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87
CHAPTER-4
REASONS OF REPLACEMENT OF THE SENSEX COMPANIES
AND PROFITABILITY ANALYSIS OF SENSEX
REPRESENTATIVE COMPANIES
As per the objective of our study the researcher examined and studied the causes of
replacement (Inclusion and Exclusion) of a company in the list of 30 constituents
that made the SENSEX of the Bombay Stock Exchange. The causes of Inclusion and
Exclusion were gleaned out after discussing the issue with brokers at Delhi, site of
Bombay Stock Exchange, and by studying the reports of the companies which were
included and excluded in the fabric of SENSEX. Table 4.1 and 4.3 portrays those
companies which were replaced (included and excluded) in the SENSEX 30 list by
the Bombay Stock Exchange (with reasons) during the study period:
Table 4.1 Reasons for the Inclusion of Companies in SENSEX-30
Sr.
No.
Name of the
Company
Scrip
Code
Inclusio
n Date
Reasons
1. National
Thermal Power
Corporation ltd.
532555
6 June,
2005
Listed History, Liquidity (Trading
Frequency, Number of Trades and
Value of Shares traded), Market
Capitalization, Track Record and
Industry Representation
2. Tata
Consultancy
Services Ltd.
532540
6 June,
2005
Listed History, Liquidity (Trading
Frequency, Number of Trades and
Value of Shares traded), Market
Capitalization, Track Record and
Industry Representation
3. Reliance
Communication
Ltd.
532712
12 June,
2006
Listed History, Liquidity (Trading
Frequency, Number of Trades and
Value of Shares traded), Market
Capitalization, Track Record and
Industry Representation
4. Mahindra & 500520 09 July, Listed History, Liquidity (Trading
Frequency, Number of Trades and
88
Mahindra Ltd. 2007 Value of Shares traded), Market
Capitalization, Track Record and
Industry Representation
5. DLF Ltd. 532868
19
Novemb
er, 2007
Listed History, Liquidity (Trading
Frequency, Number of Trades and
Value of Shares traded), Market
Capitalization, Track Record and
Industry Representation
6. Jaiprakash
Associates Ltd.
532532
14
March,
2008
Listed History, Liquidity (Trading
Frequency, Number of Trades and
Value of Shares traded), Market
Capitalization, Track Record and
Industry Representation
7. Sterlite
Industries ltd.
500900
28 July,
2008
Listed History, Liquidity (Trading
Frequency, Number of Trades and
Value of Shares traded), Market
Capitalization, Track Record and
Industry Representation
8. Tata Power Co.
Ltd.
500400
28 July,
2008
Listed History, Liquidity (Trading
Frequency, Number of Trades and
Value of Shares traded), Market
Capitalization, Track Record and
Industry Representation
9. Sun
Pharmaceutical
Industries Ltd.
524715
12
January,
2009
Listed History, Liquidity (Trading
Frequency, Number of Trades and
Value of Shares traded), Market
Capitalization, Track Record and
Industry Representation
10. Hero Honda
Motors Ltd.
500182
29 June,
2009
Listed History, Liquidity (Trading
Frequency, Number of Trades and
Value of Shares traded), Market
Capitalization, Track Record and
Industry Representation
11. Cipla ltd. 500087
03 May,
2010
Listed History, Liquidity (Trading
Frequency, Number of Trades and
Value of Shares traded), Market
Capitalization, Track Record and
89
Industry Representation
12. Jindal Steel &
Power Ltd.
532286
26 May,
2010
Listed History, Liquidity (Trading
Frequency, Number of Trades and
Value of Shares traded), Market
Capitalization, Track Record and
Industry Representation
13. Bajaj Auto Ltd. 532977
06
Decemb
er, 2010
Listed History, Liquidity (Trading
Frequency, Number of Trades and
Value of Shares traded), Market
Capitalization, Track Record and
Industry Representation
14. Coal India Ltd. 533278
08
August,
2011
Listed History, Liquidity (Trading
Frequency, Number of Trades and
Value of Shares traded), Market
Capitalization, Track Record and
Industry Representation
15. Sun
Pharmaceutical
Industries Ltd
524715
08
August,
2011
Listed History, Liquidity (Trading
Frequency, Number of Trades and
Value of Shares traded), Market
Capitalization, Track Record and
Industry Representation
16. Gail India Ltd. 532155
09
January,
2012
Listed History, Liquidity (Trading
Frequency, Number of Trades and
Value of Shares traded), Market
Capitalization, Track Record and
Industry Representation
17. Dr. Reddy’s
Laboratories
Ltd.
500124
11 June,
2012
Listed History, Liquidity (Trading
Frequency, Number of Trades and
Value of Shares traded), Market
Capitalization, Track Record and
Industry Representation
Source: Brokers’ Interview and website of BSE
90
Table 4.2 Categorization of Reasons for the Inclusion of Companies in Sensex-30
Sr.
No.
Reasons for Inclusion of
Companies in Sensex-30
Effected Companies
No. of
Companies
% to Total
Companies
1. Listed History 17 100%
2. Liquidity 17 100%
3. Market Capitalization 17 100%
4. Industry Representation 17 100%
5. Track Record 17 100%
Source: Researcher Calculation
On the basis of the information in Table 4.2 all the seventeen companies (given in
the Table 4.1) were included in BSE -SENSEX on the basis of five reasons. All the
reasons were collectively significant (100% companies were included on the basis of
five reasons). Every company has completed three months listing history on BSE-
SENSEX. No company was listed on the basis of merger/ demerger/ amalgamation.
There was no newly listed company in BSE-SENSEX without completion of the
three months listed history on Bombay Stock Exchange. It is the result based on
information collected by the researcher from various sources. Further the context
analysis of reasons/factors of inclusion of the sampled companies in Sensex, it was
found that the Listed History, Liquidity (Trading Frequency, Number of Trades and
Value of Shares traded), Market Capitalization, Track Record and Industry
Representation were the main reasons that rendered these companies (under study)
into Sensex list. There is no need to give the supporting or contradictory results of
the previous researches in this regard because it is an objective fact and not
changeable at present. However, it is suggested that the other companies should
made the continuous efforts to make these variables sound so that they may stand in
the queue of Sensex- Companies.
91
Table 4.3 Reasons for the Exclusion of Companies from SENSEX-30
Sr.
No.
Name of the
Company
Scrip
Code
Inclusion
Date
Reasons
1. Hindustan
Petroleum Corp.
Ltd.
500104
6 June,
2005
Liquidity (Trading
Frequency, Number of Trades
and Value of Shares traded)
and Market Capitalization
2. Zee Telefilms
Ltd.
505537
6 June,
2005
Liquidity (Trading
Frequency, Number of Trades
and Value of Shares traded)
and Market Capitalization
3. Tata Power Ltd. 500400
12 June,
2006
Liquidity (Trading
Frequency, Number of Trades
and Value of Shares traded)
and Market Capitalization
4. Hero Honda
Motors Ltd.
500182
09 July,
2007
Liquidity (Trading
Frequency, Number of Trades
and Value of Shares traded)
and Market Capitalization
5. Dr. Reddy’s
Laboratories
Ltd.
500124
19
November,
2007
Liquidity (Trading
Frequency, Number of Trades
and Value of Shares traded)
and Market Capitalization
6. Bajaj Auto Ltd. 500490
14 March,
2008
Liquidity (Trading
Frequency, Number of Trades
and Value of Shares traded)
and Market Capitalization
7. Ambuja
Cements ltd.
500425
28 July,
2008
Liquidity (Trading
Frequency, Number of Trades
and Value of Shares traded)
and Market Capitalization
92
8. Cipla Ltd. 500087
.
28 July,
2008
Liquidity (Trading
Frequency, Number of Trades
and Value of Shares traded)
and Market Capitalization
9. Satyam
Computers Ltd.
500376
12
January,
2009
Liquidity (Trading
Frequency, Number of Trades
and Value of Shares traded)
and Market Capitalization
10. Ranbaxy
Laboratories
Ltd.
500359
29 June,
2009
Liquidity (Trading
Frequency, Number of Trades
and Value of Shares traded)
and Market Capitalization
11. Sun
Pharmaceutical
Industries Ltd
524715
03 May,
2010
Liquidity (Trading
Frequency, Number of Trades
and Value of Shares traded)
and Market Capitalization
12. Grasim
Industries Ltd.
500300
26 May,
2010
Liquidity (Trading
Frequency, Number of Trades
and Value of Shares traded)
and Market Capitalization
13. Acc Ltd. 500410
06
December,
2010
Liquidity (Trading
Frequency, Number of Trades
and Value of Shares traded)
and Market Capitalization
14. Reliance
Infrastructure
Ltd.
500390
08 August,
2011
Liquidity (Trading
Frequency, Number of Trades
and Value of Shares traded)
and Market Capitalization
15. Reliance
Communication
Ltd
532712
08 August,
2011
Liquidity (Trading
Frequency, Number of Trades
and Value of Shares traded)
and Market Capitalization
93
16. Jaiprakash
Associates Ltd.
532532
09
January,
2012
Liquidity (Trading
Frequency, Number of Trades
and Value of Shares traded)
and Market Capitalization
17. DLF Ltd. 532868
11 June,
2012
Liquidity (Trading
Frequency, Number of Trades
and Value of Shares traded)
and Market Capitalization
Source: Brokers’ Interview and website of BSE
Table 4.4 Categorization of Reasons for the Exclusion of Companies from the
Sensex-30
Sr.
