Financial Analysis of Bajaj Auto 2013

A STUDY ON Financial Analysis of Bajaj Auto (Conducted on behalf of Som lalit Institute of management) (Submission on) A Project Report submitted in partial fulfillment of the requirements For the award of the PGP-1[B] (Financial Management) To Som lalit Institute of Management Submitted by: Mr. Akshay H. Khatri Mr. Bhavin Donda Mr. Darshan Patel Mr. Gopal Rakholiya Mr. Jaydeep Roziya Mr. Vijay Aslaliya Under the guidance of Prof. Arpita Amarnani Submitted to: Prof. Arpita Amarnani (January 2013)

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Financial Analysis of Bajaj Auto 2013 Acknowledgement We are glad to present the financial report for you. We are obliging to college to provide us this opportunity for practical study. We are thankful to Prof. Arpita Amarnani under whose guidance we are able to prepare this financial report and do analysis for the same. At last but not a least, we are thankful to the liberalization of our college for providing us a book which is very useful to us for preparing this report.

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Financial Analysis of Bajaj Auto 2013

INTRODUCTION Bajaj Auto Limited is an Indian motorized vehicle-producing company. Bajaj Auto is a part of Bajaj Group. It was founded byJamnalal Bajaj at Rajasthan in the 1930s. It is based in Pune, Mumbai, with plants in Chakan (Pune), Waluj (near Aurangabad) and Pantnagar in Uttaranchal. The oldest plant at Akurdi (Pune) now houses the R&D centre ahead. Bajaj Auto makes and exports automobiles, scooters, motorcycles and auto rickshaws. Bajaj Auto is the world's third-largest manufacturer of motorcycles and the second-largest in India. The Forbes Global 2000 list for the year 2005 ranked Bajaj Auto at 1,946.It features at 1639 in Forbes 2011 list. The company has changed its image from a scooter manufacturer to a two-wheeler manufacturer. Its product range encompasses scooterettes, scooters and motorcycles. Its growth has come in the last four years after successful introduction of models in the motorcycle segment. The company is headed by Rahul Bajaj who is worth more than US$1.5 billion.

Company Perspectives: Our Philosophy: We approach our responsibilities with ambition and resourcefulness. We organise ourselves for a transparent and harmonious flow of work. We respect sound theory and encourage creative experimentation. And we make our workplace a source of pride. We believe in: Transparency--a commitment that the business is managed along transparent lines. Fairness&mdash all stakeholders in the Company, but especially to minority shareholders. Disclosure--of all relevant financial and non-financial information in an easily understood manner. Supervision--of the Company's activities by a professionally competent and independent board of directors. Key Dates: Key Dates: 1945: Bajaj Auto is founded. 1960: Rahul Bajaj becomes the Indian licensee for Vespa scooters. 1977: Technical collaboration with Piaggio ends. 1984: Work begins on a second plant. 1998: Bajaj plans to build its third plant to meet demand.

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Financial Analysis of Bajaj Auto 2013

2000: Thousands of workers are laid off to cut costs. Company History: Bajaj Auto Limited is India's largest manufacturer of scooters and motorcycles. The company generally has lagged behind its Japanese rivals in technology, but has invested heavily to catch up. Its strong suit is high-volume production; it is the lowest-cost scooter maker in the world. Although publicly owned, the company has been controlled by the Bajaj family since its founding. Origins The Bajaj Group was formed in the first days of India's independence from Britain. Its founder, Jamnalal Bajaj, had been a follower of Mahatma Gandhi, who reportedly referred to him as a fifth son. 'Whenever I spoke of wealthy men becoming the trustees of their wealth for the common good I always had this merchant prince principally in mind,' said the Mahatma after Jamnalal's death. Jamnalal Bajaj was succeeded by his eldest son, 27-year-old Kamalnayan, in 1942. Kamalnayan, however, was preoccupied with India's struggle for independence. After this was achieved, in 1947, Kamalnayan consolidated and diversified the group, branching into cement, ayurvedic medicines, electrical equipment, and appliances, as well as scooters. The precursor to Bajaj Auto had been formed on November 29, 1945 as M/s Bachraj Trading Ltd. It began selling imported two- and three-wheeled vehicles in 1948 and obtained a manufacturing license from the government 11 years later. The next year, 1960, Bajaj Auto became a public limited company. Rahul Bajaj reportedly adored the famous Vespa scooters made by Piaggio of Italy. In 1960, at the age of 22, he became the Indian licensee for the make; Bajaj Auto began producing its first two-wheelers the next year. Rahul Bajaj became the group's chief executive officer in 1968 after first picking up an MBA at Harvard. He lived next to the factory in Pune, an industrial city three hours' drive from Bombay. The company had an annual turnover of Rs 72 million at the time. By 1970, the company had produced 100,000 vehicles. The oil crisis soon drove cars off the roads in favor of two-wheelers, much cheaper to buy and many times more fuel-efficient. A number of new models were introduced in the 1970s, including the three-wheeler goods carrier and Bajaj Chetak early in the decade and the Bajaj Super and three-wheeled, rear engine Autorickshaw in 1976 and 1977. Bajaj Auto produced 100,000 vehicles in the 1976-77 fiscal year alone. The technical collaboration agreement with Piaggio of Italy expired in 1977. Afterward, Piaggio, maker of the Vespa brand of scooters, filed patent infringement suits to block Bajaj scooter sales in the United States, United Kingdom, West Germany, and Hong Kong. Bajaj's scooter exports plummeted from Rs 133.2 million in 1980-81 to Rs 52 million ($5.4
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Financial Analysis of Bajaj Auto 2013

million) in 1981-82, although total revenues rose five percent to Rs 1.16 billion. Pretax profits were cut in half, to Rs 63 million.

