Description
Financial analysis refers to an assessment of the viability, stability and profitability of a business, sub-business or project.
“FINANCIAL EVALUATION AND COMPETITIVE ANALYSIS OF L &T”
A PROJECT REPORT Submitted to the SRM SCHOOL OF MANAGEMENT
In partial fulfillment of the requirements For the award of the degree Of MASTER OF BUSINESS ADMINISTRATION BY PHILIPS THAMPI Register No.35080381
Under the Supervision and Guidance of Prof. R. SHUNMUGAN
SCHOOL OF MANAGEMENT
SRM UNIVERSITY
KATTANKULATHUR
CHENNAI –603
203
MAY 2010
SRM SCHOOL OF MANAGEMENT SRM UNIVERSITY KATTANKULATHUR CHENNAI-603203
CERTIFICATE
Certified that this project report titled “FINANCIAL EVALUATION AND COMPETITIVE ANALYSIS OF L &T” is the bonafide work of Mr. PHILIPS THAMPI who carried out the research under my supervision. Certified further, that to the best of my knowledge the work reported herein does not form part of any other project report or dissertation on the basis of which a degree or award was conferred on an earlier occasion on this or any other candidate.
Signature of the Supervisor
Signature of the HOD
ACKNOWLEDGEMENT
I offer my sincere thanks to our Dean, Dr. (Mrs.) JAYASHREE SURESH, SRM UNIVERSITY Kattankulathur - 603203 for giving us an opportunity to undergo a Project in “FINANCIAL EVALUATION AND COMPETITIVE ANALYSIS OF L &T”. I wish to express my gratitude to Prof. R. SHUNMUGAN for providing me the valuable advices for the project. I sincerely thank Mr. R. MANOMOHANAN, CEO, MCSL who has provided me valuable information and resources for this study. I express my gratitude to Mr. S ANANTHA SUBRAHMANIAN, Head, Finance & Accounts, Infrastructure Operating Company, L&T ECC Division who has provided me the valuable facilities for the project. I am sincerely indebted to Ms. NIRANJANA C, Joint General Manager, Finance & Accounts, Infrastructure Operating Company, L&T ECC Division & to Mr. VIKRAM RANGANATHAN, Assistant Manager, Finance & Accounts, Infrastructure Operating Company, L&T ECC Division for his valuable advice and timely help throughout this work. And also my sincerely thankful to Mr. SANJAY SHARMA, Human Resource (Head Talent Acquisition) & to Mr. K. KRISHNA KUMAR, Assistant Manager-Personnel in carrying out the project study. I am so grateful to all the employees L & T ECC who have supported me in carrying out the project study.I am grateful to all the faculty members of MBA department, my friends and all others for their support in making this endeavor a success.I thank the almighty God for his blessings throughout the project study.I wish to thank my parents for their encouragement and support for doing this project.
PHILIPS THAMPI
INDEX
CHAPTER 1 2 3 4
TITLE INTRODUCTION OBJECTIVE & SCOPE REVIEW OF LITERATURE METHODOLOGY OF STUDY INDUSTRY PROFILE COMPANY PROFILE
Balance Sheet & Profit/ Loss Account of:L&T IVRCL PUNJ LLYOD
PAGE No. 1 4 6 12
5 6
15 20
7
COMPETITIVE ANALYSIS & INTERPRETATION SWOT ANALYSIS FINDINGS SUGGESTIONS CONCLUSION GLOSSARY BIBLIOGRAPHY
40
8 9 10 11 12 13
51 53 57 59 61 64
Chapter – 1
Introduction
INTRODUCTION
In the era of globalization the utilization of finance is considered as the most important function of an organization. The firms are facing a stiff competition from the whole market, so the inflow and outflow of funds will be manage well. Finance is considered as the life blood of an organization. The management of sources and application of funds will be done carefully. Every organization is trying to earn the maximum profit by the effective investment of funds. Finance is one of the most important aspects of business management. Without proper financial planning an enterprise is unlikely to be successful. Managing money (a liquid asset) is essential to ensure a secure future, both for the individual and an organization. Financial analysis is the process of using financial statements to enable the users to take economic and investment decisions. Managers use accounting information to ensure that the enterprise is on the right direction and if not, take decisions to put it on the right track. Financial analysis is the process of identifying the financial strengths and weakness of a firm by properly establishing relationships between the items of Balance Sheet and Profit and Loss Account. Analysis is the process of critically examining in detail accounting information given in the financial statements. Analyzing financial statement is a process of evaluating relationship between component parts of financial statements to obtain a better understanding of firm’s position and performance. The main aim of the financial statement analysis is to find out the profitability and financial position of the firm. There are various methods used in analyzing financial statements such as Ratio analysis, Comparative statements, Trend analysis, Common statements, Fund flow statements and Cash flow statements. The purpose of financial analysis is to diagnose the information contained in financial statements so as to judge the profitability and financial soundness of the firm.
The techniques of financial analysis serve as a tool for the management in determining the impact of financial decisions on financial conditions and the profitability of the enterprise. This can be used by the financial manager as the basis to plan future financial requirements by means of forecasting
and budgeting procedures. With the help of tools of financial manager can rationalize his decision and reach the goal. Financial analysis is helpful in assessing the financial position and profitability of a concern. This is done through comparison by ratios for the same concern over a period of years; or for one concern against another; or for one concern against the pre determined standards. Accounting ratios calculated for a number of years show the trend of the change of position. That is whether the trend is upward or downward or static.
The importance of financial statement analysis is as follows: 1. 2. 3. 4. To judge the present and future earning capacity or profitability of the concern. To judge the operational efficiency of the concern. To judge the short term and long term solvency of the concern. To help in assessing developments in the future by making forecasts and preparing budgets.
Chapter – 2
Objective & Scope of Study
2.1 Primary Objective:
1. The main aim of the study is to evaluate the competitive analysis of L&T with other two competitive companies IVRCL & PUNJ LLYOD.
2.2 Secondary Objective:
1. To analyze the status of the company with the past three years. 2. To find the Current Ratio, liquidity, profitability position & EPS of the company for three years. 3. To analyze the all the above analysis with the competitive companies for past three years.
2.3 SCOPE OF THE STUDY Competitive analysis is one the essential function in every organization for the effective utilization of resources, to know the standard and also the position of the company. The analysis the management decisions regarding the investment policies and also for what all things the company is lacking. Scope of the study is limited to the Competitive Analysis, the accounting years 2006-07 to 2008-09 have been taken as base. The process of Competitive Analysis involves the market position, the standard and the other things like rank of the company while comparing with the competing companies.
Chapter – 3
Review of Literature
Competitor analysis
Competitor analysis in marketing and strategic management is an assessment of the strengths and weaknesses of current and potential competitors. This analysis provides both an offensive and defensive strategic context through which to identify opportunities and threats. Competitor profiling coalesces all of the relevant sources of competitor analysis into one framework in the support of efficient and effective strategy formulation, implementation, monitoring and adjustment. Given that competitor analysis is an essential component of corporate strategy, it is argued that most firms do not conduct this type of analysis systematically enough. Instead, many enterprises operate on what is called “informal impressions, conjectures, and intuition gained through the tidbits of information about competitors every manager continually receives.” As a result, traditional environmental scanning places many firms at risk of dangerous competitive blindspots due to a lack of robust competitor analysis. Competitor array One common and useful technique is constructing a competitor array. The steps include:
• • • • •
Define your industry - scope and nature of the industry Determine who your competitors are Determine who your customers are and what benefits they expect Determine what the key success factors are in your industry Rank the key success factors by giving each one a weighting - The sum of all the weightings must add up to one.
• •
Rate each competitor on each of the key success factors Multiply each cell in the matrix by the factor weighting.
Competitor profiling The strategic rationale of competitor profiling is powerfully simple. Superior knowledge of rivals offers a legitimate source of competitive advantage. The raw material of competitive advantage consists of offering superior customer value in the firm’s chosen market. The definitive characteristic of customer value is the adjective, superior. Customer value is defined relative to rival offerings making competitor knowledge an intrinsic component of corporate strategy. Profiling facilitates this strategic objective in three important ways. First, profiling can reveal strategic weaknesses in rivals that the firm may exploit. Second, the proactive stance of competitor profiling will allow the firm to anticipate the strategic response of their rivals to the firm’s planned strategies, the strategies of other competing firms, and changes in the environment. Third, this proactive knowledge will give the firms strategic agility. Offensive strategy can be implemented more quickly in order to exploit opportunities and capitalize on strengths. Similarly, defensive strategy can be employed more deftly in order to counter the threat of rival firms from exploiting the firm’s own weaknesses. Clearly, those firms practicing systematic and advanced competitor profiling have a significant advantage. As such, a comprehensive profiling capability is rapidly becoming a core competence required for successful competition. An appropriate analogy is to consider this advantage as akin to having a good idea of the next move that your opponent in a chess match will make. By staying one move ahead, checkmate is one step closer. Indeed, as in chess, a good offense is the best defense in the game of business as well.
A common technique is to create detailed profiles on each of your major competitors. These profiles give an in-depth description of the competitor's background, finances, products, markets, facilities, personnel, and strategies. This involves: ? Background ¾ location of offices, plants, and online presences ¾ history - key personalities, dates, events, and trends ¾ ownership, corporate governance, and organizational structure ? Financials ¾ P-E ratios, dividend policy, and profitability ¾ various financial ratios, liquidity, and cash flow ¾ Profit growth profile; method of growth (organic or acquisitive) ? Products. ¾ products offered, depth and breadth of product line, and product portfolio balance ¾ new products developed, new product success rate, and R&D strengths ¾ brands, strength of brand portfolio, brand loyalty and brand awareness ¾ patents and licenses ¾ quality control conformance ¾ reverse engineering ? Marketing ¾ segments served, market shares, customer base, growth rate, and customer loyalty ¾ promotional mix, promotional budgets, advertising themes, ad agency used, sales force success rate, online promotional strategy ¾ distribution channels used (direct & indirect), exclusivity agreements, alliances, and geographical coverage
¾ pricing, discounts, and allowances ? Facilities
¾ plant capacity, capacity utilization rate, age of plant, plant efficiency, capital investment ¾ location, shipping logistics, and product mix by plant ? Personnel ¾ number of employees, key employees, and skill sets ¾ strength of management, and management style ¾ compensation, benefits, and employee morale & retention rates ? Corporate and marketing strategies ¾ objectives, mission statement, growth plans, acquisitions, and divestitures ¾ marketing strategies
New competitors
In addition to analyzing current competitors, it is necessary to estimate future competitive threats. The most common sources of new competitors are ==
• • •
Companies competing in a related product/market Companies using related technologies Companies already targeting your prime market segment but with unrelated products
• •
Companies from other geographical areas and with similar products New start-up companies organized by former employees and/or managers of existing companies
The entrance of new competitors is likely when:
• • • • • •
There are high profit margins in the industry There is unmet demand (insufficient supply) in the industry There are no major barriers to entry There is future growth potential Competitive rivalry is not intense Gaining a competitive advantage over existing firms is feasible
Chapter – 4
Methodology of the Study
METHODOLOGY OF THE STUDY
The study is descriptive in nature and this attempt is made to evaluate the performance of the company through the financial data which are disclosed in accounting policies 4.1 Sources of data ¾ Primary Data ¾ Secondary Data Primary Data The primary data is collected through interview with the managers and the personnel’s of accounts department. Secondary Data The secondary data is collected from the financial statements, journals and website of the company. The financial statements of the company are collected from 1997 to 2009. 4.2 TOOLS FOR ANALYSIS The tools used for analysis are:¾ Ratio Analysis ? ? ? ? ? ? ? ? ? ? Gross Profit Ratio Net Profit Ratio Debtors Turnover Ratio Current Ratio Liquid Ratio Debt Equity Ratio Inventory Turnover Ratio Return On Investment Return On Equity Earnings Per Share
4.3 LIMITATIONS OF THE STUDY • • • • •
•
The company personnel do not reveal the secrets and some confidential financial information. The study records restricted to a period of 3 years. Ratio analysis has its own limitations. Since Annual general meeting is not undertaken statements for 2010 is not available. The financial statements cannot reveal true information, so the data is as reliable as primary data. Although the time duration of the project is not up to the extent, the collection of full-fledged data could not be achieved.
