FUNDAMENTAL & TECNICAL ANALYSIS OF KARYAVA STOCK EX.docFUNDAMENTAL & TECNICAL ANALYSIS OF KARYAVA STOCK EX.doc

SAAB MARFIN MBA

A Project Report
On
“Fundamental & Technical Analysis”

Undertaken for:

KARVY Stock Broking Limited.

Fundamental & Technical Analysis MBA FINANCE -1-

SAAB MARFIN MBA

CONTENTS

SI.no Contents Page
no
1 Executive Summary 1-4

2 Introduction to the capital market 5-14

3 Company Profile 15-37

Theoretical Framework

4 Fundamental analysis 38

4.1 Economic Analysis 39-46

4.2 Industry Analysis 47-51

4.3 Company analysis 52-59

5 Technical analysis 60-76

6 Findings 77-78

7 Recommendations 79


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8 Conclusions 80
9 Bibliography 81


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Executive Summary

Project Title : Fundamental Analysis and Technical Analysis of Unitech
Ltd.

Company and Place: KARVY Stock Broking Ltd. Dharwad

Research Process:
KARVY Stock Broking Ltd. Is a premier financial services provider &
ranked top five in the country. Recently the capital market crashed
because of many reasons investors lost heavy amount But fundamental &
Macro factors Indian market is good. Stability in market is not there
currently therefore some of the investor who lost money in market crash,
so many of them are shaky to enter into market again. Therefore getting
investor confidence is more important which will happen when the market
stabilizes. So for that matter broking firms should provide proper
guidance to their investors for facilitating their decision making in
investments.

Research Objectives:
Main Objective: To know the future increase and decrease of stock price
in selected company stocks through Fundamental And Technical Analysis.

Sub Objectives:

To understand how best we can use this analysis is to meet the
financial goal of the investors.

To understand the effect of Industry specific factors on the stock
prices through Industry Analysis.

To know which securities to be bought and when to be bought.

To know which securities to be sold and when to sell.


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To provide investors with a basket of securities to be stay invested
to have a sound portfolio.
Research Plan:
The data collected for the study is secondary data. The data I have used
for the study is
1. Historical shares value of the stocks collected from
www.nseindia.com
2. The balance sheet and Income statement got from companies web
site.
3. Some of the information about the industry is collected from the
web site.

The Measurement Techniques
The following techniques are used for the study.
1. The bar chart
2. Candlestick charting
3. Point & figure chart
4. Moving average.
5. Exponential moving average (EMA)
6. The relative strength index (RSI)
7. Oscillators (ROC, RSI, MACD,STOCHASTICS)

Analysis: Using MS-Excel

Findings:
General:

One of the most important areas for any investor to look when
researching a company is the financial statement. Financial reports
are required by law and are published both quarterly and annually.


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Management discussion give investors a better understanding of
what the company does and usually points out some key areas
where they did well.

Audited financial reports have much more credibility than
unaudited ones.

The income statement takes into account some non-cash items
such as depreciation. The cash-flow statement strips away all
non-cash items and tells you how much actual money the company
generated.

For Stock:

First, the projected MPS of the stock next three years are Rs.231.05,
Rs.286.03 and Rs.352.68.
Short term support for scrip: 265-275; Next support has been
established at 150-165.
Long term target by technical analysis is 620-40 but this is unlikely
to happen in the medium term because short term trend has been
bearish and long term trend has been flat and undergoing long
consolidation

For market:
Short term support or intermediate support: 4500-4600; next long
term support lies at3100-3150
Resistance for Nifty is at present is at 6000
Short term and intermediate trend has been bearish and long term
trend is still bullish.
Long term nifty target is a 6980- 7020.

Recommendations:


SAAB MARFIN MBA

Long term investors can include Unitech, because the growth rates
and earnings are good compared to others stocks. Therefore
investors can include this in their portfolio to earn the higher return
on their investment.
The Long term investors should buy the stocks fair value found out
by the fundamental analysis.
Short term investors should look on various support and resistance
of stocks to buy or sell and make profit.

Conclusion:
Stock market or capital market provides the industry with a lot of
capital needed by the industry, which leads to the growth of the
industry and economy as a whole; hence the stock market plays an
important role in the development of the industry.
Some times Using Technical and fundamental analysis individually
leads to incorrect results hence both Fundamental and technical
analysis should be used at a time to get the desired result.
Fundamental analysts study everything from the overall economy
and industry conditions, to the financial condition and management
of companies before deciding on any particular stock.
Technical analyst’s look for peaks, bottoms, trends, patterns and
other factors affecting a stock's price movement and then make
buy/sell decisions based on those factors.


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INTRODUCTION TO CAPITAL MARKETS

Introduction to Capital Markets
Transfer of resources from those with idle resources to others who have a
productive need for them is perhaps most efficiently achieved through the
securities markets. Stated formally, securities markets provide channels
for allocation of savings to investments and thereby decouple these two
activities. As a result, the savers and investors are not constrained by
their individual abilities, but by the economy’s abilities to invest and save
respectively, which inevitably enhances savings and investment in the
economy.

Market Segments
The securities market has two interdependent and inseparable segments,
the new issues (primary market) and the stock (secondary) market. The
primary market provides the channel for sale of new securities while the
secondary market deals in securities previously issued. The price signals,
which subsume all information about the issuer and his business
including associated risk, generated in the secondary market, help the
primary market in allocation of funds. The issuers of securities issue
(create and sell) new securities in the primary market to raise funds for
investment and/or to discharge some obligation. They do so either
through public issues or private placement. There are two major types of
issuers who issue securities. The corporate entities issue mainly debt and
equity instruments (shares, debentures, etc.), while the governments
(central and state governments) issue debt securities (dated securities,
treasury bills).

The secondary market enables participants who hold securities to adjust
their holdings in response to changes in their assessment of risk and
return. They also sell securities for cash to meet their liquidity needs. A
variant of secondary market is the forward market, where securities are
traded for future delivery and payment. Pure forward is out side the


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formal market. The versions of forward in formal market are futures and
options. In futures market, standardized securities are traded for future
delivery and settlement. These futures can be on a basket of securities
like an index or an individual security. In

case of options, securities are traded for conditional future delivery.
There are two types of options – a put option permits the owner to sell a
security to the writer of options at a predetermined price while a call
option permits the owner to purchase a security from the writer of the
option at a predetermined price. These options can also be on individual
stocks or basket of stocks like index. Two exchanges, namely NSE and
BSE provide trading of derivatives of securities.

Products and Participants
Savings are linked to investments by a variety of intermediaries through a
range of complex financial products called “securities” which is defined in
the Securities Contracts (Regulation) Act, 1956. Which includes shares,
scrip’s, stocks, bonds, debentures, debenture stock, or other marketable
securities of like nature in or of any incorporate company or body
corporate, government securities, derivatives of securities, units of
collective investment scheme, security receipts, interest and rights in
securities, or any other instruments so declared by the central
government These demand for and supply of securities and funds
determine, under competitive market conditions in goods and securities
market, the prices of securities.

Securities Market and Economic Growth
A well functioning securities market is conducive to sustained economic
growth. There have been a number of studies, starting from World Bank
and IMF to various scholars, which have established robust relationship
not only one way, but also the both ways, between the development in
the securities market and the economic growth.
The securities market fosters economic growth to the extent that it-

Fundamental & Technical Analysis MBA FINANCE - 10 -

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Augments the quantities of real savings and capital formation from
any given level of national income,
Increases net capital inflow from abroad,
Raises the productivity of investment by improving allocation of
investible funds, and (d) Reduces the cost of capital.


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International Linkage
The securities market facilitates the internationalization of an economy by
linking it with the rest of the world. This linkage assists through the
inflow of capital in the form of portfolio investment. Moreover, a strong
domestic stock market performance forms the

basis for well performing domestic corporate to raise capital in the
international market. This implies that the domestic economy is opened
up to international competitive pressures, which help to raise efficiency. It
is also very likely that existence of a domestic securities market will deter
capital outflow by providing attractive investment opportunities within
domestic economy.

There are also other developmental benefits associated with the existence
of a securities market.
The securities market provides a fast-rate breeding ground for the
skills and judgment needed for entrepreneurship, risk bearing,
portfolio selection and management.
An active securities market serves as an ‘engine’ of general
financial development and may, in particular, accelerate the
integration of informal financial systems with the institutional
financial sector. Securities directly displace traditional assets such
as gold and stocks of produce or, indirectly, may provide portfolio
assets for unit trusts, pension funds and similar FIIs that raise
savings from the traditional sector.
The existence of securities market enhances the scope, and
provides institutional mechanisms, for the operation of monetary
and financial policy

A Profile of Indian Securities Market
The past decade in many ways has been remarkable for securities market
in India. It has grown exponentially as measured in terms of amount
raised from the market, number of stock exchanges and other


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intermediaries, the number of listed stocks, market capitalization, trading
volumes and turnover on stock exchanges, and investor population. The
market has witnessed fundamental institutional changes resulting in
drastic reduction in transaction costs and significant improvements in
efficiency, transparency and safety.