New Competition in the 1980s Japanese and Italian scooter companies began entering the Indian market in the early 1980s. Although some boasted superior technology and flashier brands, Bajaj Auto had built up several advantages in the previous decades. Its customers liked the durability of the product and the ready availability of maintenance; the company's distributors permeated the country. The Bajaj M-50 debuted in 1981. The new fuel-efficient, 50cc motorcycle was immediately successful, and the company aimed to be able to make 60,000 of them a year by 1985. Capacity was the most important constraint for the Indian motorcycle industry. Although the country's total production rose from 262,000 vehicles in 1976 to 600,000 in 1982, companies like rival Lohia Machines had difficulty meeting demand. Bajaj Auto's advance orders for one of its new mini-motorcycles amounted to $57 million. Work on a new plant at Waluj, Aurangabad commenced in January 1984. The 1986-87 fiscal year saw the introduction of the Bajaj M-80 and the Kawasaki Bajaj KB100 motorcycles. The company was making 500,000 vehicles a year at this point. Although Rahul Bajaj credited much of his company's success with its focus on one type of product, he did attempt to diversify into tractor-trailers. In 1987 his attempt to buy control of Ahsok Leyland failed. The Bajaj Sunny was launched in 1990; the Kawasaki Bajaj 4S Champion followed a year later. About this time, the Indian government was initiating a program of market liberalization, doing away with the old 'license raj' system, which limited the amount of investment any one company could make in a particular industry. A possible joint venture with Piaggio was discussed in 1993 but aborted. Rahul Bajaj told the Financial Times that his company was too large to be considered a potential collaborator by Japanese firms. It was hoping to increase its exports, which then amounted to just five percent of sales. The company began by shipping a few thousand vehicles a year to neighboring Sri Lanka and Bangladesh, but soon was reaching markets in Europe, Latin America, Africa, and West Asia. Its domestic market share, barely less than 50 percent, was slowly slipping. By 1994, Bajaj also was contemplating high-volume, low-cost car manufacture. Several of Bajaj's rivals were looking at this market as well, which was being rapidly liberalized by the Indian government. Bajaj Auto produced one million vehicles in the 1994-95 fiscal year. The company was the world's fourth largest manufacturer of two-wheelers, behind Japan's Honda, Suzuki, and Kawasaki. New models included the Bajaj Classic and the Bajaj Super Excel. Bajaj also signed development agreements with two Japanese engineering firms, Kubota and Tokyo R & D. Bajaj's

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Financial Analysis of Bajaj Auto 2013

most popular models cost about Rs 20,000. 'You just can't beat a Bajaj,' stated the company's marketing slogan. The Kawasaki Bajaj Boxer and the RE diesel Autorickshaw were introduced in 1997. The next year saw the debut of the Kawasaki Bajaj Caliber, the Spirit, and the Legend, India's first fourstroke scooter. The Caliber sold 100,000 units in its first 12 months. Bajaj was planning to build its third plant at a cost of Rs 4 billion ($111.6 million) to produce two new models, one to be developed in collaboration with Cagiva of Italy. New Tools in the 1990s Still, intense competition was beginning to hurt sales at home and abroad during the calendar year 1997. Bajaj's low-tech, low-cost cycles were not faring as well as its rivals' higher-end offerings, particularly in high-powered motorcycles, since poorer consumers were withstanding the worst of the recession. The company invested in its new Pune plant in order to introduce new models more quickly. The company spent Rs 7.5 billion ($185 million) on advanced, computercontrolled machine tools. It would need new models to comply with the more stringent emissions standards slated for 2000. Bajaj began installing Rs 800 catalytic converters to its two-stroke scooter models beginning in 1999. Although its domestic market share continued to slip, falling to 40.5 percent, Bajaj Auto's profits increased slightly at the end of the 1997-98 fiscal year. In fact, Rahul Bajaj was able to boast, 'My competitors are doing well, but my net profit is still more than the next four biggest companies combined.' Hero Honda was perhaps Bajaj's most serious local threat; in fact, in the fall of 1998, Honda Motor of Japan announced that it was withdrawing from this joint venture. Bajaj Auto had quadrupled its product design staff to 500. It also acquired technology from its foreign partners, such as Kawasaki (motorcycles), Kubota (diesel engines), and Cagiva (scooters). 'Honda's annual spend on R & D is more than my turnover,' noted Ruhal Bajaj. His son, Sangiv Bajaj, was working to improve the company's supply chain management. A marketing executive was lured from TVS Suzuki to help push the new cycles. Several new designs and a dozen upgrades of existing scooters came out in 1998 and 1999. These, and a surge in consumer confidence, propelled Bajaj to sales records, and it began to regain market share in the fast-growing motorcycle segment. Sales of three-wheelers fell as some states, citing traffic and pollution concerns, limited the number of permits issued for them. In late 1999, Rahul Bajaj made a bid to acquire ten percent of Piaggio for $65 million. The Italian firm had exited a relationship with entrepreneur Deepak Singhania and was looking to reenter the Indian market, possibly through acquisition. Piaggio itself had been mostly bought out by a German investment bank, Deutsche Morgan Grenfell (DMG), which was looking to sell some shares after turning the company around. Bajaj attached several conditions to his purchase of a minority share, including a seat on the board and an exclusive Piaggio distributorship in India. In late 2000, Maruti Udyog emerged as another possible acquisition target. The Indian government was planning to sell its 50 percent stake in the automaker, a joint venture with
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Financial Analysis of Bajaj Auto 2013