Chapter – 5
Industry Profile
The evolution of Indian Construction Industry was almost similar to the construction industry evolution in other countries: founded by Government and slowly taken over by enterprises. After independence the need for industrial and infrastructural developments in India laid the foundation stone of construction, architectural and engineering services. The period from 1950 to mid 60’s witnessed the government playing an active role in the development of these services and most of construction activities during this period were carried out by state owned enterprises and supported by government departments. In the first five-year plan, construction of civil works was allotted nearly 50 per cent of the total capital outlay. The first professional consultancy company, National Industrial Development Corporation (NIDC), was set up in the public sector in 1954. Subsequently, many architectural, design engineering and construction companies were set up in the public sector (Indian Railways Construction Limited (IRCON), National Buildings Construction Corporation (NBCC), Rail India Transportation and Engineering Services (RITES), Engineers India Limited (EIL), etc.) and private sector (M N Dastur and Co., Hindustan Construction Company (HCC), Ansals, etc.). In the late 1960s government started encouraging foreign collaborations in these services. The Guidelines for Foreign Collaboration, first issued in 1968, stated that local consultant would be the prime contractor in such collaboration. The objective of such an imposition was to develop local design capabilities parallel with the inflow of imported technology and skills. This measure encouraged international construction and consultancy organisations to set up joint ventures and register their presence in India. In India Construction has accounted for around 40 per cent of the development investment during the past 50 years. Around 16 per cent of the nation's working population depends on construction for its livelihood. The Indian construction industry employs over 3 crore people and creates assets worth over Rs 20,000 crore. It contributes more than 5 per cent to the nation's GDP and 78 per cent to the gross capital formation. Total capital expenditure of state and central govt. will be touching Rs. 8,G2,G87crores in 2011 12 from Rs. 1,43,587 crores (1999 2000).
The share of the Indian construction sector In total gross capital formation (GCF) came down from 60 per cent in 1970-71 to 34 per cent in 1990-91. Thereafter, it increased to 48 per cent in 1993-94 and stood at 44 per cent in 1999-2000. In the 21st century, there has been an increase in the share of the construction sector in GDP and capital formation.
GDP from Construction at factor cost (at current prices) increased to Rs. 174571 crores (12.02% of the total GDP ) in 2004-05 from Rs. 116238crores (10.39% of the total GDP) in 2000-01. The main reason for this is the increasing emphasis on involving the private sector infrastructure development through public-private partnerships and mechanisms like build-operatetransfer (BOT), private sector investment has not reached the expected levels. The Indian construction industry comprises 200 firms in the corporate sector. In addition to these firms, there are about 1,20,000 class A contractors registered with various government construction bodies. There are thousands of small contractors, which compete for small jobs or work as sub¬contractors of prime or other contractors. Total sales of construction industry have reached Rs. 42885.38 crores in 2004 05 from Rs. 21451.9 crores in 2000-01.
Future Challenges
The Indian economy has witnessed considerable progress in the past few decades. Most of the infrastructure development sectors moved forward, but not to the required extent of increasing growth rate up to the tune of 8 to 10 per cent. The Union Government has underlined the requirements of the construction industry. With the present emphasis on creating physical infrastructure, massive investment is planned in this sector. The Planning Commission has estimated that investment requirement in infrastructure to the tune of about Rs. 14,50,000 crore or US$ 320 billion during the 11th Five Year Plan period. This is a requirement of an immense magnitude. Budgetary sources cannot raise this much resources. Public Private Partnerships (PPP) approach is best suited for finding the resources. Betterconstruction management is required for optimising resources and maximising productivity and efficiency.
? Construction Industry Booming Opportunities In India: ? COMMONWEALTH GAMES - 2010 in New Delhi The Commonwealth Games - 2010 in New Delhi throws mega opportunities for Building Material Companies, Construction Equipments & Technologies companies. · Commonwealth Games Village project worth US$ 40 mn. · Elevated Ring Road, Widening and Redesigning of Roads in and around Delhi. · More Subways and 15 - 20 Flyovers.
· Sports Specialty Hospital. · Setting up of a Cultural Centre. · The Delhi Development Authority (DDA) has been asked to earmark eight to nine plots for Five Star Hotels. ? ROADS · The government has announced four lanning of 48 new projects with an estimated cost of US$ 12 bn. Development and upgradation of roads will require an investment of US$ 24 bn. till 2008. Private sector participation in road projects will grow significantly.
· "The Golden Quadrilateral Plan" (5850 Kms.) for linking the four metropolitan cities of Delhi, Mumbai, Chennai and Kolkata with an estimated cost of US$ 5.5 bn. ? RAILWAYS · The railway sector will need an investment of US$ 22 bn. for new coaches, tracks and communications and safety equipment over the next ten years. · A 10 year Corporate Safety Plan of the Indian Railways envisaging an expenditure of US $ 7.24 bn. besides development of appropriate technology for higher level of safety in train operation. · Metro Rail Corporation projects worth US $ 12.84 bn in cities like Delhi, Bangalore, Hyderabad, Chennai, Ahmedabad and many other cities are on target. ? AIRPORTS · Upgradation and modernization of airports will require US$ 33 bn. investment in the next ten years.
? SPECIAL ECONOMIC ZONES ((SEZs) · Projects are coming up to develop Special Economic Zones worth US $ 2.5 bn. ? URBAN IFRASTRUCTURE - Township / Malls / Office Buildings Etc. · India has a large and growing middle class population of 300 mn people, out of which a large section is need on new houses. It is estimated that there is a national housing storage of 41 mn. units. · Retailing is becoming the boom industry with organized retail being a market of US$ 6 bn. The sector will need about 25 mn. sq. ft. of space by the year 2005. · NASSCOM-McKinsey surveys have predicted the ITES sector in India will require approximately 100 mn. sq. ft. of office space, which means a promising opportunity for the construction industry. · Water supply and sanitation projects alone offer scope for annual investment of US$ 5.71 bn.
? POWER · The Ministry of Power has formulated a blueprint to provide reliable, affordable and quality power to all users by 2012. This calls for investment of US$ 73 bn. in the next five years. ? SAGAR MALA · The "Sagar Mala" project for expansion and modernization of ports, inland navigation and maritime transport. This involve an investment of US $ 22 bn. in a period of ten years. While the government will take care of 15% of the investment, the rest will come from the private sector. ? FDI IN CONSTRUCTION SECTOR IN INDIA · The Govt. of India has permitted FDI up to 100% for development of integrated townships in India last year. India is now the second most favoured destination for FDI, behind China. ? Beside these, there are projects coming up to develop Special Bio-Technology Parks and IT Parks.
Chapter – 6
Company Profile
COMPANY PROFILE
Larsen & Toubro Limited (L&T) is a USD 7 billion technology, engineering and construction company, with global operations. It is one of the largest and most respected companies in India’s private sector. A strong, customer-focused approach and the constant quest for top-class quality have enabled L&T to attain and sustain leadership in its major lines of business across seven decades. L&T has a distinguished record of achievements including the world’s largest coal gasifier made in India and exported to China, India’s first indigenous hydrocracker reactor, oil and gas platform projects executed to global benchmarks and the world’s largest Continuous Catalyst Regeneration Reactor. Construction Division ECC - the Engineering Construction & Contracts Division of L&T –is India’s Largest construction organization. It figures among top 225 contractors in the world and ranks 47 among global contractors (revenues outside the home country) and 72 among international contractors (revenues from home as well as outside country) as per the survey conducted by Engineering News Record Magazine (August 2007). Many of the country’s prized landmarks – its exquisite buildings, tallest structures, largest industrial projects, longest flyovers, highest viaducts, longest pipelines and several benchmark projects- have been built by ECC. ECC’s leading-edge capabilities cover every discipline of construction: civil, mechanical, electrical and instrumentation. Turnkey Capabilities ECC is equipped with the requisite expertise and wide-ranging experience to undertake Engineering Procurement and Construction (EPC) jobs with single-source responsibility. EPC contracts are executed using state-of-the-art design tools and projects management techniques. ECC’s track record of over six decades covers all industrial sectors and infrastructure projects.
Service Spectrum ECC’s range of services includes: • Pre-engineering, feasibility studies and detailed project reports • Engineering, design and consultancy services • Complete civil and structural construction services for all types of buildings, industrial and infrastructure projects • Complete mechanical system engineering including-fabrication and erection of structural steel works; manufacture, supply, erection, testing and commissioning of plant and equipment; heavy lift erection; high-pressure piping; fire-fighting; HVAC and LP/utility piping networks • Electrical system design, project electrification, automation and control system including instrumentation for all types of industrial and telecom projects • Design, manufacture, supply and installation of EHV switchyards, transmission lines Structure ECC Division has been organized into different Business Sectors to allow for more in-depth Technology and Business Development in line with the growth envisaged in the Strategic Plan and to focus attention on domestic and international business. ? Buildings & Factories • Institutional & Commercial Buildings • Factories & Residential Buildings ? Building Product • L&T Concrete ? Transportation infrastructure • Ports & Harbours and special Projects • Bridges • Roads & Runways ? Hydro and Nuclear Power • Hydropower & Irrigation Projects • Nuclear Power, Space and Defense Projects
? Industrial Projects & Utilities • Minerals & Metals • Bulk Material Handling • Water and Utilities ? Power Transmission & Distribution • Electrical Instrumentation and Communication • Transmission Lines and Railway Electrification ? Developmental Projects • L&T Infrastructure Development Projects Limited • L&T Urban Infrastructure Ltd. ECC’s Engineering Design Research Centre (EDRC) provides a broad spectrum of Engineering, Design, Research and Consultancy services, ranging from concept to commissioning of all types of projects in the above business units/sectors.
This Business Unit targets projects to be executed on principles of Build-Own-OperateTransfer (BOOT), Build-Operate-Transfer (BOT), Build-Own-Lease-and-Transfer (BOLT) and BuildOwn-Operate-Share-and-Transfer (BOOST) and other variants. These projects could typically be promoted by consortium comprising private and public sector companies, financial institutions and multinationals. The range of projects developed and targeted include highways and expressways, bridges, seaports/terminals, airports, ropeways, water supply projects, sanitary engineering projects, bulk material handling projects, power transmission utilities, infotech and industrial parks/estates, petro parks, public car parks, gas/oil pipelines, hydel projects and non-conventional energy projects. This Business Unit draws on ECC’s traditional strengths and wide-ranging experience to execute projects on EPC basis through Special Purpose Vehicles (SPVs) and Joint Ventures (JVs).
ROADS L&T Transportation Infrastructure Limited (L&T-TIL) This SPV was formed to design and construct a Bypass road at Coimbatore. This project is the first private road project executed on BOT basis in Tamil Nadu. The project was handled by L&T from concept to completion. The scope of this project included construction of a 28km bypass road along with an additional two-lane bridge across river Noyyal at Athupalam. The concession period, including construction time will be 32 years for the bypass and 21 years for the Athupalam bridge. The commercial operations at the Athupalam bridge and Bypass commenced in December 1998 and January 2000 respectively. Ahmedabad-Mehsana Toll Road Limited (AMTRL) L&T has completed construction of a 51km four-lane toll road project (plus two service lanes on either side for almost the entire length) from Ahmedabad to Mehsana), and the Kadi-Kalol spur road (11 km) through AMTRL, an SPV promoted by Government of Gujarat and Infrastructure Leasing & Financial Services (IL&FS). L&T is also a shareholder in the SPV. L&T is both the EPC contractor and Operations & Maintenance Contractor in this project. This project was implemented on BOOT basis. Construction has been completed well ahead of schedule. And operation & Maintenance in progress from Feb 2003 onwards.
GVK Jaipur-Kishangarh Expressway Private Ltd. L&T is constructing a six-lane expressway between Jaipur and Kishangarh on National Highway 8 (NH-8) through an SPV namely GVK Jaipur-Kishangarh Expressway Private Ltd. The project scope involves 90.4 KM of six lane highway with flyovers and interchanges at major junctions and provision of state of the art Highway traffic management and toll system. L&T is EPC Contractor for a stretch of 40 km and responsible for the installation and commissioning of the Toll and HTMS. L&T is part of the developer consortium for this project the construction is in progress likely to be completed ahead of schedule.
BRIDGES Narmada Infrastructure Construction Enterprise Limited (NICE) NICE is an SPV formed by L&T for design, construction, maintenance and operation of the second Narmada bridge at Zadeshwar on NH-8 in Gujarat. This project was undertaken on BOT basis. The scope of the project included the construction of a 1.4km-long bridge adjacent to the first bridge, along with 4.6km of approach roads. Commercial service began in November 2000. The concession will be for a period of 15 years, including the construction period. L&T Western India Toll Bridge Limited (L&T-WIT) This SPV was formed by L&T to handle the construction of the two-lane bridge across river Watrak on NH8, including the approach roads near village Kheda in the Ahmedabad -Vadodara section of NH8 on BOT basis. The scope of this project included the construction of a 335m long bridge and around 9.2km of approach roads, and strengthening of 10km of the existing road. The project was completed in March 2001, well ahead of schedule. Second Vivekananda Bridge Tollway Company Limited (SVBTC) Second Vivekananda Bridge Tollway Company Limited (SVBTC) is an SPV formed by PASGIC and L&T for Finance, Design, Build, Operate and Maintain the proposed 6.1 kms long six lane Bridge across river Hoogly on NH - 2, near Kolkata in West Bengal on Build - Operate - Transfer (BOT) basis. . The scope of the Project includes the construction of 880m long 31.1m wide extradosed Cable stayed Bridge and six lane approaches on both Howrah 3.67 kms-long, and Kolkata 1.56Kms-long with many ramps. The Concession will be for a period of 30 years, which includes a 3 year construction period.
