CHAPTER – I

INTRODUCTION OF THE STUDY

1.1 Introduction

Fundamental analysis tries to identify the true value, or intrinsic value, of a financial
instrument. To do so, fundamental analysts have to follow economic indicators such
as economic news, interest rates, various financial ratios and future growth prospects
for an industry.

Fundamental analysis is also known as quantitative analysis, involves delving into a

company’s financial statements such as profit and loss account and balancesheet in
order to study various financial indicators such as revenues, earnings, liabilities,
expenses, and assets)

Fundamental analysis is very effective at forecasting economic conditions, but not

necessarily exact market prices. Studying GDP forecasts or employment reports can
give you a fairly clear picture of an economy's health and the forces at work behind it.
But you still need a method to translate that into specific trade entry and exit points.

The bridge between fundamental data and a specific trading strategy usually comes
from a trader model. These models use current and historical data to estimate future
prices and translate those into specific trades.

For a fundamental analyst, the market price of a stock tends to move towards its
'intrinsic value', which is the 'true value' of a company as calculated by its
fundamentals. If the market value does not match the true value of the company, there
is an investment opportunity.

Example of this is that if the current market price of a stock is lower than the intrinsic
price, the investor should purchase the stock because he expects the stock price to rise
and move towards its true value. Alternatively, if the current market price is above the
intrinsic price, the stock is considered overbought and the investor sells the stock
because he knows that the stock price will fall and move closer to its intrinsic value.
To determine the true price of the company's stock, the following factors need to be
considered.

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Fundamental analysis includes:

1. Economic analysis
2. Industry analysis
3. Company analysis

The intrinsic value of the shares is determined based upon these three analyses. It is
this value that is considered the true value of the share. If the intrinsic value is higher
than the market price, buying the share is recommended. If it is equal to market price,
it is recommended to hold the share; and if it is less than the market price, then one
should sell the shares.

Fundamental Analysis views an economy and its currency through economic

statistics. These statistics often depict a particular sector of an economy rather than
the economy as a whole. Because of this, different statistics may point in opposite
directions, one area of an economy may be growing while another falters, or the
importance of one industry declines as another rises.

Quantitative fundamentals are numeric, measurable characteristics about the

company. It’s easy to see how the biggest source of quantitative data is the
financial statements. Qualitative fundamentals are the less tangible factors
surrounding a business – things such as the quality of a company’s board members
and key executives, its brand-name recognition, patents or proprietary technology.

1.2 Statement Of Problem

Fundamental analysis provides the true value of the company but it is a long term
analysis where it needs lot of company information. Another problem is only experts
in shares can perform the analysis.

Every asset financial as well as real, has value. The key for successfully investing in
and managing these assets lies in understanding not only what the value is, but the
sources of the value. Any asset at can be valued but some assets are easier to value
than others, and the details of the valuation will vary from case to case. Thus, the
valuation of a share of a real estate property will require different information and
follow a different format from the valuation of a publicly traded stock. There is

2
undeniably uncertainty associated with valuation. Often the uncertainty comes from
the asset being valued, although the valuation model may add to that ascertained.

A postulate of sound investing is that an investor does not pay more for asset than it’s
worth. This statement may seem logical and obvious as financial assets are acquired
for the cash flows expected from owing them, which implies that the price that is paid
for any asset should reflect the cash flows it is expected to generate.

The problem in valuation is not that there are not enough models to value an asset; it
is that there are too many. Choosing the right model to use in valuation is as critical to
arriving at a reasonable value as understanding how to use the model. Analysts use a
wide variety of models from simple to the sophisticated.

1.3 Objectives Of The Study

 To understand the macroeconomic variables those will an impact on the company

progress

 To study the various trends, opportunities, challenges of the industry in which the
company operates.

 To understand the various policies of the company those have impact on the
financial performance of the company.

 To understand the various investment valuation models that can be used

 To select the appropriate model that suits the stock.

 Find the intrinsic value of the stock and compare with market value of the study.

 To recommend whether to buy, hold or sell the stock based on the analysis.

 Determining company’s ability to beat its competitor.

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1.4 Scope Of The Study

The study basically tries to identify the intrinsic value of the company by using the
published financial details of the company. The study is restricted to one particular
company in the sector. The study also includes testing the intrinsic value of the
company. To evaluate true value of shares and compare it with present market price to
decide whether a share is overvalued and undervalued. The study will give the
investors in detail analysis of the stock.

1.5 Research Methodology

Type Of Research:

Research design is the conceptual structure within which research is conducted.

It constitutes the blue print for the collection, measurement and analysis of data. The
type of research adopted for the study is descriptive research as the research does not
require any manipulation of variables and does not establish casual relationship
between events; it just simply describes the variables.

It is a systematic way to solve the research problem. It is a system of models,

procedures and techniques used to find the result of research problems.

Sources Of Data:

Primary Data

Those are the data that are obtained by a study specially designed to fulfill the
needs of the problem. Meeting the company professionals personally collected the
information necessary for the study.

Secondary Data

Data which are not originally collected but rather obtained from published or
unpublished sources as known as secondary data.In this research secondary data was

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collected through sources like internet, research report, magazines, and company
journals.

1.6 Limitations

 Fundamental Analysis require lot of data which is usually not available for
retails traders.
 Fundamental analysts attempt to study everything that can affect the share s
value, including macroeconomic factors (like the overall economy and
industry conditions) and company-specific factors (like financial condition and
management).
 Doesn’t provide trade signals
 cost of collecting data is too high
 Fundamental analysis is costly and available only after the stock is reacted in
the stock market
 The study was confined only to one particular sector.
 The study was more confined with secondary data.
 The study assumes no changes in the tax rates in the country.
 there is no direct causal connection between a stock's fundamental progress
and the behaviour of that company's stock

 Fundamental analysis may offer excellent insights, but it can be

extraordinarily time- consuming. Time-consuming models often produce
valuations that are contradictory to the current price

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1.7 Chapter Scheme

Chapter I – Introduction

This part of the study gives a picture about the introduction of the topic

Chapter Ii – Profile

This figure outs the type of organisation and its transactions

Chapter Iii – Review Of Literature

This part of study contains the view of old literature on the topic and the
research adopted

Chapter Iv – Data Analysis And Interpretation

In this chapter using the analyzed data we have tried to find the intrinsic value
of the company

Chapter V – Findings, Recommendations, Directions And Conclusion

In this chapter we will actually include all that we have analysed and what has
been found. Finally conclude checking whether the objective of the study has
been achieved or not

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 CHAPTER II

PROFILES

2.1 Industry Profile

A battery is an electrochemical device in which the free energy of a chemical

reaction is converted into the electrical energy. The chemical energy contained in the
active materials is converted into electrical energy by means of electrochemical
oxidation-reduction reactions.

How a Battery Works?

When you place the key in your car’s ignition and turn the ignition switch to
“ON” a single is sent to the car’s battery. Upon receiving this signal the car battery
takes energy that it has been strong in chemical form and releases it as electricity.
This electric power is used to crank the engine. The battery also releases energy to
power the car’s lights and others accessories.

It is the only device, which can store electrical energy in the form of chemical
energy, and hence it is called as a storage battery.

Sealed Maintenance Free (SMF) Batteries:

Sealed Maintenance Free (SMF) batteries technologies are leading the battery
industry in the recent year in automobile and industrial sector around the globe.

SMF batteries come under the rechargeable battery category so it can be use a
number of times in the life of a battery. SMF batteries are more economical than
nickel cadmium batteries. These batteries are more compact than the west type
batteries. It can be used at any position, these batteries are very popular for portable
power requirements and space constraint applications.