No.
Reasons for Exclusion of
Companies from Sensex-30
Effected Companies
No. of
Companies
% to Total
Companies
1. Liquidity 17 100%
2. Market Capitalization 17 100%
Source: Researcher Calculation
On the basis of the information in the Table 4.4 all the seventeen companies (given
in Table 4.3) were excluded from the BSE-SENSEX on the basis of two reasons.
Both reasons were significant because 100% companies were excluded on the basis
of liquidity and market capitalization. There can be no other reasons on the basis of
which a company could be excluded from the BSE-SENSEX viz. merger/ demerger/
amalgamation, delisted by SEBI, delisted by BSE and a company voluntarily
delisted. But, in this study there were only two reasons on the basis of which all
companies were excluded from the SENSEX. Further the context analysis of
reasons/factors of exclusion of the sampled companies from Sensex, it was found
that the Liquidity (Trading Frequency, Number of Trades and Value of Shares
traded) and Market Capitalization were the main reasons that excluded these
companies (under study) from Sensex list.
94
PROFITABILITY ANALYSIS OF SENSEX REPRESENTATIVE
COMPANIES
Fundamental analysis involves looking at any numbers that can show something
about a company’s worth. That includes the financial statements and ratios derived
from those numbers that can give you more insight into whether the company is
performing well, indifferently or badly. Profitability and valuation ratios are the
most comprehensive means of a company as they reflect the corroborated influence
of risk and profitability financial ratios. These ratios are more important because
they reflect the general confidence and trust of the market in a company’s
management, but said confidence and trust depends upon many economic, social,
and political factors. When investors fundament their decisions, they take into
consideration a variety of indicators, such as internal performances achieved by a
company, and established by analyzing the information reflected in its financial
statements. The researcher has selected those ratios which are generally used by
investment market players.
Table 4.5 Profitability and Valuation Ratios of State Bank of India
Years ROCE RONW GPR NPR EPS DPS PER PBR
2005-2006 5.72 17.04 21.32 12.25 81.77 14 11.84 1.84
2006-2007 5.62 15.41 22.09 12.19 83.91 14 11.83 1.67
2007-2008 6.57 16.75 22.71 13.75 103.94 21.5 15.38 2.06
2008-2009 6.77 17.05 23.43 14.3 139.76 29 7.63 1.17
2009-2010 6.07 14.08 20.93 12.91 140.65 30 14.78 2
2010-2011 5.6 12.62 19.59 10.15 126.27 30 21.92 2.7
2011-2012 6.38 15.72 18.3 10.99 170.05 35 12.32 1.67
AVERAGE 6.1 15.52 21.2 12.36 120.91 24.79 13.67 1.87
AAGR 0.73 -2.43 -2.33 -2.25 10.53 14.92 4.04 1.95
t-Value 0.549 1.511 2.188 1.234 5.252 5.904 0.741 0.442
Sig./ Non-Sig. NS NS NS NS S S NS NS
Source: Financial Statements of the Company but Calculation and Analysis by the Researcher
Note: Average Capital Employed has been taken for calculating ROCE and Average Net
Worth has been taken for calculating RONW.
95
Table 4.5 reveals the profitability and valuation ratios of State Bank of India. The
average of return on capital employed ratio was 6.10 and the Annual Average
Growth Rate was 0.73 percent. The return on capital employed ratio was non-
significant at 95 percent confidence level. (t=.549, d.f. =5 and critical value= 2.571)
The average of return on net worth ratio was 15.52 and the annual average growth
rate was -2.43 percent. The return on net worth ratio was non-significant at 5 percent
level of significance at degree of freedom 5 because the calculated value of t=1.511
was less than the tabulated value=2.571.
The Gross Profit Ratio was increasing trends from 2005-06 to 2008-09. The average
of Gross Profit Ratio was 21.20 and the Annual Average Growth Rate was -2.33
percent. The gross profit ratio was non- significant at 95 percent confidence level.
(t=2.188, d.f. =5 and critical value= 2.571)
The Net Profit Ratio was increasing trends from 2005-06 to 2008-09. The Average
of Net Profit Ratio was 12.36 and the Annual Average Growth Rate was -2.25
percent. The return on net profit ratio was non-significant at 5 percent level of
significance at degree of freedom 5 because the calculated value of t=1.234 was less
than the tabulated value=2.571.
The earning per share ratio was increasing trends. The average of earning per share
was 120.91 and the Annual Average Growth Rate was 10.53 percent. The earning
per share ratio was significant at 95 percent confidence level. (t=5.252, d.f. =5 and
critical value= 2.571)
The Dividend per Share ratio was increasing trend throughout the study period. The
average of Dividend per Share ratio was 24.79 and the Annual Average Growth Rate
was 14.92 percent. The dividend per share ratio was significant at 5 percent level of
significance at degree of freedom 5 because the calculated value of t=5.904 was
more than the tabulated value=2.571.
The price-to-earning ratio of the company was highest (21.92) in 2010-11 that
indicated expensive share and in 2008-09 was lowest (7.63) that indicated cheapest
share during the study period. The average of Price-to-earning Ratio was 13.67 and
the Annual Average Growth Rate was 4.04 percent. The price-to-earning ratio was
96
non-significant at 95 percent confidence level. (t=0.741, d.f. =5 and critical value=
2.571)
The price-to-book ratio of the company was more than one throughout the study
period and it indicated that the stock was overvalued. The Annual Average Growth
Rate of Price-to-book Ratio was 1.95 percent and average was 1.87. The price-to-
book ratio was non-significant at 5 percent level of significance at degree of freedom
5 because the calculated value of t=0.442 was less than the tabulated value=2.571.
It was found that annual average growth rates of ROCE ratio, EPS ratio, DPS ratio,
PE ratio, PB ratio were positive and RONW ratio, GP ratio, NP ratio were negative
during the study period. There was consistency in six ratios (ROCE, RONW, GP,
NP, PE and PB) and there was inconsistency in rest of the ratios.
Table 4.6 Profitability and Valuation Ratios of HDFC Ltd.
Years ROCE RONW GPR NPR EPS DPS PER PBR
2005-2006 8.84 30.11 37.43 29.86 47.58 20 28.08 7.46
2006-2007 9.9 31.35 34.04 26.93 58.33 22 26.06 6.93
2007-2008 11.01 22.59 41.46 29.8 81.53 25 29.24 5.67
2008-2009 11.96 18.2 29.44 20.76 75.3 30 18.74 3.06
2009-2010 10.52 19.95 34.7 24.93 92.47 36 29.34 5.13
2010-2011 40.17 21.74 38.02 27.5 22.64 9.1 30.84 5.92
2011-2012 19.2 22.69 32.81 23.78 26.13 11 25.78 5.23
AVERAGE 15.94 23.8 35.41 26.22 57.71 21.87 26.87 5.63
AAGR 16.58 -5.02 -1.06 -2.44 -10.2 -9.19 0.25 -4.37
t-Value 2.439 1.916 0.561 1.236 1.272 1.242 0.087 0.96
Sig./Non-Sig. NS NS NS NS NS NS NS NS
Source: Financial Statements of the Company but Calculation and Analysis by the Researcher
Note: Average Capital Employed has been taken for calculating ROCE and Average Net
Worth has been taken for calculating RONW.
Table 4.6 portrays the profitability and valuation ratios of HDFC Ltd. The return on
capital employed ratio of the company was increasing trends from 2005-06 to 2010-
11. The annual average growth rate of return on capital employed ratio was 16.58
percent and average was 15.94. The return on capital employed ratio was non-
significant at 95 percent confidence level. (t=2.439, d.f. =5 and critical value=
2.571)
97
The average of return on net worth ratio was 23.80 and annual average growth rate
was negative (-5.02) percent. The return on net worth ratio was non-significant at 5
percent level of significance at degree of freedom 5 because the calculated value of
t=1.916 was less than the tabulated value=2.571.
The annual average growth rate of gross profit ratio was (-1.06) percent and average
was 35.41. The gross profit ratio was non- significant at 95 percent confidence level.
(t=0.561, d.f. =5 and critical value= 2.571)
The average of net profit ratio was 26.22 and the annual average growth rate was
negative (-2.44) percent. The return on net profit ratio was non-significant at 5
percent level of significance at degree of freedom 5 because the calculated value of
t=1.236 was less than the tabulated value=2.571.
The earning per share ratio of the company was increasing trends from 2005-06 to
2009-10. The annual average growth rate of earning per share ratio was -10.20
percent and average was 57.71. The earning per share ratio was non-significant at 95
percent confidence level. (t=1.272, d.f. =5 and critical value= 2.571)
The dividend per share ratio of the company was increasing trends from 2005-06 to
2009-10. The annual average growth rate of dividend per share ratio was negative (-
9.19) percent and average was 21.87. The dividend per share ratio was non-
significant at 5 percent level of significance at degree of freedom 5 because the
calculated value of t=1.242 was less than the tabulated value=2.571.
The price-to-earning ratio of the company was highest (30.84) in 2010-11 that
indicated expensive share and in 2008-09 was lowest (18.74) that indicated cheapest
share during the study period. The annual average growth rate of price-to-earning
ratio was 0.25 percent and average was 26.87. The price-to-earning ratio was non-
significant at 95 percent confidence level. (t=0.087, d.f. =5 and critical value=
2.571)
The price-to-book ratio of the company was more than one throughout the study
period and it indicated that the stock was overvalued. The annual average growth
rate of price-to-book ratio was negative (-4.37) percent and average was 5.63. The
price-to-book ratio was non-significant at 5 percent level of significance at degree of
98
freedom 5 because the calculated value of t=0.960 was less than the tabulated
value=2.571.
