A Project Report On

“TO STUDY THE FINANCIAL ANALYSIS OF CAPITAL STRUCTURE

OF BAJAJ FINSERV, PUNE”

SUBMITTED BY
SAMIR SINGH

UNDER THE GUIDANCE OF

PROF. CHARU SHARMA

SUBMITTED TO
SAVITRIBAI PHULE PUNE UNIVERSITY

SUBMITTED IN PARTIAL FULFILMENT OF

BACHELOR OF BUSINESS ADMINISTRATIO

INDIRA COLLEGE OF COMMERCE AND SCIENCE

(2016-2019)
DECLARATION

I, SAMIR SINGH declare that the project work titled “Capital Structure
Management” is totally independent work done by me under the guidance
and supervision of Prof. CHARU SHARMA .
This work has been submitted in the partial fulfilment of the Bachelor of
Business Administration to University of Pune.

The information has been collected from genuine and authentic sources.

The project work or any part of it has not be submitted or published in any
form for any other degree, to University of Pune or any other university.

PLACE:-
DATE:-
PREFACE

Someone has rightly said practical knowledge is far better than classroom
teaching. During the course of this project I actually realized how true the
saying is when I analysed the industry and the real world. This project
enables me to know the consumer needs and the competitor’s activity in the
real world.
Moreover, internship helped in introducing to me the general nature and
structure of industries and business organization. It enhanced the awareness
towards study, business website and published data and information relating
to the hotel industry sector. It has helped in improving my knowledge about
the hotel industry sector.
This is the brief report on the comparison survey that was conducted and the
findings and observation during the survey is drawn and final suggestion and
conclusion have been given.
The experience which I gained by doing this projects is being submitted
which content detailed analysis of the research under taken by me.
The research provides as opportunity to the student to devote his/her skill
knowledge and competencies required during the technical session.
 ACKNOWLEDGEMENT

It gives me great honour while expressing my sense of gratitude towards all those who helped
and guided me during this project.

I would like to express my sincere and profound sense of gratitude to the Sales Manager-
Next, Mr. Prateek of Bajaj Finserv Limited for their inspiring guidance, kindness, constant
encouragement and constructive criticism during the course of my internship and in the
preparation of this report.

I would also like to thank my faculty guide Prof. Charu Sharma of Indira College of
Commerce and Science, Pune for her complete guidance and encouragement in the
completion of this project.

I would also take the opportunity to thank Dr. Janardhan Pawar (Principal Incharge) and
Dr. Sonali Shrotri (HOD–BBA and BBA IB) of Indira College of Commerce and Science,
Pune for giving me the opportunity to be a part of this institution and encouraging me to
complete this project.

I would also like to thank to colleagues working for Bajaj Finserv Ltd for their
encouragement and support during my project and also to all those who have helped me
directly or indirectly in preparing this project report.

SAMIR SINGH
BBA
ICCS, PUNE
 TABLE OF CONTENT

1 CHAPTER 1 PAGE NO.

1.1 Introduction of the Capital Structure
1.2 Importance of Capital Structure
1.3 Financial Analysis
1.4 Ratio Analysis
1.5 Ratio to be studied
2 CHAPTER 2
2.1 Company Profile
2.2 History of Company
2.3 Board of Directors
2.4 Future Prospects
3 CHAPTER 3
3.1 Research Methodology
3.2 Reason of Study
3.3 Objective of Study
3.4 Data Source
3.5 Limitations
4 CHAPTER 4
4.1 Data Analysis and Interpretation
5 CHAPTER 5
5.1 Findings
5.2 Conclusion
5.3 Bibliography
5.4 Annexure
EXECUTIVE SUMMARY

The core objective of the internship is to fulfill the requirement of the BBA program as
prescribed by the Pune University. An intern has to prepare project report at the end of
the internship period but the main objective of the internship is to get the hands-on
experience of the real world organization. The internship was completed with the
objective of getting practical knowledge in the Finance department regarding ratio
analysis and capital structure of BAJAJ FINSERV & also attempted to gather more
information on basic job functions of other departments to have better understanding of
the company financial condition and Finance department. It was commendable to see how
wholeheartedly they welcomed, acknowledged and appreciated new ideas and
knowledge. I have provided few recommendations based upon my understanding and
knowledge.

I successfully completed all the assigned duties and handed them over to the senior
supervisor at the end of the internship. I thoroughly enjoyed the challenges that came
along every single day. These lessons that I have learned will be a valuable one for my
future endeavours as well.
CHAPTER 01

1.1 Introduction to 'Capital Structure'

The capital structure is how a firm finances its overall operations and growth by using
different sources of funds. Debt comes in the form of bond issues or long-term notes
payable, while equity is classified as common stock, preferred stock or retained
earnings. Short-term debt such as working capital requirements is also considered to be
part of the capital structure.

'Capital Structure'
A firm's capital structure can be a mixture of long-term debt, short-term debt, common
equity and preferred equity. A company's proportion of short- and long-term debt is
considered when analysing capital structure. When analysts refer to capital structure, they
are most likely referring to a firm's debt-to-equity (D/E) ratio, which provides insight into
how risky a company is. Usually, a company that is heavily financed by debt has a more
aggressive capital structure and therefore poses greater risk to investors. This risk,
however, may be the primary source of the firm's growth.

Debt vs. Equity

Debt is one of the two main ways companies can raise capital in the capital markets.
Companies like to issue debt because of the tax advantages. Interest payments are tax-
deductible. Debt also allows a company or business to retain ownership, unlike equity.
Additionally, in times of low interest rates, debt is abundant and easy to access.

Equity is more expensive than debt, especially when interest rates are low. However,
unlike debt, equity does not need to be paid back if earnings decline. On the other hand,
equity represents a claim on the future earnings of the company as a part owner.
 Debt-to-Equity Ratio as a Measure of Capital Structure
Both debt and equity can be found on the balance sheet. The assets listed on the balance
sheet are purchased with this debt and equity. Companies that use more debt than equity
to finance assets have a high leverage ratio and an aggressive capital structure. A
company that pays for assets with more equity than debt has a low leverage ratio and a
conservative capital structure. That said, a high leverage ratio and/or an aggressive capital
structure can also lead to higher growth rates, whereas a conservative capital structure can
lead to lower growth rates. It is the goal of company management to find the optimal mix
of debt and equity, also referred to as the optimal capital structure.

