SAPM: Fundamental Analysis

SUBMITTED TO:

SUBMITTED BY:

Dr. A.S. Chawla

Rupali Jindal
130423303
MBA SEM-4

SCHOOL OF MANAGEMENT STUDIES, PUNJABI UNIVERSITY,

PATIALA

Indian economy
The Economy of India is the tenth-largest in the world by nominal GDP and the third-largest by
purchasing power parity (PPP). The country is one of the G-20 major economies, a member of
BRICS and a developing economy among the top 20 global traders according to the WTO.
According to Indian Finance Ministry the growth of the Indian economy is projected to
accelerate to 7.4% (2014-15) in the current fiscal compared with 6.9% (2013-14) last year. In an
annual report, the IMF forecast that Indian Economy would grow by 7.5% percent in the 201516 fiscal year that starts on April 1, up from 7.2%(2014-15) percent in the year now ending.
India was the 19th-largest merchandise and the 6th largest services exporter in the world in 2013;
it imported a total of $616.7 billion worth of merchandise and services in 2013, as the 12thlargest merchandise and 7th largest services importer. Agriculture sector is the largest employer
in India's economy but contributes a declining share of its GDP (13.7% in 2012-13). Its
manufacturing industry has held a constant share of its economic contribution, while the fastestgrowing part of the economy has been its services sector which includes construction,
telecom, software and information technologies, infrastructure, tourism, education, health care,
travel, trade, banking and other components of its economy.

Oil and gas sector

The oil and gas sector is one of the six core industries in India. It is of strategic importance and
plays a pivotal role in influencing decisions across other important spheres of the economy.
India is the fourth-largest energy consumer (2013) of oil & gas in the world, accounting for 37
per cent of total energy consumption. Oil consumption is estimated to reach four million barrels
per day (MBPD) by FY16, expanding at a compound annual growth rate (CAGR) of 3.2 per cent
during FY08-16. By 2025, India is expected to overtake Japan to become the third-largest
consumer of oil.
The country has 5.7 billion barrels of proven oil reserves. It had 47.8 trillion cubic feet (TCF) of
gas reserves and produced 33.7 billion cubic meter (BCM) of gas in 2013.
India has 19 refineries in the public sector and three in the private sector. In FY14, public sector
refineries accounted for 53.4 per cent of total refinery crude throughput.
India has 9,460 km of crude oil pipelines and 14,083 km of product pipelines.

Company analysis
Liquidity and solvency ratios:
Indian Oil Corporation
Ratio
Current
Quick
Debt-equity

2014
0.81
0.64
1.22

2013
0.84
0.79
1.28

2012
0.83
0.74
1.22

2011
0.80
0.51
0.95

2010
0.76
0.45
0.88

The above table describes the liquidity and solvency ratios of Indian Oil Corporation. The ratios
discussed here are current, quick and debt-equity ratio. Current ratio is somewhat stable from the
last five years, but is not in accordance with the rule. Although, the trend of current ratio shows
that the company is fairly paying back its debt with its short term assets. Quick ratio on the other
hand is fluctuating as compare to the current ratio. Quick ratio was 0.64 in 2014 which was less
than the earlier two years. But as a market leader in this segment its performance is much more
stable than its competitors. The debt equity ratio of the company in the last three years is facing
an almost stable ground with little increase in 2013. But the debt equity ratio has increased as
compared to the 2010 and 2011, which means that the company has been adopting aggressive
means to finance its activities through debt. But being a capital intensive and labor intensive
industry, the D-E ratio is not up to the desired mark.
Profitability Ratios:
Indian Oil Corporation
Ratio
Operating profit
Gross profit
Net profit
Return on capital employed
Return on Assets

2014
3.31
2.10
1.47
9.11
271.80

2013
3.07
1.90
1.11
8.64
251.75

2012
4.20
3.90
0.98
13.08
238.38

2011
3.80
2.43
2.22
10.32
227.83

2010
5.60
4.40
3.74
15.83
208.14

2012
1.82
0.93
0.61
10.18
412.51

2011
2.33
1.24
1.00
11.50
388.82

2010
2.89
1.86
1.26
11.11
361.97

Bharat Petroleum
Ratio
Operating profit
Gross profit
Net profit
Return on capital employed
Return on Assets