Securities and Exchange Board of India (SEBI)
With the objectives of improving market efficiency, enhancing
transparency, checking unfair trade practices and bringing the Indian
market up to international standards, a package of reforms consisting of
measures to liberalize, regulate and develop the securities market was
introduced during the 1990s. This has changed corporate securities
market beyond recognition in this decade. The practice of allocation of
resources among different competing entities as well as its terms by a
central authority was discontinued. The secondary market overcame the
geographical barriers by moving to screen-based trading. Trades enjoy
counterparty guarantee.

Bombay Stock Exchange (BSE)
Bombay Stock Exchange Limited is the oldest stock exchange in Asia with
a rich heritage. Popularly known as "BSE", it was established as "The
Native Share & Stock Brokers Association" in 1875. It is the first stock
exchange in the country to obtain permanent recognition in 1956 from
the Government of India under the Securities Contracts (Regulation) Act,
1956.The Exchange's pivotal and pre-eminent role in the development of
the Indian capital market is widely recognized and its index, SENSEX, is
tracked worldwide. With Demutualisation, the trading rights and
ownership rights have been de-linked effectively addressing concerns
regarding perceived and real conflicts of interest. The Exchange is
professionally managed under the overall direction of the Board of
Directors. The Board comprises eminent professionals, representatives of
Trading Members and the Managing Director of the Exchange.


SAAB MARFIN MBA
The Exchange has a nation-wide reach with a presence in 417 cities and
towns of India. The systems and processes of the Exchange are designed
to safeguard market integrity and enhance transparency in operations.
During the year 2004-2005, the trading volumes on the Exchange
showed robust growth. The Exchange provides an efficient and
transparent market for trading in equity, debt instruments and derivatives.
The BSE's On Line Trading System (BOLT) is a proprietary system of the
Exchange and is BS 7799-2-2002 certified. The surveillance and clearing
& settlement functions of the Exchange are ISO 9001:2000 certified.

BSE as a brand is synonymous with capital markets in India. The BSE
SENSEX is the benchmark equity index that reflects the robustness of the
economy and finance. At par with international standards,
First in India to introduce Equity Derivatives
First in India to launch a Free Float Index
First in India to launch US$ version of BSE Sensex

First in India to launch Exchange Enabled Internet Trading Platform
First in India to obtain ISO certification for Surveillance, Clearing &
Settlement
'BSE On-Line Trading System’ (BOLT) has been awarded the globally
recognized the Information Security Management System
standard
First to have an exclusive facility for financial training
Moved from Open Outcry to Electronic Trading within just 50 days
An equally important accomplishment of BSE is the launch of a
nationwide investor awareness campaign - Safe Investing in the
Stock Market -
In 2002, the name The Stock Exchange, Mumbai, was changed to
BSE.


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National Stock Exchange (NSE)
The National Stock Exchange of India Limited has genesis in the report of
the High Powered Study Group on Establishment of New Stock Exchanges,
which recommended promotion of a National Stock Exchange by financial
institutions (FII’s) to provide access to investors from all across the
country on an equal footing. Based on the recommendations, NSE was
promoted by leading Financial Institutions at the behest of the
Government of India and was incorporated in November 1992 as a
tax-paying company unlike other stock exchanges in the country

On its recognition as a stock exchange under the Securities Contracts
(Regulation) Act, 1956 in April 1993, NSE commenced operations in the
Wholesale Debt Market (WDM) segment in June 1994. The Capital Market
(Equities) segment commenced operations in November 1994 and
operations in Derivatives segment commenced in June 2000.

NSE has been promoted by leading financial institutions, banks, insurance
companies and other financial intermediaries. NSE is one of the first
de-mutualised stock exchanges in the country, where the ownership and
management of the Exchange is completely divorced from the right to
trade on it. Though the impetus for its establishment came from policy
makers in the country, it has been set up as a public limited company,
owned by the leading institutional investors in the country.
The NSE model however, does not preclude, but in fact accommodates
involvement, support and contribution of trading members in a variety of
ways. Its Board comprises of senior executives from promoter institutions,
eminent professionals in the fields of law, economics, accountancy,
finance, taxation, etc, public representatives.

NSE Milestones


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Nov-92 Incorporation
Apr-93 Recognition as a stock exchange
May-93 Formulation of business plan
Jun-94 Wholesale Debt Market segment goes live
Nov-94 Capital Market (Equities) segment goes live
Mar-95 Establishment of Investor Grievance Cell
Apr-95 Establishment of NSCCL, the first Clearing Corporation
Jun-95 Introduction of centralised insurance cover for all trading members
Jul-95 Establishment of Investor Protection Fund
Oct-95 Became largest stock exchange in the country
Apr-96 Commencement of clearing and settlement by NSCCL
Apr-96 Launch of S&P CNX Nifty
Jun-96 Establishment of Settlement Guarantee Fund
Setting up of National Securities Depository Limited, first depository in
Nov-96 India, co-promoted by NSE
Nov-96 Best IT Usage award by Computer Society of India
Dec-96 Commencement of trading/settlement in dematerialised securities
Dec-96 Dataquest award for Top IT User
Dec-96 Launch of CNX Nifty Junior
Feb-97 Regional clearing facility goes live
Nov-97 Best IT Usage award by Computer Society of India
May-98 Promotion of joint venture, India Index Services & Products Limited (IISL)
May-98 Launch of NSE's Web-site: www.nse.co.in
Jul-98 Launch of NSE's Certification Programme in Financial Market
Aug-98 CYBER CORPORATE OF THE YEAR 1998 award
Feb-99 Launch of Automated Lending and Borrowing Mechanism
Apr-99 CHIP Web Award by CHIP magazine
Oct-99 Setting up of NSE.IT
Jan-00 Launch of NSE Research Initiative
Feb-00 Commencement of Internet Trading
Jun-00 Commencement of Derivatives Trading (Index Futures)
Sep-00 Launch of 'Zero Coupon Yield Curve'
Launch of Broker Plaza by Dotex International, a joint venture between
Nov-00 NSE.IT Ltd. and i-flex Solutions Ltd.
Dec-00 Commencement of WAP trading
Jun-01 Commencement of trading in Index Options
Jul-01 Commencement of trading in Options on Individual Securities
Nov-01 Commencement of trading in Futures on Individual Securities
Dec-01 Launch of NSE VaR for Government Securities
Jan-02 Launch of Exchange Traded Funds (ETFs)
NSE wins the Wharton-Infosys Business Transformation Award in the
May-02 Organization-wide Transformation category
Oct-02 Launch of NSE Government Securities Index
Jan-03 Commencement of trading in Retail Debt Market
Jun-03 Launch of Interest Rate Futures
Aug-03 Launch of Futures & options in CNXIT Index
Jun-04 Launch of STP Interoperability
Aug-04 Launch of NSE’s electronic interface for listed companies


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Mar-05 ‘India Innovation Award’ by EMPI Business School, New Delhi
Jun-05 Launch of Futures & options in BANK Nifty Index
Dec-06 'Derivative Exchange of the Year', by Asia Risk magazine
Jan-07 Launch of NSE – CNBC TV 18 media centre
Mar-07 NSE, CRISIL announce launch of IndiaBondWatch.com
Jun-07 NSE launches derivatives on Nifty Junior & CNX 100
Oct-07 NSE launches derivatives on Nifty Midcap 50
Jan-08 Introduction of Mini Nifty derivative contracts on 1st January 2008
Mar-08 Introduction of long term option contracts on S&P CNX Nifty Index

Depository System
The Depositories Act, 1996 was passed with the objective of ensuring free
transferability of securities with speed, accuracy and security. It does so
by
Making securities of public limited companies freely transferable
subject to certain exceptions
Dematerializing the securities in the depository mode
Providing for maintenance of ownership records in a book entry
form.

In order to streamline both the stages of settlement process, the Act
envisages transfer ownership of securities electronically by book entry
without making the securities move from person to person. The Act has
made the securities of all public limited companies freely transferable,
restricting the company's right to use discretion in effecting the transfer
of securities, and the transfer deed and other procedural requirements
under the Companies Act have been dispensed with. Two depositories,
viz., NSDL and CDSL, have come up to provide instantaneous electronic
transfer of securities.

