CAPITAL STRUCTURE

Companies:
1. JSPL
2. L&T
3. Kajaria Ceramics
4. Kirloskar Brothers

Submitted By:
Group - 2
Ashish Sharma - 9
Ayushi -11
Aarushi Rajput - 16
Nidhi Singh 25
Page 1 of 40

Sudeep Mishra - 37

INTRODUCTION OF COMPANIES
1. JSPL(Jindal Steel & Power Ltd.)

JSPL is an industrial powerhouse with a dominant presence in steel, power,

mining, power generation and infrastructure sectors. Part of the US $-18billion OP Jindal Group this young, agile and responsive company is
constantly expanding its capabilities to fuel its fairy tale journey that has
seen it grow from nowhere to a US $-3.6-billion business conglomerate. The
company has committed investments exceeding US$ 30 billion in the future
and has several business initiatives running simultaneously across
continents.
Led by Mr Naveen Jindal, the youngest son of the legendary Shri O.P. Jindal,
the company produces economical and efficient steel and power through
backward and forward integration.
From the widest flat products to a whole range of long products, JSPL today
brags a product portfolio that caters to markets across the steel value chain.
The company produces the world's longest (121-metre) rails and it is the first
in the country to manufacture large-size parallel flange beams.
JSPL operates the largest coal-based sponge iron plant in the world and has
an installed capacity of 3 MTPA (million tonnes per annum) of steel at
Raigarh in Chhattisgarh. Also, it has set up a 0.6 MTPA wire rod mill and a 1.0
MTPA capacity bar mill at Patratu, Jharkhand, a medium and light structural
mill at Raigarh, Chhattisgarh and a 1.5 MTPA steel melting shop and a plate
mill to produce up to 5.00-metre-wide plates at Angul, Odisha. An
enterprising spirit and the ability to discern future trends have been the
driving force behind the company's remarkable growth story. The
organization is wedded to ideals like innovation and technological leadership
and is backed by a highly driven and dedicated workforce of 15,000 people.
In Africa, the company has large mining interests in South Africa,
Mozambique, Namibia, Botswana and Mauritania and is expanding into steel,
energy and cement. In Australia, the company is investing in greenfield and

Page 2 of 40

brownfield resource sector companies and projects to supplement its

planned steel and power projects in India and abroad.
In Indonesia, the company has invested on the development of two
greenfield exploration assets. It is also exploring investment opportunities in
the power and infrastructure sector in Indonesia. JSPL endeavours to
strengthen India's industrial base by aiding infrastructural development,
through sustainable development approaches and inclusive growth. The
company deploys its resources to improve infrastructure, education, health,
water, sanitation, environment and so on in the areas it operates in. The
company has won several awards for its innovative business and social
practices.

Product Range of JSPL:

Rails
Parallel Flange Sections
Plates & Coils
Angles and Channels
Jindal Panther TMT Rebars
Wire Rods
Fabricated Sections
Jindal SpeedFloor
Semi-Finished ProductsPower
Minerals
Ferro Chrome
Sponge Iron

2. Kajaria Ceramics
Kajaria Ceramics is the largest manufacturer of ceramic/vitrified tiles in India.
It has an annual aggregate capacity of 45.20 mn. sq. meters, distributed
across seven plants-Sikandrabad in Uttar Pradesh, Gailpur in Rajasthan, four
plants in Morbi in Gujarat and one at Vijayawada in Andhra Pradesh.
The motivating factor remains the zeal, the zeal to be the best, to be at the
top and to achieve the highest echelons of excellence. The manufacturing
units are equipped with cutting edge technology. Intense automation, robotic
car application and a zero chance for human error are just few reasons why
Kajaria remains at the top in the industry.
Page 3 of 40

Founded 25 years ago with a single-minded vision, to be the best in

providing tile solutions, Kajaria has since then grown stronger with its hard
work, innovations and patronage from our discerning customers.
The Indian consumers' rapidly growing appetite for style and aesthetics is
the inspiration behind every design of Kajaria Ceramics. Kajaria has today
become a synonym for quality, service and innovation - not only in the
domestic market but in the international market too.
Kajaria Ceramics has increased its capacity from 1 mn. sq. mtrs to 45.20 mn.
sq. mtrs. in last 25 years and offers more than 1000 options in ceramic wall
& floor tiles, vitrified tiles, designer tiles and much more. These tiles come in
a wide range of colours and textures to complement bathrooms, living
rooms, corridors, study rooms & kitchen, born our of an inspired creativity of
those who feel that rooms should be an extension of the beauty reflected.
With an unparalleled commitment towards quality we have strived to adopt
technologies and standards with the changing times.
Be it technology, research, design or quality, Kajaria has set its sight on all
these factors adopting new production techniques in order to enhance the
quality of its products. Due to creativity and design ability of our team, our
design comprises both innovation and exclusivity.
Leveraging the two invaluable assets - the Kajaria brand and unparalleled,
multi-layer distribution network - to expand the product bouquet to cater to
the growing aspirations of the discerning Indian customers.
Product Range of Kajaria Ceramics:

Ceramic Wall and Floor Tiles

Polished Vitrified Tiles
Glazed Vitrified Tiles
Vitrified Paving Tiles (Pavigers)
Sanitryware
Tile Adhesives

3. L&T - Larsen & Toubro Limited

Page 4 of 40

Larsen & Toubro Limited (L&T) is a technology, engineering, construction

and manufacturing company. It is one of the largest and most respected
companies in India's private sector.
More than seven decades of a strong, customer-focused approach and the
continuous quest for world-class quality have enabled it to attain and
sustain leadership in all its major lines of business.
L&T has an international presence, with a global spread of offices. A thrust
on international business has seen overseas earnings grow significantly. It
continues to grow its global footprint, with offices and manufacturing
facilities in multiple countries.
The company's businesses are supported by a wide marketing and
distribution network, and have established a reputation for strong customer
support.
L&T believes that progress must be achieved in harmony with the
environment. A commitment to community welfare and environmental
protection are an integral part of the corporate vision.
In response to changing market dynamics, L&T has gone through a phased
process of redefining its organization model to facilitate growth through
greater levels of empowerment. The new structure is built around multiple
businesses that serve the needs of different industries.
Product range of L&T:
Construction
Infrastructure
Buildings and Factories
Power Transportation and Distribution Project
Metallurgical and Material Handling
Reality Projects
Engineered Products and Systems
Refinery
Oil and Gas
Petrochemical
Fertilizers
Coal Gasification
Aerospace
Thermal Power Plant
Nuclear Power Plant
Page 5 of 40

