Analysis of Investment and

Financing Decisions by
HCC
Hindustan Construction
HCC & HREL
Company

Amogh Khadke A70059018037

Kushal S A70059018053
Mohit Chhabrani A70059018064
Sohan Shinde A70059018024
Ve d a n g M i ra s h i A70059018007
About HCC
• Hindustan Construction Company (HCC) is one
strong pioneer in Indian infrastructure industry
since 1926
• This ambitious endeavor is lead by Mr. Ajit
Gulabchand & Mr. Arjun Dhawan.
• Family to 2000 members, HCC is a Public Private
Company since 1999
• Flagship projects like Mumbai-Pune Expressway,
Bandra-Worli Sealink, Lavasa City have been
prestige to company.

MBA CPM B 2
 Capital Structure FR
HCC
• HCC to maintain its capital structure, it includes the equity capital and the
equity reserves which all referable to the shareholders of the company.
• The Company is striving hard to be the going concern company.
• Company’s aim is to maintain favorable capital structure and lessen the
cost of capital.
• The Company’s total debt to equity ratio is decreasing year on year.
• The company’s recent debt to equity ratio i.e. as on 31st March 2018 is
1.34.
• The company’s long term goal is maintain debt to equity ratio of 1.25.
• To maintain the capital structure, the company will make the minor
adjustments to meet their finical agreement by returning the capital
amount of the shareholders, calling for the new shares or change in the
dividend payment

MBA CPM B 3
 FR
HCC
Capital Structure
Total Debt and Equity
6000
5135.63 5034.96
5000
4396.69
4000 3725.6
in Cr.

3000 2689.98 2774.94

2000 1803.32
1327.19
1000

0
2014-15 2015-16 2016-17 2017-18
Finicial Year

Total Debt Total Equity

MBA CPM B 4
 Leverage FR
HCC

Leverage is defined as influence of one element over another in financial

management also it is defined as change in one variable which will results in
change of profits.

Financial Leverage Operating Leverage

It is defined as the usage of debt in
company’s capital structure for which
company has to pay interest cost ,the
degree of financial leverage (DFL) is
used to measure effect on earnings
per share due to change in Earning
Before Interest and taxes (EBIT) (S,
2015).
It is defined as usage of those assets
in company operation for which it must
pay fixed cost example manpower, the
degree of operational leverage is used
to measure the effect of earnings
before interest and taxes due to
changes in fixed and variable cost (S,
2015).

MBA CPM B 5
 FR
HCC
Leverage Calculations
Leverage
31 March 2018 31 March 2017 31 March 2016

Finance Cost 659.97 772.37 701.71

PBT 111.97 96.96 140.42

Fixed Cost
Employee benefits
expense 437.97 396.8 383.24
EBIT 771.94 869.33 842.13
Financial Leverage 6.894168081 8.965862211 5.997222618
Operational Leverage 1.567362748 1.456443468 1.455084132

MBA CPM B 6
 Cost of Equity over Market Volatility FR
HCC

% Return from Security Standard Deviation

3.71154968
• Based on Share Prices of Security HCC %Return

% Return from Market Standard Deviation

0.698134754
BSE 500 %Return
• Based on Index value on which Security is listed.
• Average Market Return effect over 1 year (252 market days) Correlation 0.342236519

Beta Value 1.819459404

Regression Analysis
• Regression of Security Returns over Market Return i.e. Y on X Average %Market
0.054598604
Return
• Resulting into Beta Value/Market volatility.
Market Return 14.74601499
Computation of Cost Of Equity
• Computation of Cost of Equity by CAPM Formula Risk Free Return % 7.46

Cost of Equity 20.71660849

MBA CPM B 7
 Unlevered Beta
Eliminating Impact of leverage

• Unlevered beta removes the financial

effects of leverage.
• Used for comparing companies with HCC Real Estate
different capital structures. HCC Value Ltd Value
• Unlevered beta calculations are 0.94 Beta(lev) 1.8194594 Beta(lev) 1.65491
which is almost close to market Beta(unlev) 0.9445183
volatility.
• Lower risks but also lower returns when
market fluctuations are considered.

MBA CPM B 8
 FR
HCC
Cost of Capital for HCC
Computation of Capital Structure
• From the findings of financial statement, total WACC (HCC)
debt and total equity is calculated. Capital Structure %age
Total Debt 3725.40 57.31
Computation of % of Debt and Equity Total Equity 2774.94 42.69
Value 6500.34
• Calculating the % weights debt & equity. Debt to Equity
Ratio 1.34
Weighted Average Cost of Capital Kd % 11.5013851
• Multiplying the % weights debt & equity to its Ke % 20.7166085
respective cost’s and adding both the equity and WACC % 15.4352858
debt components

MBA CPM B 9
 FR
HCC
Cost of Capital for HREL
Computation of Capital Structure
• From the findings of financial statement, total
debt and total equity is calculated. WACC (HCC Real Estate Ltd)
Capital Structure %age
Computation of % of Debt and Equity Total Equity 420.33 50.7264
Total Debt 408.29 49.2736
• Calculating the % weights debt & equity. Value 828.62
Kd 3.94083
Weighted Average Cost of Capital Ke 19.5177
• Multiplying the % weights debt & equity to its
respective cost’s and adding both the equity and WACC 11.8424
debt components

MBA CPM B 10
 FR
HCC
Analysis over Capital
Structure of HCC & HREL
Analysis
HCC HREL
• Cost of Capital for HCC is 15.43% and HREL is WACC 15.43 11.84
about 11.84%. Total Assets 11226.23 1005.1
Operating Profit 657.94 21.66
• The WACC gives the minimum rate of return Taxes 203.9614 4.8735
at which a company produces value for its Net operating
investors. Profit after tax 453.9786 16.7865
Invested capital 703.42 534.54
• ROIC is the amount of return a company
ROIC % 64.538768 3.1403637
makes above the average cost it pays for its PAT 34.44 -18.35
debt and equity capital. Equity 2774.94 42.03
ROE 1.2411079 -43.65929
ROA 5.8607386 2.1550095

MBA CPM B 11
 HCC
Hindustan Construction
THANK YOU
Company
Any Questions.?