Capital Market Intermediaries
There are several institutions, which facilitate the smooth functioning of
the securities market. They enable the issuers of securities to interact
with the investors in the primary as well as the secondary arena.
Merchant Bankers


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Credit Rating Agencies
R& T Agents - Registrars to Issue
Stock Brokers
Custodians
Mutual Funds
Depositories
Depository Participants

Players (investors) in securities market

Individual investors
Institutional investors
FII’s
Mutual fund investor

Capital Market Instruments
The changes in the regulatory framework of the capital market and fiscal
policies have also resulted in newer kinds of financial instruments
(securities) being introduced in the market. Also, a lot of financial
innovation by companies who are now permitted to undertake treasury
operations, has resulted in newer kinds of instruments - all of which can
be traded – being introduced. The variations in all these instruments
depend on the
tenure, the nature of security, the interest rate, the collateral security
offered and the trading features, etc.
Debentures
Bonds
Preference Shares
Equity Shares
Government securities
Capital Market Processes
There are various processes that Issuers of securities follow or utilize in
order to tap the savers for raising resources. Some of the commonly used
processes and methods are described below.
Initial Public Offering (IPO)


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Private Placement
Preferential Offer/Rights Issue
Internet Broking

Dependence on Securities Market
Three main sets of entities depend on securities market. While the
Corporates and governments raise resources from the securities market
to meet their obligations, the households invest their savings in securities.
While the corporate sector and governments together raised a sum of Rs.
226,911 crore during 2001-02, the household sector invested 4.3% of
their financial savings through the securities market during 2000-01.

Corporate Sector
The 1990s witnessed emergence of the securities market as a major
source of finance for trade and industry. The share of capital market
based instruments in resources raised externally increased to 53% in
1993-94, but declined thereafter to 31% by 2000-01.

Governments
Along with increase in fiscal deficits of the governments, the dependence
on market borrowings to finance fiscal deficits has increased over the
years. The state governments and the central government financed about
14% and 18% respectively of their fiscal deficit by market borrowings
during 1990-91. In percentage terms, dependence of the state
governments on market borrowing did not increase much during the
decade 1991-2002. In case of central government, it increased to 69.4%
by 2001-02.


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Household
According to the RBI data, the household sector accounted for 84.8 % of
gross domestic
savings in Fixed income investment instruments during 2006-07; which
has increased in
comparison to 83.9% in 2005-06. In fiscal 2006-07, the household sector
has invested 55.7 % of financial savings in deposits, 24.2 % in
insurance/provident funds, 4.9 % in small savings, and 6.5 % in securities
market including government securities , units of mutual funds and other
securities.

Investor population and profile
According to the SEBI-NCAER survey of Indian investors conducted in
early 1999, an estimated 12.8 million, or 7.6% of all Indian households
representing 19 million individuals had directly invested in equity shares
and/or debentures as at the end of financial year 1998-99. The investor
households increased at a compound growth rate of 22% between
1985-86 and 1998-99. About 35% of investor households became
investors in equity shares prior to 1991, while 47% of the investors
entered the market between 1991 and 1995 and 17% after 1995. More
than 156 million or 92% of all Indian households were non-investor
households who did not have any investments in equity/debentures. Low
per capita income, apprehension of loss of capital, and economic
insecurity, which are all inter-related factors, significantly influenced the
investment attitude of the households. The lack of awareness about
securities market and absence of a dependable infrastructure and
distribution network coupled with aversion to risk inhibited non-investor
households from investing in the securities market.


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About KARVY
The Karvy group was formed in 1983 at Hyderabad, India. Karvy ranks
among the top player in almost all the fields it operates. Karvy Computer
share Limited is India’s largest Registrar and Transfer Agent with a client
base of nearly 500 blue chip corporate, managing over 2 crore accounts.
Karvy Stock Brokers Limited, member of National Stock Exchange of India
and the Bombay Stock Exchange, ranks among the top 5 stock brokers in
India. With over 6, 00,000 active accounts, it ranks among the top 5
Depositary Participant in India, registered with NSDL and CDSL. Karvy
COM trade, Member of NCDEX and MCX ranks among the top 3
commodity brokers in the country. Karvy Insurance Brokers is registered
as a Broker with IRDA and ranks among the top 5 insurance agent in the
country. Registered with AMFI as a corporate Agent, Karvy is also among
the top Mutual Fund mobilizer with over Rs. 5,000 crores under
management. Karvy Realty Services, which started in 2006, has quickly
established itself as a broker who adds value, in the realty sector. Karvy
Global offers niche off shoring services to clients in the US.
Karvy has 575 offices over 375 locations across India and overseas at
Dubai and New York. Over 9,000 highly qualified people staff Karvy.

Karvy – Early Days
Karvy the name comes from the names of the directors:

K - Mr. V. Kutumba Rao
A - Mr. K Ajay Kumar
R - Mr. M S Ramakrishna
V - Mr. Vikram Singh
Y - Mr. M Yugandhar

The birth of Karvy was on a modest scale in 1979. It began with the vision
and enterprise of a small group of practicing Chartered Accountants who
founded the flagship company …Karvy Consultants Limited. Karvy started
with consulting and financial accounting automation, and carved inroads


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into the field of registry and share accounting by 1985. Since then, Karvy
have utilized its experience and superlative expertise to go from strength
to strength…to better its services, to provide new ones, to innovate,
diversify and in the process, evolved Karvy as one of India’s premier
integrated financial service enterprise.

GROWTH AND DEVELOPMENT OF KARVY
Over the last 20 years Karvy has traveled the success route, towards
building a reputation as an integrated financial services provider, offering
a wide spectrum of services. And Karvy have made this journey by taking
the route of quality service, path breaking innovations in service,
versatility in service and finally…totality in service. Karvy’s highly qualified
manpower, cutting-edge technology, comprehensive infrastructure and
total customer-focus has secured for Karvy the position of an emerging
financial services giant enjoying the confidence and support of an
enviable clientele across diverse fields in the financial world.
Karvy’s values and vision of attaining total competence in its servicing has
served as the building block for creating a great financial enterprise,
which stands solid on its fortresses of financial strength - its various
companies.
With the experience of years of holistic financial servicing behind it and
years of complete expertise in the industry to look forward to, Karvy have
now emerged as a premier integrated financial services provider.
And today, Karvy can look with pride at the fruits of its mastery and
experience comprehensive financial services that are competently
segregated to service and manage a diverse range of customer
requirements.


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KARVY-Milestones

AT PRESENT STATUS OF KARVY

Presently Karvy is a member of National Stock Exchange (NSE), the
Bombay Stock Exchange (BSE), and The Hyderabad Stock Exchange (HSE).
Market analysis and market predictions are done by professional
management team.

KARVY is covering the entire spectrum of financial services such as Stock
Broking Services, Advisory Services, Stock broking, Depository
Participants, Distribution of financial products - mutual funds, bonds,
fixed deposit, equities, Insurance Broking, Commodities Broking, Personal
Finance Advisory Services, Merchant Banking & Corporate Finance,
placement of equity, IPOs, among others.
It is the largest mobiliser of funds as per PRIME DATABASE. It is among
the top 5 stock brokers in India (4% of NSE volumes). India's No. 1
Registrar & Securities Transfer Agents (Ranked as “The Most Admired
Registrar" by MARG). Among the top 3 Depository Participants. Largest
Network of Branches & Business Associates. First ISO - 9002 Certified
Registrar in India. Among top 10 Investment bankers. Largest Distributor
of Financial Products are --


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Every 50th Indian is serviced by KARVY Every 20th trade in stock market
is done through KARVY. Every 6th Investor in India invests through KARVY
India's No.1 Registrars and Transfer agent : KARVY Every 10th Demat
Account is held at KARVY.

ORGANISATION STRUCTURE OF KARVY

LEVEL-I

Board of

CMD, MD, & other Directors

Karvy Karvy Karvy Karvy
Stock Consultants Investor Global
Broking Limited Service Service
Limited Limited Limited

Karvy Karvy Karvy Karvy
Inc. Computershar Insurance Commodities
e Pvt. Limited Broking Broking
Private Private
Limited Limited

Karvy Regional
HQs / Branches


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Level-II

Regional Branch
Head
ISO CELL

Operation Support Branches
s Divisions Functions

ACCOUNTS
RIS

SYSTEM
FPD

HRD
BROKING

ADMN,
DP
PURCHASE,
& STORES

BRANCHES

Operations Support
Divisions Functions


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STUDY OF COMPANY PROFILE WITH RESPECT TO
Mc KINSEY’S 7S MODEL

STRATEGY:
In modern times the word strategy has found its way into the
management field. In the context of a business concern, strategy
indicates specific program of action for achieving the organization
objectives by employing the firm’s resources efficiently and economically.
It involves preparing oneself for meeting unforeseen factor. It is also
concerned with meeting the challenges posed by the policies and actions
of other competitors in the market.

Quality Policy
To achieve and retain leadership, Karvy shall aim for complete customer
satisfaction, by combining its human and technological resources, to
provide superior quality financial services. In the process, Karvy will strive
to exceed Customer's expectations.

Quality Objectives are to:


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Build in-house processes that will ensure transparent and
harmonious relationships with its clients and investors to provide
high quality of services.
Establish a partner relationship with its investor service agents and
vendors that will help in keeping up its commitments to the
customers.
Provide high quality of work life for all its employees and equip
them with adequate knowledge & skills so as to respond to
customer's needs.
Continue to uphold the values of honesty & integrity and strive to
establish unparalleled standards in business ethics.
Use state-of-the art information technology in developing new and
innovative financial products and services to meet the changing
needs of investors and clients.
Strive to be a reliable source of value-added financial products and
services and constantly guide the individuals and institutions in
making a judicious choice of same.
Strive to keep all stake-holders (shareholders, clients, investors,
employees, suppliers and regulatory authorities) proud and
satisfied.

