shivprasad a mba06002076

8/7/2019 Shivprasad A MBA06002076

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K.L.E.SSINSTITUTE OF MANAGEMENT STUDIES AND RESEARCH,

HUBLI 580031

MASTERS OF BUSINESS ADMINISTRATION(Recognized by AICTE, New Delhi and Affiliated to Karnataka University, Dharwad)

A PROJECT REPORT ONA Study on Fundamental and Technical Analysis of

Common Shares

Submitted By:

Shivaprasad N Abaloor

MBA 4th Semester

MBA06002076

K.L.E.SOCIETYS

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Institute guide:Prof. Rahul KavishwarFacultyKLESs IMSRHubli

Company guide:Mr. Sadanand HiremathManagerKarvey PhinophilisDharwad


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INSTITUTE OF MANAGEMENT STUDIES AND RESEARCHVIDYANAGAR

HUBLI-31

(Recognised by A.I.C.T.E, New Delhi and affiliated to Karnataka

University, Dharwad.)

Certificate

This is to certify that Mr. Shivaprasad N

Abaloor, K.U.D Examination No. MBA06002076

of MBA IV semester has successfully completed

his Major Concurrent Project.

Project Guide: Director:

Mr. Rahul Kavishwar Dr. M. M. Bagali

KLESs IMSR Director, KLESs IMSR

Hubli-31 Hubli-31

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Declaration

I, Shivaprasad N Abaloor, hereby

declare that this project entitled A STUDY ON

FUNDAMENTAL AND TECHNICAL ANALYSIS OF COMMON

SHARES, has been prepared by me under the

valuable guidance and supervision of Mr.

Rahul Kavishwar, Faculty Member, KLESs

Institute Of Management Studies And

Research, Hubli, in partial fulfillment of the

requirements for the award of the Masters

Degree in Business Administration during

the academic year 2007-2008.

I also declare that this project report

has not been submitted to any other university

for the award of any other degree, fellowship,

associate ship or any other similar title.

Countersigned:-

Mr.Rahul Kavishwar Shivaprasad N Abaloor.

(Faculty Member) Register No. MBA06002076

(M.B.A. Student)

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DATE :

PLACE: Hubli

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Acknowledgement

I would like to thank Dr. M.. M Bagali, Director of KLESs

Institute Of Management Studies And Research, Hubli, for the guidance he

has given to me in the conduction of my project work.

I express my profound thanks to Mr Rahul Kavishwar, my

teacher and guide, who has been magnanimous in guiding, encouraging and

supporting me during this project and special thanks to himbecause who

guided me to choose this immensely productive topic and it was because of

his confidence in me that I have been able to carry out such a beautiful study

report..

My sincere thanks goes to Mr.Sadand Hiremath, Branch

Manager, Karvy Stock Broking Ltd, Dharwad, for giving me an opportunity

to do a project for their esteemed organisation and for extending his

valuable guidance and patient support throughout my project

.

Shivaprasad N. Abaloor

KLESs IMSR , Hubli.

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Contents

Sl. No Particulars Page no.

1 Executive summary 01

2 Objectives 05

3 About Indian stock market 07

4 About Karvy securities 12

5 Introduction to the topic 37

6 Company Analysis 59

7 Findings 93

8 Recommendation 94

9 Conclusion 95

10 Bibliography 96

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EXECUTIVE SUMMARY:

TITLE OF THE PROJECT:

A Study On Fundamental and Technical Analysis of Common Shares

SCOPE OF THE STUDY:

This study is of utmost importance because of its utility in estimating the future

trends of the stock prices and to make a decent profit out of it. And security analysts are

much sought after chief economists in any DP and AMCs. The project is done takingsingle equity stock, analysis and valuation of which can be a model for other common

shares valuation.

The stock exchange comes in the secondary market. Stock exchange performs

activities such as trading in share, securities, bonds, mutual fund & commodities. The

performance of benchmark Stock exchanges is directly influencing the prices of the

individual scrip. So the study has also not overlooked the analysis of stock market in fact

I have considered it as an integral part of security analysis. At the macro-level Broking

firms undertake this security analysis and also trading facility and trading advice. So is

the importance of Broking firms which (industry) is growing at an enormous rate, as more

and more people are attracted towards stock exchanges with the hope of making profits.

INDUSTRY:

The equity stock (Indian Hotels) selected is from hotel industry. Hotel Industry in India

has witnessed tremendous boom in recent years. Hotel Industry is inextricably linked to

the tourism industry and the growth in the Indian tourism industry has fuelled the growth

of Indian hotel industry. The thriving economy and increased business opportunities in

India have acted as a boon for Indian hotel industry. The arrival of low cost airlines and

the associated price wars have given domestic tourists a host of options. The 'Incredible

India' destination campaign and the recently launched 'Atithi Devo Bhavah' (ADB)

campaign have also helped in the growth of domestic and international tourism and

consequently the hotel industry.

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According to a report, Hotel Industry in India currently has supply of 110,000 rooms and

there is a shortage of 150,000 rooms fueling hotel room rates across India. According to

estimates demand is going to exceed supply by at least 100% over the next 2 years. Five-

star hotels in metro cities allot same room, more than once a day to different guests,

receiving almost 24-hour rates from both guests against 6-8 hours usage. With demand-

supply disparity, hotel rates in India are likely to rise by 25% annually and occupancy by

80%, over the next two years. This will affect the competitiveness of India as a cost-

effective tourist destination.

PROJECT:

Fundamental analysis

The approach of evaluating the information contained in financial statements, industry

reports, and economic factors to determine the intrinsic value of a firm and its stock.

Technical analysis is the examination of past price movements to forecast future price

movements. Technical analysts are sometimes referred to as chartists because they rely

almost exclusively on charts for their analysis.

FINDINGS

For stock:

First, the projected MPS using fundamental approach for the stock for next three

years are 144,163 and 176 rupees.

Short term support for scrip: 130-140; Next support has been established at 110-

115

Long term resistance for scrip: 160-165

Long term support is at 65 level;

Now the scrip is slightly on the down trend(short term) and settling down to the

intermediate support of 110-115

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Long term target by technical analysis is 225 but this is unlikely to happen in the

medium term because short term trend has been bearish and long term trend has

been flat and undergoing long consolidation.

For market: Short term support or intermediate support: 4500-4600; next long term support

lies at3100-3150

Resistance for Nifty is at present is at 6000

Short term and intermediate trend has been bearish and long term trend is still

bullish

Long term nifty target is a 6980- 7020.

Conclusion

Technical analysis can be used as a reliable tool for investing in to stocks.

Technical analysis is more useful in identifying the identification of buying points

and selling points.

Combination of both approaches will give a investor right guidance in taking

decisions regarding buying and selling points.

Recommendations

The long term investors should buy the scrip at key support levels at which the

price is lower or almost equal to the fair value found out by fundamental

approach.

Short term investors (traders) need not be worried about the fundamentals of the

company but should have a close eye on various supports and resistances of scrip

and market to buy/ sell and book the profit.

Short term traders should buy or sell whenever there is break outs from the

various levels of resistance and support with expansion in volume. But the same

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does not apply to long term investors unless the break out is from key

support/resistance levels.

Market is very much sentiment driven, so investors are advised to concentrate

more on technicals then being worried about fundamentals which is very difficult

some times.

So investors are advised to try to discount every happening or news which affects

market and stock before they see its effect on the market or stock so that they get

more benefit out of it.

OBJECTIVES OF THE STUDY:

Objectives

To forecast the future price movements (2-3 years) of selected common share.

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To identify right entry and exit (buy and sell points) points for both long term

and short term perspective.

Trying to forecast the performance of market (Nifty).

Sub Objectives

To determine the key support and resistance levels for the market as well as

selected scrip, and hence exit and entry levels.

To determine short-term and long-term trends for both market and selected stocks.

To arrive at fair values for these scrip in future (for 1st, 2nd and 3rd year) using

fundamental approach.

DURATION OF THE PROJECT:

The project was done for duration of eight weeks.

METHODOLOGY:

.

We have two approaches fundamental (EIC) and Technical analysis combined

together to arrive at future price targets.

In fundamental analysis we have in tern adopted Top-Down approach, wherein

macro-economic analysis is followed by industry analysis (hotel) and finally

company analysis.

In technical analysis we have charting for short term and long term time period.