It was found that annual average growth rates of ROCE ratio, PE ratio were positive
and RONW ratio, GP ratio, NP ratio, EPS ratio, DPS ratio, PB ratio were negative
during the study period. There was consistency in all the eight ratios.
Table 4.7 Profitability and Valuation Ratios of Maruti Suzuki Ltd.
Years ROCE RONW GPR NPR EPS DPS PER PBR
2005-2006 34.68 24.19 16.94 9.9 40.65 3.5 21.51 4.63
2006-2007 35.63 25.38 17.36 10.63 53.29 4.5 15.38 3.46
2007-2008 30.51 22.67 17.17 9.67 59.03 5 14.05 2.85
2008-2009 15.76 12.08 11.65 5.96 41.57 3.5 18.65 2.04
2009-2010 31.95 23.58 15.18 8.58 85.43 6 16.58 3.46
2010-2011 23.35 17.81 11.36 6.3 77.98 7.5 16.2 2.63
2011-2012 13.29 10.06 9.23 4.59 55.37 7.5 24.37 2.57
AVERAGE 26.45 19.4 14.13 7.95 59.05 5.36 18.11 3.09
AAGR -10.5 -9.48 -8.08 -9.95 6.41 11.11 1.96 -6.2
t-Value 2.275 2.111 3.71 3.525 1.511 3.4 0.589 1.754
Sig./Non-Sig NS NS S S NS S NS NS
Source: Financial Statements of the Company but Calculation and Analysis by the Researcher
Note: Average Capital Employed has been taken for calculating ROCE and Average Net
Worth has been taken for calculating RONW.
Table 4.7 shows the profitability and valuation ratios of Maruti Suzuki Ltd.
Company. The average of return on capital employed ratio was 26.45 and the annual
average growth rate was negative (-10.5) percent. The return on capital employed
ratio was non- significant at 95 percent confidence level. (t=2.275, d.f. =5 and
critical value= 2.571)
The annual average growth rate of return on net worth was negative (-9.48) percent
and average was 19.40. The return on net worth ratio was non-significant at 5
percent level of significance at degree of freedom 5 because the calculated value of
t=2.111 was less than the tabulated value=2.571.
The annual average growth rate of gross profit ratio was negative (-8.08) percent and
average was 14.13. The gross profit ratio was significant at 95 percent confidence
level. (t=3.71, d.f. =5 and critical value= 2.571)
99
The average of net profit ratio was 7.95 and the annual average growth rate was
negative (-9.95) percent. The return on net profit ratio was significant at 5 percent
level of significance at degree of freedom 5 because the calculated value of t=3.525
was more than the tabulated value=2.571.
The earning per share ratio of the company was increasing trends from 2005-06 to
2007-2008. The annual average growth rate of earnings per share ratio was (6.41)
percent and average was 59.05. The earning per share ratio was non-significant at 95
percent confidence level. (t=1.511, d.f. =5 and critical value= 2.571)
The dividend per share ratio of the company was increasing trends from 2005-06 to
2007-2008. The annual average growth rate of dividend per share ratio was (11.11)
percent and average was 5.36. The dividend per share ratio was significant at 5
percent level of significance at degree of freedom 5 because the calculated value of
t=3.4 was more than the tabulated value=2.571.
The price-to-earning ratio of the company was highest (24.37) in 2011-12 that
indicated expensive share and in 2007-08 was lowest (14.05) that indicated cheapest
share during the study period. The annual average growth rate of price-to-earning
ratio was (1.96) percent and average was 18.11. The price-to-earning ratio was non-
significant at 95 percent confidence level. (t=0.589, d.f. =5 and critical value=
2.571)
The price-to-book ratio of the company was more than one throughout the study
period and it indicated that the stock was overvalued. The annual average growth
rate of price to book ratio was negative (-6.2) percent and average was 3.09. The
price-to-book ratio was non-significant at 5 percent level of significance at degree of
freedom 5 because the calculated value of t=1.754 was less than the tabulated
value=2.571.
It was found that annual average growth rates of EPS ratio, DPS ratio and PE ratio
were positive and ROCE ratio, RONW ratio, GP ratio, NP ratio and PB ratio were
negative during the study period. There was consistency in five ratios (ROCE,
RONW, EPS, PER and PBR) relating to fundamental analysis and there was
inconsistency in rest of the ratios.
100
Table 4.8 Profitability and Valuation Ratios of Infosys Ltd.
Years ROCE RONW GPR NPR EPS DPS PER PBR
2005-2006 45.09 39.89 34.84 26.82 81.41 44.85 36.62 11.93
2006-2007 45.99 41.9 35.14 28.77 64.35 11.4 31.28 10.31
2007-2008 41.52 36.26 36.19 28.57 72.5 33.25 19.73 6.06
2008-2009 42.92 37.18 36.56 28.72 97.74 23.5 13.55 4.25
2009-2010 37.76 29.13 39.39 27.45 96.92 25 26.98 6.81
2010-2011 37.89 27.69 37.66 25.38 102.35 60 31.62 7.58
2011-2012 42.66 31.22 39.59 27.1 139.93 47 20.47 5.53
AVERAGE 41.98 34.75 37.05 27.54 93.6 35 25.75 7.5
AAGR -1.94 -5.24 1.85 -0.78 8.96 10.06 -4.17 -8.12
t- Value 1.893 3.753 5.053 1.083 3.736 1.091 0.737 1.703
Sig./Non- Sig. NS S S NS S NS NS NS
Source: Financial Statements of the Company but Calculation and Analysis by the Researcher
Note: Average Capital Employed has been taken for calculating ROCE and Average Net
Worth has been taken for calculating RONW.
Table 4.8 indicates the profitability and valuation of Infosys Ltd. Company. The
average of return on capital employed ratio was 41.98 and the annual average
growth rate was -1.94 percent. The return on capital employed ratio was non-
significant at 95 percent confidence level. (t=1.893, d.f. =5 and critical value=2.571)
The average of return on net worth ratio was 34.75 and the annual average growth
rate was negative (-5.24) percent. The return on net worth ratio was significant at 5
percent level of significance at degree of freedom 5 because the calculated value of
t=3.753 was more than the tabulated value=2.571.
The gross profit ratio was increasing trends. The average of gross profit ratio 37.05
and the annual average growth rate was 1.85 percent. The gross profit ratio was
significant at 95 percent confidence level. (t=5.053, d.f. =5 and critical value=
2.571)
The average of net profit ratio was 27.54 and the annual average growth rate was
negative (-0.78) percent. The return on net profit ratio was non-significant at 5
percent level of significance at degree of freedom 5 because the calculated value of
t=1.083 was less than the tabulated value=2.571.
101
The average of earning per share ratio was 93.6 and annual average growth rate was
8.96 percent. The earning per share ratio was significant at 95 percent confidence
level. (t=3.736, d.f. =5 and critical value= 2.571)
The average of dividend per share ratio was 35 and the annual average growth rate
was 10.06 percent. The dividend per share ratio was non-significant at 5 percent
level of significance at degree of freedom 5 because the calculated value of t=1.091
was less than the tabulated value=2.571.
The price-to-earning of the company was highest (36.62) in 2005-06 that indicated
expensive share and in 2008-09 was lowest (13.55) that indicated cheapest share
during the study period. The average of price-to-earning ratio was 25.75 and annual
average growth rate was -4.17 percent. The price-to-earning ratio was non-
significant at 95 percent confidence level. (t=0.737, d.f. =5 and critical value=
2.571)
The price-to-book ratio of the company was more than one throughout the study
period and it indicated that the stock was overvalued. The average of price-to-book
ratio was 7.5 and annual average growth rate was -8.12 percent. The price-to-book
ratio was non-significant at 5 percent level of significance at degree of freedom 5
because the calculated value of t=1.703 was less than the tabulated value=2.571.
It was found that annual average growth rates of GPR ratio, EPS ratio, DPS ratio
were positive and ROCE ratio, RONW ratio, NP ratio, PE ratio, PB ratio were
negative during the study period. There was inconsistency in three ratios (RONW
ratio, GP ratio and EPS ratio) and there was consistency in rest of the ratios.
Table 4.9 Profitability and Valuation Ratios of Tata Steel Ltd.
Years ROCE RONW GPR NPR EPS DPS PER PBR
2005-2006 50.13 41.7 39.74 23.17 61.51 13 8.72 3.04
2006-2007 36.63 35.4 40.56 24.18 69.95 16.25 6.43 1.87
2007-2008 23.27 25.97 40.2 23.85 61.06 16 11.35 2.32
2008-2009 17.23 21.88 34.04 21.36 66.75 16 3.09 0.61
2009-2010 13.7 14.19 33.16 20.17 54.97 8 11.51 1.52
2010-2011 16.58 16.36 37.16 23.36 69.93 12 8.87 1.27
102
2011-2012 15.32 13.45 32.44 19.73 67.07 12 7.01 0.87
AVERAGE 24.69 24.14 36.76 22.26 64.46 13.32 8.14 1.64
AAGR -15.73 -15.4 -2.9 -2.15 1.62 -4.54 0.01 -13.88
t-Value 4.47 7.926 2.791 2.002 0.911 1.188 0.0009 2.103
Sig./Non-Sig. S S S NS NS NS NS NS
Source: Financial Statements of the Company but Calculation and Analysis by the Researcher
Note: Average Capital Employed has been taken for calculating ROCE and Average Net
Worth has been taken for calculating RONW.
