Zee Entertainment Limited “Ratio Report”

Ratio Report

Particulars Zee entertainment enterprise ltd Network 18
  2015-16 2016-17 2016-17
Current ratio 3.98 4.56 0.29
Quick ratio 2.26 2.88 0.19
Cash ratio 1.27 2.14 0.04
Defensive interval ratio 251 417 89
  1. Liquidity Ratio

 

  • Liquidity ratio

The increase in Current, Quick and Cash ratio is due to certain investments reclassified as current investments based on maturity and some additional current investments made during the year. Also, the cash and bank balance lying with the company as on 31st March 2017 were ₹ 26133 million as against ₹ 9631 million on 31st March 2016 which is mainly attributed to the sale of the major part of the sports business to Sony Group.

Whereas ratios of Network 18 are very low because of the fall in cash and cash equivalent and increase in the short term borrowings in the current year.

The increase in cash and cash equivalent has also resulted in the improved defensive interval ratio which was 417 days in March 2017 as compare to 251 days in March 2016.

 

 

  1. Activity ratio
Particulars Zee entertainment enterprise ltd Network 18
  2015-16 2016-17 2016-17
Receivable turnover ratio 4.74 4.85 4.42
Days of sales outstanding 77 75 83
Payable turnover ratio 6.11 5.76 1.43
Average days of payable 60 63 256
Inventory turnover ratio 2.07 1.85 81.65
Days of inventory on hand 176 196 4
Cash conversion cycle 193 209 -169
Total assets turnover ratio 0.78 0.71 0.28
Fixed assets turnover ratio 4.14 4.90 0.86
Working capital turnover ratio 1.46 1.24 -1.18

 

 

  • Cash conversion cycle

The cash conversion cycle has increased from 193 days in 2016 to 209 days in 2017 mainly on the account of increase in the inventory holding period, whereas in case of Network 18 the Cash Conversion cycle shows a negative sum because of its inventory holding period which is only 4 days attributable to the reduction in the inventories during the year.

 

  • Assets turnover ratio

Fixed assets turnover ratio has increased in the current year which is mainly attributable to the reduction in the value of goodwill by Rs 6167 million in 2017.

 

  • Working capital Turnover ratio

The working capital ratio has gone down from 1.46x to 1.24x due to increment in working capital as there has been an increase in inventory and investments in the year 2017.The increase in working capital is primarily due to investments in satellite rights of movies.

 

 

  1. Profitability ratio
              Particulars Zee entertainment enterprise ltd Network 18
  2015-16 2016-17 2016-17
Net profit margin 14.17% 34.51% -18.16%
Gross profit margin 55.30% 56.75% 65.20%
Operating profit margin 24.70% 28.16% -14.61%
EBT Margin 21.95% 26.02% -20%
Operating return on assets 19.17% 20.13% -4.10%
Return on total capital 23.25% 24.01% 4.93%
Return on assets 12.64% 25.58% -4.11%
Return on equity 18.35% 38.75% -17.14%
Return on common equity 24.18% 53.56% -20.16%

 

  • Net Profit Margin

Profit for the year increased by Rs 13,968 million (170%) to Rs 22,205 million from Rs 8,237 million. Figures are not comparable on account of profit generated during the current year from sale of major part of sports broadcasting business which is contributing to the increased in Net profit margin in the year 2016-17.

EBT Margin has gone up during the year on the account of decrease in the finance cost and cost of goods sold.

Whereas Network 18 has suffered a loss during this year due to increase in the Selling, general and administrative expenses and employee benefit expenses and fall in the revenue from operations causing a negative Net profit Margin.

 

 

  • Return on Total Assets

The return on assets of the company in respect of the previous year and also in respect of its peer company has increased because the goodwill has reduced 6167 million mainly on account of derecognition of goodwill relating to sports business and increase in net profit due to the sale of major part of sports broadcasting business.

 

 

 

 

  1. Solvency ratio
Particulars Zee entertainment enterprise ltd Network 18
  2015-16 2016-17 2016-17
Debt to equity ratio 0.36 0.29 1.02
Debt to capital ratio 0.26 0.22 0.50
Debt to assets ratio 0.21 0.19 0.26
Financial leverage 1.67 1.57 3.37
Interest coverage 8.99 13.20 2.72
Fixed charge coverage 4.81 6.19 -1.95

 

 

  • Debt ratio

The Debt ratio of the company has improved from the previous year due to the increment in retained earnings being part of the shareholder’s equity and due to issue of equity shares to the employees under Employee stock options which also improved Financial Leverage.

Whereas Network 18 has raised its funds by borrowings to meet its working capital requirement being a burden on the equity.

 

 

  • Interest coverage and fixed charge coverage

The interest coverage and fixed charge coverage has increased due to the increase in the revenue from advertisement and subscription attributing to the rise in EBIT and decrease in the finance cost in the year 2016-17.

 

 

  1. Du Pont Analysis
Particulars Zee entertainment enterprise ltd Network 18
  2015-16 2016-17 2016-17
Operating profit margin 25.0% 28.0% -15.0%
Interest burden 96.0% 160.0% 137.0%
Tax burden 65.0% 77.0% 91.0%
Total assets turnover ratio 0.78 0.71 0.28
Financial leverage 1.67 1.57 3.37
Return on Equity 18.35% 38.75% -17.%

 

 

The return on equity has been improved in the year 2016-17 despite of increased tax burden and interest burden. This improvement was majorly due to increase in the operating profit margin. Whereas, the ROE of Network 18 is negative because the company is at loss during the year.

 

Ratio report on the “Zee Entertainment Limited”
Guided By : Juhi bhandari
Written By :  Neha Toshniwal

ZenSar Technologies Ltd.

ACTIVITY RATIO:-
 

PARTICULARS

ZENSAR TECHNOLOGIES LTD INFOSYS LTD
F.Y. 15-16 F.Y.16-17 F.Y. 15-16 F.Y.16-17
 
Receivables Turnover 5.97 5.71 5.93 5.79
Average Collection Period (In Days) 61 64 62 63
Inventory Turnover 1.73 1.97
Inventory Processing Period (In Days) 212 185
Payables Turnover 1.48 1.29 4.84 4.24
Average Payment Period (In Days) 248 282 75 86
Total Assets Turnover 1.70 1.54 0.88 0.86
Fixed Assets Turnover 7.54 7.30 4.71 4.58
Working Capital Turnover 4.07 3.48 1.68 1.75
Cash Conversion Cycle (In Days) 25 -33 -13 -23
  • CASH CONVERSION CYCLE:-

In case of cash conversion cycle (CCC), company has improved from 25 days to negative 33 days which is very desirable and it’s achieved due to increase in average payment period from 248 days to 282 days because of decrease in purchase & creditors of security & network products, as company start moving in robotics & automation than in software services, and also from due to decrease in inventory processing period from 212 days to 185 days , decrease in days sales outstanding (DSO) from 62 days to 58 days and due to increase in domestic revenue than offsite revenue  as compared to trade receivables . So, as company has negative CCC which means that there working capital must be efficient but as there cash ratio is less which means that they are not efficiently using working capital instead they are investing in others items.