AIRPORTS Bangalore International Airport Limited (BIAL) BIAL is a JV company, in which Karnataka State Industrial & Investment Development Corporation (KSIIDC) and Airports Authority of India (AAI) will hold 26% of the equity. The balance equity of 74% will be brought in by joint venture partners, viz. Siemens, L&T and Unique (Zurich Airport) of Switzerland. The first phase of the project covers construction of a 4000m runway, a terminal building and other infrastructure needed to efficiently manage a modern airport. The airport will cater to the expected traffic demand of 4.1 million passengers per year in the first phase. The overall investment will be US$240 million (Rs.1240 crores). The construction works will commence shortly.
IT PARKS L&T Infocity Limited L&T Infocity Limited (LTIL) is a JV of L&T and Andhra Pradesh Industrial Infrastructure Corporation Limited (APIIC). The company is developing HITEC City (Hyderabad Information Technology Engineering Consultancy City), spread over an area of 158 acres in a phased manner spanning 8-10 years. HITEC City is an integrated techno-township which shall comprise office area, commercial space, hotel and convention centre, club-house, petrol station with all infrastructural facilities like substation, road network, parks, rock gardens, sewage disposal, etc. HITEC City provides state-of-the-art facilities such as uninterrupted power, high bandwidth data communication and voice communication networks for software companies, engineering and consultancy firms. The first phase of the project, Cyber Towers, with a built-up area of 5.8 lakh Sft has been fully occupied by over 40 companies, including global IT and commercial players like Microsoft, Oracle, GE Capital, Hongkong & Shanghai Banking Corporation and Keane (formerly Metamor). LTIL undertakes operation and maintenance of all services in HITEC City. Phase II, Cyber Gateway, with a built-up area of 8.81 lakh Sft. is being constructed in a modular fashion, along with the development of essential infrastructure. Plots are also offered for sale to corporates for building independent customised facilities. The major companies that occupied Phase II are Microsoft, GE Capital, Oracle, Dell and ICICI Bank. LTIL has entered into a joint venture with ASCENDAS, the Singapore-based business space solutions provider, to develop an IT complex in the third phase of HITEC City. Known as ‘Cyber Pearl’, the proposed project will offer five lakh Sft. of business space. The construction is nearing completion. L&T Infocity Limited (LTIL) is the lead partner with 52% stake in the SPV L&T Infocity Lanka Private Limited (LTILPL) promoting the IT facility for HSBC in Colombo. LTIL has conceptualised and grounded the project. LTIL is also rendering project management services to LTILPL. LTIL is the principal consultant to DMRC for their IT Park project at Shastri Park in New Delhi. Apart from undertaking a feasibility study with financial analysis, LTIL is now rendering the engineering & design consultancy (along with EDRC), marketing and O&M consultancy. Cyber Park “Cyber Park” is the state of the art IT Park which is coming up in Electronics City, Bangalore. A Special Purpose vehicle by name Cyber Park Development & Construction Limited has been formed to jointly develop the project with Software Technology Parks of India ( STPI ). Built over an area of 4.46 acres, Cyber Park when completed, will offer a super built-up area of 45,539 sq.m with floor plate of approximately 3,438 sq.m. This phase wise development is conceptualised as two identical blocks varying in height (Block 1 - G+ 6 floors and Block 2 - G+ 4 floors) and placed opposite to each other. There is ample
provision for parking 595 cars in the 2 level basement , apart from the open car park area which could accommodate 40 cars. Infrastructure facilities include quality power with DG back-up, exclusive 11 kV feeder with redundancy, 8 no:s passenger elevators and 2 no:s service lifts, OFC backbone to each floor and centralised fire protection system with smoke detectors and spinklers. Amenities consist of a Gynasium, health club, business centre, fully equipped 200 seat auditorium and an open-air amphitheatre. Phase I of the project is scheduled to be completed by June 2004.
TRADE & EXHIBITION CENTRES Hyderabad International Trade Expositions Limited (HITEX) HITEX is promoted by L&T Infocity Limited (LTIL), National Academy of Construction (NAC), Hyderabad Urban Development Authority (HUDA), Andhra Pradesh Tourism Development Corporation (APTDC) and Municipal Corporation of Hyderabad (MCH). This entire modern air-cooled trade exposition centre shall be developed on a 100-acre plot at Cyberabad in a phased manner. The first phase of the project was inaugurated in January 2003.
Designed to maximise functionality and flexibility, HITEX will have eight air cooled halls of 3500 Sqm each of indoor, column-free exhibition space at the ground level, with restaurant/meeting rooms at the mezzanine floor. It will offer an open exhibition space (32,825 Sqm) and two large conference halls and eight small conference rooms of a total area of 4553 Sqm. A convention centre with 4000 seat capacity and 200 room hotel are also planned in this complex. WATER SUPPLY PROJECTS Vizag Industrial Water Supply Company Limited (VIWSCO) The project involves augmentation of water supply to Yeluru Left Bank Canal (YLBC) for which a pipeline from river Godavari at Rajahmundhry is made with regular maintenance along with phased rehabilitation of the YLBC. The Govt. of Andhra Pradesh embarked upon this project on privatization route to spur the entire Industrial development of Visakhapatnam. L&T is the EPC contractor for the Godavari pipe line and canal rehabilitation works and will be a part of the concessionaire. The pipeline works from Rajahmundry to YLBC 56 kms. is nearing completion. The Operation & maintenance of the pipeline and canal will be taken up on completion of construction. The concession period for the project is 32 years.
Board of Directors A.M. Naik J.P. Nayak Chairman & Managing Director Whole-time Director & President (Machinery & Industrial Product) Whole-time Director & Chief Financial Officer Whole-time Director & President (Engineering & Construction Projects) Whole-time Director & President (Electricals & Electronics) Whole-time Director & President (Construction) Whole-time Director & Senior Executive Vice President (IT & Technology Services) Whole-time Director & Senior Executive Vice President (Heavy Engineering) Non-Executive Director Non-Executive Director Non-Executive Director Nominee-LIC Nominee-LIC Non-Executive Director Nominee – GIC Nominee – SUUTI Non-Executive Director
Y.M. Deosthalee
K. Venkataramanan
R.N. Mukhija
K.V. Rangaswami
V.K. Magapu
M.V. Kotwal
S. Rajgopal S.N. Talwar M.M. Chitale Thomas Mathew T. N. Mohan Raj Subodh Bhargava Bhagyam Ramani (Mrs) A.K. Jain J.S. Bindra Company Secretary N. Hariharan
Registered Office L & T House, Ballard Estate, Mumbai – 400 001 Auditors M/s. Sharp & Tannan Solicitors M/s Manilal Kher Ambalal & Co. Registrar & Share Transfer Agents Sharepro Services (India) Private Limited.
IVCRL PROFILE
IVRCL Infrastructures & Projects Limited is an India-based engineering and construction company. The Company is engaged in the business of development and execution of engineering procurement, construction and commissioning (EPCC) and lump sum turn key (LSTK) facilities in various infrastructure projects, such as water supply, roads and bridges, townships and industrial structures, power transmission, for Central/State Governments, other local bodies and private sector in India. The Company subsidiaries include IVR Enviro Projects Private Limited, IVRCL PSC Pipes Private Limited, IVR Prime Urban Developers Limited, Hindusthan Dorr-Oliver Limited, Geo-IVRCL Engineering Limited and IVR Strategic Resources & Services Limited. For the fiscal year ended 31 March 2009, IVRCL Infrastructures & Projects Limited's revenues increased 29% to RS49.52B. Net income decreased 13% to RS2.47B. Revenues reflect an increase in income from operations and higher other income. Net income was offset by an increase in construction, stores, spare materials consumed, higher sub contracting expenses, greater employee costs and increased depreciation expenses.
PUNJ LLOYD PROFILE
For the large, global player that it is today, Punj Lloyd had a modest start. Atul Punj, Chairman - Punj Lloyd was the third generation in the Punj family business. He started the pipeline division of Punj Sons Private Limited in 1982 which was later incorporated as Punj Lloyd Engineering Private Limited in 1988. The company was rechristened Punj Lloyd Private Limited in the following year and subsequently became Public Limited in 1992. From what started with pipelines, grew to constructing tanks & terminals, refineries, power plants and civil infrastructure. Punj Lloyd was also quick to spot opportunities in overseas markets and secured its first overseas contract – Balongan Jakarta Product Pipeline, in Indonesia in 1992. At the time of the Indonesian crisis, Punj Lloyd stood steadfast when other international companies retracted. Punj Lloyd soon widened its international operations to Abu Dhabi, Kuwait, Qatar, Malaysia, Kazakhstan, Bangladesh, among others. This formed the basis for the establishment of the Group’s regional offices in the Caspian, Middle East and North Africa (MENA), South East Asia and South Asia. Punj Lloyd became listed in 2006 and in the same year, Punj Lloyd made another significant move. It acquired Sembawang Engineers & Constructors in Singapore, one of the largest engineering and construction groups in Southeast Asia and Simon Carves, the leaders in polymers and petrochemicals. The energy-packed 2006 also saw the Group enter into strategic joint venture agreements Dayim in Saudi Arabia for oil & gas and infrastructure and KAEFER of Germany for insulation. Growing from strength to strength, the group embarked on a branding initiative in 2006 to focus on creating a powerful EPC brand that unites global operations and diverse service offerings. The new logo is based on the idea of synergy - different entities working together to create a whole that is larger than the sum of its parts. The Group acquired a significant stake in UK’s Technodyne International in 2008, making it a complete end-to-end service provider from design to construction in cryogenic LNG tanks. It has also made inroads into the happening Defence industry with a tie up with Singapore Technologies Kinetics to manufacture defence equipment for the Indian Army. Enthusiastic of the opportunity in the nuclear space, Punj Lloyd has signed a memorandum of understanding with Thorium Power. This is a landmark achievement for Punj Lloyd as it makes it the first Indian company to partner with an American nuclear company after the 123 agreement. From its evolution from a pipeline company to a renowned EPC player to today an over US$ 2.6 billion diversified player, also in Defence, Aviation, Upstream and Marine, Punj Lloyd’s history is dotted with interesting and heartening anecdotes of its rich experiences gained in different geographies, of people who stood tall to bring it so far, of complexities of its various diverse projects and the challenges of time.
Chapter – 7
Analysis & Interpretation
COMPETITIVE ANALYSIS For L&T Gross Profit Ratio 2009 2008 2007 L & T 51.63 50.18 42.88 IVRCL 16.38 16.33 17.17 PUNJ LLYOD 71.6 97.3 125.6
Interpretation: Gross Profit Ratio indicates the difference between sales and direct cost. This ratio explains the relationship between Gross profit and Net Sales. In the year the 2007, the Gross Profit Ratio of L&T was 42.88, as compared to IVRCL which was 17.17 and for PUNJ LLYOD it was 125.6. In the year the 2008, the Gross Profit Ratio of L&T was 50.18, as compared to IVRCL which was 16.33 and for PUNJ LLYOD it was 97.3. In the year the 2009, the Gross Profit Ratio of L&T was 51.63, as compared to IVRCL which was 16.38 and for PUNJ LLYOD it was 71.6. So we can conclude the Gross Profit Ratio of L&T had shown an upward trend, but compared to PUNJ LLYOD it is not satifyable.
Net Profit Ratio 2009 2008 2007 L & T 8.66 7.44 7.98 IVRCL 4.53 5.69 6.03 PUNJ LLYOD 2.7 4.9 2.8
Interpretation: Net Profit Ratio is measured to find the efficiency of the management in operating the business successfully from the owner’s point of view; it actually indicates the return on shareholders’ investment. In the year 2007 the Net Profit Ratio of L&T was 7.98, as compared to IVCRL the ratio was 6.03 and for PUNJ LLYOD it was 2.8. In the year 2008 the Net Profit Ratio of L&T was 7.44, as compared to IVCRL the ratio was 5.69 and for PUNJ LLYOD it was 4.9. In the year 2009 the Net Profit Ratio of L&T was 8.66, as compared to IVCRL the ratio was 4.53 and for PUNJ LLYOD it was 2.7 So we can conclude, here the Net Profit Ratio of L&T was growing as compared to other companies and other companies ratios are going down.
Debtors Turnover Ratio 2009 2008 2007 L & T 1.114 1.003 1.055 IVRCL 1.27 1.02 1.14 PUNJ LLYOD 4.46 3.71 4.19
Interpretation: Debtors Turnover Ratio measures the number of times the receivables are rotated in a year in terms of sales. This ratio also indicates the efficiency of credit collection and efficiency of credit policy. In the year the 2007, the Debtors Turnover Ratio of L&T was 1.055, as compared to IVRCL which was 1.14 and for PUNJ LLYOD it was 4.19. In the year the 2008, the Debtors Turnover Ratio of L&T was 1.003, as compared to IVRCL which was 1.02 and for PUNJ LLYOD it was 3.71. In the year the 2009, the Debtors Turnover Ratio of L&T was 1.114, as compared to IVRCL which was 1.27 and for PUNJ LLYOD it was 4.46. So we can conclude the Debtors Turnover Ratio of L&T initially decreased but improved a little in the end, but compared to PUNJ LLYOD it is not satifyable.