Table 4.9 depicts the profitability and valuation ratios of Tata Steel Ltd. Company.
The return on capital employed ratio of the company was decreasing trends from
2005-06 to 2009-2010. The average of return on capital employed ratio was 24.69
and the annual average growth rate was negative (-15.73) percent. The return on
capital employed ratio was significant at 95 percent confidence level. (t=4.47, d.f.
=5 and critical value= 2.571)
The return on net worth ratio of the company was decreasing trends from 2005-06
to 2009-2010. The annual average growth rate of return on net worth ratio was
negative (-15.4) percent and average was 24.14. The return on net worth ratio was
significant at 5 percent level of significance at degree of freedom 5 because the
calculated value of t=7.926 was more than the tabulated value=2.571.
The average of gross profit ratio was 36.76 and the annual average growth rate was
negative (-2.9) percent. The gross profit ratio was significant at 95 percent
confidence level. (t=2.791, d.f. =5 and critical value= 2.571)
The annual average growth rate of net profit ratio was negative (-2.15) percent and
average was 22.26. The return on net profit ratio was non-significant at 5 percent
level of significance at degree of freedom 5 because the calculated value of t=2.002
was less than the tabulated value=2.571.
The average of earning per share ratio was 64.46 and the annual average growth rate
was (1.62) percent. The earning per share ratio was non-significant at 95 percent
confidence level. (t=0.911, d.f. =5 and critical value= 2.571)
The annual average of dividend per share ratio was negative (-4.54) and average was
13.32. The dividend per share ratio was non-significant at 5 percent level of
103
significance at degree of freedom 5 because the calculated value of t=1.188 was less
than the tabulated value=2.571.
The price-to-earning ratio of the company was highest (11.51) in 2009-10 that
indicated expensive share and in 2008-09 was lowest (3.09) that indicated cheapest
share during the study period. The average of price-to-earning ratio was 8.14 and the
annual average growth rate was (0.01) percent. The price-to-earning ratio was non-
significant at 95 percent confidence level. (t=0.0009, d.f. =5 and critical value=
2.571)
The price-to-book ratio of the company was less than one in 2008-09 and 2011-12 it
indicated the stock was undervalued and in all other financial year it was more than
one that indicated that the stock was overvalued. The annual average growth rate of
price-to-book ratio was negative (-13.88) percent and average was 1.64. The price-
to-book ratio was non-significant at 5 percent level of significance at degree of
freedom 5 because the calculated value of t=2.103 was less than the tabulated
value=2.571.
It was found that annual average growth rates of EPS ratio and PE ratio were
positive and rest of the ratios were negative during the study period. There was
consistency in five ratios (NP, EPS, DPS, PE and PB) relating to fundamental
analysis and there was inconsistency in rest of the ratios.
Table 4.10 Profitability and Valuation Ratios of Tata Motors Ltd.
Years ROCE RONW GPR NPR EPS DPS PER PBR
2005-2006 31.25 31.36 12.69 7.53 37.59 13 24.81 6.48
2006-2007 30.52 30.98 11.62 7.04 47.1 15 15.45 4.1
2007-2008 21.28 23.91 11.31 7.11 50.52 15 12.34 3.08
2008-2009 6.88 5.34 7.51 3.98 18.81 6.05 9.59 0.76
2009-2010 11.2 11.32 11.03 6.4 36.93 15.05 20.46 2.89
2010-2011 11.07 10.37 7.53 3.84 25.51 20.05 48.9 3.96
2011-2012 9.83 8.27 5.43 2.29 1.34 4 82.54 4.46
AVERAGE 17.43 17.36 9.59 5.46 31.11 12.59 30.58 3.68
AAGR -16.92 -18.89 -9.86 -13.72 -23.33 -8.53 21.37 -3.71
t-Value 2.932 2.688 3.521 3.508 2.317 0.922 1.889 0.32
Sig./Non-Sig. S S S S NS NS NS NS
Source: Financial Statements of the Company but Calculation and Analysis by the Researcher
Note: Average Capital Employed has been taken for calculating ROCE and Average Net
Worth has been taken for calculating RONW.
104
Table 4.10 indicates the profitability and valuation ratios of Tata Motors Ltd.
Company. The average of return on capital employed ratio was 17.43 and the annual
average growth rate was negative (-16.92) percent. The return on capital employed
ratio was significant at 95 percent confidence level. (t=2.932, d.f. =5 and critical
value= 2.571)
The annual average growth rate of return on net worth ratio was negative (-18.89)
and average was 17.36. The return on net worth ratio was significant at 5 percent
level of significance at degree of freedom 5 because the calculated value of t=2.688
was more than the tabulated value=2.571.
The gross profit ratio of the company was decreasing trends. The annual average
growth rate of gross profit ratio was negative (-9.86) percent and average was 9.59.
The gross profit ratio was significant at 95 percent confidence level. (t=3.521, d.f.
=5 and critical value= 2.571)
The average of net profit ratio was 5.46 and the annual average growth rate was
negative (-13.72) percent. The return on net profit ratio was significant at 5 percent
level of significance at degree of freedom 5 because the calculated value of t=3.508
was more than the tabulated value=2.571.
The annual average growth rate of earning per share ratio was negative (-23.33)
percent and average was 31.11. The earning per share ratio was non-significant at 95
percent confidence level. (t=2.317, d.f. =5 and critical value= 2.571)
The annual average growth rate of dividend per share ratio was negative (-8.53) and
average was 12.59. The dividend per share ratio was non-significant at 5 percent
level of significance at degree of freedom 5 because the calculated value of t=0.922
was less than the tabulated value=2.571.
The price-to-earning ratio of the company was highest (82.54) in 2011-12 that
indicated expensive share and in 2008-09 was lowest (9.59) that indicated cheapest
share during the study period. The price-to-earning ratio of the company was
decreasing trends from 2005-06 to 2008-09. The average of price-to- earning ratio
was 30.58 and the annual average growth rate was (21.37) percent. The price-to-
105
earning ratio was non-significant at 95 percent confidence level. (t=1.889, d.f. =5
and critical value= 2.571)
The price-to-book ratio of the company was less than one in 2008-09 it indicated
that the stock was undervalued and in all other financial year it was more than one it
indicated the stock was overvalued.. The average of price-to-book ratio was 3.68 and
the annual average growth rate was negative (-3.71) percent. The price-to-book ratio
was non-significant at 5 percent level of significance at degree of freedom 5 because
the calculated value of t=0.32 was less than the tabulated value=2.571.
It was found that annual average growth rates of PE ratio was positive and ROCE
ratio, RONW ratio, GP ratio NP ratio, EPS ratio, DPS ratio, PB ratio were negative
during the study period. There was consistency in four ratios (EPS, DPS, PE and
PB) and there was inconsistency in rest of the ratios.
Table 4.11 Profitability and Valuation Ratios of Bharti Airtel Ltd.
Years ROCE RONW GPR NPR EPS DPS PER PBR
2005-2006 22.55 31.82 34.13 17.91 10.62 0 38.87 10.67
2006-2007 34.07 43.04 38.96 22.59 21.27 0 35.88 12.68
2007-2008 34.43 39.46 39.45 24.29 32.9 0 25.11 7.75
2008-2009 33.17 32.35 33.42 22.77 40.45 2 15.47 4.3
2009-2010 26.27 29.28 40.7 26.47 24.65 1 12.65 3.24
2010-2011 18.54 19.09 33.98 20.3 20.16 1 17.73 3.1
2011-2012 14.24 12.25 30.94 13.77 14.93 1 22.56 2.59
AVERAGE 26.18 29.61 35.94 21.16 23.57 0.71 24.04 6.33
AAGR -8.29 -13.46 -1.61 -2.73 1.91 0.00 -10.64 -21.3
t-Value 1.906 3.415 0.978 0.759 0.24 0.00 2.104 6.97
Sig./Non-Sig. NS S NS NS NS NS NS S
Source: Financial Statements of the Company but Calculation and Analysis by the Researcher
Note: Average Capital Employed has been taken for calculating ROCE and Average Net
Worth has been taken for calculating RONW.
Table 4.11 shows the profitability and valuation ratios of Bharti Airtel Ltd.
Company. The average of return on capital employed ratio was 26.18 and the annual
average growth rate was (-8.29) percent. The return on capital employed ratio was
non- significant at 95 percent confidence level. (t=1.906, d.f. =5 and critical value=
2.571).
106
The annual average growth rate of return on net worth ratio was negative (-13.46)
percent and average was 29.61. The return on net worth ratio was significant at 5
percent level of significance at degree of freedom 5 because the calculated value of
t=3.415 was more than the tabulated value=2.571.
The annual average growth rate of gross profit ratio was negative (-1.61) percent and
average was 35.94. The gross profit ratio was non- significant at 95 percent
confidence level. (t=0.978, d.f. =5 and critical value= 2.571)
The average of net profit ratio was 21.16 and the annual average growth rate was
negative (-2.73) percent. The return on net profit ratio was non-significant at 5
percent level of significance at degree of freedom 5 because the calculated value of
t=0.759 was less than the tabulated value=2.571.