Instead they are focusing on operational efficiency and it will remain continues as they are focusing to grow their utilization level up from 83.2% to 85.9%.

 Whereas, in case of Infosys has cash conversion cycle more than Zensar because they don’t have inventory turnover ratio as they don’t have inventory any time during the year and also there is no major purchase.

  • FIXED TURNOVER RATIO:-

The fixed turnover ratio of company is decreased due to investment in capex of Rs.41 Crore and decrease in Offsite revenue. Whereas in case of Infosys it has less ratio as compare to Zensar because it doesn’t have large investment in fixed & capital assets than Zensar.

 

 

LIQUIDITY RATIO:-

ACTIVITY RATIO  REPORT:-

 

 
PARTICULARS
ZENSAR TECHNOLOGIES LTD INFOSYS LTD
F.Y. 15-16 F.Y.16-17 F.Y. 15-16 F.Y.16-17
 
Current Ratio (Working Capital) 2.52 2.68 3.91 3.83
Quick Ratio (Acid Test) 2.13 2.34 3.72 3.63
Cash Ratio 0.72 0.90 2.87 2.75
Defensive Interval (In Days) 135 140 408 385
 
  • CURRENT, QUICK & CASH RATIO:-

The increase in current, quick & cash ratio is due to increase in current investment by the company in mutual fund during the current year; so company is more capable of paying its obligations with its most liquid assets.  Whereas ratio of the peer company was more because of the large investment as compare to Zensar.

  • DEFENSIVE INTERVAL:-
SOLVENCY RATIO:-

ACTIVITY RATIO  REPORT:-

The defensive interval has been increased from 135 days to 140 days due to increase in employee expenses due to increase in utilization level & attrition rate from 79.6% to 83.2% and due to employee stock expenses; whereas peer company  ratio is more due to no inventory cost & less expenses and purchase of  software equipment & licenses .  

 

PARTICULARS

ZENSAR TECHNOLOGIES LTD INFOSYS LTD
F.Y. 15-16 F.Y.16-17 F.Y. 15-16 F.Y.16-17
 
Debt-to-Equity 0.12 0.09
Debt-to-Capital 0.11 0.08
Debt-to-Assets 0.08 0.06
Financial Leverage 1.49 1.45 1.22 1.21
Interest Coverage Ratio 35.05 38.56
Fixed Charge Coverage Ratio 31.62 36.45

 The debts ratio of the company has been decreased because of the following factors i.e. due to repayment of the short term borrowing & financial lease obligation during the current year and due to issue of equity shares to the employees under employee stock options. As, in the case of Zensar which has debt-to equity ratio <2 and interest-coverage ratio >2, is good for the company as they will be able to meet its long term obligation. Whereas in case of its peer company Infosys doesn’t have any debts, so they are more solvent than Zensar as they don’t have to borrow debts for the repayment of their long terms obligations and so they don’t have any solvency ratio.

PROFITABILITY RATIO:-

ACTIVITY RATIO  REPORT:-

 
PARTICULARS
ZENSAR TECHNOLOGIES LTD INFOSYS LTD
F.Y. 15-16 F.Y.16-17 F.Y. 15-16 F.Y.16-17
 
Net Profit Margin 10% 8% 24% 23%
Gross Profit Margin 93% 92% 98% 98%
Operating Profit Margin 13% 11% 27% 27%
Pre Tax Margin 14% 11% 32% 31%
Return Of Assets (ROA) – Excluding Interest 16.83% 12% 21% 20%
Return Of Assets (ROA) – Including Interest 17.26% 12.31% 21% 20%
Operating Return On Assets (ORA) 23% 19% 27% 25%
Return On Total Capital (ROTC) 28% 22% 27% 26%
Return On Equity (ROE) 25% 17% 26% 24%
Return On Common Equity (ROCE) 25% 17% 26% 24%
  • GROSS PROFIT MARGIN :-

The gross profit margin is slight decrease due to increase in the onsite revenue ratio from 64.3% in FY16 to 66.8% in FY17 and decrease in Offsite revenue from 36% to 33% because delay in start of some key projects  during the year, especially in the US. The exchange rates have impact on Gross Margin as well as Forex losses and conscious decline of non-core areas of MVS and IM products.

It is expected that the revenue of Zensar will grow (CAGR) by 3.8% as there digital commerce services turning around with good volume growth of 5.3% sequentially Q-o-Q with 50% new clients, also application management services by will grew by 5.2% and infrastructure services by 12.8% because of Keystone and Foolproof services being taken to all Zensar clients as it has been acquire in last quarter of F.Y. 2016-17 and new website developed by Foolproof for automobile satisfying clients demands by driving ~£200k worth of additional revenue for the client per month as well as implemented its first BOT at a large financial software company and food manufacture company in UK enabling processing of investments and vendor payment with 100% accuracy.

Also, Zensar won multiple deals across Experience Design, Digital Commerce, Analytics, Automation and Digital Testing in US & UK market. So, it is expected that their offsite revenue will increase from previous year and gross profit margin will increase by 115-120 bps (Basis Points) i.e. around 8% through business efficiencies by “Return on Digital Platform” internally developed by the company.

  • NET PROFIT, OPERATING PROFIT & PRE TAX MARGIN:-

The net profit, operating profit & pre tax margin has been decrease due to discounts from two of our customers to the extent of $1.6M, increase in employee cost, decrease in other income and increased investment in research &development cost amount to Rs.95.95 lakhs to increase Return on Digital during the current year.

Whereas in case of peer company Infosys margin are high than Zensar due to its high revenue from services and low cost of purchase software equipment & licenses. Also, Peer Company doesn’t invest more in research & development.

The operating & pre tax margin may be slightly decreased in future due to hike in wages in July 2017 and increase in utilization level from around 83% to 85% as well as increase in attrition rate from 15% to 17%. Due to which the margin will may go down by around 150-200 bps.

Whereas also in case of net profit margin it may also decreased but slightly because of  decrease in operating margin and also because of company planning to invest in capex for bring company into fully digital till next year.

  • RETURN ON ASSETS & OPERATING RETURN ON ASSETS:-

The return on assets  & operating return on assets of the company in respect of peer company & also in respect of previous year is decreased due  to company had spent close to Rs, 41 Crore towards capex majorly under operating lease and capital work has been increased due to spending more on improvement to leasehold premises and also due to acquisition of Foolproof & keystone logistic there is goodwill and due to which there is increase in intangible assets.