Analysts use the D/E ratio to compare capital structure. It is calculated by dividing debt
by equity. Savvy companies have learned to incorporate both debt and equity into their
corporate strategies. At times, however, companies may rely too heavily on external
funding, and debt in particular. Investors can monitor a firm's capital structure by tracking
the D/E ratio and comparing it against the company's peers.1

● A firm's capital structure is the composition or 'structure' of its liabilities. For

example, a firm that has $20 billion in equity and $80 billion in debt is said to be 20%
equity-financed and 80% debt-financed.
● The firm's ratio of debt to total financing, 80% in this example, is referred to as the
firm's leverage.[1] In reality, capital structure may be highly complex and include
dozens of sources of capital.
● Leverage (or gearing) ratios represent the proportion of a firm's capital that is
obtained through debt which may be either bank loans or bonds.
● In the event of bankruptcy, the seniority of the capital structure comes into play. A
typical company has the following seniority structure listed from most senior to least:
● Senior debt
● Subordinated (or junior) debt
● Preferred stock
● Common stock

.
● The Modigliani–Miller theorem, proposed by Franco Modigliani and Merton Miller in
1958, forms the basis for modern thinking on capital structure, though it is generally
viewed as a purely theoretical result since it disregards many important factors in the
capital structure process factors like fluctuations and uncertain situations that may
occur in the course of financing a firm.
● The theorem states that, in a perfect market, how a firm is financed is irrelevant to its
value. This result provides the base with which to examine real world reasons why
capital structure is relevant, that is, a company's value is affected by the capital
structure it employs. Some other reasons include bankruptcy costs, agency
costs, taxes, and information asymmetry. This analysis can then be extended to look at
whether there is in fact an optimal capital structure: the one which maximizes the
value of the firm.2

1.2 IMPORTANCE OF CAPITAL STRUCTURE

The importance or significance of Capital Structure:

1. Increase in value of the firm:

A sound capital structure of a company helps to increase the market price of shares and
securities which, in turn, lead to increase in the value of the firm.

2. Utilisation of available funds:

A good capital structure enables a business enterprise to utilise the available funds fully.
A properly designed capital structure ensures the determination of the financial
requirements of the firm and raise the funds in such proportions from various sources for
their best possible utilisation. A sound capital structure protects the business enterprise
from over-capitalisation and under-capitalisation.

3. Maximisation of return:
A sound capital structure enables management to increase the profits of a company in the
form of higher return to the equity shareholders i.e., increase in earnings per share. This
can be done by the mechanism of trading on equity i.e., it refers to increase in the
proportion of debt capital in the capital structure which is the cheapest source of capital.
If the rate of return on capital employed (i.e., shareholders’ fund + long- term
borrowings) exceeds the fixed rate of interest paid to debt-holders, the company is said to
be trading on equity.

4. Minimisation of cost of capital:

A sound capital structure of any business enterprise maximises shareholders’ wealth
through minimisation of the overall cost of capital. This can also be done by
incorporating long-term debt capital in the capital structure as the cost of debt capital is
lower than the cost of equity or preference share capital since the interest on debt is tax
deductible.

5. Solvency or liquidity position:

A sound capital structure never allows a business enterprise to go for too much raising of
debt capital because, at the time of poor earning, the solvency is disturbed for compulsory
payment of interest to .the debt-supplier.

6. Flexibility:
A sound capital structure provides a room for expansion or reduction of debt capital so
that, according to changing conditions, adjustment of capital can be made.

7. Undisturbed controlling:
A good capital structure does not allow the equity shareholders control on business to be
diluted.

8. Minimisation of financial risk:

If debt component increases in the capital structure of a company, the financial risk (i.e.,
payment of fixed interest charges and repayment of principal amount of debt in time) will
also increase. A sound capital structure protects a business enterprise from such financial
risk through a judicious mix of debt and equity in the capital structure.3
 1.3 FINANCIAL ANALYSIS
Financial analysis (also referred to as financial statement analysis or accounting
analysis or Analysis of finance) refers to an assessment of the viability, stability and
profitability of a business, sub-business or project.

It is performed by professionals who prepare reports using ratios that make use of
information taken from financial statements and other reports. These reports are usually
presented to top management as one of their bases in making business decisions.
Financial analysis may determine if a business will:

● Continue or discontinue its main operation or part of its business;

● Make or purchase certain materials in the manufacture of its product;
● Acquire or rent/lease certain machineries and equipment in the production of its goods;
● Issue stocks or negotiate for a bank loan to increase its working capital;
● Make decisions regarding investing or lending capital;
● Make other decisions that allow management to make an informed selection on various
alternatives in the conduct of its business.

GOALS
● Financial analysts often assess the following elements of a firm:

● 1. Profitability - its ability to earn income and sustain growth in both the short- and
long-term. A company's degree of profitability is usually based on the income
statement, which reports on the company's results of operations;

● 2. Solvency - its ability to pay its obligation to creditors and other third parties in the
long-term;
3. Liquidity - its ability to maintain positive cash flow, while satisfying immediate
obligations;

● Both 2 and 3 are based on the company's balance sheet, which indicates the financial
condition of a business as of a given point in time.
 ● 4. Stability - the firm's ability to remain in business in the long run, without having to
sustain significant losses in the conduct of its business. Assessing a company's
stability requires the use of both the income statement and the balance sheet, as well
as other financial and non-financial indicators. etc.

METHOD

Financial analysts often compare financial ratios (of solvency, profitability, growth, etc.):

● Past Performance - Across historical time periods for the same firm (the last 5 years for
example),
● Future Performance - Using historical figures and certain mathematical and statistical
techniques, including present and future values, This extrapolation method is the main
source of errors in financial analysis as past statistics can be poor predictors of future
prospects.
● Comparative Performance - Comparison between similar firms.

