CASE STUDY

ANALYSIS

SHARE PRICE

MOVEMENTS & BETA

VALUES

AVERAGE SHARE PRICE MOVEMENT OF 20 BANKING FIRMS IN INDIA DATED BETWEEN

24TH OCT TO 7TH DEC 2014 (30 OBSERBVATIONS) LISTED ON BSE

SL BANK OP HIGH LOW CL BETA VALUE

1 KARUR S VYSYA 538.5611 544.6556 531.7111 536.7519 0.71

2 HDFC 400.9103 406.7414 394.8293 400.3759 0.91

3 KOTAK MAHINDRA BANK 1,136.26 1,151.20 1,123.48 1,138.39 1.08

4 SOUTH INDIAN BANK 27.65484 28.062 27.159 27.54 1.2

5 BANK OF BARODA 1001.011 1019.483 989.9315 1007.441 1.28

6 ING 743.43 759.92 729.64 744.74 1.41

7 FEDERAL BANK 144.5704 146.5037 142.3704 144.2796 1.42

8 ANDHRA BANK 84.47037 86.24074 82.65556 84.52963 1.49

9 INDIAN OVERSEAS 58.32 59.32 57.32 58.22 1.49

10 SBI 288.6281 292.0342 285.58 289.0029 1.49

11 INDISIN BANK 723.8597 733.3177 717.1065 725.6129 1.57

12 DENA BANK 61.98704 62.8537 60.91111 61.72407 1.58

13 PNB 971.2537 989.9204 960.7778 976.5241 1.66

14 CANARA BANK 400.9103 406.7414 394.8293 400.3759 1.75

15 BANK OF BARODA 6921.802 6979.671 6865.454 6938.259 1.77

16 ICICI 1,605.91 1,625.36 1,593.48 1,613.21 1.77

17 AXIS BANK 464.6056 470.76 460.23 466.32 1.82

18 UNION BANK 212.7907 216.4256 210.1453 213.2151 1.93

19 YES BANK 684.25 693.97 676.81 686.89 1.95

20 IDBI 70.86296 71.95185 69.53333 70.77593 2.07

GRAPHICAL REPRESENTATION OF BETA VALUES

KOTAK MAHINDRA BANK

SOUTH INDIAN BANK

SBI

HDFC

CANARA BANK

PNB

BANK OF BARODA

ANDHRA BANK

YES BANK

INDISIN BANK

FEDERAL BANK

DENA BANK

KARUR S VYSYA

AXIS BANK

ING

INDIAN OVERSEAS

BANK OF BARODA

IDBI

ICICI

UNION BANK

0

0.5

1

1.5

2

2.5

0 5 10 15 20 25

BETA VALUES of the 20 BANKS'S STOCK

BETA VALUE

Linear (BETAVALUE)

