

There are actually other forms of capital, such as vendor financing where a company can sellgoods before they have to pay the bill to the vendor that can drastically increase return on equitybut don't cost the company anything. This was one of the secrets to Sam Walton's success atWal-Mart. He was often able to sell Tide detergent before having to pay the bill to Procter &Gamble, in effect, using PG's money to grow his retailer. In the case of an insurance company,the policyholder "float" represents money that doesn't belong to the firm but that it gets to useand earn an investment on until it has to pay it out for accidents or medical bills, in the case of anauto insurer. The cost of other forms of capital in the capital structure varies greatly on a case-by-case basis and often comes down to the talent and discipline of managers.

Seeking the Optimal Capital Structure

Many middle class individuals believe that the goal in life is to be debt-free (see should I Pay off

My Debt or Invest?). When you reach the upper echelons of finance, however, that idea is almost

anathema. Many of the most successful companies in the world base their capital structure on

one simple consideration: the cost of capital. If you can borrow money at 7% for 30 years in a

world of 3% inflation and reinvest it in core operations at 15%, you would be wise to consider at

least 40% to 50% in debt capital in your overall capital structure.

Of course, how much debt you take on comes down to how secure the revenues your businessgenerates are - if you sell an indispensable product that people simply must have, the debt will bemuch lower risk than if you operate a theme park in a tourist town at the height of a boom

CAPITAL

STRUCTURE

EQUITY

CAPITAL

DEBT CAPITAL OTHER FORMS

OF CAPITAL

STRUCTURE
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market. Again, this is where managerial talent, experience, and wisdom come into play. Thegreat managers have a knack for consistently lowering their weighted average cost of capital byincreasing productivity, seeking out higher return products, and more.To truly understand the idea of capital structure, you need to take a few moments to read Returnon Equity: The DuPont Model to understand how the capital structure represents one of the three

components in determining the rate of return a company will earn on the money its owners haveinvested in it. Whether you own a doughnut shop or are considering investing in publicly tradedstocks, its knowledge you simply must have.
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THEROETICAL BACKGROUND

INTRODUCTION:

The capital structure of a company is referred to the way in which the company finances itselfthrough debts, equity and securities; it can therefore be referred to as the capital composition ofthe company taking into consideration its liabilities, Modigliani and Miller propose theModigliani Miller theorem of capital structure which states that the value of a company in aperfect market is unaffected by the way the company is financed but through the capital structureit employs.

Other theories to describe the capital structures employed by a company include the trade offtheory, the agency cost theory and pecking order theory, and however the Modigliani Millertheory provides the basis at which a modern company should determine its capital structure.

The trade off theory recognizes that capital raised by firms is constituted by both debts andequity, however the theory states that there is an advantage of financing through debts due to taxbenefit of the debts, however some costs arises as a result of debt costs and bankrupt costs andnon bankrupt costs. The theory further states that the marginal benefit of debts declines as thelevel of debts and at the same time the marginal cost of debts increases as debts increase,therefore a rational firm will optimize by the trade off point to determine the level of debts andequity to finance its operations.

The pecking order theory was developed by Stewart Myers (1984) and it states that firms willadhere to the hierarchy of financing whereby the firm will prefer to finance itself internally andwhen all internal finances are depleted it will opt for equity, therefore this theory supports the

fact that debts are preferred by firms than equity.

The agency cost theory analyses three costs which give explanation to the importance of thecapital structure, these costs include asset substitution, underinvestment and cash flow; it givesthe importance of management to adopt the most optimal form of capital structure.

THEORIES AND APPROACHES OF CAPITAL STRUCTURE

There are several variations of the traditional theory. But the thrust of all views is that capital

structure matters. One earlier versions of the view that capital structure is relevant is the net

income approach.

The Net Income Approach

According to the Net Income (NI) Approach, the capital structure decision is relevant to the

valuation of the firm. In other words, a change in the financial leverage will lead to a

corresponding change in the overall cost of capital as well as the total value of the firm. If,


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therefore, the degree of financial leverage as measured by the ratio of debt to equity is increased,

the weighted average cost of capital will decline, while the value of the firm as well as the

market price of ordinary shares will increase. Conversely, a decrease in the leverage will cause

an increase in the overall cost of capital and a decline both in the value of the firm as well as the

market price of equity shares.

The NI income approach to valuation is based on three assumptions:

1. There are no taxes.

2. The cost of debt is less than the equity-capitalisation rate or the cost of equity.

3. The use of debt does not change the risk perception of investors.

The financial risk perception of the investors does not change with the introduction of debt or

change in leverage implies that due to change in leverage, there is no change in either the cost of

debt or the cost of equity. The implication of three assumptions underlying the NI approach isthat as the degree of leverage increases, the proportion of a cheaper source of funds, that is, debt

in the capital structure increases. As a result, the weighted average cost of capital tends to

decline, leading to an increase in the value of the firm. Thus, with the cost of debt and cost of

equity being constant, the increased use of debt (increase in leverage), will magnify the share

holders earnings and, thereby, the market value of the ordinary shares.

The financial leverage is, according to the NI approach, an important variable to the capital

structure of a firm. With a judicious mixture of debt equity, a firm can evolve an optimum capital

structure which will be the one at which value of the firm is the highest and overall cost of

capital structure is the lowest. At that structure, the market price per share would be maximum.

If the firm uses no debt or if the financial leverage is zero, the overall cost of capital will be

equal to the equity-capitalisation rate. The weighted average cost of capital will decline and will

approach the cost of debt as the degree of leverage reaches one.

Net Operating Income (NOI) Approach

Another theory of capital structure is the Net Operating Income (NOI) Approach. This approach

is diametrically opposite to the NI Approach. The essence of this Approach is that the capital

structure decision of a firm is irrelevant. Any change in leverage will not lead to any change in

the total value of the firm and the market price of shares as well as the overall cost capital is

independent of the degree of leverage.

Overall cost of capital/capitalisation rate (k0) is Constant


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The NOI Approach to valuation argues that the overall capitalisation rate of the firm remains

constant, for all degrees of leverage. The value of the firm is determined by:

In other words, the market evaluates the firm as a whole. The split of the capitalisation between

debt and equity is, therefore, not significant.

Residual value of Equity

The value of equity is a residual value which is determined by deducting the total value of debt

from the total value of the firm.

Changes in cost of Equity Capital

The equity-capitalisation rate/cost of equity capital (ke) increases with the degree of leverage.

The increase in the proportion of debt in the capital structure relative to equity shares would lead

to an increase in the financial risk to the ordinary shareholders. To compensate for the increased

risk, the shareholders would expect a higher rate of return on their investments. The increase in

the equity-capitalisation rate (or the lowering of the price-earning ratio that is P/E ratio) would

match the increase in the debt-equity ratio. The ke would be = k0 + (k0-k1) [B/S].

Cost of Debt

The cost of debt (ki) has two parts:

(a) Explicit Cost which is represented by the rate of interest irrespective of the degree ofleverage, the firm is assumed to be able to borrow at a given rate of interest. This implies that the

increasing proportion of debt in the financial structure does not affect the financial risk of the

lenders and they do not penalize the firm by charging higher interest.

(b)Implicit or hidden cost is a change in ke, increase in the degree of leverage or the proportion

of debt to equity causes an increase in the cost of equity capital. This increase in ke, being

attributable to the increase in debt, is the implicit part ofki.