Suzuki of Japan. Bajaj had been approached by several foreign car manufacturers in the past, including Chrysler (subsequently DaimlerChrysler) in the mid-1990s. Employment fell from about 23,000 in 1995-96 (the year Bajaj suffered a two-month strike at its Waluj factory) to 17,000 in 1999-2000. The company planned to lay off another 2,000 workers in the short term and another 3,000 in the following three to four years. Principal Subsidiaries: Bajaj Auto Finance Ltd.; Bajaj Auto Holdings Ltd.; Bajaj Electricals Ltd.; Bajaj Hindustan Ltd.; Maharashtra Scooters Ltd.; Mukand Ltd. Principal Competitors: Honda Motor Co., Ltd.; Suzuki Motor Corporation; Piaggio SpA. Sources http://www.bajajauto.com/bajaj_corporate.asp http://en.wikipedia.org/wiki/Bajaj_Auto http://www.fundinguniverse.com/company-histories/bajaj-auto-limited-history/

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Financial Analysis of Bajaj Auto 2013 1 Profitability Ratios

1.1 Gross profit ratio

Meaning:
This ratio measures the relationship between Gross Profit and Net Sales.

Objective:
The objective of computing this ratio is to measure the ability of the firm to meet its short-term obligations and to reflect the short-term financial strength\solvency of a firm. It suggests whether firm can meet its short term obligation from short-term assets.

Formula:

Gross Profit Ratio = Gross Profit x 100

Sales

Particular Gross profit Net sales G.P ratio%

2012-11 4553.3 18880.27

24.12

2011-10 4028.98 15998.1

25.18

2010-09 3300.52 11508.5

28.68

2009-08 1852.11 8436.94

21.95

(Rs. cr) 2008-07 2007-06 1899.05 2234.68 8663.29 9292.23

21.92 24.05

GROSS PROFIT RATIO

35.00 30.00 25.00 20.00 15.00 10.00 5.00 0.00 25.18 28.68 21.95 21.92 24.05

G.P. %

24.12

2012-11

2011-10

2010-09

2009-08

2008-07

2007-06

Years

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Financial Analysis of Bajaj Auto 2013

Interpretation: Gross Profit ratio is fluctuating from last six years but still it lies in 21 to 28, so it can be said that from sales, company is able to earn average 24.5% Gross profit i.e. Profit after deducting manufacturing expenses.

1.2 Net profit ratio

Meaning:
This ratio measures the relationship between Net profit and net sale.

Objective:
The main objective of computing this ratio is to determine the overall profitability, due to various factors such as operational efficiency, trading on equity etc.

Formula:

Net Profit after tax x 100 Sales

Particular Net profit Net sales N.P ratio in %

2012-11 3004.05 18880.27 15.91

(Rs. cr) 2011-10 201020092008200709 08 07 06 3339.73 1703.63 654.5 755.78 1237.1 15998.1 11508.5 8436.94 8663.29 9292.23 20.87 14.80 7.75 8.72 13.31

NET PROFIT RATIO

25.00 20.00 NET PROFIT % 15.00 10.00 7.76 5.00 0.00 2012-11 2011-10 2010-09 2009-08 2008-07 2007-06 YEARS 15.91 20.88 14.80 8.72

13.31

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Financial Analysis of Bajaj Auto 2013 Interpretation:

The net profit Ratio is also fluctuating from last six years. But from last 3 years it is showing increasing trend. So, It can said that company is has average income of 12% from last 6 years. So, its good for a company.

1.3 Expense Ratio

Meaning:
It is a ratio that shows relationship between Expenses and Sales. Expenses include different expenses like Administrative, Financial, Selling and Distribution.

Objective:
To identify the causes on the variation in the operating ratio, the following ratio can be calculated.

Formula:
Particular Total expense Net sales Expense ratio%

Expenses Sales
2012-11 15976.85 18880.27 84.62

x 100

2011-10

201009

200908

200807

(Rs. cr) 200706

13365.2 9486.52 7769.07 7931.75 8299.04 15988.12 83.59 11508.5 8436.94 8663.29 9292.23 82.43 92.08 91.55 89.31

Interpretation:
From sales company spends almost 85% in expenses. But still company manages to reduce its expenses from last several years. The average expenses are 88% from sales. So, the reduction in expense ratio is good for company.

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Financial Analysis of Bajaj Auto 2013

EXPENSE RATIO
94.00 92.00 EXPENSE RATIO % 90.00 88.00 86.00 84.00 82.00 80.00 78.00 76.00 2012-11 2011-10 2010-09 2009-08 2008-07 2007-06 YEARS 84.62 83.59 82.43 92.08 91.56 89.31

1.4 Operating ratio

Meaning:
This ratio measures the relationship between the operating cost and net sales.

Objective:
The main objective of computing this ratio is to determine the operational efficiency with which production or purchased or selling operation of the management.

Formula:

Cost Of Goods sold + Operating Expenses x 100 Sales

2011-10 11969.12 952.58 15998.12 80.77 2010-09 8207.98 1136.11 11508.5 81.19 2009-08 6584.83 1048.07 8436.94 90.47 (Rs. cr) 2008-07 2007-06 6764.24 1015.43 8663.29 89.80 7057.55 1077.94 9292.23 87.55

Particular 2012-11 COGS Operating expense Net sales Operating ratio 14326.97 1215.77 18880.27 82.32

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Financial Analysis of Bajaj Auto 2013

Operating Ratio
92.00 90.00 88.00 86.00 84.00 82.00 80.00 78.00 76.00 74.00 90.47 OPERATING RATIO % 89.80 87.55

82.32 80.77

81.19

2012-11

2011-10

2010-09

2009-08

2008-07

2007-06

YEARS

Interpretation:
Higher the operating ratio, lower the financial condition and vice-a-versa. Because operating ratio shows overall expenses including cost of goods sold. So, lower ratio is better. And company is able to reduce its operating profit from six years.