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Value Regulated Lead Acid (VRLA) Batteries:

VRLA batteries are leak proof, spill-proof and explosion-restraint and having
life duration of 15-20 years. These batteries withstand the environmental conditions
due to high technology, in built in the batteries. Each cell is housed in a power coated
steel tray making them convenient to transport and installation, so transit damages are
minimized in case of these batteries.

Sealed Maintenance Free (SMF) batteries and Value Regulated Lead Acid
(VRLA) batteries technology are leading the battery industry. In the recent yeas in
automobile and industrial battery sector around the globe VRLA batteries have
become the preferred choice in various applications such as uninterrupted power
supply, emergency lights, and security systems and weighing scales.

Classification of Batteries:

Batteries are broadly classified into two segments like,

 Automotive Batteries

 Industrial Batteries

Automotive Batteries:

Apart from mopeds all other automobiles including scooters need storage
battery. So automotive batteries are playing pre-dominant role in automobile sector by
influencing customers in the automobile market. Automobile batteries can be further
distinguished as the original equipment (OE) markets as low as 5-6%. OE segment
has the advantage of securing continuous orders and inquiries. This enables
manufacturers to streamline production facilities, plan production schedules and attain
certain level of operational efficiency.

The replacement market, on the other hand, is much larger. The replacement
market is characterized by the presence of large unorganized sector, which constitutes
around 55-60% of the total replacement market. This is possible due to low capital
entry barrier. These players have the advantage of inapplicability of excise duties.

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Industrial Batteries:

The industrial battery segment comprises of two main categories. One

comprises of the “Stationery Segment” and the second relating to “Motive Power and
Electric Vehicles”. The Motive Power and Electric Vehicle segment comprising of
“Telecom, Railways and Power Industries have registered a growth in excess of 20%
and this trend is likely to continue in the next 5 years.

The Industrial Segment is highly technological intensive and access to high

quality world-class technology is an important factor and is vital for brand reference.
The total demand for the industrial battery segment is met by indigenous production
with a small saves of about 10% by imports. The demand for industrial batteries has
grown slowly and steadily.

All for as industrial batteries are concerned the evolving consciousness among
Corporate and Government departments regarding environment factors will result in a
shift towards pollution-free technology. Here has been a preferential shift in this
segment from the Conventional Lead batteries to Sealed Maintenance-free batteries
(SMF). The bull of battery industry admits that the sales are fallen but at the same
time they are expecting larger orders especially from telecom industry, which gets
going. Due to strong customers like telecom, railways and electricity boards, the
industrial batteries are on prosperous scale.

Recycling Batteries:

Battery acid is recycled by neutralizing it into water of converting it to sodium

sulphate for laundry detergent, glass and textile manufacturing.

Cleaning the battery cases, meeting the plastic and reforming it into uniform
pellets recycle plastic. Lead, which makes up 50% of every battery, is method, poured
into slabs and purified. The following are the major manufacturers in battery industry
in India.

 Exide Industries

 Standard Batteries

 Amoco Batteries

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  Tudor India

 Amara Raja Batteries Ltd.

 Hyderabad Batteries Ltd.

2.2 Company’s Profile

Amara Raja Batteries Ltd is the largest manufacturer of Standby Valve

Regulated Lead Acid (VRLA) batteries in the Indian Ocean Rim comprising the area
ranging from Africa and the Middle East to South East Asia. They are in the business
of Industrial Battery, Automobile Battery and Power System. The manufacturing
facility is located at Tirupati in Andhra Pradesh. The company is the largest supplier
of stand-by power systems, altering to Indian utilities such as, Departments of
Telecommunication, Indian Railways, Power Generation Stations, MTNL, VSNL, ITI
and HTL. They are also having prestigious automotive clients including Ford, GM,
Daimler Chrysler, Ashok Leyland, TELCO, and Mahindra & Mahindra. Amara Raja
Batteries Ltd was incorporated in February 1985 as a private limited company.
The company was converted into public in the year 1990. In May 1992,
they designed and implemented the most advanced battery manufacturing facility in
India. In December 1997, they signed a joint venture agreement with the Johnson
Controls Inc, USA for the import of technology for the manufacture of Automotive
(SLI) batteries. In the year 2000, the company launched Amaron automotive batteries.
In the year 2002, they launched Quanta UPS, Amaron Hiway and Harvest batteries. In
the year 2004, they launched Amaron PRO, GO, and FRESH automotive batteries.
The company has increased the production capacity of VRLA Storage
Batteries during the financial year 2003-04 by 150000 No’s and with this expansion,
the total capacity has increased to 1275000 Nos. The company further increased the
production capacity by 500000 No’s during the year 2004-05, by 825000 No’s during
the year 2005-06. During the year 2006-07, the Company has successfully completed
the expansion of their 2V VRLA annual capacity from 240 million AH to 350 million
AH.
The Company also has enhanced their automotive (monobloc) battery
capacity from 2.4 million units per annum to 3.60 million units per annum. Also, the
company has announced aggressive capex plan contemplating an investment of Rs

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2016 million. During the year 2007-08, the company increased the capacity of
automotive battery plan from 3.6 million units to 4.9 million units which includes
additional capacity created in monobloc VRLA batteries. The company is investing an
amount of Rs 650 million to expand the large VRLA battery capacity from 450
million Ah to 900 million Ah and this new facility is expected to commence their
operation during the second half of the financial year 2008-09. In May 2007, the
company has launched a new retail store format 'Power zone' to cater the growing or
better technology and better service at affordable price in the rural markets. They are
offering a platter of products of global quality at local prices, right from automotive
batteries, tractor batteries and home UPS, from the House of Amara Raja. In May
2008, the company entered the two wheeler battery segment with the launch of
Amaron Pro Bike Rider 2-wheeler batteries powered by VRLA technology with 60
months warranty. The company has also approved an investment of Rs 520 million to
enhance the capacity of Industrial battery division.

Brief About The Promoters:

Dr. Ramachandra N. Galla, a Non-Resident Indian now settled in India is
the main promoter. He is a post graduate engineer with over 16 years’ experience in
power systems as an electrical engineer in Nuclear and conventional source power
generating stations across the USA. Mr. Galla went to USA after obtaining degrees
from S.V. University, Tirupati & Roorkee University. He holds an M.S. Degree in
system science from Michigan state university. After his return to India, he promoted
along with Andhra Pradesh Electronics Development Corporation (APEDC). A Rs. 2
crores unit – Amara Raja Power Systems Ltd. – for the manufacture of uninterrupted
power supply systems (UPS), Battery Chargers, D.C. power supplies & static
inverters. For the year ending 31st March, 1990 this unit achieved a sales turnover of
Rs. 192 lakhs and earned cash profit of Rs. 14 lakhs.

Amara Raja Group Of Companies:

 Amara Raja Batteries Limited (ARBL), Karakambadi, Tirupathi.

 Amara Raja Power Systems PVT.LTD (ARPSPL), Karakambadi, Tirupathi.

 Mangal Precision Products PVT LTD (MPPL), Karakambadi, Tirupathi.

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  Mangal Precision Products PVT LTD (MPPL), Petamitta, Chittoor.

 Amara Raja Electronics PVT. LTD (AREPL), Dighavamagham, Chittoor.