Thus, the advantage associated with the use of debt, supposed to be a cheaper source of funds

in terms of the explicit cost is exactly neutralized by the implicit cost represented by the increase

in ke. The real cost of debt and the real cost of equity, according to the NOI Approach, are the

same and equal k0.

Optimum Capital Structure

The total value of the firm is unaffected by its capital structure. No matter what the degree of

leverage is, the total value of the firm will remain constant. The market place of shares will also


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not change in the debt-equity ratio. There is nothing such as optimum capital structure. Any

capital structure is optimum according to the NOI Approach.

Modigliani-Miller (MM) Approach

In an article published in 1958, Modigliani and Miller propounded their view which is known asModigliani-Miller Approach. Their approach is identical with the net operating income

approach. They have also concluded that in the absence of taxes, a firms market value and the

cost of capital remain constant to the changes in capital structure. In other words, an optimum

capital structure does not exits. The net operating income approach leads to the same conclusion,

but Modigliani and miller have provided a behavioral justification in favor of this conclusion.

That is, they refer to a particular behavior of the investors in support of this conclusion.

Assumptions

Their conclusion is based on the following assumptions:

The capital market is perfect in the sense that investors have perfect knowledge of market forces;

they are free to buy and sell securities; the cost of transactions is zero; and they behave

rationally.

Firms can be classified into different group consisting of firms having equal business risks. They

can be divided into equivalent risk class.

Since all investors have complete information, they all use the same figure of net operating

income of the firm to ascertain its market value.

All firms distribute the entire earning among their shareholders in the form of dividend. It means

dividend payout ratio is 100%.

No corporate income taxes exist.

Under these assumptions, Modigliani and Miller have derives following propositions:

(1)Market value of the firm and the cost of capital are independent of capital structure. In other

words, a change in debt-equity ratio can have no effect on the market value of the firm as also on

the cost of capital

(2)The expected yield on equity has two components the rate of equity capitalization when debts

are non-existent plus a premium for the financial risk arising from debts. Therefore, the

advantage of low-cost debt if offset by the increase in expected yield on equity.

(3)The financing decision has no impact on the expected yield on equity. The financing decision

and investment decision are therefore, independent of each other.


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We shall consider in detail only first proposition which states that market value of a firm and the

cost of capital are independent of the degree of financial leverage in capital structure. They

explain this proposition in terms of the behavior of investors.

Arbitrage process

If the price of a product is unequal in two markets, traders buy it in the market where price is low

and sell it in the market where price is high. This phenomenon is known as price differential or

arbitrage. As a result of this process of arbitrage, price tends to decline in the high-priced market

and price tends to rise in the low-priced market unit the differential is totally removed.

Modigliani and Miller explain their approach in terms of the same process of arbitrage. They

hold that two firms, identical in all respects except leverage cannot have different market value.

If two identical firms have different market values, arbitrage will take palce unit difference in the

market values is removed completely.

To illustrate, let us suppose that there are two firms X and Y- belonging to the same group of

homogenous risk. The firm X is unleveled as its capital structure consists of equity capital only,

while firm Y is levered as its capital structure includes 10 per cent debentures of Rs.1,00,000 in

this case, according to traditional approach, the market value of firm Y would be higher than that

of firm X. But according to M-M approach, this situation cannot persist for long. The market

value of the equity share of firm Y is high but investment in it is more risky while the market

value of the equity share of firm X is low but investment in it is safe. Hence investors will sell

out equity shares of firm Y and purchase equity shares of firm X. Consequently the market value

of the equity shares of firm Y while fall, while the market value of the equity shares of firm X

will rise. Through this process of arbitrage therefore, the market values of the firms X and Y willbe equalized. This is true for all firms belonging to the same group. In equilibrium situation, the

average cost of capital will be same for all firms in the group.

The opposite will happen if the market value of the firm X is higher than that of the firm Y. In

this case investors will sell equity shares of X and buy those of Y. Consequently market values

of these two firms will be equalized.

This argument is based on the assumption that investors are well informed and behave rationally,

and hence they engage in personal leverage or home-made leverage as against the corporate

leverage to restore equilibrium in the market.

At this stage it is necessary to understand what personal leverage means. If the market value of a

levered firm is high investors sell its equity shares. In addition to the money receive in exchange

of equity shares. They borrow funds on their personal account and invest in the unleveled firm to

obtain the same return for smaller investment outlay. This activity is known as personal leverage

or home-made leverage.


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Traditional Approach

Traditional approach is an intermediate approach between the net income approach and netoperating income approach. According to this approach:(1) An optimum capital structure does exist.(2) Market value of the firm can be increased and average cost of capital can be reduced througha prudent manipulation of leverage.(3) The cost ofdebt capital increases if debts are increases beyond a definite limit. This isbecause the greater the risk of business the higher the rate of interest the creditors would ask for.The rate of equity capitalization will also increase with it. Thus there remains no benefit ofleverage when debts are increased beyond a certain limit. The cost of capital also goes up.

Thus at a definite level of mixture of debts to equity capital, average cost of capital alsoincreases. The capital structure is optimum at this level of the mix of debts to equity capital.The effect of change in capital structure on the overall cost of capital can be divided into three

stages as followsFirst stage

In the first stage the overall cost of capital falls and the value of the firm increases withthe increase in leverage. This leverage has beneficial effect as debts as debts are less expensive.The cost of equity remains constant or increases negligibly. The proportion of risk is less in sucha firm.Second stage

A stage is reached when increase in leverage has no effect on the value or the cost ofcapital, of the firm. Neither the cost of capital falls nor the value of the firm rises. This is becausethe increase in the cost of equity due to the assed financial risk offsets the advantage of low costdebt. This is the stage wherein the value of the firm is maximum and cost of capital minimum.

Third stageBeyond a definite limit of leverage the cost of capital increases with leverage and the

value of the firm decreases with leverage. This is because with the increase in debts investorsbegin to realize the degree of financial risk and hence they desire to earna higher rate of return on equity shares. The resultant increase in equity capitalization rate willmore than offset the advantage of low-cost debt.

It follows that the cost of capital is a function of the degree of leverage. Hence, an optimumcapital structure can be achieved by establishing an appropriate degree of leverage in capitalstructure.

LEVERAGE RATIO:

Any ratio used to calculate the financial leverage of a company to get an idea of the company'smethods of financing or to measure its ability to meet financial obligations. There are severaldifferent ratios, but the main factors looked at include debt, equity, assets and interest expenses.
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A ratio used to measure a company's mix of operating costs, giving an idea of how changes inoutput will affect operating income. Fixed and variable costs are the two types of operating costs;depending on the company and the industry, the mix will differ.

In laymans term, leverage indicates the action of a lever or the mechanical advantage gained by

it. However, management accountants define leverage as the ability of a firm to use fixed costasset or funds to magnify the return to its owners. Leverage is meeting a fixed cost or payingfixed returns for employing assets or funds.

Just as mechanical advantage is gained from the action of a lever (since it raises a heavy objectwith a small force), likewise, a small change in sale may result in a big change in income of afirm, and thereby the firm enjoys the advantage of the application of lever. The term leverage isused here in this sense. In the case of the firm, here the fixed cost is to be treated as the fulcrumof the leverage.