The tools used in the technical analysis are Moving averages (SMA & EMA),

oscillators (Relative Strength Index).

Identification of trends and simple equation of resistance and support are used as

barometers in technical analysis.

Data collection

Primary data is collected through direct interactions with the clients of Karvy Securities.

The Secondary data is collected from the annual reports of the company, relevant text

books on the subject matter and companys official website.

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LIMITATIONS OF THE STUDY:

1. The study (valuation) is done for only one scrip and sector.

2. Here, an attempt is made to predict the future movement of stock. It contains an

element of guess work.

3. No agjact timing is mentioned while giving target price for scrip using technical

analysis.

4. Here, I have used only 2 Technical tools to predict the movement of Scrips.

They are moving averages and relative strength index.

Sample used

Both for market and company I have used 2 and half to 3 years data to do technical

analysis.

OVERVIEW OF EQUITY MARKET IN INDIA

(STOCK MARKET)

With over 20 million shareholders, India has the third largest investor base in the

world after the USA and Japan. Over 9,000 companies are listed on the stock exchanges,

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which are serviced by approximately 7,500 stockbrokers. The Indian capital market is

significant in terms of the degree of development, volume of trading and its tremendous

growth potential.

There are 23 recognized stock exchanges in India, including the Over the Counter

Exchange of India (OTCEI) for small and new companies and the National Stock

Exchange (NSE) which was set up as a model exchange to provide nation-wide services

to investors. NSE, which in the recent past has accounted for the largest trading volumes,

has a fully automated screen based system that operates in the wholesale debt market

segment as well as the capital market segment.

India's market capitalization was amongst the highest among the emerging markets. Total

market capitalization of the BSE as on July 31, 1997 was Rs 5,573.07 billion growing by

18 percent over a period of twelve months and as of August 2005 was over $500 billion

(about Rs 22 lakh crores).

BSE (Bombay Stock Exchange)

SENSEX - THE BAROMETER OF INDIAN CAPITAL MARKETS

Introduction:

For the premier Stock Exchange that pioneered the stock broking activity in India,

128 years of experience seems to be a proud milestone. A lot has changed since 1875

when 318 persons became members of what today is called "The Stock Exchange,

Mumbai" by paying a princely amount of Re1.Since then, the country's capital markets

have passed through both good and bad periods.

In 1956, the BSE obtained permanent recognition from the Government of India -- the

first stock exchange to do so -- under the Securities Contracts (Regulation) Act, 1956.

JOURNEY OF SENSEX FROM 1K TO 16K:

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Robust portfolio investments and heavy fund buying lifted the Bombay Stock

Exchange's benchmark 30-share Sensex past the magical 12,000 mark. The Sensex finally

closed at an all-time high of 12,040 points.

This is the fastest 1,000-point gain by the Sensex. It only took 15trading sessions

for the index to cross from 11,000 to 12,000. Interestingly, the Sensex has taken only 10

months to gain 5,000 points!

The unprecedented Bull Run started on May 6, 2003 when the Sensex was at

3,001.21 level. In took just 67 trading sessions to cross the 4,000-mark and touch

4,026.27 points on August 19, 2003.

Thereafter, it pierced through the 6,000 mark on January 2, 2004 in another 43

trading sessions. The market then seemed to pause for breath as it took a whopping 370

trading sessions to cross the 7,000 mark, at 7001.55 on June 20, 2005.

From 7,000-mark, the sentiment turned distinctly firm following good liquidity

that played a significant role to determine the market direction and Sensex crossed 8,000-

mark in just 55 trading sessions at 8, 060.26 on September 8, 2005 and 54 trading days to

cross 9,000-mark at 9, 005.63 on November 28, 2005.

From 9K to 10K, it took just 48 trading sessions. The index crossed 10,000-mark

on February 6, 2006 at 10,002.83.

Then mostly its the robust Indian economic growth, liberalized norms, upliftment

of FDI and FII limits in almost all sectors which made the Sensex to sore to the level of

16000.

The journey from 16000 to 2000 and sudden fall from that peak is one of the heart

rending mile stone in the history of stock market. The US sub prime crisis and issue of P-

notes and also slow down in IIP and soaring inflation are directly attributed to this slump.

NSE (NATIONAL STOCK EXCHANGE)

The Organization:

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The National Stock Exchange of India Limited has genesis in the report of the

High Powered Study Group on Establishment of New Stock Exchanges, which

recommended promotion of a National Stock Exchange by financial institutions (FIs) to

provide access to investors from all across the country on an equal footing. Based on the

recommendations, NSE was promoted by leading Financial Institutions at the behest of

the Government of India and was incorporated in November 1992 as a tax-paying

company unlike other stock exchanges in the country.

On its recognition as a stock exchange under the Securities Contracts (Regulation)

Act, 1956 in April 1993, NSE commenced operations in the Wholesale Debt Market

(WDM) segment in June 1994. The Capital Market (Equities) segment commenced

operations in November 1994 and operations in Derivatives segment commenced in June

2000.

With the liberalization of the Indian economy, it was found inevitable to lift the Indian

stock market trading system on par with the international standards. On the basis of the

recommendations of high powered Pherwani Committee, the National Stock Exchange

was incorporated in 1992 by Industrial Development Bank of India, Industrial Credit and

Investment Corporation of India, Industrial Finance Corporation of India, all Insurance

Corporations, selected commercial banks and others.

Trading at NSE can be classified under two broad categories:

(a) Wholesale debt market and

(b) Capital market.

Wholesale debt market operations are similar to money market operations - institutions

and corporate bodies enter into high value transactions in financial instruments such as

government securities, treasury bills, public sector unit bonds, commercial paper,

certificate of deposit, etc.

There are two kinds of players in NSE:

(a) Trading members and

(b) Participants.

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Recognized members of NSE are called trading members who trade on behalf of

themselves and their clients. Participants include trading members and large players like

banks who take direct settlement responsibility.

Trading at NSE takes place through a fully automated screen-based trading mechanism

which adopts the principle of an order-driven market. Trading members can stay at their

offices and execute the trading, since they are linked through a communication network.

The prices at which the buyer and seller are willing to transact will appear on the screen.

When the prices match the transaction will be completed and a confirmation slip will be

printed at the office of the trading member.

NSE has several advantages over the traditional trading exchanges. They are as

follows:

NSE brings an integrated stock market trading network across the nation.

Investors can trade at the same price from anywhere in the country since inter-

market operations are streamlined coupled with the countrywide access to the securities.

Delays in communication, late payments and the malpractices prevailing in the

traditional trading mechanism can be done away with greater operational efficiency and

informational transparency in the stock market operations, with the support of total

computerized network.

Unless stock markets provide professionalized service, small investors and foreign

investors will not be interested in capital market operations. And capital market being one

of the major sources of long-term finance for industrial projects, India cannot afford to

damage the capital market path. In this regard NSE gains vital importance in the Indian

capital market system.

NIFTY:

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The Nifty is relatively a new comer in the Indian market. S&P CNX Nifty is a 50

stock index accounting for 23 sectors of the economy. It is used for purposes such as

benchmarking fund portfolios; index based derivatives and index funds.

The base period selected for Nifty is the close of prices on November 3, 1995,

which marked the completion of one-year of operations of NSE's capital market segment.

The base value of index was set at 1000.

S&P CNX Nifty is owned and managed by India Index Services and Products Ltd.

(IISL), which is a joint venture between NSE and CRISIL. IISL is a specialized company

focused upon the index as a core product. IISL have a consulting and licensing agreement

with Standard & Poor's (S&P), who are world leaders in index services.

About KARVY

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The Karvy group was formed in 1983 at Hyderabad, India. Karvy ranks among the top

player in almost all the fields it operates. Karvy Computer share Limited is Indias largest

Registrar and Transfer Agent with a client base of nearly 500 blue chip corporate,

managing over 2 crore accounts. Karvy Stock Brokers Limited, member of National

Stock Exchange of India and the Bombay Stock Exchange, ranks among the top 5 stock

brokers in India. With over 6, 00,000 active accounts, it ranks among the top 5 Depositary

Participant in India, registered with NSDL and CDSL. Karvy COM trade, Member of

NCDEX and MCX ranks among the top 3 commodity brokers in the country. Karvy

Insurance Brokers is registered as a Broker with IRDA and ranks among the top 5

insurance agent in the country. Registered with AMFI as a corporate Agent, Karvy is also

among the top Mutual Fund mobilizer with over Rs. 5,000 crores under management.