 Galla Foods LTD

Background And Inception Of The Company

Amara Raja Batteries Limited (ARBL) Company incorporated under the
company’s act, 1956 in 13th February 1985 and converted into public limited
company on 6th September 1990.
ARBL, an Amara raja-Johnson Controls Company is the India’s leading
automotive and industrial battery manufacturer. The company is the technology
leader and is one of the largest manufactures of lead acid batteries for both industrial
and automotive applications in the Indian storage industry with brands like amoron
and power zone in its kitty
ARBL is the first company in India to manufacture VRLA (value regulated
lead acid) Batteries. The main objective of the company is manufacturing of good
quality of SEALED MAINTENANCE FREE lead acid batteries (SMF). The company
was set up with Rs.1920 lakhs in 18 acres area near Karakambadi village, Renigunta
Mandal. The project site is notified Under “B” category.
The company has the clear-cut policy of direct selling without any
intermediate. So they have set up six branches and are operated by corporate
operations office located in Chennai. The company has virtual monopoly in higher
A.H (Amp Hour) rating market its product VRLA. It is also having the facility for
Industrial and Automotive Batteries.

Mr. Galla Rmachandra Naidu, chairman who is an NRI having engineering

background promoted AMARA RAJA BATTERIES LTD. in 1985 at Karakambadi
Village near Tirupathi. He also seeded MANGAL PRECISION PRODUCTS Ltd. in
1990 at Karakambadi Village near Chittoor and AMARA RAJA ELECTRONICS
Ltd. in 2000 at Diguvamagham village near Chittoor. Before embarking on this
venture he worked as senior project engineer with M/S Sergeant& Lundy, USA
(power consultants) for about 20 years. Prior to this, he worked as an Electrical
Engineer for US Steel Corporation for about 3 years.

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 In 1989, ARBL has entered into Industrial Battery market with Technical
alliance with GNB Batteries, USA to promote advanced Maintenance Free Valve
Regulated Lead Acid (MF-VRLA) batteries prior to setting its own facilities ARBL
Imported the product in semi-Knocked down condition. In September 1990, it was
converted into a public limited company and its IPO (Initial Public Offer) in January
1991 aggregating Rs.59.5Million. It was formed to manufacture Maintenance-free,
sealed lead acid batteries in which commercial production commenced from May
1992. Despite its initial technical support from GNB Batteries, during the financial
year 1998 ARBL ceded a 23.7% stake to Johnson Controls Inc. USA, at a premium of
Rs.75 per share to cement a financial and technical tie-up to foray into Automotive
Batteries.

Nature Of Business Carried

ARBL comprises of two major divisions viz,
1. Industrial Batteries Division (IBD)
2. Automotive Batteries Division (ABD)
3. Small Batteries Division (SBD)

Industrial battery division (IBD)

Amara raja has become the benchmark in the manufacture of industrial
batteries. India is one of the largest and fastest growing markets for industrial batteries
in the world and Amara raja is leading the front with an 80% Market share for stand
by VRLA batteries. It is having the facility for producing plastic components required
for industrial batteries.
Incorporation:
ARBL is the first company in India to manufacture VRLA batteries. The
company has setup of Rs. 1920 lakhs. Plants in 18 acres in karakambadi village, near
Tirupati.
ARBL was established in the year 1985 as private limited and then it has been
changed into public limited company with the advent of GNB industrial batteries
USA, for manufacturing sealed value regulated.

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Capacity
The actual installed capacity of IBD is over 4, 00,000 cells per annum and
utilization capacity is reached over 3, 50,000 cells per annum.

Automotive Battery Division (ABD)

ARBL inaugurated its new automotive plant at karakambadi near Tirupati. On
September 2001 this plant part of the most completely integrated battery
manufacturing facility in India with all critical components including plastics sourced
in house from existing facilities on site. This gives Amara raja is having complete
control own inventory and product quality in this project, Amara raja strategic
alliance partners Johnson Controls USA have closely worked with their Indian
counterparts to put together the latest advances in manufacturing technology and plant
engineering. It is also having the capacity for producing plastic components required
for automotive batteries.

Capacity
Amara Raja has a replacement Battery Brand Amaron hi-life. ARBL has a
capacity for manufacture of around 1,000,000 units at its facility at Tirupati with an
investment of US $ 10.00 million. A Greenfield project is planned at the same site
with an additional investment of US $6 million to augment capacity to 2 million
batteries. The Amaron hi-life battery is a product of the collaborative efforts of
engineers at Johnson Controls Inc. and Amara Raja. This Zero maintenance product
incorporates the latest technological advances in the field and is on par with batteries
manufactured and marketed in developed countries. A fully charged, factory-activated
battery provides extra high starting performance and power at any temperature.

VISION, MISSION AND QUALITY POLICY

Group Vision
By 2025,
We will be a Top 500 global group redefining businesses to deliver High Social
Impact, by anticipating future trends, building preferred brands and leveraging t
alent & technology.

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Group Mission
Mission, mantra, way of thinking, philosophy, what we live for… call it what
you want, you’ll find it below “To transform our spheres of influence and to enrich
the quality of life by building Institutions that provide better access to better
opportunities, goods and services to more people all time…”

Introduce Latest Generation Technologies:

 Adapt these technologies to suit the operating environment

 Develop and manufacture globally competitive, customer-focused products of
world-class quality.
 Responsibly introduce these products into relevant markets.
 Provide world-class customer support.

Group Quality Policy

Our aim is to achieve total customer satisfaction through the collective

commitment of our employees in design manufacture, integrate and market reliable
power supplies, batteries, allied products and services.

To accomplish above, we will focus on;

1. Establishing superior specifications for our products and processes,

2. Employing state of the art technologies and robust design principles.

3. Striving for continual improvements and in process and quality.

4. Implementing methods and technology to monitor quality levels.

5. .provide prompt sales services

We believe that the commitment of employees is primary for our quality

goals. We train motivate and involve employees at every level to achieve our aim.

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 CHAPTER III

LITERATURE SURVEY

3.1 Conceptual And Theoretical Review

Fundamental analysis is the examination of the underlying forces that affect the
well being of the economy, industry group and companies. As with most analysis, the
goal is to derive a forecast and profit from future price movements. At the company
level, fundamental analysis may involve examination of financial data, management,
business concept and competition. At the industrial level there might be an
examination of supply and demand forces for the products offered.

For the national economy, fundamental analysis might focus on economic data to
assess present and future growth of economy. To forecast future stock prices,
fundamental analysis combines economic, industry and company analysis to derive
stock’s current fair value and forecast future value.

If fair value is not equal to the current stock price, fundamental analysts believe that
the stock is either over or under valued and the market price will ultimately gravitate
towards fair value. Fundamentalists do not heed that advice of the random walkers
and believe that markets are weak form efficient. By believing that prices do not
accurately reflect all available information, fundamental analysts look to capitalize on
perceived price discrepancies.

Fundamental analysis focuses on cause and effect. Causes external the trading
markets that are likely to affect prices in the market. These factors may include
weather current inventory levels, government policies, economic indicators, trade
balances and even how traders are likely to react certain events.

Fundamental analysis maintains that markets may misprice a commodity in the short
run but that the correct price will eventually be reached. Profits can be made by
trading the mispriced commodity and then waiting for the market to recognize its
mistake and correct it.

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Fundamental analysis views an economy and its currency through economic statistics.
These statistics often depict a particular sector of an economy rather than the
economy as a whole. Because of these, different statistics may point in opposite
directions; one area of the economy may be growing while another falters, or the
importance of one industry declines as another rises.

Bottom-Up Approach to Fundamental Analysis:

With the bottom-up approach, investors focus directly on a company’s basics, or
fundamentals. Analysis such information as the company’s products, its competitive
position and financial status leads to an estimate of the company’s earnings potential
and ultimately, its value in the market.
Considering time and effort are required to produce the type of detailed financial
analysis needed to understand even relatively small companies. The emphasis in this
approach is on finding companies with good long –term growth prospects, and
making accurate earnings estimates. To organize this effort, bottom-up fundamental
research is often brokers into two categories, growth investing and value investing.