In laymans terms, the term leverage measures the relationship between 2 variables. In financial

analysis, the term leverage the represents the influence of one financial leverage variable oversome other financial leverage.

Classification of leverage:

Just as fixed cost may be broadly classified into:1. Operating fixed cost2. Financial fixed cost, likewise, leverage may be classified into:

Operating leverage, and

Financial leverageOperational leverage is dependent on three factors:

1.

Sale volume2. Fixed cost(in monetary terms), and3. Variable contribution margin.

Techniques for calculating operating leverage: The following two techniques are normally usedfor calculating operating leverage

(A)Level of output measurement of Operating Leverage;(B)Break even/costvolume profit analysis of Operating Leverage.

OPERATING LEVERAGE:

Operating leverage measure the effect of change in sales quantity and operating capacity onearning before interest and taxes (EBIT). Essentially, operating leverage boils down to ananalysis offixed costs and variable costs. Operating leverage is highest in companies that have ahigh proportion of fixed operating costs in relation to variable operating costs. This kind ofcompany uses more fixed assets in the operation of the company. Conversely, operating leverage
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is lowest in companies that have a low proportion of fixed operating costs in relation to variableoperating costs.

The benefits of high operating leverage can be immense. Companies with high operatingleverage can make more money from each additional sale if they don't have to increase costs to

produce more sales. The minute business picks up, fixed assets such as property, plant andequipment (PP&E), as well as existing workers, can do a whole lot more without addingadditional costs. Profit margins expand and earnings soar faster than revenues.

The best way to explain operating leverage is by way of examples. Take, for example, a softwaremaker such as Microsoft. The bulk of this company's cost structure is fixed and limited toupfront development and marketing costs. Whether it sells one copy or 10 million copies of itslatest Windows software, Microsoft's costs remain basically unchanged. So, once the companyhas sold enough copies to cover its fixed costs, every additional dollar of sales revenue dropsinto the bottom line. In other words, Microsoft possesses remarkably high operating leverage.

By contrast, a retailer, such as Wal-Mart demonstrates relatively low operating leverage. Thecompany has fairly low levels of fixed costs, while its variable costs are large. Merchandiseinventory represents Wal-Mart's biggest cost. For each product sale that Wal-Mart rings in, thecompany has to pay for the supply of that product. As a result, Wal-Mart's cost of goodssold (COGS) continues to rise as sales revenues rise.

Measuring Operating Leverage

Operating leverage occurs when a company has fixed costs that must be met regardless of salesvolume. When the firm has fixed costs, the percentage change in profits due to changes in salesvolume is greater than the percentage change in sales. With positive (i.e. greater than zero) fixedoperating costs, a change of 1% in sales produces a change of greater than 1% in operatingprofit.

A measure of this leverage effect is referred to as the degree of operating leverage (DOL), whichshows the extent to which operating profits change as sales volume changes. This indicates theexpected response in profits if sales volumes change. Specifically, DOL is the percentage changein income (usually taken as earnings before interest and tax, or EBIT) divided by the percentagechange in the level of sales output.

FINANCIAL LEVERAGE:
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The degree to which an investor or business is utilizing borrowed money. Companies thatare highly leveraged may be at riskofbankruptcy if they are unable to make paymentson their debt; they may also be unable to find new lenders in the future. Financial leverage is notalways bad, however; it can increase the shareholders' return on their investment and often there

are tax advantages associated with borrowing.

Degree of financial leverage:

A leverage ratio summarizing the affect a particular amount of financial leverage has on acompany's earnings per share (EPS). Financial leverage involves using fixed costs to financethe firm, and will include higher expenses before interest and taxes (EBIT). The higher thedegree of financial leverage, the more volatile EPS will be, all other things remaining the same.The formula is as follows:

Most likely, the firm under evaluation will be trying to optimize EPS, and this ratio can be usedto help determine the most appropriate level of financial leverage to use to achieve that goal.

The higher the DFL the higher the financial risk associated with it, vice versa. Financial

Leverage is also termed as Trading on Equity. A high degree of finance leverage indicates a

proportionately high use of fixed income bearing securities in the capital structure of thecompany. A low degree of financial leverage indicates less use of fixed income bearing

securities in the capital structure of the company.

COMBINED LEVERAGE:

The combined effect of operating leverage and financial leverage measures the impact of change

contribution on the EPS.

Combined leverage is the product ofoperating leverage and financial leverage. It is a proxy for the total riskof a company.

Combined leverage represents an important principle of finance. As it is the product of

financial leverage and operating leverage, companies should be reluctant to increase

financial leverage if the operating leverage is already high. Conversely, companies with low

operating leverage (and therefore operating a stable business) can afford to be more highly

geared.
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It is computed as:

= Operating leverage * Financial leverage

=

*

=

Return on InvestmentROI:-

A performance measure used to evaluate the efficiency of an investment or to compare theefficiency of a number of different investments. To calculate ROI, the benefit (return) of aninvestment is divided by the cost of the investment; the result is expressed as a percentage or aratio.

The return on investment formula:

In the above formula "gains from investment", refers to the proceeds obtained from selling the

investment of interest. Return on investment is a very popular metric because of its

versatility and simplicity. That is, if an investment does not have a positive ROI, or if there are

other opportunities with a higher ROI, then the investment should be not be undertaken.

Earnings Per ShareEPS:-

The portion of a company's profit allocated to each outstanding share of common stock. Earningsper share serve as an indicator of a company's profitability.

Calculated as:

When calculating, it is more accurate to use a weighted average number of shares outstanding

over the reporting term, because the number of shares outstanding can change over time.

However, data sources sometimes simplify the calculation by using the number of shares

outstanding at the end of the period.

Earnings per share are generally considered to be the single most important variable in

determining a share's price. It is also a major component used to calculate the price-to-earnings

valuation ratio.


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An important aspect of EPS that's often ignored is the capital that is required to generate the

earnings (net income) in the calculation. Two companies could generate the same EPS number,

but one could do so with less equity (investment) - that company would be more efficient at

using its capital to generate income and, all other things being equal would be a "better"

company. Investors also need to be aware of earnings manipulation that will affect the quality of

the earnings number. It is important not to rely on any one financial measure, but to use it in

conjunction with statement analysis and other measures.

Earnings Before Interest & Tax - EBIT

An indicator of a company's profitability, calculated as revenue minus expenses, excluding taxand interest. EBIT is also referred to as "operating earnings", "operating profit" and "operatingincome", as you can re-arrange the formula to be calculated as follows:

EBIT = Revenue - Operating Expenses

Also known as Profit before Interest & Taxes (PBIT), and equals Net Income with interest andtaxes added back to it.In other words, EBIT is all profits before taking into account interest payments and income

taxes. An important factor contributing to the widespread use of EBIT is the way in which it

nulls the effects of the different capital structures and tax rates used by different companies. By

excluding both taxes and interest expenses, the figure hones in on the company's ability to profit

and thus makes for easier cross-company comparisons.

EBIT was the precursor to the EBITDA calculation, which takes the process further by removing

two non-cash items from the equation (depreciation and amortization).

Dividend per share DPS:-

The sum of declared dividends for every ordinary share issued. Dividend per share (DPS) is the

total dividends paid out over an entire year (including interim dividends but not including special

dividends) divided by the number of outstanding ordinary shares issued.