COST OF EQUITY

HUL & DLF

DATE HUL DHL SENSEX

Jan-08 206.5 812.55 17648.71

Feb-08 227.35 780.55 17578.72

Mar-08 228.7 646.5 15644.44

Apr-08 249.5 705.25 17287.31

May-08 237.15 587.45 16415.57

Jun-08 206.1 396.2 13461.6

Jul-08 239.7 509.3 14355.75

Aug-08 245.4 493.2 14594.53

Sep-08 251.55 352.4 12860.43

Oct-08 221.95 220.25 9788.06

Nov-08 236.2 198.25 9092.72

Dec-08 250.25 281.9 9647.31

Jan-09 261.2 177.2 9424.24

Feb-09 253.8 151.7 8891.61

Mar-09 238.2 167.2 9708.5

Apr-09 234.55 230.9 11403.25

May-09 231.1 403.3 14625.25

Jun-09 267.1 310.8 14493.84

Jul-09 291.2 396.15 15670.31

Aug-09 259.85 424.2 15666.64

Sep-09 262.85 438 17126.84

Oct-09 282.95 370 15896.28

Nov-09 285.25 351.6 16926.22

Dec-09 264.75 361.15 17464.81

MONTHLY

RETURN HUL DLF SENSEX

10.0968523 -3.93821919 -0.396572894

0.593798109 -17.1737877 -11.00353154

9.094884128 9.087393658 10.5013027

-4.9498998 -16.7032967 -5.042658459

-13.09297913 -32.5559622 -17.99492799

16.30276565 28.54618879 6.642226778

2.377972466 -3.16120165 1.663305644

2.506112469 -28.5482563 -11.88184888

-11.76704433 -37.5 -23.89010321

6.420364947 -9.98864926 -7.103961357

5.948348857 42.19419924 6.099275024

4.375624376 -37.1408301 -2.312250772

-2.833078101 -14.3905192 -5.651702418

-6.146572104 10.21753461 9.187200068

-1.532325777 38.09808612 17.45635268

-1.470901727 74.66435686 28.25510271

15.577672 -22.9357798 -0.898514555

9.022837888 27.46138996 8.117034547

-10.7657967 7.080651268 -0.023420085

1.154512219 3.253182461 9.320441396

7.646946928 -15.5251142 -7.184979833

0.812864464 -4.97297297 6.479125934

-7.186678352 2.716154721 3.181986291

1.399403512 -0.05284572 0.587777469

COV-1.033689759

DEV 1 DEV2 COMBINED

8.697449 -3.885373468 -33.79283676

-0.80561 -17.120942 13.79272339

7.695481 9.140239376 70.33853494

-6.3493 -16.65045099 105.7187636

-14.4924 -32.50311649 471.0476012

14.90336 28.59903451 426.2217681

0.978569 -3.108355931 -3.04174061

1.106709 -28.49541057 -31.53612611

-13.1664 -37.44715428 493.0460035

5.020961 -9.935803544 -49.88728642

4.548945 42.24704496 192.1794985

2.976221 -37.08798436 -110.3820328

-4.23248 -14.33767347 60.68393934

-7.54598 10.27038033 -77.50003951

-2.93173 38.15093184 -111.8482043

-2.87031 74.71720258 -214.461178

14.17827 -22.8829341 -324.4403835

7.623434 27.51423568 209.7529701

-12.1652 7.133496987 -86.78041908

-0.24489 3.306028179 -0.809617518

6.247543 -15.47226844 -96.6636688

-0.58654 -4.920127255 2.885846759

-8.58608 2.76900044 -23.77486446

OBSERVATIONS

HUL DHL

AVERAGE RETURN 1.399403512 -0.05284572

SD 8.11912649 27.7892237

COV -1.033689759 -1.033689759

CORRELATION -0.004581466 -0.004581466

BETA VALUE 0.37 1.54

-60

-40

-20

0

20

40

60

80

100

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24

MONTHLY RETURN HUL

DLF

SENSEX

HUL DHL

AVERAGE

RETURN1.399403512 -0.05284572

STANDARD DEVIATION

HIGHER THE SD HIGHER THE VOLATILITY OF STOCK

0

5

10

15

20

25

30

HUL DLF

Series1

COVARIANCE

The correlation coefficient will vary from -1 to +1.

Here covariance of securities is -1.03 which means it is negative and the movement of the securities are not closely associated.

If an investor wants a portfolio whose assets have diversified earnings, he or she should pick financial assets that have low covariance to each other.

