CHRIST INSTITUTE OF MANAGEMENT

SUMMER INTERNSHIP PROJECT REPORT

ON

“Company Analysis and Buy Back Of Shares ”

BY

AKSHAY JAIN

( PGDM 2017-19)

Under the supervision of

CA SEEMA SRIVASTAVA CA. SARIKA JAIN

(COMPANY GUIDE) (FACULTY GUIDE)

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 DECLARATION BY STUDENT

This is to certify that I, Akshay Jain, a student of Bachelor in Post Graduate Diploma in
Management of 201-19 Batch, Christ Institute Of Management, Ghaziabad, have worked under
the guidance and supervision of CA Sarika Jain.

This report has the requisite standard for the partial fulfillment of the Post Graduate Diploma In
Management. To the best of my knowledge no part of this report has been reproduced from any
other report and the contents are based on original research.

I am aware that in case of non-compliance, Amity School of Business is entitled to cancel the
report.

Signature of Student

Mr. Akshay Jain

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 ACKNOWLEDGEMENT

The completion of this report would not have been possible without the participation, help and
continuous support of so many people whose names may not all be mentioned. Their contributions
are sincerely appreciated and gratefully acknowledged here. However,
I would like to express the sincere gratitude to my company mentor, Ms. Seema Sivastava and Mr.
Saurabh Jain for guiding me during the whole research, their guidance, continuous support
throughout my project, without which the success of this work would not have been possible.
Also I am thankful to my faculty guide CA. Sarika Jain, Asst. Professor, for helping me give a
direction to my research.

And to all the relatives and friends who in one way or the other shared their support in all kind of
ways, thank you.

Above all, to the Great Almighty, who choose this path for me, and his unconditional love.

Thank you all.

Akshay Jain

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TABLE OF CONTENTS

I. EXECUTIVE SUMMARY ................................................................................................................................6

II. INTRODUCTION – PHASE I ...........................................................................................................................7
III. OBJECTIVE OF THE PROJECT ....................................................................................................................8
IV. RESEARCH METHODOLOGY ......................................................................................................................8
V. ECONOMIC ANALYSIS ................................................................................................................................ 11
VI. TWO WHEELER AUTOMOTIVE INDUSTRY .......................................................................................... 14
VI.1. PORTERS FIVE FORCE FRAMEWORK ANALYSIS .........................................................................................16
VI.2. CHALLENGES FACED BY TWO WHEELER INDUSTRY ..................................................................................17
VI.3. FUTURE PROSPECTS ......................................................................................................................................17

COMPANY ANALYSIS ........................................................................................................................................... 18

HERO MOTORCORP ............................................................................................................................................19
1. About The Company..................................................................................................................................19
3. Market Share of the Company ..................................................................................................................21
4. SWOT Analysis Of the Company ..............................................................................................................21
5. Share-Holding Pattern Of The Company .................................................................................................22
6. Porters Five Forces Model On Hero Motorcop. .....................................................................................22
7. Company’s Achievements .........................................................................................................................24
8. Key Financial Results ...............................................................................................................................26
9. Key Findings..............................................................................................................................................28
9.1. Observations ..........................................................................................................................................28
PEER COMPARISON .............................................................................................................................................. 30
3. OBSERVATIONS ..............................................................................................................................................32
4. CONCLUSION ..................................................................................................................................................33

PHASE -2 ................................................................................................................................................................... 43
I. BUY BACK REGULATION .................................................................................................................................44
II. SCHEDULE OF ACTIVITIES & PROCESS CHART ............................................................................................44
III. PRICING OF BUY BACK OFFER PRICE ........................................................................................................47
IV. SIZE OF THE BUY BACK..............................................................................................................................47
V. CATEGORIZATION OF SHARE HOLDER ..........................................................................................................47
VI. RESERVATION FOR SMALL SHAREHOLDER...............................................................................................47
VII. ACCEPTANCE PROBABILITY OR RATIO .....................................................................................................48
VIII. HOW TO TENDER SHARE BY SHAREHOLDER UNDER BUY BACK – PROCEDURE ........................................48
COMPANY ANALYSIS .......................................................................................................................................49
REFERENCES: ......................................................................................................................................................... 58

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I. EXECUTIVE SUMMARY

When anyone wants to invest their money in anything be it everyday basic necessity item or a
luxury one time buy item, they think about the returns they will get. Will this status symbol be
more powerful or the other one? Is this value for my money or not? We ask ourselves these
questions on everyday basis and to get the answers we research on them, find things to support our
decision. Similar is the case when one goes to buy stock in the market. We go to market seleect
prospective companies, do or research and decide whether we will earn return or not.

In this research report, which is created over a period of two months we analyse the stock valuation
of the Two Wheeler Auto Industry , Hero Motorcorp, Bajaj Auto and TVS Motors. The companies
not only have presence in Indian Markets but also recognised across the Globe. This reaserach
report will help any potential investor looking towards investing in these stocks. The research
analyses the industry of two wheeler, its current positioning in the economy and its future
expectations. The porter five forces analysis of the industry will help the investor see what kind of
risk and opportunities the company and industry faces.

The reasearch then goes on to look at the company individually. The investor can find a breif
management discussion which will help them understand how much the company makes plans and
achieve it, how reality based their strategies are. Further on the financial of the company are
analysed through ratio analysis which explain the financial positioning of the company and how
strong the company stands in case of financial difficulties and with its peer companies.

The Second phase of the report is on Buy Back of shares. The affect on the companies
shareholding, key ratios and affect on stock market is explained. The study is done on Buy Back
by Infosys in order to forsee the affect on the company’s shareholding and on the stock Market.

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II. INTRODUCTION – PHASE I
The project undertaken would help in understanding the investment rationale behind
the two Wheeler companies i.e. Hero Motorcorp, Bajaj Auto and TVS Motors in
order to make informed investment in these stocks by calculating the intrinsic value
of the stock. The research project taken would help in gauging trends in domestic
consumer demand, international demand and at the same time demand for the
premium vehicles in the international market, which will in turn help me in
projecting the company’s key financials. Once the key financials have been
projected based on the factors like the expected GDP growth of the country, interest
rates and inflation, raw material prices and other macro-economic factors affecting
automobile industry growth in the country. After forecasting the financials, seeing
the sales trends, sensing the growth parameters in auto sector, future projects and
new launches of the company, expected stock price of the company would be
projected. The intrinsic value or the expected stock price of the company is
calculated based on Fundamental analysis.

Fundamental analysis is one of the main instrument for investors for selecting a stock
and investing in it. Fundamental analysis is also used to identify the stocks with
potential to increase in value over time due to increase in earnings. During
fundamental analysis, future changes in GDP, sales, profits, other performance
indicators both for industries and company are forecasted. There are two types of
approach followed in fundamental analysis: “Top- down Approach” and “Bottom-
Up Approach”. While doing the research, top down approach has been followed.
First step involves in making the forecast of economy, then for the industries and
finally for companies. The industry forecast are based on forecast of economy and
company forecast are based on forecast for both its industry and the economy. This
research report follows a Top down approach of analysis and forecasting because
logically for forecasting of the company’s performance the changes in
macroeconomic environment must be analysed first otherwise the inconsistent
assumptions could be drawn. Fundamental equity research involves carrying out
critical analysis to evaluate the intrinsic or fair value of stocks of a company.
Moreover, it is used to signify the possibility of growth or decline in the stock price
of the company. The main objective of the research carried is to find out the trends

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 by which decisions can be made in order to maximize returns from the equity
research.

It will also help the managers to guide their client’s in order to maximize their returns
based on fundamental research. Additionally, it will assist managers in making their
investment decisions and help them optimize their portfolio by choosing the
proportions of various assets in such a way that it maximize their returns by making
them clear whether to buy, sell or hold on their stocks.

III. Objective of the Project

 To understand the macroeconomic variables those will have an impact on the
company progress.
 To study the various trends, opportunities, challenges of the industry in which
the company operates.
 To understand the various policies of the company those have impact on the
financial performance of the company.
 To recommend whether to buy, hold or sell the stock based on the analysis.

IV. Research Methodology

1. Research design- Exploratory & Descriptive

The project will be exploratory in the initial stage and the knowledge gained
will be used for further descriptive research. In descriptive research design,
without affecting various factors data is put forth as it is. This is the type of
data where different factors cannot be changed. Hence, descriptive research
design has been chosen.

2. Population- NATIONAL STOCK EXCHANGE (NSE) 50 COMPANIES

It consists of 51 companies of NSE’s having different sectors. Nifty index has
companies which have good performance, significant market capitalization,
well corporate governance record, well diversification and true representative
of respective sectors.