DPS can be calculated by using the following formula:

D - Sum of dividends over a period (usually 1 year)


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SD - Special, one time dividends

S - Shares outstanding for the period

Dividends per share are usually easily found on quote pages as the dividend paid in the most

recent quarter which is then used to calculate the dividend yield. Dividends over the entire year

(not including any special dividends) must be added together for a proper calculation of DPS,including interim dividends. Special dividends are dividends which are only expected to be

issued once so are not included. The total number of ordinary shares outstanding is sometimes

calculated using the weighted average over the reporting period.

Debt/Equity Ratio:-

A measure of a company's financial leverage calculated by dividing its totalliabilities by stockholders' equity. It indicates what proportion of equity and debt the company is

using to finance its assets.

Also known as the Personal Debt/Equity Ratio, this ratio can be applied to personal financialstatements as well as corporate ones.A high debt/equity ratio generally means that a company has been aggressive in financing itsgrowth with debt. This can result in volatile earnings as a result of the additional interestexpense.

If a lot of debt is used to finance increased operations (high debt to equity), the company couldpotentially generate more earnings than it would have without this outside financing. If this wereto increase earnings by a greater amount than the debt cost (interest), then the shareholdersbenefit as more earnings are being spread among the same amount of shareholders. However, thecost of this debt financing may outweigh the return that the company generates on the debtthrough investment and business activities and become too much for the company to handle.This can lead to bankruptcy, which would leave shareholders with nothing.

Cost Of Debt:-

It is the effective rate that a company pays on its current debt. This can be measured in eitherbefore- or after-tax returns; however, because interest expense is deductible, the after-tax cost isseen most often. This is one part of the company's capital structure, which also includes the costof equity.

A company will use various bonds, loans and other forms of debt, so this measure is useful forgiving an idea as to the overall rate being paid by the company to use debt financing. The


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measure can also give investors an idea as to the riskiness of the company compared to others,because riskier companies generally have a higher cost of debt.

Cost Of Equity:-

In financial theory, the return that stockholders require for a company is the cost of equity. Thetraditional formula for cost of equity (COE) is the dividend capitalization model:

A firm's cost of equity represents the compensation that the market demands in exchange forowning the asset and bearing the risk of ownership.


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CASE STUDY

BANKING SECTOR

ICICI BANK

ICICI Bank is India's second-largest bank with total assets of Rs. 3,634.00 billion (US$ 81

billion) at March 31, 2010 and profit after tax Rs. 40.25 billion (US$ 896 million) for the year

ended March 31, 2010. The Bank has a network of 2,510 branches and 5,808 ATMs in India, and

has a presence in 19 countries, including India. ICICI Bank offers a wide range of banking

products and financial services to corporate and retail customers through a variety of delivery

channels and through its specialized subsidiaries in the areas of investment banking, life and

non-life insurance, venture capital and asset management. The Bank currently has subsidiaries in

the United Kingdom, Russia and Canada, branches in United States, Singapore, Bahrain, Hong

Kong, Sri Lanka, Qatar and Dubai International Finance Centre and representative offices in

United Arab Emirates, China, South Africa, Bangladesh, Thailand, Malaysia and Indonesia. Our

UK subsidiary has established branches in Belgium and Germany.

ICICI Bank's equity shares are listed in India on Bombay Stock Exchange and the National Stock

Exchange of India Limited and its American Depositary Receipts (ADRs) are listed on the New

York Stock Exchange (NYSE).

IDBI BANK LTD.

IDBI Bank Ltd. is a Universal Bank with its operations driven by a cutting edge core Banking ITplatform. The Bank offers personalized banking and financial solutions to its clients in the retailand corporate banking arena through its large network of Branches and ATMs, spread acrosslength and breadth of India. We have also set up an overseas branch at Dubai and have plans toopen representative offices in various other parts of the Globe, for encashing emerging globalopportunities.

As on March 31, 2010, the Bank had a network of 720 Branches and 1210 ATMs and plans toroll out another 300 branches during FY 2010-11. The Bank's total business, during Fy 2009-10, reached Rs. 3.06 Lakh Crore (up by 41.7 %), Balance sheet reached Rs. 2.34 Lakh Crore (up

by 35.5 %) while it earned a net profit of Rs. 1031 Crore (up by 20 %).

Our vision for the Bank is for it to be the trusted partner in progress, by leveraging qualityhuman capital and setting global standards of excellence, to build the most valued financialconglomerate. Our experience of financial markets helps us to effectively cope with challengesand capitalize on the emerging opportunities by participating effectively in our countrys growth

process.


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AXIS BANK LTD.

Axis Bank was the first of the new private banks to have begun operations in 1994, after the

Government of India allowed new private banks to be established. The Bank was promotedjointly by the Administrator of the specified undertaking of the Unit Trust of India (UTI - I), LifeInsurance Corporation of India (LIC) and General Insurance Corporation of India (GIC) andother four PSU insurance companies, i.e. National Insurance Company Ltd., The New IndiaAssurance Company Ltd., The Oriental Insurance Company Ltd. and United India InsuranceCompany Ltd.

The Bank today is capitalized to the extent of Rs. 408.84 crores with the public holding (otherthan promoters and GDRs) at 53.81%.

The Bank's Registered Office is at Ahmedabad and its Central Office is located at Mumbai. TheBank has a very wide network of more than 1095 branches (including 57 Service Branches/CPCs

as on 30th September 2010). The Bank has a network of over 4846 ATMs (as on 30th September2010) providing 24 hrs a day banking convenience to its customers. This is one of the largestATM networks in the country.

The Bank has strengths in both retail and corporate banking and is committed to adopting thebest industry practices internationally in order to achieve excellence.

HDFC BANK


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The Housing Development Finance Corporation Limited (HDFC) was amongst the first to receivean 'in principle' approval from the Reserve Bank of India (RBI) to set up a bank in the private

sector, as part of the RBI's liberalization of the Indian Banking Industry in 1994. The bank wasincorporated in August 1994 in the name of 'HDFC Bank Limited', with its registered office inMumbai, India. HDFC Bank commenced operations as a Scheduled Commercial Bank in January1995.

HDFC Bank recognizes the importance of good corporate governance, which is generally acceptedas a key factor in attaining fairness for all stakeholders and achieving organizational efficiency.This Corporate Governance Policy, therefore, is established to provide a direction and frameworkfor managing and monitoring the bank in accordance with the principles of good corporategovernance.

STATE BANK OF INDIA (SBI)

The State Bank of India, the countrys oldest Bank and a premier in terms of balance sheet size,number of branches, market capitalization and profits is today going through a momentous phase ofChange and Transformationthe two hundred year old Public sector behemoth is today stirring outof its Public Sector legacy and moving with an agility to give the Private and Foreign Banks a runfor their money.

The bank is entering into many new businesses with strategic tie ups Pension Funds, GeneralInsurance, Custodial Services, Private Equity, Mobile Banking, Point of Sale Merchant Acquisition,Advisory Services, structured products etceach one of these initiatives having a huge potential for

growth.

The Bank is forging ahead with cutting edge technology and innovative new banking models, toexpand its Rural Banking base, looking at the vast untapped potential in the hinterland and proposesto cover 100,000 villages in the next two years.