Karvy Realty Services, which started in 2006, has quickly established itself as a broker

who adds value, in the realty sector. Karvy Global offers niche off shoring services to

clients in the US.

Karvy has 575 offices over 375 locations across India and overseas at Dubai and New

York. Over 9,000 highly qualified people staff Karvy.

Karvy Early Days

Karvy the name comes from the names of the directors:

K - Mr. V. Kutumba Rao

A - Mr. K Ajay Kumar

R - Mr. M S Ramakrishna

V - Mr. Vikram Singh

Y - Mr. M Yugandhar

The birth of Karvy was on a modest scale in 1979. It began with the vision and enterprise

of a small group of practicing Chartered Accountants who founded the flagship company

Karvy Consultants Limited. Karvy started with consulting and financial accounting

automation, and carved inroads into the field of registry and share accounting by 1985.

Since then, Karvy have utilized its experience and superlative expertise to go from

strength to strengthto better its services, to provide new ones, to innovate, diversify and

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in the process, evolved Karvy as one of Indias premier integrated financial service

enterprise.

GROWTH AND DEVELOPMENT OF KARVYOver the last 20 years Karvy has traveled the success route, towards building a reputation

as an integrated financial services provider, offering a wide spectrum of services. And

Karvy have made this journey by taking the route of quality service, path breaking

innovations in service, versatility in service and finallytotality in service. Karvys

highly qualified manpower, cutting-edge technology, comprehensive infrastructure and

total customer-focus has secured for Karvy the position of an emerging financial services

giant enjoying the confidence and support of an enviable clientele across diverse fields inthe financial world.

Karvys values and vision of attaining total competence in its servicing has served as the

building block for creating a great financial enterprise, which stands solid on its fortresses

of financial strength - its various companies.

With the experience of years of holistic financial servicing behind it and years of

complete expertise in the industry to look forward to, Karvy have now emerged as a

premier integrated financial services provider.

And today, Karvy can look with pride at the fruits of its mastery and experience

comprehensive financial services that are competently segregated to service and manage a

diverse range of customer requirements.

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KARVY-Milestones

AT PRESENT STATUS OF KARVY

Presently Karvy is a member of National Stock Exchange (NSE), the Bombay Stock

Exchange (BSE), and The Hyderabad Stock Exchange (HSE). Market analysis andmarket predictions are done by professional management team.

KARVY is covering the entire spectrum of financial services such as Stock Broking

Services, Advisory Services, Stock broking, Depository Participants, Distribution of

financial products - mutual funds, bonds, fixed deposit, equities, Insurance Broking,

Commodities Broking, Personal Finance Advisory Services, Merchant Banking &

Corporate Finance, placement of equity, IPOs, among others.

It is the largest mobiliser of funds as per PRIME DATABASE. It is among the top 5

stock brokers in India (4% of NSE volumes). India's No. 1 Registrar & Securities

Transfer Agents (Ranked as The Most Admired Registrar" by MARG). Among the top 3

Depository Participants. Largest Network of Branches & Business Associates. First ISO -

9002 Certified Registrar in India. Among top 10 Investment bankers. Largest Distributor

of Financial Products are --

The Finapolis, monthly magazine & Karvy Bazaar Baatein, a weekly report cover stock

market analysis and other financial matters.

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Every 50th Indian is serviced by KARVY Every 20th trade in stock market is done

through KARVY. Every 6th Investor in India invests through KARVY India's No.1

Registrars and Transfer agent : KARVY Every 10th Demat Account is held at KARVY.

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ORGANISATION STRUCTURE OF KARVY

LEVEL-I

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Board ofDirectors

CMD, MD, & other Directors

KarvyConsultants

Limited

KarvyInvestorServiceLimited

Karvy GlobalServiceLimited

KarvyStock

BrokingLimited

KarvyComputershare

Pvt. Limited

KarvyInsuranceBrokingPrivateLimited

KarvyInc.

KarvyCommodities

Broking PrivateLimited

Karvy Regional

HQs / Branches


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Level-II

STUDY OF COMPANY PROFILE WITH RESPECT TO

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Regional Branch Head

ISO CELL

Operations

Divisions

Support

FunctionsBranches

ACCOUNTS

HRD

SYSTEM

ADMN,PURCHASE,& STORES

BRANCHES

Operations

Divisions

Support

Functions

RIS

FPD

BROKING

DP


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Mc KINSEYS 7S MODEL

STRATEGY:

In modern times the word strategy has found its way into the management field. In the

context of a business concern, strategy indicates specific program of action for achieving

the organization objectives by employing the firms resources efficiently andeconomically. It involves preparing oneself for meeting unforeseen factor. It is also

concerned with meeting the challenges posed by the policies and actions of other

competitors in the market.

Quality Policy

To achieve and retain leadership, Karvy shall aim for complete customer satisfaction, by

combining its human and technological resources, to provide superior quality financial

services. In the process, Karvy will strive to exceed Customer's expectations.

Quality Objectives are to:

Build in-house processes that will ensure transparent and harmonious

relationships with its clients and investors to provide high quality of services.

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Establish a partner relationship with its investor service agents and vendors that

will help in keeping up its commitments to the customers.

Provide high quality of work life for all its employees and equip them with

adequate knowledge & skills so as to respond to customer's needs. Continue to uphold the values of honesty & integrity and strive to establish

unparalleled standards in business ethics.

Use state-of-the art information technology in developing new and innovative

financial products and services to meet the changing needs of investors and

clients.

Strive to be a reliable source of value-added financial products and services and

constantly guide the individuals and institutions in making a judicious choice ofsame.

Strive to keep all stake-holders (shareholders, clients, investors, employees,

suppliers and regulatory authorities) proud and satisfied.

STRUCTURE:

Board of Directors

Mr. C Parthasarathy (Chairman and Managing Director), Mr. M Yugandhar (Managing

Director ), Mr. M S Ramakrishna (Director ), Mr. Prasad V Potluri (Director), William

Stuart Crosby (Chairman Karvy Computershare Pvt Ltd.), Chandra

Balaraman(Director Karvy Computershare Pvt Ltd.), Mark Davis(Director Karvy

Computershare Pvt Ltd.), Mr. Uday Raval(Director - Karvy Inc. )

Karvys organization structure can be viewed as accomplishing departments Operations

Divisions and Support Function Division.

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Below the Operations Divisions there are sub divisions namely Registry and Investor

Services (RIS), Depository Participant (DP), Broking Services, Financial Product

Distribution (FPD).

Below the Support Functions, there are sub divisions namely Accounts, System, Human

Resource Development, and Administration, Purchase & Stores.

These department heads controls the day-to-day affairs of the company. These

department heads are directly reports to the director. Board of Directors directly appoints

department heads. The departmental heads does locations of responsibilities among

various positions.

In Karvy Departments are inter related. Majority of decisions are taken by the top

management. While taking important decision the department managers are also

consulted and their suggestions are also considered. Hence Participative style of

management is followed in Karvy.

SYSTEM:

KARVY covers the entire spectrum of financial services such as Stock broking,

Depository Participants, Distribution of financial products - mutual funds, bonds, fixed

deposit, equities, Insurance Broking, Commodities Broking, Personal Finance Advisory

Services, Merchant Banking & Corporate Finance, placement of equity, IPOs.

A link called Resource Center, devoted solely to research. Karvys highly skilled

research team, comprising of technical analysts as well as fundamental specialists, secure

result-oriented information on market trends, market analysis and market predictions.

This crucial information is given as a constant feedback to its customers, through daily

reports delivered thrice daily; The Pre-session Report, where market scenario for the day

is predicted, The Mid-session Report, timed to arrive during lunch break, where the

market forecast for the rest of the day is given and The Post-session Report, the final

report for the day, where the market and the report itself is reviewed. To add to this

repository of information, Karvy publish a monthly magazine The Finapolis, which

analyzes the latest stock market trends and takes a close look at the various investment

options, and products available in the market, while a weekly report, called Karvy Bazaar

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Baatein, gives more information on the immediate trends in the stock market. In addition,

its specific industry reports give comprehensive information on various industries.

Karvys Stock Broking services are widely networked across India, with the number of

trading terminals providing retail stock broking facilities. To empower the investor

further Karvy have made serious efforts to ensure that its research calls are disseminated

systematically to all our stock broking clients through various delivery channels like

email, chat, SMS, phone calls etc.

