[COMPANY NAME]

[Company address]

FINANCIAL MANAGEMENT 1
ASSIGNMENTZee Entertainment
Enterprises Limited
[Document subtitle]

LARSEN & TOURBO

Larsen & Toubro is a major technology, engineering, construction, manufacturing
and financial services conglomerate, with global operations. L&T addresses
critical needs in key sectors - Hydrocarbon, Infrastructure, Power, Process
Industries and Defence - for customers in over 30 countries around the world.
L&T is engaged in core, high impact sectors of the economy and our integrated
capabilities span the entire spectrum of design to deliver. With over 7 decades
of a strong, customer focused approach and a continuous quest for world-class
quality, we have unmatched expertise across Technology, Engineering,
Construction, Infrastructure Projects and Manufacturing, and maintain a
leadership in all our major lines of business.
Every aspect of L&T's businesses is characterised by professionalism and high
standards of corporate governance. Sustainability is embedded into our longterm strategy for growth.
The Companys manufacturing footprint extends across eight countries in
addition to India. L&T has several international offices and a supply chain that
extends around the globe.

Products and Services

Construction:
In construct department the company offers variety of products and services
which are as follows

Buildings & Factories

Transportation Infrastructure
Heavy Civil Infrastructure
Water & Effluent Treatment
Renewable Energy
Power Transmission & Distribution
Smart World & Communication
Construction & Mining Machinery
Construction & Mining Equipment

The above following divisions of company works in many countries providing

infrastructure and construction services all over the globe.

Electrical & Automation:

Relays
Meters
Automation Products & Systems
Low Voltage Products
Medium Voltage Products
Marinised products
Control & Automation
Marine Switchboards & Control Systems
Control & Automation
Low Voltage Systems
Medium Voltage Systems
Meters
Marine Solutions
Automation Products & Systems

Heavy Engineering

Process Plant
Nuclear Power Plant
Defence & Aerospace

Hydraulics

Hydraulic Cylinders
Swivel / Rotary Joints
High Torque Low Speed Motors
Radial Piston Pumps
Customised Hydraulic Systems

Hydrocarbon

Upstream
Mid & Downstream
Construction & Pipelines (HCP) Projects
Metallurgical & Material Handling
Metallurgical & Material Handling

Power

Coal Based Power Plants

Gas Based Power Plants

Power Development Limited

Thermal Power Projects

Hydro Power Projects

Rubber Processing Machinery

Mechanical Tyre Curing Presses

Hydraulic Tyre Curing Presses
Tyre Building Machines
Auxiliary Equipment
Spares
Tube Curing Presses
Bladder Curing Presses

Shipbuilding

New Construction - Defence Shipbuilding

New Construction - Commercial Shipbuilding
Ship Repairs, Refits & Conversions

Technology Services

Industrial Products
Medical Devices
Polymer
Process Industry
Telecom & Hi-tech
Transportation
Embedded System and Applications
Engineering Process Services
Mechanical Engineering
Product Lifecycle Management (PLM)
Engineering Analytics
Internet of Things and Machine to Machine
Power Electronics

L&T Team
L&t is lead by A.M. Naik who is chairman of complete L&T group. Its team
constitutes about 7 Leaders who make sure the future of company is golden &
blistering.

Larsen & Tourbo Report Card

PE ratio

23.61

11/12/15

EPS (Rs)

54.39

Mar, 15

Sales (Rs crore)

13,234.29

Sep, 15

Face Value (Rs)

Net profit margin

(%)

8.86

Mar, 15

Last bonus

1:2

22/05/13

Last dividend (%)

812.5

01/06/15

Return on
average equity

13.63

Mar, 15

10 year Financials for Larsen & Tourbo

MARKETRETURN

A theoretical bundle of investments that includes every type of asset available in