2014
3.10
2.24
1.55
18.52
269.11

2013
2.54
1.74
1.09
14.57
230.04

Essar Oil
Ratio
Operating profit
Gross profit
Net profit
Return on capital employed
Return on Assets

2014
3.88
2.51
0.12
14.26
16.77

2013
1.97
1.97
-1.32
9.48
8.10

2012
2.87
1.56
-2.18
6.85
15.97

2011
5.09
3.56
1.35
9.32
47.87

2010
2.85
0.90
0.07
3.64
29.30

Indian oil corporation is compared with its two other competitors namely, Bharat Petroleum and
Essar oil. By looking towards the tables above, we can say that the operating profit margin of
Indian Oil Corporation has followed a very stable trend and its margin in 2014 was also 3.31 %
with an exception to essar oil having 3.88%. Unlike the other two companies essar oil has
reported negative net profits in 2013 and 2012. Return on capital employed ratio is also on a
stable ground and is experiencing fewer fluctuations as compare to the other two companies
which is a good sign for investors. Return on assets trend is also favoring Indian Oil Corporation;
it is having a higher ROA as compared to its other two competitors.
Conclusion
From the above analysis it is clear that, from the investor point of view, it will be much safer to
invest in India Oil Corporation as it is showing much greater stability and its vital ratios are also
depicting stabilize and increasing profit.

Automobile Sector
With the increasing growth in demand on back of rising income, expanding middle class and
young population base, in addition to a large pool of skilled manpower and growing technology,
will propel India to be among the world's top five auto-producers by 2015.
The automobile industry accounts for 22 per cent of the country's manufacturing gross domestic
product (GDP). The auto sector is one of the biggest job creators, both directly and indirectly. It
is estimated that every job created in an auto company leads to three to five indirect ancillary
jobs.
India is expected to become a major automobile manufacturing hub and the third largest market
for automobiles by 2020, according to a report published by Deloitte.
India is currently the seventh-largest automobiles producer in the world with an average annual
production of 17.5 million vehicles, and is on way to become the fourth largest automotive
market by volume, by 2015.

Company analysis
Liquidity and Solvency ratios
Mahindra & Mahindra
Ratio
Current
Quick
Debt-equity

2014
1.19
0.93
0.22

2013
1.02
0.77
0.22

2012
0.99
0.72
0.26

2011
0.97
0.73
0.23

2010
1.11
0.86
0.37

The above table describes the current, quick and debt equity ratio of Mahindra & Mahindra. The
current ratio of the company from the last two years is above 1 which is a good sign. It indicates
that the company is in good financial health and is paying back its short term obligations. Quick
ratio is also showing a stable trend with increase in 2014. In 2014 its quick ratio was 0.93, which
means that the company has 0.93 paise of liquid assets available to cover each Re. 1 of current
liabilities. Being a capital intensive company, its debt equity ratio is not as what it should be. But
from the last five years, it is following a similar trend and is stable for most of the time. This also
indicates that the company is not aggressively using debt to finance its projects.
Profitability ratios
Mahindra & Mahindra
Ratio
Operating profit
Gross profit
Net profit
Return on capital employed
Return on Assets

2014
11.65
9.52
9.11
22.28
272.63

2013
11.64
9.88
8.17
25.42
238.75

2012
11.84
10.02
8.90
23.85
198.23

2011
14.72
12.96
11.14
27.50
167.99

2010
16.29
14.29
11.08
27.70
137.95

2012
7.06
3.86
4.49
13.53
525.68

2011
9.93
7.16
6.16
22.32
479.99

2010
12.74
9.93
8.34
27.89
409.65

Maruti Suzuki
Ratio
Operating profit
Gross profit
Net profit
Return on capital employed
Return on Assets

2014
11.66
6.89
6.25
16.91
694.45

2013
9.70
5.43
5.38
15.92
615.03

Tata Motors
Ratio
Operating profit
Gross profit
Net profit
Return on capital employed
Return on Assets