1.4.1 Return on investment/Capital employed

Meaning:
This ratio measures a relationship between net profit before interest and tax and capital employed.

Objective:
The objective of calculating this ratio is to find out the efficiency of the management to invest long term funds, supplied by the creditors and shareholders.

Formula:
Return Of Capital Employed Ratio = Net Profit (EBIT) x 100 Capital Employed
(Rs. cr) 2007-06 1733.39 7159.75

Particular EBIT Capital employed

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2012-11 4048.41 6455.91

2011-10 4352.44 5101.06

2010-09 2417.28 4266.92

2009-08 979.1 3191.19

2008-07 1139.89 2921.93

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Financial Analysis of Bajaj Auto 2013

Return on investment% 62.70 85.32 56.65 30.68 39.01 24.21

Return on Investment/Capital Employed

90.00 80.00 70.00 60.00 50.00 40.00 30.00 20.00 10.00 0.00 85.32 62.71

R.O.I.%

56.65 39.01 30.68 24.21

2012-11

2011-10

2010-09

2009-08

2008-07

2007-06

YEARS

Interpretation:
Of course, higher rate on investment is good for company. And comparing to 2006-2010, company has increased its return on investment for last 2 years. So, companys financial condition is better than last several years.

1.4.2 Return on share holders fund

Meaning:
This ratio measures a relationship between net profit after interest, tax and shareholders funds.

Objectives:
The objective of computing this ratio is to find out how efficiently the funds supplied by the equity shareholder have been used.

Formula:
Return on Shareholders = Net Profit After Tax x 100 Shareholders fund
Particular 2012-11 2011-10 2010-09 2009-08 (Rs. cr) 2008-07 2007-06

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Financial Analysis of Bajaj Auto 2013

Shareholders fund Net profit (After tax) Return on shareholders fund% 6041.07 3004.05 4910.22 3339.73 2928.34 1703.63 1869.69 654.5 1587.59 755.78 5534.32 1237.1

201.10

147.02

171.89

285.67

210.06

447.36

Return on Share Holders Fund

500.00 450.00 400.00 350.00 300.00 250.00 200.00 150.00 100.00 50.00 0.00 447.36

R.O.S.F.%

285.67 201.10 147.02 171.89 210.06

2012-11

2011-10

2010-09

2009-08

2008-07

2007-06

YEARS

Return on shareholders fund is almost double than share holders fund. And especially from last 6 years company has earned profit between 150 to 200% on shareholders fund. So company has better value in market

Interpretation:

1.4.3 Return on equity share capital

Meaning:
This ratio measures a relationship between net profit after interest, tax and pref. dividend and equity share capital.

Objectives:
The objective of computing this ratio is to find out how efficiently the capital is supplied by the equity shareholder has been used. Formula: Return on equity share capital = Profit (PAT) Preference Dividend x 100
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Financial Analysis of Bajaj Auto 2013

Equity Capital
Particular Net profit (After tax) Equity capital Return on equity share capital 2012-11 3004.05 289367020 103.81 2011-10 3339.73 2010-09 1703.63 2009-08 654.5 (Rs. cr) 2008-07 2007-06 755.78 1237.1 144683510 52.24 101183510 122.26

289367020 144683510 144,683,510 115.42 117.75 45.24

Return on Equity Share Capital

140.00 120.00 R.O.E.S.C.(In Rs) 100.00 80.00 60.00 40.00 20.00 0.00 2012-11 2011-10 2010-09 2009-08 2008-07 2007-06 YEARS 45.24 52.24 103.81 115.42 117.75 122.26

Interpretation:
The return on investment is the subject to worry as it is declining, but still it is above 100% for last year. The highest is 122.26% in the year 2006-07. But after it, in next two years, it was declining in nature. The lowest was 45.24% in the year 2008-09. But the condition is good of return on equity share capital.

1.4.4 Earnings per share (EPS)

Meaning:
This ratio measures the earnings available to an equity shareholder on the basis of per share.

Objective:
The objective of computing this ratio is to measure the profitability of the firm on the basis of per equity share.
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Financial Analysis of Bajaj Auto 2013 Calculation:

Earnings Per Share = Net Profit (PAT) Preference dividend x 100 Number of Equity Share
2012-11 3004.05 289367020 103.81 2011-10 3339.73 289367020 115.42 2010-09 1703.63 2009-08 654.5 (Rs. cr) 2008-07 2007-06 755.78 1237.1

Particular Net profit (After tax) Numberof equity shares Earnings per share in Rs.

144683510 144,683,510 144683510 101183510 117.75 45.23 52.23 122.26

Earnings per share (EPS)

140.00 120.00 E.P.S.(in Rs) 100.00 80.00 60.00 40.00 20.00 0.00 2012-11 2011-10 2010-09 2009-08 2008-07 2007-06 YEARS 45.24 52.24 103.81 115.42 117.75 122.26

Interpretation:
The earnings per share are the subject to worry as it is declining, but still it is above 100% for last year. The highest is 122.26% in the year 2006-07. But after it, in next two years, it was declining in nature. The lowest was 45.24% in the year 2008-09. But the condition is good of return on equity share capital.