STYLE:

An activity like forecasting and planning are made by top level managers. Major policiesand plans are made by top management and it is implemented and administered by

employees. In the organization the style of informal communication and meetings with

employees has created workers to a friendly environment.

STAFF:

The term staff refers to manpower planning, recruitment, performance appraisal,

motivation and morale.

SKILLS:

The managers and workers in each department are skilled to the extent of functions they

perform. Directors of the company are skilled in every activities and disciplines of

organization.

A 1600 team of highly qualified and dedicated professionals drawn from the best of

academic and professional backgrounds are committed to maintaining high levels ofclient service delivery. This has propelled Karvy to a position among the top distributors

for equity and debt issues with an estimated market share of 15% in terms of applications

mobilized, besides being established as the leading procurer in all public issues.

A link called Resource Center, devoted solely to research. Karvys highly skilled

research team, comprising of technical analysts as well as fundamental specialists, secure

result-oriented information on market trends, market analysis and market predictions.

Achievements

Largest mobiliser of funds as per PRIME DATABASE

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Among the top 5 stock brokers in India (4% of NSE volumes)

India's No. 1 Registrar & Securities Transfer Agents (Ranked as " The Most

Admired Registrar" by MARG)

A Category- I -Merchant banker.

Among the to top 3 Depository Participants

Largest Network of Branches & Business Associates

First ISO - 9002 Certified Registrar in India

Among top 10 Investment bankers

Largest Distributor of Financial Products

Full Fledged IT driven operations

Handled the largest- ever Public Issue - IDBI

Handled over 500 Public issues as Registrars.

Handling the Reliance Account which accounts for nearly 10 million account

holders

Major issues managed as arrangers

Kerala State Electricity Board.

Power Finance Corporation

A.P. Water Resources Development Corporation.

A.P. Roads Development Corporation.

A.P. State Electricity Board.

Haldia Petrochemicals Ltd.

Major issues managed as Co-Managers

IndusInd Bank Ltd

ICICI Bonds March 97

ICICI Bonds Dec 97

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ICICI Safety Bonds March 98

ICICI Safety Bonds April 98. July 98, Oct 98, Dec 98, Jan 99.

The Jammu and Kashmir Bank Ltd

Major issue handled as Registrars to Issues

IDBI Equity

Morgan Stanley Mutual Fund

Bank of Baroda

Bank of Punjab Ltd

Corporation Bank

IndusInd Bank Ltd Jammu and Kashmir Bank Ltd

Housing and Urban Development Corporation (HUDCO) Ltd

Madras Refineries Ltd

Tamil Nadu Newsprint & Paper Ltd

BPL Ltd

Birla 3M Ltd

Essar Shipping Ltd

Essar Steels Ltd.

Hindustan Petroleum Corporation Ltd.

Infosys Technologies Ltd.

Jindal Vijayanagar Steels Ltd.

Nagarjuna Fertilizers & Chemicals Ltd.

Rajshree Polyfil Ltd.

Karvy Securities Ltd.

Karvy has secured over Rs. 500 crore in the following debt issues.

Andhra Pradesh Road Development Corporation Ltd

ICICI Bonds ( Private Placement)

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ICICI Bonds 96

ICICI Bonds 97- I

ICICI Bonds 97 II

ICICI Safety Bonds March 98.

IDBI Bonds 96.

IDBI Flexi Bonds I

IDBI Flexi Bonds II

IDBI Flexi Bonds III

Kerala State Electricity Board

Krishna Bhagya Jala Nigam Ltd

Power Finance Corporation Ltd

Andhra Pradesh Water Resources Development Corporation

Andhra Pradesh State Electricity Board

SHARED VALUES:

Employees at each level of organization are conscious about delivering customer value

for his money. Each and every employee understands the mission and vision of the

company. Employees of company are committed towards the quality aspects in service.

The employees of Karvy themselves put forward in fulfilling the organizational principles

for betterment of organization.

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STUDY OF FUNCTIONAL DEPARTMENTS OF KARVY

In Karvy the functions are mainly divided into two parts namely Operational Functions

and the Supporting Functions.

OPERATING FUNCTIONS:

Registry and Investor Services (RIS) in which Karvy carry out functions as Registrar &

transfer Agent (RTA), and Registrar to the Issues. Financial Product Distribution

(FPD), Here financial products include Mutual Funds, Fixed income securities, bonds,

fixed deposits, Tax-saving Products, Insurance, etc. Stock Broking Services andDepository Participant (DP), which are explained in Service Profile of the Karvy group

of companies.

SUPPORTING FUNCTIONS:

2.61 Administration - Purchase and Stores Department

Responsibilities

To ensure preventive breakdown of equipment/accessories including computer

hardware

To ensure speedy breakdown maintenance

To ensure that the maintenance status of all equipment/ accessories is entered in

the service

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HOD

Assistant HOD

AdministrationTeam


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To ensure that the maintenance is carried out efficiently

Maintenance includes preventive, breakdown and general maintenance. Preventive

maintenance shall be done as per the prefixed time schedule by the subcontractors for thepurpose. The administration incharge shall make necessary arrangements for this purpose.

In Breakdown / General maintenance admi9nistration team receive information

regarding any breakdown or general repairs. On receipt of the same, the administrative

team shall maintain a record of all maintenance done.

The Procedure involves identification of subcontractors which will be done through

Newspaper, advertisements, word of mouth. Both the parties meet to their requirements

and enter into agreement. Subcontractors are appointed for providing services Preventive

maintenance, Breakdown maintenance, Courier services and any other services.

2.62 Accounts Department

Finance operations in Karvy are centralized at the Head Office Account. Periodic fund

requirement at the regional level will be sort as and when required. But all cheques and

such instruments would be signed by the local regional manager.

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2.63 System Administration Department

In this department the functions include Trouble shooting, desktop queries, Network

problems, Software and Hardware problems, Installation of new systems, creating newnetworks.

2.64 Human resource Department

The human resource Department (HRD) caters to the entire recruitment and employee

upbringing in the company.

The HR functions and practices, which are practiced at the Karvy, are:

Manpower Planning: The departmental heads are entrusted with the responsibility of

assessing the present and the future manpower requirement in their departments.

Manpower planning is being done in the company in order to secure a confidence and

capability

Recruitment: Advertising in newspaper and other media, private employment agencies,

personal contacts, colleges and universities are the sources used by Karvy.

Training: The personnel department gives training for all new employees.

Performance Appraisal: The HOD of the department, to which the employees belongs,

presents a report of the employees, to be appraised. In addition to that other managers to

whom the employee is associated is also evaluating the performance of the employee.

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Dy. General Manager

Dy.Manager

Asst. Manager


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Motivation: The Company provides both extrinsic and intrinsic motivation to the

employees. Extrinsic motivation is considered with external motivators which employees

get through pay, promotion, fringe benefits, holidays etc. Intrinsic motivation is

concerned with the feeling of having accomplished something worthwhile i.e. the

satisfaction one gets after doing ones work well, praise, responsibility, recognition,

participation are the examples. Job rotation is undertaken to reduce the monitoring and

burden of the employees.

Morale: For improving employees morale positive measures like job rotation, building

responsibility into job etc are introduced. Both upward and downward communication

takes place within the company. Participation is the key to commitment.

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SERVICE PROFILE OF THE

KARVY GROUP OF COMPANIES

Karvy Stock Broking Limited

Member - National Stock Exchange (NSE), the Bombay Stock Exchange (BSE), and the

Hyderabad Stock Exchange (HSE). Karvy Stock Broking Limited, one of the

cornerstones of the Karvy edifice, flows freely towards attaining diverse goals of the

customer through varied services.