These ratios are calculated by dividing a (group of) account balance(s), taken from
the balance sheet and / or the income statement, by another, for example:

Net income / equity = return on equity (ROE)

Net income / total assets = return on assets (ROA)
Stock price / earnings per share = P/E ratio

Comparing financial ratios is merely one way of conducting financial analysis. Financial
ratios face several theoretical challenges:

● They say little about the firm's prospects in an absolute sense. Their insights
about relative performance require a reference point from other time periods
or similar firms.
● One ratio holds little meaning. As indicators, ratios can be logically
interpreted in at least two ways. One can partially overcome this problem by
combining several related ratios to paint a more comprehensive picture of the
firm's performance.
● Seasonal factors may prevent year-end values from being representative. A
ratio's values may be distorted as account balances change from the
beginning to the end of an accounting period. Use average values for such
accounts whenever possible.
● Financial ratios are no more objective than the accounting methods
employed. Changes in accounting policies or choices can yield drastically
different ratio values.
● Fundamental analysis.
Financial analysts can also use percentage analysis which involves reducing a series
of figures as a percentage of some base amount. For example, a group of items can
 be expressed as a percentage of net income. When proportionate changes in the same
figure over a given time period expressed as a percentage is known as horizontal
analysis. Vertical or common-size analysis, reduces all items on a statement to a
“common size” as a percentage of some base value which assists in comparability
with other companies of different sizes. As a result, all Income Statement items are
divided by Sales, and all Balance Sheet items are divided by Total Assets.

Another method is comparative analysis. This provides a better way to determine

trends. Comparative analysis presents the same information for two or more time
periods and is presented side-by-side to allow for easy analysis.

1.4 RATIO ANALYSIS

A Ratio is a numerical expression signifying the relationship of one figure to another
figure. It is calculated by dividing one figure by another figure; resulting in a quotient
which is called a ratio.
Ratio by itself is an absolute figure and will not convey any meaningful information
unless it is compared with other figure and inferences drawn.
Ratio analysis is the process of determining and interpreting mathematical relationships
based on financial statements. It is a technique of interpretation of financial statements
which helps to judge the financial strengths or weakness of the concern.
The comparison of financial ratio is done against the following:

(a) Standard or norms set under standard set of prescribed conditions.

(b) Historical figures indicating the performance in the past.
(c) Ratio indicating the performance of other companies in the same industry.

A ratio analysis is a quantitative analysis of information contained in a company’s

financial statements. Ratio analysis is used to evaluate various aspects of a company’s
operating and financial performance such as its efficiency, liquidity, profitability and
solvency.
When investors and analysts talk about fundamental or quantitative analysis, they are
usually referring to ratio analysis. Ratio analysis involves evaluating the performance and
financial health of a company by using data from the current and historical financial
statements. The data retrieved from the statements is used to - compare a company's
performance over time to assess whether the company is improving or deteriorating;
compare a company's financial standing with the industry average; or compare a company
to one or more other companies operating in its sector to see how the company stacks up.
Most investors are familiar with a few key ratios, particularly the ones that are relatively
easy to calculate. Some of these ratios include the current ratio, return on equity (ROE),
the debt-equity (D/E) ratio, the dividend payout ratio, and the price/earnings (P/E) ratio.
While there are numerous financial ratios, ratio analysis can be categorized into six main
groups:
1. Liquidity Ratios: liquidity ratios measure a company's ability to pay off its short-term
debts as they come due using the company's current or quick assets. Liquidity ratios
include current ratio, quick ratio, and working capital ratio.
2. Solvency Ratios: also called financial leverage ratios, solvency ratios compare a
company's debt levels with its assets, equity, and earnings to evaluate whether a company
can stay afloat in the long-term by paying its long-term debt and interest on the debt.
Examples of solvency ratios include debt-equity ratio, debt-assets ratio, and interest
coverage ratio.
3. Profitability Ratios: these ratios show how well a company can generate profits from
its operations. Profit margin, return on assets, return on equity, return on capital
employed, and gross margin ratio are examples of profitability ratios.
4. Efficiency Ratios: also called activity ratios, efficiency ratios evaluate how well a
company uses its assets and liabilities to generate sales and maximize profits. Key
efficiency ratios are the asset turnover ratio, inventory turnover, and days' sales in
inventory.
5. Coverage Ratios: these ratios measure a company's ability to make the interest
payments and other obligations associated with its debts. Times interest earned ratio and
debt-service coverage ratio are two examples of coverage ratios.
6. Market Prospect Ratios: e.g. dividend yield, P/E ratio, earnings per share, and dividend
payout ratio. These are the most commonly used ratios in fundamental analysis. Investors
use these ratios to determine what they may receive in earnings from their investments
and to predict what the trend of a stock will be in the future.4
IMPORATNCE OF RATIO ANALYSIS;

A ratio is a symptom comparable with the pulse rate, blood pressure or the temperature of
an individual. It is a visible indicator that the problem exists. Ratio analysis focus on the
specific relationship in the financial statements.
The following are some of the important uses of ratio analysis.
I. It helps to understand the efficiency and performance of the concern as a whole.
II. Its main purpose is to gain insights into the operating and financial problem
confronting the firm.
III. It helps to identify the trouble or potential trouble spot of the firm. This would
impel the management to investigate those areas more thoroughly.
IV. It helps to pinpoint the relationships that are not obvious from the financial
statements.
V. It helps to highlight the factor responsible for the present state of financial affairs.
VI. Ratio analysis helps the shareholder in evaluating the firm’s activities and policies
that affect profitability, liquidity and ultimately the market price of the shares.
RATIO TO BE STUDIED
 Debt eqity Capital
ratio Gearing Ratio

Interest
Solvency Ratio Coverage
Ratio

Fixed Assets
to Net Worth
Ratio

CHAPTER 02

2.1 COMPANY PROFILE

India is undergoing rapid development. This means that there are millions of people who
dream of better home, better infrastructure and a better life. This opens several avenues of
potentially limitless growth in the banking and finance sector. The availability of credit
facility has increased the wants of the people, they aspire for better standard of living and
Bajaj Finser Remi saw an opportunity here and decided to finance lifestyle products such
as apparels, eyewear etc. which middle-class people wanted to buy but couldn’t afford to
spend on them.
An innovative, competitive and thriving financial services industry in any country plays a
vital role in its smooth functioning and development. India's financial services sector has
posited a stable growth curve over the years driven by sound fundamentals, rising
personal incomes corporate restructuring, financial sector liberalization and the growth of
a consumer-oriented, credit-oriented culture. This has led to the increasing demand for
financial products, including EMI financing, consumer loans (especially for cars and
homes), as well as for insurance and pension products. The soaring demand for financial
services offers promising investment prospects.