STRUCTURE:

Board of Directors
Mr. C Parthasarathy (Chairman and Managing Director), Mr. M Yugandhar
(Managing Director ), Mr. M S Ramakrishna (Director ), Mr. Prasad V
Potluri (Director), William Stuart Crosby (Chairman – Karvy Computer
share Pvt Ltd.), Chandra Balaraman(Director– Karvy Computer share Pvt
Ltd.), Mark Davis(Director– Karvy Computer share Pvt Ltd.), Mr. Uday
Raval(Director - Karvy Inc. )
Karvy’s organization structure can be viewed as accomplishing
departments Operations Divisions and Support Function Division.


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Below the Operations Divisions there are sub divisions namely Registry
and Investor Services (RIS), Depository Participant (DP), Broking Services,
Financial Product Distribution (FPD).

Below the Support Functions, there are sub divisions namely Accounts,
System, Human Resource Development, and Administration, Purchase &
Stores.
These department heads controls the day-to-day affairs of the company.
These department heads are directly reports to the director. Board of
Directors directly appoints department heads. The departmental heads
does locations of responsibilities among various positions.

In Karvy Departments are inter related. Majority of decisions are taken by
the top management. While taking important decision the department
managers are also consulted and their suggestions are also considered.
Hence Participative style of management is followed in Karvy.

SYSTEM:
KARVY covers the entire spectrum of financial services such as Stock
broking, Depository Participants, Distribution of financial products -
mutual funds, bonds, fixed deposit, equities, Insurance Broking,
Commodities Broking, Personal Finance Advisory Services, Merchant
Banking & Corporate Finance, placement of equity, IPOs.

A link called ‘Resource Center’, devoted solely to research. Karvy’s highly
skilled research team, comprising of technical analysts as well as
fundamental specialists, secure result-oriented information on market
trends, market analysis and market predictions. This crucial information
is given as a constant feedback to its customers, through daily reports
delivered thrice daily; The Pre-session Report, where market scenario for
the day is predicted, The Mid-session Report, timed to arrive during lunch
break, where the market forecast for the rest of the day is given and The
Post-session Report, the final report for the day, where the market and


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the report itself is reviewed. To add to this repository of information,
Karvy publish a monthly magazine The Finapolis, which analyzes the
latest stock market trends and takes a close look at the various
investment options, and products available in the market, while a weekly
report, called Karvy Bazaar Baatein, gives more information on the
immediate trends in the stock market. In addition, its specific industry
reports give comprehensive information on various industries.

Karvy’s Stock Broking services are widely networked across India, with the
number of trading terminals providing retail stock broking facilities. To
empower the investor further Karvy have made serious efforts to ensure
that its research calls are disseminated systematically to all our stock
broking clients through various delivery channels like email, chat, SMS,
phone calls etc.

STYLE:
An activity like forecasting and planning are made by top level managers.
Major policies and plans are made by top management and it is
implemented and administered by employees. In the organization the
style of informal communication and meetings with employees has
created workers to a friendly environment.

STAFF:
The term staff refers to manpower planning, recruitment, performance
appraisal, motivation and morale.

SKILLS:
The managers and workers in each department are skilled to the extent of
functions they perform. Directors of the company are skilled in every
activities and disciplines of organization.
A 1600 team of highly qualified and dedicated professionals drawn from
the best of academic and professional backgrounds are committed to
maintaining high levels of client service delivery. This has propelled Karvy


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to a position among the top distributors for equity and debt issues with
an estimated market share of 15% in terms of applications mobilized,
besides being established as the leading procurer in all public issues.
A link called ‘Resource Center’, devoted solely to research. Karvy’s highly
skilled research team, comprising of technical analysts as well as
fundamental specialists, secure result-oriented information on market
trends, market analysis and market predictions.
Achievements
Largest mobiliser of funds as per PRIME DATABASE
Among the top 5 stock brokers in India (4% of NSE volumes)
India's No. 1 Registrar & Securities Transfer Agents (Ranked as "
The Most Admired Registrar" by MARG)
A Category- I -Merchant banker.
Among the to top 3 Depository Participants
Largest Network of Branches & Business Associates
First ISO - 9002 Certified Registrar in India
Among top 10 Investment bankers
Largest Distributor of Financial Products
Full Fledged IT driven operations
Handled the largest- ever Public Issue - IDBI
Handled over 500 Public issues as Registrars.
Handling the Reliance Account which accounts for nearly 10 million
account holders

Major issues managed as arrangers

Kerala State Electricity Board.
Power Finance Corporation
A.P. Water Resources Development Corporation.
A.P. Roads Development Corporation.
A.P. State Electricity Board.
Haldia Petrochemicals Ltd.

Major issues managed as Co-Managers


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IndusInd Bank Ltd
ICICI Bonds – March 97
ICICI Bonds – Dec 97
ICICI Safety Bonds March 98
ICICI Safety Bonds – April 98. July 98, Oct 98, Dec 98, Jan 99.
The Jammu and Kashmir Bank Ltd

Major issue handled as Registrars to Issues

IDBI Equity
Morgan Stanley Mutual Fund
Bank of Baroda
Bank of Punjab Ltd
Corporation Bank
IndusInd Bank Ltd
Jammu and Kashmir Bank Ltd
Housing and Urban Development Corporation (HUDCO) Ltd
Madras Refineries Ltd
Tamil Nadu Newsprint & Paper Ltd
BPL Ltd
Birla 3M Ltd
Essar Shipping Ltd
Essar Steels Ltd.
Hindustan Petroleum Corporation Ltd.
Infosys Technologies Ltd.
Jindal Vijayanagar Steels Ltd.
Nagarjuna Fertilizers & Chemicals Ltd.
Rajshree Polyfil Ltd.

Karvy Securities Ltd.

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

Andhra Pradesh Road Development Corporation Ltd
ICICI Bonds ( Private Placement)


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ICICI Bonds – 96
ICICI Bonds – 97- I
ICICI Bonds – 97 – II
ICICI Safety Bonds March 98.
IDBI Bonds 96.
IDBI Flexi Bonds I
IDBI Flexi Bonds II
IDBI Flexi Bonds III
Kerala State Electricity Board
Krishna Bhagya Jala Nigam Ltd
Power Finance Corporation Ltd
Andhra Pradesh Water Resources Development Corporation
Andhra Pradesh State Electricity Board

SHARED VALUES:
Employees at each level of organization are conscious about delivering
customer value for his money. Each and every employee understands the
mission and vision of the company. Employees of company are
committed towards the quality aspects in service. The employees of Karvy
themselves put forward in fulfilling the organizational principles for
betterment of organization.


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STUDY OF FUNCTIONAL DEPARTMENTS OF KARVY

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

OPERATING FUNCTIONS:

Registry and Investor Services (RIS) in which Karvy carry out functions as
Registrar & transfer Agent (RTA), and Registrar to the Issues. Financial
Product Distribution (FPD), Here financial products include Mutual Funds,
Fixed income securities, bonds, fixed deposits, Tax-saving Products,
Insurance, etc. Stock Broking Services and Depository Participant (DP),
which are explained in Service Profile of the Karvy group of companies.

SUPPORTING FUNCTIONS:

Administration - Purchase and Stores Department

HOD

Assistant HOD

Administration
Team

Responsibilities
To ensure preventive breakdown of equipment/accessories
including computer hardware
To ensure speedy breakdown maintenance
To ensure that the maintenance status of all equipment/
accessories is entered in the service
To ensure that the maintenance is carried out efficiently


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Maintenance includes preventive, breakdown and general maintenance.
Preventive maintenance shall be done as per the prefixed time schedule
by the subcontractors for the purpose. The administration incharge shall
make necessary arrangements for this purpose.
In Breakdown / General maintenance admi9nistration team receive
information regarding any breakdown or general repairs. On receipt of
the same, the administrative team shall maintain a record of all
maintenance done.

The Procedure involves identification of subcontractors which will be done
through Newspaper, advertisements, word of mouth. Both the parties
meet to their requirements and enter into agreement. Subcontractors are
appointed for providing services Preventive maintenance, Breakdown
maintenance, Courier services and any other services.

2.62 Accounts Department

Finance operations in Karvy are centralized at the Head Office Account.
Periodic fund requirement at the regional level will be sort as and when
required. But all cheques and such instruments would be signed by the
local regional manager.


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System Administration Department

Dy. General Manager

Dy.Manager

Asst. Manager

In this department the functions include Trouble shooting, desktop
queries, Network problems, Software and Hardware problems, Installation
of new systems, creating new networks.

Human resource Department
The human resource Department (HRD) caters to the entire recruitment
and employee upbringing in the company. The HR functions and practices,
which are practiced at the Karvy, are:
Manpower Planning: The departmental heads are entrusted with the
responsibility of assessing the present and the future manpower
requirement in their departments. Manpower planning is being done in
the company in order to secure a confidence and capability
Recruitment: Advertising in newspaper and other media, private
employment agencies, personal contacts, colleges and universities are the
sources used by Karvy.

