Valuation of Shares PDF

A
Project Report
On
“VALUATION OF EQUITY SHARES OF FIVE

COMPANIES”
Submitted by
Mr. Vivek A. Bale
Submitted for the requirement of Master of Business Administration
To,
The Director
Aditya Institute of Management
NARHE [PUNE]
Affiliated to University of Pune,
Academic Year, 2014-15
DECLARATION
This is to certify that, I have actually carried out and completed the project
work entitled. “VALUATION OF EQUITY SHARES OF FIVE
COMPANIES”. For the requirement of Master of Business Administration at
Pune University during the academic year 2014-15. This Project Report has not
submitted to any other University or Institutions for the award of any other degree
or diploma.
Place :- Pune Mr. VIvek A. Bale
INDEX
Chapte Sub.
r No. Chapter Chapter Name Page
No No
I Introduction 1 to 4
1.1 Introduction of Study
1.2 Objectives of Study
1.3 Hypotheses of Study
1.4 Scope of Study
1.5 Methodology of Study
1.6 Limitation of Study
II Conceptual Study of Valuation of Shares
2.1 Meaning & Definition of Shares
2.2 Features of Equity Shares
2.3 Types of Shares
2.4 Shares Capital
2.5 Method of Valuation of Shares
III Profile of five Companies under Study
3.1 Meaning & Definition of Company
3.2 Profile of Company
IV Analysis & Interpretation of Data
4.1 Intrinsic Value
4.2 Market Value
4.3 Fair Value
V Observation & Testing of Hypotheses
VI Suggestions
 Bibliography
CHAPTER NO.1
INTRODUCTION OF STUDY
Introduction
1.1 Introduction of Study : -

Valuation of Shares:
Valuation is the processes that links & assist to determine the worth of an
asset. It can be applied to expected benefits from real as well as financial assets &
securities to determine their worth at a given point of time. This key input the
valuation process are;
1. The value of an asset depends on the returns it is expected to provide
over the holding /ownership period. In addition to the total cash flow
estimates their timing his also required to identify the return expected
from the shares.
2. The required return is used in the valuation process the incorporate risk
into the analysis risk denotes the chance that expected outcome would
not be realized. The live of risk associated with a given cash flow has a
significant bearing on its.
Value that is the greater the risk the lower the value & vice years
higher risk can be incorporated in to the valuation analysis by using
a higher required rate to determine the present value.
3. Expected return in term of cash flow together with their time & risk in
terms of the required return
1.2 Objectives of Study :-

1. To Study theoretical aspects of valuation.
2. To explain the different methods or valuation of equity shares.
3. To ascertain the value of share of companies.
4. To study the valuation of assets & liabilities of the company.
5. To make some suggestions on the baits of data analysis.
1.3 Hypothesis of Study : -
1. The intrinsic value of shares is fair.
2. The performance relating to shares of all five companies is good.
CHAPTER NO.2
CONCEPTUAL STUDY
2.1 Meaning & Definition of Equity Shares:-
All shares are those which do not enjoy any special rights in respect of payment of
dividend & repayment of capital. Equity shares are risk bearing shares. All shares holder
control the affairs of the company because they have right to vote.
2.2 Features of Equity Shares:
1. An equity share/ ordinary share which is not preference share.
2. The rate of dividend on equity shares is not fixed.
3. The board of directors recommends the rate of dividend which is declared

in the annual general meeting.
4. The holders of equity share have voting right in proportion to the paid up equity
capital of the company.
5. The equity share capital is sometimes referred to us the “Risk Bearing Capital”.
6. It is also referred to us permanent capital because equity are not redeemed in the
life time of the company.
2.3 Types of Shares:-
There are two types of shares.
1. Preference shares
2. Equity shares
Equity Share:
Shares which are not preference shares are termed as “Equity Share”. These
shares do not carry any preferential right.
2.4 Share Capital:-
The Sum total of the nominal value of shares of a company is called its shares
capital. The share capital is the two types.
1. Equity share capital