2014
-2.56
-8.59
0.87
2.52
59.58

2013
3.83
-0.22
0.64
5.95
59.98

2012
7.69
4.73
2.26
10.26
61.84

2011
9.90
7.01
3.81
10.75
315.36

2010
11.40
8.47
6.26
10.37
259.03

The above tables compare the three different companies namely, Mahindra & Mahindra, Maruti
Suzuki and Tata Motors. From the above analysis it is clear that the operating profit of Mahindra
& Mahindra is much more stable as compared to its competitors which is a good sign for
investors. In terms of gross and net profit also, Mahindra & Mahindra is showing an impressive
profile. The gross profit of Mahindra & Mahindra for the year of 2014 is 9.52 as compared to
-8.59 of Tata motors. Mahindra & Mahindra is using its capital much more efficiently than its
competitors as depicted by ROCE ratio. In 2014, the ROCE for Mahindra & Mahindra, Maruti
Suzuki and Tata Motors is 22.28, 16.91 and 2.52 respectively. But return on assets describe
something else, as Maruti Suzuki is having the highest return on assets. Its ROA in 2014 was
694.45 as compared to 272.63 and 59.58 of Mahindra & Mahindra and Tata motors respectively.

Conclusion
From the above analysis it is clear that investing in Mahindra & Mahindra is a better idea. Its
profit and debt repaying capabilities are much more stable than its competitors. Moreover,
Mahindra & Mahindra is employing its capital in a much more impressive way as compare to its
competitors.

Cement Sector
India's cement industry is a vital part of its economy, providing employment to more than a
million people, directly or indirectly. Ever since it was deregulated in 1982, the Indian cement
industry has attracted huge investments, from both Indian and foreign investors, making it the
second largest in the world. The industry is currently in a turnaround phase, trying to achieve
global standards in production, safety, and energy-efficiency.
India has a lot of potential for development in the infrastructure and construction sector and the
cement sector is expected to largely benefit from it. Some of the recent major government
initiatives such as development of 100 smart cities are expected to provide a major boost to the
sector.

Expecting such developments in the country and aided by suitable government foreign policies,
several foreign players such as Lafarge, Holcim and Vicat have invested in the country in the
recent past. A significant factor which aids the growth of this sector is the ready availability of
the raw materials for making cement, such as limestone and coal.
Company analysis
Liquidity and Solvency ratios
Shree Cements
Ratio
Current
Quick
Debt-equity

2014
0.90
0.77
0.23

2013
1.01
1.06
0.25

2012
0.71
0.55
0.35

2011
1.06
0.96
0.93

2010
1.13
1.10
1.09

The above table describes the current, quick and debt-equity ratio of Shree cements. Current ratio
of the company is above or almost equal to 1 which is a good sign for the investors to invest in
the company. Quick ratio of the company is also in a healthy state. In 2014 its quick ratio was
0.77 which describes that the company is in a good health to repay its debts with its liquid assets.
Debt equity ratio is not what it should be for a capital intensive company like Shree cements. In
2014 its debt equity ratio was 0.23 almost equal to 0.25 in the year earlier. This means that the
company does not prefer debt to finance its projects.
Profitability ratios
Shree Cements
Ratio
Operating profit
Gross profit
Net profit
Return on capital employed
Return on Assets

2014
23.60
14.26
12.96
17.70
1352.25

2013
27.92
20.12
17.37
27.24
1103.32

2012
27.90
13.10
10.20
25.31
784.77

2011
25.37
6.06
5.86
7.57
570.13

2010
41.45
25.73
18.32
25.91
526.23

2012
22.64
17.71
13.09
21.69
469.22

2011
20.02
14.27
10.42
15.45
389.21

2010
28.08
22.56
15.30
27.22
370.05

Ultratech Cement
Ratio
Operating profit
Gross profit
Net profit
Return on capital employed
Return on Assets

2014
18.82
13.63
10.40
14.08
623.45

2013
23.17
18.48
12.96
20.48
555.65

JK Cement
Ratio
Operating profit
Gross profit
Net profit
Return on capital employed
Return on Assets

2014
13.40
8.61
3.41
7.32
251.47

2013
19.23
14.82
7.88
16.92
242.74

2012
20.40
15.46
6.84
18.59
184.32

2011
11.30
6.53
2.68
7.25
162.80

2010
21.55
17.38
10.89
17.86
155.28

The above table compares Shree cement with Ultratech cement and JK cement in terms of
operating profit, gross profit, net profit, return on capital employed and return on assets. From
the last 5 years, the operating profit of Shree cement was more than the operating profits of JK
cement and Ultratech cement. This means that the company is generating considerably good
profit from its core business. Same is the case with the gross and net profit, Shree cements
records the higher profit than its competitors. Return on capital employed is also much better for
Shree cements, it means that the company is earning well on the capital that it has employed.
Return on assets is also favorable for Shree cements, ROA was 1352.25 in 2014.