-1.03368975

9

-1.2

-1

-0.8

-0.6

-0.4

-0.2

0

1

cov

BETA

0

0.2

0.4

0.6

0.8

1

1.2

1.4

1.6

HUL

DLF

0.37

1.54

Series1•DLF stock’s price experiences movements greater (more volatile) than the stock

market by 54% (BETA >1)

•HUL stock’s price movements are less than the market fluctuations by 63%

(BETA <1)

COST OF EQUITY

HUL DLF

Rf 8% 8%

Expected Return 16% 16%

Rj 0.1095 0.2032

Rj = Rf + bj(RM - Rf)

DEBT PROBLEMS

AT

ASAHI GLASS LIMITED

YEAR MAJOR LANDMARKS IMPICATION

1986-88 IST PUBLIC OFFER 6.81 TIMES OVER SUBSCRIBED

SALES TURN OVER 115 M

1988-90 1ST DIVIDENT

1996-97 SALES TURN OVER CROSSED 1000M

1997-98 1ST BONUS SHARES 1:1 RATIO WITH 45% DIVIDEND

1999-2000 SALES TURN OVER CROSSED 1000M

2001-2002 2ND BONUS SHARE 55%

EQUITY STAKE IN FGI 79.6% STAKE

2002-03 STOCK SPLIT 10 Eq OF RS 1 FROM RS 10

SALES TURN OVER 5000M

2004-05 3rd BONUS ISSUE 1:01

DIVIDEND 250%

INTRIM DIVIDEND 100%

FINANCIAL STRUCTURE

1999-2000 2000-2001 2001-2002 2002-2003 2003-2004 2004-2005 2005-2006 2006-2007 2007-2008 2008-2009

shareholders fund 293 350 400 791 1301 1756 2509 2811 2945 1896

DEBT:

Interest free sales tax loan 205 249 257 248 243 235 227 190 146 91

interest free foreign currency loan 2268 2088 2088 2130 2075 1915 2421

Interest bearing loan 498 633 920 854 373 2128 6311 10132 11853 13661

Total debt 703 882 1177 3370 2704 4451 8668 12397 13914 16173

Debt/equity 239.931741 252 294.25 426.0429836 207.8401 253.4738 345.47629 441.0174 472.4618 853.0063

Industry Bench mark od Debt-equity ratio1.77 for manufacturing

LOW LEVERAGE MEDIUM LEVERAGE HIGH LEVERAGE

1999-2000 2000-2001 2001-2002 2002-2003 2003-2004 2004-2005 2005-2006 2006-2007 2007-2008 2008-2009