2. Preference share capital
1. Equity share capital:
“It is the sum total of the nominal value of equity share of a company”.
2. Preference share capital:
“It is the sum total of the nominal value of preference share of company”.
Classification of Shares Capital:
“Accordingto Schedule -6 of the companies Act, 1956 share capital of the

company should be classified in the capital of the company is divided as under”.
a. Authorized share Capital-
The amount of capital which the company is authorizes to rise by
memorandum of association and with which the company is
registered with the registrar of companies. This capital is also named
as “Registered Capital or Nominal Capital”.
b. Issued Capital-
“It is the nominal value of that part of the authorized capital which is
allotted for cash as well as for consideration other than cash. But it
cannot exceed the authorized capital. If issued capital is less than the
authorized capital, then it means that there is more amount of issued
capital”.
C. Subscribed Capital-
“It means that part of the issued capital which is allotted for cash. No
distinction can be drawn between issued capital and subscribed
capital and unless then shares are subscribed and paid for there
cannot be issued capital”.
D. Called up Capital-
“It means that part of the allotted share capital which has been called
up by the company”.
E. Paid up Capital-
“Paid up capital has been defined V/s 2(32) as paid up capital or

capital paid up includes capital credited as paid up”.
2.5 Valuation of Shares:-
Valuation of share is one of the most perplexing problems that confront

students of accountancy. The basic principles are by a no means difficult but their
applications call for a considerable degree of knowledgeof the various
technicalities involved.
2.6 Need of Valuation:-
The necessity for valuation of a share arises in the following circumstances.
1. For estate duty and wealth tax purpose.

2. For amalgamation and absorption schemes.
3. For gift Tax purpose.
4. For discharge of debts & liabilities in exceptional nature.
5. Conversion of preference share in to equity shares.
6. Advancing loans on the security of shares.
7. Purchase share for control.
2.7 Methods of Valuation:-
a. Net Assets Method
This method is also called balance sheet method or asset, backing method
or intrinsic or break-up value method. Under this method, an attempt is made to
determine as to how much amount per share, for this purpose it is necessary to determine
the net assets of the business as on that date net assets mean the total of third party
liabilities as only realizable assets are to be taken the item such as preliminary expenses
discount on debenture/ shares underwriting commission profit & loss Account (Debit
Balance) etc. appearing under the heading miscellaneous expenditure & loss are not to be
taken in to consideration similarly realizable value & not the book value are to be
considered.
The intrinsic value per share is arrived at by dividing value of net assets by the
number of share issued & subscribed.
Important:
1. While taking third party liabilities, even contingent liabilities are to be

considered.
2. Depreciation Fund
If there is a depreciation fund in respect of any fixed assed and no change in
the value of that assets is given, the depreciation fund is to be deducted
from the value of that asset to get its realizable value.
3. Realizable Value
If realizable value of any assets are not mentioned, their book – value are to
be taken as realizable value.
Net Asset
Intrinsic Value of Each share = No . of Equity shares
B. Market Value Method of Yield Basis Method
Under this method, prospective earning of the company are considered.

There are different ways of calculating the market value as follows.
1. On the basis of dividend declared by the company

Rate of Divided
Market Value = Normal rateof return X Paid up value of share
Example:-
12
Market Value = 15 X 100
= 80%
2. On the basis of earning

It is suitable method for valuation of share when the investors are
interested in knowing companies earning & the rate of profit.
Rate of profit
×
Market Value = Normal rateof return Paid up value of share
Profiy Available
×
Rate of Profit = Paid up Valueof Share 100
Example:-
Equity share capital is 10000 equity share of Rs.10each, Rs.8 paid up & the profit
available is Rs.20000. The normal rate of return 20% Calculate the market value
per share
Profit Available
×
Rate of Profit = Paid up value of share 100
20000
×
= 80000 100
= 25%
25
×
Market Value = 20 8
=10each per share
1. Capitalization Method
There is another method of calculating the market value which may be
termed as capitalization method.
Profit Available for equity share holder