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3. Sampling And Data Collection: NON-PROBABLITY SAMPLING
Two wheeler sector having three companies TVS Motors, Hero Motorcorp
and Bajaj Auto are listed in NSE have been selected as a sample based on
convenient random sampling.

4. Data Collection
Data collected from annual reports, balance sheet, and profit and loss account
of companies. Macroeconomic numbers of central statistical organization.

5. Variables for analysing the Study

a. Price to Earning Ratio
b. Earning Per Share Ratio
c. Return On Equity
d. Return Capital Employed
e. Current Ratio

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ECONOMIC ANALYSIS

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V. Economic Analysis

Indian economy is one of the fastest growing economy in the world. India is ahead of
China, Indonesia and other emerging economies. India’s GDP was 6.7 in 2017 and is
expected to grow by 7.5% by 2020, and is expected to grow to 7.7% at the end of
Financial Year. The service sector contributes more than 50% to the GDP of India. The
service sector includes Financial, Real Estate& Professional services, Public
Administration, Defense, Transportation and other services. Currently this sector is the
backbone of the Indian economy. India is also one of the fastest growing population of
the world, with 13.42 billion people. Auto industry is said to be the engine of growth in
most developing countries, including in China and India today. Indian automobile
industry which was at its nascent stage at the beginning of the 21st century has now
become a huge industry that contributes majorly to growth and development of Indian
Economy. It is about 26% of the GDP and 49% of manufacturing GDP and employs 29
million people directly and indirectly, and contributes to 13% of Tax revenue of the
Government of India. The industry includes Passenger vehicles, Commercial Vehicles,
2 wheelers and 3 wheelers. Total Automobile production in India for FY17 was 25.31
Million units, with two wheelers forming 79% and passenger vehicles 15% of the total
production. The passenger vehicle segment grew at a CAGR of 9% followed by 2
wheeler, growing by 10% and 9% respectively. There are many factors that are
contributing to the growth of this Industry, they are :

1. Implementation Of Goods & Services Taxes

The implementation of one of the biggest reforms in Indian history, the

implementation of Goods and Services Tax (GST) has contributed towards
reduction in prices of raw materials which are essential for the production. The
implementation of GST removed Central Excise duty, Service Tax, Value Added
Tax etc. This has contributed to low operating cost and increase n profits for the
companies

2. Normal Monsoon Prediction

Expectation of good Monsoon plays a very crucial role in sales of this industry.
The agriculture sector contributes 17.32% to the total GDP. In expectation of
good monsoon the sales of tractors, 4wheelers and 2wheelers increases. The
Meteorological department has predicted above normal monsoon for the FY19.
Farm and allied sector growth is officially estimated to more than halve to 3 per
cent in 2017-18, against 6 per cent in the previous year.

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 3. Decrease in Interest rates by Reserve Bank Of India
The decrease in interest rates by RBI has made the loans less expensive by
reducing the lending rates which helped in creating demand for the industry.

4. Fuel Prices
Decrease in fuel prices has reduced the operating cost of the automotive
companies and has initiated them towards more fuel efficient technologies.

5. Construction of Roads-
The government of India Launched Bharat Mala Project in order to build high
quality standard Roads of approximately 83677km by 2022. Increase in the
connectivity between different cities, towns and villages has led to increase in the
demand of auto sector.
6. Employment
The industry is a employment hub for more than 60 million workers.

The auto industry has always played a crucial role in framing a good economy. Current
low car penetration, rising prosperity and the increasing affordability of private vehicles
offer a healthy growth for the Indian automotive industry. The companies benefiting
most from this evolving landscape will be those who forge judicious alliances and
resource-sharing agreements, who prepare for the growing importance of green
technologies, and who remain flexible enough to respond to the twin needs of private
light transport and mass transport schemes.

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INDUSTRY ANALYSIS

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VI. Two Wheeler Automotive Industry
The Indian automotive industry consists of five segments: commercial vehicles;
multi-utility vehicles & passenger cars; two-wheelers; three-wheelers; and tractors.
With 2,49,72,788 units sold in the domestic market and 4040172 units exported
during the FY18 , the industry marked a computed annual growth of 10% over the
period of 2012-2018. The two-wheeler sales have witnessed a spectacular growth
trend since the inception.

Two wheeler dominate the Indian Auto market. The demand of two wheelers have
been increasing at a CAGR of 10% and
has exceptionally shown increase in the Domestic Sales
year 2017-18 by 15%. This sector has 25000000.00 25.00%

highest production level compared with 20000000.00 20.00%

other sectors of the automotive industry. 15000000.00 15.00%

The two wheeler sector production is 10000000.00 10.00%
growing at a CAGR of 8.11% as 5000000.00 5.00%
compared to passenger vehicles which
0.00 0.00%
is growing at a CAGR of 4.5%.

Sales Percentage Change

The two wheeler contributes 81% to
Auto Industry of India which is highest among all the sectors.

MARKET SHARE
Production Trends
Two Wheelers Percentage Change
13% 3%
3%
25000000 25.0%

20000000 20.0%

15000000 15.0%
81%
10000000 10.0%

5000000 5.0%
Passenger Vehicles Commercial Vehicles 0 0.0%
Three Wheelers Two Wheelers

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Two wheeler sector is one of the largest contributor to the two wheeler industry
mainly due to the following factors:

1. Increase in Population-
India is a 2nd largest population nation of the world. It has a youth population
is 35% of the total population. Growing population will lead to increase in
demand for two wheelers.
2. Increase in Middle Income population-
The middle class market is expected to grow 35o million by 2020. And so
there is an increase in demand for all the affordable sectors including two
wheelers.
3. Attractive Loan Schemes for Two Wheelers by NBFC’s
Banks and NBFC’s have continuously been coming with attractive schemes
in order increase the demand for two wheelers. The two wheeler segment
saw a disbursement of Rs.256 billion during the fiscal year 2017-18.

4. New Technology-
The companies in this sector are highly working in manufacturing fuel
efficient technology so that the companies can benefit with low cost two
wheelers.

5. Increase in rural Consumption Demand-

The increase in demand is expected from rural India because of increase in
road connectivity from villages to mandi to cities. Various government plans
have completed the road construction and many are at full swing and are
expected to be completed by 2020.

6. Inflation
The average inflation in 2012 was 11.47% which is now significantly
reduced to 4.00% mainly due to reduction in crude oil prices and commodity
prices. This has led to decrease in the prices Agricultural products,
commodity prices decrease etc.

The two wheeler industry will emerge as one of the largest sector of the auto sector
in India. All the factors contributing towards its growth are positive.

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VI.1. Porters Five Force Framework Analysis

Threat of New Entrants’- Moderate

The threat to new entrants is generally medium because of the brand equity and capital
intensive nature of the business. The amount of investment in such an industry is
comparatively very high from raw materials to manufacturing to sales, every level
requires huge investments.

Bargaining Power of Supplier- Low

The raw material required for manufacturing and auto ancillary are large in number and
their business are quite fragmented. Many of them depends on one or two companies
like if we take an example of ROLTA which provides components to HERO only, will get
largely affected if two wheeler maker decides to switch suppliers. Hence, it is likely that
the suppliers to the manufacturers have not so considerable bargaining power.

Bargaining power of Buyers- High

In a market, like India there is lot of bargaining power available to the customers as
there are variety of products available in the same range, by different manufacturers.

Threat Of Subsitutes- Low

The threat from substitute products continues to be low, with public transportation being
under developed even in cities.This is presently low but in coming future with
improvement in public transport such as metro rail etc. it can become high in cities.

Competitive Rivalry- High

As the competition intensifies, it generally leads to low returns because the price are
reduced and operating cost becomes huge. The competition has more intensified after
the companies have started launching same kind of the products in the market.

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VI.2. Challenges faced by Two Wheeler Industry
In Indian automobile industry, there are some challenges by virtue of which auto
sector faces a lot of hurdles. These challenges should overcome for good future
prospects. The challenges faced are mentioned below:-

1. Production cuts are a common phenomenon

2. Increase in competition from foreign players
3. Environmental issues.
4. Orientation towards R & D is less.

VI.3. Future Prospects

India has witnessed a lot interest in recent years in two wheeler industry. It is
market with huge potential for growth. As significant growth expected in overall
economy which would be good for Indian Auto sector. The future challenges of
Indian automobile industry lies in the achieving the automotive mission plan by
achieving economies of scale so that cost of production is reduces, infrastructural
bottlenecks. At the same time stimulating domestic demand and export. There are
several reasons to expect exports of two wheelers because of geographical position
of country. Additionally, Low wages, skilled labour makes it ideal location for the
manufacturers to set up its own manufacturing unit for domestic as well export
front.