Stock Broking Services

It is an undisputed fact that the stock market is unpredictable and yet enjoys a high

success rate as a wealth management and wealth accumulation option. The difference

between unpredictability and a safety anchor in the market is provided by in-depth

knowledge of market functioning and changing trends, planning with foresight and

choosing one & other options with care. Karvy offer trading on a vast platform; National

Stock Exchange, Bombay Stock Exchange and Hyderabad Stock Exchange. Karvys

highly skilled research team, comprising of technical analysts as well as fundamental

specialists, secure result-oriented information on market trends, market analysis and

market predictions. This crucial information is given as a constant feedback to its

customers, through daily reports delivered thrice daily; The Pre-session Report, where

market scenario for the day is predicted, The Mid-session Report, timed to arrive during

lunch break, where the market forecast for the rest of the day is given and The Post-

session Report, the final report for the day, where the market and the report itself is

reviewed. To add to this repository of information, Karvy publish a monthly magazine

The Finapolis, which analyzes the latest stock market trends and takes a close look at the

various investment options, and products available in the market, while a weekly report,

called Karvy Bazaar Baatein, gives more information on the immediate trends in the stock

market. In addition, its specific industry reports give comprehensive information on

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various industries. Karvys Stock Broking services are widely networked across India,

with the number of trading terminals providing retail stock broking facilities.

To empower the investor further Karvy have made serious efforts to ensure that its

research calls are disseminated systematically to all our stock broking clients through

various delivery channels like email, chat, SMS, phone calls etc.

Depository Participants

The onset of the technology revolution in financial services Industry saw the emergence

of Karvy as an electronic custodian registered with National Securities Depository Ltd

(NSDL) and Central Securities Depository Ltd (CSDL) in 1998. Karvy set standards

enabling further comfort to the investor by promoting paperless trading across the country

and emerged as the top 3

Depository Participants in the country in terms of customer serviced. Offering a wide

trading platform with a dual membership at both NSDL and CDSL, Karvy have

established live DPMs, Internet access to accounts and an easier transaction process in

order to offer more convenience to individual and corporate investors. A wide national

network makes its efficiencies accessible to all.

Distribution of Financial Products

A 1600 team of highly qualified and dedicated professionals drawn from the best of

academic and professional backgrounds are committed to maintaining high levels of

client service delivery. This has propelled Karvy to a position among the top distributors

for equity and debt issues with an estimated market share of 15% in terms of applications

mobilized, besides being established as the leading procurer in all public issues.

Advisory Services

Under its retail brand Karvy the Finapolis', it delivers advisory services to a cross-

section of customers. The service is backed by a team of dedicated and expert

professionals with varied experience and background in handling investment portfolios.

They are continually engaged in designing the right investment portfolio for each

customer according to individual needs and budget considerations with a comprehensive

support system that focuses on trading customers' portfolios and providing valuable

inputs, monitoring and managing the portfolio through varied technological initiatives.

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Karvy - the Finapolis', covers the latest of market news, trends, investment schemes and

research-based opinions from experts in various financial fields.

Mutual Fund Services

Karvy has attained a position of immense strength as a provider of across-the-board

transfer agency services to AMCs, Distributors and Investors. Nearly 40% of the top-

notch AMCs including prestigious clients like Deutsche AMC and UTI swear by the

quality and range of services that Karvy offers. Besides providing the entire back office

processing, Karvy provides the link between various Mutual Funds and the investor,

including services to the distributor, the prime channel in this operation. Carrying the

limitless' ideology forward, Karvy has explored new dimensions in every aspect of

Mutual Fund servicing right from volume management, cost effective pricing, delivery in

the least turnaround time, efficient back-office and front-office operations to customized

service.

Karvy has been with the AMCs every step of the way, helping them serve their investors

better by offering them a diverse and customized range of services. The first to market'

approach that is Karvys anthem has earned the reputation of an innovative service

provider with a visionary bent of mind.

Karvys service enhancements such as Karvy Converz', a full-fledged call center, a top-

line website (www.karvymfs.com), the m-investor' and many more, creating a galaxy of

customer advantages.

Karvy Consultants Limited

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As the flagship company of the Karvy Group, Karvy Consultants Limited has always

remained at the helm of organizational affairs, pioneering business policies, work ethic

and channels of progress. Today, Karvy service over 6 lakhs customer accounts in this

business spread across over 250 cities/towns in India and are ranked amongst the largest

Depository Participants in the country. With a growing secondary market presence, Karvy

have transferred this business to Karvy Stock Broking Limited (KSBL), Karvys associate

and a member of NSE, BSE and HSE.

Karvy Investor Service

Merchant Banking

Recognized as a leading merchant banker in the country, Karvy registered with SEBI as a

Category I merchant banker. This reputation was built by capitalizing on opportunities in

corporate consolidations, mergers and acquisitions and corporate restructuring. Karvys

quality professional team and our work-oriented dedication have propelled it to offer

value-added corporate financial services and act as a professional navigator for long term

growth of its clients, who include leading corporates, State Governments, foreigninstitutional investors, public and private sector companies and banks, in Indian and

global markets.

Its financial advice and assistance in restructuring, divestitures, acquisitions, de-mergers,

spin-offs, joint ventures, privatization and takeover defense mechanisms have elevated its

relationship with the client to one based on unshakable trust and confidence.

Karvy Global Services Limited

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The specialist Business Process Outsourcing unit of the Karvy Group. Here Karvy offer

several delivery models on the understanding that business needs are unique and therefore

only a customized service could possibly fit the bill. Be it in re-engineering and managing

processes or delivering new efficiencies, Karvys service meets up to the most stringent

of international standards. Karvys outsourcing models are designed for the global

customer and are backed by sound corporate and operations philosophies, and domain

expertise. Providing productivity improvements, operational cost control, cost savings,

improved accountability and a whole gamut of other advantages. Karvys wide market

coverage includes Banking, Financial and Insurance Services (BFIS), Retail and

Merchandising, Leisure and Entertainment, Energy and Utility and Healthcare.

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Karvy Computershare Pvt. Limited

Karvy have traversed wide spaces to tie up with the worlds largest transfer agent, the

leading Australian company, Computershare Limited. The company that services more

than 75 million shareholders across 7000 corporate clients and makes its presence felt in

over 12 countries across 5 continents has entered into a 50-50 joint venture with Karvy.

Excellence has to be the order of the day when two companies with such similar

ideologies of growth, vision and competence, get together.

Issue Registry

Karvy has emerged as the largest transaction-processing house for the Indian Corporate

sector. With an experience of handling over 700 issues, Karvy today, has the ability to

execute voluminous transactions and hard-core expertise in technology applications have

gained the No.1 slot in the business. Karvy is the first Registry Company to receive ISO

9002 certification in India that stands testimony to its stature.

It is actively coordinating with both the main depositories to develop special models to

enable the customer to access depository (NSDL, CDSL) services during an IPO.

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Karvy Insurance Broking Private Limited

At Karvy Insurance Broking Pvt. Ltd., it provide both life and non-life insurance products

to retail individuals, high net-worth clients and corporates. With the opening up of the

insurance sector and with a large number of private players in the business, Karvy is in a

position to provide tailor made policies for different segments of customers. With Indian

markets seeing a sea change, both in terms of investment pattern and attitude of investors,

insurance is no more seen as only a tax saving product but also as an investment product.By setting up a separate entity, Karvy would be positioned to provide the best of the

products available in this business to its customers.

Karvys wide national network, spanning the length and breadth of India, further supports

these advantages. Further, personalized service is provided here by a dedicated team

committed in giving hassle-free service to the clients.

Karvy Commodities Broking Private Limited

At Karvy Commodities, Karvy is focused on taking commodities trading to new

dimensions of reliability and profitability. Karvy has made commodities trading, anessentially age-old practice, into a sophisticated and scientific investment option.

Here Karvy enable trade in all goods and products of agricultural and mineral origin that

include lucrative commodities like gold and silver and popular items like oil, pulses and

cotton through a well-systematized trading platform.

Regular trading workshops and seminars are conducted to hone trading strategies to

perfection. Karvys commitment to excel in this sector stems from the immense

importance that commodity broking has to a cross-section of investors farmers,

exporters, importers, manufacturers and the Government of India itself.

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Karvy Inc.

With its growing ambitions of reaching out to investors across the shores of this country,

Karvys has set up Karvy Inc. in the US located in New York to provide various financial

products and information on Indian equities to potential Foreign Institutional Investors

(FIIs) in the region. This entity soon would be ACC registered and would also become a

member of various important stock exchanges in the US. This entity would extensively

facilitate various businesses of Karvy viz., stock broking (Indian equities), research and

investment by (Qualified Institutional Buyer) QIBs in Indian markets for both secondary

and primary offerings, outsourcing of various assignments for the multiple streams of

business in Karvy Global Services Ltd (KGSL).