Current Ratio 2009 2008 2007 L & T 1.31 1.19 1.27 IVRCL 2.58 3.28 2.51 PUNJ LLYOD 2.05 2.03 1.92
Interpretation: In the year 2007, the Current ratio of ‘L & T’ was 1.27, as compared to IVRCL which was 2.51 and PUNJ LLYOD which was 1.92. Hence the short term liquidity ratio position of L&T in the year 2007 was not good compared to the other two companies. In the year 2008, the Current ratio of ‘L & T’ was 1.19, as compared to IVRCL which was 3.28 and PUNJ LLYOD which was 2.03. Hence the short term liquidity ratio position of L&T in the year 2008 was not good compared to the other two companies. In the year 2009, the Current ratio of ‘L & T’ was 1.31, as compared to IVRCL which was 2.58 and PUNJ LLYOD which was 2.05. Hence the short term liquidity ratio position of L&T in the year 2009 was not good compared to the other two companies. So we can conclude even if the Liquidity Ratio of L&T showing an upward trend since 2007, but as compare with other companies it is not satifyable.
Liquid Ratio 2009 2008 2007 L & T 0.73 0.70 0.85 IVRCL 0.84 0.95 0.94 PUNJ LLYOD 0.82 0.92 0.95
Interpretation:
In the year 2007, the Liquid Ratio of ‘L & T’ was 0.85, as compared to IVRCL which was 0.94 and PUNJ LLYOD which was 0.95. Hence the short term liquidity ratio position of L&T in the year 2007 was not good compared to the other two companies. In the year 2008, the Liquid Ratio of ‘L & T’ was 0.70, as compared to IVRCL which was 0.95 and PUNJ LLYOD which was 0.92. Hence the short term liquidity ratio position of L&T in the year 2008 was not good compared to the other two companies. In the year 2009, the Liquid Ratio of ‘L & T’ was 0.73, as compared to IVRCL which was 0.84 and PUNJ LLYOD which was 0.82. Hence the short term liquidity ratio position of L&T in the year 2009 was not good compared to the other two companies. So, even if the Liquidity Ratio of L&T showing an upward trend since 2007 till now, but as compare with other companies it is not satifyable.
Debt Equity Ratio 2009 2008 2007 L & T 0.53 0.38 0.36 IVRCL 0.77 0.66 0.42 PUNJ LLYOD 1.43 0.59 1.38
Interpretation:
In the year 2007, the Debt Equity ratio of ‘L & T’ was 0.36, as compared to IVRCL which was 0.42 and PUNJ LLYOD which was 1.38. Hence the long term solvency position of L&T in the year 2007 was not good compared to the other two companies. In the year 2008, the Debt Equity ratio of ‘L & T’ was 0.38, as compared to IVRCL which was 0.66 and PUNJ LLYOD which was 0.59. Hence the long term solvency position of L&T in the year 2008 improved marginally but was not good compared to the other two companies. In the year 2009, the Debt Equity ratio of ‘L & T’ was 0.53, as compared to IVRCL which was 0.77 and PUNJ LLYOD which was 1.43. Hence the long term solvency position of L&T in the year 2009 improved tremendously but was not good compared to the other two companies. So we can conclude even if the Debt Equity Ratio of L&T showing an upward trend since 2007, but as compare with other companies it is not satifyable.
Inventory Turnover Ratio 2009 2008 2007 L & T 3.22 2.85 3.26 IVRCL 2.06 2.24 3.50 PUNJ LLYOD 1.18 0.09 ?0.71
Interpretation:
In the year 2007, the Inventory Turnover ratio of ‘L & T’ was 3.26, as compared to IVRCL which was 3.50 and PUNJ LLYOD which was -0.71. Hence the efficiency of business operations of L&T in the year 2007 was better than PUNJ LLYOD but lesser as comapred to IVRCL. In the year 2008, the Inventory Turnover ratio of ‘L & T’ was 2.85, as compared to IVRCL which was 2.24 and PUNJ LLYOD which was 0.09. Hence the efficiency of business operations of L&T in the year 2008 decreased marginally and was good compared to the other two companies. In the year 2009, the Inventory Turnover ratio of ‘L & T’ was 3.22, as compared to IVRCL which was 2.06 and PUNJ LLYOD which was 1.18. Hence the efficiency of business operations of L&T in the year 2009 improved tremendously and was good compared to the other two companies. So we can conclude that the Inventory Turnover Ratio of L&T showed a decrease and increase in the last two years but was still better than the other two companies.
Return on Investment 2009 2008 2007 L & T 17.55 20.58 20.15 IVRCL 0.83 0.98 0.97 PUNJ LLYOD 0.08 0.06 0.03
Interpretation: In the year 2007, the Return on Investment ratio of ‘L & T’ was 20.15, as compared to IVRCL which was 0.97 and PUNJ LLYOD which was 0.03. Hence the profit earned by investing capital of L&T in the year 2007 was far better than PUNJ LLYOD and IVRCL. In the year 2008, the Return on Investment ratio of ‘L & T’ was 20.58, as compared to IVRCL which was 0.98 and PUNJ LLYOD which was 0.06. Hence the profit earned by investing capital of L&T in the year 2008 increased marginally and was very good compared to the other two companies. In the year 2009, the Return on Investment ratio of ‘L & T’ was 17.55, as compared to IVRCL which was 0.83 and PUNJ LLYOD which was 0.08. Hence the profit earned by investing capital of L&T in the year 2009 decreased but was still very good compared to the other two companies. So we can conclude that the Return on Investment Ratio of L&T showed a increase and decrease in the last two years but was still better than the other two companies. Return On Equity
2009 2008 2007
L & T 24.67 28.21 26.84
IVRCL 5.45 7.88 8.46
PUNJ LLYOD 0.53 0.36 0.12
Interpretation:
In the year 2007, the Return on Equity ratio of ‘L & T’ was 26.84, as compared to IVRCL which was 8.46 and PUNJ LLYOD which was 0.12. Hence the return on equity shareholders funds of L&T in the year 2007 was much better than PUNJ LLYOD and IVRCL. In the year 2008, the Return on Equity ratio of ‘L & T’ was 28.21, as compared to IVRCL which was 7.88 and PUNJ LLYOD which was 0.36. Hence the return on equity shareholders funds of L&T in the year 2008 increased but was very good compared to the other two companies. In the year 2009, the Return on Equity ratio of ‘L & T’ was 24.67, as compared to IVRCL which was 5.45 and PUNJ LLYOD which was 0.53. Hence the return on equity shareholders funds of L&T in the year 2009 decreased but was still very good compared to the other two companies. So we can conclude that the Return on Equity Ratio of L&T showed a increase and decrease in the last two years but was still better than the other two companies.
Earnings per Share 2009 2008 2007 L & T 59.50 37.80 25.11 IVRCL 16.93 16.08 12.38 PUNJ LLYOD 7.42 7.81 2.36
Interpretation:
In the year 2007, the Earning Per Share of ‘L & T’ was 25.11, as compared to IVRCL which was 12.38 and PUNJ LLYOD which was 2.36. Hence the market price of shares of L&T in the year 2007 was much higher than PUNJ LLYOD and IVRCL. In the year 2008, the Earning Per Share of ‘L & T’ was 37.80, as compared to IVRCL which was 16.08 and PUNJ LLYOD which was 7.81. Hence the market price of shares of L&T in the year 2008 increased considerably and was very good compared to the other two companies. In the year 2009, the Earning Per Share of ‘L & T’ was 59.50, as compared to IVRCL which was 16.93 and PUNJ LLYOD which was 7.42. Hence the market price of shares of L&T in the year 2009 increased drastically and was still very good compared to the other two companies. So we can conclude that the Earning Per Share of L&T showed a rapid upward trend in the last two years and remained better position than the other two companies.
Chapter – 8
SWOT Analysis
SWOT ANALYSIS
STRENGTHS: ¾ Refinement and Innovation of Construction ¾ Acquisition of quality clients ¾ Political Support ¾ Brand ¾ Strong team of Professionals ¾ Impressive Performance ¾ Customer Loyalty ¾ Generation of trust
WEAKNESS: ¾ The ranking in India is high, but globally the ranking is not high compared.
OPPORTUNITIES: ¾ Withdrawal of most of the major players from the market due to recessions. ¾ The products are well received in the market due to the construction quality, style and trust. ¾ Exposure to other States & Countries
THREATS: ¾ Scarcity of working funds at affordable rates ¾ Competition from other construction companies.
Chapter – 9
Findings
FINDINGS
COMPETITIVE ANALYSIS ? After analyzing 3 years Competitive Analysis, the company has a high rank in India compared to other competing companies. ? In some years the company having a decrease in some ratios, but at the same time when we compare with other companies we can find the company’s standard of growth. ? In some periods especial in 2008. The reason may be due to recession, so in the Indian market recession brings a stop in growth, that means comes to stable position. ? The main source of fund for the company is from construction if we are comparing. ? The company’s share is circulated in the market. The value or demand we can see by its market price and also the dividend given by the company to the shareholders.
RATIO ANALYSIS ? Gross Profit Ratio The Gross Profit Ratio is growing since 2007. ? Net Profit Ratio The Net Profit Ratio is also growing but but not constant. ? Debtors Turnover Ratio The Debtors Turnover Ratio is growing, so it’s not good for the company. ? Current Ratio Except 2008 the company the ratio of 2009 has gone upward compared to 2007. ? Liquid Ratio The Liquidity Ratio of L&T showing an upward trend since 2007 till now ? Debt Equity Ratio Since 2007 the debt equity ratio showing an upward trend. ? Inventory Turnover Ratio The Inventory Turnover Ratio of L&T showed a decrease and increase in the last two years. ? Return On Investment The Return on Investment Ratio of L&T showed an increase and decrease in the last two years. ? Return on Equity The Return on Equity Ratio of L&T also showed an increase and decrease in the last two years
? Earnings Per Share Showing an upward trend since 2007.
Chapter – 10
Suggestions
SUGGESTIONS
? The Company is only having a good rank in India but do not have a good position or rank in the International Market. ? The company should concentrate in International market. ? The company’s investment in other companies is not giving much return. ? The company should do a close watch on the market while investing. ? If possible the company can give more concentration in Return on Equity.
Chapter – 11
Conclusion
CONCLUSION
Competitive Analysis is an essential analysis for the company for knowing the position of the company while comparing with the competitors. Through this analysis we can understand the company’s status and position while comparing with IVRCL and PUNJ LLYOD. And also helps the company to find the drawbacks and the things that should be taken into consideration. And all these prove the effective investment decisions will enable the firm to achieve good return on their investments.
Chapter – 12
Glossary
GLOSSARY RETURN ON INVESTMENT (OR) OVERALL PROFITABILITY RATIO This ratio is called ‘Return on Investment’ (R.O.I) or ‘Return on capital employed’. It measures the sufficiency or otherwise of profit in relation to capital employed. RETURN ON EQUITY This ratio signifies the return on equity shareholders’ funds. The profit considered for computing the ratio is taken after payment of preference dividend. GROSS PROFIT RATIO This ratio is also known as Gross margin or trading margin ratio. Gross profit ratio indicates the difference between sales and direct costs. NET PROFIT RATIO This ratio is also called net Profit to sales ratio. It is a measure of management’s efficiency in operating the business successfully from the owner’s point of view. It indicates the return on shareholders’ investments. Higher the ratio better is the operational efficiency of the business concern. EARNINGS PER SHARE (EPS) This ratio highlights the overall success of the concern from owner’s point of view and it is helpful in determining market price of equity shares. It reflects upon the capacity of the concern to pay divided to its equity of shareholders. INVENTORY OR STOCK TURNOVER RATIO This ratio is also called stock velocity ratio. It is calculated to ascertain the efficiency of inventory management in terms of capital investment. It shows the relationship between the cost of goods sold and the amount of average inventory. DEBTORS TURNOVER RATIO Debtor’s turnover ratio is also called ‘Receivables Turnover Ratio’ or ‘Debtors Velocity’. Debtors’ turnover ratio measures the number of times the receivables are rotated in a year in terms of sales. This ratio also indicates the efficiency of credit collection and efficiency of credit policy.
CURRENT RATIO The ratio of current assets to current liabilities is called ‘Current Ratio’. In order to measure the short-term liquidity or solvency of a concern, comparison of current assets and current liabilities is inevitable. Current ratio indicates the ability of a concern to meet its current obligations as and when they are due for payment. LIQUID RATIO This ratio is also called ‘Quick’ or ‘Acid Test’ ratio. It is calculated by comparing the quick assets with current liabilities. DEBT EQUITY RATIO This ratio is ascertained to determine long-term solvency position of a company. Debt equity ratio is also called ‘External-internal equity ratio’.
Chapter – 13
Bibliography
BIBLIOGRAPHY
T.S Reddy, Y. Hari Prasad Reddy / Financial and Management Accounting / Margham Publications. Financial Management- I. M Pandey Financial Management- Shashi K Gupta Annual Reports of L&T, IVRCL & PUNJ LLYOD for the past 3 years. www.wikipedia.com – Competitive Analysis www.l&tecc.com
doc_649145947.pdf
Financial analysis refers to an assessment of the viability, stability and profitability of a business, sub-business or project.