BAJAJ Finserv was formed in April 2007 as a result of its demerger from BAJAJ Auto
Limited to act as a pure play financial services business. The process of demerger was
completed in Feb 2008.

BAJAJ Finserv Limited is the holding company for the financial services businesses of
the BAJAJ Group. Its insurance joint ventures with Allianz SE, Germany namely BAJAJ
Allianz Life Insurance Company Limited and BAJAJ Allianz General Insurance
Company Limited are engaged in life and general insurance business respectively. Its
subsidiary BAJAJ Finance Limited is a Non-Banking Finance Company engaged in
consumer finance, SME finance and commercial lending. BAJAJ Financial Solutions
Limited, a wholly owned subsidiary of BAJAJ Finserv Limited is engaged in wealth
advisory business.

Key milestones

● Launch of EMI card pilot : May 2011

● 1 Lac Transactions Milestone : June 2011

● 1Mn Cards Milestone : November 2012

 ● 5 lac transactions milestone : October 2013

● 1.5Mn Cards milestone : November 2014

● 2.1Mn Cards delivered Milestone : June 2015

● 2.6Mn cards delivered milestone : Apr 2016

Products Covered

0% interest Consumer Durables Finance is available on a wide range of

products and in over 80 cities across India. Hereunder is an indicative list
of products covered.

➢ Apparels
➢ Footwear
➢ Eyewear
➢ Kitchen Appliances
➢ Cooking Range products
➢ Air purifiers / Water Purifiers / R.O.
➢ Washing machine
➢ Television
➢ Microwave oven
Present in the top 79 cities of the country, we are now the largest Consumer Durables
Financier in India. We financed over 10% of all consumer electronics sold in the country
in the last year. Last year, we acquired more than 1.45 million new customers, through
our over 2,500 points of sale across the country.
Our existing customers can enjoy special benefits of their relationship with the EMI card.
With EMI card, any of our existing customers can go and buy their next consumer
durable and Retail product from our partner outlets with the simple swipe of the EMI
card. There is no need for any additional document.
GROWING POTENTIAL IN THE INDUSTRY

Demand for banking services is growing significantly, albeit in a country where less than
half of households have a bank account. It is in the retail sector that the surge in demand
is most marked. Housing loans grew by more than 50% and loans to the retail commercial
sector rose by more than 100%. The NBFCs are growing at a fast pace and gained market
share in the origination of rental credit and such a loan is growing at a rapid compound
annual growth rate of about 25% over last four years as compare to 17% for overall retail
credit. NBFCs have registered a robust growth i.e. a CAGR of 19% over few year,
consisting of 13% of total credit and estimated to reach nearly 18% by 2018-19. Indian
consumer is increasingly adopting Digital as a way of life. India is currently the second
largest smartphone market with user base 220 million and is expected to cross 300 million
user by 2017 so, most consumer are adopting digital payment and Debit card to complete
their payment. RBI Financial stability report says that NBFCs loan expanded 16.6% in
the year, twice as fast as the 8.8% credit growth across the banking sector and aggregate
balance sheet of NBFCs sector expanded 15.5% in fiscal year 2016 compared with 15.7%
with the previous years. The gross NPA ratio for the NBFCs sector declined to 4.6% of
total advances in March 2016 from 5.1% in September 2015, according to FSR (Financial
Stability Report).

NON-BANKING FINANCIAL COMPANIES

Non-banking financial companies (NBFCs) are fast emerging as an important segment of

the Indian financial system. It is an heterogeneous group of institutions (other than
commercial and co-operative banks) performing financial intermediation in a variety of
ways, like accepting deposits, making loans and advances, leasing, hire purchase, etc.
They raise funds from the public, directly or indirectly, and lend them to ultimate
 spenders. They advance loans to the various wholesale and retail traders, small-scale
industries and self-employed persons.
NBFC are present in all competitive fields such as, vehicle financing, housing loans,
leasing, hire purchase and personal loans financing etc. NBFC's are not required to
maintain cash reserve ratio (CRR) and statutory liquid ratio (SLR). Priority sector lending
norm of 40% (of total advances) is not applicable to them. While this is at their
advantage, they do not have access to low cost demand deposits. As a result their cost of
funds is always high, resulting in thinner interest spread. But currently with surplus
liquidity in the system, the cost of funds for NBFC's has substantially eased thus
improving their margins. Gradually, they are being recognized as complementary to the
banking sector due to their customer-oriented services; simplified procedures; attractive
rates of return on deposits; flexibility and timeliness in meeting the credit needs of
specified sectors; etc.
On regulatory front, NBFCs have been classified into 3 categories:
● Those accepting public deposits
● Those not accepting public deposits but engaged in financial business

2.2 HISTORY

2009

-Bajaj Financial Solution, a fully-owned subsidiary of Bajaj Finserv, has appointed Mr Arpit
Agarwal as CEO while earlier, Mr Agarwal was the Managing Director and Group Chief
Executive Officer at Dawnay Day AV.
2010

-Bajaj Finserv - Bajaj Finserv (BF) announces new brand identity and new busenesses.

-Bajaj finserv – recommended a dividend of Re. 1 per share(20%)

2011

-Bajaj Finserv- recommended a dividend of Rs. 1.25 per share(25%)

2012

-Launch of 0% interest Lifestyle Finance.

-Bajaj Finserv Lending, Extended Warranty will provide additional 1 year coverage for
products after the expiry of the manufacturer Warranty period.

-Flexisaver launches another innovative product for Small and Medium Enterprise customers.

-Bajaj Finserv Lending launches online personal loan service

-Tie up with CPP India for card protection services

-Bajaj Finserv Ltd Issues Rights in the Ratio of 1:10

2013
-Bajaj has recommend a dividend of Rs. 1.50 per share.

2014
-Bajaj has recommended a dividend of Rs. 1.75 per share.