 Defence

4. Kirloskar Brothers
Kirloskar Brothers Limited (KBL) is a world class pump manufacturing
company with expertise in engineering and manufacture of systems for fluid
management. Established in 1888 and incorporated in 1920, KBL is the
flagship company of the $ 2.1 billion Kirloskar Group. The market leader in
fluid management, KBL provides complete fluid management solutions for
large infrastructure projects in the areas of water supply, power plants,
irrigation, oil & gas and marine & defence. We engineer and manufacture
industrial, agriculture & domestic pumps, valves and hydro turbines.
In 2003 KBL acquired SPP Pumps, United Kingdom and established SPP INC,
Atlanta, USA, is as a wholly owned subsidiary of SPP, UK and expanded its
international presence. In 2007, Kirloskar Brothers International B.V., The
Netherlands and Kirloskar Brothers (Thailand) Ltd, a wholly owned subsidiary
in Thailand were incorporated. In 2008, KBL incorporated Kirloskar Brothers
Europe BV, a joint venture between Kirloskar Brothers International BV and
Industrial Pump Group, The Netherlands. In 2010 KBL further consolidated its
global position by acquiring 90% stakes in Braybar Pumps, South Africa. SPP
MENA was established in Egypt in 2012. KBL has joint venture cooperation
with Ebara, Japan since 1988. Kirloskar Corrocoat Private Limited is joint
venture cooperation with Corrocoat, UK since 2006. KBL acquired The
Kolhapur Steel Limited in 2007 and Hematic Motors in 2010.
KBL has eight manufacturing facilities in India at Kirloskarvadi, Dewas,
Kondhapuri, Shirwal Ahmedabad, Coimbatore, Kolhapur and Karad. In
addition, KBL has seven manufacturing and packaging facilities in Egypt,
South Africa, Thailand, The Netherlands, United Arab Emirates, United
Kingdom and United States of America. KBL has 12,700 channel partners in
India and 80 overseas and is supported by best in class network of
Authorised Centres and Authorised Refurbishment Centres across the
country.
All plants of KBL are ISO 9001 & ISO 14001, OHSAS 18001, ISO 14000
Environment Standard certified. They apply Total Quality Management tools
using European Foundation for Quality Management (EFQM) model. The
Kirloskarvadi plant of KBL is a state-of-the-art integrated manufacturing
Page 6 of 40

facility having Asias largest hydraulic research centre with testing facility up
to 5000 kW and 50,000 m3 / hour.
KBL is the only pump manufacturing company in India and ninth in the world
to be accredited with the N and NPT certification by American Society of
Mechanical Engineers (ASME).

Product range of Kirloskar Brothers:

Pumps
End Suction Pump
Monobloc Pump
Split Case Pump
Submersible Pump
Multistage Pump
Sump Pump
Vertical Turbine Pump
Special & Engineered Pump
Valves
Butterfly Valve
Sluice valve
Non Return Valve
Kinetic Air Valve
Foot Valve
FM Approved Gate Valve
Cast Steel Gate Valve
Cast Steel Globe Valve
Cast Steel Check Valve
Ball Valve
Steam Trap Device
Forged Steel Gate, Globe, Check Valve
Suction Diffuser & Triple Duty Valve
Hydro Turbines
Francis Turbines
Kaplan Turbines
Pelton Wheel Turbines
Packaged Systems
HYPN
Eterna
Fire Fighting System
HVACR System
Page 7 of 40

 Condition Monitoring System

Solar Pumping System

INTRODUCTION TO MARKET LEADERS

1. Market

leader

in

Steel

and

Power

Industry-

ArcelorMittal
With 119 million tonnes of annual production capacity and 245,000
employees across 60 countries, ArcelorMittal is the worlds leading steel and
mining company.
We are the leader in all major global steel markets, including automotive,
construction, household appliances and packaging, with leading research and
development and technology, as well as sizeable captive supplies of raw
materials and outstanding distribution networks. With an industrial presence
in more than 22 countries spanning four continents, the company covers all
of the key steel markets, from emerging to mature.

Products range of ArcelorMittal:

Heavy plates
Beams & sections
American sizes (W-size)
British beams (UB/UC)
European beams (IPE/HE)
Merchant bars (Angles,Flat bars, Roundbars)
Channels(Parallel / Taper / Flange)
Hollow sections (Square/Rectangular/Hollow)
Tubulars
Seamless
Welded

2. Market leader in Ceramics Industry- RAK Ceramics

RAK Ceramics is around USD 1 billion global conglomerate that supplies to

over 160 countries and has been officially recognised as the worlds largest
ceramics manufacturer with a global annual production output of 117 million
square meters of ceramic and porcelain tiles, 4.5 million pieces of bathware
Page 8 of 40

and 20 million pieces of tableware. The Ras Al Khaimah-based public-listed

company was established in 1991 by H.H. Sheikh Saud Bin Saqr Al Qasimi,
Ruler of Ras Al Khaimah and UAEs Supreme Council Member who had the
vision of making the company into world-class organisation and H.H. Sheikh
Mohammed Bin Saud Al Qasimi, Crown Prince of Ras Al Khaimah and the
Chairman of RAK Ceramics has been directing the company towards global
competitiveness.
Abdallah Massaad, CEO of RAK Ceramics is currently leading the company
strategically to position RAK Ceramics as a premium international brand
known for its innovative product range through technological advancement
and high-quality production.
Specializing in high-quality ceramic wall and floor tiles, Gres Porcellanato,
and sanitary ware, RAK Ceramics uses more than 8,000 production models,
with new designs added almost every week to its portfolio. Tiles are
manufactured in a variety of sizes, from 10 cm x 10 cm up to 125 cm x 185
cm, the widest range offered in the ceramic field.
RAK Ceramics is the worlds first company to launch Luminous, the wonder
tile that glows in the dark and the Antimicrobial, a super specialty tile for the
hospitality industry. The company's creations include the high-valued brand
"Elegance Ceramics" and it continues to be a global pioneer in the world of
ceramics through innovative eco-friendly products such as RAK SLIM, Stone
Art Collection, Orion Collection and Wood Art Collection using the latest
Nanopix digital printing technology. It has also launched its trendy tiles in
unique sizes of 25x70 and 20x50 appealing to the urban consumers. Further
it has tapped children tiles segment with the launch of Junior Tiles Collection.
Product range by RAK Ceramics