  • RETURN ON TOTAL CAPITAL, EQUITY & COMMON EQUITY:-

The return on total capital, return on equity & return on common equity has been decreased due to issue of equity share capital to employees under employee stock options & increase in finance lease obligations as well as increase in r&d cost & employee expenses.

In the future the return on equity and capital may further decrease because of Issue of further shares to employees under employee stock options that will be exercise in next year.

DUPOINT ANALYSIS:-

ACTIVITY RATIO  REPORT:-

 

 
PARTICULARS
ZENSAR TECHNOLOGIES LTD INFOSYS LTD
F.Y. 15-16 F.Y.16-17 F.Y. 15-16 F.Y.16-17
 
Tax Burden (Net Income/EBT)               (a) 70.12% 68.37% 73.76% 74.02%
Interest Burden (EBT/EBIT)                        (b) 111.55% 103.11% 117.18% 115.82%
EBIT Margin                      (c) 13% 11% 27% 27%
Asset Turnover                (d)         1.70 1.54 0.88 0.86
Financial Leverages       (e) 1.49 1.45 1.22 1.21
 
ROE = (a)*(b)*(c)*(d)*(e) 25% 17% 26% 24%

The return on equity has been decreased due to overall effect of tax & interest burden goes down , EBIT margin decreased , asset turnover & financial leverages also decreased due to major expenditure in R&D and Capex and also due to increase in equity due to issue of new equity shares to the emplouees under employees stock options.

Whereas, in case of [peer company it has high  ROE because of its high revenue, no interest cost as no debts is there and no major expenditure in capex & other cost.

By:- Pooja Jain

Common Size Report on – “Century Ply”

centuryply

 

PARTICULARS 2015-2016 2016-2017
A.                ASSETS    
                    Non – Current Assets    
Property, Plant and Equipment 21.11% 19.19%
Capital work-in Progress 3.30% 3.44%
Investment Property 0.52% 0.38%
Goodwill on consolidation 0.02% 0.02%
Intangible Assets 0.16% 0.10%
Intangible Assets under development 0.01% 0.02%
Expenditure on New/ Expansion Projects 5.38% 15.42%
                    Financial Assets    
Investments 0.00% 0.00%
Loans and Advances 0.65% 0.65%
Other Financial Assets 0.02% 0.00%
Deferred Tax Assets 5.61% 4.35%
Other Non-Current Assets 2.69% 1.54%
                      Current Assets    
Inventories 25.31% 18.97%
                      Financial Assets    
Investments 0.01% 0.00%
Trade Receivables 24.19% 21.59%
Cash and Cash Equivalents 3.08% 4.19%
Bank Balances other than above 0.23% 0.05%
Loans and Advances 0.34% 0.25%
Other Financial Assets 1.43% 4.83%
Other current assets 5.93% 5.03%
TOTAL ASSETS 100.00% 100.00%
     
B                EQUITY AND LIABILITIES    
                   Equity    
Equity Share Capital 1.89% 1.40%
Other Equity 43.11% 43.70%
Non-Controlling Interest 0.77% 0.76%
                   Liabilities    
         Non-Controlling Liabilities    
Financial Liabilities    
Borrowings 5.44% 9.26%
Other Financial Liabilities 0.01% 0.01%
Other non-current liabilities 0.05% 0.03%
Deferred Tax Liabilities 0.06% 0.09%
         Current Liabilities    
Financial Liabilities    
Borrowings 30.24% 26.47%
Trade Payables    
Dues to micro and small enterprises 0.04% 0.09%
Dues to others 7.31% 8.81%
Other Financial Liabilities 7.42% 5.75%
Other Current Liabilities 2.89% 2.45%
Provisions 0.58% 0.73%
Current Tax Liabilities (Net) 0.20% 0.45%
TOTAL EQUITY AND LIABILITIES 100.00% 100.00%

COMMON SIZE BALANCE SHEET

 

COMMENTS:

  • The company’s asset part consists 60% of current assets which shows that it has greater composition of assets which are more liquid.
  • The company’s expenditure on new and expansion of the projects has increased from 5.38% in FY 2015-2016 to 15.42% in FY 2016-2017, mainly due to inception of new plants for MDF at Gujarat and Particle board at Chennai. However, the same was funded through a mix of retained earnings and long term borrowings.
  • The long term borrowings has shown a significant increase from last year which is around 4.5%. This due to the arrangement of funds for company’s long term expansion projects and establishment of new plants for MDF and Particle board.
  • Inventories and Trade receivables of the company has also decreased apparently from the last financial year, this shows higher encashability of debtors and inventories of the company. The same has resulted in decline of short term borrowings from 30.24% in FY2015-16 to 26.47%in FY2016-17.
  • The Equity and liabilities of the company has a major composition of Other Equities that is close to around 44%, which mainly includes reserves and retained profits. This shows that the company is performing outstanding in profitability and earnings aspects.

 

COMMON SIZE PROFIT AND LOSS STATEMENT

PARTICULARS 2015-2016 2016-2017
Revenue from operations 100.00% 100.00%
Less : COGS 53.53% 52.32%
Gross Profit 46.47% 47.68%
less : Selling and Distribution Expenses 29.88% 30.82%
EBITDA 16.59% 16.86%
less : Depreciation and amortisation 2.66% 2.99%
EBIT 13.92% 13.87%
less : interest 2.69% 1.52%
EBT 11.23% 12.35%
less : tax expense 1.71% 2.60%
EAT 9.53% 9.75%

 

 

 

 

 

 

COMMENTS:

Particulars 2015-16 2016-17 2015-16 2016-17
      % %
Laminates:        
Revenue(Rs) 335.31cr 363.57cr 14.2% 8.45%
Volume(Units) 4260499 4925024 18.3% 15.6%
Realisation rate (Rs) 0.007cr/unit 0.007cr/unit -14.2% 0.00%
Plywood:        
Revenue(Rs) 1173.51cr 1260.93cr 2.3% 7.4%
Volume(Units) 241915 251720 3.38% 4.05%
Realisation rate (Rs) 0.48cr/unit 0.50cr/unit -0.12% 4%
Logistics:        
Revenue(Rs) 83.73cr 87.61cr 19.1% 4.6%
Volume(Units) 82057 80153 13.2% -2.3%
Realisation rate (Rs) RS. 10204 RS. 10930 5.3% 7.1%
OTHERS:        
Revenue(Rs) 54.29 41.17 30.6% -24.2%
Volume(Units)
Realisation rate (Rs)
Other Revenue
Total Revenue 1646.84cr 1753.28cr 6.46%

 

  • The major share in the revenue is of the plywood industry with incremental revenues and realisation rate.
  • The interest on borrowing or finance cost has been decreased even though there is an increase in long term borrowings because the overall interest on borrowings has been decreased causing a certain decline in the interest expense.
  • The Gross profit of the company has also increased around 1% from the last accounting year and it is around 47% of the company’s sales. This shows that the company’s operational performance is adequately fine.
  • The current year tax expense has been increased and this year the deferred tax has also increased instead of last year’s set off in tax expense.
  • Though the interest expenditure of the company has reduced, however the benefit of the same could not be seen on the EAT due to increased tax expenses over the year.