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COMPANY ANALYSIS

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 HERO MOTORCORP
1. About The Company
Hero Motorcorp is the largest two wheeler vehicle manufacturer in India. It started its
operation from in 1984 as joint venture with Japanese Honda company. Hero had 54%
stake and Honda Motor had 46% stake and was running under the brand name
HeroHonda. The partnership ended in 2010 because some unresolved disputes that
were there.The company’s chairman, Managing Director is Mr. Pawan Munjal. The
company has diversified itself into not only two wheelers but also in scooter and
mopeds. The global footprint of the company has now reached 35 countries spread
across Asia, Africa and South and Central America.

The company has maintained an average growth of 16% in its profit after tax. The
company has maintained an average annual growth of 7% in its total revenue. The
company has been constantly being taking the steps towards increasing the sales
through various promotional activities such as Motor Sport events and Salute the
Heroes event which got commendable response. During the year, the company crossed
the milestone of producing 70 million two-wheelers, becoming the only Indian two-
wheeler Company to achieve this honour. The achievement is a testimony to the
growing popularity of our wide range of two-wheelers in India and the world.

The company contributes significantly for its CSR activities also. The company launched
Ride safe India(For road safety), Hamari Pari and Empower to educate ( For Girl Child
Empowerment and Education), Happy Earth (For clean and green India), community
care (For Community Development)and Digi Aware( For digital awareness on social
cause). All the projects received tremendous responses in the last two years.

The company in its strategic move to make itself successful in Latin America, the
company brought on board Argentinian football legend and the coach of Atletico de
Madrid team – Diegeo Simione – the brand ambassador in Argentina because of huge
football fans. The company is building brand in the Caribbean even before its
commercial launch in that market. It is the Title Sponsor of the Hero Caribbean Premier
League – a highly popular T20 cricket tournament. The association with Tiger Woods
and the Tiger Woods Foundation has already helped us build awareness about Brand
Hero globally.

The hero group is foraying into the electric vehicle segment in right earnest. After tying
up with UK-based design company Hewland Transmissions for design synergies in
June 2017, it has bagged an order for supplying transmissions, designed at Hewland to
an electric drive company in England. This sowed that the company is working towards
innovations and future prospects also.

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The company inaugurated a new project in Siri City in Andhra Pradesh which involves
an investment of Rs 1,600 crore for the state-of-the-art plant which will generate 12,000
new job opportunities in the state. When fully operational, this facility will take up our
total combined installed capacity to 11 million units of motorcycles and scooters per
annum, which is in line with our vision of surpassing the landmark 10- million unit
volumes by 2020. In addition to building a state-of-the-art facility, company has
committed to creating a world-class manufacturing eco-system in the region, with a
base of globally benchmarked vendors and suppliers, which will together generate over
12,000 new jobs, thereby accelerating the socio-economic progress in the state.

Plants in India and Its Capacity

Plant 1 Haridwar (Uttarakhand) 2.7 million units per annum

Plant 2 Dharuhera (Haryana) 2.1 million units per annum
Plant 3 Gurgaon (Haryana) 2.1 million units per annum
Plant 4 Neemrana (Haryana) 1.1 million units per annum
Plant 5 Vadodara (Gujarat) 1.2 million units in Phase
1, 1.8 million units in
Phase 2.
Plant 6 Chittoor (Andhra Pradesh) 1.8 million units by end-
December 2019

Hero MotoCorp, the country's largest two-wheeler manufacturer, is aggressively

growing its manufacturing capacity. The company, which currently has an installed
production capacity of 9.2 million units across its plants in India.

The company has sold Rs. 75 lakhs unit sales in FY18 becoming the first ever entity to
achieve such a feat globally. The company had sold 66.6 lakh bikes and scooters in
2016-17. The company was able to achieve this mark because of positive industry
momentum, rural uplift and various schemes by NBFC’s.

The overall main growth of the company was from north and eastern regions of the
country and south and west is still not so popular. The company is working strategically
to become market leader in India.

There was a 15% rise in the rural because there is greater demand of motorcycles and
scooter growth has only been about 20% , so the company assumed that the national
industry growth was 15% the rural is probably grown at least 200 to 300 basis points
higher than that average.

The company benefited because of CGST Rs. 176 cr. for the 9 months in FY17-18, and
was added to total Income and not accounted for any loss.

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 3. Market Share of the Company

Share In the Market

Hero Motorcorp

32% 35% Bajaj Auto

Honda Motorcycle & Scooter

India
17% 16% Others

Source : SIAM

4. SWOT Analysis Of the Company

STRENGHT WEAKNESS
1. Huge Brand Recognition 1. Low presense in South and West India
2. Diffrentiated technologies & Aesthetics. 2. unable to calculate the future expenses,
3. Presence in 35 countries across the Globe. when the government annonces the change
4. Good Corporate Governance in BSIV to BSVI norms for engines.

SWOT
OPPORTUNITIES THREATS
1. The good monsoon in FY 19 1. Increase in competition from Local
2. Various new schemes by NBFC's & Banks Players
3. Incease in rural demand. 2. Polital Disturbances.
4. To Participate in upcomming sports events 3. Trade war in different countries.
to increase the presemnce of the brand. 4. Global Turbulances
5. Decrease in Crude Oil Prices

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5. Share-Holding Pattern Of The Company

Shareholding as a % of total no. of

shares

3%
Promoter & Promoter Group
35%
Public
42%
Forign Portfolio Investors
LIC of India
20%

6. Porters Five Forces Model On Hero Motorcop.

Threat Of New
Entrants
[LOW]

Threat of Threats of Power Of

Subsitutes Rivalry Buyers
[Moderate] [HIGH] [LOW]

Power Of
Suppliers
[Moderate]

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Threat Of New Entrants – LOW
Companies like Hero Motorcop which are there from decades and are enjoying the economies of
scale. But for a new player it is not easy as capital required is quite high, plus distribution
network has to be strong. The new companies should be ready for any macro level turbulances in
domestic as well as gobal market.

Threat of Substitutes - Moderate

Available substitutes include public transportation such as buses, metro train, train, and aircraft.
The buses cannot reach every easily as well as other substitutes. In addition, consumers can use
other conventional means of transportation such as bicycling or walking.

Power Of Suppliers- Moderate

Some suppliers are smaller and as such do not have that much power over the pricing and
distribution of their products. Input which will add value to the vehicle supplier are those inputs
which have bargaining powers like CEAT in case of tyres, ROLTA in case of parts.

Power of Buyers - Low

While buyers are individuals and are not grouped together, they still have an immense amount of
information available to them regarding the pricing and cost to manufacture of Hero Motocorp,
though this has a negligible impact on sales of HERO . As a result, buyers don’t have any power
to negotiate the purchasing price with HERO Vehicles.

Competitive Rivalry – Extremely High

The competitor for Hero are local players such as Bajaj Auto and TVS Motors. These companies
are in similar business. The product competitiveness and pricing strategy plays a key role for the
company to rule. The company has presence in North and East but less growth in South and west
part of India which has given advantage to the companies to compete in this aggressive market.

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7. Company’s Achievements
 The company achieved a landmark achievement in 2017-18 of 7587130
units. The company registered an annual growth of 13.85%

Yearly Sales
8000000 25.00%
7000000 20.00%
6000000
15.00%
AXIS TITLE

5000000
4000000 10.00%
3000000 5.00%
2000000
1000000 0.00%
0 -5.00%
2008- 2009- 2010- 2011- 2012- 2013- 2014- 2015- 2016- 2017-
09 10 11 12 13 14 15 16 17 18
Series1 3722000 4600130 5402444 6235205 6075583 6245960 6631826 6632322 6664240 7587130
Series2 11.53% 23.59% 17.44% 15.41% -2.56% 2.80% 6.18% 0.01% 0.48% 13.85%

 The company recorded highest sales in the month of March 2018,

registering a sale of 730473 units which was growth of 16% on
Month-on- Month Basis

Monthly sales
40.00% 800000
30.00% 700000
20.00% 600000
10.00% 500000 AXIS TITLE
400000
0.00% 300000
-10.00% 200000
-20.00% 100000
-30.00% 0
Augus Septe Octob Nove Dece Janua Febru Marc
April May June July
t mber er mber mber ry ary h
Year 591306633884624185623269678,79720739631105605270472731641501629597730,47
% Increase -3.06% 7.20% -1.53% -0.15% 8.91% 6.18% -12.44 -4.09% -21.90 35.70%-1.86%16.02%

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 Expansion Of Manufacturing Facilities-
o Commenced the construction of it’s eighth world-class manufacturing
facility in Chittoor, Andhra Pradesh in March’ 18.
o Commenced commercial production at it’s second manufacturing
facility outside India, in Bangladesh, in May’17.
 New Products Launched
o Unveiled India’s first 200cc adventure motorcycle – XPulse at
Auto Expo 2018
o Forayed into 125cc scooter segment with unveiling of ‘Maestro
Edge 125’ & ‘Duet 125’ at Auto Expo 2018
o Unveiled Xtreme 200R with aim to strengthen Hero’s presence in
the premium motorcycle segment
o Launched the new Passion PRO, Passion XPRO and Super
Splendor.
 Sports Initiatives-
o Became the ‘National Supporter’ for the FIFA U-17 World Cup
India 2017, held in India in Oct’17
o Hosted Hero World Challenge, a Tiger Woods Invitational PGA
sanctioned Golf tournament in the Bahamas for the fourth
consecutive year.
o Extended the innovative night-golf competition, ‘Hero Challenge’
by three years to multiple events on the European Tour

 Company Welcomed GST-

o The Company passed on the benefit of GST to its customers with a
reduction in the prices w.e.f. July 1, 2017 with quantum of
reduction ranges from Rs.400 to Rs.1800 on mass-selling models.
Some of the premium segment models would see a reduction of up
to Rs.4000 in certain markets. The company benefited because of
CGST Rs.176 cr. for the 9 months in FY17-18, and was added to
total Income and not accounted for any loss.