It is also focusing at the top end of the market, on whole sale banking capabilities to provide Indiasgrowing mid / large Corporate with a complete array of products and services. It is consolidating itsglobal treasury operations and entering into structured products and derivative instruments. Today,the Bank is the largest provider of infrastructure debt and the largest arranger of externalcommercial borrowings in the country. It is the only Indian bank to feature in the Fortune 500 list.

CAPITAL GOODS

BHEL

BHEL is the largest engineering and manufacturing enterprise in India in the energy-related/infrastructure sector, today. BHEL was established more than 40 years ago, ushering in theindigenous Heavy Electrical Equipment industry in India - a dream that has been more than realized


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with a well-recognized track record of performance. The company has been earning profitscontinuously since 1971-72 and paying dividends since 1976-77.

BHEL caters to the core sectors of the Indian Economy, viz. Power, Transmission, Industry,Transportation, Renewable Energy, Oil & Gas and Defense. The wide network of BHELs 15

Manufacturing Divisions, 4 Power Sector Regional Centers, 8 Service Centers, 15 RegionalOffices, 4 Overseas Offices, 1 Subsidiary and over 100 project sites spread all over India enablesthe Company to promptly serve its customers and provide them with suitable products, systems andservices -- efficiently and at competitive prices. The high level of quality & reliability of itsproducts is due to the emphasis on design, engineering and manufacturing to international standardsby acquiring and adapting some of the best technologies from leading companies in the world,together with technologies developed in its own R&D centers.

BHEL has acquired certifications to Quality Management Systems (ISO 9001), EnvironmentalManagement Systems (ISO 14001) and Occupational Health & Safety Management Systems(OHSAS 18001) and is also well on its journey towards Total Quality Management.

BHEL's vision is to become a world-class engineering enterprise, committed to enhancingstakeholder value. The company is striving to give shape to its aspirations and fulfill theexpectations of the country to become a global player.

ABB

As one of the worlds leading engineering companies, ABB helps customers to use electrical power

effectively and to increase industrial productivity in a sustainable way. The ABB Group ofcompanies operates in over 100 countries and employs about 120,000 people.

ABB operations in India include 14 manufacturing facilities with over 7500 employees. Customersare served through an extensive countrywide presence with more than 18 marketing offices, 8service centers, 3 logistics warehouses and a network of over 800 channel partners. The ABBGroup is increasingly leveraging the Indian operations for projects, products, services, engineeringand R&D.

The Authorized Share Capital of the Company is Rs.500, 000,000 divided into 212,500,000 EquityShares of Rs.2/- each and 750,000 11% Redeemable 10 years, Cumulative Preference Shares ofRs.100/- each.

The Issued, Subscribed and Paid-up share capital of the Company, as at the end of the financial yearended December 31, 2007, is Rs.423,816,750/-, consisting of 211,908,375 Equity Shares of the face

value of Rs.2/- each.

SIEMENS

The Siemens Group in India has emerged as a leading inventor, innovator and implementer ofleading-edge technology enabled solutions operating in the core business segments of Industry,Energy and Healthcare. The Groups business is represented by various companies that span across


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these various segments.

Siemens brings to India state-of-the-art technology that adds value to customers through acombination of multiple high-end technologies for complete solutions. The Group has thecompetence and capability to integrate all products, systems and services. It caters to Industry needsacross market segments by undertaking complete projects such as Hospitals, Airports and Industrialunits.

The Siemens Group in India comprises of 22 companies, providing direct employment to over17,000 persons. Currently, the group has 18 manufacturing plants, a wide network up of Sales andService offices across the country as well as over 500 channel partners.

Today, Siemens, with its world-class solutions plays a key role in Indias quest for developingmodern

ELECON ENGINEERING COMPANY LTD.

Elecon Engineering Company Limited was established in the year 1951. Since then it hasbeen cast in the mould of a pioneer. Setting trailblazing standards of technical excellencescaling new heights in its determination to deliver the best. From elevators, conveyors andgears to material handling plants. For over 5 decades, Elecon has supplied hi-techequipment to major core sectors such as steel, fertilizers, cement , coal, lignite and iron oremines, Sugar, power stations and port mechanization in India and abroad. From a modeststart of design and manufacture of Elevators and Conveyors from which incidently, thecompany derives its corporate identity. viz. "Elecon". It has grown over the years to beknown as a pioneer of the concept of mechanized way of Bulk Material HandlingEquipment in India. During the span of more than 4 decades, Elecon has encompassed all

the major core sectors through its supplies of highly sophisticated equipment bearing ampletestimony of the symbolic mark of Elecon's unbeatable technology. Elecon has thus, madeits presence felt through consistent and satisfactory performance of its equipment in suchcore sectors as fertilizer, cement, coal/power generation, chemical, steel plant and portmechanization etc., across the country. Elecon is the first company in India to havemanufactured sophisticated equipment for Bulk Material Handling.

BEML LTD.

BEML Limited (formerly Bharat Earth Movers Limited) was established in May 1964 as aPublic Sector Undertaking for manufacture of Rail Coaches & Spare Parts and MiningEquipment at its Bangalore Complex. The Company has partially disinvested and presentlyGovernment of India owns 54 percent of total equity and rest 46 percent is held by Public,Financial Institutions, Foreign Institutional Investors, Banks and Employees. The Companystarted with a modest turnover of ` 5 Cr during 1965 and today, thanks to its diverse


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business portfolio, the company has been able to achieve a turnover of more than `3,500 Cr.

Its three major Business verticals viz., Mining & Construction, Defence and Rail & Metroare serviced by its nine manufacturing units located at Bangalore, Kolar Gold Fields (KGF),Mysore, Palakkad and Subsidiary - Vignyan Industries Ltd, in Chikmagalur District.

BEMLs products are exported to more than 56 countries. As part of companysglobalization strategy, the company has expanded its global reach by opening localcompany at Indonesia and Brazil recently in addition to Malaysia and China offices.

INFORMATION TECHNOLOGY

INFOSYS

Infosys Technologies Ltd. (NASDAQ: INFY) was started in 1981 by seven people withUS$ 250. Today, we are a global leader in the "next generation" of IT and consulting withrevenues of US$ 5.4 billion (LTM Sep-10).

Infosys defines, designs and delivers technology-enabled business solutions that helpGlobal 2000 companies win in a Flat World. Infosys also provides a complete range ofservices by leveraging our domain and business expertise and strategic alliances withleading technology providers.

Our offerings span business and technology consulting, application services, systemsintegration, product engineering, custom software development, maintenance, re-engineering, independent testing and validation services, IT infrastructureservices and business process outsourcing.

Infosys pioneered the Global Delivery Model (GDM), which emerged as a disruptive force

in the industry leading to the rise of offshore outsourcing. The GDM is based on theprinciple of taking work to the location where the best talent is available, where it makesthe best economic sense, with the least amount of acceptable risk.

Infosys has a global footprint with 63 offices and development centers in India, China,Australia, the Czech Republic, Poland, the UK, Canada and Japan. Infosys and itssubsidiaries have 122,468 employees as on September 30, 2010.

Infosys takes pride in building strategic long-term client relationships. Over 97% of ourrevenues come from existing customers.