“FINANCIAL EVALUATION AND COMPETITIVE ANALYSIS OF L &T”
A PROJECT REPORT Submitted to the SRM SCHOOL OF MANAGEMENT
In partial fulfillment of the requirements For the award of the degree Of MASTER OF BUSINESS ADMINISTRATION BY PHILIPS THAMPI Register No.35080381
Under the Supervision and Guidance of Prof. R. SHUNMUGAN
SCHOOL OF MANAGEMENT
SRM UNIVERSITY
KATTANKULATHUR
CHENNAI –603
203
MAY 2010
SRM SCHOOL OF MANAGEMENT SRM UNIVERSITY KATTANKULATHUR CHENNAI-603203
CERTIFICATE
Certified that this project report titled “FINANCIAL EVALUATION AND COMPETITIVE ANALYSIS OF L &T” is the bonafide work of Mr. PHILIPS THAMPI who carried out the research under my supervision. Certified further, that to the best of my knowledge the work reported herein does not form part of any other project report or dissertation on the basis of which a degree or award was conferred on an earlier occasion on this or any other candidate.
Signature of the Supervisor
Signature of the HOD
ACKNOWLEDGEMENT
I offer my sincere thanks to our Dean, Dr. (Mrs.) JAYASHREE SURESH, SRM UNIVERSITY Kattankulathur - 603203 for giving us an opportunity to undergo a Project in “FINANCIAL EVALUATION AND COMPETITIVE ANALYSIS OF L &T”. I wish to express my gratitude to Prof. R. SHUNMUGAN for providing me the valuable advices for the project. I sincerely thank Mr. R. MANOMOHANAN, CEO, MCSL who has provided me valuable information and resources for this study. I express my gratitude to Mr. S ANANTHA SUBRAHMANIAN, Head, Finance & Accounts, Infrastructure Operating Company, L&T ECC Division who has provided me the valuable facilities for the project. I am sincerely indebted to Ms. NIRANJANA C, Joint General Manager, Finance & Accounts, Infrastructure Operating Company, L&T ECC Division & to Mr. VIKRAM RANGANATHAN, Assistant Manager, Finance & Accounts, Infrastructure Operating Company, L&T ECC Division for his valuable advice and timely help throughout this work. And also my sincerely thankful to Mr. SANJAY SHARMA, Human Resource (Head Talent Acquisition) & to Mr. K. KRISHNA KUMAR, Assistant Manager-Personnel in carrying out the project study. I am so grateful to all the employees L & T ECC who have supported me in carrying out the project study.I am grateful to all the faculty members of MBA department, my friends and all others for their support in making this endeavor a success.I thank the almighty God for his blessings throughout the project study.I wish to thank my parents for their encouragement and support for doing this project.
PHILIPS THAMPI
INDEX
CHAPTER 1 2 3 4
TITLE INTRODUCTION OBJECTIVE & SCOPE REVIEW OF LITERATURE METHODOLOGY OF STUDY INDUSTRY PROFILE COMPANY PROFILE
Balance Sheet & Profit/ Loss Account of:L&T IVRCL PUNJ LLYOD
PAGE No. 1 4 6 12
5 6
15 20
7
COMPETITIVE ANALYSIS & INTERPRETATION SWOT ANALYSIS FINDINGS SUGGESTIONS CONCLUSION GLOSSARY BIBLIOGRAPHY
40
8 9 10 11 12 13
51 53 57 59 61 64
Chapter – 1
Introduction
INTRODUCTION
In the era of globalization the utilization of finance is considered as the most important function of an organization. The firms are facing a stiff competition from the whole market, so the inflow and outflow of funds will be manage well. Finance is considered as the life blood of an organization. The management of sources and application of funds will be done carefully. Every organization is trying to earn the maximum profit by the effective investment of funds. Finance is one of the most important aspects of business management. Without proper financial planning an enterprise is unlikely to be successful. Managing money (a liquid asset) is essential to ensure a secure future, both for the individual and an organization. Financial analysis is the process of using financial statements to enable the users to take economic and investment decisions. Managers use accounting information to ensure that the enterprise is on the right direction and if not, take decisions to put it on the right track. Financial analysis is the process of identifying the financial strengths and weakness of a firm by properly establishing relationships between the items of Balance Sheet and Profit and Loss Account. Analysis is the process of critically examining in detail accounting information given in the financial statements. Analyzing financial statement is a process of evaluating relationship between component parts of financial statements to obtain a better understanding of firm’s position and performance. The main aim of the financial statement analysis is to find out the profitability and financial position of the firm. There are various methods used in analyzing financial statements such as Ratio analysis, Comparative statements, Trend analysis, Common statements, Fund flow statements and Cash flow statements. The purpose of financial analysis is to diagnose the information contained in financial statements so as to judge the profitability and financial soundness of the firm.
The techniques of financial analysis serve as a tool for the management in determining the impact of financial decisions on financial conditions and the profitability of the enterprise. This can be used by the financial manager as the basis to plan future financial requirements by means of forecasting
and budgeting procedures. With the help of tools of financial manager can rationalize his decision and reach the goal. Financial analysis is helpful in assessing the financial position and profitability of a concern. This is done through comparison by ratios for the same concern over a period of years; or for one concern against another; or for one concern against the pre determined standards. Accounting ratios calculated for a number of years show the trend of the change of position. That is whether the trend is upward or downward or static.
The importance of financial statement analysis is as follows: 1. 2. 3. 4. To judge the present and future earning capacity or profitability of the concern. To judge the operational efficiency of the concern. To judge the short term and long term solvency of the concern. To help in assessing developments in the future by making forecasts and preparing budgets.
Chapter – 2
Objective & Scope of Study
2.1 Primary Objective:
1. The main aim of the study is to evaluate the competitive analysis of L&T with other two competitive companies IVRCL & PUNJ LLYOD.
2.2 Secondary Objective:
1. To analyze the status of the company with the past three years. 2. To find the Current Ratio, liquidity, profitability position & EPS of the company for three years. 3. To analyze the all the above analysis with the competitive companies for past three years.
2.3 SCOPE OF THE STUDY Competitive analysis is one the essential function in every organization for the effective utilization of resources, to know the standard and also the position of the company. The analysis the management decisions regarding the investment policies and also for what all things the company is lacking. Scope of the study is limited to the Competitive Analysis, the accounting years 2006-07 to 2008-09 have been taken as base. The process of Competitive Analysis involves the market position, the standard and the other things like rank of the company while comparing with the competing companies.
Chapter – 3
Review of Literature
Competitor analysis
Competitor analysis in marketing and strategic management is an assessment of the strengths and weaknesses of current and potential competitors. This analysis provides both an offensive and defensive strategic context through which to identify opportunities and threats. Competitor profiling coalesces all of the relevant sources of competitor analysis into one framework in the support of efficient and effective strategy formulation, implementation, monitoring and adjustment. Given that competitor analysis is an essential component of corporate strategy, it is argued that most firms do not conduct this type of analysis systematically enough. Instead, many enterprises operate on what is called “informal impressions, conjectures, and intuition gained through the tidbits of information about competitors every manager continually receives.” As a result, traditional environmental scanning places many firms at risk of dangerous competitive blindspots due to a lack of robust competitor analysis. Competitor array One common and useful technique is constructing a competitor array. The steps include:
• • • • •
Define your industry - scope and nature of the industry Determine who your competitors are Determine who your customers are and what benefits they expect Determine what the key success factors are in your industry Rank the key success factors by giving each one a weighting - The sum of all the weightings must add up to one.
• •
Rate each competitor on each of the key success factors Multiply each cell in the matrix by the factor weighting.
Competitor profiling The strategic rationale of competitor profiling is powerfully simple. Superior knowledge of rivals offers a legitimate source of competitive advantage. The raw material of competitive advantage consists of offering superior customer value in the firm’s chosen market. The definitive characteristic of customer value is the adjective, superior. Customer value is defined relative to rival offerings making competitor knowledge an intrinsic component of corporate strategy. Profiling facilitates this strategic objective in three important ways. First, profiling can reveal strategic weaknesses in rivals that the firm may exploit. Second, the proactive stance of competitor profiling will allow the firm to anticipate the strategic response of their rivals to the firm’s planned strategies, the strategies of other competing firms, and changes in the environment. Third, this proactive knowledge will give the firms strategic agility. Offensive strategy can be implemented more quickly in order to exploit opportunities and capitalize on strengths. Similarly, defensive strategy can be employed more deftly in order to counter the threat of rival firms from exploiting the firm’s own weaknesses. Clearly, those firms practicing systematic and advanced competitor profiling have a significant advantage. As such, a comprehensive profiling capability is rapidly becoming a core competence required for successful competition. An appropriate analogy is to consider this advantage as akin to having a good idea of the next move that your opponent in a chess match will make. By staying one move ahead, checkmate is one step closer. Indeed, as in chess, a good offense is the best defense in the game of business as well.
A common technique is to create detailed profiles on each of your major competitors. These profiles give an in-depth description of the competitor's background, finances, products, markets, facilities, personnel, and strategies. This involves: ? Background ¾ location of offices, plants, and online presences ¾ history - key personalities, dates, events, and trends ¾ ownership, corporate governance, and organizational structure ? Financials ¾ P-E ratios, dividend policy, and profitability ¾ various financial ratios, liquidity, and cash flow ¾ Profit growth profile; method of growth (organic or acquisitive) ? Products. ¾ products offered, depth and breadth of product line, and product portfolio balance ¾ new products developed, new product success rate, and R&D strengths ¾ brands, strength of brand portfolio, brand loyalty and brand awareness ¾ patents and licenses ¾ quality control conformance ¾ reverse engineering ? Marketing ¾ segments served, market shares, customer base, growth rate, and customer loyalty ¾ promotional mix, promotional budgets, advertising themes, ad agency used, sales force success rate, online promotional strategy ¾ distribution channels used (direct & indirect), exclusivity agreements, alliances, and geographical coverage
¾ pricing, discounts, and allowances ? Facilities
¾ plant capacity, capacity utilization rate, age of plant, plant efficiency, capital investment ¾ location, shipping logistics, and product mix by plant ? Personnel ¾ number of employees, key employees, and skill sets ¾ strength of management, and management style ¾ compensation, benefits, and employee morale & retention rates ? Corporate and marketing strategies ¾ objectives, mission statement, growth plans, acquisitions, and divestitures ¾ marketing strategies
New competitors
In addition to analyzing current competitors, it is necessary to estimate future competitive threats. The most common sources of new competitors are ==
• • •
Companies competing in a related product/market Companies using related technologies Companies already targeting your prime market segment but with unrelated products
• •
Companies from other geographical areas and with similar products New start-up companies organized by former employees and/or managers of existing companies
The entrance of new competitors is likely when:
• • • • • •
There are high profit margins in the industry There is unmet demand (insufficient supply) in the industry There are no major barriers to entry There is future growth potential Competitive rivalry is not intense Gaining a competitive advantage over existing firms is feasible
Chapter – 4
Methodology of the Study
METHODOLOGY OF THE STUDY
The study is descriptive in nature and this attempt is made to evaluate the performance of the company through the financial data which are disclosed in accounting policies 4.1 Sources of data ¾ Primary Data ¾ Secondary Data Primary Data The primary data is collected through interview with the managers and the personnel’s of accounts department. Secondary Data The secondary data is collected from the financial statements, journals and website of the company. The financial statements of the company are collected from 1997 to 2009. 4.2 TOOLS FOR ANALYSIS The tools used for analysis are:¾ Ratio Analysis ? ? ? ? ? ? ? ? ? ? Gross Profit Ratio Net Profit Ratio Debtors Turnover Ratio Current Ratio Liquid Ratio Debt Equity Ratio Inventory Turnover Ratio Return On Investment Return On Equity Earnings Per Share
4.3 LIMITATIONS OF THE STUDY • • • • •
•
The company personnel do not reveal the secrets and some confidential financial information. The study records restricted to a period of 3 years. Ratio analysis has its own limitations. Since Annual general meeting is not undertaken statements for 2010 is not available. The financial statements cannot reveal true information, so the data is as reliable as primary data. Although the time duration of the project is not up to the extent, the collection of full-fledged data could not be achieved.