Top-Down Approach to Fundamental Analysis:

The top-down approach is the opposite of the bottom-up approach. Investors
begin with the economy and the overall market, considering such important factors as
interest rates and inflation. The next consider future industry prospects or sectors of
the economy that are likely to do particularly well. Finally, having decided that macro
factors are favourable to investing, and having determined which parts of the overall
economy are likely to perform well, individual companies are analyzed.

3.2 Research Review

Sabelle Martinez(2002), summarizes previous research on the links between

share prices, accounting earnings and fundamentals(i.e. financial variables)
identifies value-relevant fundamentals used by analysts and assesses their

17
usefulness by using principal components analysis on 1992-1996 data for 50
french industrial firms. Finds three important factors(profitability ratios,
returns/leverage and working capital/financial balance) which can be used in
conjunction with two macroeconomic variables(inflation and change in real gross
national product) to explain return variability.

Mehmet balcilar(2007), The authors analyse the relationship between the real
exchange rate and economic fundamentals-demand, supply and nominal stocks.
Fundamental stocks on the exchange rate is time dependent. Hence there is a loss
in information when using standard linear models that average out effects over
time. The response of the exchange rate to demand and supply shocks have
weakened over the 1994-2010 period.

David ginlay-robinson(2009), an overview of the relevance and value of

stakeholder analysis and provides a list of key factors for considering when
carrying this out. The importance of stakeholder analysis as a component in
change management with in business strategy is revealed.

Stefano biazzo(2010) (University of Padua, Italy), Managing processes with the

aim of improving them necessarily requires both analysis and critical evaluation
of organizational practice. This article takes up the theme of business process
analysis with the aim of highlighting and comparing alternative techniques and
approaches. An interpretative model of the fundamental differences between these
approaches is proposed. This study discusses both the limits and the possibilities
offered by each approach and concludes with a reflection on the problem of
integrating diverse analytical perspectives.

Kwee keong choong(2012), systematic review of the business, public and non-
profit sector literature in examining what constitutes the fundamentals of PMS,
and how these fundamentals have influenced the use of data (especially on non-
financial data), development of measuring methods, measuring attributes and
measuring process.

Glenn grove, (2014) We use bank-specific, industry-specific, and

macroeconomic determinants of profitability contemporaneous with our

18
performance indicators. We follow the accounting fundamental analysis path in
explaining the bank performance.

Manuel Garcia-ayuso (2018) (department of accounting and financial

economics, university of seville) Fundamental analysis is aimed at assessing the
intrinsic value of companies based on publicly available accounting information.
Thus, the main purpose of fundamental analysis research should be identifying
the main determinants of value, establishing empirical relations between them
and fundamental accounting variables, and finally, predicting the future
behaviour of such variables to estimate the value of the firm.
Traditional fundamental analysis ignores the existence of some intangible assets,
such as intellectual capital, that are currently considered as the main determinants
of value. Human capital is an essential component of intellectual capital. This
paper provides evidence on the extent to which the quality of human resources is
related to the value of accounting variables that are used
in fundamental analysis due to their perceived usefulness as proxies for investors'
expectations on the firm's future profitability and growth in both, earnings and
shareholders' equity.

Les coleman (2019), Fundamental Analysis of Equities, fundamental analytical

techniques involve the use of information in current and past financial statements,
in conjunction with industry and macroeconomic data to arrive at a firm’s
intrinsic value. Three factors have promoted the popularity of fundamental
analysis. The first is evidence that firm’s characteristics prove better able to
predict returns than systemic risk. A second factor is the abundance of
fundamental contributors to equity return, which is fed by copious firm-specific
data about accounts, operations and strategy, and form market-based transactions.
Third is that fundamental analysis offers the opportunity for experienced
exponents to display hard-to-replicate skill.

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 CHAPTER IV

DATA ANALYSIS AND INTERPRETATION

TOOLS AND TECHNIQUES FOR FUNDAMENTAL ANALYSIS

ECONOMIC ANALYSIS

1. GDP
2. Savings and investment
3. Inflation rate
4. Interest rate

INDUSTRY ANALYSIS

1. SWOT
2. Growth of industry
3. Porter’s five force model
4. Competitor analysis

COMPANY ANALYSIS

1. comparative balance sheet

2. common size

3. cash flow
4. Ratio analysis

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4.1 ECONOMIC ANALYSIS

4.1.1. GROSS DOMESTIC PRODUCT

Gross domestic product (GDP) is the monetary value of all the finished goods
and services produced within a country's borders in a specific time period. Though
GDP is usually calculated on an annual basis, it can be calculated on a quarterly basis.
A "real" GDP takes into account inflation, measuring the value of the goods and
services using their prices from the previous year.

Fig No: 4.1.1 Gross Domestic Product (GDP)

India's economy grew at an impressive 8.2 per cent in the first quarter of 2018-19
financial year ending June 30 on the back of a strong core performance and a healthy
base. The Indian government changed the base year for GDP calculation from 2004-
05 to 2011-12, by changing the goods and services in the basket to make it more
current, in 2015. This is the highest growth in two years and strongest since the first
quarter of 2016. Sectors which registered growth of over 7 per cent include
‘manufacturing, ‘electricity, gas, water supply & other utility services’ ‘construction’
and ‘public administration, defence and other services’

21
 4.1.2. SAVINGS AND INVESTMENTS

Savings refers to that part of disposable income, which is not used in consumption,
i.e. whatever is remained in the hands of a person, after paying all the expenses. On
the other end, investment is the act of investing the saved money into financial
products, with a view of earning profits. It alludes to the increase in capital stock.

2009- 2010- 2011- 2012- 2013- 2014- 2015- 2016- 12th plan
10 11 12 13 14 15 16 17 Average
Household 25.4 22.8 23.2 23.6 24.0 24.4 24.8 25.2 24.4
Private 8.2 7.9 8.3 8.4 8.5 8.6 8.6 8.7 8.6
Corporate
Public 0.2 1.7 1.8 2.0 2.8 3.5 4.2 5.0 3.5
Gross 33.8 32.3 33.3 34.0 35.3 36.5 37.6 38.9 36.5
Domestic
product

Table No: 4.1.2 savings and investment

Fig No: 4.1.2 savings and investment

The ratio of gross fixed capital formation to GDP climbed from 26.5 percent in 2003,
reached a peak of 35.6 percent in 2007, and then slid back to 26.4 percent in 201

22
4.1.3. INFLATION RATE

Annual consumer inflation in India declined to 2.33 percent in November of 2018

from an upwardly revised 3.38 percent in October and below market expectations of
2.8 percent. It is the lowest inflation rate since June of 2017 as food prices fell the
most since the series began in 2012. The Reserve Bank of India revised down its
inflation forecasts to 2.7 percent-3.2 percent for the period Oct 2018-March 2019,
amid lower food and fuel prices.

Fig No: 4.1.3 inflation rate

Monthly inflation rate in India was -0.33% in December 2018. That is 0.33 less than it
was in November 2018 and 0.36 more than in December 2017. At the same time,
2018 year to date inflation rate is 5.24% and year over year inflation rate is 5.24%.