Ceramic tiles
Porcelain tiles
Sanitary Ware
Faucets and Kitchen Fittings
Tableware
Bath ware
Tile Adhesives
Interior ancillary products

ANALYSIS AND FINDINGS

Ratios Analyzed
Solvency Ratios
Page 9 of 40

The ratios indicate the degree to which the activities of a firm are
supported by creditors funds as opposed to owners. The relationship of
owners equity to borrowed funds is an important indicator of financial
strength. The debt requires fixed interest payments and repayment of the
loan and legal action can be taken if any amounts due are not paid at the
appointed time. A relatively high proportion of funds contributed by the
owners indicate a cushion (surplus) which shields creditors against
possible losses from default in payment.
The greater the proportion of equity funds, the greater the degree of
financial strength. Financial leverage will be to the advantage of the
ordinary shareholders as long as the rate of earnings on capital employed
is greater than the rate payable on borrowed funds.
The following ratios can be used to identify the financial strength and risk
in the business.
Debt-Equity Ratio: Debt-to-Equity ratio indicates the relationship
between the external equities or outsiders funds and the internal
equities or shareholders funds. It is also known as external - internal
equity ratio. It is determined to ascertain soundness of the long
term financial policies of the company. Debt to equity ratio indicates
the proportionate claims of owners and the outsiders against the
firms assets. The purpose is to get an idea of the cushion available
to outsiders on the liquidation of the firm. However, the
interpretation of the ratio depends upon the financial and business
policy of the company. The owners want to do the business with
maximum of outsider's funds in order to take lesser risk of their
investment and to increase their earnings (per share) by paying a
lower fixed rate of interest to outsiders. The outsider creditors on
the other hand, want that shareholders (owners) should invest and
risk their share of proportionate investments. A ratio of 1:1 is
usually considered to be satisfactory ratio although there cannot be
rule of thumb or standard norm for all types of businesses.
Theoretically if the owners interests are greater than that of
creditors, the financial position is highly solvent. In analysis of the
long-term financial position it enjoys the same importance as the
current ratio in the analysis of the short-term financial position.
Debt Equity Ratio = External Equities / Internal Equities
Interest coverage ratio: The ratio establishes the relationship
between net profit before interest and tax and interest payable on
long term debts. Interest is a charge on profit therefore; net profit
before interest and tax is taken to calculate the ratio.

Page 10 of 40

Interest Coverage Ratio = Net profit before Interest and

Tax / Interest
The ratio is very meaningful to debenture holders and lenders of the
long term funds. The objective of calculating this ratio is to
ascertain the amount of profit available to cover the interest. A high
ratio is considered better for the lenders as it means higher safety
for them.

Dividend per share ratio: Dividend per share (DPS) is the total
dividends paid out over an entire year (including interim dividends but
not including special dividends) divided by the number of outstanding
ordinary shares issued.
Dividend Per Share=Dividends/Number of Shares

Earning Per Share ratio: EPS ratio is a small variation of return on

equity capital ratio and is calculated by dividing the net profit after
taxes and preference dividend by the total number of equity shares.
The earnings per share is a good measure of profitability and when
compared with EPS of similar companies, it gives a view of the
comparative earnings or earnings power of the firm. EPS ratio
calculated for a number of years indicates whether or not the earning
power of the company has increased.

[Earnings per share (EPS) Ratio = (Net profit after tax Preference
dividend) / No. of equity shares (common shares)]

Intra Firm Analysis

1. Debt Equity Ratio:
Jindal Steel & Power Ltd.
JSPL

MAR10
1.24

MAR11
1.32

MAR12
1.33

MAR13
1.58

Page 11 of 40

JSPL
1.8
1.6
1.4
1.2

JSPL

1
0.8
0.6
0.4
0.2
0
MAR10

MAR11

MAR12

MAR13

As we know that the debt equity ratio assesses the long term financial
position and soundness of the long term financial policies of the firm.
As we can observe from the above chart that the debt-equity ratio is
increasing over the years, it has increased from 1.24 in FY10 to 1.58 in FY13.
Greater than 1 ratio indicates that the portion of assets provided by creditors
is greater than the portion of assets provided by stockholders.
Creditors usually like a low debt to equity ratio because a low ratio (less than
1) is the indication of greater protection to their money. But stockholders like
to get benefit from the funds provided by the creditors therefore they would
like a high debt to equity ratio.
Higher debt in a company gives it a greater tax shield as interest payable on
debt is tax deductable, but it comes with a cost of financial distress. This is
why increasing debt in a capital structure of a company is considered as a
trade-off between the tax shield and the financial distress that comes along.
The trade-off theory for the capital structure suggests that companies with
large tangible assets and taxable income should go for more of debt.
JSPL in past 4 years has a increasing debt equity ratio of greater than 1
therefore there is a role of reducing financial distress over the desired tax
benefits of debt in this case.

Page 12 of 40

Kajaria Ceramics
MAR10
Kajaria
1.39
Ceramics

MAR11
1.26

MAR12
0.62

MAR13
0.48

Kajaria Ceramics
1.6
1.4
1.2
1

Kajaria Ceramics

0.8
0.6
0.4
0.2
0
MAR10

MAR11

MAR12

MAR13

As we can observe from the above trend that the company graph is falling in
terms of debt equity ratio i.e. company is paying off its debt in order to
remove the financial distress and side by side the tax rebate which the
company is getting is also reducing. Companys debt has been decreased by
65 % which clearly indicates that company is moving more towards risk and
higher cost of capital because return on equity is much higher than the
return on debt.