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

Performance Appraisal: The HOD of the department, to which the
employees belongs, presents a report of the employees, to be appraised.
In addition to that other managers to whom the employee is associated is
also evaluating the performance of the employee.

Motivation: The Company provides both extrinsic and intrinsic motivation
to the employees. Extrinsic motivation is considered with external
motivators which employees get through pay, promotion, fringe benefits,


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holiday’s etc. Intrinsic motivation is concerned with the feeling of having
accomplished something worthwhile i.e. the satisfaction one gets after
doing one’s work well, praise, responsibility, recognition, participation
are the examples. Job rotation is undertaken to reduce the monitoring
and burden of the employees.

Morale: For improving employee’s morale positive measures like job
rotation, building responsibility into job etc are introduced. Both upward
and downward communication takes place within the company.
Participation is the key to commitment.


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SERVICE PROFILE OF THE
KARVY GROUP OF COMPANIES

Karvy Stock Broking Limited

Member - National Stock Exchange (NSE), the Bombay Stock Exchange
(BSE), and the Hyderabad Stock Exchange (HSE). Karvy Stock Broking
Limited, one of the cornerstones of the Karvy edifice, flows freely towards
attaining diverse goals of the customer through varied services.

Stock Broking Services
It is an undisputed fact that the stock market is unpredictable and yet
enjoys a high success rate as a wealth management and wealth
accumulation option. The difference between unpredictability and a safety
anchor in the market is provided by in-depth knowledge of market
functioning and changing trends, planning with foresight and choosing
one & other options with care. Karvy offer trading on a vast platform;
National Stock Exchange, Bombay Stock Exchange and Hyderabad Stock
Exchange. Karvy’s highly skilled research team, comprising of technical
analysts as well as fundamental specialists, secure result-oriented
information on market trends, market analysis and market predictions.
This crucial information is given as a constant feedback to its customers,
through daily reports delivered thrice daily; The Pre-session Report,
where market scenario for the day is predicted, The Mid-session Report,
timed to arrive during lunch break, where the market forecast for the rest
of the day is given and The Post-session Report, the final report for the
day, where the market and the report itself is reviewed. To add to this
repository of information, Karvy publish a monthly magazine The
Finapolis, which analyzes the latest stock market trends and takes a close
look at the various investment options, and products available in the


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market, while a weekly report, called Karvy Bazaar Baatein, gives more
information on the immediate trends in the stock market. In addition, it’s
specific industry reports give comprehensive information on various
industries. Karvy’s Stock Broking services are widely networked across
India, with the number of trading terminals providing retail stock broking
facilities.

To empower the investor further Karvy have made serious efforts to
ensure that its research calls are disseminated systematically to all our
stock broking clients through various delivery channels like email, chat,
SMS, phone calls etc.

Depository Participants
The onset of the technology revolution in financial services Industry saw
the emergence of Karvy as an electronic custodian registered with
National Securities Depository Ltd (NSDL) and Central Securities
Depository Ltd (CSDL) in 1998. Karvy set standards enabling further
comfort to the investor by promoting paperless trading across the
country and emerged as the top 3
Depository Participants in the country in terms of customer serviced.
Offering a wide trading platform with a dual membership at both NSDL
and CDSL, Karvy have established live DPMs, Internet access to accounts
and an easier transaction process in order to offer more convenience to
individual and corporate investors. A wide national network makes its
efficiencies accessible to all.

Distribution of Financial Products
A 1600 team of highly qualified and dedicated professionals drawn from
the best of academic and professional backgrounds are committed to
maintaining high levels of client service delivery. This has propelled Karvy
to a position among the top distributors for equity and debt issues with
an estimated market share of 15% in terms of applications mobilized,
besides being established as the leading procurer in all public issues.


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Advisory Services
Under its retail brand ‘Karvy – the Finapolis', it delivers advisory services
to a cross-section of customers. The service is backed by a team of
dedicated and expert professionals with varied experience and
background in handling investment portfolios. They are continually
engaged in designing the right investment portfolio for each customer
according to individual needs and budget considerations with a
comprehensive support system that focuses on trading customers'
portfolios and providing valuable inputs, monitoring and managing the
portfolio through varied technological initiatives. ‘Karvy - the Finapolis',
covers the latest of market news, trends, investment schemes and
research-based opinions from experts in various financial fields.

Mutual Fund Services
Karvy has attained a position of immense strength as a provider of
across-the-board transfer agency services to AMCs, Distributors and
Investors. Nearly 40% of the top-notch AMCs including prestigious clients
like Deutsche AMC and UTI swear by the quality and range of services that
Karvy offers. Besides providing the entire back office processing, Karvy
provides the link between various Mutual Funds and the investor,
including services to the distributor, the prime channel in this operation.
Carrying the ‘limitless' ideology forward, Karvy has explored new
dimensions in every aspect of Mutual Fund servicing right from volume
management, cost effective pricing, delivery in the least turnaround time,
efficient back-office and front-office operations to customized service.

Karvy has been with the AMCs every step of the way, helping them serve
their investors better by offering them a diverse and customized range of
services. The ‘first to market' approach that is Karvy’s anthem has earned
the reputation of an innovative service provider with a visionary bent of
mind.


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Karvy’s service enhancements such as ‘Karvy Converz', a full-fledged call
center, a top-line website (www.karvymfs.com), the ‘m-investor' and
many more, creating a galaxy of customer advantages.

Karvy Consultants Limited

As the flagship company of the Karvy Group,
Karvy Consultants Limited has always remained at the helm of
organizational affairs, pioneering business policies, work ethic and
channels of progress. Today, Karvy service over 6 lakhs customer
accounts in this business spread across over 250 cities/towns in India
and are ranked amongst the largest Depository Participants in the country.
With a growing secondary market presence, Karvy have transferred this
business to Karvy Stock Broking Limited (KSBL), Karvy’s associate and a
member of NSE, BSE and HSE.

Karvy Investor Service

Merchant Banking
Recognized as a leading merchant banker in the country, Karvy registered
with SEBI as a Category I merchant banker. This reputation was built by
capitalizing on opportunities in corporate consolidations, mergers and
acquisitions and corporate restructuring. Karvy’s quality professional
team and our work-oriented dedication have propelled it to offer
value-added corporate financial services and act as a professional
navigator for long term growth of its clients, who include leading
corporates, State Governments, foreign institutional investors, public and
private sector companies and banks, in Indian and global markets.
Its financial advice and assistance in restructuring, divestitures,
acquisitions, de-mergers, spin-offs, joint ventures, privatization and


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takeover defense mechanisms have elevated its relationship with the
client to one based on unshakable trust and confidence.

Karvy Global Services Limited

The specialist Business Process Outsourcing unit of the Karvy Group. Here
Karvy offer several delivery models on the understanding that business
needs are unique and therefore only a customized service could possibly
fit the bill. Be it in re-engineering and managing processes or delivering
new efficiencies, Karvy’s service meets up to the most stringent of
international standards. Karvy’s outsourcing models are designed for the
global customer and are backed by sound corporate and operations
philosophies, and domain expertise. Providing productivity improvements,
operational cost control, cost savings, improved accountability and a
whole gamut of other advantages. Karvy’s wide market coverage includes
Banking, Financial and Insurance Services (BFIS), Retail and Merchandising,
Leisure and Entertainment, Energy and Utility and Healthcare.


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Karvy Computershare Pvt. Limited

Karvy have traversed wide spaces to tie up with the world’s largest
transfer agent, the leading Australian company, Computershare Limited.
The company that services more than 75 million shareholders across
7000 corporate clients and makes its presence felt in over 12 countries
across 5 continents has entered into a 50-50 joint venture with Karvy.
Excellence has to be the order of the day when two companies with such
similar ideologies of growth, vision and competence, get together.

Issue Registry
Karvy has emerged as the largest transaction-processing house for the
Indian Corporate sector. With an experience of handling over 700 issues,
Karvy today, has the ability to execute voluminous transactions and
hard-core expertise in technology applications have gained the No.1 slot
in the business. Karvy is the first Registry Company to receive ISO 9002
certification in India that stands testimony to its stature.

It is actively coordinating with both the main depositories to develop
special models to enable the customer to access depository (NSDL, CDSL)
services during an IPO.


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Karvy Insurance Broking Private Limited

At Karvy Insurance Broking Pvt. Ltd., it provide both life and non-life
insurance products to retail individuals, high net-worth clients and
corporates. With the opening up of the insurance sector and with a large
number of private players in the business, Karvy is in a position to
provide tailor made policies for different segments of customers. With
Indian markets seeing a sea change, both in terms of investment pattern
and attitude of investors, insurance is no more seen as only a tax saving
product but also as an investment product. By setting up a separate entity,
Karvy would be positioned to provide the best of the products available in
this business to its customers.