TCS-TATA COSULTANCY SERVICES

Tata Consultancy Services Limited (TCS) (BSE: 532540, NSE: TCS) is a Software services

consulting company headquartered in Mumbai, India. TCS is the largest provider

ofinformation technology and business process outsourcing services in Asia.TCS has
http://www.infosys.com/about/who-we-are/pages/history.aspxhttp://www.infosys.com/about/who-we-are/pages/history.aspxhttp://www.infosys.com/flat-world/business/pages/index.aspxhttp://www.infosys.com/about/alliances/pages/index.aspxhttp://www.infosys.com/offerings/pages/index.aspxhttp://www.infosys.com/offerings/consulting-services/pages/index.aspxhttp://www.infosys.com/offerings/IT-services/application-services/pages/index.aspxhttp://www.infosys.com/offerings/IT-services/systems-integration/pages/index.aspxhttp://www.infosys.com/offerings/IT-services/systems-integration/pages/index.aspxhttp://www.infosys.com/offerings/engineering-services/product-engineering/pages/index.aspxhttp://www.infosys.com/offerings/engineering-services/pages/index.aspxhttp://www.infosys.com/offerings/engineering-services/pages/index.aspxhttp://www.infosys.com/offerings/IT-services/independent-validation-testing-services/pages/index.aspxhttp://www.infosys.com/offerings/IT-services/infrastructure-services/pages/index.aspxhttp://www.infosys.com/offerings/IT-services/infrastructure-services/pages/index.aspxhttp://www.infosys.com/offerings/BPO-services/Pages/index.aspxhttp://www.infosys.com/global-sourcing/global-delivery-model/pages/index.aspxhttp://www.infosys.com/contact/pages/index.aspxhttp://en.wikipedia.org/wiki/Bombay_Stock_Exchangehttp://www.bseindia.com/bseplus/StockReach/AdvanceStockReach.aspx?scripcode=532540http://en.wikipedia.org/wiki/National_Stock_Exchange_of_Indiahttp://www.nseindia.com/marketinfo/companyinfo/companysearch.jsp?cons=TCS&section=7http://en.wikipedia.org/wiki/Mumbaihttp://en.wikipedia.org/wiki/Information_technologyhttp://en.wikipedia.org/wiki/Business_process_outsourcinghttp://en.wikipedia.org/wiki/Business_process_outsourcinghttp://en.wikipedia.org/wiki/Information_technologyhttp://en.wikipedia.org/wiki/Mumbaihttp://www.nseindia.com/marketinfo/companyinfo/companysearch.jsp?cons=TCS&section=7http://en.wikipedia.org/wiki/National_Stock_Exchange_of_Indiahttp://www.bseindia.com/bseplus/StockReach/AdvanceStockReach.aspx?scripcode=532540http://en.wikipedia.org/wiki/Bombay_Stock_Exchangehttp://www.infosys.com/contact/pages/index.aspxhttp://www.infosys.com/global-sourcing/global-delivery-model/pages/index.aspxhttp://www.infosys.com/offerings/BPO-services/Pages/index.aspxhttp://www.infosys.com/offerings/IT-services/infrastructure-services/pages/index.aspxhttp://www.infosys.com/offerings/IT-services/infrastructure-services/pages/index.aspxhttp://www.infosys.com/offerings/IT-services/independent-validation-testing-services/pages/index.aspxhttp://www.infosys.com/offerings/engineering-services/pages/index.aspxhttp://www.infosys.com/offerings/engineering-services/pages/index.aspxhttp://www.infosys.com/offerings/engineering-services/product-engineering/pages/index.aspxhttp://www.infosys.com/offerings/IT-services/systems-integration/pages/index.aspxhttp://www.infosys.com/offerings/IT-services/systems-integration/pages/index.aspxhttp://www.infosys.com/offerings/IT-services/application-services/pages/index.aspxhttp://www.infosys.com/offerings/consulting-services/pages/index.aspxhttp://www.infosys.com/offerings/pages/index.aspxhttp://www.infosys.com/about/alliances/pages/index.aspxhttp://www.infosys.com/flat-world/business/pages/index.aspxhttp://www.infosys.com/about/who-we-are/pages/history.aspxhttp://www.infosys.com/about/who-we-are/pages/history.aspx


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offices in 42 countries with more than 142 branches across the globe. The company is listed

on the National Stock Exchange and Bombay Stock Exchange of India.

TCS is one of the operative subsidiaries of one of India's largest and

oldest conglomerate company, the Tata Group or Tata Sons Limited, which has interests inareas such as energy, telecommunications, financial services, manufacturing, chemicals,

engineering, materials, government and healthcare.

TCS established the first software research center in India, the Tata Research Development

and Design Center, in Pune, India in 1981.TRDDC undertakes research in Software

Engineering, Process Engineering and Systems Research.

Researchers at TRDDC also developed Master Craft (now called TCS Code Generator

Framework) a Model Driven Development software that can automatically create code

based on a model of software, and rewrite the code based on the user's needs.

WIPRO

Wipro IT Business, a division of Wipro Limited (NYSE:WIT), is amongst the largest

global IT services, BPO and Product Engineering companies. In addition to the IT business,

Wipro also has leadership position in niche market segments of consumer products and

lighting solutions. The company has been listed since 1945 and started its technology

business in 1980. Today, Wipro generates USD 6 billion (India GAAP figure 2009-10) of

annual revenues. Its equity shares are listed in India on the Mumbai Stock Exchange and

the National Stock Exchange; as well as on the New York Stock Exchange in the US.

Wipro makes an ideal partner for organizations looking at transformational IT solutions

because of its core capabilities, great human resources, commitment to quality and the

global infrastructure to deliver a wide range of technology and business consulting

solutions and services, 24/7. Wipro enables business results by being a transformation

catalyst. It offers integrated portfolio of services to its clients in the areas of Consulting,

System Integration and Outsourcing for key-industry verticals.

One of the worlds largest third party R&D services provider, Wipro caters to product

engineering requirements in multiple domains. Most of the technology that you come

across in daily life - airplanes, automobile navigation systems, cell phones, computing
http://en.wikipedia.org/wiki/National_Stock_Exchange_of_Indiahttp://en.wikipedia.org/wiki/Bombay_Stock_Exchangehttp://en.wikipedia.org/wiki/Conglomerate_(company)http://en.wikipedia.org/wiki/Tata_Grouphttp://en.wikipedia.org/wiki/Punehttp://en.wikipedia.org/wiki/Software_Engineeringhttp://en.wikipedia.org/wiki/Software_Engineeringhttp://en.wikipedia.org/wiki/Process_Engineeringhttp://en.wikipedia.org/wiki/Model-driven_engineeringhttp://en.wikipedia.org/wiki/Model-driven_engineeringhttp://en.wikipedia.org/wiki/Process_Engineeringhttp://en.wikipedia.org/wiki/Software_Engineeringhttp://en.wikipedia.org/wiki/Software_Engineeringhttp://en.wikipedia.org/wiki/Punehttp://en.wikipedia.org/wiki/Tata_Grouphttp://en.wikipedia.org/wiki/Conglomerate_(company)http://en.wikipedia.org/wiki/Bombay_Stock_Exchangehttp://en.wikipedia.org/wiki/National_Stock_Exchange_of_India


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servers, drug delivery devices, microwaves, printers, refrigerators, set top boxes, TVs - will

find a Wipro component in them.

TECH MAHINDRA

Tech Mahindra is part of the US $7.1 billion Mahindra Group, in partnership with British

Telecommunications plc (BT), one of the worlds leading communications service

providers. Focused primarily on the telecommunications industry, Tech Mahindra is a

leading global systems integrator and business transformation consulting organization.