The earning per share ratio of the company was increasing trends from 2005-06 to
2008-09. The annual average growth rate of earning per share ratio was 1.91 percent
and average was 23.57. The earning per share ratio was non-significant at 95 percent
confidence level. (t=0.24, d.f. =5 and critical value= 2.571)
The annual average of dividend per share ratio was (0) and average was 0.71. The
dividend per share ratio was non-significant at 5 percent level of significance at
degree of freedom 5 because the calculated value of t=0 was less than the tabulated
value=2.571.
The price-to-earning ratio of the company was highest (38.87) in 2005-06 that
indicated expensive share and in 2009-10 was lowest (12.65) that indicated cheapest
share during the study period. The price-to-earning ratio of the company was
decreasing trends from 2005-06 to 2009-10. The average of price-to-earning ratio
was 24.04 and the annual average growth rate was (-10.64) percent. The price-to-
earning ratio was non-significant at 95 percent confidence level. (t=2.104, d.f. =5
and critical value= 2.571).
The price-to-book ratio of the company was more than one throughout the study
period and it indicated that the stock was overvalued. The annual average growth
rate of price to book ratio was negative (-21.30) percent and average was 6.33. The
price-to-book ratio was significant at 5 percent level of significance at degree of
107
freedom 5 because the calculated value of t=6.970 was more than the tabulated
value=2.571.
The study found that there was consistency in profitability and valuation ratios of
Bharti Airtel Ltd. company because six null hypotheses were accepted out of eight
null hypotheses. The annual average growth rates of six ratios have been negative
and only one ratio has positive and one ratio has zero annual average growth rate.
Table 4.12 Profitability and Valuation Ratios of L&T Ltd.
Years ROCE RONW GPR NPR EPS DPS PER PBR
2005-2006 24.16 21.27 10.11 6.87 70.58 22.3 34.47 7.25
2006-2007 30.92 27.11 12.3 7.97 47.65 13.2 33.98 7.99
2007-2008 31.82 28.47 13.41 8.7 71.73 16.95 42.17 9.28
2008-2009 26.89 23.96 14.73 10.27 57.71 10.5 11.66 3.17
2009-2010 23.85 21.48 17.29 11.82 70.83 12.5 22.96 5.45
2010-2011 22.9 17.7 14.77 9.03 63.15 14.55 26.18 4.69
2011-2012 24.11 18.95 13.18 8.38 71.11 16.5 18.38 3.18
AVERAGE 26.38 22.71 13.68 9.01 64.68 15.21 27.11 5.86
AAGR -2.67 -4.37 4.37 3.54 1.74 -3.01 -8.7 -11.56
t-Value 1.357 1.904 1.909 1.315 0.671 0.756 1.4 2.372
Sig./Non-Sig. NS NS NS NS NS NS NS NS
Source: Financial Statements of the Company but Calculation and Analysis by the Researcher
Note: Average Capital Employed has been taken for calculating ROCE and Average Net
Worth has been taken for calculating RONW.
Table 4.12 portrays the profitability and valuation ratios of L&T Ltd. The return on
capital employed ratio of the company was increasing trends 2005-06 to 2007-08.
The annual average growth rate of return on capital employed ratio was -2.67
percent and average was 26.38. The return on capital employed ratio was non-
significant at 95 percent confidence level. (t=1.357, d.f. =5 and critical value=
2.571)
The return on net worth ratio of the company was increasing trends 2005-06 to
2007-08. The average of return on net worth ratio was 22.71 and the annual average
growth rate was negative (-4.37) percent. The return on net worth ratio was non-sig
nificant at 5 percent level of significance at degree of freedom 5 because the
calculated value of t=1.904 was less than the tabulated value=2.571.
108
The gross profit ratio of the company was increasing trends 2005-06 to 2009-10.
The annual average growth rate of gross profit ratio was (4.37) percent and average
was 13.68. The gross profit ratio was non- significant at 95 percent confidence level.
(t=1.909, d.f. =5 and critical value= 2.571)
The net profit ratio of the company was increasing trends 2005-06 to 2009-10. The
average of net profit ratio was 9.01 and the annual average growth rate was (3.54)
percent. The net profit ratio was non-significant at 5 percent level of significance at
degree of freedom 5 because the calculated value of t=1.315 was less than the
tabulated value=2.571.
The annual average growth rate of earning per share ratio was 1.74 percent and
average was 64.68. The earning per share ratio was non-significant at 95 percent
confidence level. (t=0.671, d.f. =5 and critical value= 2.571)
The annual average growth rate of dividend per share ratio was negative (-3.01)
percent and average was 15.21. The dividend per share ratio was non-significant at 5
percent level of significance at degree of freedom 5 because the calculated value of
t=0.756 was less than the tabulated value=2.571.
The price-to-earning ratio of the company was highest (42.17) in 2007-08 that
indicated expensive share and in 2008-09 was lowest (11.66) that indicated cheapest
share during the study period. The annual average growth rate of price-to-earning
ratio was -8.7 percent and average was 27.11. The price-to-earning ratio was non-
significant at 95 percent confidence level. (t=1.40, d.f. =5 and critical value= 2.571)
The price-to-book ratio of the company was more than one throughout the study
period and it indicated that the stock was overvalued. The annual average growth
rate of price-to-book ratio was negative (-11.56) percent and average was 5.86. The
price-to-book ratio was non-significant at 5 percent level of significance at degree of
freedom 5 because the calculated value of t=2.372 was less than the tabulated
value=2.571.
It was found that annual average growth rates of GP ratio, NP ratio, EPS ratio were
positive and ROCE, RONW, DPS, PE, PB were negative during the study period.
109
There was consistency in all the eight ratios (ROCE, RONW, GP, NP, EPS, DPS,
PE and PB).
Table 4.13 Profitability and Valuation Ratios of ITC Ltd.
Years ROCE RONW GPR NPR EPS DPS PER PBR
2005-2006 37.73 26.55 36.34 22.84 5.58 2.65 34.94 8.13
2006-2007 40.02 27.86 35.47 22.33 6.65 3.1 22.62 5.45
2007-2008 40.44 27.88 35.99 22.41 7.68 8.02 3.7 23.04
2008-2009 37.38 25.42 34.43 20.9 8.02 3.7 23.04 5.1
2009-2010 43.65 29.33 36.49 22.37 8.98 10 2.93 7.17
2010-2011 48.69 33.35 37.44 23.56 5.72 4.45 31.72 8.83
2011-2012 51.34 35.58 38.12 24.48 7.15 4.5 31.73 9.46
AVERAGE 42.75 29.42 36.33 22.7 7.11 5.2 21.53 9.6
AAGR 4.29 3.97 0.8 0.95 1.82 7.94 0.47 0.76
t-Value 3.934 3.143 1.716 1.259 0.611 0.981 0.025 0.087
Sig./Non-Sig. S S NS NS NS NS NS NS
Source: Financial Statements of the Company but Calculation and Analysis by the Researcher
Note: Average Capital Employed has been taken for calculating ROCE and Average Net
Worth has been taken for calculating RONW.
Table 4.13 portrays the profitability and valuation ratios of ITC Ltd. Company. The
return on capital employed of the company was increasing trends from 2005-06 to
2007-2008. The average of return on capital employed ratio was 42.75 and the
annual average growth rate was 4.29 percent. The return on capital employed ratio
was significant at 95 percent confidence level. (t=3.934, d.f. =5 and critical value=
2.571)
The return on net worth ratio of the company was increasing trends from 2005-06 to
2007-2008. The annual average growth rate of return on net worth ratio was 3.97
percent and average was 29.42. The return on net worth ratio was significant at 5
percent level of significance at degree of freedom 5 because the calculated value of
t=3.143 was more than the tabulated value=2.571.
The average of gross profit ratio was 36.33 and the annual average growth rate of
gross profit ratio was 0.8 percent. The gross profit ratio was non- significant at 95
percent confidence level. (t=1.716, d.f. =5 and critical value= 2.571)
110
The average of net profit ratio was 22.70 and the annual average growth rate was
0.95 percent. The return on net profit ratio was non-significant at 5 percent level of
significance at degree of freedom 5 because the calculated value of t=1.259 was less
than the tabulated value=2.571.
The earning per share ratio of the company was increasing trends from 2005-06 to
2009-2010. The annual average growth rate of earning per share ratio was (1.82)
percent and average was 7.11. The earning per share ratio was non-significant at 95
percent confidence level. (t=0.611, d.f. =5 and critical value= 2.571)
The dividend per share ratio of the company was increasing trends from 2005-06 to
2007-2008. The average of dividend per share was 5.20 and the annual average was
(7.94) percent. The dividend per share ratio was non-significant at 5 percent level of
significance at degree of freedom 5 because the calculated value of t=0.981 was less
than the tabulated value=2.571.
The price-to-earning ratio of the company was highest (34.94) in 2005-06 that
indicated expensive share and in 2009-10 was lowest (2.93) that indicated cheapest
share during the study period. The annual average growth rate of price-to-earning
ratio was (0.47) percent and average was 21.53. The price-to-earning ratio was non-
significant at 95 percent confidence level. (t=0.025, d.f. =5 and critical value=
2.571)
The price-to-book ratio of the company was more than one throughout the study
period and it indicated that the stock was overvalued. The average of price-to-book
ratio was (9.60) and the annual average growth rate was 0.76 percent. The price-to-
book ratio was non-significant at 5 percent level of significance at degree of freedom
5 because the calculated value of t=0.087 was less than the tabulated value=2.571.