2015
-Bajaj Finserv Ltd – Tata power solar partners with Bajaj Finserv to make solar more
accessible

-Bajaj Finserv Ltd – Proud to be ranked amongst the top 25 workplaces in Asia by
GPTW(Grate Place To Work)

2.3 BOARD OF DIRECTORS

Rahul Bajaj
(Chairman)
Rahul Bajaj, (born on 10 June 1938), is a Non-Executive Chairman of our Company. He
is recognized as one of the most successful business leaders of India. He has been
conferred Honorary Doctorates by 7 Universities including IIT Roorkee.

Nanoo Gobindram Pamnani

Vice Chairman
Nanoo Gobindram Pamnani (born February 26, 1945) is an Economics
(Honours) graduate from Bombay University and also holds a Bachelor of
Science (Economics) degree from London School of Economics (major in
Economics and Econometrics).
Sanjiv Bajaj
Managing Director

Sanjiv Bajaj (born November 2, 1969) graduated with distinction in

Mechanical Engineering from the University of Pune. He then completed his
Masters in Manufacturing Systems Engineering from the University of
Warwick, UK and subsequently went on to complete his MBA from Harvard
Business School.
D.J. Balaji Rao
Director
D. J. Balaji Rao (born December 15, 1939) is a Mechanical Engineer from
the University of Madras and holds a Postgraduate Diploma in Industrial
Engineering from Bombay University. He attended the Advanced
Management Programme at the European Institute of Business
Administration (INSEAD) at Fountainbleu, France, in 1990.
Madhur Bajaj
Director

Madhur Bajaj (born August 19, 1952) graduated in Commerce from

Sydenham College, Bombay, in 1973. He also holds a Master’s degree in
Business Administration from the International Institute of Management
Development (IIMD), Lausanne, Switzerland.
Rajiv Bajaj
Director
Rajiv Bajaj graduated, with distinction, in Mechanical Engineering, from the
University of Pune in 1988. He then went on to complete his Masters in
Manufacturing Systems Engineering, again with distinction, from the
University of Warwick in 1990.
Dr Gita Piramal
Independent Director
Dr. Gita Piramal (born September 4, 1954) is an Entrepreneur and
Businesswoman, author and journalist, with a PhD. in business history from
Bombay University.
Dr. Naushad Forbes
Director
Dr. Naushad Forbes (born on 13 May 1960) is the Co - Chairman of Forbes
Marshall, India's leading Steam Engineering and Control Instrumentation
firm. He chairs the Steam Engineering Companies within the group.5
 2.4 FUTURE PROSPECTUS

VISION:

1. To attain world class Excellency by demonstrating value added products to

customers.
2. To attain brand value by learning, innovation, perfection and transparency.
3. To ensure proactively, to create the future through innovation.
4. To set new standards and reach near to perfection.
5. To convey clear conviction and characterize themselves.

MISSION:

1. Focus on value based lending.

2. Fostering team work and enhancing the capability of team.
3. Continual Improvement.
4. Total elimination of fraud practices.
5. Ensuring easy and quick accessibility to customers.

BAJAJ Finserv has a vision to become a full-fledged financial services company and be
the financial partner to the Indian consumer and help him across his financial needs,
whether for finance, for investment management, for protection or for post-retirement
support, throughout his lifecycle.

BAJAJ Finserv is a consumer focused company with emphasis on profitable growth and
operational efficiency to deliver best results to all its stakeholders.

Consumer lifestyle Finance:

● “Consumer Lifestyle finance means to provide the finance on the consumer durable
products like, apparels, footwear, eyewear, small electronic appliance, utensils and
other household items it is known as consumer lifestyle finance”
● The consumer lifestyle finance provide the 0% interest on lifestyle product to the
consumer, this gives customers another compelling reason to opt for 0% interest
Consumer Lifestyle Finance for their lifestyle purchases. Consumer lifestyle finance
schemes are generally available at the dealer location (point of sale) or the showroom.
The beneficiaries are not just customers – lenders, manufacturers, and retailers too
benefit. Manufacturers gain from the resultant boost to sales and increased consumer
preference towards high-margin products. Financing schemes enable customers,
especially those with lower income levels, to use future income streams to buy
consumer products upfront and pay in installments over a period.
● The most popular finance scheme prevalent in the market currently is the 3 months
scheme, where there is 0 down payment scheme to the consumer and they can pay the
amount in next 3 months. The interest and processing charges are 0. Consumer
lifestyle financing appears robust, continued support from manufacturers (who are
effectively bearing the interest costs currently) would be critical to sustain high
growth.

EMI Card:
● BAJAJ FINSERV Lending launched an innovative product for its existing Consumer
Lifestyle Finance customers.
● Through the EMI card, an existing customer can buy any consumer durable by simply
swiping the EMI card across our dealer partner outlets, without the need for any
repeated documentation.
● This is another industry first, leveraging the technology investments the company has
made and is a proof point of our commitment to investing in growing our relationship
with our existing customers.
Consumer Finance:
● “The division of retail banking that deals with lending money to consumers. This
includes a wide variety of loans, including credit cards, mortgage loans, and auto
loans, and can also be used to refer to loans taken out at either the prime rate or the
subprime rate.”
● The consumer finance is a win-win system in which everyone wins. For the
consumers it is an opportunity to upgrade standard of living here and now instead of
waiting for years of savings to accumulate. For manufacturer, consumer finance
stimulates demand and brings down inventories. For dealers it is one type of sales
booting. For finance company it is profit generation.

Area of operation:

● Consumer Durable Finance

● Two and Three Wheeler Finance
● Lifestyle product finance
● Vendor finance
● Construction Equipment Finance
● Doctor loan
CHAPTER 03

3.1 Research Methodology

3.1.1 RESEARCH
Research comprises "creative and systematic work undertaken to increase the stock
of knowledge, including knowledge of humans, culture and society, and the use of this
stock of knowledge to devise new applications." It is used to establish or confirm facts,
reaffirm the results of previous work, solve new or existing problems, support theorems,
or develop new theories.

3.1.2 METHODOLOGY

Methodology is the systematic, theoretical analysis of the methods applied to a field of study.
It comprises the theoretical analysis of the body of methods and principles associated with a
branch of knowledge. Typically, it encompasses concepts such as paradigm, theoretical
model, phases and quantitative or qualitative techniques.

3.2 REASON OF STUDY

1) To study the financial position and status of the company.