Tech Mahindra has recently expanded its IT portfolio by acquiring the leading global

business and information technology services company, Mahindra Satyam (earlier known

as Satyam Computer Services).

Tech Mahindras capabilities spread across a broad spectrum, including Business Support

Systems (BSS), Operations Support Systems (OSS), Network Design & Engineering, Next

Generation Networks, Mobility Solutions, Security consulting and Testing. The solutions

portfolio includes Consulting, Application Development & Management, Network

Services, Solution Integration, Product Engineering, Infrastructure Managed Services,

Remote Infrastructure Management and BPO. With an array of service offerings for TSPs,

TEMs and ISVs, Tech Mahindra is a chosen transformation partner for several leading

wireline, wireless and broadband operators in Europe, Asia-Pacific and North America.

Tech Mahindra has a global footprint through operations in more than 25 countries with 17

sales offices and 13 delivery centers.Tech Mahindra's track record for value delivery is

supported by over 34, 000 professionals who provide a unique blend of culture, domain

expertise and in depth technology skill sets.

MAHINDRA SATYAM

We are Mahindra Satyam, leading information, communications and technology (ICT)

company providing top-class business consulting, information technology andcommunication services. Leveraging deep industry and functional expertise, leading

technology practices and a global delivery model, we enable companies achieve their

business goals and transformation objectives.


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We are powered by a pool of talented IT and consulting professionals across enterprise

solutions, client relationship management, business intelligence, business process quality,

operations management, engineering solutions, digital convergence, product lifecycle

management, and infrastructure management services, among other capabilities. Our

development and delivery centers in the US, Canada, Brazil, the UK, Hungary, Egypt,

UAE, India, China, Malaysia, Singapore and Australia serve numerous clients, including

several Fortune 500 companies.

We are part of the $7.1 billion Mahindra Group, a global industrial federation of companies

and one of the top 10 business houses based in India. The Groups interests span

automotive products, aviation, components, farm equipment, financial services, hospitality,

information technology, logistics, real estate and retail.

PHARMACUETICALS

RANBAXY

Ranbaxy Laboratories Limited (Ranbaxy), India's largest pharmaceutical company, is an

integrated, research based, international pharmaceutical company, producing a wide range

of quality, affordable generic medicines, trusted by healthcare professionals and patients

across geographies. Ranbaxy today has a presence in 23 of the top 25 pharmaceutical

markets of the world. The Company has a global footprint in 46 countries, world-class

manufacturing facilities in 7 countries and serves customers in over 125 countries.

In June 2008, Ranbaxy entered into an alliance with one of the largest Japanese innovator

companies, Daiichi Sankyo Company Ltd., to create an innovator and generic

pharmaceutical powerhouse. The combined entity now ranks among the top 20

pharmaceutical companies, globally. The transformational deal will place Ranbaxy in a

higher growth trajectory and it will emerge stronger in terms of its global reach and in its

capabilities in drug development and manufacturing.

Ranbaxy was incorporated in 1961 and went public in 1973. For the year 2009, the

Company recorded Global Sales of US $ 1519 Mn. The Company has a balanced mix of

revenues from emerging and developed markets that contribute 54% and 39% respectively.

In 2009, North America, the Company's largest market contributed sales of US $ 397 Mn,


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followed by Europe garnering US $ 269 Mn and Asia clocking sales of around US $ 441

Mn.

CIPLA

Cipla has registered excellent growth for the year FY01 with 38% improvement in top line

and 34% increase in bottom line. The companys entry into generic business in a big way

has paid rich dividend. Ciplas recent offer for anti-AIDS drugs to South African countries

will enhance exports. Strong presence in asthmatic, antibiotic and cardiovascular segments

will help to retain leadership position in the domestic market. Cipla is likely to emerge as a

leading global player in anti-AIDS and inhaler segments. We estimate the company to

outperform most peers in the current year on account of developments as mentioned in the

report.

Cipla occupies 3rd position in the domestic formulations market and commands a market

share of 4.74%. The company is growing rapidly at 22.1% compared to the market growth

of 10.1%. Cipla currently markets 346 products and is the market leader in the generic

segment with more than 100 products. The company has strong presence in anti-asthmatic,

antibiotics, cardiovascular, anti-AIDS and anticancer areas. We expect the company to

maintain the leading position in these segments due to its several fast moving brands and

rapid introduction of new products.

WYETH

Wyeth Pharmaceuticals, a division of Wyeth, has leading products in the areas ofwomens

health care, infectious disease, gastrointestinal health, central nervous system,

inflammation, transplantation, hemophilia, oncology, vaccines and nutritional products.

Wyeth is one of the worlds largest research-driven pharmaceutical and health care

products companies. It is a leader in the discovery, development, manufacturing and

marketing of pharmaceuticals, vaccines, biotechnology products and non-prescription

medicines that improve the quality of life for people worldwide. The Companys major

divisions include Wyeth Pharmaceuticals, Wyeth Consumer Healthcare and Fort Dodge

Animal Health.


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Wyeth Pharmaceuticals, formerly Wyeth-Ayerst Laboratories, is the original company

founded by the Wyeth brothers, originally known as John Wyeth and Brother. They focus

on the research, development, and marketing of prescription drugs. The pharmaceuticals

division is further subdivided into five subdivisions: Wyeth Research, Prescription

Products, Biotech, Vaccines, and Nutritionals. Wyeth's research and development

director Robert Ruffolo has been quoted in the New York Times about the firm's efforts to

develop new drugs.

DR. REDDYS

Established in 1984, Dr. Reddys Laboratories (NYSE: RDY) is an emerging global pharmaceutical

company.As a fully integrated pharmaceutical company, our purpose is to provide affordable and innovative

medicines through our three core businesses:

-Pharmaceutical Services and Active Ingredients, comprising our Active Pharmaceuticals andCustom Pharmaceuticals businesses;

-Global Generics, which includes branded and unbranded generics; and

-Proprietary Products, which includes New Chemical Entities (NCEs), DifferentiatedFormulations, and Generic Biopharmaceuticals.

Our products are marketed globally, with a focus on India, US, Europe and Russia. Dr. Reddys

conducts NCE research in the areas of metabolic disorders, cardiovascular indications, anti-infective and inflammation.

Our strong portfolio of businesses, geographies and products gives us an edge in an increasinglycompetitive global market and allows us to provide affordable medication to people across theworld, regardless of geographic and socio-economic barriers.

AUROBINDO PHARMA

Among the largest 'Vertically Integrated' pharmaceutical companies in India, Aurobindo has robust

product portfolio spread over major product areas encompassing CVS, CNS, Anti-Retroviral,Antibiotics, Gastroenterological, Anti-Diabetics and Anti-Allergic with approved manufacturing

facilities by USFDA, UKMHRA, WHO, MCC-SA, ANVISA-Brazil for both APIs & Formulations

and has Global presence with own infrastructure, strategic alliances, subsidiaries & joint ventures.