Karvy’s wide national network, spanning the length and breadth of India,
further supports these advantages. Further, personalized service is
provided here by a dedicated team committed in giving hassle-free
service to the clients.

Karvy Commodities Broking Private Limited

At Karvy Commodities, Karvy is focused on taking commodities trading to
new dimensions of reliability and profitability. Karvy has made
commodities trading, an essentially age-old practice, into a sophisticated
and scientific investment option.
Here Karvy enable trade in all goods and products of agricultural and
mineral origin that include lucrative commodities like gold and silver and
popular items like oil, pulses and cotton through a well-systematized


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trading platform.
Regular trading workshops and seminars are conducted to hone trading
strategies to perfection. Karvy’s commitment to excel in this sector stems
from the immense importance that commodity broking has to a
cross-section of investors – farmers, exporters, importers, manufacturers
and the Government of India itself.

Karvy Inc.

With its growing ambitions of reaching out to investors across the shores
of this country, Karvy’s has set up Karvy Inc. in the US located in New
York to provide various financial products and information on Indian
equities to potential Foreign Institutional Investors (FIIs) in the region.
This entity soon would be ACC registered and would also become a
member of various important stock exchanges in the US. This entity
would extensively facilitate various businesses of Karvy viz., stock
broking (Indian equities), research and investment by (Qualified
Institutional Buyer) QIBs in Indian markets for both secondary and primary
offerings, outsourcing of various assignments for the multiple streams of
business in Karvy Global Services Ltd (KGSL).


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THEROTICAL FRAMEWORK

FUNDAMENTAL ANALYSIS:

Fundamental analysis is the examination of the underlying forces that
affect the well being of the economy, industry groups, and companies.
The goal is to derive the forecasted earning growths for future price
movements.

Fundamental analysis is the method of evaluating securities by
attempting to measure the intrinsic value of a particular stock. It is the
study of everything from the overall economy and industry conditions, to
the financial condition and management of specific companies (i.e., using
real data to evaluate a stock’s value). The method utilizes items such as
revenues, earnings, return on equity and profit margins to determine a
company’s underlying value and potential for future growth.

One of the major assumptions under fundamental analysis is that,
even though things get mis priced in the market from time to time, the
price of an asset will eventually gravitate toward its true value. This seems
to be a reasonable bet considering the long upward march of quality
stocks in general despite regular setbacks and periods of irrational
exuberance. The key strategy for the fundamentalist is to buy when prices
are at or below this intrinsic value and sell when they got overpriced.

Fundamental analysis consists of:

For the national economy we focus on economic data to assess the
present and future growth of the economy.
At the industry level, there might be an examination of supply and
demand forces for the products offered.
At the company level, may involve examination of financial data,
management, business concept and competition.


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Economy analysis

The economy is the overall economic environment in which all firms
operate. The key variables used to describe the state of economy are:

World economy

Asian economy

Indian economy

1. Growth rate of GDP

2. Industry growth rate

3. Agriculture and monsoons

4. Savings and investment

5. Inflation

6. Interest rates

7. Balance of payments

8. Infrastructure

World economy
According to the recent statistics, the world GDP (comprising 180
economies) has reached at a sum of US $ 46,747 Billions. Top 15
contributors to the world GDP are USA, Japan, Germany, China, UK, France,
Italy, Canada, Spain, Brazil, Russia, Korea, India, Mexico and Australia.

Percentage share of USA to the total world GDP is 28.3. While both the


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emerging economies such as India and China have a share of 1.82 and
5.41 respectively.

Find next page the top 15 contributors to the world GDP.

Asian Economy
Asian Economies have brought tremendous success in the recent years.
Economic growth rate in China crossed a two-digit number, while
economic growth in India’s Economy is near to 10 percent. Apart from
those two emerging Asian Economic giants, economies such as
Philippines, Indonesia and Malaysia are growing at a faster pace. Find
below various economic indicators on the Asian Economies.

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

GDP Growth Projection on Asian Economies

Country Name 2007 2008
Japan 2.3 1.9
Hong Kong SAR 5.5 5
Korea 4.4 4.4
Singapore 5.5 5.7


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China 10 9.5
India 8.4 7.8
Indonesia 6 6.3
Malaysia 5.5 5.8
Philippines 5.8 5.8
Thailand 4.5 4.8

The output over the world increased by 4.4% in the year 2005. The largest
contributors of the world output were India, China and Russia. The Gross
World Product (in purchasing power parity) as to the 2005 estimated data
has reached at $ 60.71 trillions with a real growth rate of 4.7%.

The services sector contributes a largest share to the world GDP. As to the
2004 estimated data, the services sector accounted for 64% followed by
industries at 32% and Agriculture 4%.
The level of exports and imports over the world has reached at $10.33
trillion and 10.3 trillions f.o.b. as to 2004 estimation.

World inflation:
Inflation, which can be simply stated to be a state of economic activities
with rising price level and falling purchasing power of money, has become
global phenomenon. Fast rising oil prices over the world has pressurized
the general price level in countries of the world. Present world economy is
experiencing higher economic growth with some inflationary pressure.
The stabilized countries have the inflation level ranging between 1-3%
and the developing countries have inflation between 3-6%.

Indian economy:
Indian primary sector
Agriculture is the mainstay of Indian economy because of its high share in
employment and livelihood creation notwithstanding its reduced
contribution to the nation’s GDP. The share of agriculture in the gross
domestic product has registered a steady decline from 36.4 per cent in


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1982-83 to 17 per cent in 2007-08. Yet this sector continues to support
more than half a billion people providing employment to 52 per cent of
the workforce. It is also an important source of raw material and demand
for many industrial products, particularly fertilizers, pesticides,
agricultural implements and a variety of consumer goods. This is first
time after green revolution that the India has become dependent in
satisfying its own food need. Growth pattern of Indian agriculture has
been so irregular, because of over dependency on the monsoon. This year
we could achieve dismal growth of 2.5%.India is expecting its agriculture
to grow at least 4% (CAGR) in the 11th plan to have sustainable and
consistent growth of overall GDP.
Industrial sector (secondary sector)
Industrial growth in India has been inspired by the LPG in 1991. in the
10th plan we could achive growth rate of 8-9%. At present industry
sector is contributing 28% to country’s GDP. Though at present India is
experiencing slowdown in growth of industry production, the long term
growth of 8-10% is still intact. The first eight months of the current fiscal,
till November 2007, witnessed a moderate slowdown in the growth of the
industrial sector. The slowdown has mainly been on account of the
manufacturing sector. The mining and quarrying sector grew at a faster
pace, while the growth in electricity remained unchanged from April-
November 2006. Nonetheless, the 9.2 per cent growth achieved during
April-November 2007 by the industrial sector, when seen against the
backdrop of the robust growth during the preceding four years, suggests
that the buoyancy in this sector has continued, albeit with a degree of
moderation. Two important changes have occurred in the growth pattern
of the use-based industrial categories:
First, capital goods have grown at an accelerated pace, over a high base
attained in the previous years, which augurs well for the required
industria capacity addition. Secondly, the consumer durables basket that
forms part of the Index of Industrial Production (IIP) showed a negative
growth during the period, thereby forcing a visible decline in the growth


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

Dimension of Indian Economy

GDP Composition

17%
28%
Manufacturing
Service
Agriculture

55%

Gross domestic product: measure of the total production of final goods
and services in the economy during a specified period usually a year.
Higher the growth rate, the other things being equal, the more favorable
it is for the stock market.

The growth rate of GDP is more important indicator of the performance of
the economy. The average growth rate of Indian economy during
1950-1980 was around 3.5% in real terms. In 1980 it was 5% and 6.2% in
2004. At present it is 8.7 and estimated to cross 9%.

Industrial growth rate: stock market analysts mainly focus on the
industrial sector. Higher the growth rate, more favorable is the things for
stock market. The industrial sector witnessed a slowdown in the first nine


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months of the current financial year. The growth of 9 per cent during
April-December 2007, when viewed against the back drop of the robust
growth witnessed in the preceding four years, suggests that there is a
certain degree of moderation in the momentum of the industrial sector.
At the product group level, the moderation in growth has been selective.
Industries like chemicals, food products, leather, jute textiles, wood
products and miscellaneous manufacturing products witnessed
acceleration in growth, while basic metals, machinery and equipments,
rubber, plastic and petroleum products and beverages and tobacco
recorded lower but strong growth during April-December 2007.

Agriculture and monsoons: agriculture accounts for about a quarter of
the Indian economy and has important linkages both direct and indirect
with the industry. There has been a loss of dynamism in the agriculture
and allied sectors in recent years. A gradual degradation of natural
resources through overuse and inappropriate use of chemical fertilizers
has affected the soil quality resulting in stagnation in the yield levels.
Public investment in agriculture has declined and this sector has not been
able to attract private investment because of lower/unattractive returns.