FUNDAMENTAL AND TECHNICAL ANALYSIS

FUNDAMENTAL ANALYSIS:

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Fundamental analysis is the examination of the underlying forces that affect the

well being of the economy, industry groups, and companies. The goal is to derive the

forecasted earning growths for future price movements.

Fundamental analysis is the method of evaluating securities by attempting to

measure the intrinsic value of a particular stock. It is the study of everything from the

overall economy and industry conditions, to the financial condition and management of

specific companies (i.e., using real data to evaluate a stocks value). The method utilizes

items such as revenues, earnings, return on equity and profit margins to determine a

companys underlying value and potential for future growth.

One of the major assumptions under fundamental analysis is that, even though

things get mis priced in the market from time to time, the price of an asset will eventually

gravitate toward its true value. This seems to be a reasonable bet considering the long

upward march of quality stocks in general despite regular setbacks and periods of

irrational exuberance. The key strategy for the fundamentalist is to buy when prices are at

or below this intrinsic value and sell when they got overpriced.

Fundamental analysis consists of:

For the national economy we focus on economic data to assess the present and

future growth of the economy.

At the industry level, there might be an examination of supply and demand

forces for the products offered.

At the company level, may involve examination of financial data, management,

business concept and competition.

Economy analysis

The economy is the overall economic environment in which all firms operate. The key

variables used to describe the state of economy are:

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World economy

Asian economy

Indian economy

1. Growth rate of GDP

2. Industry growth rate

3. Agriculture and monsoons

4. Savings and investment

5. Inflation

6. Interest rates

7. Balance of payments

8. Infrastructure

World economy

According to the recent statistics, the world GDP (comprising 180 economies)

has reached at a sum of US $ 46,747 Billions. Top 15 contributors to the world GDP are

USA, Japan, Germany, China, UK, France, Italy, Canada, Spain, Brazil, Russia, Korea,

India, Mexico and Australia. Percentage share of USA to the total world GDP is 28.3.

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While both the emerging economies such as India and China have a share of 1.82 and

5.41 respectively.

Find below the top 15 contributors to the world GDP.

Asian Economy

Asian Economies have brought tremendous success in the recent years. Economic growth

rate in China crossed a two-digit number, while economic growth in Indias Economy is

near to 10 percent. Apart from those two emerging Asian Economic giants, economies

such as Philippines, Indonesia and Malaysia are growing at a faster pace. Find below

various economic indicators on the Asian Economies.

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GDP growth projections among various Asian Economies over years are as follows:

GDP Growth Projection on Asian Economies

Country Name 2007 2008

Japan 2.3 1.9

Hong Kong SAR 5.5 5.0

Korea 4.4 4.4

Singapore 5.5 5.7

China 10.0 9.5

India 8.4 7.8

Indonesia 6.0 6.3

Malaysia 5.5 5.8

Philippines 5.8 5.8

Thailand 4.5 4.8

The output over the world increased by 4.4% in the year 2005. The largest contributors of

the world output were India, China and Russia. The Gross World Product (in purchasing

power parity) as to the 2005 estimated data has reached at $ 60.71 trillions with a real

growthrateof4.7%.

The services sector contributes a largest share to the world GDP. As to the 2004 estimated

data, the services sector accounted for 64% followed by industries at 32% and Agriculture

4%. The level of exports and imports over the world has reached at $10.33 trillion and

10.3 trillions f.o.b. as to 2004 estimation.

World inflation:

Inflation, which can be simply stated to be a state of economic activities with rising price

level and falling purchasing power of money, has become global phenomenon. Fast rising

oil prices over the world has pressurized the general price level in countries of the world.

Present world economy is experiencing higher economic growth with some inflationary

pressure.

The stabilized countries have the inflation level ranging between 1-3% and the

developing countries have inflation between 3-6%.

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Sector contribution to GDP

Indian primary sector

Agriculture is the mainstay of Indian economy because of its high share in employment

and livelihood creation notwithstanding its reduced contribution to the nations GDP. Theshare of agriculture in the gross domestic product has registered a steady decline from

36.4 per cent in 1982-83 to 17 per cent in 2007-08. Yet this sector continues to support

more than half a billion people providing employment to 52 per cent of the workforce. It

is also an important source of raw material and demand for many industrial products,

particularly fertilizers, pesticides, agricultural implements and a variety of consumer

goods. This is first time after green revolution that the India has become dependent in

satisfying its own food need. Growth pattern of Indian agriculture has been so irregular,

because of over dependency on the monsoon. This year we could achieve dismal growth

of 2.5%.India is expecting its agriculture to grow at least 4% (CAGR) in the 11th plan to

have sustainable and consistent growth of overall GDP.

Industrial sector (secondary sector)

Industrial growth in India has been inspired by the LPG in 1991. in the 10th plan we

could achive growth rate of 8-9%. At present industry sector is contributing 28% to

countrys GDP. Though at present India is experiencing slowdown in growth of industry

production, the long term growth of 8-10% is still intact. The first eight months of the

current fiscal, till November 2007, witnessed a moderate slowdown in the growth of the

industrial sector. The slowdown has mainly been on account of the manufacturing sector.

The mining and quarrying sector grew at a faster pace, while the growth in electricity

remained unchanged from April- November 2006. Nonetheless, the 9.2 per cent growth

achieved during April-November 2007 by the industrial sector, when seen against the

backdrop of the robust growth during the preceding four years, suggests that the

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buoyancy in this sector has continued, albeit with a degree of moderation. Two important

changes have occurred in the growth pattern of the use-based industrial categories:

First, capital goods have grown at an accelerated pace, over a high base attained in the

previous years, which augurs well for the required industria capacity addition. Secondly,

the consumer durables basket that forms part of the Index of Industrial Production (IIP)

showed a negative growth during the period, thereby forcing a visible decline in the

growth of the total consumer goods basket, despite reasonable growth in the non-

durables.

Dimension of Indian Economy

Gross domestic product:

Measure of the total production of final goods and services in the economy during

a specified period usually a year. Higher the growth rate, the other things being equal, the

more favorable it is for the stock market.

The growth rate of GDP is more important indicator of the performance of the

economy. The average growth rate of Indian economy during 1950-1980 was around

3.5% in real terms. In 1980 it was 5% and 6.2% in 2004. At present it is 8.7 and estimated

to cross 9%.

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Industrial growth rate:

Stock market analysts mainly focus on the industrial sector. Higher the growth

rate, more favorable is the things for stock market. The industrial sector witnessed a

slowdown in the first nine months of the current financial year. The growth of 9 per cent

during April-December 2007, when viewed against the back drop of the robust growth

witnessed in the preceding four years, suggests that there is a certain degree of

moderation in the momentum of the industrial sector. At the product group level, the

moderation in growth has been selective. Industries like chemicals, food products, leather,

jute textiles, wood products and miscellaneous manufacturing products witnessed

acceleration in growth, while basic metals, machinery and equipments, rubber, plastic and

petroleum products and beverages and tobacco recorded lower but strong growth during

April-December 2007.

Agriculture and monsoons:

Agriculture accounts for about a quarter of the Indian economy and has important

linkages both direct and indirect with the industry. There has been a loss of dynamism in

the agriculture and allied sectors in recent years. A gradual degradation of natural

resources through overuse and inappropriate use of chemical fertilizers has affected the

soil quality resulting in stagnation in the yield levels. Public investment in agriculture has

declined and this sector has not been able to attract private investment because of

lower/unattractive returns.

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Savings and investment:

A notable feature of the recent GDP growth has been a sharply rising trend in

gross domestic investment and saving, with the former rising by 13.1 per cent of GDP

and the latter by 11.3 per cent of GDP over five years till 2006-07. The average

investment ratio for the Tenth Five Year Plan at 31.4 per cent was higher than that for the

Ninth Five Year Plan, while the average saving rate was also 31.4 per cent of GDP higher

than the average ratio of 23.6 per cent during the Ninth Five Year Plan.

Money supply:

For policy purposes for 2007-08, the RBI assumed a real GDP growth of 8.5 per

cent with inflation close to 5 per cent, and targeted the monetary expansion in the range

of 17-17.5 per cent and credit expansion in the range of 20 to 24 per cent as consistent

with envisaged growth and inflation.

Interest rates:

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Interest rates affect the cost of financing to the firms. Higher the interest rates,

higher will be the cost and if lower, lower the cost and more will be the profitability.

Below table shows that interest rates are decreasing year after year which is a good sign

for the growth.