L&T

L&T
MAR1
0
0.37

MAR1
1
0.33

MAR1 MAR1
2
3
0.39
0.30

Page 13 of 40

L&T
0.45
0.4
0.35
0.3

L&T

0.25
0.2
0.15
0.1
0.05
0
MAR10

MAR11

MAR12

MAR13

The debt equity ratio judges the long term financial position and soundness
of the long term policies of the firm.
As we can observe from the above chart there is a decreasing trend in the
debt-equity ratio, it has decreased from 0.37 in FY10 to 0.33 in FY11 with a
percentage decrease of 10.8%
Since L&T is a company with declining debt equity ratio and as it can be seen
from the above graph that it has decreased in the 5 years therefore, we can
say that company is going for more of equity compared to debts and this
also presents with the information that the company is paying off its debts.
In FY10, the debt-equity ratio decreased showing a percentage change of
43% compared with the previous year.
In FY11, the debt-equity ratio further decreased to 0.33 showing a
percentage decrease of 10.8% compared with FY10. The shareholders funds
were contributing 74% in the total liabilities of the firm leaving debt
proportion with 26% of total liabilities.
The declining graph of the debt equity ratio acts as a reflection of L&T as a
company. Although higher debt in a company gives it a greater tax shield as
interest payable on debt is tax deductable, but it comes with a cost of
financial distress. This is why increasing debt in a capital structure of a
company is considered as a trade-off between the tax shield and the
financial distress that comes along. The trade-off theory for the capital
Page 14 of 40

structure suggests that companies with large tangible assets and taxable
income should go for more of debt, However, L&T in past 5 years has
maintained a debt equity ratio of less than 1 i.e it has preferred to reduce the
financial distress over the desired tax benefits of debt, as well as the
magnifying effect of Earnings before interest and tax (EBIT) that a financial
leverage leaves on the Earnings per share (EPS).
A low debt-equity ratio also suggests that L&Ts management can function
without much stringent covenants from its lenders and can invest into
riskier propositions as its obligations to pay fixed interest and return the
borrowings is minimal compared to the amount of equity funds it has.
Therefore, it can be concluded that lower the debt-equity ratio higher the
degree of protection enjoyed by the lenders.

Kirloskar Brothers
MAR10
Kirloskar
1.39
Brothers

MAR11
1.26

MAR12
0.62

MAR13
0.48

Kirloskar Brothers
1.6
1.4
1.2
1

Kirloskar Brothers

0.8
0.6
0.4
0.2
0
MAR10

MAR11

MAR12

MAR13

Companys debt has drastically fallen from the yaer 2010 till 2013. There is a
decrease of 65% of debt in the capital structure of the company and
company has moved from cheaper source of finance i.e. debt to a costlier
Page 15 of 40

source of finance i.e. equity. This reflects that risk is increasing and hence
the return is also increasing because risk is directly proportional to return.
Moreover, companys fixed cost has also been decreased because paying
interest on debt is a fixed cost and company is moving away from financial
distress as per the trade off theory.

2. Interest Coverage Ratio

Jindal Steel & Power Ltd.
MAR10
MAR11
JSPL
7.91
10.66

MAR12
6.30

MAR13
3.72

JSPL
12
10
8

JSPL

6
4
2
0
MAR10

MAR11

MAR12

MAR13

As we can observe in the above trend it is inverted V in shape which means

the interest coverage ratio had increased in the year 2011 but after that it
has fallen drastically.This is all because the companys EBIT has been
increased by 36% from 2010 to 2013 but at the same time companys
interest has been increased by 148%. Companys soundness in order to pay
its interest has become extremely low and also margin of safety is also low in
the current situation.

Kajaria Ceramics
MAR10
Kajaria
2.33
Ceramics

MAR11
4.18

MAR12
4.5

MAR13
5.26

Page 16 of 40

6
5
4
Kajaria Ceramics

3
2
1
0
MAR10

MAR11

MAR12

MAR13

As we can observe from the above trend is that companys interest coverage
ratio is increasing which is a good gesture in order to reveal the companys
soundness in paying its interest. The ratio has been increased by 125%
which means that margin of safety has became high in the current situation.
This is because companys interest expense has been decreased by 16%
from the year 2010 to 2013 and at the same time companys EBIT has been
increased by 108% which clearly indicates company is moving towards a
much more financial sound position. If companys profit can fall by even
100% then also company can able to pay its interest on debt easily in the
current situation.

L&T

L&T

MAR10
11.17

MAR11
10.01

MAR12
13.62

MAR13
7.57

Page 17 of 40

L&T
16
14
12
10

L&T

8
6
4
2
0
MAR10

MAR11

MAR12

MAR13

This ratio shows how many times the interest charges are covered by the
profits available to pay interest charges.
As we can observe from the above chart the interest coverage ratio for L&T
shows a decreasing trend from FY2010 to FY11.It then shows a sluggish
increase from 2011 to 2102.However, the ratio dips drastically from 2012 to
2013.
By analyzing the above we can say that initially the Interest coverage ratio
was as high as 13.09 for L&T which means that for every Re 1 of interest
payment, L&T had a profit of Rs13.09 pay off the same which indicates the
soundness of the company. The trend for the ratio has been declining since
then except in 2012 where it shot up a little. The volatility of this ratio can be
justified as L&T is an economy based company, i.e., it does well if the
economy is doing well and vice-versa, however, it has always been
successful in maintaining a ratio to make its lenders feel secure enough. This
volatility in the industry might also be sighted as a reason for a lower debt
equity ratio as the profits of the company are not very certain, so, the
company also refrains to get into obligations to pay interest so high that the
equity shareholders start feeling insecure.
Therefore, it can be concluded that higher the interest coverage ratio, more
secure the lender is in terms of payment of interest regularly.
Page 18 of 40

Kirloskar Brothers
MAR10
Kirloskar
1.39
Brothers

MAR11
1.26

MAR12
0.62

MAR13
0.48

Kirloskar Brothers
1.6
1.4
1.2
1

Kirloskar Brothers

0.8
0.6
0.4
0.2
0
MAR10

MAR11

MAR12

MAR13

As we can see observe from the above trend that company Interest coverage
ratio is decreasing and it is also less than the standard of 1.5 which means
that the companys margin of safety is extremely low. This is because
companys EBIT has fallen by 40% from the year 2010 to 2013 whereas debt
has fallen just by 6%.
This also shows that company is burdened by its interest expense and
companys soundness is also low in the current scenario. If the ratio falls in
future than creditors comfort level will not allow them to provide more debt
to the company.
3. Dividend Per Share
Jindal Steel & Power Ltd.
JSPL

MAR10
1.25

MAR11
1.5

MAR12
1.6

MAR13
1.6

Page 19 of 40

JSPL
1.8
1.6
1.4
1.2

JSPL

1
0.8
0.6
0.4
0.2
0
MAR10

MAR11

MAR12

MAR13

As we can observe from the above trend that company is following a stable
dividend distribution policy in order to gain the interest of its shareholders
because if company has fluctuations in the dividend payout ratio, it would
lead to negative impact on the shareholders and therefore can also lead to a
share price decline in the stock market. Stable trend in dividend payout ratio
will attract more and more investors to invest in the companys share
but at the same time the ratio should be high also. The above analysis
therefore makes it quite clear that there is no rule of thumb in corporate
finance, as a decision can have various reasons and implications which also
depends from company to company.