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 8. Key Financial Results
ACTUAL FORECASTED
31.03.2014 31.03.2015 31.03.2016 31.03.2017 31.03.2018 31.03.2019 31.03.2020
INCOME
Total Renvenue from
Operations (Gross) 27,155.82 29,255.68 30,875.03 30,958.19 33100.94 34755.99 36841.35
YoY growth % 5.83% 7.73% 5.54% 0.27% 6.92% 5.00% 6.00%
Average growth of last
5 years 5.26%
Other Income 444.19 492.11 412.83 521.95 523.17 559.7919 598.977
YoY growth % 11.50% 10.79% -16.11% 26.43% 0.23% 7.00% 7.00%
Average growth of last
5 years 6.57%
Total Income 27,600.01 29,747.79 31,287.86 31,480.14 33,624.11 35,315.78 36841.35
Expenses
Cost of Material
Consumed 18221.53 19790.4 19357.96 18993.87 21995.94 22767.47 37445.26
% of material
consumed as per sales 66.02% 66.53% 61.87% 60.34% 65.42% 64.47% 101.64%
Percebntage Increase -0.93% 64.47%
Total of Inventory of
Finished Goods & Work
In Progress 8.36 -75.1 -49.86 96.74 -110.12 -110.032 -110.032
% of Revenue from
Operations 0.030% -0.252% -0.159% 0.307% -0.328% -0.312% -0.299%
Average growth of last
5 years -0.080%
Excise duty on sale of
goods 1880.35 1717.65 2258.21 2373.23 642.57 0 0
As a percentage of
Revenue from
Operations
Employee benefits
expenses 930.35 1,178.72 1339.46 1432.49 1583.71 1809.12 1809.12
YoY growth % 13.330% 26.696% 13.637% 6.945% 10.556% 14.233% 0.000%
Average growth of last
5 years 14.233%
Fianance Cost 11.82 11.7 14.61 27.28 30.8 34.77 39.26
YoY growth % -0.756% -1.015% 24.872% 86.721% 12.903% 12.903% 12.903%
Average growth of last
5 years 24.545%
Depreciation and
amortisation expenses 1107.37 540.45 443.25 502.25 574.98 523.9221 574.98

26 | P a g e
YoY growth % -3.01% -51.20% -17.99% 13.31% 14.48% -8.88% 9.75%
Average growth of last
5 years -8.880%
Total Other Expenses 2576.13 3147.08 3411.86 3485.89 3663.79 3846.98 4039.33
YoY growth % 13.734% 22.163% 8.414% 2.170% 5.103%
Average growth of last
5 years 10.317%
Total Expense 24,735.91 26,310.90 26775.49 26911.75 28381.67 27,804.79 27,804.79
As a percentage of
Revenue from
Operations
Profit Before Tax 2,864.10 3,436.89 4,512.37 4,568.39 5,292.10 6,350.52 9,210.34
% of growth in PBT 13.24% 20.00% 31.29% 1.24% 15.84% 20% 25%
Averge PBT in last 5 yrs 16.32%
Tax 758.17 943.15 1274.71 1339.1 1569.93 2085.359 2302.584
% Of sales 26.47% 27.44% 28.25% 29.31% 29.67% 30% 25%
Averge PBT in last 5 yrs 28.23%
Profit After Tax 2,105.93 2,493.74 3,237.66 3,229.29 3,722.17 4,865.84 6,907.75
As a percentage of
Revenue from
Operations 7.74% 8.57% 10.60% 11.46% 11.37% 14.00% 18.75%
Earning Per Share(EPS) 105.2625 125.5887 163.8534 177.58 188.51 243.66 345.91

8.1 Observations

 The company’s Total Renvenue from Operations (Gross) is growing at an

average rate of 5%. The company posted a growth of Revenue from
Operations (Gross) 7% in FY 18 with Rs.33100.94 and is expected to
generated revenue of Rs. 34644.11 in FY19
 The company is consuming an average of 65% of its raw material every
year as a percentage of sales, which means that the company also keeps
some stock with it in case emergency demand from the market
 Interest expenses are increasing at an increasing rate on year on year basis.
The company saw an 13% rise in its interest expenses, which is very less as
compared to last year, which was 87% in FY17
 There was a 16% rise in the Profit after tax, mainly because of reduction in
interest expense.
 The PAT is Rs. 3764.57 cr. which 6% greater than FY17

27 | P a g e
 9. Key Findings
SNO. Ratio 31-Mar- 31-Mar- 31-Mar- 31-Mar- 31-Mar- 31- 31-March-
14 15 16 17 18 March- 20
19
I Profitability Ratio
EBITDA 14.67% 13.64% 16.10% 16.47% 17.67%
Margin 19.50% 23.33%
EBIT 10.59% 11.79% 14.66% 14.84% 16.08%
Margin 18.17% 24.89%
EBT 10.55% 11.75% 14.61% 14.76% 15.99%
Margin 18.27% 25.00%
ROCE 43.25% 38.93% 37.17% 33.50% 34.88%
ROE 37.38% 33.79% 36.81% 34.16% 31.20%

II Liquidity Ratio
Current 1.112755 1.217454 1.2565 1.63684 1.764942
Ratio

III Leverage Ratio

Debt to
Equity
Ratio 0.00 0.01 0.03 0.02 0.02
Interest 336.9958 340.9436 340.1937 187.1195 191.4896
coverage
Ratio
IV Valuation
Ratios
Price to Earning
Ratio
Price to 21.64409 21.0417 17.96362 18.15393 18.8076
Book
Value
8.090679 7.111125 6.612745 6.200613 5.868676

9.1. Observations
a. EBITDA Margin- This ratio states that the operating performance without takining
into consideration the affect of interest expenses, accounting decisions or tax
environments. This helps us to analyze how much cash profit the company has
made in a year relative to its sales.

28 | P a g e
 The company is able to generate enough cash out of its sales. The company is in
a growth trajectory and is and has shown a growth of 2% in FY18. The growth is
mainly because the company is able to generate sales at the rate of 7%.
b. EBIT Margin- The EBIT margin is growing because if the increase in sales and
because of decrease in expenses because of removal of many taxes such as
Excise duty, service tax, VAT etc. The EBIT Margin is growing at an average rate
of 12%. In FY 18 the company posted a growth of 10% from FY17.
c. EBT Margin- The EBT margin has been consistently in growth trajectory. The
company is benefited largely because of implementation of GST which helped to
maintain a common tax structure, timely refund of input tax credit etc.
d. Return on Capital Employed- Capital employed is the total amount of capital that
a company has utilized in order to generate profits. The company’s management
is working with full capacity to use its assets and the decrease in the FY17 and
18 is due impact of demonetization, implementation of BSIV norms and Global
disturbances.
e. Return On Equity- ROE denotes the percentage return a shareholder earns on its
invested capital. The company has maintained an average of 30% which means
that the equity shareholder gets 30% return on the value he has invested.
f. Current Ratio- The current ratio of the company has increase significantly from
FY14-18. This can be mainly because of delayed payment by the debtors. The
problem of delayed payment will reduce because of strict norms of the GST
according to wchich the companies have to file returns in every 3 months.
g. Debt-Equity Ratio- Debt to equity ratio tells us how much debt a company
leverages over equity. This gives us a split of earnings between debt and equity.
This tells how much debt a firm is using for financing the assets relative to
shareholders. The Company has negligible debt-equity ratio