It was found that annual average growth rates of all the eight ratios (ROCE, RONW,
GP, NP, EPS, DPS, PE and PB) were positive during the study period. There was
consistency in six ratios (GP, NP, EPS, DPS, PE and PB) and there was
inconsistency in rest of the ratios.
111
Table 4.14 Profitability and Valuation Ratios of BHEL
Years ROCE RONW GPR NPR EPS DPS PER PBR
2005-2006 36.37 25.2 20.91 12.49 66.57 14.5 33.75 7.53
2006-2007 45.16 30.02 23.15 13.94 94.86 24.5 23.83 6.3
2007-2008 45.23 29.23 24.26 14.67 55.82 15.25 36.84 9.34
2008-2009 40.73 26.47 19.49 11.8 61.22 17 24.57 5.69
2009-2010 35.94 29.88 21.65 12.94 84.15 23.3 28.35 7.34
2010-2011 49.83 33.33 22.63 14.25 117.69 31.15 17.51 5.01
2011-2012 28.56 30.93 23.15 14.68 27.72 6.4 9.27 2.48
AVERAGE 40.26 29.29 22.18 13.54 72.58 18.87 24.87 6.24
AAGR -2.26 2.59 0.44 1.22 -5.25 -4.57 -13.37 -11.46
t-Value 0.732 2.140 0.345 0.874 0.690 0.534 2.811 2.361
Sig./ Non-Sig. NS NS NS NS N S NS S NS
Source: Financial Statements of the Company but Calculation and Analysis by the Researcher
Note: Average Capital Employed has been taken for calculating ROCE and Average Net
Worth has been taken for calculating RONW.
Table 4.14 portrays the profitability and valuation ratios of BHEL Company. The
average of return on capital employed ratio was 40.26 and the annual average
growth rate was -2.26 percent. The return on capital employed ratio was non-
significant at 95 percent confidence level. (t=0.732, d.f. =5 and critical value=
2.571)
The annual average growth rate of return on net worth ratio was 2.59 percent and
average was 29.29. The return on net worth ratio was non-significant at 5 percent
level of significance at degree of freedom 5 because the calculated value of t=2.140
was less than the tabulated value=2.571.
The average of gross profit ratio was 22.18 and the annual average growth rate was
0.44 percent. The gross profit ratio was non- significant at 95 percent confidence
level. (t=0.345, d.f. =5 and critical value= 2.571)
The average of net profit ratio was 13.54 and the annual average growth rate of net
profit ratio was 1.22 percent. The return on net profit ratio was non-significant at 5
percent level of significance at degree of freedom 5 because the calculated value of
t=0.874 was less than the tabulated value=2.571.
The annual average growth rate of earning per share ratio was -5.25 percent and
average was 72.58. The earning per share ratio was non-significant at 95 percent
confidence level. (t=0.690, d.f. =5 and critical value= 2.571)
112
The average of dividend per share ratio was 18.87 and the annual average growth
rate was -4.57 percent. The dividend per share ratio was non-significant at 5 percent
level of significance at degree of freedom 5 because the calculated value of t=0.534
was less than the tabulated value=2.571.
The price-to-earning ratio of the company was highest (36.84) in 2007-08 that
indicated expensive share and in 2011-12 was lowest (9.27) that indicated cheapest
share during the study period. The annual average growth rate of price-to-earning
ratio was -13.37 percent and average was 24.87. The price-to-earning ratio was
significant at 95 percent confidence level. (t=2.811, d.f. =5 and critical value=
2.571)
The price-to-book ratio of the company was more than one throughout the study
period and it indicated that the stock was overvalued. The average of price-to-book
ratio was 6.24 and the annual average growth rate was -11.46 percent. The price-to-
book ratio was non-significant at 5 percent level of significance at degree of freedom
5 because the calculated value of t=2.361 was less than the tabulated value=2.571.
It was found that annual average growth rates of RONW ratio, GP ratio, NP ratio
were positive and rest of the ratios were negative during the study period. There was
consistency in seven ratios (ROCE, RONW, GP, NP, EPS, DPS, and PB) and there
was inconsistency in one ratio (PE).
Table 4.15 Profitability and Valuation Ratios of Reliance Industries Ltd.
Years ROCE RONW GPR NPR EPS DPS PER PBR
2005-2006 18.76 21.9 17.44 11.21 63.7 10 12.5 2.46
2006-2007 20.12 22.45 17.31 10.69 84.28 10.3 16.24 3.11
2007-2008 18.66 21.64 20.82 14.54 131.97 11.2 17.16 4.17
2008-2009 13.21 15.69 16.64 10.78 95.24 12.05 15.99 2.09
2009-2010 11.89 13.37 16.13 8.44 48.59 6.3 22.12 2.74
2010-2011 13.64 14.78 15.65 8.17 60.79 7.3 17.24 2.35
2011-2012 13.92 12.97 11.26 6.07 60.01 7.75 12.47 1.5
AVERAGE 15.74 17.54 16.46 9.99 77.8 9.27 16.25 2.63
AAGR -6.21 -8.35 -5.2 -8.44 -5.38 -5.94 1.11 -7.17
t-Value 2.815 5.057 2.423 3.004 1.019 1.877 0.32 1.652
Sig./Non-Sig. S S NS S NS NS NS NS
Source: Financial Statements of the Company but Calculation and Analysis by the Researcher
Note: Average Capital Employed has been taken for calculating ROCE and Average Net
Worth has been taken for calculating RONW.
113
Table 4.15 indicates the profitability and valuation ratios of Reliance Industries Ltd.
Company. The annual average growth rate of return on capital employed ratio was
negative (-6.21) percent and average was 15.74. The return on capital employed
ratio was significant at 95 percent confidence level. (t=2.815, d.f. =5 and critical
value= 2.571)
The return on net worth ratio of the company was decreasing trends. The annual
average growth rate of return on net worth ratio was negative (-8.35) percent and
average was 17.54. The return on net worth ratio was significant at 5 percent level of
significance at degree of freedom 5 because the calculated value of t=5.057 was
more than the tabulated value=2.571.
The annual average growth rate of gross profit ratio was negative (-5.20) percent and
average was 16.46. The gross profit ratio was non- significant at 95 percent
confidence level. (t=2.423, d.f. =5 and critical value= 2.571)
The net profit ratio of the company was decreasing trends. The annual average
growth rate of net profit ratio was negative (-8.44) percent and average was 9.99.
The return on net profit ratio was significant at 5 percent level of significance at
degree of freedom 5 because the calculated value of t=3.004 was more than the
tabulated value=2.571.
The annual average growth rate of earning per share ratio was negative (-5.38) and
average was 77.80. The earning per share ratio was non-significant at 95 percent
confidence level. (t=1.019, d.f. =5 and critical value= 2.571)
The annual average growth rate of dividend per share ratio was (-5.94) percent and
average 9.27. The dividend per share ratio was non-significant at 5 percent level of
significance at degree of freedom 5 because the calculated value of t=1.877 was less
than the tabulated value=2.571.
The price-to-earning ratio of the company was highest (22.12) in 2009-10 that
indicated expensive share and in 2005-06 was lowest (12.5) that indicated cheapest
share during the study period. The annual average growth rate of price-to-earning
ratio was 1.11 percent and average was 16.25. The price-to-earning ratio was non-
114
significant at 95 percent confidence level. (t=0.320, d.f. =5 and critical value=
2.571)
The price-to-book ratio of the company was more than one throughout the study
period and it indicated that the stock was overvalued. The annual average growth
rate of price to book ratio was negative (-7.17) percent and average was 2.63. The
price-to-book ratio was non-significant at 5 percent level of significance at degree of
freedom 5 because the calculated value of t=1.652 was less than the tabulated
value=2.571.
It was found that annual average growth rates of PE ratio was positive and ROCE
ratio, RONW ratio, GP ratio NP ratio, EPS ratio, DPS ratio, PB ratio were negative
during the study period. There was consistency in five ratios (GP, EPS, DPS, PE and
PB) relating to fundamental analysis and there was inconsistency in rest of the
ratios.
Table 4.16 Profitability and Valuation Ratios of Hindalco Industries Ltd.
Years ROCE RONW GPR NPR EPS DPS PER PBR
2005-2006 17.95 19.17 25.58 14.89 16.49 2.2 11.06 1.87
2006-2007 21.86 23.28 22.42 14.17 24.34 1.7 5.35 1.09
2007-2008 14.52 19.17 19.11 15.13 23.01 1.85 7.16 1.17
2008-2009 10.47 10.83 18.47 12.35 12.89 1.35 4.03 0.37
2009-2010 7.66 7.41 15.14 9.88 9.79 1.35 18.56 1.25
2010-2011 8.08 7.42 13.89 9.04 10.92 1.5 19.11 1.35
2011-2012 7.6 7.25 12.88 8.41 11.48 1.55 11.28 0.79
AVERAGE 12.59 13.5 18.21 11.98 15.56 1.64 10.94 1.13
AAGR -14.55 -16.95 -9.34 -8.76 -10.14 -4.76 11.34 -6.12
t-Value 5.402 5.169 17.139 6.578 2.526 2.219 1.159 0.734
Sig./Non-Sig. S S S S NS NS NS NS
Source: Financial Statements of the Company but Calculation and Analysis by the Researcher
Note: Average Capital Employed has been taken for calculating ROCE and Average Net
Worth has been taken for calculating RONW.