Kajaria Ceramics

Kajaria
Ceramics

MAR10
1

MAR11
2

MAR12
2.5

MAR13
3

Page 20 of 40

Kajaria Ceramics
3.5
3
2.5
Kajaria Ceramics

2
1.5
1
0.5
0
MAR10

MAR11

MAR12

MAR13

As we can observe that companys dividend payout ratio is showing an

increasing trend which indicates that company is changing its dividend policy
every year which might be risky for company because if the net income of
the company falls in future than there will be decrease in the dividend
payout ratio and it will not be good for the company reputation. But there is
positive side also that company EBIT is increasing from last 4 years and
hence in order to maximize the wealth of Shareholders Company is
distributing more and more dividend every year.

L&T

L&T
MAR10
12.50

MAR11
14.50

MAR12
16.50

MAR13
18.50

Page 21 of 40

L&T
20
18
16
14
12
10
8
6
4
2
0
MAR10

L&T

MAR11

MAR12

MAR13

As we can observe from the above chart that the dividend per share ratio
shows an increasing trend from FY10-FY13.
Companies in general look to follow a stable dividend policy i.e maintain a
stable dividend payout ratio. This is mainly because of the expectations of
the investors, if a company pays a higher dividend in one year and decrease
it in the next, it would lead to negative impact on the shareholders and
therefore can also lead to a share price decline in the stock market. So
companies very carefully decide on whether to increase the amount of
dividend to be paid or not. Especially, companies in an industry as volatile as
the real estate industry in india, companies refrain from increasing the
dividend paid to its shareholders on a regular basis.
In case a company wants to share its extra profits in a particular year, they
generally do it by the way of
1) Interim Dividend
2) Bonus Shares
3) Share Buyback
As far as L&T is concerned, it has shown a continuous increase in the
dividend per share from FY2010 to FY2013. This can have majorly 3 reasons:
Page 22 of 40

1) The number of outstanding shares of the company has decreased or

2) It has increased its dividend payout ratio or
3) The earnings after tax have been shooting with the same dividend
payout ratio
From our above analysis and the balance sheet given below, we know that
neither the number of outstanding shares has decreased, nor the earnings
after tax have increased. Therefore, L&T have been continuously increasing
its dividend payout ratio as a result of which, the dividend per share shows
an increasing trend.
This kind of trend generally will attract more investors as their return is
maximizing, but this might always not be true. The management of a
Company might also take such decisions if the majority of the shares in the
company are held by the promoter and the managers themselves. Also as we
saw a declining trend in the debt equity ratio, this might be a step from L&T
to attract more equity shareholders in their company in order to reach a
desired mix of debt and equity in its capital structure.
The above analysis therefore makes it quite clear that there is no rule of
thumb in corporate finance, as a decision can have various reasons and
implications which also depends from company to company.

Kirloskar Brothers

Kirloskar
Brothers

MAR10
5.5

MAR11
3.5

MAR12
2

MAR13
2

Page 23 of 40

Kirloskar Brothers
6
5
4

Kirloskar Brothers

3
2
1
0
MAR10

MAR11

MAR12

MAR13

As we can observe that companys dividend payout ratio is showing a

downward trend which indicates that companys dividend policy is
fluctuating. This is not a good gesture for the investors because a rationale
investor always invests to maximize its wealth but in this case company is
providing a bad picture in the investors mind by decreasing its dividend
every year. The dividend payout ratio has been decreased by 63% from the
last 4 years because companys net income has been decreased drastically.
Therefore, it should always be advised to decide very carefully to increase
the amount of dividend or not.
4. Earnings Per Share
Jindal Steel & Power Ltd.
JSPL

MAR10
15.89

MAR11
22.09

MAR12
22.58

MAR13
17.04

Page 24 of 40

JSPL
25
20
15

JSPL

10
5
0
MAR10

MAR11

MAR12

MAR13

As we can observe that companys EPS is showing an inverted U shape that

means earning per share has been increased in the previous two last years
but decreased in last year due to decrease in net profit. This would not be
good gesture for an investor because an investor always aims to maximize
its earning and with falling EPS companys stock price would depreciate in
the near future.

Kajaria Ceramics
MAR10
Kajaria
4.87
Ceramics

MAR11
8.24

MAR12
10.97

MAR13
13.66

Page 25 of 40

Kajaria Ceramics
16
14
12
10

Kajaria Ceramics

8
6
4
2
0
MAR10

MAR11

MAR12

MAR13

An increasing trend in EPS is always good sign for investors because the
primary and the foremost objective of the investor are only achieved when
his earning per share gets increased. In the above trend the companys EPS
is increasing because companys net profit has been tremendously increased
by 216% in the last 4 years. This has a direct effect on the goodwill of the
company.

L&T

L&T
MAR1
0
72.66

MAR1
1
65.01

MAR1 MAR1
2
3
72.77 79.80

Page 26 of 40

L&T
90
80
70
60

L&T

50
40
30
20
10
0
MAR10

MAR11

MAR12

MAR13

As we can observe from the above chart that EPS of L&T has followed an
increasing trend throughout except for the FY 10-11.
It can be seen from the financial statement for FY09-FY13 that the net profit
shows a decreasing trend from 2010-2013. However, the no of shares issued
have been decreasing over the 5 years thereby resulting in increased EPS.
Therefore, it can be concluded that decrease in the number of shares issued
not only increases EPS but also increases the controlling state of
shareholders.

Kirloskar Brothers

Kirloskar
Brothers

MAR10
14.81

MAR11
7.73

MAR12
3.93

MAR13
5.47

Page 27 of 40

Kirloskar Brothers
16
14
12
10

Kirloskar Brothers

8
6
4
2
0
MAR10

MAR11

MAR12

MAR13

As we can observe that companys Net profit are decreased by 50% which
has a direct affect on the EPS of the company because EPS is obtained by
dividing net profit with no. of shares floating in the market.This would leave
negative impact on the investors mind as every investor invest to maximize
its earning and this company will definitely not a good choice for an investor
invest in as per the past records but nobody knows what happens in future.