Consumer prices in India rose 2.57 percent year-on-year in February of 2019,

following a downwardly revised 1.97 percent rise in January and above market
expectations of 2.43 percent. It is the highest inflation rate in four months as food
prices fell less. In its February meeting, the Reserve Bank of India lowered its
inflation forecasts to 2.8 percent for January-March 2019, mentioning a deflation in
food items and a sharp fall in fuel inflation. Inflation Rate in India averaged 6.22
percent from 2012 until 2019, reaching an all time high of 12.17 percent in November
of 2013 and a record low of 1.54 percent in June of 2017.

23
4.1.4. INTEREST RATE

Fig No: 4.1.4 interest rate

The Reserve Bank of India lowered unexpectedly its benchmark interest rate by 25bps
to 6.25 percent on February 7th and shifted its stance to "neutral", in an attempt to
boost a slowing economy as inflation rate remains well below its mid-point 4 percent
target. Interest Rate in India averaged 6.65 percent from 2000 until 2019, reaching an
all time high of 14.50 percent in August of 2000 and a record low of 4.25 percent in
April of 2009.

The effect of real GDP on interest rates is essentially equivalent to the effect of
domestic economic growth on interest rates. A rise in GDP will lead to a rise in
interest rates, as demands for funds increase.

When an economy is booming, more investors will be investing money in it. This
increased demand for funds can lead to lenders asking for higher interest rates.
Secondly, as an economy booms, inflation will generally increase. This will lead to an
increase in the interest rate commanded by lenders, so as to keep pace with inflation.

Lower interest rate means less costly to borrow from banks and less return for saving
so more investment and spending, causing a higher amount of economic activity and
growth.

24
4.2 INDUSTRY ANALYSIS

4.2.1. SWOT ANALYSIS

Comprehensive SWOT profile of AmaraRaja Batteries Ltd provides you an in-depth

strategic analysis of the company’s businesses and operations. The profile helps you
formulate strategies that augment your business by enabling you to understand your
partners, customers and competitors better.

Strength

 High customer focus in all aspects from design to manufacturing to sales.

 Huge dealer network.
 Online ordering of batteries
 Excellent advertising and marketing through TVCs, print media

Weakness

 Higher cost means limited margins

 Huge competition from local and international brands means limited
market share growth

 Not having full-fledged function (Employee, marketing, tendering, project

management etc) inadequate infrastructure

Opportunities

 Boom in automobile sales in all segments.

 Customers are getting more brand sensitive and focus on quality more
than cost.
 International markets responding well to inroads by Amaron.

Threats

 Other battery manufacturers offering lower prices.

 Improvement in car technologies can lead to modification of batteries
 Cheap products by Amara raja batteries limited
 Shortage of skilled manpower.
 Unfavourable govt policies can affect operational efficiency.

25
 4.2.2. GROWTH OF THE INDUSTRY

The Indian battery market grew slowly in the past 2-3 years because of a weak
monsoon and an economic slowdown, among other things. But, because of the
government’s effort to speed up growth and forecast of a good monsoon this year, the
battery industry’s fortune is expected to turn around in the coming years. Passage of
the GST (Goods and Services Tax) Bill will also help organise the market around 40
per cent of the market is unorganised.

Fig No: 4.2.2 Growth of the Industry

Batteries production in India increased from 28372 in October to 29859 in January

2019. The Indian auto industry became the 4th largest in the world with sales
increasing 9.5 per cent year-on-year to 4.02 million units (excluding two wheelers) in
2017.

26
4.2.3. PORTER’S FIVE FORCE MODEL

New entrants’ threat

 High capital requirement

 Requirement of advanced technologies
 Patent limit for new competition
 Economies of scale
 Need to brand names that are strong

Customers/buyers bargaining power

 The buyers price sensitivity is low

 There is a low distributors dependency
 The number of customers is large
 Buyers have numerous option
 Large number of cheap options to choose

Threat of substitutes

 There is a high threat in terms of making a switch to substitutes

 The substitutes are limited

Bargaining power held by suppliers

 High level of competition among suppliers

 Low suppliers concentration
 Critical inputs production

Level of rivalry among competitors

 Entry of few competitors

 Fast growth rate in the industry
 Product differentiation
 Limitations of the government
 Large size industry
 Low costs of storage

27
4.2.4. COMPETITOR ANALYSIS

Competitor analysis in marketing and strategic management is an assessment

of the strengths and weakness of current and potential competitors. This analysis
provides both an offensive and defensive strategic context to identify opportunities
and threats. Profiling combines all of the relevant sources of competitor analysis into
one framework in the support of efficient and effective is an essential component of
corporate strategy.

Name Last Price Market Cap. Sales Net Profit Total Assets
(Rs. cr.) Turnover

Bosch 18,154.95 55,410.25 11,690.15 1,370.72 9,981.30

Motherson Sumi 130.75 41,289.99 7,456.09 879.13 7,284.50

Exide Ind 206.40 17,544.00 9,186.32 668.35 5,389.31

Amara Raja Batt 740.45 12,647.81 6,059.15 471.32 2,995.82

WABCO India 5,952.55 11,290.55 2,568.90 272.83 1,525.89

Minda Ind 277.80 7,284.39 1,857.08 135.83 1,050.28

Sundaram-Clayto 2,391.30 4,838.10 1,642.96 54.92 1,251.48

Minda Corp 126.60 2,876.63 932.99 70.08 693.70

Federal-Mogul 477.75 2,657.83 1,303.87 82.95 715.99

Suprajit Eng 189.70 2,653.38 964.82 104.64 756.86

Shriram Pistons 950.00 2,125.62 1,729.41 138.88 1,020.55

Jamna Auto 50.35 2,006.27 1,608.55 125.34 471.53

Gabriel India 138.50 1,989.47 1,833.14 94.24 532.09

Wheels 784.95 1,888.95 2,460.24 71.77 807.56

JTEKT India 86.80 1,725.08 1,212.25 32.44 490.18

Automotive Axle 1,130.80 1,708.86 1,519.37 83.93 444.34

Sandhar Technol 268.60 1,616.72 1,684.17 67.73 698.58

Subros 234.25 1,528.15 1,912.89 60.62 720.24

Lumax Inds 1,575.45 1,472.69 1,649.92 63.24 394.36

28
Rane Holdings 997.85 1,424.71 95.56 48.79 400.84

Steel Str Wheel 856.65 1,335.49 1,518.19 75.09 1,484.65

LG Balakrishnan 384.45 1,206.88 1,302.63 79.64 604.63

Banco Products 155.85 1,114.62 618.12 119.73 617.72

JBM Auto 246.90 1,007.24 765.78 32.10 518.66

Shanthi Gears 115.05 940.14 214.12 28.58 317.79

Lumax Auto Tech 132.65 904.11 595.93 29.22 258.77

India Nippon 382.05 864.25 452.39 50.10 345.02

Rico Auto 57.25 774.51 1,075.75 49.64 727.27

Sharda Motor 1,218.30 724.44 1,155.45 78.61 355.02

Table No: 4.2.4 competitor analysis

29
4.3 COMPANY ANALYSIS

4.3.1. COMPARATIVE BALANCE SHEET:

A comparative statement is a document that compares a particular financial

statement with prior period statements or with the same financial report generated by
another company.