Aurobindos R & D strengths lie in developing intellectual property in non-infringing processes and

resolving complex chemistry challenges. In the process, Aurobindo develops new drug delivery

systems, dosage formulations and applies new technology for better processes.
http://en.wikipedia.org/wiki/Robert_R._Ruffolo,_Jrhttp://en.wikipedia.org/wiki/New_York_Timeshttp://en.wikipedia.org/wiki/New_York_Timeshttp://en.wikipedia.org/wiki/Robert_R._Ruffolo,_Jr


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Among the largest 'Vertically Integrated' pharmaceutical companies in India, Aurobindo has robust

product portfolio spread over major product areas encompassing CVS, CNS, Anti-Retroviral,

Antibiotics, Gastroenterological, Anti-Diabetics and Anti-Allergic with approved manufacturing

facilities by USFDA, UKMHRA, WHO, MCC-SA, ANVISA-Brazil for both APIs & Formulations

and has Global presence with own infrastructure, strategic alliances, subsidiaries & joint ventures.

Aurobindos R & D strengths lie in developing intellectual property in non-infringing processes and

resolving complex chemistry challenges. In the process, Aurobindo develops new drug delivery

systems, dosage formulations and applies new technology for better processes.

FMCG

HUL (HINDUSTAN UNILEVER LTD.)

Hindustan Unilever Limited (HUL) is India's largest Fast Moving Consumer Goods Company,touching the lives of two out of three Indians with over 20 distinct categories in Home & Personal

Care Products and Foods & Beverages. The companys Turnover is Rs. 17,523 crores (for thefinancial year 2009 - 2010)

HUL is a subsidiary of Unilever; one of the worlds leading suppliers of fast moving consumergoods with strong local roots in more than 100 countries across the globe with annual sales of about40 billion in 2009 Unilever has about 52% shareholding in HUL.

Hindustan Unilever was recently rated among the top four companies globally in the list of GlobalTop Companies for Leaders by a study sponsored by Hewitt Associates, in partnership with

Fortune magazine and the RBL Group. The company was ranked number one in the Asia-Pacificregion and in India.

The mission that inspires HUL's more than 15,000 employees, including over 1,400 managers, is tohelp people feel good, look good and get more out of life with brands and services that are good forthem and good for others. It is a mission HUL shares with its parent company, Unilever, whichholds about 52 % of the equity.

ITC

ITC is one of India's foremost private sector companies with a market capitalisation of over US $

30 billion and a turnover of US $ 6 billion.* ITC is rated among the World's Best Big Companies,

Asia's 'Fab 50' and the World's Most Reputable Companies by Forbes magazine, among India's

Most Respected Companies by BusinessWorld and among India's Most Valuable Companies by

Business Today. ITC ranks among India's `10 Most Valuable (Company) Brands', in a study

conducted by Brand Finance and published by the Economic Times. ITC also ranks among Asia's

50 best performing companies compiled by Business Week.

ITC has a diversified presence in Cigarettes, Hotels, Paperboards & Specialty Papers, Packaging,

Agri-Business, Packaged Foods & Confectionery, Information Technology, Branded Apparel,


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Personal Care, Stationery, Safety Matches and other FMCG products. While ITC is an outstanding

market leader in its traditional businesses of Cigarettes, Hotels, Paperboards, Packaging and Agri-

Exports, it is rapidly gaining market share even in its nascent businesses of Packaged Foods &

Confectionery, Branded Apparel, Personal Care and Stationery.

As one of India's most valuable and respected corporations, ITC is widely perceived to bededicatedly nation-oriented. Chairman Y C Deveshwar calls this source of inspiration "a

commitment beyond the market". In his own words: "ITC believes that its aspiration to create

enduring value for the nation provides the motive force to sustain growing shareholder value. ITC

practices this philosophy by not only driving each of its businesses towards international

competitiveness but by also consciously contributing to enhancing the competitiveness of the larger

value chain of which it is a part."

P&G (PROCTOR AND GAMBLE)

The Procter & Gamble Company (P&G) is a giant in the area of consumer goods. The leadingmaker of household products in the United States, P&G has operations in nearly 80 countriesaround the world and markets its nearly 300 brands in more than 160 countries; more than half ofthe company's revenues are derived overseas. Among its products, which fall into the maincategories of fabric care, home care, beauty care, baby care, family care, health care, snacks, andbeverages, are 16 that generate more than $1 billion in annual revenues: Actonel (osteoporosistreatment); Always (feminine protection); Ariel, Downy, and Tide (laundry care); Bounty (papertowels); Charmin (bathroom tissue); Crest (toothpaste); Folgers (coffee); Head & Shoulders,Pantene, and Wella (hair care); Iams (pet food); Olay (skin care); Pampers (diapers); and Pringles(snacks). Committed to remaining the leader in its markets, P&G is one of the most aggressivemarketers and is the largest advertiser in the world. Many innovations that are now commonpractices in corporate Americaincluding extensive market research, the brand-managementsystem, and employee profit-sharing programswere first developed at Procter & Gamble.

COLGATE AND PALMOLIVE

Driving Growth Worldwide Building Market Leadership Growing Profitability

Colgate's long history of strong performance comes from absolute focus on our core globalbusinesses: Oral Care, Personal Care, Home Care and Pet Nutrition. This has been combined with a

successful worldwide financial strategy. Around the world, Colgate has consistently increased grossmargin while at the same time reducing costs in order to fund growth initiatives, including newproduct development and increases in marketing spending. These, in turn, have generated greaterprofitability.

Colgate managers around the world are dedicated to increasing market shares in all our corebusinesses. Colgate has achieved global leadership in toothpaste, hand dishwashing liquid, liquidhand soap and specialty pet food.


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MARICO

Marico is a leading Indian Group in Consumer Products & Services in the Global Beauty andWellness space. Marico's Products and Services in Hair care, Skin Care and Healthy Foods

generated a Turnover of about Rs. 26.6 billion (about USD 600 Million) during 2009-10. Maricomarkets well-known brands such as Parachute, Saffola, Sweekar, Hair & Care, Nihar, Shanti,Mediker, Revive, Manjal, Kaya, Aromatic, Fiancee, HairCode, Caivil, Code 10 and Black Chic.Marico's brands and their extensions occupy leadership positions with significant market shares inmost categories- Coconut Oil, Hair Oils, Post wash hair care, Anti-lice Treatment, PremiumRefined Edible Oils, niche Fabric Care etc. Marico is also present in the Skin Care Solutionssegment through Kaya Skin Clinics in India, Middle East and Bangladesh. In addition, Marico alsoacquired the aesthetics business, of the Singapore based Derma Rx Asia Pacific Pte. Ltd. (DermaRx), under the Kaya portfolio.

Marico's branded products are present in Bangladesh, other SAARC countries, the Middle East,Egypt, Malaysia and South Africa. The Overseas Sales franchise of Marico's Consumer Products(whether as exports from India or as local operations in a foreign country) is one of the largestamongst Indian Companies and is entirely in branded products and services.

Harsh Mariwala was awarded the Ernst & Young Entrepreneur of the Year Award 2009 in the

Manufacturing category.


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ANALYSIS OF DATA

BANKING SECTOR

DEBT EQUITY RATIO

COMPANIES/YEAR 2006 2007 2008 2009 2010

ICICI 228.8135 313.3033 278.678 256.6012 265.7483

IDBI 0.011571 0.012116 0.012679 0.012495 0.010028

HDFC 192.7486 222.6536 296.9485 342.041 393.9357

AXIS 153.5558 227.1818 260.6868 355.3093 391.1192

SBI 780.3293 902.9535 932.9522 1253.444 1428.818

Banking sector is the sector which has h

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