Inter Firm
1. Debt Equity Ratio

JSPL
L&T
Kajaria
Ceramics
Kirloskar
Brothers

Mar10
1.24
0.37
1.39

Mar11
1.32
0.29
1.26

Mar12
1.33
0.33
0.62

Mar13
1.58
0.27
0.48

0.50

0.47

0.43

0.29

Page 28 of 40

1.8
1.6
1.4
1.2
JSPL

L&T

0.8

Kajaria Ceramics
Kirloskar Brothers

0.6
0.4
0.2
0
Mar10

Mar11

Mar12

Mar13

As we can see in the above trend that company with highest debt equity
ratio is JSPL that means this company is in its mature stage where the
cashflows of the firm become stable and company can able to pay its interest
easily without any burden.
Whereas the other companies are still in the growth stage that is they are
having low debt equity ratio and the company with least debt equity ratio is
L&T which also indicates that this company is away from financial distress.

2. Interest Coverage Ratio

JSPL
L&T
Kajaria
Ceramics
Kirloskar
Brothers

Mar10
7.91
11.17
2.33

Mar11
10.66
9.99
4.18

Mar12
6.30
10.39
4.50

Mar13
3.72
7.57
5.26

5.87

4.93

1.19

2.63

Page 29 of 40

12
10
8
JSPL
L&T

Kajaria Ceramics
Kirloskar Brothers

4
2
0
Mar10

Mar11

Mar12

Mar13

As per our knowledge we know that Higher the interest coverage ratio lesser
will be debt burden on the company. As we can see from the above data
company with highest Interest coverage ratio is L&T that means this
company doesnt have any kind of debt burden on it and also company can
easily get debt from any financial institution because the soundness of the
company in order to payback its debt is high. Moreover the margin of safety
is also high of the company as compare to the other three companies
whereas company with the low interest coverage ratio is Kirloskar Brothers
indicates debt burden and creditors comfort level to lend money to Kirloskar
Brothers is also low in this case.

3. Dividend Per Share

JSPL
L&T
Kajaria
Ceramics
Kirloskar
Brothers

Mar10
1.25
12.50
1.00

Mar11
1.50
14.50
2.00

Mar12
1.60
16.50
2.50

Mar13
1.60
18.50
3.00

5.50

3.50

2.00

2.00

Page 30 of 40

20
18
16
14
12

JSPL

10

L&T
Kajaria Ceramics

Kirloskar Brothers

6
4
2
0
Mar10

Mar11

Mar12

Mar13

Higher the dividend per share is a step towards gaining the interests of
shareholders because at the last the main objective of the corporate finance
is to maximize the wealth of shareholders.
From the above given data we can observe that company with highest
dividend per share and increasing dividend per share is L&T which means
this company management is efficient in achieving the foremost objective of
corporate finance and hence the company is achieving success much faster
than the other 3 companies.
Other companies have lesser DPS but only one out 4 have decreasing DPS
i.e. Kirloskar Brothers which indicates that the company is somehow fails to
set its dividend policy because decreasing DPS should have a negative
impact on shareholders.

4. Earnings Per Share

JSPL
L&T
Kajaria
Ceramics

Mar10
15.89
72.66
4.87

Mar11
22.09
65.01
8.24

Mar12
22.58
72.77
10.97

Mar13
17.04
79.80
13.66

Page 31 of 40

Kirloskar
Brothers

14.81

7.73

3.93

5.47

90
80
70
60
JSPL

50

L&T

40

Kajaria Ceramics
Kirloskar Brothers

30
20
10
0
Mar10

Mar11

Mar12

Mar13

Higher the EPS higher will be satisfaction of shareholders as each individual invest in a company
to earn more than its investment. As we can observe that company with highest EPS is L&T that
means company is in a position to convert the cost of 1 re into much higher return to their
investment whereas the other 3 companies are also doing well in converting the investment of
shareholders into higher return to maximize their satisfaction level.

Page 32 of 40

ANNEXURE
JSPL- Balance Sheet
Particulars
Liabilities
Share Capital
Reserves & Surplus
Net Worth
Secured Loan
Unsecured Loan
TOTAL LIABILITIES
Assets
Gross Block
(-) Acc. Depreciation
Net Block
Capital Work in Progress
Investments
Inventories
Sundry Debtors
Cash and Bank
Loans and Advances
Total Current Assets
Current Liabilities
Provisions
Total Current Liabilities
NET CURRENT ASSETS
Misc. Expenses
TOTAL
ASSETS(A+B+C+D+E)

Mar'13
12 Months
93.48
12254.59
12348.07
11577.42
7923.52
31849.01

Mar'12
12 Months
93.48
10751.93
10845.41
6848.09
7524.37
25217.87

Mar'11
12 Months
93.43
8595.91
8689.34
5085.01
6356.69
20131.04

Mar'10
12 Months
93.12
6652.88
6746
4235.16
4148.1
15129.26

18821.38
4665.19
14156.19
11483.94
1330.72
3598.52
1426.13
36.77
7777.66
12839.08
4988.13
2972.79
7960.92
4878.16
0

15163.15
3614.14
11549.01
10493.96
1412.17
3051.31
905.06
30.94
6115.66
10102.97
5868.89
2471.35
8340.24
1762.73
0

12757.46
2757.04
10000.42
7081.06
1210.01
2204.12
737.12
43.71
5111.03
8095.98
4360.09
1896.34
6256.43
1839.55
0

8814.21
2110.15
6704.06
7225.21
1067.11
1328.5
622.36
60.1
3164.54
5175.5
3701.93
1343.71
5045.64
129.86
3.02

31849.01

25217.87

20131.04

15129.26

JSPL- Profit and Loss

INCOME:
Sales Turnover

Mar'13

Mar'12

Mar'11

Mar'10

14954.7

13333.95

9574.17

7895.58
Page 33 of 40

Excise Duty
NET SALES
Other Income
TOTAL INCOME
EXPENDITURE:
Manufacturing Expenses
Material Consumed
Personal Expenses
Selling Expenses
Administrative Expenses
Expenses Capitalised
Provisions Made
TOTAL EXPENDITURE
Operating Profit
EBITDA
Depreciation
Other Write-offs
EBIT
Interest
EBT
Taxes
Profit and Loss for the Year
Non Recurring Items
Other Non Cash Adjustments
Other Adjustments
REPORTED PAT
KEY ITEMS
Preference Dividend
Equity Dividend
Equity Dividend (%)
Shares in Issue (Lakhs)
EPS - Annualised (Rs)