 

 

By:- Parth Maheshwari

Balaji Telefilms Ltd.

“Porter’s Five Forces Report”

The Indian Media and Entertainment (M&E) industry is a sunrise sector for the economy and is making high growth strides. Proving its resilience to the world, the Indian M&E industry is on the cusp of a strong phase of growth. The entertainment industry continues to be dominated by the television segment, with the segment accounting for 44.24 per cent of revenue share in 2016, which is expected to grow further to 48.18 per cent by 2021.

Balajitelefilms limited is a leading content provider in the Indian entertainment industry and has been in business since 23 years.  It has its business diversified in television industry, motion pictures and digital media. The company occupies a dominant space in the television content creation space, with the No.1 show on Indian television to its credit and all of its shows among the Top 50 on television. Currently its producer of several leading serials on major channels like Star Plus, 9X, Sony TV, Zee TV and SUN TV network.

Competitive Forces and Balaji Telefilms Ltd

Threat of new entrants:

Television content production is a capital intensive business and requires reasonably high capital investment. There are also many regulatory requirement related to the content produced.Balaji telefilms limited already has around 250+ hour of premium original and exclusive content.  Also, production and distribution of motion pictures too need high investment. Making the barriers to enter production and distribution channel very high.

Threat of substitute:

In the current scenario there is threat to television shows from the digital media, younger generation shifting to online series rather than television shows. Making the threat of substitute high, althoughBalaji telefilms limited has diversified in digital media and launched ALTbalaji, the subscription based entertainment platform with six new shows and planning to add new shows every month, in order to mitigate the threat.

Bargaining power of buyers:

Balaji Telefilms limited sells it content to different broadcasters namely star TV, ZEE and Viacom. Since it is able to command higher TRP, hence, bargaining higher margin from broadcasters compared to its peers. Although due to some tie ups with certain broadcaster it has to sell and air its content on prime slot to that specific broadcaster. Therefore, making the bargaining power of buyers moderate.

Bargaining power of seller:

The suppliers in this case are the actors. Balaji Telefilms, being the largest entertainment software provider, evinces a lot of interest from aspiring actors who are eager to work with it. Thus the bargaining power of the aspiring actors is very low. However, once these aspirants become household names their demands increase resulting in higher salary costs to the company. Hence, the bargaining power is moderate.

Rivalry between existing players:

The rivalry between production houses is high and they try to poach each other’s actors, creative personnel and technicians. Since, Balaji telefilms is at leader’s position it easily attracts new talent and retention of current buyers and suppliers is easy.  Further, they plan to earn the Intellectual Property (IP) rights of all the content that they create as to own it. By this making the rivalry forces low.

By:- Sunaina Vaidya.

Eicher Motors Limited

 

 

Eicher

 

Eicher Motors Limited

CIN No.: L34102DL198PLC129877

Regd. Office: 3rd floor, Select Citywalk

A-3, District Centre, Saket, New Delhi- 110017

Phone No.: +91-124-7102900

Email: info@eicher.in

 

Name of the Company: Eicher Motors Limited

Listed on BSE and NSE

NSE Code: EICHERMOT

BSE Code: 505200

Market Cap: INR 74,492.67 Cr.

Revenue: INR 7939.45 Cr.

Profit: INR 1664.65 Cr.

Current Market Price on NSE: INR 27328.15

Current Market Price on BSE: INR 27350.10

Website:www.eicher.in

Introduction

Eicher Motors Limited(EML) is the flagship company of the Eicher group. EML is the leading player in the Indian Automotive space. It operates in 3 distinct business verticals- Motorcycles, Commercial Vehicles and Personal Utility Vehicles.EML owns the iconic Royal Enfieldmotorcycle business, which leads the premium motorcycle segment in India. The oldest motorcycle brand in continuousproduction world-wide, Royal Enfield has witnessed a huge surge in demand in the recent past and is charting its courseto be the leading player in the mid-sized motorcycle segment globally. EML’s joint venture with the Volvo group, VE

Commercial Vehicles Limited, designs, manufactures and markets reliable, fuel efficient trucks and buses; and is leadingthe path in driving modernization in commercial transportation in India and other developing markets. EML’s 50:50 strategic jointventure with USA-based Polaris Industries Inc. formed in 2012, Eicher Polaris Private Limited launched the Multix, a new3-in-1 vehicle purpose built for the independent businessman in June, 2015.

 

Product Portfolio

  • A division of EML, Royal Enfield has created the mid-size motorcycle segment in India. Royal Enfield’s product line-up includes
  1. Bullet
  2. Classic
  • Thunderbird
  1. Continental GT
  2. Himalayan
  3. Interceptor

Further in 2012 Royal Enfield launched Royal Enfield Gears.

In January 2018, Royal Enfield has setup its First Royal Enfield Garage Café in Goa. The Garage Cafe is a massive 120-seater cafe and also has a Royal Enfield motorcycle museum-and-exhibition area, an exclusive gear store, a motorcycle customization area and a service bay.

 

 

  • VE Commercial Vehicles Ltd. JV of EML and Volvo group deals in complete range of commercial vehicles which include
  1. Eicher Light to Medium Duty Trucks (5-15 tonne)
  2. Eicher Heavy Duty Trucks (16 tonne +)
  • Volvo Trucks including Mining and Tunnel Trippers
  1. Eicher Buses
  2. Euro-6 compliant enginemanufactured in VE Powertrain, the first engine plant in India producing Euro-6 compliant engine.
  3. Strategic supplier of drive line components and aggregates to Escorts, Mahindra, Voltas, Royal Enfield etc.
  • In 2012 EML signed a strategic JV agreement with Polaris Industries Inc. to design, manufacture and sell full new range of personal vehicle. In 2013, the JV company Eicher Polaris Private Limited set-up its manufacturing facility in Jaipur, Rajasthan. Its first vehicle was launched in 2015 named “MULTIX” which was India’s first personal utility vehicle which can be used as people carrier, cargo carrier and power generator.