29 | P a g e
PEER COMPARISON

30 | P a g e
1. RATIOS
Hero
Particulars Motorcorp Bajaj Auto TVS Motors
Revenue from
Operations Rs.33100.94 cr Rs.25098.64cr. Rs.16656cr.
EBITDA Margin 17.67% 21.23% 29.89%
EBIT Margin 16.08% 22.49% 7.65%
PAT Margin 11.37% 16.81% 2.76%
ROCE 28.82% 27.63% 45%
ROE 31.20% 20.66% 42%
Current Ratio 2.00 2.25 0.81
P/E Ratio 18.80 18.85 44.76
P/BV Ratio 5.86 3.89 8.87

2. Industry Price To Earning Ratio

Industry P/E Ratio
Endurance Tachnlogy 44.14
Mah Scooters 57.4
Scooters India 0
Atul Auto 18.2
Bajaj Auto 19.6
Tvs Motors 40.76
Hero Motorcorp 18.98
Industry P/E Ratio 28.44

31 | P a g e
3. Observations
 Hero Motocorp has highest sales Revenue from Operations
among the three companies with
Rs.33100.94 cr.
33100.94
25098.64
16656

Hero Motorcorp Bajaj Auto TVS Motors

 Profit after tax margin is

highest for Bajaj Auto with PAT MARGIN
16.81% as compared to
hero motorcorp which has
11.37%, this is mainly due TVS MOTORS 3%

increase in other
expenses, cost of material 16.81%
BAJAJ AUTO
consumed and most
importantly change in
HERO MOTORCORP 11.37%
norms from BSIII to BSIV.

 Hero Motorcorp leads the race for

efficiently using shareholder’s ROCE
investment to generate profits.
The company has 29% of ROCE in TVS Motors,
TVS MOTORS
FY8 as compared with bajaj Auto 24%
which has 27% ROCE and TVS
Bajaj Auto,
Motors has 24%. BAJAJ AUTO
27.63%

Hero
HERO MOTORCORP Motorcorp,
28.82%

0.00% 5.00% 10.00%15.00%20.00%25.00%30.00%

32 | P a g e
  A rising ROE suggests that a
company is increasing its ability ROE
to generate profit without 35.00%
31.20%
needing as much capital. It also 30.00%
indicates how well a company's
25.00%
management is deploying the 20.66%
20.00%
shareholders' capital.
Hero motorcorp has highest with 15.00% 12%
31.20% followed by Bajaj Auto 10.00%
and TVS Motors.
5.00%

0.00%
Hero Motorcorp Bajaj Auto TVS Motors

 The TVS motors is showing an

overvalued P/E when compared
P/E Ratio
with industry P/E. This is mainly 50.00
44.76
45.00
because of increase increase in
40.00
sales. But the investors should be
35.00
cautious about the stock as the 30.00
28.44 28.44 28.44
company has also increased the 25.00 P/E Ratio
18.80 18.85
loan book in FY 18. The Hero 20.00
Indutry P/E
Motorcop and Bajaj Auto are Under 15.00
Valued stock. The investors can buy 10.00
5.00
the undervalued firms as the prices
0.00
of the stock are expected to rise and Hero Bajaj Auto TVS Motors
the and reach an industry P/E. Motorcorp

4. Conclusion
The three companies that are taken are fundamentally strong. The company that is
selected to earn good return on investment is Hero Motorcorp. The Hero leads on all
basic parameters required for the best selection of stock. The company’s P/E ratio is
undervalued, Return on equity is higher and return on capital employed Is also higher.

33 | P a g e
Peer Comparison Based on Forward P/E Ratio

a. Hero Motocorp

Chart Title
8000.00

7000.00

6000.00

5000.00

4000.00

3000.00

2000.00

1000.00

0.00

21-Jun-17
41001.00
41057.00
41109.00
41164.00
41221.00
41278.00
41332.00
41390.00
41444.00
41499.00
41556.00
41612.00
41667.00
41722.00
41781.00
41835.00
41892.00
41955.00
42010.00
42065.00
42123.00
42178.00
42230.00
42289.00
42346.00
42402.00
42459.00
42516.00
42571.00
42628.00
42684.00
42739.00
42795.00
27-Apr-17

16-Aug-17

5-Dec-17
30-Jan-18
27-Mar-18
11-Oct-17
13.00 17.00 21.00 25.00 29.00 33.00 Close Price

Level- Present

CMP 3513.85
Expected P/E of FY 19 243.66
Current P/E Chart as on On 28/06/2018 the company has P/E of
28.06.2018 17.00 17. The projected P/E ratio of the
Target 4142 company of FY19 is 247.66. The target
Growth % 18 of 6-8 months is of Rs.4142.00 from
current market Price Rs.3513.85.

34 | P a g e
Level – As on 31.03.2018
CMP 3513.85 On 31/03/2018 the company has P/E of
Expected P/E of FY 19 243.66 18.14. The projected P/E ratio of the
Current P/E as on company of FY19 is 243.66. The target
31.03.2018 18.14
of 6-8 months is of Rs.44419.00 from
Target 4419
current market Price Rs.3513.85. That is
Growth% 26
26% return on investment.

Level – At 3 years Avg. P/E

CMP 3513.85 The Expected P/E of the company is for FY19
Expected EPS FY19 243.66 is 243.66. The growth on investment is
3Yrs Avg P/e 18.67 expected to be at 30%. The investors with long
Target 4548 term horizon should invest in the stock.
Growth % 29

Level- At 4 years Avg. P/E

CMP 3513.85
Expected P/E of FY 19 243.66
The Expected P/E of the company is for FY19
4Yrs Avg P/e 19.55
is 243.66. The growth on investment is
Target 4763
expected to be at 36%. The investors with
Growth% 36
long term horizon should invest in the stock for
at least 4 years.

Level- At 5 Years Avg. P/E

The investors who are conservative and

CMP 3513.85 expect a proper return over a long term
Expected P/E of FY 19 243.66 horizon for five years should invest. The
5 Yrs Avg P/e 19.59 company is expected to generate 36%
Target 4774
Growth % 36

35 | P a g e
The P/E ratio of Hero Motorcop as on 28.06.2018 based on trailing twelve months(TTM)
EPS which was 193.76 is 17. The company will be able earn 20-25% return in six to
eight months.

The company’s P/E ratio is showing growth rate of 36% on 5 Year average P/E is
showing positive view for the investor which is willing to invest in the market for long
term basis.

The company on an average is delivering 30-40% return based on forward P/E ratio. So
it will be a healthy investment idea.

b. Bajaj Auto
Level 1- 1 Year Avg. P/E ratio

CMP 2718.2 The company is giving a 9% return on 1 year

Expected EPS FY19 143.42 average P/E which is the average of EPS of one year
1Yrs Avg P/e 20.73 on TTM basis. The CMP is Rs. 2718.2 and Expected
to grow to Rs. 2974 by the end of the year.
Target 2974
Growth % 9

Level 2- 2 Year Avg. P/E Ratio

The company is giving a 12% return on 2 year

CMP 2718.2 average P/E which is the average of EPS of one
Expected EPS FY19 143.42 year on TTM basis. The CMP is Rs. 2718.2 and
2Yrs Avg P/e 21.24 Expected to grow to Rs. 3047 by the end of the
Target 3047 year. This would be an aggressive move to
Growth % 12 invest in this stock for a horizon of 2 years.

Level 3- 3 year Avg. P/E ratio

CMP 2718.2 The company is giving a 6% return on 2

year average P/E which is the average
Expected EPS FY19 143.42
of EPS of one year on TTM basis. The
3Yrs Avg P/e 20.12 CMP is Rs. 2718.2 and Expected to
Target 2886 grow to Rs. 2886 by the end of the year.
Growth % 6 This would be an aggressive move to
invest in this stock for a horizon of 3 yrs.

36 | P a g e
Level 4- 4 Yrs Avg. P/E

CMP 2718.2
The company is giving a 10% return on
Expected EPS FY19 143.42 4 year average P/E which is the average
4Yrs Avg P/e 20.80 of EPS of one year on TTM basis. The
Target 2983 CMP is Rs. 2718.2 and Expected to
grow to Rs. 2983 by the end of the year.
Growth % 10

Level 5- 5 Yrs Avg. P/E

CMP 2718.2 The company is giving a 6% return on 5

Expected EPS FY19 143.42 year average P/E which is the average
5Yrs Avg P/e 20.17 of EPS of one year on TTM basis. The
Target 2893 CMP is Rs. 2718.2 and Expected to
Growth % 6 grow to Rs. 2893 by the end of the year.

Level- As on 31/03/2018

The company is giving an negative 4%

CMP 2718.2 return on 31.03.2018, average P/E
Expected EPS FY19 143.42 which is the average of EPS of one year
P/E on 31.03.2018 18.21 on TTM basis is 143.42. The CMP is
Target 2612
Rs. 2718.2 and will reap a loss of Rs.
Growth % -4
106.20 by the end of the year.