Savings and investment: A notable feature of the recent GDP growth
has been a sharply rising trend in gross domestic investment and saving,
with the former rising by 13.1 per cent of GDP and the latter by 11.3 per
cent of GDP over five years till 2006-07. The average investment ratio for
the Tenth Five Year Plan at 31.4 per cent was higher than that for the
Ninth Five Year Plan, while the average saving rate was also 31.4 per cent
of GDP higher than the average ratio of 23.6 per cent during the Ninth
Five Year Plan.

Money supply: For policy purposes for 2007-08, the RBI assumed a real
GDP growth of 8.5 per cent with inflation close to 5 per cent, and targeted
the monetary expansion in the range of 17-17.5 per cent and credit
expansion in the range of 20 to 24 per cent as consistent with envisaged
growth and inflation.


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Interest rates: interest rates affect the cost of financing to the firms.
Higher the interest rates, higher will be the cost and if lower, lower the
cost and more will be the profitability. Below table shows that interest
rates are decreasing year after year which is a good sign for the growth.

Year Interest(bank)
rates % p.a.
April 1997 11
April 1998 10
March 1999 8
March 2001 7
April 2003 6


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Inflation: The Wholesale Price Index (WPI), which is available on a weekly
basis, continues to be the most popular measure of headline inflation in
India.

Balance of payments: The strength, resilience and stability of the
country’s external sector is reflected by various indicators. These include
a steady accretion to reserves, moderate levels of current account deficit,
changing composition of capital inflows, flexibility in exchange rates,
sustainable external debt levels with elongated maturity profile and an
increase in capital inflows. The current account has followed an inverted
“U” shaped pattern during the period from 2001-02 to 2006-07, rising to
a surplus of over 2 per cent of GDP in 2003-04. Thereafter it has returned
close to its post-1990s reform average, with a current account deficit of
1.2 per cent in 2005-06 and 1.1 per cent of GDP in 2006-07.Capital
inflows, as a proportion of GDP, have been on a clear uptrend during the
six years (2001-02 to 2006-07) of this decade. They reached a high of
5.1 per cent of GDP in 2006-07 after a somewhat modest growth rate of
3.1 per cent in 2005-06.The net result of these two trends has been a
gradual rise in reserve increase to reach 4 percent of GDP in 2006-07
(Figure 6.1). With capital inflows exceeding financing requirements,
foreign exchange reserve increase was of the order of US$ 15.1 billion in
2005-06 and US$ 36.6 billion in 2006-07 (Table 6.2). As a proportion of
GDP, external debt was 17.2 per cent and 17.9 per cent in 2005-06 and
2006-07 respectively.


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Infrastructure: with the rapid growth of the economy in recent years the
importance and the urgency of removing infrastructure constraints have
increased. Traditionally, power, railways, roads, ports, airports and
telecommunications were the exclusive domain of the government. Policy
has changed gradually over the past two decades under the pressure of
rising gaps between demand and supply of infrastructure and
deteriorating quality of assets.


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Industry Analysis
Growth of Construction Industry:
Since the beginning of economic reforms in 1991, the Indian economy
has recorded a compounded annual growth rate (CAGR) of over 6.7%.
That is impressive in itself, and makes India the second fastest growing
large economy in the world — bettered only by China. More significant is
the orbit change in India’s GDP growth since 2003-04. With 9.4% growth
in 2006-07 following 9% growth in 2005-06, India’s CAGR since 2003-04
has exceeded 8.6%. There is a wide consensus among economists,
policy-makers and industry that India can now sustain a CAGR of around
8.5% for the foreseeable future. Indeed, the general feeling is that with
more investments in physical infrastructure, it is
quite feasible for the country to achieve double-digit growth by 2011-12
— the terminal year of the Eleventh Five Year Plan. This strong economic
growth, along with the
demographic impetus of a growing population in the working-age
category, is creating a massive demand supply mismatch across the real
estate sector. The sheer increase in the ‘need for built-up space’ is
opening up several opportunities for developers — be it for
constructing residential properties, creating commercial space for offices
or retail, setting up of SEZs, or developing entertainment zones.

Current situation of Constructions
The turnover of the construction industry witnessed 57% growth on Year
of Year(YoY) basis to reach Rs150,933m in December 2007. This is
because investments planned in the infrastructure both by government
and private sector, booming housing construction and expansion in
corporate production facilities, is likely to fast forward the growth in the
Indian construction industry. Aggregate operating profit increased by 35%
to Rs22,186.55m. The other income of the industry was Rs8,481.04m.
The depreciation increased to Rs2,048.49m. The net profit increased by
83% to reach Rs19,819.89m on YoY basis.


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The overall cost for the construction industry as the percentage of sales is
90.27% from Rs87 billion in December 2006 to Rs1,35 billion in
December 2007. The cost of raw materials to the total sales is 37.82%
during December 2007. The staff costs and other operating expenses are
7.34% and 8.04% of the total sales, as compared to the corresponding
quarter of the previous year. Depreciation and tax decreased but the
interest rate was high.
Inversement
Real estate investments account for about 60% of the total construction
investments. Demand-supply gap for residential housing, favorable
demographics, rising affordability levels, availability of financing options
as well as fiscal benefits available on availing of home loan are the key
drivers supporting the demand for residential construction. In addition to
this, demand for office space from IT/BPO segment is expected to
continue due to emergence of India as a preferred outsourcing
destination. Also, boom in organized retail is expected to result in huge
demand for real estate construction. According to industry estimates, the
Indian real estate industry is expected to grow at a compounded rate of
33% between FY05 to FY10, mainly driven by the residential segment.

Regulations:
Construction Industry in India According to the 11th five-year plan
(2007-12), the core infrastructure sector, comprising power, roads,
highways, railways, ports, airports, mining and irrigation, will require
massive investments to the tune of US$490 billion over the next five years
to sustain current 9-10% GDP growth per annum. The construction
industry accounts for 40-50% of the plan outlays and contributes about
20%, nearly US$59.4 billion to the national GDP. It employs around 31m
people, second only to the agriculture sector. The industry has witnessed
a sustained growth of 30% per annum during the last four years and is
poised to grow at 55% in the current fiscal 2007-08, outperforming even
the growth of IT and biotech industry in the knowledge sector. Jawaharlal
Nehru National Urban Renewal Mission, with an outlay of approximately


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Rs1,200 billion, is one of the most ambitious projects currently underway
in the nation for strengthening the urban infrastructure.

While the government announced the withdrawal of tax benefits under
Section 80 IA of the Income Tax Act, there is a lot of confusion regarding
its interpretation. While some companies are of the opinion that they can
no more claim benefits under this section (i.e. they will have to pay taxes
at marginal rate), others feel that the benefit has been withdrawn only on
the subcontracted work i.e. they can still claim tax benefits on
self-executed projects.


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Budget 2008-09
India is on the verge of witnessing a sustained investment phase in
infrastructure buildup. With a slew of announcements in housing, road,
port and airport development, we are seemingly on a path of sustained
higher economic growth on the back of improvement in infrastructure
construction in the country. From a policy perspective, there has been a
growing consensus that a private-public partnership is required to
remove difficulties concerning the development of infrastructure in the
country. A substantial chunk of the abovementioned investment target is
likely to come from the private sector.

Budget measures
The general CENVAT rate has been reduced to 14% from 16%.
Allocation for National Highway Development Programme (NHDP)
has been enhanced to Rs 12,966 crore in 2008-09 from Rs 10,867
crore bn in 2007-08.
The budget has given special attention to development of roads in
North Eastern region where 180 kms of roads will be completed in
2007-08 and 300 kms of road is being targetted for completion in
2008-09.
The corpus of Rural Infrastructure Development Fund (RIDF-XIV)
has been raised to Rs14,000 crore, with a separate window for rural
roads.
The budget has also given considerable thrust to irrigation project
where the outlay for 2008-09 has been increased to Rs 20,000
crore from Rs 11,000 crore in 2007-08.
The government is setting up 14 irrigation projects with initial
capital of Rs 100 crore to fund long-gestation major and medium
irrigation projects.

Budget Impact


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The Bharat Nirman and water irrigation programmes will benefit
companies involved in road construction and BOT irrigation
projects.
Reduction of CENVAT is also a big positive for the sector as it
indicates government’s commitment towards the Goods and Service
Tax Act.
Company Impact
Companies like Jain Irrigation and Madhucon Projects will benefit from
increased outlay in irrigation spending.

Industry Wish list
Builders’ Association of India
Alter existing customs duty structure on imported steel bars and
rods – fix the duty at 5% without levy of special additional duty and
countervailing duty
Extend existing structure of import duty, countervailing duty and
special duty on cement for another year, to discourage domestic
manufacturers from hiking prices
Project exporters who have executed projects abroad to be allowed
to import equipment purchased abroad at 5% duty instead of
current 50%
Scrap 2% TDS on construction companies as margins are wafer thin
at 4-5%. Allow companies to pay advance tax instead


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PORTER’S FIVE FORCE MODEL

Supply Past 2-3 years have seen a substantial increase in the
number of contractors and builders, especially in the
housing and road construction segment.