Infrastructure Facility

  • Royal Enfield
  • Royal Enfield has 3 manufacturing plants in Chennai having total capacity of 8,25,000 units in F.Y. 2017-18 which will be 9,00,000 units in F.Y. 2018-19.
  • It has 2 Technology centres in Chennai and UK.
  • Presently total dealers in India are 761. They are planning to increase No. of dealers to 825 by March 2018.
  • It has 35 exclusive stores overseas.
  • VECV
  • In Pithampur it has
  • Commercial Vehicle Manufacturing Plant having capacity of 84,000 trucks and buses, and scalable up to 1,00,000 trucks and buses
  • VE Powertrain Facility having current capacity of 50,000 engines, scalable up to 1,00,000 engines and it has already started supplying Euro-6 compliant engine to Europe over 3,000 per month.
  • Eicher Engineering Component has production facilities at Thane, Dewas and SEZ, Pithampur for components and aggregates for VECV, Escorts, Mahindra, Royal Enfield etc.
  • In Baggad, MP it has bus body plant.
  • of dealers are 299 including 15 Company Owned Company Operated (COCO) outlets.
  • It has 22 distributors, 161 Eicher Genuine Parts Shoppe and 2,283 multi-brand parts retailers
  • It has 224 GPS enabled Vans and 29 Container Set up Sites.
  • In 10 Months of F.Y. 2017-18 export of Commercial Vehicle is 6723 units.
  • Eicher Polaris Private Ltd
  • It has manufacturing facility at Jaipur having capacity of 60,000 units per annum and which can be expanded up to 1,20,000 units equipped with robotic weld lines and in-house paint system.
  • It has 97 domestic stores and it is focusing on nearby International markets such as Nepal, Bangladesh and Sri Lanka.

 

Employee Details(As of December 2017)

Sr. No. Company Name No. of Employees
1 Eicher Motors Limited 2910 (excluding outsourced)
2 VE Commercial Vehicles Limited 4827 (permanent)
3 Eicher Polaris Private Limited 420+

 

 

Director Details

Eicher Motors Limited VE Commercial Vehicles Limited Eicher Polaris Private Limited
Ø  S. Sandilya

Non-executive Chairman

Ø  HakanKarlsson

Chairman

Ø  Michael D. Dougherty

Chairman

Ø  Siddhartha Lal

Managing Director & CEO

Ø  VinodAggarwal

Managing Director & CEO

Ø  PankajDubey

CEO & Whole Time Director

Ø  MJ Subbaiah

Independent Director

Ø  Siddhartha Lal

Eicher Nominated Director

Ø  Siddhartha Lal

Eicher Nominated Director

Ø  PrateekJalan

Independent Director

Ø  Jacques Michel

Volvo Nominated Director

Ø  Lalit Malik

Eicher Nominated Director

Ø  ManviSinha

Independent Director

Ø  Philippe Divry

Volvo Nominated Director

Ø  B Govindarajan

Eicher Nominated Director

  Ø  Raul Rai

Eicher Nominated Director

Ø  Michael Todd Speetzen

Polaris Nominated Director

  Ø  PrateekJalan

Independent Director

 
  Ø  Lila Poonawalla

Independent Director

 

Group Structure

List of Subsidiaries

Sr. No. Name of Subsidiary
1 VE Commercial Vehicles Ltd (VECV)
2 VECV Lanka (Private) Ltd
3 VECV South Africa (PTY) Ltd
4 Royal Enfield BrasilComercio de MotocicletasLtda
5 Royal Enfield North America Limited (RENA)
6 Royal Enfield Canada Limited
7 Eicher Group Foundation (Sec. 8 Company)

 

Joint Venture

  • Eicher Polaris Private Limited

Recent Updates

  • Eicher launched first ever Skyline Pro Electric buses in collaboration with KPIT’s Revolvo Technology.
  • In January 2018, Royal Enfield has setup its First Royal Enfield Garage Café in Goa. The Garage Cafe is a massive 120-seater cafe and also has a Royal Enfield motorcycle museum-and-exhibition area, an exclusive gear store, a motorcycle customization area and a service bay.
  • In April, 2017, Royal Enfield had opened a direct distribution subsidiary in Brazil, as well as its first exclusive store in Sao Paulo.
  • Royal Enfield will be launching the twin-cylinder new motorcycles Interceptor 650 and Continental GT 650cc in India in the summer of 2018.
  • Royal Enfield, a division of Eicher Motors, has started commercial production from its new manufacturing facility at Vallam Vadagal near Chennai. This plant will be Royal Enfield’s third facility.
  • Eicher announced its new range of light and medium (LMD) trucks in Indian market to meet the rapid transportation demand of the e-commerce industry. The company introduced 5 new variants in the Pro 1000 andPro 3000 series.
  • VE Commercial Vehicle (VECV) holds 100% equity in Eicher Engineering Solutions Inc., USA (EESI). EESI holds 100% equity in Eicher Engineering Solutions (Shanghai) Co. Ltd. and Eicher Engineering Solutions (Beijing) Co. Ltd. On March 17, 2017, VECV has disinvested 100% holding in EESI for $1.85 million. Accordingly, EESI and its wholly owned subsidiaries of Shanghai and Beijing have ceased to be subsidiaries of VECV, and in turn, have also ceased to be subsidiaries of Eicher Motors Limited.

By:- Piyush Jain

SWOT Analysis Report – “HAVELLS INDIA LTD”

 

                    1200px-Havells_Logo.svg

                             “SWOT Analysis Report”

PARENT COMPANY Havells India
CATEGORY Electrical equipment
SECTOR Energy power and electrical equipment
TAGLINE Deeper into homes
USP One of the most trusted brand of electrical goods providing best quality at affordable prices and frequently comes up with new innovations.

 

                                              STP

 

SEGMENT Cables, motors, switchgears, reactive power solutions, heavy duty fans, professional lighting.
TARGETED GROUPS Construction companies, dealers, distributors.
POSITIONING A quality power of powerful, innovative, affordable and energy efficient electrical goods.

 

                                              SWOT

 

STRENGTH ·         The company has a strong distribution network (it has 7575 no. of dealers and 1702 dealers are added to it this year).

·         The company has a good acquisition history, it has acquired some of the prestigious Indian brands like of Standard Electrics, Crabtree, Promptech, and a latest acquisition of Lloyd.

·         It has a strong brand image.

·         The company is awards by various authorities like Shri Rajpal Singh Shekhawat, honourable minister of industries.

WEAKNESS ·         Power dependent segments will be affected with less or no power supply.

·         Electric goods are majorly required in infrastructure for example government’s construction activities, any slowdown or delay in such activities will affect the company.

OPPORTUNITIES ·         Focus of government on electrification and commitment to improve infrastructure and housing, the use of electrical goods is assured.

·         Emerging middle class people towards better standard of living, the company can expect growth in future.

·         By having a wider base of distribution network, company can introduce its products to new geographical areas.

·         GST is likely to be implemented in 2017-18, with this the company hopes to leverage its brand positioning and distribution network.

THREATS ·         Segments like cables and switchgears are dependent on industrial and infrastructure capital expenditure, any delay would affect the segmental revenue growth.

