Report on Bajaj Auto Pvt. Ltd.

Submitted to :- Pranoti Kulkarni Submitted by:-

Biswa Ranjan Mohanty(19BSP3591)

Ashi Shah (19BSP3590)
Sanjeet Kumar Yadav (19BSP2455)
Prachi Singh (19BSP1895)
Rakhika Sahu (19BSP2144)
Vinay Ksirsagar (19BSP3225)
 Every project requires a great deal of creativity
and cooperation on the part of the group members in
order to achieve the desired objectives. This financial
management project gave us an opportunity to work as a
team and help to gain insight in various financial tools
and techniques that are used by the manager which help
them to effective and effective decision. It also helped us
to put into practice the concept learnt in class and learning
their applicability.
We would like to take this opportunity to thank
Prof. Pranoti Kulkarni for providing us with her valuable
advice and guidance at every step of this project.
 Bajaj Auto Limited is an Indian global two-
wheeler company and three-wheeler manufacturing
company based in Pune, Maharashtra. It manufactures
motorcycles, scooters and auto rickshaws. Bajaj Auto is a
part of the Bajaj Group. It was founded by Jamnalal Bajaj
in Rajasthan in the 1940s. It is based in Pune,
Maharashtra, with plants in Chakan (Pune), Waluj (near
Aurangabad) and Pantnagar in Uttarakhand. The oldest
plant at Akurdi (Pune) now houses the R&D centre
'Ahead'.
Bajaj Auto came into existence on 29 November
1944 as M/s Bachraj Trading Corporation Private
Limited. It started off by selling imported two- and three-
wheelers in India. In 1959, it obtained a license from the
Government of India to manufacture two-wheelers and
three-wheelers and obtained Licence from Piaggio to
manufacture Vespa Brand Scooters in India and started
making Vespa 150 scooters. It became a public limited
company in 1960. In 1970, it rolled out its 100,000th
vehicle. In 1977, it sold 100,000 vehicles in a financial
year. In 1985, it started producing at Waluj near
Aurangabad. In 1986, it sold 500,000 vehicles in a
financial year. In 1995, it rolled out its ten millionth
vehicle and produced and sold one million vehicles in a
year.
 With the launch of motorcycles in 1986, the
company has changed its image from a scooter
manufacturer to a two-wheeler manufacturer.
In 2017 it was announced that Bajaj Auto and Triumph
Motorcycles Ltd would form an alliance to build mid-
capacity motorcycles.
According to the authors of Globality: Competing with
Everyone from Everywhere for Everything, Bajaj has
operations in 50 countries creating a line of bikes targeted
to the preferences of entry-level buyers.
PRINCIPAL SUBSIDIARIES: Bajaj Auto Finance Ltd.
, Bajaj Auto Holding Ltd. , Bajaj Electricals Ltd., Bajaj
Hindustan Ltd., Maharastra Scooters Ltd., Mukund Ltd.
PRINCIPAL COMPETITORS : Honda Motors Co.
Ltd., Suzuki Motors, Corporation, Piaggo SpA
 Financial Functions of the Organization
Bajaj Auto is considered to be amongst the most
conservative organisations in the Industry and this reflects
in their equity and debt structure. The company has a very
efficient finance department to take care of its
investments to assure the welfare and profit maximization
of its shareholders. Headed by Kevin P D’Sa, the finance
department has a gamut of responsibilities, least of which
is the book keeping and internal auditing. They are
expected to be robust and take decisions that affect every
decision of the firm, from production to marketing,
distribution, sales, services and dividend distribution. In
light of the modern industry scenario, the various duties
fulfilled by the finance department include-
(1) To regulate, supervise and implement a timely, full
and accurate set of accounting books of the firm reflecting
all its activities in a manner commensurate with the
relevant legislation and regulation in the territories of
operation of the firm and subject to internal guidelines set
from time to time by the Board of Directors of the firm.
(2) To implement continuous financial audit and control
systems to monitor the performance of the firm, its flow
of funds, the loyalty to the budget, the expenditures, the
income, the cost of sales and other budgetary items.
(3) To timely, regularly and duly prepare and present to
the Board of Directors financial statements and reports as
required by all pertinent laws and regulations in the
territories of the operations of the firm and as deemed
necessary and demanded from time to time by the Board
of Directors of the Firm.
(4) To meet the terms with all reporting, accounting and
audit requirements imposed by the capital markets or
regulatory bodies of capital markets in which the
securities of the firm are traded or are about to be traded
or otherwise listed.
(5) To prepare and present for the approval of the Board
of Directors an annual budget, other budgets, financial
plans, business plans, feasibility studies, investment
memoranda and all other financial and business
documents as may be required from time to time by the
Board of Directors of the firm.
(6) To alert the Board of Directors and to warn it
regarding any irregularity, lack of compliance, lack of
loyalty, lacunas and problems whether actual or potential
concerning the financial systems, the financial operations,
the financing plans, the accounting, the audits, the 13
budgets and any other matter of a financial nature or
which could or does have a financial implication.
(7) To collaborate and coordinate the activities of outside
suppliers of financial services hired or contracted by the
firm, including accountants, auditors, financial
consultants, underwriters and brokers, the banking system
and other financial venues.
(8) To maintain a working relationship and to develop
additional relationships with banks, financial institutions
and capital markets with the aim of securing the funds
necessary for the operations of the firm, the attainment of
its development plans and its investments.
(9) To fully computerize all the above activities in a
combined hardware-software and communications system
which integrates with the systems of other members of the
group of companies?
(10) Otherwise, to initiate and engage in all manner of
activities, whether financial or other, conducive to the
financial health, the growth prospects and the fulfillment
of investment plans of the firm to the best of his ability
and with the appropriate dedication of the time and efforts
required.
 WORKING CAPITAL
It is a measure of both a company's efficiency and its
short-term financial health. In case of Bajaj Auto Ltd. it is
related to the working capital requirements. The working
capital ratio is calculated as:

WORKING CAPITAL = CURRENT ASSETS – CURRENT

LIABILITIES

Positive working capital means that the company is able

to pay off its short-term liabilities. Negative working
capital means that a company currently is unable to meet
its short-term liabilities with its current assets (cash,
accounts receivable and inventory). Also known as "net
working capital", or the "working capital ratio".
Working capital management entails short term decisions
- generally, relating to the next one year period - which is
"reversible".
The current ratio of a company is a measure of their short
term solvency (in the next twelve months or business
cycle). Higher the Current ratio better is a company
positioned to fulfil its short term obligations. As evident
from the table above, Bajaj Auto is fairly low on the
Current Ratio scale but still not a matter of immediate
concern to the management. The Debt Equity Ratio of a
company is a measure of their proportionate use of debt
and equity for financing its assets. A high D/E ratio
suggests that the company has financed its growth mostly
via debt. This can be a concern for the management as the
company will now 15 have to bear additional interest
burden of debt servicing and hence, lead to volatile
earnings. As per calculations above, the D/E ratio seems
fairly decent. The Profit Margin ratio of a company is a
measure of how well the business is performing in terms
of profit. It measures the percentage of profits on per
rupee of sales and is thus a measure of efficiency of a
company. It determines the company’s ability to
withstand competition and adverse conditions like rising
costs, falling prices, or declining sales in the future. As
the interest burden is increasing, it could be a possible
reason for the falling profit margin ratio.

Particular Rs. In Cr. 2019 Rs. In Cr. 2018

Current Assets, Loans and 6409.07 4295.9
Advances
(Less) Current Liabilities and 5600.49 4594.86
Provisions
Working Capital ( Current Assets- 808.58 -298.47
Current Liabilities)
Calculated Ratios Ratios(decimal) Ratios(decimal)