Demand Demand exceeds supply by a large margin. Demand for
quality infrastructure construction is mainly emanating
from the housing, transportation and urban
development segments.

Barriers to Low for road and housing construction. However, high
entry working capital requirements can create growth
problems for companies with weak financial muscle.

Bargaining Low. Due to the rapid increase in the number of
power of contractors and construction service providers, margins
suppliers have been stagnant despite strong growth in volumes.

Bargaining Low. The country still lacks adequate infrastructure
power of facilities and citizens have to pay for using public
customers services.

Competition Very high across segments like road construction,
housing and urban infrastructure development.
Relatively less in airport and port development.


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COMPANY ANALYSIS
Established in 1971, Unitech today is India’s leading real estate company
with a market
capitalization of around US$ 10 billion. From being a National Capital
Region (NCR) focused real estate developer, Unitech is fast establishing a
pan India presence. It is already a market leader in NCR and Kolkata and
endeavors to attain leadership in every
market that it operates in. Unitech has the most diversified product mix
comprising residential, commercial, Information Technology (IT) parks,
Retail, Amusement parks and Hotels. It is known for the quality of its
product and is the first real estate developer to have been certified ISO
9001:2000 certificate in North India.

Future expansion plans
As of 31 March 2007, the Company has 22 major ongoing residential
projects. The total
residential space offering from on-going projects is over 25 million
square feet. Of these 22 major projects, nine are in Gurgaon, five in
Greater Noida, six in Kolkata and one each in Lucknow and Bangalore.

Ongoing Projects
Project Location Type
Close(North) Gurgaon Multi-Storied
Close(South) Gurgaon Multi-Storied
Uniworld Spa Gurgaon Multi-Storied
Fresco Gurgaon Multi-Storied
Uniworld Garden Gurgaon Multi-Storied
Espace Gurgaon Villa
Harmony Gurgaon Multi-Storied
Escape Gurgaon Multi-Storied
Uniworld City Gurgaon Multi-Storied
Horizon Greater Noida Multi-Storied
Habitat Greater Noida Multi-Storied


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Heights Greater Noida Multi-Storied
Cascades Greater Noida Multi-Storied
Verve Greater Noida Multi-Storied
Garden Kolkata Multi-Storied
Air Kolkata Multi-Storied
Downtown Kolkata Multi-Storied
Heights Kolkata Multi-Storied
Cascades Kolkata Multi-Storied
Horizon Kolkata Multi-Storied
South City Lucknow Multi-Storied
Heritage Estate Bangalore Multi-Storied
Upcoming Township Projects
Project Location Type
Unitech Grande Noida Multi-Storied
Uniworld Resorts Gurgaon Villa & Multi-Storied
Gateway Kolkata Multi-Storied
Uniworld City Greater Noida Multi-Storied
Oasis Chennai Villa & Multi-Storied
Oasis Hyderabad Villa & Multi-Storied

Risk factors:
In the course of its business, Unitech is exposed to a wide variety of risks.
The company is pursuing a strategy of high growth through entry into
new markets. Though the company has, in the recent past, significantly
scaled up its internal as well as external resources in keeping with its
strategy, it remains to be seen if the company can manage this growth
effectively. Demand for real estate especially residential real estate is
sensitive to interest rate movements. Interest rats have been rising in the
recent past owing to a Reserve Bank of India’s credit tightening policy.
This could adversely affect company’s business plans considering that
residential segment constitutes a significant portion of company’s
business. Also, recent curbs by RBI and the Government of India to reduce
credit flow to real estate sector may affect company’s plans. Rise in cost


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of raw materials could impact company’s performance. While the prices of
cement and steel are
beyond company’s control, we have been leveraging the bargaining power
of scale to manage the cost of other materials through consolidated
purchase of those materials. Real estate business in India being highly
regulated by Governments at various levels, several regulatory approvals,
permits, licenses etc. are required to be obtained from the Government
from time to time for our projects. Any delay in obtaining such approvals
can affect the timely execution of our projects. While there remain a
number of risks to our business, due to Unitech’s experience of over two
decades in real estate development, its relatively low average cost of the
land bank, its capital efficiency and its innovative
methods of turning around cash flows, we believe that the company will
continue to generate healthy shareholder returns for the future. Therefore,
Unitech’s outlook for 2007-08 remains positive.
Financial performance analysis:

Ratios Industry 2007 2006 2005
Current Ratio 1.74 0.95 0.48 0.43
Quick Ratio 1.46 0.93 0.46 0.4
Inventory Turnover
Ratio 14.23 32.16 16.45 15.78
Debt Equity Ratio 1.85 3.11 3.06 1.86
Operating Profit Ratio 23.49 56.83 19.41 9.73
Return On Equity 28.46 84.72 31.01 17.2
P/E 29.02 31.97 50.04 13.99
Price to Book Value
Ratio 7.26 16.37 18.35 2.63
Dividend Payout
Ratio 13.34 4.13 152.1 127.47
Earning Yield 3.46 3.13 2 7.15
Dividend Yield 0.47 0.13 0.04 1.19
Total Asset Turnover
Ratio 0.88 0.22 0.58 0.93
Capital Turnover
Ratio 2.31 0.91 2.36 2.66
Gross Profit Margin 21.84 56.64 18.94 9.31
Net Profit Margin 12.78 39.22 10.32 5.67

Interpretation:


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Liquidity ratios:

Ratios Industry Company
Current Ratio
1.74 0.95
Quick Ratio
1.46 0.93

Though company’s current ratio is increasing year by year still it is
lesser than industry average. But as the company has got ability to use
capital more efficiently, this ratio gives it more leverage in terms of
earnings. So it can be justifiable.


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Turnover ratios:
Total Asset Turnover Ratio 0.36
0.88
Capital Turnover Ratio 0.54
2.31
Inventory Turnover Ratio
14.23 32.16

Inventory turnover ratio is exceptionally good compared to industry.
Inventory turnover ratios are improving year by year. Asset and Capital
Turnover Ratios are lower than industry, because company has not yet
realized good from its newly restructured capital .

Leverage ratios:
Debt Equity Ratio
1.85 3.11

Company is in the comfortable zone. So that it can still use more
Financial Leverage in future.
Profitability ratios:
Operating Profit Ratio
23.49 56.83
Gross Profit Margin 21.84 56.64
Net Profit Margin 12.78 39.22

All profitability ratios for the company are exceptionally good and they
are more than double the industrial average. Perhaps this could be
possible because of its volume, very good companies business
strategies and mainly because of high project execution expertise that
the company has got over the year.

Valuation ratios:
P/E 29.02 31.97
Price to Book Value Ratio 7.26 16.37
Dividend Payout Ratio 13.34 4.13
Earning Yield 3.46 3.13


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Dividend Yield 0.47 0.13

P/E of company is higher than industry average; it is because of the
company brand and almost de-risked business operations and
company’s higher earning ratios. Coming to Price to BV ratio company
higher ratio than industry average which is substantiable from the
companies past financial track record point of view. The DY and EY for
scrip is lower than industry average, because of lower proportion of
dividend payout owing to companies high growth potential.
Summary:
So I can conclude company’s scrip is over valued.

Note:

Adjustment factor for P/E:
I have considered only Historical P/E but not the Weighted P/E ratio.
Because Constant Growth Dividend Model can not be applied for the
company. ( because there is no consistent dividend pay out).


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2006/ 2005/ 2004/ 2003/
Period & months 2007/03 03 03 03 03
INCOME
Net Operating
Income 2,441.74 653.13 509.33 373.95 235.63
EXPENSES
Material
Consumption 78.97 61.07 55.68 20.14 25.45
Manufacturing
Expenses 853.98 396.1 359.62 298.87 174.36
Personnel Expenses 65.62 31.11 15.95 10.38 8.71
Selling Expenses 13.13 10.62 8.35 4.3 0.91
Administrative
Expenses 42.35 27.4 20.15 14.71 8.45

Cost of Sales 1,054.04 526.29 459.75 348.4 217.88

Reported PBDIT 1,387.69 126.84 49.57 25.56 17.75
Other Recurring
Income 65.66 21.45 17.41 8.1 12.01
Adjusted PBDIT 1,453.35 148.29 66.98 33.66 24.55
Depreciation 4.54 3.1 2.14 1.69 1.84
Other Write-offs 0 0 0 0 0
Adjusted PBIT 1,448.81 145.19 64.84 31.97 22.71
Financial Expenses 193.71 37.14 21.92 9.54 12.01
Adjusted PBT 1,255.11 108.05 42.92 22.43 10.7
Tax Charges 361.27 38.48 13.46 6.46 4.61
Adjusted PAT 893.84 69.57 29.47 15.98 6.1
Non-recurring
Items 89.72 0.07 0.45 -1.91 4.52
Other Non-cash
Adjustments 0.44 -0.51 -1.05 2.5 0.02
REPORTED PAT 983.56 69.64 29.92 14.07 10.61
No. of shares 81.17 1.25 1.25 1.25 1.25

EPS 12.12 55.71 23.94 11.26 8.49


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