·         With the view of potential growth in electrical equipment industry, the number of players under the industry has increased; the increase in competition is likely to put pressure on existing players.

·         Downfall in economy will affect its growth by being a cyclic company.

By:- Kratika Bhatt.

MRF Ltd (MDA Report)

        mrf-tyres-500x500             

                     Madras Rubber Factory Ltd

Reg Off: New No. 114, Greams Road, Chennai, Tamil Nadu, India

 MANAGEMENT DISCUSSION AND ANALYSIS

Economy and Industry Overview

The year of 2016-17 started on a positive note with normal monsoon, relatively low inflation and a modest budgetary support to drive consumption growth. Expectation of higher Government spending on infrastructure also indirectly increased growth expectation. However demonetisation also impacted automobile industry and ultimately it was survived by trade and customers in smaller markets. Impact of demonetisation was however substantially recovered by the end January 2017.

The Indian tyre industry grew by 3.6% and in value it is estimated to be Rs. 55,000 Cr. in 2016-17.Tyre industry is directly affected by automobile sector. It majorly comprises of Commercial Vehicle segment consisting of Heavy, Light, Small Commercial Vehicles (H/L/SVC). The next largest segment is Passenger Vehicle consisting of Car, Sports Utility Vehicle (SUV), Motorcycle and Scooters.

Traditionally tyres are classified as Cross-ply (Bias) and Radial based on technology deployed in their manufacture. In India, the commercial tyre segment continues to be dominated by Cross-ply tyres due to road condition, loading capacity and higher cost of Radial tyre.

Tyre industry consist of three distinct markets namely Replacement, Institutional/ Original Equipment Manufacturer (OEM) and Exports. By value, Replacement Market accounts for approximately 60%, Institutional / OEM and Exports making up to 22% and 18% respectively. Of the total tyres produced in India, top 11 tyre companies account for more than 90% of the volume.

Tyre industry provides direct and indirect employment of more than million people, comprising of dealers re-traders and truck operators. This business, has historically transacted in cash and will face more difficulties as moving in modern methods for payments via NEFT, cheque etc. to reduce cash transaction.

The Indian Automotive sector registered a reasonable growth of 10.6% in sales in passenger Vehicle Industry. It is considered as positive sign even after various adverse factors such as Demonetisation, ban on diesel car in NCR and changeover in emission norms. There was huge demand noticed in Utility vehicles that resulted significant growth in passenger car segment. Apart from domestic sales, export sales also shown an increase of 16.2%.

The company has now entered its fourth decade of leadership in Indian tyre Industry and is also Fourteenth largest manufacturer worldwide. In past year there were various economic factor, favourable and unfavourable and made the year rather unpredictable. There were various unexpected economic reforms, changes in political environment, uncertain global market including events such as BREXIT. Growth of Indian tyre industry was also at moderate pace due to Impact of demonetisation and subdue realisations. Besides of these, Indian economy continued to be beacon of high growth among global market.

Opportunities and Threats

There was a positive impact on domestic industry on Heavy Commercial Vehicle (HCV)/ Medium Commercial Vehicle (MCV) segment which was due to non-availability of cheap Chinese tyres into country.

In the medium to long term duration, with the US International Trade Commission’s favourable ruling in the case of Chinese Tyre imports into the US, it is expected that Chinese exports to the US will revive and this will somewhat bring down the imports of cheap tyres into India. With increase in Global Natural Rubber prices, it can be said that prices of domestic tyre will be less than that of imported tyre. Apart from international decisions, HCV and MCV production boosted because of transition enforced by the Supreme Court Judgment on BS-III and BS-IV transition. However the same judgment will have positive impact on replacement segment later in the year.

Key Drivers

Natural rubber is primary raw material for tyre industry. It is totally dependent on environment factors rather than entirely importing from foreign countries. With normal monsoon during the previous year, risk of non-availability of natural rubber was however mitigated to some extent.

Segment wise and Product wise Performance

During the financial year 2016-17 Company’s turnover of Rs. 14,743 Cr. as against Rs. 22,162 Cr. for the previous 18 months period ended 31st March 2016. Across the board there was an overall increase in all segments adding up to a 10% increase in total tyre production. The same is analysed below:

Particular Increase over previous year
Heavy Commercial Vehicle 3%
Light Commercial Vehicle 11%
Passenger & Sports Utility Vehicle 5%
Motorcycle 12%
Scooter 22%
Farm Segment 5%

Outlook

The outlook for the domestic tyre industry looks stable in the short to medium term due to favourable demand in both domestic and export markets. The issue of raw material cost escalation especially of natural rubber is there which will ultimately reduce the operational margins for a while in near future.

Recently a report shown lack of availability of natural rubber and forcing company to import the same, it will cost to company Rs. 27 extra as compare to domestic price.

However with good monsoon and investments in infrastructure segment will result increasing growth in GDP and will have positive benefits for tyre industry. The positive indication shown by the infrastructure and rural sectors in recent months will definitely have impact on tyre industry, both in Original Equipment and Replacement markets.

On account to increase overall revenue to achieve target of around Rs. 20,0000-Rs. 22,000 Cr by 2020-21, company plans to invest Rs. 800-1,000 Cr. every year on its existing products in relation to Automation and Research & Development, and Brown Field Areas of Gujarat. Also commitment is already made to invest Rs. 4000 Cr in Gujarat for the same purpose.

By:- Vishal Patel

Let’s know about DOMINOS.

dominos

 

Jubilant FoodWorks Ltd.
Plot No. 1A, sector-16A, Noida- 201301
U.P., India

Name of the Company Jubilant FoodWorks Limited
Corporate Identification Number L74899UP1995PLC043677
Date of Registration 16th March 1995
NSE Code JUBLFOOOD
BSE Code 533155
ISIN Number INE797F01012
Website www.jubilantfoodworks.com
Email investor@jublfood.com
Contact Number 0120 4090500
Contact Person Mona Aggarwal (CS & Compliance Officer)
Current market price 1790.20 INR

Introduction:-
Jubilant foodWorks limited (company) is a Jubilant Bhartia Group Company. The company was incorporated in 1995 and initiated operations in 1996. The company got listed in February 2010. The Promoters are Mr. Shyam S. Bhatia, Mr. Hari S. Bhatia, Jubilant energy private limited, Jubilant consumer private limited (formerly jubilant fresh Pvt. Ltd.)
The company and its subsidiaries operate dominos pizza brand with exclusive rights for India, Nepal, Bangladesh & Sri Lanka. At present it operates in India and Sri Lanka. The company is having 1126 dominos pizza restaurants across 264 cities (as on F.Y. 2016-2017). The company has opened dominos restaurant in 29 new cities in 2017.
The company has one wholly-owned foreign subsidiary Jubilant Foodworks Lanka (Pvt.) Ltd. Which operates Domino`s Pizza business in Sri Lanka and having 23 restaurants.