the world financial market, with each asset weighted in proportion to its total
presence in the market. The expected return of a market portfolio is identical to
the expected return of the market as a whole. Because a market portfolio is
completely diversified, it is subject only to systematic risk (risk that affects the
market as a whole) and not to unsystematic risk (the risk inherent to a particular
asset class).
MARKET RISK
Market risk is the risk that the value of an investment will decrease due to moves
in market factors. Volatility frequently refers to the standard deviation of the
change in value of a financial instrument with a specific time horizon.
CAPM
In finance, one of the most important things to remember is that return is a
function of risk. This means that the more risk you take, the higher your potential
return should be to offset your increased chance for loss.
One tool that finance professionals use to calculate the return that an investment
should bring is the capital asset pricing model (capm from now on). Capm
calculates a required return based on a risk measurement. To do this, the model
relies on a risk multiplier called the beta coefficient, which we will discuss in the
next section.
Like all financial models, the capm depends on certain assumptions. Originally,
there were nine assumptions, although more recent work in financial theory has
relaxed these rules somewhat. The original assumptions were:
1.
Investors are wealth maximizers who select investments based on
expected return and standard deviation.
2.
Investors can borrow or lend unlimited amounts at a risk-free (or zero risk)
rate.
3.
There are no restrictions on short sales (selling securities that you don't
yet own) of any financial asset.
4.

All investors have the same expectations related to the market.

5.
All financial assets are fully divisible (you can buy and sell as much or as
little as you like) and can be sold at any time at the market price.
6.

There are no transaction costs.

7.

There are no taxes.

8.

No investor's activities can influence market prices.

9.

The quantities of all financial assets are given and fixed.

Rf=0.072092
Beta=1.76
Year

Close Price

2010
2011
2012
2013
2014
2015

Market Return

(Ri-R)^2

1979.05
995.1
1605.85

-0.246435605
0.256991948

0.100055994
0.035010625

1069.9
1496.5
1363.8

0.089771763
0.29893891
-0.049863597

0.000395655
0.052467671
0.014338693

Market
Return=

0.06988068
4

CAPM (Ke)= 0.072092+1.76*(0.268925902-0.072092)=

0.068270003

Sum=

0.20226
8639

Average=

0.0698806
84

(6.82%)

Income Per Share's FV

Share Return

(Ri-R)^2

16.25
14.25
18.5
16.5
14.5

-0.972465079
0.38920198
-0.483643331
0.296090879
-0.0866696

0.64154982
0.31438338
0.09743531
0.21863845
0.00719569
1.27920265

Sum=
Market Return=

-0.17149703

Average=
0.040453728
CAPM(Ke)=0.072092+1.76*(-0.17149703-0.072092)=
0.016408641
(1.64%)

Market
Risk=

1.13101
8415

Growth Rate
1
0.333333
-0.25
0
Sum(1+0.33333-.25+0)=1.083333
G Value (1.0833333/4)=0.270833
Bond Value=4/(Ke-G Value)
Bond Value (4/(0.302803-0.270833))=125.1303

Interpretations
Beta
Beta is a measure of the volatility, or systematic risk, of a security or
a portfolio in comparison to the market as a whole. Beta is used in
the capital asset pricing model (CAPM), a model that calculates
the expected return of an asset based on its beta and expected market
returns.
L&Ts Beta is 1.76 which means that this company has historically been
17% more volatile than the market.
So, if the market moves up by 1%, L&Ts stock prices will rise by 17%.
Risk Free Rate or Rf
The risk-free rate represents the interest an investor would expect from an
absolutely risk-free investment over a specified period of time.
In practice, however, the risk-free rate does not exist because even the
safest investments carry a very small amount of risk. In our case, Rf is
7.2% which means that an investor is expecting a minimum of 7.2%
return on his investments.
Expected Return or Ke
CAPM or Ke helps the investors to calculate risk and what type of return
they should expect on their investment.
L&Ts ke is approximately 6.82% which means that the investors are
expecting a return of 6.82% on their investments in L&Ts shares
Market Risk

Also known as systematic risk, it refers to the possibility for an investor

to experience losses due to factors that affect the overall performance of
the financial markets.
In our case, investors will bear a risk of 17% if they invest in the stocks
of L&T.

Dividend Per Share

DPS is the profit received per share of a company. In our case, income
per share for the year 2015 is 14.5 Rs, which means that the investors
have earned a profit of 14.5 Rs on a share of face value of 2 Rs.
Dividend Growth Rate
The annualized percentage rate of growth that a particular
stock's dividend undergoes over a period of time. The time period
included in the analysis can be of any interval desired and is calculated by
simply taking a simple annualized figure over the time period.
In our case, the dividend growth rate for the year 2015 is 100%
which means that the dividend on each share has doubled up.