Chapter – 5
Industry Profile
The evolution of Indian Construction Industry was almost similar to the construction industry evolution in other countries: founded by Government and slowly taken over by enterprises. After independence the need for industrial and infrastructural developments in India laid the foundation stone of construction, architectural and engineering services. The period from 1950 to mid 60’s witnessed the government playing an active role in the development of these services and most of construction activities during this period were carried out by state owned enterprises and supported by government departments. In the first five-year plan, construction of civil works was allotted nearly 50 per cent of the total capital outlay. The first professional consultancy company, National Industrial Development Corporation (NIDC), was set up in the public sector in 1954. Subsequently, many architectural, design engineering and construction companies were set up in the public sector (Indian Railways Construction Limited (IRCON), National Buildings Construction Corporation (NBCC), Rail India Transportation and Engineering Services (RITES), Engineers India Limited (EIL), etc.) and private sector (M N Dastur and Co., Hindustan Construction Company (HCC), Ansals, etc.). In the late 1960s government started encouraging foreign collaborations in these services. The Guidelines for Foreign Collaboration, first issued in 1968, stated that local consultant would be the prime contractor in such collaboration. The objective of such an imposition was to develop local design capabilities parallel with the inflow of imported technology and skills. This measure encouraged international construction and consultancy organisations to set up joint ventures and register their presence in India. In India Construction has accounted for around 40 per cent of the development investment during the past 50 years. Around 16 per cent of the nation's working population depends on construction for its livelihood. The Indian construction industry employs over 3 crore people and creates assets worth over Rs 20,000 crore. It contributes more than 5 per cent to the nation's GDP and 78 per cent to the gross capital formation. Total capital expenditure of state and central govt. will be touching Rs. 8,G2,G87crores in 2011 12 from Rs. 1,43,587 crores (1999 2000).
The share of the Indian construction sector In total gross capital formation (GCF) came down from 60 per cent in 1970-71 to 34 per cent in 1990-91. Thereafter, it increased to 48 per cent in 1993-94 and stood at 44 per cent in 1999-2000. In the 21st century, there has been an increase in the share of the construction sector in GDP and capital formation.
GDP from Construction at factor cost (at current prices) increased to Rs. 174571 crores (12.02% of the total GDP ) in 2004-05 from Rs. 116238crores (10.39% of the total GDP) in 2000-01. The main reason for this is the increasing emphasis on involving the private sector infrastructure development through public-private partnerships and mechanisms like build-operatetransfer (BOT), private sector investment has not reached the expected levels. The Indian construction industry comprises 200 firms in the corporate sector. In addition to these firms, there are about 1,20,000 class A contractors registered with various government construction bodies. There are thousands of small contractors, which compete for small jobs or work as sub¬contractors of prime or other contractors. Total sales of construction industry have reached Rs. 42885.38 crores in 2004 05 from Rs. 21451.9 crores in 2000-01.
Future Challenges
The Indian economy has witnessed considerable progress in the past few decades. Most of the infrastructure development sectors moved forward, but not to the required extent of increasing growth rate up to the tune of 8 to 10 per cent. The Union Government has underlined the requirements of the construction industry. With the present emphasis on creating physical infrastructure, massive investment is planned in this sector. The Planning Commission has estimated that investment requirement in infrastructure to the tune of about Rs. 14,50,000 crore or US$ 320 billion during the 11th Five Year Plan period. This is a requirement of an immense magnitude. Budgetary sources cannot raise this much resources. Public Private Partnerships (PPP) approach is best suited for finding the resources. Betterconstruction management is required for optimising resources and maximising productivity and efficiency.
? Construction Industry Booming Opportunities In India: ? COMMONWEALTH GAMES - 2010 in New Delhi The Commonwealth Games - 2010 in New Delhi throws mega opportunities for Building Material Companies, Construction Equipments & Technologies companies. · Commonwealth Games Village project worth US$ 40 mn. · Elevated Ring Road, Widening and Redesigning of Roads in and around Delhi. · More Subways and 15 - 20 Flyovers.
· Sports Specialty Hospital. · Setting up of a Cultural Centre. · The Delhi Development Authority (DDA) has been asked to earmark eight to nine plots for Five Star Hotels. ? ROADS · The government has announced four lanning of 48 new projects with an estimated cost of US$ 12 bn. Development and upgradation of roads will require an investment of US$ 24 bn. till 2008. Private sector participation in road projects will grow significantly.
· "The Golden Quadrilateral Plan" (5850 Kms.) for linking the four metropolitan cities of Delhi, Mumbai, Chennai and Kolkata with an estimated cost of US$ 5.5 bn. ? RAILWAYS · The railway sector will need an investment of US$ 22 bn. for new coaches, tracks and communications and safety equipment over the next ten years. · A 10 year Corporate Safety Plan of the Indian Railways envisaging an expenditure of US $ 7.24 bn. besides development of appropriate technology for higher level of safety in train operation. · Metro Rail Corporation projects worth US $ 12.84 bn in cities like Delhi, Bangalore, Hyderabad, Chennai, Ahmedabad and many other cities are on target. ? AIRPORTS · Upgradation and modernization of airports will require US$ 33 bn. investment in the next ten years.
? SPECIAL ECONOMIC ZONES ((SEZs) · Projects are coming up to develop Special Economic Zones worth US $ 2.5 bn. ? URBAN IFRASTRUCTURE - Township / Malls / Office Buildings Etc. · India has a large and growing middle class population of 300 mn people, out of which a large section is need on new houses. It is estimated that there is a national housing storage of 41 mn. units. · Retailing is becoming the boom industry with organized retail being a market of US$ 6 bn. The sector will need about 25 mn. sq. ft. of space by the year 2005. · NASSCOM-McKinsey surveys have predicted the ITES sector in India will require approximately 100 mn. sq. ft. of office space, which means a promising opportunity for the construction industry. · Water supply and sanitation projects alone offer scope for annual investment of US$ 5.71 bn.
? POWER · The Ministry of Power has formulated a blueprint to provide reliable, affordable and quality power to all users by 2012. This calls for investment of US$ 73 bn. in the next five years. ? SAGAR MALA · The "Sagar Mala" project for expansion and modernization of ports, inland navigation and maritime transport. This involve an investment of US $ 22 bn. in a period of ten years. While the government will take care of 15% of the investment, the rest will come from the private sector. ? FDI IN CONSTRUCTION SECTOR IN INDIA · The Govt. of India has permitted FDI up to 100% for development of integrated townships in India last year. India is now the second most favoured destination for FDI, behind China. ? Beside these, there are projects coming up to develop Special Bio-Technology Parks and IT Parks.
Chapter – 6
Company Profile
COMPANY PROFILE
Larsen & Toubro Limited (L&T) is a USD 7 billion technology, engineering and construction company, with global operations. It is one of the largest and most respected companies in India’s private sector. A strong, customer-focused approach and the constant quest for top-class quality have enabled L&T to attain and sustain leadership in its major lines of business across seven decades. L&T has a distinguished record of achievements including the world’s largest coal gasifier made in India and exported to China, India’s first indigenous hydrocracker reactor, oil and gas platform projects executed to global benchmarks and the world’s largest Continuous Catalyst Regeneration Reactor. Construction Division ECC - the Engineering Construction & Contracts Division of L&T –is India’s Largest construction organization. It figures among top 225 contractors in the world and ranks 47 among global contractors (revenues outside the home country) and 72 among international contractors (revenues from home as well as outside country) as per the survey conducted by Engineering News Record Magazine (August 2007). Many of the country’s prized landmarks – its exquisite buildings, tallest structures, largest industrial projects, longest flyovers, highest viaducts, longest pipelines and several benchmark projects- have been built by ECC. ECC’s leading-edge capabilities cover every discipline of construction: civil, mechanical, electrical and instrumentation. Turnkey Capabilities ECC is equipped with the requisite expertise and wide-ranging experience to undertake Engineering Procurement and Construction (EPC) jobs with single-source responsibility. EPC contracts are executed using state-of-the-art design tools and projects management techniques. ECC’s track record of over six decades covers all industrial sectors and infrastructure projects.
Service Spectrum ECC’s range of services includes: • Pre-engineering, feasibility studies and detailed project reports • Engineering, design and consultancy services • Complete civil and structural construction services for all types of buildings, industrial and infrastructure projects • Complete mechanical system engineering including-fabrication and erection of structural steel works; manufacture, supply, erection, testing and commissioning of plant and equipment; heavy lift erection; high-pressure piping; fire-fighting; HVAC and LP/utility piping networks • Electrical system design, project electrification, automation and control system including instrumentation for all types of industrial and telecom projects • Design, manufacture, supply and installation of EHV switchyards, transmission lines Structure ECC Division has been organized into different Business Sectors to allow for more in-depth Technology and Business Development in line with the growth envisaged in the Strategic Plan and to focus attention on domestic and international business. ? Buildings & Factories • Institutional & Commercial Buildings • Factories & Residential Buildings ? Building Product • L&T Concrete ? Transportation infrastructure • Ports & Harbours and special Projects • Bridges • Roads & Runways ? Hydro and Nuclear Power • Hydropower & Irrigation Projects • Nuclear Power, Space and Defense Projects
? Industrial Projects & Utilities • Minerals & Metals • Bulk Material Handling • Water and Utilities ? Power Transmission & Distribution • Electrical Instrumentation and Communication • Transmission Lines and Railway Electrification ? Developmental Projects • L&T Infrastructure Development Projects Limited • L&T Urban Infrastructure Ltd. ECC’s Engineering Design Research Centre (EDRC) provides a broad spectrum of Engineering, Design, Research and Consultancy services, ranging from concept to commissioning of all types of projects in the above business units/sectors.
This Business Unit targets projects to be executed on principles of Build-Own-OperateTransfer (BOOT), Build-Operate-Transfer (BOT), Build-Own-Lease-and-Transfer (BOLT) and BuildOwn-Operate-Share-and-Transfer (BOOST) and other variants. These projects could typically be promoted by consortium comprising private and public sector companies, financial institutions and multinationals. The range of projects developed and targeted include highways and expressways, bridges, seaports/terminals, airports, ropeways, water supply projects, sanitary engineering projects, bulk material handling projects, power transmission utilities, infotech and industrial parks/estates, petro parks, public car parks, gas/oil pipelines, hydel projects and non-conventional energy projects. This Business Unit draws on ECC’s traditional strengths and wide-ranging experience to execute projects on EPC basis through Special Purpose Vehicles (SPVs) and Joint Ventures (JVs).
ROADS L&T Transportation Infrastructure Limited (L&T-TIL) This SPV was formed to design and construct a Bypass road at Coimbatore. This project is the first private road project executed on BOT basis in Tamil Nadu. The project was handled by L&T from concept to completion. The scope of this project included construction of a 28km bypass road along with an additional two-lane bridge across river Noyyal at Athupalam. The concession period, including construction time will be 32 years for the bypass and 21 years for the Athupalam bridge. The commercial operations at the Athupalam bridge and Bypass commenced in December 1998 and January 2000 respectively. Ahmedabad-Mehsana Toll Road Limited (AMTRL) L&T has completed construction of a 51km four-lane toll road project (plus two service lanes on either side for almost the entire length) from Ahmedabad to Mehsana), and the Kadi-Kalol spur road (11 km) through AMTRL, an SPV promoted by Government of Gujarat and Infrastructure Leasing & Financial Services (IL&FS). L&T is also a shareholder in the SPV. L&T is both the EPC contractor and Operations & Maintenance Contractor in this project. This project was implemented on BOOT basis. Construction has been completed well ahead of schedule. And operation & Maintenance in progress from Feb 2003 onwards.
GVK Jaipur-Kishangarh Expressway Private Ltd. L&T is constructing a six-lane expressway between Jaipur and Kishangarh on National Highway 8 (NH-8) through an SPV namely GVK Jaipur-Kishangarh Expressway Private Ltd. The project scope involves 90.4 KM of six lane highway with flyovers and interchanges at major junctions and provision of state of the art Highway traffic management and toll system. L&T is EPC Contractor for a stretch of 40 km and responsible for the installation and commissioning of the Toll and HTMS. L&T is part of the developer consortium for this project the construction is in progress likely to be completed ahead of schedule.
BRIDGES Narmada Infrastructure Construction Enterprise Limited (NICE) NICE is an SPV formed by L&T for design, construction, maintenance and operation of the second Narmada bridge at Zadeshwar on NH-8 in Gujarat. This project was undertaken on BOT basis. The scope of the project included the construction of a 1.4km-long bridge adjacent to the first bridge, along with 4.6km of approach roads. Commercial service began in November 2000. The concession will be for a period of 15 years, including the construction period. L&T Western India Toll Bridge Limited (L&T-WIT) This SPV was formed by L&T to handle the construction of the two-lane bridge across river Watrak on NH8, including the approach roads near village Kheda in the Ahmedabad -Vadodara section of NH8 on BOT basis. The scope of this project included the construction of a 335m long bridge and around 9.2km of approach roads, and strengthening of 10km of the existing road. The project was completed in March 2001, well ahead of schedule. Second Vivekananda Bridge Tollway Company Limited (SVBTC) Second Vivekananda Bridge Tollway Company Limited (SVBTC) is an SPV formed by PASGIC and L&T for Finance, Design, Build, Operate and Maintain the proposed 6.1 kms long six lane Bridge across river Hoogly on NH - 2, near Kolkata in West Bengal on Build - Operate - Transfer (BOT) basis. . The scope of the Project includes the construction of 880m long 31.1m wide extradosed Cable stayed Bridge and six lane approaches on both Howrah 3.67 kms-long, and Kolkata 1.56Kms-long with many ramps. The Concession will be for a period of 30 years, which includes a 3 year construction period.