×
Market Value = Normal rate of return 100
Example:-
If the company has subscribed capital of Rs.10000 equity share of Rs.100

each (Rs. 1000000) & the profit earned by the company Rs.150000 & the
normal rate of return is 10% than they market value as per capitalization
method will be as follows
Profit Available for equity share holder

×
Market Value = Normal rate of return 100
150000
×
= 10 100
= 1500000
Capital Value
Market Value Per share = No of Equity Shares
150000
= 10000
= 150 each share
C. Fair value Method
There are some accountants who do not prefer to use intrinsic value & the
yield value method for ascertaining the correct value of share. They
however, prescribed the fair value method is the main of intrinsic value &
yield value method & the some provided a better indication about the value
of share than the earlier two method.
Intrinsic value+ Market value

Fair value per share = 2
CHAPTER NO.3
PROFIE OF FIVE COMPANIES OF STUDY
3.4 Meaning & Definition of Company:-
In common Parlance Company means an association of person formed for the

economics gain of its members. However, in law any association of person for any
common object can be registered as company. The object need not be economy gain
of its members.
Example :-
A Company can be formed for purpose such as charity, research advancement of

knowledge etc.
Definition
In the Word of Justice Lindley:
“ A Company it an association of main person who contribute money or money’s

worth to a common stock & employ it for a company purpose. The common stock so
contributed is denoted in money & is the capital of the company. The person who
contributes it or to whom it belonging are members”.
The companies Act defines a company as “A company formed & registered under
this Act or an existing company”.
3.2 Profile of Companies
1] BAJAL AUTO LIMITED
i) Name of Company BAJAL AUTO LIMITED

ii) Registered Office Mumbai- Pune Road Akurdi Pune -411035
iii) Telephone (020)-27472851
27406063
iv) Fax (020)-27407380
v) E-Mail ID Investo@bajaauto.co.in
vi) Board of Directors Rahul Bajaj (Chairman)
Madhur Bajaj (Vice Chairman)
Rajiv Bajaj (MD)
J.N.Godrej (Director)
SumanKirloskar (Director)
Shekhar Bajaj (Director)
D.S. Metha (Director)
vii) Equity Share Capital 289367020 equity shares of Rs.10 each
viii) Rate of Dividend Rs 40 Per Share
2] SUDARSHAN CHEMICAL INDUSTRIES LIMITED
i) Name of Company SUDARSHAN CHEMICAL

INDUSTRIES LIMITED
ii) Registered Office 162,Wellesley Road Pune – 411001
iv) Fax (020)-26058222
v) E-Mail ID contact@sudarshan.com.
vi) Board of Directors Mr. K.L.Rathi (Chairman)
Mr. B.S.Metha (Director)
Mr. P.R. Rathi(Director)
Mr. P.P.Chhabria (Director)
Mr.S.N.Indamdar (Director)
Mr. N.J.Rathi (Director)
vii) Equity Share Capital 6922775 equity shares of Rs.10 each fully
paid up
viii) Rate of Dividend Rs 12.50 Per Share
3] MELSTAR INFORMATION TECHNOLOGIES LIMITED
i) Name of Company MELSTAR INFORMATION

TECHNOLOGIES LIMITED
ii) Registered Office Melstar House, G4, MIDC Cross Road
“A” Anderi (East Mumbai -400093
iv) Fax (022)-28310520
v) E-Mail ID info@melstar.com.
vi) Board of Directors Mr. Yeshvardhan Birla (Chairman)
Mr. M.S.Adige (Director)
Mr. P.V.R. Murthy (Director)
Mr. Rajesh Shah (Director)
Mr.AnojMenon (Director)
vii) Equity Share Capital 14283139 equity shares of Rs.10 each fully
paid up
viii) Rate of Dividend Nil
4] ACC LIMITED
i) Name of Company ACC LIMITED