0
14954.7
0
15113.98

0
13333.95
0
13518.43

0
9574.17
0
9717.33

548.14
7347.44
0
7552.81

939.38
6780.34
447.89
0
2848.64
0
0
11016.25
3938.45
4097.73
1048.46
0
3049.27
820.77
2228.5
635.95
1592.55
0
0
0
1592.55

838.37
6060.52
385.44
0
1987.13
0
0
9271.46
4062.49
4246.97
867.19
0
3379.78
536.77
2843.01
732.36
2110.65
0
0
0
2110.65

568.47
3709.15
277.78
0
1436.22
0
0
5991.62
3582.55
3725.71
687.77
0
3037.94
285
2752.94
688.82
2064.12
0
0
0
2064.12

838.4
3179.38
219.72
209.68
344.78
0
0
4791.96
2555.48
2760.85
512.16
0
2248.69
331.66
1917.03
427.78
1489.25
-12.5
2.93
0
1479.68

0
149.57
160
9348.34
17.04

0
149.46
159.88
9348.34
22.58

0
140.19
150.04
9342.69
22.09

0
116.52
125.12
9312.34
15.89

Kajaria ceramics Ltd. Balance Sheet

Particulars
Liabilities
Share Capital
Reserves & Surplus

Mar'13
12 Months
14.72
342.07

Mar'12
12 Months
14.72
267.18

Mar'11
12 Months
14.72
207.85

Mar'10
12 Months
14.72
174.62

Page 34 of 40

Net Worth
Secured Loan
Unsecured Loan
TOTAL LIABILITIES
Assets
Gross Block
(-) Acc. Depreciation
Net Block
Capital Work in Progress
Investments
Inventories
Sundry Debtors
Cash and Bank
Loans and Advances
Total Current Assets
Current Liabilities
Provisions
Total Current Liabilities
NET CURRENT ASSETS
Misc. Expenses
TOTAL

356.78
150.45
20
527.23

281.9
174.8
0
456.7

222.56
275.68
4
502.24

189.34
258.83
4
452.17

749.84
285.14
464.71
6.85
37.16
176.53
136.58
2.79
61.34
377.24
316.35
42.37
358.72
18.52
0

722.95
253.89
469.07
1.76
12.35
175.78
141.01
5.9
53.7
376.39
321.68
81.19
402.87
-26.48
0

699.99
220.95
479.04
0.06
9.01
151.51
90.9
2.99
80.84
326.25
273.18
38.94
312.12
14.13
0

543.55
198.76
344.79
2.54
3.39
140.26
77.32
4.49
75.58
297.64
174.62
21.58
196.2
101.44
0

ASSETS(A+B+C+D+E)

527.23

456.7

502.24

452.17

Mar'11
12Month

Mar'10

Kajaria ceramics- Profit and Loss

INCOME:
Sales Turnover
Excise Duty
NET SALES
Other Income
TOTAL INCOME
EXPENDITURE:
Manufacturing Expenses
Material Consumed
Personal Expenses
Selling Expenses

Mar'13
12Month

Mar'12
12Month

1588.2
0
1588.2
0
1591.62

1401.76
92.49
1309.27
0
1309.99

1004.57
50.05
954.52
0
955.59

766.75
35.83
730.92
0
731.75

237.08
894.06
122.13
0

197.09
709.45
103.66
48.84

94.84
554.62
75.81
42.98

106.83
371.63
61.28
43.52

s 12Months

Page 35 of 40

Administrative Expenses
Expenses Capitalised
Provisions Made
TOTAL EXPENDITURE
Operating Profit
EBITDA
Depreciation
Other Write-offs
EBIT
Interest
EBT
Taxes
Profit and Loss for the

113.44
0
0
1366.71
221.49
224.91
38.36
0
186.55
35.48
151.07
47.49

48.19
0
0
1107.23
202.04
202.76
37.08
0
165.68
39.21
126.48
35.44

37.36
-0.14
0
805.46
149.06
150.13
29.5
0
120.63
33.1
87.53
27.18

32.42
-0.28
0
615.41
115.51
116.34
26.71
0
89.63
42.47
47.16
14.4

Year
Non Recurring Items
Other Non Cash

103.58
-3.03

91.04
-9.36

60.35
1.65

32.76
4.28

Adjustments
Other Adjustments
REPORTED PAT
KEY ITEMS
Preference Dividend
Equity Dividend
Equity Dividend (%)
Shares in Issue (Lakhs)
EPS - Annualised (Rs)

0
0
100.54

-0.96
0
80.72

-1.34
0
60.66

-1.19
0
35.85

0
18.49
125.66
735.84
13.66

0
18.4
124.99
735.84
10.97

0
14.72
100
735.84
8.24

0
7.36
49.99
735.84
4.87

Kirloskar Brothers Ltd. Balance Sheet

Particulars
Liabilities
Share Capital
Reserves & Surplus
Net Worth
Secured Loan
Unsecured Loan
TOTAL LIABILITIES
Assets
Gross Block
(-) Acc. Depreciation

Mar'13
12 Months
15.87
762.69
778.56
117.96
110.35
1006.86

Mar'12
12 Months
15.87
737.76
753.63
209.33
113.54
1076.51

Mar'11
12 Months
15.87
727.57
743.44
166.3
182.4
1092.14

Mar'10
12 Months
15.87
697.51
713.38
77.43
279.81
1070.61

529.78
220.76

490.19
207.25

460.28
180.6

426.46
153.8
Page 36 of 40

Net Block
Capital Work in Progress
Investments
Inventories
Sundry Debtors
Cash and Bank
Loans and Advances
Total Current Assets
Current Liabilities
Provisions
Total Current Liabilities
NET CURRENT ASSETS
Misc. Expenses
TOTAL

309.02
7.43
214.94
183.31
355.27
17.52
820.69
1376.79
844.07
57.25
901.32
475.48
0