Current Ratio (CA/CL) 1.14 0.934

Book Value 752.67 660.19
 Balance Sheet

Total Share Capital 289.37 289.37

Equity Share Capital 289.37 289.37
Share Application Money 0.00 0.00
Preference Share Capital 0.00 0.00
Reserves 21,490.53 18,814.49
Revaluation Reserves 0.00 0.00
Networth 21,779.90 19,103.86
Secured Loans 0.00 0.00
Unsecured Loans 0.00 120.77
Total Debt 0.00 120.77
Total Liabilities 21,779.90 19,224.63
Gross Block 1,763.94 4,506.25
Less: Accum. Depreciation 0.00 2,627.92
Net Block 1,763.94 1,878.33
Capital Work in Progress 48.02 56.47
Investments 19,159.36 17,588.30
Inventories 961.51 742.58
Sundry Debtors 2,559.69 1,491.87
Cash and Bank Balance 922.81 778.00
Total Current Assets 4,444.01 3,012.45
Loans and Advances 1,965.06 1,283.94
Fixed Deposits 0.00 0.00
Total CA, Loans and Advances 6,409.07 4,296.39
Deffered Credit 0.00 0.00
Current Liabilities 5,445.31 4,357.07
Provisions 155.18 237.79
Total CL and Provisions 5,600.49 4,594.86
Net Current Assets 808.58 -298.47
Miscellaneous Expenses 0.00 0.00
Total Assets 21,779.90 19,224.63
Contingent Liabilities 1,853.88 2,248.64
Book Value (Rs) 752.67 660.19
Investment Valuation Ratios
March 19 March 2108

Face Value 10.00 10.00

Dividend Per Share 60.00 60.00
Operating Profit Per Share (Rs) 172.17 165.31
Net Operating Profit Per Share (Rs) 1,045.38 869.65
Free Reserves Per Share (Rs) -- --
Bonus in Equity Capital 89.45 89.45
Profitability Ratios
Operating Profit Margin(%) 16.46 19.00
Profit Before Interest And Tax
14.78 16.85
Margin(%)
Gross Profit Margin(%) 15.59 17.75
Cash Profit Margin(%) 14.41 16.65
Adjusted Cash Margin(%) 14.41 16.65
Net Profit Margin(%) 15.45 16.16
Adjusted Net Profit Margin(%) 14.65 15.34
Return On Capital Employed(%) 29.22 30.25
Return On Net Worth(%) 21.46 21.29
Adjusted Return on Net Worth(%) 19.89 21.46
Return on Assets Excluding
752.67 660.19
Revaluations
Return on Assets Including
752.67 660.19
Revaluations
Return on Long Term Funds(%) 29.22 30.25
Liquidity And Solvency Ratios
Current Ratio 1.14 0.94
Quick Ratio 0.97 0.77
Debt Equity Ratio -- 0.01
Long Term Debt Equity Ratio -- 0.01
Debt Coverage Ratios
Interest Cover 1,420.90 4,439.60
Total Debt to Owners Fund -- 0.01
Financial Charges Coverage Ratio 1,480.21 4,679.91
Financial Charges Coverage Ratio
1,103.87 3,346.73
Post Tax
Management Efficiency Ratios
Inventory Turnover Ratio 31.46 34.42
Debtors Turnover Ratio 14.93 20.58
Investments Turnover Ratio 31.46 34.42
Fixed Assets Turnover Ratio 17.34 5.58
Total Assets Turnover Ratio 1.39 1.31
Asset Turnover Ratio 1.48 1.38

Average Raw Material Holding -- --

Average Finished Goods Held -- --
Number of Days In Working
-6.94 -17.70
Capital
Profit & Loss Account Ratios
Material Cost Composition 73.95 70.68
Imported Composition of Raw
-- --
Materials Consumed
Selling Distribution Cost
1.60 1.73
Composition
Expenses as Composition of Total
37.79 36.88
Sales
Cash Flow Indicator Ratios
Dividend Payout Ratio Net Profit 37.13 39.12
Dividend Payout Ratio Cash Profit 35.13 36.31
Earning Retention Ratio 59.94 61.19
Cash Earning Retention Ratio 62.25 63.96
AdjustedCash Flow Times -- 0.03