Year Interest(bank) rates %

p.a.

April 1997 11

April 1998 10

March 1999 8

March 2001 7

April 2003 6

Inflation:

The Wholesale Price Index (WPI), which is available on a weekly basis,

continues to be the most popular measure of headline inflation in India.

Balance of payments:

The strength, resilience and stability ofthe countrys external sector is reflected by

various indicators. These include a steady accretion to reserves, moderate levels of

current account deficit, changing composition of capital inflows, flexibility in exchange

rates, sustainable external debt levels with elongated maturity profile and an increase in

capital inflows. The current account has followed an inverted U shaped pattern during

the period from 2001-02 to 2006-07, rising to a surplus of over 2 per cent of GDP in

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2003-04. Thereafter it has returned close to its post-1990s reform average, with a current

account deficit of 1.2 per cent in 2005-06 and 1.1 per cent of GDP in 2006-07.Capital

inflows, as a proportion of GDP, have been on a clear uptrend during the six years (2001-

02 to 2006-07) of this decade. They reached a high of 5.1 per cent of GDP in 2006-07

after a somewhat modest growth rate of 3.1 per cent in 2005-06.The net result of these

two trends has been a gradual rise in reserve increase to reach 4 percent of GDP in 2006-

07 (Figure 6.1). With capital inflows exceeding financing requirements, foreign exchange

reserve increase was of the order of US$ 15.1 billion in 2005-06 and US$ 36.6 billion in

2006-07 (Table 6.2). As a proportion of GDP, external debt was 17.2 per cent and 17.9

per cent

In 2005-06 and 2006-07 respectively.

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Infrastructure:

With the rapid growth of the economy in recent years the importance and the

urgency of removing infrastructure constraints have increased. Traditionally, power,

railways, roads, ports, airports and telecommunications were the exclusive domain of the

government. Policy has changed gradually over the past two decades under the pressure

of rising gaps between demand and supply of infrastructure and deteriorating quality of

assets.

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INDUSTRY ANALYSIS

Introduction

Hotel Industry in India has witnessed tremendous boom in recent years. Hotel Industry

is inextricably linked to the tourism industry and the growth in the Indian tourism

industry has fuelled the growth of Indian hotel industry. The thriving economy and

increased business opportunities in India have acted as a boon for Indian hotel industry.

The arrival of low cost airlines and the associated price wars have given domestic tourists

a host of options. The 'Incredible India' destination campaign and the recently launched

'Atithi Devo Bhavah' (ADB) campaign have also helped in the growth of domestic and

international tourism and consequently the hotel industry.

The opening up of the aviation industry in India has exciting opportunities for hotel

industry as it relies on airlines to transport 80% of international arrivals. The

government's decision to substantially upgrade 28 regional airports in smaller towns and

privatization & expansion of Delhi and Mumbai airport will improve the business

prospects of hotel industry in India. Substantial investments in tourism infrastructure are

essential for Indian hotel industry to achieve its potential. The upgrading of national

highways connecting various parts of India has opened new avenues for the development

of budget hotels in India. Taking advantage of this opportunity Tata group and another

hotel chain called 'Homotel' have entered this business segment.

Factors considered:

Growth of industry

Industry life cycle

Current situation analysis

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The constant boom and the resultant demand-supply mismatch has led to sharp

increases in the average room rates and thus pushing up revenues of industry

players (hotels, tour operators, airlines, shipping lines, etc)

The tourism sector is expected to perform very well in futureand the industryoffers an interesting investment opportunity for long-term investors.

Most of the five-star hotels are seeing more than 80 % occupancy and some of the

lesser-known five-star hotels are overbooked.

Reasons for this boom

there could be several reasons for the buoyancy in the Indian tourism industry.

First, the upward trend observed in the growth rate of Indian economy has raised

middle class incomes, prompting more people to spend money on vacations

abroad or at home.

Second, India is booming in the information technology industry and has become

the IT center.

Third, Aggressive advertising campaign Incredible India" by the government has

also had contribution in changing India's image from that of a land of snake

charmers, and sparking new interest among overseas travelers.

Industry life cycle stage:

Services sector is growing at a higher rate and is now contributing 55% to the country

GDP. All service sector industries like hotel, transport, tourism, hospitality are realising a

higher growth rate. The hotel industry is now in the rapid growth stage.

Current situation of Indias hotels

Hotel Imperial New Delhi: 99.57 % occupancy. Hotel Trident Hilton,Gurgaon

(suburban Delhi): 98.3 % occupancy. Indian hotels are witnessing mindblowing

occupancy rates.

Increase in average room rent for the entire hotel industry over the last year:

35 %.

Unmet demand for hotel rooms: 150 000 rooms. Additional demand this year:

15 000 rooms.

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The boom has attracted several global players, ranging from Starwood and Mariott

to Four Seasons and ShangriLa. The largest hotel company in the world,French

chain Accor, has entered India and is now devising aggressive plans for expansion

in the market. Several others are racing to increase their presence in India,including the Marriott group.

Currently Marriott has over 1,000 rooms spread across four properties in Mumbai

and Goa.

Inversement

Now besides hotel companies, even the investment firms and private equity

companies are beginning to get excited about India. Berggruen Holdings India, a

subsidiary of New York-based investment company Berggruen Holdings,has

announced that it is seed-funding a non-luxury hotel chain in India.

Private equity firm Warburg Pincus has picked up around 27 % stake in Delhi-

based mid-price hotel chain,Lemon Tree, for $ 60.2 million.

Th Comptition

The world's leading hotel brands - joining the battle

The country has been flooded by some of the world's leading hotel brands. New

brands such as Amanda, Satinwoods, Banana Tree, Hampton Inns, Scandium By

Hilt and Mandarin Oriental are planning to enter the Indian hospitality industry in

joint ventures with domestic hotel majors.

Unitech, which is setting up two hotels in Delhi,has already formed a joint venture

with Marriott International to run its three new hotels in India, which are expected

to start operations by 2008. The three new hotels will be located in Kolkata,

Gurgaon and Noida. We are investing around 700 crore rupees to set up these

hotels, says Unitech managing director Sanjay Chandra.

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The measures taken on the infrastructure front will also help improve the prospects of the

Indian hospitality sector. If these measures are implemented, then it will go a long way in

promoting India with well-connected tourist destinations

Company Impact

No major impact on the large five star hotel players

Industry Wish list

FICCI's wish list

The hotel industry to be treated at par with other infrastructure sectors such as

roads, ports and telecommunications and be granted full tax benefits.

The tax benefit given to the two-star, three-star and four-star category (constructed

and start functioning within the period 1st April 2007 to 31st March 2010 in the

National Capital Territory of Delhi and districts of Faridabad, Gurgaon, Gautam

Budh Nagar and Ghaziabad) should also be extended to newly constructed hotels

of five-star category. Further, the tax stimulus of a 100% tax holiday benefit for

ten years instead of five years should also be given as it involves huge investments

and high risk in terms of uncertainty of revenues after the Commonwealth Games.

The industry is also seeking rollback of the depreciation rate for hotel buildings to

20%, which was reduced to 10% in 2003. It said that a hotel's building were the

main plant and machinery for the hotel and because of the nature of the business,

they had to be renovated, refurbished and refurnished on a continuous basis and

should be treated differently from other buildings.

Hotels should be exempted from paying service tax on services received from

Foreign Tour Operators, as it is one of the prime foreign exchange earners.

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Also, proper infrastructure development is needed. Private sector participation

needed to upgrade infrastructure in several identified tourist circuits.

Budget 2006-07 and 2007-08

No major impact on the large five star hotel players

Swot analysis

Every business with the global prospects in the multi dimensional, volatile atmosphere

has to introspect its strategies taking into consideration the strengths, weaknesses,

opportunities and threats. The hotel industry also tags along the line and has to undertake

smart and innovative moves to woo its clientele who expect best possible service at

competitive rates. It is estimated that approximately a lull of 2%-10% of the previous year

business in all categories of hotels. Some hotels have to face modernization at huge costs

often especially in cyber city like Bangalore where technology up-gradation is swift and

the inflows of customers require multi dimensional facilities ranging from full-fledged

business center to high grade video conferencing.

Hotels seeking a balance between achieving high occupancies and high average room

rates may have higher long term profit. The peculiar nature of the hotel business may

compel the management to think short term about day-to-day problems or the next-meal

periods, as the ROOM DAY is a PERISHABLE ITEM. The room occupancy perishes on

the expiry of the day.