OPERATING INCOME 401 398 414 933 1320 1289 1207 1649 2046 1428

(INTEREST) 76 58 49 79 24 32 108 355 848 1243

Gross profit 325 340 365 854 1296 1257 1099 1294 1199 185

(DEPRECIATION) 161 193 174 439 501 403 63 653 1005 1135

PROFIT BEFORE TAX 139 130 173 382 776 850 912 632 196 -958

(TAX) 46 50 54 5 58 68 50 212 62 -552

PROFIT AFTER TAX 93 80 119 377 718 782 862 420 134 -406

EPS 25.22 21.51 16.03 4.71 8.91 9.69 6.17 2.63 0.83 -2.54

ROE 23.01 19.31 18.89 10.96 19.78 19.63 20.09 10.06 7.04 1.68

DFL 1.23384615 1.170588 1.134247 1.092505855 1.018519 1.025457 1.0982712 1.274343 1.706422 7.718919

DEBT73%

EQUITY27%

CAPITAL STRUCTURE- LOW LEVERAGE

EQUITY

15%

DEBT85%

CAPITAL STRUCTURE-HIGH LEVERAGE

EQUITY25%

DEBT75%

CAPITAL STRUCTURE - MEDIUM LEVERAGE

Industry Bench mark od Debt-equity

ratio1.77 for manufacturing

-5

0

5

10

15

20

25

30

EPS

LOW LEVERAGE MEDIUM LEVERAGE

HIGH LEVERAGE

-5

0

5

10

15

20

25

30

1 2 3 4 5 6 7 8 9 10

Series1

EPS

ROE

LOW LEVERAGE 23.01 19.31 18.89

MEDIUMLEVERAGE

10.96 19.78 19.63 20.09

HIGH LEVERAGE 10.06 7.04 1.68

0

5

10

15

20

25

RO

E

ROE

0

5

10

15

20

25

1 2 3 4 5 6 7 8 9 10

ROE

Series1

DCL

-6

-4

-2

0

2

4

1 2 3 4 5 6 7 8 9 10

DOL

DOL-10

-5

0

5

10

15

20

25

1 2 3 4 5 6 7 8 9 10

DFL

DFL

-30

-20

-10

0

10

1 2 3 4 5 6 7 8 9 10

DCL

DCL

0

500

1000

1500

2000

2500

EBIT

EBIT

0

200

400

600

800

1000

1200

1400

1 2 3 4 5 6 7 8 9 10

INTEREST

Series1

0

100

200

300

400

500

600

700

800

900

1 2 3 4 5 6 7 8 9 10

DEBT-EQUITY RATIO

Series1401 398 414

933

1320 1289 1207

1649

2046

1428

93 80 119377

718 782 862

420134

-406

EBIT &EAT

EBIT EAIT

0 0 0

22682088 2088 2130 2075

1915

2421

1 2 3 4 5 6 7 8 9 10

INTEREST FREE FOREGIN CURRENCY LOAN

Series1

48.3953

45.9516

43.66

45.2444.59

49.85

51.24

38

40

42

44

46

48

50

52

1 2 3 4 5 6 7

EX RATE

EX RATE

0

10

20

30

40

50

60

1 2 3 4 5 6 7

USD

USD

HERO HONDA

NET PROFIT AFTER TAX, 12818

DIVIDEND, 39940

5000

10000

15000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

EAT AND DIVIDEND

0

1000

2000

3000

4000

5000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

DIVIDEND,DIVIDEND RATE,DIVIDEND PAYOUT RATIO

DIVIDEND DIVIDEND RATE DIVIDEND PAYOUT

STABLE DIVIDEND POLICY

11.4 10.57

16.97 15.6 15.34 13.519.25

6.694.48

2.09

2327

7570

62

56

47 46 46

37

1 2 3 4 5 6 7 8 9 10

DEBT EQUITY RATIO DIVIDEND PAYOUT

0

50

100

150

200

250

300

350

400

1 2 3 4 5 6 7 8 9 10

INTEREST

INTEREST

STOCK SPLIT 2001

PARTICULARS AMOUNT(millions)

EQUITY(face value Rs.10* 39,900,000) 3,99,000,000

RESERVES 6292000000

SHARE HOLDER’S EQUITY 6689000000

EPS 6.18

PARTICULARS AMOUNT(millions)

EQUITY(face value Rs.2* 199,500,000 ) 3,99,000,000

RESERVES 6269000000

SHARE HOLDER’S EQUITY 6689000000

EPS 1.23

HYPOTHETICAL EXAMPLE

EPS(100 Shares) 6.18*100= 618

EPS(500 Shares) 1.23*500= 618

BONUS

PARTICULARS IN MILLIONS

BEFORE 1994 SHARE CAPITAL 49.87

1994 (Bonus 1:4) 199.5

1998 (Bonus 1:1) 399

Hypothetical Example 1994 1998

PAT 1400 1900

Share Holdings 199.5 399

EPS 7.02 4.76

Share Holders value 702 (100shares) 952 (100 shares+100

bonus share)

BUY BACK OF SHARES

On the down sideshare prices of Deccan Chronicle Holdings (DCHL),

Jindal Poly Films, Amtek Auto and Praj Indusries, Balrampur Chini

and FDC fell 32.2 per cent, 24.4 per cent, 16.6 per cent, 7.6 per cent,

6.1 per cent and 5.2 per cent, respectively.

The price trend depends on various factors such as the market

situation, the mode of the offer, that is, tender or market purchase,

the size of the offer, the difference between the offer price and the

market price of the stock

0

20

40

60

80

1 2 3 4 5 6 7 8 9 10

EPS

EPS

0

10000

20000

30000

40000

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

Reserves

Reserves

THANK YOU