2) To take out different prospects related to capital structure.
3) To seek knowledge related to financial statement analysis.
4) To give out finding and a short SWOT Analysis related to capital structure.
3.3 Objective of study

The study is emphasises on checking the financial strength and weakness related to
following sub objectives.

● To study the various component of capital structure and the overall composition.
● To gain more knowledge regarding analysing the financial statement of the company.
● To take out finding and highlights in regard of capital structure.

3.4 DATA SOURCE

A) The study is based on the secondary data available from the company through
different source.
B) The Financial statement are extracted from the annual reports provided by the
company for

3.5 LIMITATION

1) Lack of Availability of data

2) Time constrains
3) Lesser knowledge in Financial matter
4) Lesser chances to gather primary data
5) Inaccuracy in numerical calculation.
CHAPTER 04

4.1 DEBT-EQUITY RATIO

Debt/Equity (D/E) Ratio, calculated by dividing a company’s total liabilities by its

stockholders' equity, is a debt ratio used to measure a company's financial leverage. The
D/E ratio indicates how much debt a company is using to finance its assets relative to the
value of shareholders’ equity.
● The formula for calculating D/E ratios is:
● The debt/equity ratio is also referred to as a risk or gearing ratio.6
The debt-to-equity ratio (D/E) is a financial ratio indicating the relative proportion
of shareholders' equity and debt used to finance a company's assets.
The Ideal Ratio of Debt Equity is 1:1.

Debt/Equity Ratio= DEBT/EQUITY

DEBT EQUITY

YEAR RATIO (in times)

(in Cr.) (in CR.)

2016 17.34 2560.3 0.0068

2017 19.35 2696 0.0072

2018 19 2766 0.0069

 3000

2500

2000

1500 debt
equity
ratio(in times)
1000

500

0
2016
2017
2018

INTERPRETATION

The debt equity ratio is an indicator of the design of the capital structure of any
company. It is calculated to measure the extent to which debt financing has been
used in a business. Bajaj finserv is a financial service provider and thus may
follow retrends of finance industry. It can be seen that the debt equity ratio in
the first year was 0.0054 which increased to 0.0069 times in year 2017.
4.2 CAPITAL GEARING RATIO

The term “capital gearing” is used to describe the relationship between equity share
capital including reserves and surplus to preference share capital and other fixed interest
bearing loans.
Capital gearing ratio is a useful tool to analyse the capital structure of a company and is
computed by dividing the common stockholders’ equity by fixed interest or dividend
bearing funds.
Capital Gearing Ratio
= Equity share capital+ Reserves and surplus / Preference share capital
+ Long term debt fixed interest
OR

Capital Gearing Ratio = Common Stockholders’ Equity / Fixed Interest

bearing funds

The gearing ratio between 25% to 50% is typically considered optimal or Ideal Ratio.

Total
Year Equity Reserve equity Prefernce Long- Total Ratio
share and shares and share term
capital surplus reserves capital debt
2016 79.56 2480.73 2560.29 0 17.34 17.34 147.65

2017 79.57 2616.41 2695.98 0 19.35 19.35 139.33

2018 79.57 2686.45 2766.02 0 19 19 145.58

3000

2500

Equity share capital

2000
Reserve and surplus
equity shares and reserves
1500
Prefernce share capital
Long-term debt
1000
total
ratio
500

0
2016 2017 2018

INTERPRETATION
Capital gearing ratio helps to explain the relationship of net worth with respect to
prefence share and long term debt. It can be seen that company is a low geared in nature
but further they are trying to improve from 2013 to 2017 as in 2013 the ratio is 186.48
shifting to 145.58. the net worth of the company is highest in 2017 i.e. 2766 and lowest in
2013 i.e. 2407. So, it can also be said that there is regular increase in the net worth which
shows the growth of the company.
4.3 SOLVENCY RATIO

Solvency ratio is one of the various ratios used to measure the ability of a company to
meet its long term debts. Moreover, the solvency ratio quantifies the size of a company’s
after tax income, not counting non-cash depreciation expenses, as contrasted to the total
debt obligations of the firm. Also, it provides an assessment of the likelihood of a
company to continue congregating its debt obligations.

Solvency ratios are primarily used to measure a company's ability to meet its long-term
obligations. ... By interpreting a solvency ratio, an analyst or investor can gain insight
into how likely a company will be to continue meeting its debt obligations. A stronger or
higher ratio indicates financial strength.
The solvency ratio of greater then 20% is considered fianacially or Ideal Ratio.

The formula used for computing the solvency ratio is:

Solvency ratio = (After Tax Net Profit + Depreciation) / Total liabilities

Profit/Loss For The Total current

Year
Period (After Tax Net Profit liabilities
DEPRECIATION + Depreciation) RATIO

61.03
2014 50.84 1.28 52.12 0.85
58.26
2015 83.39 1.3 84.69 1.45
62.38
2016 125.93 2.54 128.47 2.06

31.94
2017 163.13 1.38 164.51 5.15
29.11
2018 70.02 1.46 71.48 2.46
 SOLVENCY RATIO
6.00

5.15

5.00

4.00
RATIO

3.00
2.46

2.06
2.00
1.45

0.85
1.00

0.00
2012.5 2013 2013.5 2014 2014.5 2015 2015.5 2016 2016.5 2017 2017.5
YEAR RATIO

INTERPRETAION

The Ratio indicates the relationship between net profit and the total current liabilities. It can
be seen that the solvency ratio is highest in the forth year i.e. 5.15. It can also be said that
there is a lot of changes in the net profit from 2014 to 2018 as in 2014 and 2015, the profit for
the company is quite good, which help them to pay their further debts.
4.4 FUNDED DEBT TO TOTAL CAPITALISATION RATIO

The total debt-to-capitalization ratio is a tool that measures the total amount of
outstanding company debt as a percentage of the firm’s total capitalization. The ratio is an
indicator of the company's leverage, which is defined as using debt to purchase assets.
Companies need to manage debt carefully because of the cash flow needed to make
principal and interest payments.

Every business uses assets to generate sales and profits, and capitalization refers to the
amount of money raised to purchase assets. A business can raise money by issuing debt to
creditors or by selling stock to shareholders. The amount of capital raised is reported in
the long-term debt and stockholders' equity accounts in the balance sheet.