37 | P a g e
 Chart Title
4000.00
3500.00
3000.00
2500.00
2000.00
1500.00
1000.00
500.00
0.00
1-Apr-13 1-Apr-14 1-Apr-15 1-Apr-16 1-Apr-17 1-Apr-18

15 18 21 24 27 30 Close Price

The Current P/E ratio is showing a negative return in next 6-8 months but the company
has a positive view on 1Year P/E showing 9% return, 2 year P/E showing 12% return.
The investor is at an advantage for 1 year to 5 year horizon of investment.

The company on an average will give 5-6% return over a period of 1year, 2year to 5
years. The company is a is slow moving company in the industry, however that
company has been able to generate profit because of increase in sales in the coming
year because of positive macroeconomic results and other global factors

38 | P a g e
 c. TVS Motors
Level 1 – 1 yr average P/E

CMP 556 The company is giving an 35% return on 1

Expected EPS FY19 16.94 Year average P/E which is the average of
1Yrs Avg P/e 44.39 EPS of one year on TTM basis is 16.94. The
Target 752
CMP is Rs. 556 and will lead to a profit of Rs.
Growth% 35
196 by the end of the year

Level 2 – 2 year average P/E

CMP 556 The company is giving an 27% return on 2

Expected EPS FY19 16.94 Year average P/E which is the average of
2Yrs Avg P/e 41.53 EPS of one year on TTM basis is 16.94. The
Target 703
CMP is Rs. 556 and the target is Rs.703
Growth% 27
providing a profit of Rs.147 over a period of
two years
Level 3- 3 Year average P/E

CMP 556 The company is giving an 8% return on 3

Expected EPS FY19 16.94 Year average P/E which is the average of
3Yrs Avg P/e 35.47 EPS of one year on TTM basis is 16.94. The
Target 601
CMP is Rs. 556 and the target is Rs.601
Growth% 8
providing a profit of Rs.147 over a period of
two years
Level 4 – 4 Year average P/E

CMP 556 The company is giving an 5% return on 4

Expected EPS FY19 16.94 Year average P/E which is the average of
4Yrs Avg P/e 34.40 EPS of one year on TTM basis is 16.94. The
Target 583
CMP is Rs.556 and the target is Rs.583
Growth% 5
providing a profit of Rs.27 over a period of
two years.
Level 4 – 4 Year average P/E

CMP 556 The company is giving an 5% return on 4

Expected EPS FY19 16.94 Year average P/E which is the average of
5 Yrs Avg P/e 29.90 EPS of one year on TTM basis is 16.94. The
Target 507 CMP is Rs.556 and the target is Rs.583
Growth% -9 providing a profit of Rs.27 over a period of
two years.

39 | P a g e
 Chart Title
4000
3500
3000
2500
2000
1500
1000
500
0
1-Apr-13 1-Apr-14 1-Apr-15 1-Apr-16 1-Apr-17 1-Apr-18

4 15 26 37 48 60 Close Price

The P/E ratio chart is showing 35 % return on one year average P/E and also
27% in 2 year which is a positive indication for the investors who believe that
long term investing can increase their wealth. The company is fundamentally
strong but lacks in production capacity and sales distribution.

40 | P a g e
Comparison Of Companies

1. On One Year Average P/E Ratio Growth%

Hero Motorcop is highest giving
36% return followed by TVS BAJAJ AUTO 9%
motors by 35% and lastly the
Bajaj Auto. HERO MOTORCOP 36%
On this basis Hero Motorcop is
selected. TVS MOTORS 35%

0% 10% 20% 30% 40%

TVS Motors Hero Motorcop Bajaj Auto

Growth% 35% 36% 9%

2. On 2 Year Average P/E Ratio Growth %

Hero Motorcop is highest giving
40.00%
37% return followed by Bajaj Auto 35.00%
by 27% and lastly the TVS Motors 30.00%
Axis Title

25.00%
On this basis Hero Motorcop is 20.00%
selected. 15.00%
10.00%
5.00%
0.00%
Hero
TVS Motors Bajaj Auto
Motorcop
Growth % 12.09% 36.93% 26.53%

3. On 5 Year average P/E Ratio

Growth %
Hero motorcorp is the best stock
for the investor, and it is expected Bajaj Auto
that he will reap approx. 35%
Hero Motorcop
increase in his investment in 5Year
TVS Motors
horizon.
-20.0% -10.0% 0.0% 10.0% 20.0% 30.0% 40.0%

TVS Motors Hero Motorcop Bajaj Auto

Growth % 6.4% 35.7% -8.9%

41 | P a g e
Conclusion

Hero Motorcorp is the company that is selected to provide 30-40 % return on 1year, 2
Year to 5Year. The company’s management has been focusing on sales not only in
Northern and Eastern part of India but also Western and Southern part where the
company is growing at a slower rate. The company is foreseeing a double digit growth
in sales in 2018-19, due to macro- economic factors such asexpected growth in GDP of
7.4% in FY 19, above normal monsoon which will help to increase the rural presence
etc.

42 | P a g e
PHASE -2

43 | P a g e
 Report on Buy Back as per SEBI Regulation, 1998 with the prospects of
INFOSYS

I. Buy Back Regulation

The companies are empowered to purchase its own securities by virtue of section 68 to
70 of the Companies Act, 2013. A company can buy back its own shares or other
specified securities by any of the following Method:

a. From existing shareholder on a proportionate basis through the tender offer:

b. From the open market through-
(i) Book- building process,
(ii) Stock Exchanges:
c. From odd lot holders

Provide that no buy back of any kind of share or other specified situations shall be made
out of the proceeds or earlier issue of the same kind of shares or same kind of other
specified securities.

No company shall buy back its own shares unless

a. The buyback is authorized by articles

b. A special resolution has been passed in the general meeting of the authorizing buy
back.
c. The buy back is less than 25% of the total paid up capital and free reserves of the
company.
d. The rate of Debt-Equity ratio shall remain 2:1 and not not less than that after the buy
back
e. All share of the buy back should be fully paid up
f. The Buy back of shares is in accordance with the regulation of the SEBI.

General Obligation:

a. shall contain true, factual and material information and shall not contain any misleading
information in all the documents to Buy Back
b. the company shall pay the consideration only by way of cash

II. Schedule of Activities & Process Chart

1. Schedule Of Activities

44 | P a g e
Sno. Process Days Remarks(if any)
1 Special Resolution
2 Board resolution Within 7 days of
special resolution
3 Publish in Newspaper Within 2 days of In one English,
Board resolution Hindi and Regional
newspaper of the
state where the
company’s
headquarters are
registered.
4 Draft Letter of Offer, Fees and Within 5 days of
Letter of solvency Publish of
Newspaper
5 Comment on the draft letter by the Within 7 days of
board receipt of Draft
letter of offer
6 Dispatch the letter to the security Within 5 working
holder willing to participate in Buy days of receipt of
Back comment from
board for the buy
back
7 Open Offer Not later than five
working days
8 Close Offer After 10 days of
open offer
9 Payment to the selected Within 7 days of
shareholder in buy back Close Offer date
10 Extinguishment of certificate Within 15 days of
Close of offer date

45 | P a g e
 2. Process Chart 1. English
Publish in Newspaper
SPECIALRESO SPECIAL
Newspaper 2. Hindi
LUTION With in 7 days to RESOLUTIO
Within 2 Newspaper
the board & stock N working days
Exchanges 3. Regional
Board Newspaper
Resolution where the
Within 5 company is
working Days Headquartered

Extinguishment of Draft Letter Of Offer with the Board

certificate +
Fees
+
Letter Of Solvency

Within 15 Days
Within 7 working days

Payment to
Shareholders selected
Board Provides Comment
for BUYBACK

Within 5 working days

Within 7 Days

For a period of 10 days Dispatch the letter to the security holder

willing to participate in Buy Back
Close Offer
Not later than 5
working days

Open Offer

46 | P a g e
III. Pricing of buy back offer price
There are two popular ways in which Buy Back is taken place:
a. Tender Offer.
In this method, the company fixes a buy-back price and puts the offer. In this method,
the maximum price and the maximum shares it will accept will be clearly mentioned.
Promoters cannot generally participate in this method. Existing investors can voluntarily
tender their shares by specifying the price and quantity at which they want to tender.
When more than the desired number of shares are tendered, the company will be
accept on a proportionate basis or such other process.
b. Open Market Purchase
This is the simplest process since the company can buy the shares at the prevailing
market price by buying them on the stock exchange through their brokers. The company
is at its liberty to buy the shares from the market at the price it wants and the quantity at
which it wishes to buy. Further, the company does not buy all the shares at once. It
buys in several tranches at different prices spread over a period of time. The transaction
will be done like a typical buy / sell transaction.