Comparative balance sheet as on 31.3.2017 and 31.3.2108

31.3.17 31.3.18 Increase(+) or

Particulars
(Rs in crore) (Rs in crore) Decrease(-)

Amount Percentages
A)ASSETS
NON-CURRENT
ASSETS
(a) Property, plant and
1487.02 1698.19 -211.17 -14.20%
equipment
(b) Capital work-in-
240.25 226.38 13.87 5.77%
progress
(c) Other intangible assets 5.12 5.06 0.06 1.17%
(d) Financial assets
(i) Investments 18.88 19.81 -0.93 -4.93%
(ii) Other financial assets 5.9 5.27 0.63 10.68%
(e) Income tax assets (net) 10.88 18.58 -7.70 -70.77%
(f) Other non-current assets 57.9 42.96 14.94 25.80%
TOTAL NON -
1825.95 2016.25 -190.30 -10.42%
CURRENT ASSETS
CURRENT ASSETS
(a) Inventories 816.95 1049.71 -232.76 -28.49%
(b) Financial assets
(i)Investments 127.78 15.33 112.45 88.00%
(ii)Trade receivables 570.49 782.45 -211.96 -37.15%
(iii) Cash and cash
100.74 48.73 52.01 51.63%
equivalents
(iv) Bank balances other
70.18 62.55 7.63 10.87%
than (iii) above
(v) Other fi nancial assets 7.51 9.15 -1.64 -21.84%

30
(c) Other current assets 64.97 184.38 -119.41 -183.79%
TOTAL CURRENT
1758.62 2152.30 -393.68 -22.39%
ASSETS
TOTAL ASSETS 3584.57 4168.55 -583.98 -16.29%
B)EQUITY AND
LIABILITIES
1) Equity
(a) Equity share capital 17.08 17.08 0.00 0.00%
(b) Other equity 2575.99 2920.31 -344.32 -13.37%
Total equity 2593.07 2937.39 -344.32 -13.28%
LIABILITIES
2)Non-current liabilities
(a) Financial liabilities

(i) Borrowings 69.01 58.43 15.33%

10.58
(b) Provisions 40.42 45.15 - 4.73 -11.70%
(c) Deferred tax liabilities
81.51 87.81 - 6.30 -7.73%
(net)
(d) Other Non-current
40.94 46.79 -5.85 -14.29%
liabilities
TOTAL NON -
CURRENT 231.88 238.18 -6.30 -2.72%
LIABILITIES
3)Current liabilities
(a) Financial liabilities
(i)Trade payables 418.44 592.26 -173.82 -41.54%
(ii)Other fi nancial
146.63 168.44 -21.81 -14.87%
liabilities
(b) Provisions 53.66 55.96 -2.30 -4.29%
(c) Other current liabilities 140.49 176.32 -35.43 -25.15%
TOTAL CURRENT
759.62 992.98 -233.36 -30.72%
LIABILITIES

TOTAL EQUITY AND

-16.29%
LIABILITIES 3584.57 4168.55 -583.98
Table No: 4.3.1Comparative Balance sheet

Interpretation:
By comparing 2017 and 2018 the current asset will increase from 1758.62crore
to 4168.55crore

31
4.3.2 COMMON SIZE STATEMENT

Common size statements indicate the relationship of various items with some
common items.
Common size statement as on 31.3.2015 and 31.3.2016

2016
Particulars 2015

Amount Amount
(Rs in % (Rs %
crore) icrore)
ASSETS

CURRENT ASSETS

Trade receivables 5921.4 33.6 5541.02 27.15

Cash and cash equivalents 2221.71 12.51 1502.58 7.38

TOTAL CURRENT ASSETS 8143.11 45.58 7048.6 34.51

FIXED ASSETS

Tangible assets 9398.93 52.95 13122.66 64.50

Intangible assets 43.69 0.24 40.63 0.19

Intangible assets under development 1.52 0.85 1.72 0.84

TOTAL 9444.14 53.21 13165.01 64.51

Non-current investment 160.76 0.905 160.76 0.787

Other non-current assets 0.7 0.39 38.24 0.187

TOTAL 161.46 0.909 199 0.975

TOTAL ASSETS 17748.71 100 20407.61 100

32
 Particulars 2015 2016
Amount Amount
(Rs in % (Rs %
crore) icrore)

CAPITAL AND RESERVES

Share capital 170.81 0.804 170.81 0.639

Reserves and surplus 16824.90 79.23 20845.61 78.02

TOTAL 16995.71 80.03 21016.42 78.66

LONG TERM LIABILITIES

Long term borrowings 741.38 3.49 724.72 2.71

Long term provision 443.06 2.08 460.15 1.72

TOTAL 1184.44 5.57 1184.87 4.43

CURRENT LIABILITIES

Trade payables 349.29 1.64 1520.80 5.69

Other current liabilities 1509.43 7.10 2470.55 9.24

Short term provision 1195.72 5.63 522.41 1.95

TOTAL 3054.44 14.37 4513.76 16.88

TOTAL EQUITY AND

21234.59 100 26715.05 100
LIABILITIES
Table No: 4.3.2 common size statement

Interpretation:

By comparing 2015 and 2016 for common size statement the current asset
increased from 8143.11 to 7049.6 crore the total asset will increases from 17748.71 to
20407.61 crore

33
4.3.3. CASH FLOW ANALYSIS

The statement of cash flow shows how a company spends its money (cash outflows)
and from where a company receives its money (cash inflows).

PARTICULARS 2016 2017

I. CASH FLOW FROM OPERATING ACTIVITIES

Profit before tax from continuing operations 134915575 298143709
Add/less: Adjustment for
a. Depreciation 13176061 13209317
b. loss on sale of tangible fixed assets - 446580
c. Interest(including interest on Trade payables) 54397166 40644972
d. Bad debts written off - 8713000
e. provision for doubtful debts - 34262876
f. Exchange loss on restatement (493456) 3125814
g. provision for leave encashment 1573928 8411417
h. provision for gravity (323819) 1447311
i. provision for warranty 2041434 1000000
j. Dividend received (91200) (22800)
k. interest received (4250888) (6092392)
l. insurance claim received (858392)
m. provision for doubtful debts written back (8825) (556392)
n. provision for loss on projects 1293895 4658699
o. Credit Balances written back (933264) (1721947)
p. Fixed Assets written off 1472576 1257581
66995216 108784036
Operating profit before working capital changes 201910791 406927745
Add/less: Adjustment for working capital changes
a. Decrease/(increase) in inventories (32178777) (24903048)
b. Decrease/(increase) in Trade receivables (73545416) (261680053)
c. Decrease/(increase) in loans and advances (75545416) (212654956)
d. Increase/(Decrease) in trade and other payables (50007977) 408976097
(230812534) (90261960)
Cash generated from operations (28901743) 316665786
Less: Income tax paid 4020327443 99606852
Net cash from operating activities-A (69105017) (217058933)
II. CASH FLOW FROM INVESTING
ACTIVITIES
a. purchase of intangible fixed assets (2608968) (6722449)
b. (Increase)/decrease in capital work in progress - (23164741)

34
c. Sales of intangible fixed assets - 478532
d. investment in partnership firm - -
e. Interest received on bank and other deposits 4250888 6092392
f. Dividend received 91200 22800
Net cash from investing activities – B 1733121 23293467
II. CASH FLOW FROM FINANCING
ACTIVITIES
a. Increase/(Decrease) in borrowings 120032311 (361648625)
b. interest paid (54397166) (40644972)
c. increase in share capital - 280112520
Net cash from financing activities – C 65635145 (122181077)
Net cash flow from all activities (A+B+C) (1736752) 71584390
Opening cash and bank balances 51580051 49843299
Add: Net increases/(decreases) in cash & cash
(1736752) 71584390
equivalents
Closing cash and bank balances 49843299 121427689
Table No: 4.3.3 cash flow analysis

See accompanying notes to the financial statements

In terms of our report attached For and on behalf of the Board of Directors

For Brahmayya & Co. For Deloitte Haskins & Sells LLP
Chartered Accountants Chartered Accountants
(Firm's Registration No. 000513S) (Firm's
Registration No. 117366W/W-100018)
Karumanchi Rajaj Sumit Trivedi Dr. Ramachandra N Galla Jayadev Galla
Partner Partner Chairman Vice Chairman and
Managing Director
M. No. 202309 M.No. 209354 S.Vijayanand S.V. Raghavendra
Chief Executive officer Chief Financial
Officer
M.R. Rajaram
Company Secretary
Place : Secunderabad Place : Secunderabad Place: Hyderabad
Date : May 24, 2017 Date : May 24, 2017 Date : May 24, 2017

35
4.4. RATIO ANALYSIS

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.