1.4.5 Dividend per share

Meaning:
This ratio measures relationship between dividend per share and number of equity shares.
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Financial Analysis of Bajaj Auto 2013 Objectives:

The objective of computing this ratio is to find out net distributed profit after interest and pref. dividends, belongs to equity shareholder. Formula: Dividend Per Share = Total Dividend Declared Number of Equity Share
(Rs. cr) 2008-07 2007-06 289.37 404.73

Particular Total dividend declared Number of shares Dividend per share

2012-11 1302.15

2011-10 1157.47

2010-09 578.73

2009-08 318.3

289367020 45.00

289367020 144683510 40.00 40.00

144683510 22.00

144683510 20.00

101183510 40.00

Divident per Share

50.000 45.000 40.000 35.000 30.000 25.000 20.000 15.000 10.000 5.000 0.000 45.000 40.000 40.000 40.000

D.P.S.(In Rs.)

22.000

20.000

2012-11

2011-10

2010-09

2009-08

2008-07

2007-06

YEARS

Interpretation:
The dividend per share is highest in last year i.e. in 2011-12. It is 45. Even in the recession year 2008-09 Bajaj auto is able to declare 20rs.Dividend. And after it, it is increasing since last year. In 2010 and 2011 it has declared the same dividend 22.

2 Activity/Turnover ratios
2.1 Overall turnover ratio
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Financial Analysis of Bajaj Auto 2013 Meaning:

This ratio measures a relationship between Net Sales and Capital Employed.

Objective:
This ratio measures the effectiveness with which the firm uses financial resources as its disposal. A Company must take full use of fixed assets as its disposal. A low ratio may signify that the capital is lying idle. A high ratio indicates that either the firm overtaking to an extent that its financial state is in danger.

Formula:

Overall Turnover Ratio =

Net Sales Capital Employed (Rs. cr) 2008-07 2007-06 8663.29 9292.23 2921.93 2.96 7159.75 1.30

Particular Net sales Capital employed Overall turnover ratio(times)

2012-11 18880.27 6455.91 2.92

2011-10 15988.12 5101.06 3.13

2010-09 11508.5 4266.92 2.70

2009-08 8436.94 3191.19 2.64

Overall Turnover Ratio

3.50 3.00 2.50 O.T.R. 2.00 1.50 1.00 0.50 0.00 2012-11 2011-10 2010-09 2009-08 2008-07 2007-06 YEARS 1.30 2.92 3.13 2.70 2.64 2.96

Interpretation:
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Financial Analysis of Bajaj Auto 2013

Overall turnover ratio is comparatively low in 2011-12 to 2010-11. The highest turnover ratio is in the year 2010-11 i.e. 3.13. Net sales in 2011-12 are 2.92 times than total capital employed which indicates strong position of a company.

2.3.1 Fixed asset turnover ratio

Meaning:
This ratio measures a relationship between net sales and fixed assets of the firm.

Objective:
The objective of calculating this ratio is to point out the efficiency of the firm in the use of fixed assets.

Formula:

Fixed Assets Turnover Ratio =

Sales . Fixed Assets

Particular Net sales Fixed assets Fixed assets turnover ratio

2012-11 18880.27 1523.38 12.39

2011-10 15988.12 1552.57 10.30

2010-09 11508.5 1521.11 7.57

2009-08 8436.94 1548.09 5.45

(Rs. cr) 2008-07 2007-06 8663.29 9292.23 1292.82 1296.39 6.70 7.17

Fixed asset turnover ratio

14.00 12.00 10.00 F.A.T.R. 8.00 6.00 4.00 2.00 0.00 2012-11 2011-10 2010-09 2009-08 2008-07 2007-06 YEARS 12.39 10.30 7.57 5.45 6.70 7.17

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Financial Analysis of Bajaj Auto 2013

2.3.2 Debtors ratio

Meaning:
This period shows an average period for which credit sales remain outstanding and measures the quality of debtors. It indicates the rapidity or slowness with which the money is collected from debtors.

Objectives:
The Objective of calculating this ratio shows the number of days taken to collect the dues of credit sales. It shows the efficiency or otherwise of collection policy of an enterprise.

Formula:

Debtors Ratio = (Debtors + bills Receivable) x Number of Days Credit Sales

2012-11 422.79 18880.27 360 8.06 2011-10 362.76 15998.12 360 8.16 2010-09 239.45 11508.5 360 7.49 2009-08 358.65 8436.94 360 15.30 (Rs. cr) 2008-07 2007-06 275.31 529.83 8663.29 9292.23 360 360 11.44 20.53

Particular Debtors Credit sales No. days Debtor ratio ( in times)

Debtor ratio
25.00 20.00 Debtor ratio 15.00 10.00 8.06 5.00 0.00 2012-11 2011-10 2010-09 2009-08 2008-07 2007-06 years 15.30 11.44 8.16 7.49 20.53

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Financial Analysis of Bajaj Auto 2013 Interpretation:

Lesser the debtor ratio betters the conditions. And the debtor ratio is continuously declining. It means that in the year 2011-12 collection is made within average 8 days after the sell is done on credit. At the initial stage the period was 21 days but due to betterment in much internal efficiency, company has managed to reduce it up to 8 days.

2.3.3 Debtors turnover ratio

Meaning:
It is relationship between the annual days and the Debtors ratio.

Objectives:
The main purpose of prepare this ratio is to determine the number of times the amount of credit sales is collected during the year.