AIRPORTS Bangalore International Airport Limited (BIAL) BIAL is a JV company, in which Karnataka State Industrial & Investment Development Corporation (KSIIDC) and Airports Authority of India (AAI) will hold 26% of the equity. The balance equity of 74% will be brought in by joint venture partners, viz. Siemens, L&T and Unique (Zurich Airport) of Switzerland. The first phase of the project covers construction of a 4000m runway, a terminal building and other infrastructure needed to efficiently manage a modern airport. The airport will cater to the expected traffic demand of 4.1 million passengers per year in the first phase. The overall investment will be US$240 million (Rs.1240 crores). The construction works will commence shortly.
IT PARKS L&T Infocity Limited L&T Infocity Limited (LTIL) is a JV of L&T and Andhra Pradesh Industrial Infrastructure Corporation Limited (APIIC). The company is developing HITEC City (Hyderabad Information Technology Engineering Consultancy City), spread over an area of 158 acres in a phased manner spanning 8-10 years. HITEC City is an integrated techno-township which shall comprise office area, commercial space, hotel and convention centre, club-house, petrol station with all infrastructural facilities like substation, road network, parks, rock gardens, sewage disposal, etc. HITEC City provides state-of-the-art facilities such as uninterrupted power, high bandwidth data communication and voice communication networks for software companies, engineering and consultancy firms. The first phase of the project, Cyber Towers, with a built-up area of 5.8 lakh Sft has been fully occupied by over 40 companies, including global IT and commercial players like Microsoft, Oracle, GE Capital, Hongkong & Shanghai Banking Corporation and Keane (formerly Metamor). LTIL undertakes operation and maintenance of all services in HITEC City. Phase II, Cyber Gateway, with a built-up area of 8.81 lakh Sft. is being constructed in a modular fashion, along with the development of essential infrastructure. Plots are also offered for sale to corporates for building independent customised facilities. The major companies that occupied Phase II are Microsoft, GE Capital, Oracle, Dell and ICICI Bank. LTIL has entered into a joint venture with ASCENDAS, the Singapore-based business space solutions provider, to develop an IT complex in the third phase of HITEC City. Known as ‘Cyber Pearl’, the proposed project will offer five lakh Sft. of business space. The construction is nearing completion. L&T Infocity Limited (LTIL) is the lead partner with 52% stake in the SPV L&T Infocity Lanka Private Limited (LTILPL) promoting the IT facility for HSBC in Colombo. LTIL has conceptualised and grounded the project. LTIL is also rendering project management services to LTILPL. LTIL is the principal consultant to DMRC for their IT Park project at Shastri Park in New Delhi. Apart from undertaking a feasibility study with financial analysis, LTIL is now rendering the engineering & design consultancy (along with EDRC), marketing and O&M consultancy. Cyber Park “Cyber Park” is the state of the art IT Park which is coming up in Electronics City, Bangalore. A Special Purpose vehicle by name Cyber Park Development & Construction Limited has been formed to jointly develop the project with Software Technology Parks of India ( STPI ). Built over an area of 4.46 acres, Cyber Park when completed, will offer a super built-up area of 45,539 sq.m with floor plate of approximately 3,438 sq.m. This phase wise development is conceptualised as two identical blocks varying in height (Block 1 - G+ 6 floors and Block 2 - G+ 4 floors) and placed opposite to each other. There is ample
provision for parking 595 cars in the 2 level basement , apart from the open car park area which could accommodate 40 cars. Infrastructure facilities include quality power with DG back-up, exclusive 11 kV feeder with redundancy, 8 no:s passenger elevators and 2 no:s service lifts, OFC backbone to each floor and centralised fire protection system with smoke detectors and spinklers. Amenities consist of a Gynasium, health club, business centre, fully equipped 200 seat auditorium and an open-air amphitheatre. Phase I of the project is scheduled to be completed by June 2004.
TRADE & EXHIBITION CENTRES Hyderabad International Trade Expositions Limited (HITEX) HITEX is promoted by L&T Infocity Limited (LTIL), National Academy of Construction (NAC), Hyderabad Urban Development Authority (HUDA), Andhra Pradesh Tourism Development Corporation (APTDC) and Municipal Corporation of Hyderabad (MCH). This entire modern air-cooled trade exposition centre shall be developed on a 100-acre plot at Cyberabad in a phased manner. The first phase of the project was inaugurated in January 2003.
Designed to maximise functionality and flexibility, HITEX will have eight air cooled halls of 3500 Sqm each of indoor, column-free exhibition space at the ground level, with restaurant/meeting rooms at the mezzanine floor. It will offer an open exhibition space (32,825 Sqm) and two large conference halls and eight small conference rooms of a total area of 4553 Sqm. A convention centre with 4000 seat capacity and 200 room hotel are also planned in this complex. WATER SUPPLY PROJECTS Vizag Industrial Water Supply Company Limited (VIWSCO) The project involves augmentation of water supply to Yeluru Left Bank Canal (YLBC) for which a pipeline from river Godavari at Rajahmundhry is made with regular maintenance along with phased rehabilitation of the YLBC. The Govt. of Andhra Pradesh embarked upon this project on privatization route to spur the entire Industrial development of Visakhapatnam. L&T is the EPC contractor for the Godavari pipe line and canal rehabilitation works and will be a part of the concessionaire. The pipeline works from Rajahmundry to YLBC 56 kms. is nearing completion. The Operation & maintenance of the pipeline and canal will be taken up on completion of construction. The concession period for the project is 32 years.
Board of Directors A.M. Naik J.P. Nayak Chairman & Managing Director Whole-time Director & President (Machinery & Industrial Product) Whole-time Director & Chief Financial Officer Whole-time Director & President (Engineering & Construction Projects) Whole-time Director & President (Electricals & Electronics) Whole-time Director & President (Construction) Whole-time Director & Senior Executive Vice President (IT & Technology Services) Whole-time Director & Senior Executive Vice President (Heavy Engineering) Non-Executive Director Non-Executive Director Non-Executive Director Nominee-LIC Nominee-LIC Non-Executive Director Nominee – GIC Nominee – SUUTI Non-Executive Director
Y.M. Deosthalee
K. Venkataramanan
R.N. Mukhija
K.V. Rangaswami
V.K. Magapu
M.V. Kotwal
S. Rajgopal S.N. Talwar M.M. Chitale Thomas Mathew T. N. Mohan Raj Subodh Bhargava Bhagyam Ramani (Mrs) A.K. Jain J.S. Bindra Company Secretary N. Hariharan
Registered Office L & T House, Ballard Estate, Mumbai – 400 001 Auditors M/s. Sharp & Tannan Solicitors M/s Manilal Kher Ambalal & Co. Registrar & Share Transfer Agents Sharepro Services (India) Private Limited.
IVCRL PROFILE
IVRCL Infrastructures & Projects Limited is an India-based engineering and construction company. The Company is engaged in the business of development and execution of engineering procurement, construction and commissioning (EPCC) and lump sum turn key (LSTK) facilities in various infrastructure projects, such as water supply, roads and bridges, townships and industrial structures, power transmission, for Central/State Governments, other local bodies and private sector in India. The Company subsidiaries include IVR Enviro Projects Private Limited, IVRCL PSC Pipes Private Limited, IVR Prime Urban Developers Limited, Hindusthan Dorr-Oliver Limited, Geo-IVRCL Engineering Limited and IVR Strategic Resources & Services Limited. For the fiscal year ended 31 March 2009, IVRCL Infrastructures & Projects Limited's revenues increased 29% to RS49.52B. Net income decreased 13% to RS2.47B. Revenues reflect an increase in income from operations and higher other income. Net income was offset by an increase in construction, stores, spare materials consumed, higher sub contracting expenses, greater employee costs and increased depreciation expenses.
PUNJ LLOYD PROFILE
For the large, global player that it is today, Punj Lloyd had a modest start. Atul Punj, Chairman - Punj Lloyd was the third generation in the Punj family business. He started the pipeline division of Punj Sons Private Limited in 1982 which was later incorporated as Punj Lloyd Engineering Private Limited in 1988. The company was rechristened Punj Lloyd Private Limited in the following year and subsequently became Public Limited in 1992. From what started with pipelines, grew to constructing tanks & terminals, refineries, power plants and civil infrastructure. Punj Lloyd was also quick to spot opportunities in overseas markets and secured its first overseas contract – Balongan Jakarta Product Pipeline, in Indonesia in 1992. At the time of the Indonesian crisis, Punj Lloyd stood steadfast when other international companies retracted. Punj Lloyd soon widened its international operations to Abu Dhabi, Kuwait, Qatar, Malaysia, Kazakhstan, Bangladesh, among others. This formed the basis for the establishment of the Group’s regional offices in the Caspian, Middle East and North Africa (MENA), South East Asia and South Asia. Punj Lloyd became listed in 2006 and in the same year, Punj Lloyd made another significant move. It acquired Sembawang Engineers & Constructors in Singapore, one of the largest engineering and construction groups in Southeast Asia and Simon Carves, the leaders in polymers and petrochemicals. The energy-packed 2006 also saw the Group enter into strategic joint venture agreements Dayim in Saudi Arabia for oil & gas and infrastructure and KAEFER of Germany for insulation. Growing from strength to strength, the group embarked on a branding initiative in 2006 to focus on creating a powerful EPC brand that unites global operations and diverse service offerings. The new logo is based on the idea of synergy - different entities working together to create a whole that is larger than the sum of its parts. The Group acquired a significant stake in UK’s Technodyne International in 2008, making it a complete end-to-end service provider from design to construction in cryogenic LNG tanks. It has also made inroads into the happening Defence industry with a tie up with Singapore Technologies Kinetics to manufacture defence equipment for the Indian Army. Enthusiastic of the opportunity in the nuclear space, Punj Lloyd has signed a memorandum of understanding with Thorium Power. This is a landmark achievement for Punj Lloyd as it makes it the first Indian company to partner with an American nuclear company after the 123 agreement. From its evolution from a pipeline company to a renowned EPC player to today an over US$ 2.6 billion diversified player, also in Defence, Aviation, Upstream and Marine, Punj Lloyd’s history is dotted with interesting and heartening anecdotes of its rich experiences gained in different geographies, of people who stood tall to bring it so far, of complexities of its various diverse projects and the challenges of time.
Chapter – 7
Analysis & Interpretation
COMPETITIVE ANALYSIS For L&T Gross Profit Ratio 2009 2008 2007 L & T 51.63 50.18 42.88 IVRCL 16.38 16.33 17.17 PUNJ LLYOD 71.6 97.3 125.6
Interpretation: Gross Profit Ratio indicates the difference between sales and direct cost. This ratio explains the relationship between Gross profit and Net Sales. In the year the 2007, the Gross Profit Ratio of L&T was 42.88, as compared to IVRCL which was 17.17 and for PUNJ LLYOD it was 125.6. In the year the 2008, the Gross Profit Ratio of L&T was 50.18, as compared to IVRCL which was 16.33 and for PUNJ LLYOD it was 97.3. In the year the 2009, the Gross Profit Ratio of L&T was 51.63, as compared to IVRCL which was 16.38 and for PUNJ LLYOD it was 71.6. So we can conclude the Gross Profit Ratio of L&T had shown an upward trend, but compared to PUNJ LLYOD it is not satifyable.
Net Profit Ratio 2009 2008 2007 L & T 8.66 7.44 7.98 IVRCL 4.53 5.69 6.03 PUNJ LLYOD 2.7 4.9 2.8
Interpretation: Net Profit Ratio is measured to find the efficiency of the management in operating the business successfully from the owner’s point of view; it actually indicates the return on shareholders’ investment. In the year 2007 the Net Profit Ratio of L&T was 7.98, as compared to IVCRL the ratio was 6.03 and for PUNJ LLYOD it was 2.8. In the year 2008 the Net Profit Ratio of L&T was 7.44, as compared to IVCRL the ratio was 5.69 and for PUNJ LLYOD it was 4.9. In the year 2009 the Net Profit Ratio of L&T was 8.66, as compared to IVCRL the ratio was 4.53 and for PUNJ LLYOD it was 2.7 So we can conclude, here the Net Profit Ratio of L&T was growing as compared to other companies and other companies ratios are going down.
Debtors Turnover Ratio 2009 2008 2007 L & T 1.114 1.003 1.055 IVRCL 1.27 1.02 1.14 PUNJ LLYOD 4.46 3.71 4.19
Interpretation: Debtors Turnover Ratio measures the number of times the receivables are rotated in a year in terms of sales. This ratio also indicates the efficiency of credit collection and efficiency of credit policy. In the year the 2007, the Debtors Turnover Ratio of L&T was 1.055, as compared to IVRCL which was 1.14 and for PUNJ LLYOD it was 4.19. In the year the 2008, the Debtors Turnover Ratio of L&T was 1.003, as compared to IVRCL which was 1.02 and for PUNJ LLYOD it was 3.71. In the year the 2009, the Debtors Turnover Ratio of L&T was 1.114, as compared to IVRCL which was 1.27 and for PUNJ LLYOD it was 4.46. So we can conclude the Debtors Turnover Ratio of L&T initially decreased but improved a little in the end, but compared to PUNJ LLYOD it is not satifyable.