Table 4.16 portrays the profitability and valuation ratios of Hindalco Industries Ltd.
Company. The average of return on capital employed ratio was 12.59 and the annual
average growth rate was negative (-14.55) percent. The return on capital employed
115
ratio was significant at 95 percent confidence level. (t=5.402, d.f. =5 and critical
value= 2.571)
The annual average growth rate of return on net worth ratio was negative (-16.95)
percent and average was 13.50. The return on net worth ratio was significant at 5
percent level of significance at degree of freedom 5 because the calculated value of
t=5.169 was more than the tabulated value=2.571.
The gross profit ratio of the company was decreasing trends throughout the study
period. The average of gross profit ratio was 18.21 and the annual average growth
rate was negative (-9.34) percent. The gross profit ratio was significant at 95 percent
confidence level. (t=17.139, d.f. =5 and critical value= 2.571)
The annual average growth rate of net profit ratio was negative (-8.76) percent and
average was 11.98. The return on net profit ratio was significant at 5 percent level of
significance at degree of freedom 5 because the calculated value of t=6.578 was less
than the tabulated value=2.571.
The average of earning per share ratio was 15.56 and the annual average growth rate
was (-10.14) percent. The earning per share ratio was non-significant at 95 percent
confidence level. (t=2.526, d.f. =5 and critical value= 2.571)
The annual average growth rate of dividend per share ratio was negative (-4.76)
percent and average was 1.64. The dividend per share ratio was non-significant at 5
percent level of significance at degree of freedom 5 because the calculated value of
t=2.219 was less than the tabulated value=2.571.
The price-to-earning ratio of the company was highest (19.11) in 2010-11 that
indicated expensive share and in 2008-09 was lowest (4.03) that indicated cheapest
share during the study period. The annual average growth rate of price-to-earning
ratio was (11.34) percent and average was 10.94. The price-to-earning ratio was
non-significant at 95 percent confidence level. (t=1.159, d.f. =5 and critical value=
2.571)
The price-to-book ratio of the company was less than one in 2008-09 and 2011-12 it
indicated that the stock was undervalued and in all other financial year it was more
116
than one that indicated the stock was overvalued. The average of price to book ratio
was 1.13 and the annual average growth rate was negative (-6.12) percent. The
price-to-book ratio was non-significant at 5 percent level of significance at degree of
freedom 5 because the calculated value of t=0.734 was less than the tabulated
value=2.571.
It was found that annual average growth rates of PE ratio was positive and ROCE
ratio, RONW ratio, GP ratio NP ratio, EPS ratio, DPS ratio, PB ratio were negative
during the study period. There was consistency in four ratios (EPS, DPS, PE and
PB) relating to fundamental analysis and there was inconsistency in rest of the
ratios.
Table 4.17 Profitability and Valuation Ratios of ONGC Ltd.
Years ROCE RONW GPR NPR EPS DPS PER PBR
2005-2006 35.68 28.63 50.14 30.08 94.89 45 13.8 3.46
2006-2007 33.17 27 44.63 27.62 68.4 31 12.84 3.03
2007-2008 31.82 25.2 44.5 27.91 72.65 32 13.51 2.97
2008-2009 27.3 21.59 40 25.37 69.96 32 11.14 2.12
2009-2010 25.38 20.2 43.7 27.96 72.96 33 15.06 2.69
2010-2011 24.93 20.48 44.99 28.75 20.7 8.75 14.01 2.55
2011-2012 28.41 23.87 49.76 32.85 27.81 9.75 9.61 2.02
AVERAGE 29.53 23.85 45.39 28.65 61.05 27.36 12.85 2.69
AAGR -4.37 -3.90 -0.08 1.05 -16.74 -19.26 -2.39 -6.02
t-Value 3.328 2.496 0.055 0.792 3.147 3.434 0.973 3.157
Sig./ Non-Sig. S NS NS NS S S NS S
Source: Financial Statements of the Company but Calculation and Analysis by tbe Researcher
Note: Average Capital Employed has been taken for calculating ROCE and Average Net
Worth has been taken for calculating RONW.
Table 4.17 reveals the profitability and valuation ratios of ONGC Ltd. The return on
capital employed ratio was decreasing trends from 2005-06 to 2010-11. The average
of return on capital employed ratio was 29.53 and the Annual Average Growth Rate
was -4.37 percent. The return on capital employed ratio was significant at 95 percent
confidence level. (t=3.328, d.f. =5 and critical value= 2.571)
The return on net worth ratio was decreasing trends from 2005-06 to 2009-10.The
average of return on net worth ratio was 23.85 and the annual average growth rate
117
was -3.90 percent. The return on net worth ratio was non-significant at 5 percent
level of significance at degree of freedom 5 because the calculated value of t=2.496
was less than the tabulated value=2.571.
The Gross Profit Ratio was decreasing trends from 2005-06 to 2008-09. The average
of Gross Profit Ratio was 45.39 and the Annual Average Growth Rate was -0.08
percent. The gross profit ratio was non- significant at 95 percent confidence level.
(t=0.055, d.f. =5 and critical value= 2.571).
The Average of Net Profit Ratio was 28.65 and the Annual Average Growth Rate
was 1.05 percent. The net profit ratio was non-significant at 5 percent level of
significance at degree of freedom 5 because the calculated value of t=0.792 was less
than the tabulated value=2.571.
The average of earning per share ratio was 61.05 and the Annual Average Growth
Rate was -16.74 percent. The earning per share ratio was significant at 95 percent
confidence level. (t=3.147, d.f. =5 and critical value= 2.571)
The average of Dividend per Share ratio was 27.36 and the Annual Average Growth
Rate was -19.26 percent. The dividend per share ratio was significant at 5 percent
level of significance at degree of freedom 5 because the calculated value of t=3.434
was more than the tabulated value=2.571.
The price-to-earning ratio of the company was highest (15.06) in 2009-10 that
indicated expensive share and in 2011-12 was lowest (9.61) that indicated cheapest
share during the study period. The average of Price-to-earning Ratio was 12.85 and
the Annual Average Growth Rate was -2.39 percent. The price-to-earning ratio was
non-significant at 95 percent confidence level. (t=0.973, d.f. =5 and critical value=
2.571)
The price-to-book ratio of the company was more than one throughout the study
period and it indicated that the stock was overvalued. The Annual Average Growth
Rate of Price-to-book Ratio was -6.02 percent and average was 2.69. The price-to-
book ratio was significant at 5 percent level of significance at degree of freedom 5
because the calculated value of t=3.157 was more than the tabulated value=2.571.
118
It was found that annual average growth rates of NP ratio was positive and ROCE
ratio, RONW ratio, GP ratio NP ratio, EPS ratio, DPS ratio, PB ratio were negative
during the study period. There was consistency in four ratios (RONW, NP, GP and
PE) relating to fundamental analysis and there was inconsistency in rest of the ratios.
Table 4.18 Profitability and Valuation Ratios of HDFC Bank
Years ROCE RONW GPR NPR EPS DPS PER PBR
2005-2006 5.09 17.74 32 19.46 27.04 5.5 28.61 4.57
2006-2007 5.84 19.46 27.95 17.17 34.55 7 27.48 4.71
2007-2008 6.38 17.74 25.23 15.72 43.42 8.5 30.4 4.07
2008-2009 7.71 16.91 22.4 13.75 51.08 10 18.95 2.81
2009-2010 5.95 16.12 28.96 18.23 62.43 12 30.95 4.11
2010-2011 6.08 16.74 31.69 19.7 81.72 16.5 28.67 4.3
2011-2012 7.31 18.69 29.52 18.94 21.32 4.3 24.39 4.08
AVERAGE 6.34 17.63 28.25 17.57 45.94 9.11 27.06 4.09
AAGR 3.37 -0.72 0.44 1.04 4.23 4.07 -1.13 -1.54
t-Value 1.683 0.661 0.2 0.459 0.516 0.507 0.385 0.532
Sig./ Non- Sig. NS NS NS NS NS NS NS NS
Source: Financial Statements of the Company but Calculation and Analysis by the Researcher
Note: Average Capital Employed has been taken for calculating ROCE and Average Net
Worth has been taken for calculating RONW.
Table 4.18 portrays the profitability and valuation of HDFC bank. The annual
average growth rate of return on capital employed ratio was 3.37 percent and
average was 6.34. The return on capital employed ratio was non- significant at 95
percent confidence level. (t=1.683, d.f. =5 and critical value= 2.571)
The average of return on net worth ratio was 17.63 and the annual average growth
rate was negative (-0.72) percent. The return on net worth ratio was non-significant
at 5 percent level of significance at degree of freedom 5 because the calculated value
of t=0.661 was less than the tabulated value=2.571.
The annual average growth rate of gross profit ratio was 0.44 percent and average
was 28.25. The gross profit ratio was non- significant at 95 percent confidence level.
(t=0.20, d.f. =5 and critical value= 2.571)
119
The annual average growth rate of net profit ratio was 1.04 percent and average was
17.57. The return on net profit ratio was non-significant at 5 percent level of
significance at degree of freedom 5 because the calculated value of t=0.459 was less
than the tabulated value=2.571.