Calculated as:

Year DEBT
TOTAL CAPITALISATION RATIO

12.91
2014 2420.4 0.0053

15.78
2015 2478.8 0.0064

17.34
2016 2577.6 0.0067

19.35
2017 2715.3 0.0071

19
2018 2785 0.0068
 FUNDED DEBT - TOTAL CAPITALISATION RATIO
0.008

0.007

0.006

0.005
RATIO

0.004
RATIO
0.003

0.002

0.001

0
2013 2014 2015 2016 2017
YEAR

INTERPRETATION

The ratio establishes a link between the long-term funds raised from outsiders and total
long-term funds available in the business. As the ratio is highest in fourth year i.e. 0.0071
mean as compared to other years company owned more debt in fourth year. It can also
see that the in this year the company is more dependent on outsiders funds. It was in the
lowest in 2014 i.e. 0.0053 and there is inclined upto 0.0068 but again there comes the
declining stage.
4.5 FIXED ASSETS TO NET WORTH RATIO
The ratio establishes the relationship between fixed assets and shareholder’s funds, i.e.
share capital plus reserve, surpluses and retained earnings.
Measure of the solvency of a firm, this ratio indicates the extent to which the owners’
cash is frozen in the form of brick and mortar and machinery, and the extent to which
funds are available for the firm’s operations. A ratio higher then 0.75 indicates that the
firm is vulnerable to unexpected events and changes in the business climate and 0.75 is
the Ideal Ratio.

The ratio can be calculated as follow:-

Fixed Assets to Net worth ratio = Fixed Assets (after depreciation) /

shareholder’s fund

Total Shareholder’s
Fixed assets Ratio
Funds
Year
2014 69.9 2407.51 0.029

2015 70.91 2463.05 0.029

2016 75.87 2560.29 0.030

2017 76.12 2695.98 0.028

2018 75.14 2766.02 0.027

 FIXED ASSET RATIO

0.030

0.029 0.029
RATIO

0.028

0.027

2013 2014 2015 2016 2017

YEAR

ratio

INTERPRETATION

The ratio of fixed assets to net worth indicated the extent to which shareholder’s funds are
sunk into the fixed assets. It can be seen that in the third year the ratio is highest i.e. 0.030 as
compared to other years. It can also be seen that on an average of five years the ratio is
0.0286. The fixed asset is highest in 2015 which means company is capable of buying their
own assets. The fixed assets of the company is always in inclining position which means
company is always purchasing fixed assets from 2014 to 2018 (i.e. from 60.9 to 75.15)
4.6 INTEREST COVERAGE RATIO
The interest coverage ratio is a debt ratio and profitability ratio used to determine how
easily a company can pay interest on its outstanding debt. The interest coverage ratio may
be calculated by dividing a company's earnings before interest and taxes (EBIT) during a
given period by the company's interest payments due within the same period.

Interest coverage ratio is also called “times interest earned.”7

The Ratio below 1.5 is the Ideal Ratio.

The method for calculating interest coverage ratio may be represented with the following
formula:

Year Profit/Loss Before Tax

Interest expenses RATIO

2014 79.16 0 0

2015 105.51 0 0

2016 158.1 0 0

2017 194.81 0 0

2018 104 0 0
 1
0.9 INTEREST COVERAGE RATIO
0.8
0.7
0.6
RATIO

0.5
0.4
0.3
RATIO
0.2
0.1
0
2013 2014 2015 2016 2017
YEAR

INTERPRETATION

Interest coverage ratio indicates the number of times interest is covered by the profit
available to pay the interest charges. As it can be shown in the graph bajaj finserv is not
having any burdern of interest in all the five years. The Ratio below 1.5 is the Ideal Ratio.
 Findings

The overall trend of 3 years shows that the company was highly dependent
on equity as compared to outsiders funds which indicates that company is
conservative and low geared.
➢ Bajaj finserv is the company which is able to finance its fixed assets on
their own.
➢ Bajaj finserv don’t have to depend on outsiders to finance the fixed
assets.
➢ Bajaj finserv has no burden of interest thus, it helps the company to don’t
even think to pay the outsiders burden.
➢ Bajaj finserv is a company which doesn’t pay any interest which means
the long term creditors is least interested in the company
➢ The company is considered to be more satisfactory or stable because of
the long term solvency position of the firm.
➢ Bajaj finserv is a company which is low geared in nature which means
company future earning is certain.
➢ As company is trying to move towards maintain gearing stage which
helps them to maintain a steady rate of dividend.
➢ Generally speaking a low debt as compared to shareholder’s fund is
considered as favourable from the long term creditors point of view
because a high proportion of owners fund provides a larger margin of
safety for them.
 CONCLUSION

It was a worthwhile experience working at the bajaj finserv

The friendly welcoming staff and the space they have created for a trainee/intern allowed
me ample opportunity to learn and know myself as an employee. This experience brought
out my strength and also the areas I needed to improvise. It added more confidence to my
professional approach, built a stronger positive attitude and taught me how to work in an
organisation.

Through this project report we get to learn that how company builds its capital structure
through using various techniques. Through all the years of balance sheet we get to know
how reliable company is, companies works for profit motive finance helps them to decide
which is the best place to invest money so that return are expected and earned in future

The concept of the optimal portfolio holds that rational investors will make decisions
which maximize returns at a given and comfortable level of risk
The entire month of the internship was a learning experience. A lots of ups and downs
came in the path of project completion but the end results were very promising. Company
seems to be doing quite well and its customers base seems satisfied. It has a lot of
potential in sector only if it is able to tap the untapped market an0d do more market
penetration.