IV. Size of the buy back

The buy back offer cannot be more than 25% of Paid up capital and Free reserves
(including Securities Premium) of the company.

V. Categorization of share holder

Category
Reserved category of small Non- Institution Public shareholder holding share
shareholder capital up to Rs.2 Lacs
General shareholder Non- Institution Public shareholder holding share
capital more than Rs.2 Lacs

VI. Reservation for small shareholder

Fifteen per cent of the number of securities the company proposes to buy back or the
number of securities entitled as per their shareholding, whichever is higher, shall be
reserved for small shareholder

47 | P a g e
VII. Acceptance probability or ratio
Not all shares tendered in the buy back process would get accepted by the company.
Since proportionate basis is used, Acceptance Ratio tells how many of the available
shares could get accepted.

Let us see the example of INFOSYS buy-back. INFOSYS is proposing to buy back
11.30 crore shares at ₹1150 per share. There are 200 crore shares held by the public.
This accounts to roughly 5 percent of the public holding. So, only 5 shares out of every
100 shares would get through the buy back process. Of course, not all public
shareholders will offer their shares in the buy-back.

VIII. How to tender share by shareholder under buy back – procedure

An eligible shareholder holds Equity shares in the form of dematerialized form. He has
to follow the following procedure:

a. He has to indicate the seller member for the details of Equity Shares they intend to
tender under the Buyback.
b. The Seller Member will be required to place a bid on behalf of the Eligible Shareholders
who wish to tender Equity Shares in the Buyback using the acquisition window of the
Indian Stock Exchanges. Before placing the bid, the Eligible Shareholder will need to
transfer the tendered Equity Shares to the Clearing Corporation by using the settlement
number through the early pay-in mechanism as prescribed by the Depositories. This
shall be validated at the time of order/bid entry. The details of the settlement number for
the Buyback will be provided in a separate circular which shall be issued at the time of
issue opening by Clearing Corporation.
c. Upon placing the bid, the Seller Member will provide a Transaction Registration Slip
(“TRS”) generated by the Exchange bidding system to the Eligible Shareholder. TRS
will contain the details of order submitted like Bid ID No., Application No., DP ID, Client
ID, No. of Equity Shares tendered etc.
d. Eligible Shareholders shall also provide all relevant documents, that are necessary to
ensure transferability of the Equity Shares in respect of the Tender Form to be sent.
Such documents may include (but not be limited to):
(i) Duly attested power of attorney, if any person other than the Eligible Shareholder
has signed the Tender Form;
(ii) Duly attested death certificate and succession certificate/ legal heirship
certificate/court approved scheme of merger/ amalgamation for a company, in case any
Eligible Shareholder has expired; and
(iii) In case of companies, the necessary certified corporate authorizations (including
board and/or general meeting resolutions).
e. The Eligible Shareholders will have to ensure that they keep the DP Account active.

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f. Eligible Shareholders who intend to participate in the Buyback should consult their
respective Seller Members for payment to them of any cost, charges and expenses
(including brokerage) that may be levied by the Seller Member upon the selling Eligible
Shareholders for tendering Equity Shares in the Buyback (secondary market
transaction). Whether a Seller Member assesses any such costs, charges or expenses
will depend on the commercial arrangement between the Eligible Shareholder and their
respective Seller Member. Accordingly, the Buyback consideration received by the
selling Eligible Shareholders from their respective Seller Members, in respect of
accepted Equity Shares, could be net of such costs, charges and expenses (including
brokerage) and the Company accepts no responsibility to bear or pay such additional
cost, charges and expenses (including brokerage) incurred solely by the selling Eligible
Shareholders.
g. Clearing Corporation shall settle the trades by making direct funds payout to the Eligible
Shareholders and the Seller Members must issue a contract note.

COMPANY ANALYSIS
BUYBACK of Shares- Infosys

About the company`

Infosys is a leading provider of consulting, technology, outsourcing and next-generation

services. The Company is a global leader in technology services and consulting. It
enables its clients in 45 countries to create and execute strategies for their digital
transformation. From engineering to application development, knowledge management
and business process management, it helps its clients find the right problems to solve,
and to solve these effectively. Its team of more than 1,98,000 innovators as of June 30,
2017, across the globe, is differentiated by the imagination, knowledge and experience,
across industries and technologies that it brings to every project it undertakes.

The Company’s business solutions include:

 Consulting Services
 Business Application Services: Enterprise System implementation and services, Digital
solutions and services, Data Analytics, Business Process Management
 Technology Services: Application Development, Modernization & Management, Cloud
Infrastructure and Security, Engineering Services, Enterprise Mobility, Internet of Things
(IoT), Software Testing
 Outsourcing Services: Application Outsourcing, Business Process Outsourcing
including
 Customer Service, Finance & Accounting, Human Resources, Sourcing & Procurement

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 Process Outsourcing
 Products and platform solutions include Infosys Nia, the Edge suite of products, Skava,
Panaya and FinacleTM, an industry-leading universal banking solution

Process Followed by Infosys for Buy Back of securities:

1. Passing of a Special Resolution by the board of directors

 The company passed a Special resolution regarding the buy-back of shares.
 The company accorded that for the buyback by the Company of its fully paid-up equity
shares of face value of ₹ 5/- each (“Equity Shares”), from the equity shareholders of the
Company as on a record date (the “Record Date”), for an amount not exceeding ₹
13,000 Crores (Rupees Thirteen Thousand Crores only) (hereinafter referred to as the
“Buyback Offer Size”).
 The Buyback Offer Size is 20.51% of the total paid-up equity capital and free reserves
of the Company as per the latest audited Balance Sheet as on June 30, 2017. The
buyback offer will comprise a purchase of up to 11,30,43,478 Equity Shares,
aggregating to 4.92% of the paid-up equity share capital of the Company at a price of ₹
1,150/- (Rupees one thousand One hundred and Fifty Only) per Equity Share on a
proportionate basis through the “Tender Offer” route (hereinafter referred to as the
“Buyback”), in accordance and consonance with the provisions contained in the
Buyback Regulations and the Act.
 The company bought back from Securities premium account and free reserves.
 The Company did Buy back of Equity Shares from the shareholders on a proportionate
basis under the Tender Offer route, provided that 15% of the number of Equity Shares
which the Company proposes to buy back or the number of Equity Shares entitled as
per the shareholding of small shareholders, as defined in the Buyback Regulations
(“Small Shareholders”), as of the Record Date, whichever is higher, shall be reserved
for Small Shareholders.
 The company appointed Kotak Mahindra Capital Company Limited and J.P. Morgan
India Private Limited be appointed as the joint merchant bankers for the proposed
Buyback.
 The Company shall not issue and allot any Equity Shares or other specified securities
including by way of bonus, till the date of closure of this Buyback
 The Company shall not raise further capital for a period of one year from the closure of
Buyback offer except in discharge of its subsisting obligations
 Borrowings from banks and financial institutions, if any, will not be used for the Buyback

2. Public Announcement

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 The company has published the details of Buy back offer in in one English, Hindi and
regional newspaper where the headquarters of the company is located i.e. Karnataka.
[Annexure B]

3. Reason for Buy Back-

As part of the Capital Allocation Policy, the Company’s Board had identified an amount
of up to ₹ 13,000 crore (approximately US$ 2 billion based on USD / INR exchange
rate as on March 31, 2017) to be paid out to shareholders during financial year 2018.
The Buyback is being undertaken by the Company in line with the Capital Allocation
Policy of the Company after taking into account the strategic and operational cash
needs of the Company in the medium term. The Buyback is being undertaken for the
following reasons:
(a) The Buyback will help the Company to return surplus cash to its shareholders in
proportion to their shareholding, thereby enhancing the overall returns to shareholders;
(b) The Buyback is generally expected to improve Return On Equity and Earnings Per
Share by reducing the equity base.
(c) The Buyback, which is being implemented through the Tender Offer route would
involve allocation to the Small Shareholders the higher of: (a) the number of Equity
Shares entitled per their shareholding; or (b) 15% of the number of Equity Shares to be
bought back, as per Regulation 2(1)(Ia) of the Buyback Regulations. The Company
believes that this reservation for small shareholders would benefit a large number of the
Company’s public shareholders, who would be classified as “Small
Shareholders”
(d) The Buyback gives an option to the shareholders of the Company, either to
participate and get cash in lieu of Equity Shares to be accepted under the Buyback offer
or not to participate and enjoy a resultant increase in their percentage shareholding in
the Company following the Buyback offer, without additional investment as a result of
decrease in the paid-up Equity Share Capital. ASDC

4. Buy Back Price

The company opted for book building process for deciding the price of Buy back offer.
The Company proposed to buy back up to 11,30,43,478 Equity Shares from all the
Eligible Shareholders, on a proportionate basis (subject to the reservation for Small
Shareholders), through the Tender Offer route at a price of ₹ 1,150/- (Rupees One
Thousand One Hundred and Fifty only) per Equity Share, payable in cash for an
aggregate amount of up to ₹ 13,000 Crore/- (Rupees Thirteen Thousand Crore only)
(being less than 25% of the total paid-up equity capital and free reserves of the
Company as per the audited standalone financial statements of the Company as on
June 30, 2017). The maximum number of Equity Shares proposed to be bought back
represents 4.92% of the total paid-up equity share capital of the Company.