The earning per share ratio of HDFC bank was increasing trends from 2005-06 to
2010-2011. The annual average growth rate of earning per share ratio was 4.23
percent and average was 45.94. The earning per share ratio was non- significant at
95 percent confidence level. (t=0.516, d.f. =5 and critical value= 2.571)
The dividend per share ratio of HDFC bank was increasing trends from 2005-06 to
2010-11. The annual average growth rate of dividend per share ratio was 4.07
percent and average was 9.11. The dividend per share ratio was non-significant at 5
percent level of significance at degree of freedom 5 because the calculated value of
t=.507 was less than the tabulated value=2.571.
The price-to-earning ratio of the company was highest (30.95) in 2009-10 that
indicated expensive share and in 2008-09 was lowest (18.95) that indicated cheapest
share during the study period. The annual average of price-to-earning ratio was
negative (-1.13) percent and average was 27.06. The price-to-earning ratio was non-
significant at 95 percent confidence level. (t=0.385, d.f. =5 and critical value=
2.571)
The price-to-book ratio of the company was more than one throughout the study
period and it indicated that the stock was overvalued. The average of price-to-book
ratio was 4.09 and the annual average growth rate was (-1.54) percent. The price-to-
book ratio was non-significant at 5 percent level of significance at degree of freedom
5 because the calculated value of t=0.532 was less than the tabulated value=2.571.
It was found that annual average growth rates of ROCE ratio, GP ratio, NP ratio EPS
ratio, DPS ratio were positive and RONW ratio, PE ratio, PBR ratio were negative
during the study period. There was consistency in all the eight ratios.
120
Table 4.19 Profitability and Valuation Ratios of ICICI Bank
Years ROCE RONW GPR NPR EPS DPS PER PBR
2005-2006 6.16 14.62 25.98 17.76 27.35 8.5 21.54 2.36
2006-2007 6.7 13.37 19.05 14.14 32.88 10 25.95 3.16
2007-2008 7.65 11.75 18.29 13.51 36.03 11 21.37 1.84
2008-2009 7.14 7.83 18.63 12.09 32.4 11 10.27 0.75
2009-2010 6.17 7.96 23.19 15.66 34.63 12 27.51 2.06
2010-2011 6.16 9.65 28.18 19.83 42.97 12 25.09 2.33
2011-2012 7.18 11.2 27.79 19.27 54.17 16.5 16.38 1.69
AVERAGE 6.74 10.91 23.02 16.04 37.2 11.57 21.16 2.03
AAGR 0.29 -5.4 3.76 3.28 7.99 7.65 -1.9 -4.22
t- Value 0.149 1.614 1.255 1.088 4.31 5.523 0.322 0.59
Sig./Non-Sig. NS NS NS NS S S NS NS
Source: Financial Statements of the Company but Calculation and Analysis by the Researcher
Note: Average Capital Employed has been taken for calculating ROCE and Average Net
Worth has been taken for calculating RONW.
Table 4.19 shows the profitability and valuation of ICICI Bank. The average of
return on capital employed ratio was 6.74 and the annual average growth rate was
0.29 percent. The return on capital employed ratio was non- significant at 95 percent
confidence level. (t=0.149, d.f. =5 and critical value= 2.571)
The average return on net worth ratio was 10.91 and the Annual average growth rate
was -5.40 percent. The return on net worth ratio was non-significant at 5 percent
level of significance at degree of freedom 5 because the calculated value of t=1.614
was less than the tabulated value=2.571.
The Annual average growth rate of gross profit ratio was 3.76 percent and average
was 23.02. The gross profit ratio was non- significant at 95 percent confidence level.
(t=1.255, d.f. =5 and critical value= 2.571)
The annual average growth rate of net profit ratio was 3.28 percent and average was
16.04. The return on net profit ratio was non-significant at 5 percent level of
significance at degree of freedom 5 because the calculated value of t=1.088 was less
than the tabulated value=2.571.
121
Earning per share ratio of the company were increasing trends. The Annual average
growth rate of earning per share ratio was 7.99 percent and average was 37.20. The
earning per share ratio was significant at 95 percent confidence level. (t=4.310, d.f.
=5 and critical value= 2.571)
The dividend per share ratio of the company was increasing trends throughout the
study period. The annual average growth rate of dividend per share ratio was 7.65
percent and average was 11.57. The dividend per share ratio was significant at 5
percent level of significance at degree of freedom 5 because the calculated value of
t=5.523 was more than the tabulated value=2.571.
The price-to-earning ratio of the company was highest (27.51) in 2009-10 that
indicated expensive share and in 2008-09 was lowest (10.27) that indicated cheapest
share during the study period. The average of price-to-earning ratio was 21.16 and
the Annual average growth rate of price earning ratio was negative (-1.90) percent.
The price-to-earning ratio was non-significant at 95 percent confidence level.
(t=0.322, d.f. =5 and critical value= 2.571)
The price-to-book ratio of the company was less than one in 2008-09 it indicated
that the stock was undervalued and in all other financial year it was more than one it
indicated that stock was overvalued. The annual average growth rate of price-to-
book ratio was negative (-4.22) percent and average was 2.03. The price-to-book
ratio was non-significant at 5 percent level of significance at degree of freedom 5
because the calculated value of t=0.590 was less than the tabulated value=2.571.
It was found that annual average growth rates of ROCE ratio, GP ratio, NP ratio,
EPS ratio, DPS ratio were positive and RONW ratio, PE ratio, PB ratio were
negative during the study period. There was consistency in six ratios (ROCE,
RONW, GP, NP, PE and PB) and there was inconsistency in rest of the ratios.
122
Table 4.20 Profitability and Valuation Ratios of Wipro Ltd.
Years ROCE RONW GPR NPR EPS DPS PER PBR
2005-2006 41.01 35.72 25.64 19.68 13.47 5 41.47 12.4
2006-2007 39.72 36.11 25.7 20.66 18.61 6 30 8.74
2007-2008 28.7 29.35 22.23 17.35 19.94 6 21.33 5.38
2008-2009 22.72 24.71 18.88 13.76 19.62 4 12.51 2.87
2009-2010 28.41 32.43 27.25 21.29 32.49 6 21.75 5.87
2010-2011 24.85 24.83 23.88 18.35 18.84 6 25.39 5.51
2011-2012 25.76 20.52 21.04 14.79 18.08 6 24.28 4.43
AVERAGE 30.17 29.1 23.52 17.98 20.15 5.57 25.25 22.17
AAGR -6.83 -6.74 -1.61 -2.65 4.3 1.66 -5.63 -11.17
t-Value 2.87 3.436 0.754 1.011 1.015 0.623 0.992 1.889
Sig./Non-Sig. S S NS NS NS NS NS NS
Source: Financial Statements of the Company but Calculation and Analysis by the Researcher
Note: Average Capital Employed has been taken for calculating ROCE and Average Net
Worth has been taken for calculating RONW.
Table 4.20 depicts the profitability and valuation ratios of Wipro Ltd. Company.
The return on capital employed ratio of the company was decreasing trends from
2005-06 to 2008-09. The average of return on capital employed was 30.17 and the
annual average growth rate was negative (-6.83) percent. The return on capital
employed ratio was significant at 95 percent confidence level. (t=2.87, d.f. =5 and
critical value= 2.571)
The average of return on net worth ratio was 29.10 and the annual average growth
rate was negative (-6.74) percent. The return on net worth ratio was significant at 5
percent level of significance at degree of freedom 5 because the calculated value of
t=3.436 was more than the tabulated value=2.571.
The annual average growth rate of gross profit ratio was negative (-1.61) percent and
average was 23.52. The gross profit ratio was non- significant at 95 percent
confidence level. (t=0.754, d.f. =5 and critical value= 2.571)
The average of net profit ratio was 17.98 and the annual average growth rate was -
2.65 percent. The return on net profit ratio was non-significant at 5 percent level of
significance at degree of freedom 5 because the calculated value of t=1.011 was less
than the tabulated value=2.571.
123
The earning per share ratio of the company was increasing trends from 2005-06 to
2007-08. The annual average growth rate of earning per share ratio was (4.3) percent
and average was 20.15. The earning per share ratio was non-significant at 95 percent
confidence level. (t=1.015, d.f. =5 and critical value= 2.571)
The average of dividend per share ratio was 5.57 and the annual average growth rate
was (1.66) percent. The dividend per share ratio was non-significant at 5 percent
level of significance at degree of freedom 5 because the calculated value of t=0.623
was less than the tabulated value=2.571.
The price-to-earning ratio of the company was highest (41.47) in 2005-06 that
indicated expensive share and in 2008-09 was lowest (12.51) that indicated cheapest
share during the study period. The annual average growth rate of price-to-earning
ratio was negative (-5.63) percent and average was 25.25. The price-to-earning ratio
was non-significant at 95 percent confidence level. (t=0.992, d.f. =5 and critical
value= 2.571)
The price-to-book ratio of the company was more than one throughout the study
period and it indicated that the stock was overvalued. The annual average growth
rate of price to book ratio was negative (-11.17) percent and average was 22.17. The
price-to-book ratio was non-significant at 5 percent level of significance at degree of
freedom 5 because the calculated value of t=1.889 was less than the tabulated
value=2.571.
It was found that annual average growth rates of EPS ratio and DPS ratio were
positive and rest of the ratios were negative during the study period. There was
consistency in six ratios (GP, NP, EPS, DPS, PE and PB) and there was
inconsistency in rest of the ratios.
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