4.4.1. Current Ratio

To calculate the ratio, analysts compare a company's current assets to its current
liabilities.
Current ratio=current asset/current liabilities

CURRENT ASSETS CURRENTLIABILITIES CURRENT RATIO

YEARS (Rs in crore) (Rs in crore) (in times)
2014 12986.10 6337.03 2.05
2015 12758.86 5332.21 2.39
2016 14080.81 6293.59 2.24
2017 1758.62 759.62 2.31
2018 2152.30 992.98 2.17
Table No: 4.4.1 current Ratio

Interpretation:

In the year 2018, the current ratio is greater than 2 (i.e. 2.17) it indicates adequate
current asset to meet current liabilities

current ratio
4
current ratio

2 1.52 1.6
1.28 1.23 1.11

0
2014 2015 2016 2017 2018

YEARS

fig No: 4.4.1 current ratio

36
4.4.2. Liquid Ratio

This is also called as quick or acid test ratio. It is calculated by comparing the
quick asset with current liabilities. A liquid asset is an asset that can be converted into
cash speedily

Liquid Ratio=Liquid assets/current liabilities

YEAR QUICK ASSETS CURRENT LIABILITIES LIQUID RATIO

(Rs in crore) (Rs in crore) (in times)
2014 9636.02 6337.03 1.52
2015 8577.53 5332.21 1.60
2016 8064.33 6293.59 1.28
2017 941.67 759.62 1.23
2018 1102.59 992.98 1.11
Table No: 4.4.2 liquid ratio

Interpretation

For the year 2018, the liquid ratio is 1. 11, it indicates the ideal liquid ratio.

LIQUID RATIO
4
liquid ratio

2 1.52 1.6
1.28 1.23 1.11

0
2014 2015 2016 2017 2018
YEARS

Fig No: 4.4.2 liquid ratio

37
 4.4.3. Earning Per Share

The earnings per share ratio (EPS ratio) measure the amount of a
company's net income. It is an important financial measure, which indicates the
profitability of a company. It is calculated by dividing the company net income with
its total number of outstanding shares. It is a tool that market participants use
frequently the profitability of a company before buying its share.

Earning per share = Equity Earning/No. of outstanding shares

EQUITY YEARS EQUITY EARNING NO. OF OUTSTANDING EARNING PER

(Rs in crore) SHARES SHARE(in times)

2014 471.32 170813.303 2.75

2015 478.49 170813.303 2.80
2016 489.45 170813.303 2.86
2017 410.86 170813.303 2.40
2018 367.43 170813.303 2.15
Table No:4.4.3 Earning per share

Interpretation

It shows company has fluctuations in company. There is slight decrease over

the five years.

EARNING PER SHARE

4
earning per share

2.75 2.8 2.86

2.4
2.15
2

0
2014 2015 2016 2017 2018
YEARS

Fig No: 4.4.3 Earning Per Share

38
4.4.4. GROSS PROFIT RATIO

A profitability ratio that establishes a relationship between the gross profit of a

firm and its total net sales is known as Gross Profit Ratio or GP ratio.

Gross profit ratio = Gross profit / Net sales×100

YEARS GROSS PROFIT NET SALES GROSS PROFIT

(Rs in crore) (Rs in crore) RATIO(in times)
2014 367.44 3837.17 9.57
2015 410.86 4211.33 9.75
2016 489.45 4690.67 10.43
2017 478.49 5317.15 8.99
2018 471.32 6059.15 7.77
Table No: 4.4.4 Gross profit ratio

Interpretation

Gross profit is derived every year while analyzing the financial statements of a
firm in order to compare it with previous years as well as other competitors in the
industry.

GROSS PROFIT RATIO

12 9.75 10.43
9.57 8.99
gross profit ratio

10 7.77
8
6
4
2
0
2014 2015 2016 2017 2018
YEARS

Fig No: 4.4.4 gross profit ratio

39
 4.4.5. DEBT AND EQUITY RATIO:

The debt-to-equity ratio (D/E) is a financial ratio indicating the relative

proportion of shareholder’s equity and debt used to finance a company's assets. Closely
related to leveraging, the ratio is also known as risk, gearing or leverage.

DEBT AND EQUITY RATIO=SHARE HOLDERS FUND/TOTAL LONG TERM FUNDS

YEARS SHARE TOTAL LONG DEBT EQUITY

HOLDERS TERM FUNDS(Rs in RATIO(in times)
FUND(Rs in crore) crore)
2014 1362.70 1419.47 0.95
2015 1699.57 1765.04 0.96
2016 2101.64 2149.57 0.97
2017 2593.07 2593.07 1
2018 2937.39 2937.39 1
Table No: 4.4.5 Debt-Equity ratio

Interpretation:

In the year 2016, Debt-equity ratio was 0.97, which is increased to 1.00 during the
year 2017, and it is constant in 2018. This shows that company depends on debt and
equity fund.

DEBT EQUITY RATIO

1.2 0.97 1 1
0.95 0.96
Debt equity ratio

0.6

0
2014 2015 2016 2017 2018
YEARS

Fig No: 4.4.5 Debt and Equity ratio

40
4.4.6. FIXED ASSET TURNOVER RATIO:

The fixed asset turnover ratio is an efficiency ratio measures the extent of the
revenue generated in comparison to its investment in fixed assets by comparing net
sales with fixed assets.

FIXED ASSET TURNOVER RATIO=NET SALES/AVERAGE FIXED ASSETS

YEARS SALES AVERAGE FIXED FIXED ASSET

(Rs in crore) ASSET(Rs in crore) TURNOVER RATIO
(in times)
2014 3837.17 767.86 4.99
2015 4211.33 1030.58 4.08
2016 4690.67 1436.24 3.26
2017 5317.15 1732.39 3.06
2018 6059.15 1929.63 3.14
Table No: 4.4.6 Fixed asset turnover ratio

Interpretation:

In the year 2017, the fixed asset turnover ratio was 3.06, which was increased to
3.14 during the year 2018. This shows utilization of fixed assets is improved.

FIXED ASSET TURNOVER RATIO

fixed asset turnover

6 4.99
4.08
4 3.26 3.14
2.06
ratio

2
0
2014 2015 2016 2017 2018
YEARS

Fig No: 4.4.6 Fixed asset turnover ratio

41
4.4.7. WORKING CAPITAL TURNOVER RATIO:

Working capital is money available to a company for day-to-day operations.

Simply put, working capital measures a company's liquidity, efficiency, and overall
health. The working capital ratio is another way to compare a company's current
assets to its current liabilities.

WORKING CAPITAL TURNOVER RATIO=SALES/NET WORKING CAPITAL

YEARS SALES NET WORKING WORKINGCAPITAL

(Rs in crore) CAPITAL TURNOVER RATIO
(Rs in crore) (Rs in crore)
2014 3837.17 6649.07 0.57
2015 4211.33 7425.79 0.56
2016 4690.67 7787.27 0.60
2017 5317.15 999 5.32
2018 6059.15 1159.32 5.22
Table No: 4.4.7 working capital turnover ratio

Interpretation:

In the year 2016 the working capital ratio is 0.60, which was increased to 5.32
during the year 2017. This shows the effective utilization of working capital.