Formula: Debtors Turnover Ratio

Particular No of days Debtors ratio Debtors turnover ratio 2012-11 360 8.06 44.67 2011-10 360 8.16 44.12

Number of days Debtors ratio

2010-09 360 7.49 48.06 2009-08 360 15.3 23.53 (Rs. cr) 2008-07 360 11.44 31.47 2007-06 360 20.53 17.54

Debtor turnover Ratio

60.00 D.T.R.(NO. OF TIMES) 50.00 40.00 30.00 20.00 10.00 0.00 2012-11 2011-10 2010-09 2009-08 2008-07 2007-06 YEARS 23.53 17.54 44.67 44.12 48.06

31.47

Interpretation:
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Financial Analysis of Bajaj Auto 2013

From the graph it can be analyzed that the credit sales is collected approx. 45 times in the year 2011-12 which is comparatively very good then in the year 2006-07. In the year 2009-10 company was able to collect 48 times so it is very good no. because collection is done frequently.

2.3.4 Creditors ratio

Meaning:
The ratio is computed by dividing creditors and bills payable by the average daily purchases. The average daily purchases are obtained by dividing the total annual sales by 360.

Objectives:
The Objective of calculating this ratio shows the number of days make payment the dues of credit purchases. It shows the efficiency or otherwise of payment policy of an enterprise.

Formula:

Creditors ratio =

Creditors + Bills Payable x Number of Days Credit Purchases

2011-10 2010-09 1943.08 1571.2 11880.3 8119.92 360 360 58.87 Days 69.65 days 2009-08 799.98 6441.63 360 44.70 days 2008-07 878.75 6685.37 360 47.31 days (Rs. cr) 2007-06 137.451 6892.3 360 7.17 Days

Particular 2012-11 Creditors 2003.08 Purchases 14196.69 No.of 360 days Creditors 50.79 ratio days

Creditors Ratio
80.00 Creditors ratio(no.of times) 70.00 60.00 50.00 40.00 30.00 20.00 10.00 0.00 2012-11 2011-10 2010-09 2009-08 2008-07 7.18 2007-06 50.79 58.88 44.71 47.32 69.66

Group No. 6

Years

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Financial Analysis of Bajaj Auto 2013 Interpretation:

Higher the credit ratio betters the position. In the year 2009-10 it has reached to highest almost 70 days to pay credit purchase. So company would have required lesser working capital in that year. The worst is in initial years that are 7.18 in the year 2006-07. In last year 2011-12 the credit ratio rate is 50.79 which is good.

2.3.5 Creditors turnover ratio

Meaning:
This ratio establishes a relationship between net credit purchases and avg. trade creditors.

Objective:
The objective of computing this ratio is to determine the efficiency with which the creditors are arranged.

Formula: Creditors Turnover Ratio

Number of days Creditors ratio

2009-08 360 44.7 8.05 times (Rs. cr) 2008-07 2007-06 360 360 47.319 7.60 times 7.179 50.14 Times

Particular No. of days Creditors ratio Creditors turnover ratio

2012-11 360 50.794 7.08 times

2011-10 360 58.879 6.11 times

2010-09 360 69.659 5.16 times

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Financial Analysis of Bajaj Auto 2013 Creditors turnover ratio

Creditors turnover ratio(no. of times) 60.00 50.00 40.00 30.00 20.00 10.00 0.00 2012-11 2011-10 2010-09 2009-08 2008-07 2007-06 Years 7.09 6.11 5.17 8.05 7.61 50.15

Interpretation:
Lesser the rate betters the situation. In the last year it is 7.09 it shows that in last year company has paid only for 7 times to its receivers so it would have required lesser working capital. The ratio is worst in the year 2006-07.

2.3.6 Stock turnover ratio

Meaning:
This ratio establishes a relationship between costs of goods sold & average stock.

Objectives:
The objective of computing this ratio is to determine the efficiency with which the inventory is utilized.

Formula:
Particular Cost of sales (COGS) Average stock Stock turn ratio

Stock Turnover Ratio = Cost of goods Sold Average Stock 2012-11 14326.97 2011-10 2010-09 2009-08 6584.83 2008-07 6764.24 (Rs. cr) 2007-06 7057.55

11970.4

8207.98

390.865 36.65 times

302.4 39.58 times

237.2 34.60 times

225.64 29.18 times

203.965 33.16 times

170.49 41.39 Times

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Financial Analysis of Bajaj Auto 2013

stock turnover Ratio

45.00 40.00 35.00 30.00 25.00 20.00 15.00 10.00 5.00 0.00 Stock turnoverin times 36.65 39.59 34.60 30.86 35.29 41.40

2012-11

2011-10

2010-09

2009-08

2008-07

2007-06

years

Interpretation:
The stock turnover ratio is 36.65 in the last year. It means that average stock is 36.65 times than cost of goods sold. It shows good position of the company. The lowest is in the year 2008-09 and the highest in the year 2006-07.

2.3.7 Working capital turnover

Meaning:
This ratio establishes relationship between net sales and net working capital. This ratio shows that from the working capital how many times it is turned into sales. Higher the ratio, the working capital of the company is good.

Formula:
Particular Net sales Net working capital Working capital turnover
Group No. 6

Working capital turnover = Sales Net working capital 2012-11 18880.27 2,528.03 7.47 2011-10 15988.12 445.94 35.85 2010-09 11508.5 974.70 11.81 2009-08 8436.94 1,111.86 7.59 (Rs. cr) 2008-07 8663.29 606.46 14.29 2007-06 9292.23 2,319.66 4.01

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Financial Analysis of Bajaj Auto 2013 Working capital turnover ratio

40.00 W.C.T.R.(NO. OF TIMES) 35.00 30.00 25.00 20.00 15.00 10.00 5.00 0.00 2012-11 2011-10 2010-09 2009-08 2008-07 2007-06 YEARS 11.81 7.47 7.59 4.01 14.29 35.85

Interpretation:
Working capital turnover ratio is highest in the year 2010-11 and lowest is in the year 2006-07. In the year 2011-12 the working capital is 7.47 times than sales.