This can be brought about by promoting its products and services and making people
more aware of the benefits of. Also it can have some flexibility in its procedure so that the
consumer feel more at home with the company the company and the process of
completing the file will be easier if the sales executive and the managers corporate each
other in their work. I came to know about the work culture in bajaj finserve through this
project. There was too many learning like how you manage your employees and manage
them and help them is working.
 BIBLIOGRAPHY

BOOKS REFERED
● Fundamentals Of Financial Management (by Vyuptakesh Sharan)
● Analysis of Financial Statement (by Sonali S. Shrotri & Prof. Ganesh Ramesh
Teltumbade)

SITES VISITED
➢ https://www.investopedia.com/terms/c/capitalstructure.asp.
➢ https://en.wikipedia.org/wiki/Capital_structure.
➢ https://en.wikipedia.org/wiki/Financial_analysis
➢ https://www.investopedia.com/terms/r/ratioanalysis.asp
➢ http://www.yourarticlelibrary.com/financial-management/capital-structure/capital-
structure-meaning-concept-importance-and-factors-accounting/65150
➢ https://www.investopedia.com/terms/d/debtequityratio.asp
➢ https://www.investopedia.com/terms/i/interestcoverageratio.asp
➢ https://www.readyratios.com/reference/analysis/solvency_ratio.html
➢ https://www.bajajfinserv.in/about-us-board-of-directors
➢ http://www.moneycontrol.com/company-facts/bajajfinserv/history/BF04#BF04
 ANNEXURE

Profit & Loss account of Bajaj Finserv

Mar 18 Mar-17 Mar-16 Mar-15 Mar-14

12 mths 12 mths 12 mths 12 mths 12 mths

INCOME

Revenue From Operations [Gross] 153.9 242.32 200.24 144.49 141.47

Revenue From Operations [Net] 153.9 242.32 200.24 144.49 141.47

Total Operating Revenues 153.9 242.32 200.24 144.49 141.47

Other Income 11.1 9.13 11.42 12.81 10.78

Total Revenue 165 251.45 211.66 157.3 152.25

EXPENSES

Employee Benefit Expenses 20.35 17.05 16.63 15.19 12.95

Depreciation And Amortisation Expenses 1.46 1.38 2.54 1.3 1.28

Other Expenses 39.19 38.21 34.39 35.3 31.86

Total Expenses 61 56.64 53.56 51.79 46.09

Profit/Loss Before Exceptional, ExtraOrdinary 104 194.81 158.1 105.51 106.16

Items And Tax

Exceptional Items 0 0 0 0 -27

Profit/Loss Before Tax 104 194.81 158.1 105.51 79.16

Tax Expenses-Continued Operations

Current Tax 35.23 32.3 30.73 20.36 27.45

Deferred Tax -1.25 -0.62 1.44 1.64 0.87

Tax For Earlier Years 0 0 0 0.12 0

Total Tax Expenses 33.98 31.68 32.17 22.12 28.32

Profit/Loss After Tax And Before ExtraOrdinary

70.02 163.13 125.93 83.39 50.84
Items

Profit/Loss From Continuing Operations 70.02 163.13 125.93 83.39 50.84

Profit/Loss For The Period 70.02 163.13 125.93 83.39 50.84

 BALANCE SHEET OF BAJAJ FINSERV

Balance Sheet of Bajaj Finserv ------------------- in Rs. Cr. -------------------

Mar 18 Mar 17 Mar 16

EQUITIES AND LIABILITIES

SHAREHOLDER'S FUNDS

Equity Share Capital 79.57 79.57 79.56 79.56

Total Share Capital 79.57 79.57 79.56 79.56

Revaluation Reserves 12.03 6.30 3.70 0.00

16,058.7
Reserves and Surplus 13,512.63 11,005.79 7,895.98
3

16,070.7
Total Reserves and Surplus 13,518.93 11,009.49 7,895.98
6

16,150.3
Total Shareholders Funds 13,598.50 11,089.05 7,975.54
3

Minority Interest 7,200.83 5,876.68 4,225.54 2,898.92

NON-CURRENT LIABILITIES

39,384.6
Long Term Borrowings 30,523.60 17,931.01 7,360.58
2

Deferred Tax Liabilities [Net] 9.49 10.74 11.36 8.82

22,102.9
Other Long Term Liabilities 21,040.60 16,697.16 9,794.29
0

Long Term Provisions 375.48 266.22 174.37 83.91

Total Non-Current 61,872.4

51,841.16 34,813.90 17,247.60
Liabilities 9

CURRENT LIABILITIES
Short Term Borrowings 8,897.42 5,538.49 4,313.90 2,080.14

Trade Payables 7,670.32 5,950.09 5,360.82 4,562.96

21,832.0
Other Current Liabilities 17,380.27 25,512.80 28,542.59
3

Short Term Provisions 4,993.85 3,259.84 2,952.41 2,071.13

43,393.6
Total Current Liabilities 32,128.69 38,139.93 37,256.82
2

128,617.
Total Capital And Liabilities 103,445.03 88,268.42 65,378.88
27

ASSETS
NON-CURRENT ASSETS

Tangible Assets 875.55 798.59 793.64 754.96

Intangible Assets 80.51 45.92 38.00 23.88

Capital Work-In-Progress 3.54 10.76 2.76 1.79

Fixed Assets 959.60 855.27 834.40 780.63

Non-Current Investments 9,397.07 14,732.16 13,261.53 9,249.25

Deferred Tax Assets [Net] 433.39 343.44 257.55 131.22

Long Term Loans And

413.29 422.52 329.77 214.70
Advances

59,051.0
Other Non-Current Assets 42,891.68 34,267.56 21,877.31
6
 70,943.7
Total Non-Current Assets 59,674.10 49,379.84 32,682.14
5

CURRENT ASSETS

Current Investments 4,164.96 2,167.82 1,737.87 686.65

Trade Receivables 1,253.12 677.86 541.45 353.02

Cash And Cash Equivalents 1,529.39 2,297.52 1,399.58 1,603.14

Short Term Loans And

678.21 615.14 439.91 371.05
Advances

50,047.8
Other Current Assets 38,012.59 34,769.77 29,682.88
4

57,673.5
Total Current Assets 43,770.93 38,888.58 32,696.74
2

128,617.
Total Assets 103,445.03 88,268.42 65,378.88
27

OTHER ADDITIONAL INFORMATION

CONTINGENT LIABILITIES,
COMMITMENTS

Contingent Liabilities 1,671.24 381.19 367.96 117.62

BONUS DETAILS
NON-CURRENT INVESTMENTS

Non-Current Investments
256.46 5,673.68 13,261.53 9,249.25
Unquoted Book Value

CURRENT INVESTMENTS

Current Investments
376.17 2,068.36 1,737.87 686.65
Unquoted Book Value