WORKING CAPITAL TURNOVER RATIO

working capital turnover

6 5.32 5.22

3
ratio

0.57 0.56 0.6

0
2014 2015 2016 2017 2018
YEARS

Fig No: 4.4.7 working capital turnover ratio

42
4.4.8. LEAST SQUARE TREND METHOD:

The least squares method is a form of mathematical regression analysis that

finds the line of best fit for a set of data, providing a visual demonstration of the
relationship between the data points. Each point of data is representative of the
relationship between a known independent variable and an unknown dependent
variable.

Y = a + bx

X Y X 𝒙𝟐 Xy
2014 3837.17 (2.00) 4 (7674.28)
2015 4211.33 (1.00) 1 (4211.33)
2016 4690.67 0 0 0
2017 5317.15 1 1 5317.15
2018 6059.15 2 4 12118.3
∑Y= 24115.44 ∑x=0 ∑𝒙𝟐 =10 ∑xy=5550.19
Table No: 4.4.8 Least square trend

𝑥= 𝑋− 𝑋

𝑋=∑ 𝑋/𝑛 = 2016

a = 𝑌 = ∑ 𝑌/𝑛 =4823.08

b = ∑ 𝑥𝑦/ ∑ 𝑥 2

The straight line trend is

Y = a + bx

Y = 4823.08 + 555.01x

43
For the year 2019,

Y = 4823.08 + 555.01x

X = 2019-2016 = 3

Y = 4823.08 + 555.01(3) = 6488.11

For the year 2020,

Y = 4823.08 + 555.01x

X = 2020-2016 = 4

Y = 4823.08 + 555.01(4) = 7043.12

For the year 2021,

Y = 4823.08 + 555.01x

X = 2021-2016 = 5

Y = 4823.08 + 555.01(5) = 7598.13

For the year 2022,

Y = 4823.08 + 555.01x

X = 2022-2016 = 6

Y = 4823.08 + 555.01(6) = 8153.11

44
Interpretation:

It is used to predict the values of sales for the given years. For 2019, the predicted
sales will be 6488.11. For 2020, the predicted sales will be 7043.12. For 2021, the
predicted sales will be 7598.13. For 2022, the predicted sales will be 8153.14.

15000

10000
predicted sales

5000

0
2014 2015 2016 2017 2018 2019 2020 2021 2022
-5000

-10000
YEARS

Fig No: 4.4.8. Least square trend

45
4.4.9. CORRELATION ANALYSIS:

Correlation analysis is used to understand the nature of relationships between

two individual variables. It is a method of statistical evaluation used to study the
strength of a relationship between two variables.

𝑵 ∑ 𝑿𝒀−(∑ 𝑿)(∑ 𝒀)
r=
√[𝑵 ∑ 𝒙𝟐 −(∑ 𝒙)𝟐 ][(𝑵 ∑ 𝒚𝟐 −(∑ 𝒚)𝟐]

Where:

N = Number of pairs of score

∑xy = sum of products of paired scrores

∑x = sum of x scrores

∑y = sum of y scrores

∑𝑥 2 = sum of squared y scores

∑𝑦 2 = sum of squared x scores

YEAR SALES PROFIT 𝒙𝟐 𝒀𝟐 XY

X Y
2014 3837.14 367.44 14723643.38 135012.15 1409918.72
2015 4211.33 410.86 17735300.37 168805.93 1730267.04
2016 4690.67 489.45 22002385.05 239561.30 2295848.43
2017 5317.15 478.49 28272084.12 228952.68 2544203.10
2018 6059.15 471.32 36713298.7 222142.54 2855798.5
∑x=24115.44 ∑y=2217.56 ∑𝒙𝟐 =119446711.6 ∑𝒚𝟐 =994474.6 ∑xy=10836035.7

Table No: 4.4.9 correlation analysis

46
r = 5 ∗ 10836035.79 − (24115.44)(2217.56)
⁄
√5 ∗ 119446711.6 − (54115.44)2 )(5 ∗ 994474.6) − (2217.56)2 )

r=0.758

Interpretation:

The level of significance value is 0.05 the calculated value is 0.758, which was
greater than 0.05.so we should reject null hypothesis. There is positive relationship
between sales and profit.

47
 CHAPTER V

5.1 FINDINGS

 Company has reached the standard ratio in the present year i.e. 2:17 so the
company is having a position to repayment of its short term liabilities.
 Company is maintaining quick assets over quick ratio. So the quick assets
would meet the quick liabilities.
 Company share value decreases gradually. So there are fluctuations in
company earning per share
 Gross profit decreased in the present year i.e. 2018. So the company should
have good control over the operating expenses.
 Company debt equity ratio is 1 in 2018 it means company depends on debt and
equity fund.
 Utilization of fixed asset is improved in present year than compared to
previous year. So company generating sales.
 Working capital turnover ratio increased in 2017 and 2018. This shows
company has effectively utilized the working capital.
 Least square used to predict the movement of sales of the company. In present
year the sales will decline. In future trend shows upward it means sales will
get increase.
 Correlation is positive it means both sales and profit increases parallel.
 Comparison of two years balance sheet is comparative balance sheet. In
present year both assets and liabilities are greater than previous year.

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5.2 SUGGESTIONS AND RECOMMENDATION

As the company is profit seeking one, it has to direct all of its resources to achieve
this goal. The company is trying to enhance its value and there by its shareholders
base. While searching for profitability, the liquidity and solvency positions are crucial
elements to be watched carefully. On the basis of the analysis and observations, the
following suggestions are made:

 After the analysis of financial statements, the company status is good because
the working capital of the company is doubled from the last year’s position.
 The company is paying high interest rate, it leads the company to face the
problems in future
 The company is utilizing the fixed assets, which majorly helps for the growth
of the organisation. The company should maintain the growth.
 Amararaja has to increase its gross profits and net profits it helps for the
diversification of the company to other sectors.
 Sales increased in every year and at the same time expenses also increased. So
the company should adopt cost control technique to reduce the cost.
 The investors should not consider only ratio analysis to invest in any
company.
 Net profit is to be calculated in the future this can be done by increasing the
sales volume and decreasing the cost of production.
 The operation of the current assets of the company must be improved to obtain
the ideal the position.

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5.3 DIRECTIONS FOR FURTHER RESEARCH

 The research can be prolonged by including some ratios like cash ratio to
minimum the borrowings.
 To know the general financial health of the company analysts can perform
proprietary ratio, this ratio also shows the proportion of shareholders funds in
the total investment.
 Inventory turnover ratio measures how fast the inventory is moving through
the firm and generating sales. It indicates the efficiency of firm in production
and selling products.
 Investor decision is crucial for any business, this decision can be done with the
help of return on investment.

5.4 CONCLUSION

From the above analysis of the company, I conclude that the company financial
position is good because the company’s leverage, activity and profitability positions
are good.

Fundamental analysis can be valuable, but it should be approached with caution. It is

important to be familiar with the analyst behind the report. Corporate statements and
press releases good information

As per analysis we can say that company is utilizing the fixed assets because it is a
manufacturing company. But its share value decreased as compared to other
companies.

50
JOURNAL

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APPENDIX

www.equitymaster.com

www.investopedia.com

www.moneycontrol.com

www.nseindia.com

www.yahoofinance.com

www.ibef.org

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