2.3.8 Book value per share

Meaning:
This measures relationship between proprietors fund & number of equity shares.

Formula:
Particular Proprietors fund Number of shares Book value per share

Book value per share : Proprietors fund No. of shares 2012-11 6041.07 2011-10 4910.22 2010-09 2928.34 2009-08 1869.69 144683510 (Rs. cr) 2008-07 2007-06 1587.59 5534.32 144683510 101183510

289,367,020

289,367,020 144683510

208.77

169.69

202.40

129.23

109.73

546.96

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Financial Analysis of Bajaj Auto 2013 Book value per share

600.00 500.00 B.V.P.S(In Cr. Rs.) 400.00 300.00 200.00 100.00 0.00 2012-11 2011-10 2010-09 2009-08 2008-07 2007-06 Years 208.77 169.69 202.40 129.23 109.73 546.96

Interpretation:
Book value per share depends on no. of shares and proprieties funds. So according to no. of shares the condition is ideal in the year 2010-11. And t he worst in the year 2006-07.

2.4 Liquidity ratio

3.4.1 Current ratio

Meaning:
This ratio establishes the relationship between current assets and current liabilities.

Objective:
The objective of computing this ratio is to measure the ability of the firm to meet its short-term obligation.

Formula:

Current Ratio = Current Assets Current Liability

(Rs. cr) 2008-07 2007-06 1300.1 3508.97 1043.25 1498.97
Page 27

Particular Current assets Current liabilities

Group No. 6

2012-11 4511.62 2562.12

2011-10 2325.31 2426.65

2010-09 1137.62 2026.25

2009-08 1986.43 1213.41

Financial Analysis of Bajaj Auto 2013

Current ratio 1.76 0.96 0.56 1.64 1.25 2.34

Current Asset Ratio

Current asset ratio(no of times) 2.50 2.00 1.76 1.50 1.00 0.50 0.00 2012-11 2011-10 2010-09 2009-08 2008-07 2007-06 Years 0.96 0.56 1.64 1.25 2.34

Interpretation:
Current ratio 2:1 is the ideal condition. At initial stage company had to kept higher rate of current asset but after certain years the rate is near to 2. And in last year it is good because its 1.76 and just near to 2. So company has a better condition.

2.4.1 Liquid/ Quick/Acid ratio

Meaning:
This ratio establishes the relationship between liquid assets and liquid liabilities.

Objectives:
The objective of computing this ratio is to measure the ability of the firm to meet its short-term obligation as and when due without relying upon the realization of stock

Formula:
Particular Liquid assets

Liquid Ratio = Liquid Assets Liquid Liability 2011-10 2325.31 2010-09 1137.62 2009-08 1986.43 2008-07 1300.1 (Rs. cr) 2007-06 3508.93

2012-11 4511.82

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Financial Analysis of Bajaj Auto 2013

Liquid liabilities Liquid ratio 2562.12 1.76:1 2425.57 0.95:1 2024.16 0.56:1 1213.41 1.63:1 1043.25 1.24:1 1498.97 2.34:1

Quick Ratio
2.50 liquid ratio(no of times) 2.00 1.76 1.50 1.00 0.50 0.00 2012-11 2011-10 2010-09 2009-08 2008-07 2007-06 Years 0.96 0.56 1.64 1.25 2.34

Interpretation:
1:1 is the best quick ratio. So, in the year 2010-11 it is the best because it is just near to 1. And the lowest is 0.56 in the year 2009-10. In the initial years, the ratio has reached to 2.34 which the highest one. But overall the situation is acceptable.

2.5 Leverage ratio

3.5.1 Proprietary ratio

Meaning:
This ratio measures the proportion of owners fund as compare to total funds.

Objective:
The objective of computing this ratio is to measure the relative proportion of equity and pref. sh. capital and reserves & surplus (inclusive of balance of profit and losses account) to total funds.

Formula: Proprietary Ratio = Proprietors Fund

Net Assets Particular
Group No. 6

x 100

2012-11

2011-10

2010-09

2009-08

(Rs. cr) 2008-07 2007-06

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Financial Analysis of Bajaj Auto 2013

Proprietor fund Net assets Proprietary ratio% 6041.07 6455.91 93.57 4910.22 5265.08 93.26 2928.34 4268.61 68.60 1869.69 3443.88 54.29 1587.59 2932.91 54.13 5534.32 7233.92 76.50

Proprietary Ratio
100.00 90.00 80.00 70.00 60.00 50.00 40.00 30.00 20.00 10.00 0.00 proprietary ratio(no of times) 93.57 93.26 76.51 68.60 54.29 54.13

2012-11

2011-10

2010-09

2009-08

2008-07

2007-06

Years

Interpretation: In the year 2011-12 proprietarys fund is almost 94% to the net assets so the financial condition of a firm is good if we see the proprietary ratio. In the recession year the ratio was reached at the bottom 54.13 in the year 2007-08.

2.5.1 Debt equity ratio

Meaning:
This ratio establishes a relationship between long-term debts and shareholders funds.

Objective:
The objective of computing this ratio is to measure the relative proportion of debt and equity in financing the assets of the firm.