History:-
The first domino`s pizza in India opened in new Delhi in 1996. India was the third largest market in 2013, behind US & UK. In 2014, India became Domino`s second largest market. Domino`s began accepting online orders in 2011, and online orders accounted for approximately 18-20% of total sales as of December 2013.

Product & segment:-

The company has the franchisee for two international brands under its roof. Domino`s pizza and Dunkin Donuts.
The company launched Dunkin Donuts in India in 2012 in Delhi and has 50 Dunkin donut restaurants. Dunkin` Donuts is a subsidiary of Dunkin` Brands and is the world`s leading baked goods and coffee chain, selling more than 1 billion cups of coffee a year and more than 3 million customers per day. The company has opened Dunkin donuts restaurant in 13 new cities in 2017.
Company has two distinct non competing segment one is home delivery of pizza`s market and all day part food & beverage market.

Recent updates:-
The company was headed by Ajay Kaul since 2005. Pratik Pota became the CEO from April 2017.
The company has created a new digital team to spearhead the technology and appointed Anand Thakur as Chief Digital Officer (CDO).

 

By:- Surya Samdani

Lets know about Talwalkars.

Author :  Akansha Mehta.

Talwalkars Better Value Fitness Ltd, popularly known as Talwalkars, is India’s largest chain of health clubs. It has 198 Health Clubs across 85 cities in India on a consolidated basis, with over 200,000 members. It provides various health calculating services such as body mass index, calorie burn calculator, heart rate calculator, ideal weight calculator, body fat calculator and basal metabolic rate among other. The first gym being set up in Mumbai in 1932 and now offers a diverse set of services including gyms, spas, aerobics and health counseling. At Talwalkars, they generate multiple fitness and wellness streams that extend beyond core gymming which comprise of value-added services like transform, reduce, uniform, nutrition, spa, massage, aerobics, yoga and dietary regimes etc.

Headquarter: Mumbai

CEO: Prashant Talwalkar (18 Jun 2009–)

Founder: Vishnu Talwalkar

Founded: 1932

Revenue: Rs 2860 million in INR (For F.Y-2016-17)

CIN: U92411MH2003PLC140134

Website: www.talwalkars.net

Operations 

The multiple health and fitness services are provided by the Company through five fitness centre formats of Talwalkars Premium/Large format Gyms, Talwalkars (formats mostly located in Metros), PWG (Power World Gyms at Colombo, Srilanka), HiFi (low cost format mostly located in non-metro locations) and Zorba Studios yoga studios chain). They have partnerships with -:

  1. Zorba-Zorba which offers customized programs and camps for corporate, where they teach aerobic exercises for weight loss, incorporating various techniques of yoga and zumba to manage stress and overall well-being.
  2. Power World Gyms Limited- This operates and manages the largest chain of gyms in Sri Lanka under the brand name “Power World”.
  3. Talwalkars David Lloyd Leisure Consulting provides consulting for leisure and sports clubs in high-end residential developments, gated community townships and corporate campuses.
  4. Talwalkars gym is a proud associate of Zumba Fitness. In addition to its many physical benefits, Zumba also has a positive effect on emotional well-being.
  5. Growfitter-: From Yoga to Kickboxing, Pilates to Zumba, Growfitter is one stop shop for all things fitness which is something to look forward.

Management and direction

>

Sr. No. Name of Executive Director Designation
1 Girish Talwalkar Executive Chairman
2 Madhukar Talwalkar Whole-time Director
3 Vinayak Gawande Whole-time Director
4 Prashant Talwalkar Managing Director & CEO
5 Anant Gawande Whole-time Director & CFO
6 Harsha Bhatkal Whole-time Director
7 Avanti Sankav Company Secretary

Subsidiaries and Associate Company

The Company has continued the process of expansion including acquiring operationally-efficient local gyms/fitness centers across India and abroad. The Company has following 7 subsidiaries

  1. Denovo Enterprises Private Limited with gym spread in northern and western region.
  2. Equinox Wellness Private Limited  with gym spread in Eastern India.
  3.  Aspire Fitness Private Limited with gym spread in Western India.
  4. Jyotsna Fitness Private Limited with gym spread in Western India
  5. Talwalkars Club Private Limited is a wholly-owned Subsidiary of the Company During the year the company acquired a controlling stake in following companies.
  6. Talwalkars Club Systems Private Limited is a wholly- owned Subsidiary of the Company, incorporated in March, 2016 to own, lease and manage recreational/ lifestyle clubs by providing all kinds of sports, games, recreational and hospitality facilities.
  7. Inshape Health and Fitnez Private Limited is a fitness centre service provider catering to the middle income and upper middle income group in Chennai.

Recent updates

Mergers and acquisitions
  • The company currently in the midst of undertaking significant capital expenditure towards the organic expansion of its fitness centres. The company in order to achieve better management and to have clear focus on business operations,  has decided to demerge gym business, thereby transferring gym business of Talwalkars Better Value Fitness to Talwalkars Lifestyles, in the interests of maximizing overall shareholder value.
  • The company is currently awaiting approvals from the Municipal Authority and is yet to commence construction for its club project. The proposed demerger is, however subject to final approval of lenders, creditors, other stakeholders and regulatory authorities
Other updates
  • Recently Talwalkars Better Value Fitness Limited has informed the Exchange regarding intimation of Mickey Mehta ups fitness quotient through strategic alliance with Talwalkars.
  • Fitness chain Talwalkars Better Value Fitness has announced plans to foray into South-East Asian countries through a tie-up with Snap Fitness Inc., one of the largest gym chains having operations in the U.S., Canada, Mexico, Australia, New Zealand, England, Egypt and India. As part of the expansion, Talwalkars will establish a wholly-owned subsidiary in Singapore to be the exclusive master franchise for Snap Fitness in Singapore, Malaysia, Vietnam, Thailand, Sri Lanka and Bangladesh.
  • On 16March-2017 Talwalkars, the health and fitness centre chain, has acquired 50 percent stake in Force Fitness.- Talwalkars, the health and fitness center chain, says the deal will cut the cost of setting up or acquiring a gym by 35-40 percent.
  • On 29March 2017 Talwalkars Better Value Fitness Limited, India’s largest fitness chain, has announced the opening of the 10 Zorba.

Mega Bailout Plan

Ayush Pathak,
B.Com,Financial Modeling,
Financial Analyst
S&P Hyderabad

There was a big announcement on October 25th about recapitalization of banks. Center announced a capital injection of Rs. 2.11 lakh crores. And with this news, I am motivated to write another blog on this describing why it is needed? Impacts of it, how it will work, etc..
So, let’s start with basic with a question,

What is capital injection?