Conclusion
From the above analysis it is clear that investment in Shree cements will yield much better
results for investors as compared to investments in the other companies. Shree cements has
shown much more stable performance and have recorded much stable and impressive profits
than its competitors.

Healthcare Sector
Healthcare has become one of India's largest sectors - both in terms of revenue and employment.
The industry comprises hospitals, medical devices, clinical trials, outsourcing, telemedicine,
medical tourism, health insurance and medical equipment. The Indian healthcare industry is
growing at a tremendous pace due to its strengthening coverage, services and increasing
expenditure by public as well private players.
The Indian healthcare delivery system is categorised into two major components - public and
private. The Government i.e. public healthcare system comprises limited secondary and tertiary
care institutions in key cities and focuses on providing basic healthcare facilities in the form of
primary healthcare centers (PHCs) in rural areas. The private sector provides majority of
secondary, tertiary and quaternary care institutions with a major concentration in metros, tier I
and tier II cities.

India's primary competitive advantage over its peers lies in its large pool of well-trained medical
professionals. Also, India's cost advantage compared to peers in Asia and Western countries is
significant - cost of surgery in India is one-tenth of that in the US or Western Europe.
Company analysis
Liquidity and Solvency ratios
Max healthcare
Ratio
Current
Quick
Debt-equity

2014
0.94
1.76
0.05

2013
1.10
1.68
0.04

2012
3.63
3.73
0.03

2011
6.23
5.82
0.29

2010
1.30
1.55
0.27

Above table describes about the current, quick and debt-equity ratio of max healthcare. The
current ratio of max healthcare is 0.94 near to 1, which is a preferable sign for the investors. The
quick ratio is also 1.76 for the year of 2014. This describes that the company is in a good health
to pay its debt using liquid sources. The debt equity ratio is on the other hand shows that the
company is not too eager to finance its projects using the debt, as it is clear from the trend. Debtequity ratio in 2014 was 0.05.
Profitability ratios
Max healthcare
Ratio
Operating profit
Gross profit
Net profit
Return on capital employed
Return on Assets

2014
21.37
18.99
18.36
6.03
119.68

2013
44.76
43.18
36.75
20.71
116.22

2012
4.37
1.32
-2.04
0.60
108.54

2011
5.24
2.11
-8.62
1.07
93.13

2010
5.12
1.52
-0.16
0.52
95.14

2012
16.87
13.62
8.16
14.04
172.05

2011
16.33
13.32
7.73
13.03
136.61

2010
15.67
12.69
8.20
11.57
249.54

Apollo hospitals
Ratio
Operating profit
Gross profit
Net profit
Return on capital employed
Return on Assets

2014
15.89
12.55
8.51
12.72
213.10

2013
16.68
13.41
9.23
13.13
196.05

Fortis healthcare
Ratio
Operating profit
Gross profit
Net profit
Return on capital employed
Return on Assets

2014
-21.80
-26.40
4.00
2.66
80.16

2013
-0.32
-6.97
3.17
3.94
78.99

2012
1.69
-2.61
49.34
2.77
79.02

2011
6.03
1.98
33.19
5.04
74.42

2010
7.50
2.25
12.27
1.64
49.70

In the above tables Max healthcare is compared with Apollo hospitals and Fortis healthcare. We
can see form the above analysis that the operating profit of Max healthcare is much greater than
its competitors, which means that Max healthcare generates more profits from its operations than
Fortis healthcare and Apollo hospitals. Gross and net profits show the similar behavior, favoring
Max healthcare above its competitors. As far as return on capital employed, here Apollo hospitals
take the edge, having ROCE 12.72 as compared to 6.03 (Max healthcare) and 2.66 (Fortis
healthcare). This signifies that Apollo Hospitals employs its capital more efficiently. Similar is
the case with the return on assets. We can see form the above analysis that the return on assets is
also favoring Apollo hospitals.
Conclusion
After studying the above data, we can say that it will yield much better returns if we invest in
Max healthcare. Its debt repaying capacity is also much stable than the players in the similar
fields. As far as the profit is concerned, we can see that Max healthcare is generating much better
profits as compared to its competitors.