Formula: Debt-Equity Ratio = Long Term Liabilities

Shareholders Fund

x 100

(Rs. cr)
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Financial Analysis of Bajaj Auto 2013

Particular Long term liability Share holders fund Debt ratio equity 2012-11 254.55 6041.07 4.21 2011-10 331.59 4910.22 6.75 2010-09 1338.58 2928.34 45.71 2009-08 1321.5 1869.69 70.68 2008-07 1334.34 1587.59 84.05 2007-06 1625.43 5534.32 29.37

Debt Equity ratio

90.00 80.00 70.00 60.00 50.00 40.00 30.00 20.00 10.00 0.00 84.05 70.68 D.E. Ratio(no of times)

45.71 29.37 6.75 2011-10 2010-09 2009-08 2008-07 2007-06

4.21 2012-11

Years

Interpretation:
Lower the ratio betters the situation. And the best year for company is 2011-12. Company has enough shareholders fund to overcome their long term liabilities. In the year 2007-08 the condition was bad as long term liabilities are 84.05%. Equity is higher than Debt of the company in other years.

2.5.2 Long term fund to fixed assets

Meaning:
This ratio establishes a relationship between long-term funds to fixed assets.

Objectives:
The objective of computing this ratio is to measure the relation between long-term funds and fixed assets. With the help of this ratio one can move
Group No. 6 Page 31

Financial Analysis of Bajaj Auto 2013

how far the long-term funds have been invested in fixed assets and one can decide how efficiently the capital is used in the enterprise.

Formula:
Long term fund to fixed assets ratio = Long Term Fund x 100 Fixed Assets
(Rs. cr) 2008-07 2007-06 1334.34 1625.43 1292.82 103.21 times 1296.39 125.38 times

Particular Long term fund Fixed assets Long term fund to fixed assets ratio

2012-11 254.55 1521.24 16.73 times

2011-10 190.84 1548.29 12.32 times

2010-09 1338.58 1521.11 88 times

2009-08 1321.5 1548.09 85.36 times

Interpretation: The highest ratio is 125.38 in the year 2006-07 and the lowest is in the year 2010-11 i.e. 12.32 times. At initial year the ratio of long term fund to fixed assets is very high but after that the ratio is decreasing which is good for the company.

Long Term fund to fixed Assets

140.00 120.00 ratio(no of times) 100.00 80.00 60.00 40.00 20.00 0.00 2012-11 2011-10 2010-09 2009-08 2008-07 2007-06 Years 16.73 21.42 88.00 85.36 103.21 125.38

2.6 Coverage ratio

2.6.1 Interest coverage ratio
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Financial Analysis of Bajaj Auto 2013 Meaning:

This ratio indicates as to how many times the profit covers the payment of interest on debentures and other long term loans.

Objective:
The objective of this ratio is to know the debt service capacity of the firm in respect of fixed interest on long term debts.

Formula: Interest coverage ratio = Profit before depreciation, interest & tax
Interest paid
Particular Profit before depreciation, interest & tax Interest paid Interest coverage ratio 2012-11 4194.03 2011-10 4475.28 2010-09 2553.56 2009-08 1108.89 (Rs. cr) 2008-07 2007-06 1313.85 1108.89

22.24 188.58

1.69 2648.09

5.98 427.01

21.01 52.77

5.16 254.62

5.34 207.65

Interest Coverage Ratio

3000.00 Ratio(no of times) 2500.00 2000.00 1500.00 1000.00 500.00 0.00 188.58 2012-11 2011-10 2010-09 427.02 254.62 207.66 52.78 2009-08 2008-07 2007-06 2648.09

Years

Interpretation:
Higher the ratio betters the situation. And the highest is in the year 2010-11. The profit has reached to 2648.09 times than interest. In the recession year profit has reached to the bottom i.e. 52.78 times to the Interest paid In the last year it is 188.58 which is quite good.

3.) Cost of capital

1.) Cost of equity:
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Financial Analysis of Bajaj Auto 2013

Beta: = 0.0001/0.000135 = 0.70 As per RBI, Risk free rate is 12.5%

Re= Rf + (Rm-Rf) = Re= 12.5 +0.702186(0.000557-0.125) =Re= 12.41% WACC: For the year 2006-07: Source Equity Reserves and surplus Debt Proportion Cost of capital Weighted Avg. 0.01821 12.41 0.2259861 0.99 12.41 12.2859 0.004 8.9 0.0356 12.5474861

For the year 2007-08:

Source Equity Reserves and surplus Debt Market price 144.68 1442.91 1327.39 2914.98 proportion 0.0496 0.495 0.455 cost of capital 12.41 12.41 8.9 weighted average 0.615536 6.14295 4.0495 10.807986

For the year 2008-09:

Sources Equity Reserves and surplus Debt Market price 144.7 1725 1570 3439.7 Proportion 0.042067622 0.501497224 0.456435154 Cost of capital 12.41 12.41 8.9 weighted average 0.522059191 6.223580545 4.062272873 10.80791261

For the year 2009-10:

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Financial Analysis of Bajaj Auto 2013

Sources Equity Reserves and surplus Debt Total Market price 144.68 2783.66 1325.6 4253.94 Proportion 0.034010823 0.654372182 0.311616995 1 Cost of capital 12.41 12.41 8.9 weighted average 0.42194 8.121104 2.7768 11.319844

For the year 2010-11:

Sources Equity Reserves and surplus Debt Total Market price 289.37 4620.85 301.62 5211.84 Proportion 0.055521658 0.886606266 0.057872076 1 Cost of capital 12.41 12.41 8.9 weighted average 0.688755 11.002706 0.51531 12.206771

For the year 2011-12:

Sources Equity Reserves and surplus Debt Market price Proportion Cost of capital weighted average 289.37 0.045859027 12.41 0.569110522 5751.7 0.911522839 12.41 11.31199843 268.92 0.042618134 8.9 0.379301394 6309.99 12.26041035

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