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5. Schedule of Activities
Activity Schedule Of Activities
Date Day
Date of Board Meeting 19/08/2017 Saturday
approving the proposal
for the Buyback
Date on which the result 09/08/2017 Monday
of the postal ballot
through which the
Shareholders approved
the Buyback was
declared
Date of publication of the 10/01/2017 Tuesday
Public Announcement for
Buyback in
Newspapers
Record Date for 01/11/2017 Wednesday
determining the Buyback
Entitlement and the
names of
Eligible Shareholders
BuyBack Opens on 30/11/2017 Thursday
BuyBack Closes on 14/12/2017 Thursday
Last date of receipt of 18/12/2017 Monday
completed Tender Forms
and other specified
documents including
physical share
certificates by the RTA*
Last date of verification 22/12/2017 Friday
by Registrar
Last date of providing 22/12/2017 Friday
Acceptance of tendered
Equity Shares to the
Indian
Stock Exchanges by the
Registrar
Last date of settlement of 26/12/2017 Tuesday
bids / payment of
consideration by the
clearing
corporations^
Last date of dispatch of 26/12/2017 Tuesday
share certificate(s) by

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 RTA / return of
unaccepted
demat shares by Indian
Stock Exchanges to
Seller Member / Eligible
Shareholder
Last Date of 02/01/2018 Tuesday
Extinguishment of Equity
Shares

6. Buy Back Entitlement

Category Entitlement Ratio of Buy Back

Reserved Category 23 Equity Shares out of every 81 fully paid up Equity
shares held on the Record Date
General Category 7 Equity shares out of every 163 fully paid up Equity
shares held on the Record date

7. Effect of Buy Back on the Financial of the company

Pre Buyback Situation
Share Capital Pre-Buy Back(Rs. In
crores)
Authorised Share Capital 1200
2,40,00,00,000 Equity shares of face value ₹5/ each
Issued, Subscribed and Paid-Up Share Capital 1148
2,29,69,93,267 fully paid-up Equity Shares of ₹5/-
each

Post Buyback Situation

Share Capital Post Buyback(₹ in
crores)
Authorised Share Capital 1200
2,40,00,00,000 Equity Shares of face value ₹5/- each
Issued, Subscribed and Paid-Up Share Capital 1092
2,18,39,49,789 fully paid-up Equity Shares of ₹5/-
each

The shareholding pattern of the Company as on the Record Date, i.e., November 1,
2017 as well as post completion of the Buyback is as shown below:

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 Particulars Number of % of No. of Equity % of
Equity existin Shares Post Share
Shares g Buyback Capital
Share post
Capital Buybac
k
Promotors 292806199 12.75 282142529 12.92
Foreign Investors 1,16,85,34,51 50.87
(OCBs/FIIs/NRIs/Nonreside 9
nts/
Non-domestic 1901807260 87.80
companies/ADRs)
Indian Financial Institutions/ 50,52,82,194 22.00
Banks/Mutual Funds/Govt.
Companies
Public including other 33,03,70,355 14.38
Bodies
Corporate
Total 2,29,69,93,26 100 218,39,49,78 100
7 9

* Assuming full acceptance of Equity Shares in the Buyback in the ratio of their
entitlement and acceptance of Promoters and Promoter Group shares based on their
intention or entitlement, whichever is lower.

Excerpts from the Statement of Profit and Loss Account

Period Ending June 30, March 31, March 31, March 31,
2017 2017 2016 2015
Period 3 months 12 months 12 Months 12 Months
Income from 17078 68484 62441 53319
Operations
Other Income 814 3080 3123 3430
Total Income 17892 71564 65564 56749
Total Expenses 12517 49880 45362 38448
excluding
Interest,
Depreciation,
Tax &
Extraordinary
items
Interest 0 0 0 0
Depreciation 450 1703 1459 1017
Profit before 4925 19981 18743 17284
Tax

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 Share in loss of (71) (30) (3) (1)
associate and
write down of
investment in
associate
Provision for 1371 5598 5251 4911
tax (incl.
deferred tax)
Profit after tax 3483 14353 13489 12372
Other 65 (278) 291 NA
comprehensive
income net of
tax
Total 3548 14075 13780 NA
Comprehensive
Income

Excerpts from the Balance Sheet and Key Financial Ratios

As On June 30,2017 March 31, March 31, March 31,

2017 2016 2015
Equity share 1148 1148 1148 1148
Capita;
Reserves & 66208 66869 59934 47794
Surplus
Net Worth/ 67356 68017 61082 48068
Shareholders
Equity
Total Debt Nil Nil Nil Nil
Key
Financial
Ratio
Earning Per 14.87 60.16 55.26 102.33
Share (Rs.)
(Basic)
Book value 293.24 296.12 265.93 418.54
Per share
(Rs.)
Debt- Equity NA NA NA NA
Ratio
Return On 20.86 20.32 20.78 25.31
Net Worth
(%)

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 Salient financial parameters consequent to the Buyback based on the standalone
audited results as on June 30, 2017 are as follows:
Particulars Pre Buyback Post Buyback
Net Worth ( in Rs. Crore) 67356 54356
Return on Net Worth/ 20.86 25.85
Return on Equity (%)b
Basic Earnings per 14.87 15.64
Share (₹)
Book Value per share 293.24 248.89
(Rs.)
P/E (Rs.) 15.30 14.54
Total Debt To Equity NA NA

8. Effect on Share Price on NSE during Buy Back Offer

The Stock price on 21st August 2017 was `873.40 which shoot up to `1013.10 on 14th
December which was the closing date of Buy Back Tender offer.

Conclusion

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The company in a strategic move allocated its `1300 crores via buy back which it had to
distribute to the shareholders of the company. The response to this buy back was
tremendous shareholders point of view as well as company’s point of view. The
company received more than 100% response from small shareholders and from general
shareholders it got more than 500%
Sr. Category Of No. of No. of Total Valid %
No. Shareholders Equity valid Bids Equity Response
Shares Shares
reserved in Tendered
Buyback
1 Reserved category 6956522 392945 30371128 179.11
for Small
Shareholders
2 General category 96086956 43101 534724709 556.50
of other
Shareholders
Total 113043478 436046 565095837 499.89

The shareholding pattern of the Company as on the Record Date, i.e., November 1,
2017 as well as post completion of the Buyback is as shown below:
Particulars Number of % of No. of Equity % of
Equity existin Shares Post Share
Shares g Buyback Capital
Share post
Capital Buybac
k
Promotors 292806199 12.75 282142529 12.92
Foreign Investors 1,16,85,34,51 50.87
(OCBs/FIIs/NRIs/Nonreside 9
nts/
Non-domestic 1901807260 87.80
companies/ADRs)
Indian Financial Institutions/ 50,52,82,194 22.00
Banks/Mutual Funds/Govt.
Companies
Public including other 33,03,70,355 14.38
Bodies
Corporate
Total 2,29,69,93,26 100 218,39,49,78 100
7 9

* Assuming full acceptance of Equity Shares in the Buyback in the ratio of their
entitlement and acceptance of Promoters and Promoter Group shares based on their
intention or entitlement, whichever is lower.

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The company’s EPS was increased from 14.87 to 15.84. The Book Value of the
company was decreased from 293.24 to 248.89. The P/E ratio was also reduced to
14.54 from 15.30.

References:
1. Annual Reports of Hero Motorcorp, Bajaj Auto and TVS Motors
2. https://www.business-standard.com/article/current-affairs/monsoon-2018-
forecast-india-normal-rainfall-predicts-met-dept-farmers-relief-all-you-need-to-
know-118041600303_1.html
3. https://oilprice.com/Energy/Energy-General/Why-This-Oil-Crisis-Is-Different-To-
2008.html
4. https://www.livemint.com/Opinion/TvcFydQcN6KEFkvdW7BprM/Indias-
burgeoning-middle-class.html
5. http://mospi.nic.in/135-government-final-consumption-expenditure
6. http://statisticstimes.com/economy/sectorwise-gdp-contribution-of-india.php
7. http://www.inflation.eu/inflation-rates/india/historic-inflation/cpi-inflation-india.aspx

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