Assignment NO 2

Financial analysis of JP Associates (cost of capital, WACC)

Submitted by: Shahid Manzoor Reg.NO 11206567 Section Q2203 Financial management (FIN501)

Company profile Introduction

With a single minded focus in mind, to achieve pioneering myriads of feat in civil engineering Shri. Jaiprakash Gaur, Founder Chairman of Jaiprakash Associates Limited after acquiring a Diploma in Civil Engineering in 1950 from the University of Roorkee, had a stint with Govt. of U.P. and with steadfast determination to contribute in nation building, branched off on his own, to start as a civil contractor in 1958, group is the 3rd largest cement producer in the country. The groups cement facilities are located in the Satna Cluster (U.P), which has one of the highest cement production growth rates in India. The Corporate Information section imbibes the vision and the mission statements of the group. It provides a comprehensive list of the Board of Directors, along with policies on Corporate Governance and Code of Conduct. The Quality Policy covers aspects pertaining to customer satisfaction and the efficient use of the vital resources. The efforts of the group are highlighted by the achievement section which depicts the various awards that are bagged by the group over the various years. The Group has CT -1 and CR 1 grading to its credit.
Vision

As a group, we are committed to strategic business development in infrastructure, as the key to nation building in the 21st century. We aim to achieve perfection in everything we undertake with a commitment to excel. It is the determination to transform every challenge into opportunity; to seize every opportunity to ensure growth and to grow with a human face.
Mission

Our solitary Mission is to achieve Excellence in every sector that we operate in - be it Engineering & Construction, Cement, Real Estate or Consultancy. To augment our core competencies and adopt the most comprehensive modern technology to overtake the obstacles in our path of achievement. To obtain sustainable development and simultaneously enhancing the shareholders value and fulfilling our obligations towards building a better India".

Sources of funds: Share capital of the company is constant in 2011 and 2012, but company has increased its share capital from 2010 to 2011 by 36 lac. When we compare it with 2009 . it has been increased with huge amount of 144.57 crs and same from 2008 by 46.06 crs to 2009. Reserves of the company has been increased by 2906.93 crs from 2011 to 2012 but is almost little constant in 2011 and 2010. But there is an increment from previous years. Company has abolished the equity share warrants from 2009. As well as equity application money from 2008. Now the company is not using these sources. From the above steps we come to know that the JP associates is using shareholders funds as it sources of funds in a good proportion. Company has decreased its loans from 2011 to 2012. But it was using loans as its source very much in preceding the previous year. As we see in balance sheet the company has not increased its sources of funds very much from previous year. The sources of funds proportion are 35% of shareholders equity and the company is using debt of 60% as its source. Other liabilities are almost 5 %.
Year SOURCES OF FUNDS : Share Capital + Reserves Total + Equity Share Warrants Equity Application Money Total Shareholders Funds Secured Loans + Unsecured Loans + Total Debt Other Liabilities Total source Mar 12 425.29 11,879.01 0.00 0.00 12,304.30 14,732.19 6,306.53 21,038.72 1,741.41 35,084.43 35.07 Mar 11 425.29 8,972.08 0.00 0.00 9,397.37 14,929.62 6,575.52 21,505.14 1,308.61 32,211.12 29.1 Mar 10 424.93 8,075.79 0.00 0.00 8,500.72 11,358.01 6,550.70 17,908.71 0.00 26,409.43 32.1 Mar 09 280.36 6,258.85 158.80 0.00 6,698.01 7,338.28 5,767.89 13,106.17 0.00 19,804.18 33.8 Mar 08 234.30 3,965.20 398.50 0.02 4,598.02 4,643.55 3,662.03 8,305.58 0.00 12,903.60 35.6

59.96 100

66.7 100

67.8 100

66.1 100

64.3 100

Comparative analysis of cost of capital of JP associates and DLF ltd. JP ASSOCIATES Cost of equity: 2012 4.75 1,026.38 216.08 17,296.41 25.00 80.05 31% 2011 5.43 1,167.78 215.06 19,681.16 40.00 91.51 44% 2010 7.89 1,708.36 216.52 31,806.67 54.00 146.90 37% 2009 7.45 897.01 120.40 9,990.55 50.00 82.98 60% 2008 5.04 609.67 120.96 26,566.98 50.00 219.63 23%

EPS (A) PAT (B) No. of shares C=(B/A) Mkt Capitalization (D) Dividend (E) Mkt Price F= (D/C) Ke % (E/F)

Cost of debt: 2012 1,832.48 18% 82 1502.6 22,780.13 7 2011 1,503.21 18% 82 1232.6 22,813.75 5 2010 1,148.19 18% 82 941.5 17,908.71 5 2009 582.33 21% 79 460 13,106.17 4 2008 380.92 19% 81 308.5 8,305.58 4

Interest (A) Tax rate % (B) 1-T (C)=(1-B) After tax interest D= (C*A) Average debt (E) *(DRV+SP/2) Kd % (D/E)

DLF LTD Cost of equity 2012 5.81 2,574.79 179 34,221.75 34.43 191 18 2011 7.48 1,547.77 169.7 45,358.54 26.74 267 10 2010 4.44 765.06 172 52,432.69 45.04 305 14.8 2009 8.95 1,269.58 173 28,377.18 22.35 164 13.6 2008 14.42 1,041.79 178.6 110,218.55 27.74 617 4.5

EPS (A) PAT (B) No. of shares C=(B/A) Mkt Capitalization (D) Dividend (E) Mkt Price F= (D/C) Ke % (E/F)

Cost of debt 2012 1,553.78 30 70 1,087.7 19,947.60 5.45 2011 1,286.70 18 82 1,055 19,806.31 5.33 2010 847.24 18 82 694.7 12,637.85 5.5 2009 809.85 12.5 87.5 708.6 9,614.97 7.37 2008 447.65 17 83 371.5 8,386.40 4.43

Interest (A) Tax rate % (B) 1-T (C)=(1-B) After tax interest D= (C*A) Average debt (E) *(DRV+SP/2) Kd % (D/E)

As we can see that in the years 2008, 2009, 2010 and 2011 the cost of debt of JP associates was higher than that of DLF Ltd. These costs were 7,5,5,4 and 4 respectively as compared to 4.43, 7.37, 5.5 and 5.33 of DLF Ltd. JP associates WACC Kd % Ke % WACC 4.19=(7*59.96) 3.33 10.87 12.80 15.06 16.13 3.39 11.87 15.26 2.64 20.28 22.92 2.57 8.18 10.75

DLF ltd WACC 2012 2011 2010 2009 2008 Kd % 3.2 3.1 2.7 3.2 1.9 Ke % 7.6 4.11 7.5 7.7 2.6 The overall WACC of JP associate is increased by 12.17% in 2008 to 2009 as compared to DLF ltd by 5.1%. but in 2011 and 2012 DLF ltd has increased in more proportion