282.94
36.01
214.94
209.96
298.05
20.53
872.48
1401.03
797.49
60.92
858.41
542.62
0

279.68
35.87
167.33
192.75
473.42
57.91
928.03
1652.11
978.84
64
1042.84
609.27
0

272.66
21.4
190.3
179.03
599.75
96.59
729.13
1604.5
943.89
74.36
1018.25
586.25
0

ASSETS(A+B+C+D+E)

1006.86

1076.51

1092.14

1070.61

Kirloskar brothers- Profit and Loss

INCOME:
Sales Turnover
Excise Duty
NET SALES
Other Income
TOTAL INCOME
EXPENDITURE:
Manufacturing Expenses
Material Consumed
Personal Expenses
Selling Expenses
Administrative Expenses
Expenses Capitalised
Provisions Made
TOTAL EXPENDITURE
Operating Profit
EBITDA
Depreciation

Mar'13
12Month

Mar'12
12Month

Mar'11
12Month

Mar'10

1872.4
0
1872.4
0
1879.4

1839.82
57.95
1781.88
0
1793.09

1994.11
52.7
1941.41
0
1953.19

2056.22
39.65
2016.57
0
2034.12

46.67
1295.79
149.68
0
239
0
0
1731.13
141.27
148.27
32.05

67.33
1234.3
153.8
70.03
180.58
0
0
1706.03
75.84
87.06
30.26

56.67
1313.64
140.01
79.5
186.38
-0.82
0
1775.38
166.03
177.82
30.01

56.93
1466.54
99.03
84.01
104.35
-0.21
0
1810.65
205.92
223.47
26.48

s 12Months

Page 37 of 40

Other Write-offs
EBIT
Interest
EBT
Taxes
Profit and Loss for the Year
Non Recurring Items
Other Non Cash Adjustments
Other Adjustments
REPORTED PAT
KEY ITEMS
Preference Dividend
Equity Dividend
Equity Dividend (%)
Shares in Issue (Lakhs)
EPS - Annualised (Rs)

0
116.22
44.27
71.95
28.5
43.45
0
0
0
43.45

0
56.8
47.83
8.97
2.47
6.51
24.99
-0.31
0
31.19

0
147.8
41.61
106.19
41.72
64.47
-3.11
0
0
61.36

0
196.99
46.64
150.35
55.44
94.91
22.53
0.08
0
117.52

0
13.41
84.5
793.58
5.47

0
15.87
100
793.4
3.93

0
27.77
175
793.38
7.73

0
43.63
274.99
793.33
14.81

L&T Balance Sheet

Particulars
Liabilities
Share Capital
Reserves & Surplus
Net Worth
Secured Loan
Unsecured Loan
TOTAL LIABILITIES
Assets
Gross Block
(-) Acc. Depreciation
Net Block
Capital Work in
Progress
Investments
Inventories
Sundry Debtors
Cash and Bank
Loans and Advances
Total Current Assets

Mar'13
12 Months
123.08
29019.64
29142.72
1234.01
6771.55
37148.28

Mar'12
12 Months
122.48
25100.54
25223.02
1453.34
6813.44
33489.8

Mar'11
12 Months
121.77
21724.49
21846.26
1063.04
5268.54
28177.84

Mar'10
12 Months
145.53
18142.82
18311.64
955.73
5845.1
25112.47

11864.73
3559.59
8305.14

10455.23
2850.25
7604.98

8872.71
2228.52
6644.19

7235.78
1727.68
5484.81

596.84
16103.39
2064.18
22613.01
1455.66
21035.99
47168.84

758.68
15871.9
1776.62
18729.84
1778.12
21172.82
43457.4

771.34
14684.82
1577.15
12427.61
1729.55
19275.34
35009.65

857.66
13705.35
1415.37
11163.7
1431.87
12662.55
26673.49
Page 38 of 40

Current Liabilities
Provisions
Total Current

32656.2
2369.73

31816.07
2387.09

26687.98
2244.18

19443.77
2188.36

Liabilities
NET CURRENT

35025.93

34203.16

28932.16

21632.13

ASSETS
Misc. Expenses
TOTAL

12142.91
0

9254.24
0

6077.49
0

5041.36
0

ASSETS(A+B+C+D+E)

37148.28

33489.8

28177.84

25112.47

L&T- Profit and Loss

INCOME:
Sales Turnover
Excise Duty
NET SALES
Other Income
TOTAL INCOME
EXPENDITURE:
Manufacturing Expenses
Material Consumed
Personal Expenses
Selling Expenses
Administrative Expenses
Expenses Capitalised
Provisions Made
TOTAL EXPENDITURE
Operating Profit
EBITDA
Depreciation
Other Write-offs
EBIT
Interest
EBT
Taxes

Mar'13
12Month

Mar'12

Mar'11

Mar'10

12Months

12Months 12Months

60873.26
0
60873.26
0
62724.16

53170.52
0
53170.52
0
54508.8

43905.87
0
43905.87
0
45053.33

37187.5
317.31
36870.19
0
37844.78

33840.81
14111.59
4436.32
0
2077.48
0
0
54466.2
6407.06
8257.96
818.47
0
7439.49
982.4
6457.09
1800.5

27425.97
13594.21
3663.45
0
2204.28
0
0
46887.91
6282.61
7620.89
699.46
0
6921.43
666.1
6255.33
1853.83

22792.8
10675.37
2830.08
0
1968.05
0
0
38266.3
5639.57
6787.03
599.22
0
6187.81
619.25
5568.56
1943.58

17247.39
10016.52
2379.14
306.22
1873.59
-36.25
0
31786.61
5083.58
6058.17
383.65
30.95
5643.57
995.37
4648.2
1577.02
Page 39 of 40

Profit and Loss for the Year

Non Recurring Items
Other Non Cash Adjustments
Other Adjustments
REPORTED PAT
KEY ITEMS
Preference Dividend
Equity Dividend
Equity Dividend (%)
Shares in Issue (Lakhs)
EPS - Annualised (Rs)

4656.59
254.06
0
0
4910.65

4401.5
55
0
0
4456.5

3624.98
332.91
0
0
3957.89

3071.18
1347.08
-45.13
2.39
4375.52

0
1052.61
855.22
6153.86
79.8

0
909.02
742.17
6123.99
72.77

0
770.02
632.35
6088.52
65.01

0
752.75
625
6021.95
72.66

Page 40 of 40