Mar '19 Mar '18

Earnings Per Share 161.57 140.59
Book Value 752.67 660.19

Debtor Turnover Ratio

FY19: 11.15
FY18 : 16.56

To ensure better stock availability among dealer and other changed partners ,
company has extended credit
Resulting in an icrease in amount of trade receivable .
Inventory Turnover Ratio :
FY19: 22.70
FY18 : 23.45

Current Ratio :
FY19: 1.45
FY18 : 2.25

Investment marketing within next 1 year from part of current asset . Value of
such investment as on 31 march 2019 was rs1576 crore as against rs 5795 crore
as against 31 march 2018.
Operating Profit Margin
FY19: 16.8
FY18 : 19.0

Net Profit Margin

FY19: 14.7
FY18 : 15.3
 Long Term Capital
Bajaj Auto Ltd. collects its long term capital through capital market
instruments. Capital market instruments are nothing but the following: Capital
Market Instruments: Capital market securities include instruments with maturities
greater than one year and those with no designated maturity at all. The market is
generally divided according to whether the instruments contain a promised set of
cash flows over time, or offer participation in the future profitability of a company.
The first sector is usually referred to as the Fixed Income Market, whereas the
second is the Equity Market. Preferred stock is an instrument that has some of the
characteristics of each of the other two types.

Equity Shares

Equity shares represent an ownership claim on the earnings and assets

of a corporation. After holders of debt claims are paid, the management of the
company can either payout the remaining earnings to stockholders in the form of
dividends or reinvest part or all of the earnings in the business. . Despite limited
liability, because of the residual nature of its claim to earnings and assets, shares as
a class is the riskiest of the securities discussed to this point.

Corporate Bonds

Corporate bonds promise to pay interest at periodic intervals and to return

principal at a fixed date. Generally corporate bonds are rated as to quality by
several agencies, the best known of which are CRISIL, ICRA and CARE

Capital Asset Pricing Model (CAPM)

 Capital Asset Pricing Model is a model that provides a framework to
determine the required rate of return on an asset and risk of the asset
 The required rate of return specified by CAPM
helps in valuing an asset.

 One can also compare expected(estimated) rate of return on an asset with its
required rate of return and determine whether the asset is fairly valued.
  As we explain in this section ,under CAPM ,the security market line (FML)
exemplifies the relationship
between an asset’s risk and its required rate of return.

Assumptions of CAPM
 Market Efficiency
 It implies that share prices reflect all the available information. This means
that there are a large number of investors holding a small amount of debt.
 Risk Aversion and Mean variance optimization
 It evaluates a security’s return and risk,in terms of the expected return and
variance or standard deviation respectively.
 We prefer the highest rate of return for a given level
of risk. This implies that investors are mean variance optimizers and they form
efficient portfolios.

 Homogenous expectations
All investors have the same expectations of their risk and return

 Single Time Period

All investors decision are based on single time period

 Risk Free Rate

All investors can lend and borrow at a risk free rate of interest.

The Formula for Expected Rate of Return using CAPM is given by:-

Ke = Rf + β (Km – Rf)
Where, Ke = Expected Rate of return,

Rf = Risk Free Rate of Return, such as interest arising from government bonds

Km = Market Rate of Return

 Significance of Beta
 In finance, the beta (β) of a stock or portfolio is a number describing the
relation of its returns with that of the financial market as a whole.
 An asset with a beta of 0 means that its price is not at all correlated with the
market; that asset is independent.
 A positive beta means that the asset generally follows the market.
 A negative beta shows that the asset inversely follows the market; the asset
generally decreases in value if the market goes up and vice versa.

Here beta value for Bajaj Auto Ltd. is calculated based on the market
price structure, and using the formula which says,

(Cov(m,j))/𝜎 2

Where, Cov(m,j) is the covariance between market price and the share price

𝜎 2 is the variance of the market price.

(β) Calculated is 1.119

For detailed calculations, please refer Tables.

Calculation of Return on Equity,

From the equation for CAPM Model, we see that Return on Investments is

Return=risk free return + β(market return – risk free return)

=6.56+1.119(8.02989-6.56)

=8.204%

Government Bond

The government bond yield for 10 yrs is 6.56 percent there fore the risk
free rate equals to 6.56 percent .