Current Ratio 2009 2008 2007 L & T 1.31 1.19 1.27 IVRCL 2.58 3.28 2.51 PUNJ LLYOD 2.05 2.03 1.92
Interpretation: In the year 2007, the Current ratio of ‘L & T’ was 1.27, as compared to IVRCL which was 2.51 and PUNJ LLYOD which was 1.92. Hence the short term liquidity ratio position of L&T in the year 2007 was not good compared to the other two companies. In the year 2008, the Current ratio of ‘L & T’ was 1.19, as compared to IVRCL which was 3.28 and PUNJ LLYOD which was 2.03. Hence the short term liquidity ratio position of L&T in the year 2008 was not good compared to the other two companies. In the year 2009, the Current ratio of ‘L & T’ was 1.31, as compared to IVRCL which was 2.58 and PUNJ LLYOD which was 2.05. Hence the short term liquidity ratio position of L&T in the year 2009 was not good compared to the other two companies. So we can conclude even if the Liquidity Ratio of L&T showing an upward trend since 2007, but as compare with other companies it is not satifyable.
Liquid Ratio 2009 2008 2007 L & T 0.73 0.70 0.85 IVRCL 0.84 0.95 0.94 PUNJ LLYOD 0.82 0.92 0.95
Interpretation:
In the year 2007, the Liquid Ratio of ‘L & T’ was 0.85, as compared to IVRCL which was 0.94 and PUNJ LLYOD which was 0.95. Hence the short term liquidity ratio position of L&T in the year 2007 was not good compared to the other two companies. In the year 2008, the Liquid Ratio of ‘L & T’ was 0.70, as compared to IVRCL which was 0.95 and PUNJ LLYOD which was 0.92. Hence the short term liquidity ratio position of L&T in the year 2008 was not good compared to the other two companies. In the year 2009, the Liquid Ratio of ‘L & T’ was 0.73, as compared to IVRCL which was 0.84 and PUNJ LLYOD which was 0.82. Hence the short term liquidity ratio position of L&T in the year 2009 was not good compared to the other two companies. So, even if the Liquidity Ratio of L&T showing an upward trend since 2007 till now, but as compare with other companies it is not satifyable.
Debt Equity Ratio 2009 2008 2007 L & T 0.53 0.38 0.36 IVRCL 0.77 0.66 0.42 PUNJ LLYOD 1.43 0.59 1.38
Interpretation:
In the year 2007, the Debt Equity ratio of ‘L & T’ was 0.36, as compared to IVRCL which was 0.42 and PUNJ LLYOD which was 1.38. Hence the long term solvency position of L&T in the year 2007 was not good compared to the other two companies. In the year 2008, the Debt Equity ratio of ‘L & T’ was 0.38, as compared to IVRCL which was 0.66 and PUNJ LLYOD which was 0.59. Hence the long term solvency position of L&T in the year 2008 improved marginally but was not good compared to the other two companies. In the year 2009, the Debt Equity ratio of ‘L & T’ was 0.53, as compared to IVRCL which was 0.77 and PUNJ LLYOD which was 1.43. Hence the long term solvency position of L&T in the year 2009 improved tremendously but was not good compared to the other two companies. So we can conclude even if the Debt Equity Ratio of L&T showing an upward trend since 2007, but as compare with other companies it is not satifyable.
Inventory Turnover Ratio 2009 2008 2007 L & T 3.22 2.85 3.26 IVRCL 2.06 2.24 3.50 PUNJ LLYOD 1.18 0.09 ?0.71
Interpretation:
In the year 2007, the Inventory Turnover ratio of ‘L & T’ was 3.26, as compared to IVRCL which was 3.50 and PUNJ LLYOD which was -0.71. Hence the efficiency of business operations of L&T in the year 2007 was better than PUNJ LLYOD but lesser as comapred to IVRCL. In the year 2008, the Inventory Turnover ratio of ‘L & T’ was 2.85, as compared to IVRCL which was 2.24 and PUNJ LLYOD which was 0.09. Hence the efficiency of business operations of L&T in the year 2008 decreased marginally and was good compared to the other two companies. In the year 2009, the Inventory Turnover ratio of ‘L & T’ was 3.22, as compared to IVRCL which was 2.06 and PUNJ LLYOD which was 1.18. Hence the efficiency of business operations of L&T in the year 2009 improved tremendously and was good compared to the other two companies. So we can conclude that the Inventory Turnover Ratio of L&T showed a decrease and increase in the last two years but was still better than the other two companies.
Return on Investment 2009 2008 2007 L & T 17.55 20.58 20.15 IVRCL 0.83 0.98 0.97 PUNJ LLYOD 0.08 0.06 0.03
Interpretation: In the year 2007, the Return on Investment ratio of ‘L & T’ was 20.15, as compared to IVRCL which was 0.97 and PUNJ LLYOD which was 0.03. Hence the profit earned by investing capital of L&T in the year 2007 was far better than PUNJ LLYOD and IVRCL. In the year 2008, the Return on Investment ratio of ‘L & T’ was 20.58, as compared to IVRCL which was 0.98 and PUNJ LLYOD which was 0.06. Hence the profit earned by investing capital of L&T in the year 2008 increased marginally and was very good compared to the other two companies. In the year 2009, the Return on Investment ratio of ‘L & T’ was 17.55, as compared to IVRCL which was 0.83 and PUNJ LLYOD which was 0.08. Hence the profit earned by investing capital of L&T in the year 2009 decreased but was still very good compared to the other two companies. So we can conclude that the Return on Investment Ratio of L&T showed a increase and decrease in the last two years but was still better than the other two companies. Return On Equity
2009 2008 2007
L & T 24.67 28.21 26.84
IVRCL 5.45 7.88 8.46
PUNJ LLYOD 0.53 0.36 0.12
Interpretation:
In the year 2007, the Return on Equity ratio of ‘L & T’ was 26.84, as compared to IVRCL which was 8.46 and PUNJ LLYOD which was 0.12. Hence the return on equity shareholders funds of L&T in the year 2007 was much better than PUNJ LLYOD and IVRCL. In the year 2008, the Return on Equity ratio of ‘L & T’ was 28.21, as compared to IVRCL which was 7.88 and PUNJ LLYOD which was 0.36. Hence the return on equity shareholders funds of L&T in the year 2008 increased but was very good compared to the other two companies. In the year 2009, the Return on Equity ratio of ‘L & T’ was 24.67, as compared to IVRCL which was 5.45 and PUNJ LLYOD which was 0.53. Hence the return on equity shareholders funds of L&T in the year 2009 decreased but was still very good compared to the other two companies. So we can conclude that the Return on Equity Ratio of L&T showed a increase and decrease in the last two years but was still better than the other two companies.
Earnings per Share 2009 2008 2007 L & T 59.50 37.80 25.11 IVRCL 16.93 16.08 12.38 PUNJ LLYOD 7.42 7.81 2.36
Interpretation:
In the year 2007, the Earning Per Share of ‘L & T’ was 25.11, as compared to IVRCL which was 12.38 and PUNJ LLYOD which was 2.36. Hence the market price of shares of L&T in the year 2007 was much higher than PUNJ LLYOD and IVRCL. In the year 2008, the Earning Per Share of ‘L & T’ was 37.80, as compared to IVRCL which was 16.08 and PUNJ LLYOD which was 7.81. Hence the market price of shares of L&T in the year 2008 increased considerably and was very good compared to the other two companies. In the year 2009, the Earning Per Share of ‘L & T’ was 59.50, as compared to IVRCL which was 16.93 and PUNJ LLYOD which was 7.42. Hence the market price of shares of L&T in the year 2009 increased drastically and was still very good compared to the other two companies. So we can conclude that the Earning Per Share of L&T showed a rapid upward trend in the last two years and remained better position than the other two companies.
Chapter – 8
SWOT Analysis
SWOT ANALYSIS
STRENGTHS: ¾ Refinement and Innovation of Construction ¾ Acquisition of quality clients ¾ Political Support ¾ Brand ¾ Strong team of Professionals ¾ Impressive Performance ¾ Customer Loyalty ¾ Generation of trust
WEAKNESS: ¾ The ranking in India is high, but globally the ranking is not high compared.
OPPORTUNITIES: ¾ Withdrawal of most of the major players from the market due to recessions. ¾ The products are well received in the market due to the construction quality, style and trust. ¾ Exposure to other States & Countries
THREATS: ¾ Scarcity of working funds at affordable rates ¾ Competition from other construction companies.
Chapter – 9
Findings
FINDINGS
COMPETITIVE ANALYSIS ? After analyzing 3 years Competitive Analysis, the company has a high rank in India compared to other competing companies. ? In some years the company having a decrease in some ratios, but at the same time when we compare with other companies we can find the company’s standard of growth. ? In some periods especial in 2008. The reason may be due to recession, so in the Indian market recession brings a stop in growth, that means comes to stable position. ? The main source of fund for the company is from construction if we are comparing. ? The company’s share is circulated in the market. The value or demand we can see by its market price and also the dividend given by the company to the shareholders.
RATIO ANALYSIS ? Gross Profit Ratio The Gross Profit Ratio is growing since 2007. ? Net Profit Ratio The Net Profit Ratio is also growing but but not constant. ? Debtors Turnover Ratio The Debtors Turnover Ratio is growing, so it’s not good for the company. ? Current Ratio Except 2008 the company the ratio of 2009 has gone upward compared to 2007. ? Liquid Ratio The Liquidity Ratio of L&T showing an upward trend since 2007 till now ? Debt Equity Ratio Since 2007 the debt equity ratio showing an upward trend. ? Inventory Turnover Ratio The Inventory Turnover Ratio of L&T showed a decrease and increase in the last two years. ? Return On Investment The Return on Investment Ratio of L&T showed an increase and decrease in the last two years. ? Return on Equity The Return on Equity Ratio of L&T also showed an increase and decrease in the last two years
? Earnings Per Share Showing an upward trend since 2007.
Chapter – 10
Suggestions
SUGGESTIONS
? The Company is only having a good rank in India but do not have a good position or rank in the International Market. ? The company should concentrate in International market. ? The company’s investment in other companies is not giving much return. ? The company should do a close watch on the market while investing. ? If possible the company can give more concentration in Return on Equity.
Chapter – 11
Conclusion
CONCLUSION
Competitive Analysis is an essential analysis for the company for knowing the position of the company while comparing with the competitors. Through this analysis we can understand the company’s status and position while comparing with IVRCL and PUNJ LLYOD. And also helps the company to find the drawbacks and the things that should be taken into consideration. And all these prove the effective investment decisions will enable the firm to achieve good return on their investments.
Chapter – 12
Glossary
GLOSSARY RETURN ON INVESTMENT (OR) OVERALL PROFITABILITY RATIO This ratio is called ‘Return on Investment’ (R.O.I) or ‘Return on capital employed’. It measures the sufficiency or otherwise of profit in relation to capital employed. RETURN ON EQUITY This ratio signifies the return on equity shareholders’ funds. The profit considered for computing the ratio is taken after payment of preference dividend. GROSS PROFIT RATIO This ratio is also known as Gross margin or trading margin ratio. Gross profit ratio indicates the difference between sales and direct costs. NET PROFIT RATIO This ratio is also called net Profit to sales ratio. It is a measure of management’s efficiency in operating the business successfully from the owner’s point of view. It indicates the return on shareholders’ investments. Higher the ratio better is the operational efficiency of the business concern. EARNINGS PER SHARE (EPS) This ratio highlights the overall success of the concern from owner’s point of view and it is helpful in determining market price of equity shares. It reflects upon the capacity of the concern to pay divided to its equity of shareholders. INVENTORY OR STOCK TURNOVER RATIO This ratio is also called stock velocity ratio. It is calculated to ascertain the efficiency of inventory management in terms of capital investment. It shows the relationship between the cost of goods sold and the amount of average inventory. DEBTORS TURNOVER RATIO Debtor’s turnover ratio is also called ‘Receivables Turnover Ratio’ or ‘Debtors Velocity’. Debtors’ turnover ratio measures the number of times the receivables are rotated in a year in terms of sales. This ratio also indicates the efficiency of credit collection and efficiency of credit policy.
CURRENT RATIO The ratio of current assets to current liabilities is called ‘Current Ratio’. In order to measure the short-term liquidity or solvency of a concern, comparison of current assets and current liabilities is inevitable. Current ratio indicates the ability of a concern to meet its current obligations as and when they are due for payment. LIQUID RATIO This ratio is also called ‘Quick’ or ‘Acid Test’ ratio. It is calculated by comparing the quick assets with current liabilities. DEBT EQUITY RATIO This ratio is ascertained to determine long-term solvency position of a company. Debt equity ratio is also called ‘External-internal equity ratio’.
Chapter – 13
Bibliography
BIBLIOGRAPHY
T.S Reddy, Y. Hari Prasad Reddy / Financial and Management Accounting / Margham Publications. Financial Management- I. M Pandey Financial Management- Shashi K Gupta Annual Reports of L&T, IVRCL & PUNJ LLYOD for the past 3 years. www.wikipedia.com – Competitive Analysis www.l&tecc.com
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