Agriculture Sector
Despite the focus on industrialization, agriculture remains a dominant sector of the Indian
economy both in terms of contribution to gross domestic product (GDP) as well as a source of
employment to millions across the country.
Agriculture plays a vital role in the Indian economy. Over 70 per cent of the rural households
depend on agriculture as their principal means of livelihood. Agriculture, along with fisheries
and forestry, accounts for one-third of the nations GDP and is its single largest contributor.
The total Share of Agriculture & Allied Sectors (Including agriculture, livestock, forestry and
fishery sub sectors) in terms of percentage of GDP is 13.9 percent during 2013-14 at 2004-05
prices. [As per the estimates released by Central Statistics Office]
Agricultural exports constitute a fifth of the total exports of the country. In view of the
predominant position of the Agricultural Sector, collection and maintenance of Agricultural
Statistics assume great importance.

The country is also the largest producer, consumer and exporter of spices and spice products in
the world and overall in farm and agriculture outputs, it is ranked second. From canned, dairy,
processed, frozen food to fisheries, meat, poultry, and food grains, the Indian agro industry has
plenty of areas to choose for business.
The Department of Agriculture and Cooperation under the Ministry of Agriculture is the nodal
organization responsible for the development of the agriculture sector in India. Under it, several
other bodies such as the National Dairy Development Board (NDDB) work for the development
of other allied agricultural sectors.
Company analysis
Liquidity and Solvency ratios
Indian Tobacco Company
Ratio
Current
Quick

2014
1.25
0.68

2013
1.22
0.66

2012
1.08
0.51

2011
1.08
0.50

2010
0.92
0.39

The above table describes the current and quick ratio of Indian Tobacco Company. The current
ratio of ITC in the year of 2014 was 1.25 which tells us that the company is in a healthy state to
repay its debt with its liquid sources. On the other hand the quick ratio for the same year was
0.68, which again tells us about the liquid strength of the company. Overall, we can see that both
the ratios were following a stable trend from the last two years after experiencing a gradual
increase from the previous years.
Indian Tobacco Company
Ratio
Operating profit
Gross profit
Net profit
Return on capital employed
Return on Assets

2014
37.47
34.76
25.57
48.12
33.02

2013
35.54
32.88
24.05
48.18
28.21

2012
35.55
32.77
23.97
46.95
23.97

2011
34.08
30.97
22.91
44.94
20.55

2010
33.02
29.74
21.30
42.64
36.69

2012
15.15
12.74
13.07
15.34

2011
18.54
15.55
11.58
17.25

2010
15.18
12.42
12.83
15.81

Monsanto India
Ratio
Operating profit
Gross profit
Net profit
Return on capital employed

2014
24.94
22.89
20.66
42.42

2013
15.74
13.28
14.66
18.57

Return on Assets

199.56

236.01

222.68

433.68

407.34

2012
20.53
18.48
12.75
63.73
132.13

2011
19.91
17.87
13.00
135.06
88.72

2010
19.74
17.58
12.67
160.29
60.29

Nestle
Ratio
Operating profit
Gross profit
Net profit
Return on capital employed
Return on Assets

2014
21.39
17.77
12.16
47.79
245.68

2013
21.92
18.59
12.76
55.43
186.53

The above table compares the profitability ratios of Indian Tobacco Company to that of
Monsanto India and Nestle. We can see form the above analysis that the operating profit of
Indian Tobacco Company is much better and stable than its competitors. This means that ITC
generates more profit from its core business as compared to its competitors which is a good sign
for investors. The gross and net profit of ITC is also in a healthy state than Monsanto India and
Nestle. The net profit of ITC for the year of 2014 was 25.57. Return on capital employed of ITC
was 48.12 in 2014, but if we look on the overall time period, nestle was showing much better
returns than its competitors. Same is the case with the return on assets, Nestle was showing a
much more impressive performance.
Conclusion
From the above analysis we can say that the investors will select Indian Tobacco Company to
invest. If we look on all the parameters, ITC clearly takes the edge. It is having better
performance and stable trends from the last five years. Right from the liquidity conditions to the
profit the company generates, Indian Tobacco Company is being favored.