Capital Injection is the supply of new money into the system (economy) or in a company or in an institution in the form of cash, equity or debt. This is generally done to make the financial condition of any sick company/companies better. Generally, capital injection is treated as the last option to make things better. It generally helps to unfreeze the credit instantly or fix the capital crunch problem. It may also have some bad impacts which are discussed later.
The last capital injection by a government into an economy, which I remember, is done by the US government in 2007-08 crises and they also treated this as very last option to unfreeze their credit system. Which now the US fed has started to unwind their balance sheet and reduce their debt.

Why Capital Injection in India? Are we in any crises?
The centre decided to do a bailout of Public Sector banks by injecting Rs. 2.11 lakh Crore or nearly 326 Billion USD, which is a huge amount, to treat the NPA problem of the Indian Banks.
Indian banks have nearly Rs. 8.29 lakh crores of NPAs and this is I think a severe threat to the Indian economy. Today, most banks are not able to lend further because of this huge NPA on their balance sheet. They are facing a problem of Capital Adequacy Ratio, which is defined as the percentage of bank’s capital to its risk-weighted assets like making a loan. According to Basel III, banks need to maintain the capital ratio of no less than 8%, but due to many defaults on the bank loans, the bank loses their capital and now the state came when banks are finding it difficult to maintain the minimum capital ratio and hence the credit seems to be frozen.
Let me tell you, in an economy, credit plays a very important role. Credit has an ability to create a modern economy and lack of credit can even destroy the economy. Credit helps shopkeepers to maintain their shelves, run their business and in many ways.
In India, we are facing a situation of lack of credit and the result of it can be seen in Indian GDP growth rate. From nearly 7-8% of growth we came down to 6-7% last year and then in the September quarter we grew by just 5.7%. Many say that demonetization and GST have pulled us down, but I think, it’s not only these two factors, we have a huge NPA problem as well which is pulling the growth down. And this needs to be dealt soon and in the best way possible. The government thinks Capital Injection is the best way to work.
I think, to handle a situation of dealing with a problem of NPAs, government and RBI should find some different way. As I first stated that capital injection should be the last option and this is mostly used at the time of crises. And I think we are not currently into a situation of “Crises”. So the answer to the question “Are we into Crises?” is “No, at least for now, we are not.”

How Government Plans to Do it?
To the best of my knowledge and understanding, the government has planned to buy Rs. 18000 Cr worth of shares through its budgetary allocation and then government issue bonds which might be called as ‘Banks Recapitalization Bonds’ for Rs 135000 Cr. which will further be used to buy more banks’ shares. So, in all government planned to inject 18000Cr. + 135000cr. that is 153000Cr. by itself.
The government bonds are yet not into a clear picture like how will they be issued, what will be the maturity? Or to whom they will be issued? Etc.. There is a belief that the bonds will be issued directly to the banks, so that banks can raise further capital from the market. Further capital is like 58000Cr Rs. which will sum up to total capital injection of 211000Cr Rs in the system.

What actually is done here?
This is actually a masterpiece idea of financial engineering. It is like, first, government give banks money and purchase their shares then Government Issue bonds which will certainly be bought by the banks. This means now banks give money to Government to buy more shares of banks. Banks will now have bonds of the government which can be used to issue new bonds in the market which has an underlying asset of government’s bonds.

Is it good to give Money to banks?
Well, we are giving money to someone whose sole job is to make money because it fails to make money. Perhaps, it doesn’t seem like a good idea but we are stuck in a jam. Indian banks seem frozen. So giving money to banks is like giving them a lifeline.
However, giving money to banks can only be fruitful if and only if, banks will book NPAs as their loss and clean out their balance sheet as soon as possible.
Banks have resisted themselves to clean their balance sheet till now because of the lack of capital they have. If they have booked losses earlier, they would have failed to maintain the minimum capital ratio requirement and therefore they have to call back their loans outstanding. Investors also would have lost trust in them and they would have also pulled their money out which further worsen their situation. But now as they are getting money from the government, they can book their losses and can clean up their balance sheet. It will not be any harm to the banks if they still resist or extend their loss booking as there is no such provision of it. However, the government can now force banks harder to book losses. So ultimately, it all depends on banks if the plan for government go successfully or not.

What Can Go Wrong?
I think, if banks do not book their loses and acted upon the capital injection which they were supposed to do, everything might go wrong. 2.11 lakh is not a small amount. It is a big capital injection and if this not used properly, it will result in hyperinflation problem.
I think, in India, there is always a huge demand for credit and if everyone starts getting it easily then it may cause a hyperinflation. We may say the greed of the bank may also increase and they go an extra mile to lend more. When the banks’ pockets are again full of money, they will lend it more and even to sub-prime customers and this may cause more default and increase in NPA.

What about the Bonds?
With the new capital injection of bonds, I seriously think that the yield of the fixed income securities will go up. With the capital injection, the short-term securities will be the first to react upon it and the yield on those will first increase. The long-term securities also will not remain unaffected. Even 10-year T-Bill of India will have its yield increased.
We will definitely be going to see some increase in inflation after the capital injection and which will increase the yield of every fixed income securities. We may soon find the RBI also increasing the rates to control the inflation. And now this could also lead to an end of low-interest rate cycle. There is also a potential threat to Indian fixed income securities as the yield of US T-Bill is also increasing. It reached near to 3%. This will further increase the yield of the Indian bonds.

What Problem the recapitalization bonds may cause?
The government bonds are issued to take a share into the banks. The government will have a certain percentage of ownership into the banks. When the government issues the bonds, it will certainly be bought by the banks and then the government will use that money to purchase shares of the banks. And with the help of the government bonds, banks will able to raise the further capital and issue more shares into the market.
Increase in the number of shares in the market will lead to lead to dilution in the EPS of the share. This means if you today have a share of a bank of EPS say 10Rs then after government’s purchase of the new shares it may come down to say 5Rs. So, the current holdings into the banks may get diluted with the increase in the share of government in the banks. The government is going to be an owner in the banks.

How Government describes this?
The government has a say in this as it will not be creating any problem and this is well planned financial structure. And hopefully, it should be well planned.
Previously, looking at the government’s figure about the disinvestments and all, the fiscal deficit target of 3.2% seems to be achievable. But with this new plan of government, I think this year, the fiscal deficit will going to increase. The government says it’s just shares in exchange for cash. The whole scene doesn’t look this. There are a lot of moving parts which have a lot of risks involved. The government has taken a huge risk by giving money to the banks. We may end up into hyperinflation, if not monitored properly. I think in near future the inflation is going to increase and fiscal deficit is going to widen up. This is an additional debt on the balance sheet of the government.

Well, I think that is pretty much about something which we can call “A mega-bailout”. I just recommend stay away from the long-term fixed income securities and expect inflation. Rates will be increased, yields will go up. So plan your investments accordingly as it may affect you as well.
Stay safe and keep learning.