The increased competition has lead to Up market self-catering, time sharing, home

entertainment, competition from producers of other services and commodities and other

trends like rising operating costs, high interest and too many hotel in many areas.

Strengths

India's rich cultural heritage

Second largest foreign exchange earner

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Demand far exceeds Supply

Global economical turn-up

Inclusion in EPCG* scheme

New business opportunities

Weaknesses

Capital intensive

Lack of adequate Man power

Non-availability of land

Regional imbalance of hotels

Long gestation period Poor infrastructure and cleanliness

Huge labor turnover

Less corporate ownership

Opportunities

Boom in tourism

Privatization of airlines

Tie ups with international hotel chains

Increase in disposable incomes

Boost in tax concessions

Threats

Sensitive to disturbances in the country Competition from other Asian countries whose official currencies have fallen

drastically

High service & luxury taxes may render India as an unviable destination.

Lack of trained entrepreneurs

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COMPANY ANALYSIS

INDIAN HOTELS

Introduction

It began on December 16, 1903, when Jamshetji Nusserwanji Tata opened Tajs first

hotel, the Taj Mahal Palace & Tower, Mumbai. This grand hotel epitomized a philosophy

that still holds true today: provide impeccable service and unparalleled facilities so every

stay is a memorable one.

Company operates its hotels under the taj hotels and resorts umberella brand and is the

largest hotel chain in south asia. It comprises hotels with 9400 rooms and 280 food and

beverage outlets. The company now owns or manages 82 hotels as against 75 in 2005-06.

the company operates internationally in usa, Australia, mauritious, malashiya, uk,

srilanka, Africa and middle east.

A part of the Tata Group of companies www.tata.com, over the years, Taj has won

international acclaim for its quality hotels and its excellence in dining, business facilities,

interiors, and world-class, personalized service.

In India, Taj is recognized as the premier hospitality provider, spanning the length and

breadth of the country, and gracing important industrial towns and cities, beautiful

beaches, historical and pilgrim centres, and wildlife destinations.

Over the years, the Taj brought into Bombay, Professors of Dance Mademoiselle Singy

to raise temperatures and a few eyebrows with the Tango, the first air-conditioned

ballroom to cool things down, the first cold storage, the first licensed bar, and more.

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http://www.tajhotels.com/Palace/The%20Taj%20Mahal%20Palace%20&%20Tower,MUMBAI/default.htmhttp://www.tata.com/http://www.tajhotels.com/Palace/The%20Taj%20Mahal%20Palace%20&%20Tower,MUMBAI/default.htmhttp://www.tata.com/


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Factors considered:

Management review

Earnings

Growth rate

Human resources

Capital structure

Infrastructure

Financial performance

Management review:

Factors considered:

Future expansion plans

Product upgradation

Risk factors

High operating leverage

Foreign exchange fluctuation risks

Human resources

Internal control systems and their adequacy

Risk mitigation initiatives

Future expansion plans

During the year company added 383 rooms to its portfolio by continuing its expansion in

international destinations and within India.

Divided into two parts:

Abroad

Domestic

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Expansion plan in abroad:

Company has acquired erstwhile and ritz carlton in Ap2007 this is its I phase of of

investment in US

Now company has made commitment to get into South Africa and its key market

for hospitality ventures

Company is on verge of completion of management contracts signed in

Malashiya, Lankawi, and Thimpu

Work on palm island, Dubai continues During the year company has signed construction of 150 rooms for Taj Exotica

golf resorts, Doha and completion of acquisition of kho Lon phuket for the

construction of 80 villa Taj Exotica, resort and spa on the island.

Formed a joint venture with Tata South Africa in South Africa, Taj international

South Africa

Expansion plan in domestic destinations:

Company continued its project work in whitefeild, Bangalore, Falaknuma Palace,

hyderabead, race course road, coimbatore, Santa Cruz, Mumbai.

Allotted a site in Noida and planning to construct a 500 room premium business

with hotel convention center

Company has a lease agreement to operate 350 room premium business hotel in

yeshwantpur, Bangalore

Continued projects in Nagpur, Trivandrum, panjim, goa and bekal, north Kerla

Management contract with gateway hotels has been signed in Raipur and

Jallundur

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Note:

Adjustment factor for P/E:

After considering all financial ratios and data I would like to adjust P/E multiple to 22

which is at present 26.54.

Adjustment factor for price to BV ratio:

Though the companys earnings and business risks are almost comparable to its

competitors, the company is enjoying higher price to BV ratio. So we think bit

conservative and try to discount the factor by readjusting its price to BV ratio to industry

average ie 4.

Adjusted factor for DYR:

Companys DYR is very low so it is adjusted to industry average ie 1.568.

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73/100

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Period & months 2007/03 2006/03 2005/03 2004/03 2003/03 2007-08 2008-09 2009-10 CAGR

INCOME

Net Operating Income 1,544.6 1,084.2 847.63 665.23 569.27 1885.9 2302.6 2811.4 1.22Manufacturing

Expenses 315.19 240.03 181.41 163.95 152.95 364.23 420.90 486.39 1.16

Personal Expenses 278.7 222.28 200.26 154.07 130.95 324.15 377.01 438.49 1.16

Selling Expenses 64.08 30.51 23.91 26.33 25.9 76.81 92.06 110.35 1.20

Administrative

Expenses 320.14 279.27 250.72 240.03 178.04 360.00 404.83 455.23 1.12

Capitalized Expenses -2.28 -8.1 -0.01 -20.67 -10.97 -1.67 -1.22 -0.89 0.73

Cost of Sales 975.83 763.99 656.29 563.71 476.87 1,123.5 1,293.5 1,489.57

Reported PBDIT 568.80 320.27 191.34 101.52 92.40 762.41 1,009.1 1,321.9

Other Recurring

Income 68.14 58.83 42.87 31.77 56.21 70.81 73.59 76.48 1.04

Adjusted PBDIT 636.94 379.10 234.21 133.29 148.61 833.22 1,082.6 1,398.3

Depreciation 91.44 65.9 56.77 48.58 38.98 108.44 128.60 152.51 1.19

Adjusted PBIT 545.50 313.20 177.44 84.71 109.63 724.78 954.05 1,245.8

Financial Expenses 102.6 48.54 53.98 43.89 56.21 115.72 130.52 147.21 1.13

Adjusted PBT 442.90 264.66 123.46 40.82 53.42 609.06 823.53 1,098.6

Tax Charges 152.25 88.22 35.82 19.55 12.92 249.35 408.39 668.85 1.64

Adjusted PAT 290.65 176.44 87.64 21.27 40.50 359.70 415.14 429.76

Non-recurring Items 31.74 7.34 18.22 35.9 15.95 36.423 41.797 47.963 1.15

REPORTED PAT 322.39 183.78 105.86 57.17 56.45 396.13 456.94 477.72

no of shares 58.66 5.67 4.64 4.51 4.51

Eps 5.50 32.41 22.81 12.68 12.52 6.75 7.79 8.14


74/100

EPS forecast:

Book value

Calculation 2006-07 2005-06 2004- 05 2003-04 2002-03 2007- 08

2008-

09 2009-10

CAG

R

Dividend 96.46 77.95 50.25 36.09 31.58 120.60 150.77 188.5 1.25REPORTED

PAT 322.39 183.78 105.86 57.17 56.45 396.13 456.94 477.7

Equity Share

Capital 58.67 56.67 46.41 45.12 45.12 61.83 65.17 68.68 1.05Reserves &

Surplus 1,738.3 1,657.8 1,081.8 844.79 842.17 2022.9 2,026.1 2,397.5Number of

Equity shares

outstanding 58.66 5.67 4.64 4.51 4.51 61.83 65.17 68.68

Net worth 2022.9 1820.3 1183.82 910.99 907.65 2,026.1 2,397.5 2,995.02

book value 34.49 302.38 243.15 197.32 196.74 37.23 40.05 42.25

Note:

Adjustment factor for P/E:

After considering all financial ratios and data I would like to adjust P/E multiple to 22

which is at present 26.54.

Adjustment factor for price to BV ratio:

Though the companys earnings and business risks are almost comparable to its

competitors, the company is enjoying higher price to BV ratio. So we think bit

conservative a

shivprasad a mba06002076

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