study of indian manufacturing industries

7/24/2019 study of indian manufacturing industries

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L&T

Larsen & Toubro Limited, also known as L&T, is an

Indian multinational conglomerate headquarteredin Mumbai, Maharashtra, India. It was founded by Danish

engineers taking refuge in India, as well as an Indian

nancing artner. The comany has business interests in

engineering, construction, manufacturing goods,

information technology, and nancial ser!ices, and also

has an o"ce in the Middle #ast and other arts of

$sia.L&T is India%s largest engineering and construction

comany. Described by DT' in ()*+ as a bellwether of

India%s engineering & construction sector, L&T was

recogni-ed as the omany of the /ear in #conomic Times

()*) awards

Beta Estimation

It is the ratio of co!ariance between market return and the

security0s return to the market return !ariance.

The beta 12 or beta coefficient3 of an in!estment indicates

whether the in!estment is more or less !olatile than the

market. In general, a beta less than * indicates that the

in!estment is less !olatile than the market, while a beta

more than * indicates that the in!estment is more !olatile

than the market.$ beta greater than one generally means

that the asset both is !olatile and tends to mo!e u and

down with the market.

The degree to which di4erent ortfolios are a4ected by

these systematic risks as comared to the e4ect on the

market as a whole, is di4erent and is measured by 5eta.

To ut it di4erently, the systematic risks of !arious

securities di4er due to their relationshis with the market.


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ame of

omany

$!erage

Market

6eturn

5eta $7M

L&T ).)89(8:+;9 *.**


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8): (


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Liquidity Ratios

1. Current ratioE urrent assetsFurrent liabilities

$ ratio less than * indicates that the rm0s liabilities

are greater than its assets and it0s likely that the

comany would be unable to ay o4 its obligations.

=hile a current ratio abo!e * shows that the comany

is not in good nancial health, it does not necessarily

mean that it will go bankrut.

Those resent roortion may be most astounding

for those quite a while ()*8. It infers that L&T required

most noteworthy Geeting dissol!ability on ()*8 $lso it

would do well to ability about nancing its resent

liabilities Throughout that quite a while.

(. Quick Ratio1$cid test ratio3 E Huick assets F urrent

liabilities

Huick assets E urrent assets In!entories

The acid test ratio or quick ratio measures the liquidity of

a comany by identifying its caability to meet its current

liabilities by utili-ing its quick assets. $s the quick ratio

eliminates the in!entories, it is a more stringent measure

of liquidity comared to the current ratio. If a rm has

su"cient quick assets to ay o4 its entire currentliabilities, it will be able to meet its obligations without the

need of selling o4 any of its longterm or Bed assets. $

higher quick ratio is usually more fa!ourable as it signies

that the comany has high nancial security in the short

term.


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J!er ()*8, L&T required those most ele!ated caability

will ay o4 its resent liabilities #!entually Tom%s erusing

utili-ing its fast benets.

Leera!e Ratios

*. Debt #quity 6atio E DebtF#quity.Lower the debt equity ratio, higher is the degree of

rotection enKoyed by the creditors.

the debt equity ratio is lowest for year ()*+ and is

highest for year ()*

$!erage Total $ssets

In ()*+, the ratio of asset o!er sales is the maBimum withnot much change in the re!ious and neBt year, ro!idingconsistency in the utili-ation of assets er sales made.

"ro#ta$i%ity Ratio

Cross Margin*. &ross "ro#t 'ar!in RatioE

et @ales


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()*+ shows a more rotable ratio than the other two,this imlies a better sales margin.

et Income(. Net "ro#t 'ar!in RatioE

et @ales

The ratio analysis shows a good con!ersion of income

from the sales made in ()*+ but it is falling in ()*8 and

again in()*


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the share rice of a comany is fairly !alued,

under!alued or o!er!alued.7F# 6atio E urrent @hare 7riceF#arnings er @hare

Aor nancial analysis Kustied 7F# ratio is calculatedusing di!idend discount method.7F# 6atio E #Bected 7ayout 6atioF16equired 6ate of

6eturn Di!idend Crowth 6ate3If the Kustied 7F# calculated using di!idend discount

analysis is higher than the current 7F# ratio the share

is under!alued and should be urchased. If the

Kustied 7F# is lower than 7F# ratio the share is

o!er!alued and should be sold.

In the year ()*+ and ()*8 7F# ratio was almost same

and for the year ()*< it has increased a bit i.e they

fairly !alued share rices in that year.

study of indian manufacturing industries

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