ii) Registered Office Cement House 121, MaharahiKarve Road
Mumbai - 400020
iv) Fax (022)-33617440
v) E-Mail ID info@melstar.com.
vi) Board of Directors Mr. N.S.Sekhsrai (Chairman)
Mr. PapulHugeentobler (Deputy Chairman)
Mr. KuldipK.Kaura (Director)
Mr. Naresh Chandra (Director)
Mr.M.L.Narula (Director)
Mr. R.A.Shah (Director)
Miss. AshwiniDani (Director)
vii) Equity Share 18795000 equity shares of Rs.10 each fully paid
Capital up
5] RELIANCE COMPNY LIMITED
i) Name of Company RELIANCE COMPNY LIMITED

ii) Registered Office 3rd Floor Maker Chambers, 222, Nariman Point
Mumbai - 4000020
iv) Fax (022)-22785111
v) E-Mail ID invester relation@rill.com.
vi) Board of Directors Mr. Mukesh D. Ambani (Chairman)
Mr. Hital R. Meswani (Director)
Mr. Pawan K. Kupil (Director)
Mr. Ashok Misra (Director)
Mr. Ashok Misra (Director)
Miss. Ramnilaila H. Ambani (Director)
Mr. Yogendra P. Trivedi (Director)
Mr. Dipak C. Jain (Director)
vii) Equity Share 1140000 equity shares of Rs.10 each fully paid
Capital up
CHAPTER NO.5
DATA COLLECTION & PRESNTATI
4.1 Data Presentation:-
1. Bajaj Auto Limited
Balance Sheet
as on 31st March 2013 (Rs. In lacks)
Liabilities Amt. Amt. Assets Amt. Amt.

Share capital 289.37 Fixed Assets
Gross Block 3390.88
Less Depreciation 1912.45
Reserve & Surplus Add Capital Work 1478.43 1548.29
General Reserve 2084.6 in Progress
Hedge Reserve 20.77 Expenditure to
date
Profit & Loss A/c 2515.48 Technical Know 69.86 4.28
Secured Loans 23.53 How Investment
Unsecured Loans 301.62 4946 4775.20
Deferred Tax Current Assets &
Liabilities Less Loans & Advance
Deferred Tax Assets 197.7 29.71 Inventories
Sundry Debtors
Current Liabilities 167.99 Cash & Bank
& Provision Balance Other
Liabilities Provision 3955.28 Current Assets 547.28
Loans & Advance 362.76
2426.65 556.49
1528.63 216.42 2872.59
1189.64
9220.36 9220.36
2. SUDARSHAN CHEMICAL INDUSTRIES LIMITED
Balance Sheet

Share capital 69227250 Fixed Assets Gross 3322103747
Block
Less Depreciation 1992628779
Reserve & Surplus 1329474968
Deferred Tax 23710457036 Add Capital Work in
Liabilities 120974039 Progress
Expenditure to date 38553227 1715028495
Secured Loans 1451997582 Investment 218574915
Unsecured Loans 511859180
Current Assets &

Loans & Advance
Inventories Sundry 1374554262
Debtors
Current Liabilities & 1004824094 Cash & Bank 1746882158
Provision Liabilities 176644931 1181469025 Balance
Provision 123498124
Other Current
Assets Loans &
Advance 65221227
463224931 3773380702
57069884112 57069884112
3. MELSTAR INFORMATION TECHOLOGIE LIMITED
Balance Sheet

Share capital 142831390 Fixed Assets Gross
(289367020 equity Block 194083826
shares of Rs.10 each) Less Accumulated
Depreciation 77402807 116681019
Deferred Tax
Liabilities
Unsecured Loans
Current Assets &
Loans & Advance
Sundry Debtors
Current Liabilities & Cash & Bank
Provision Balance 43351828
Liabilities 42974070
Provisions 5449257 Other Current 2567246
Assets Loans &
48423327 Advance
Profit & Loss A/c 32534292 78453366
22731659
219866044 219866044
4. ACC LIMITED
Balance Sheet

Gross Block 8076.95
Less
Accumulated 2994.51
Depreciation
Reserve & Surplus 6281.54 5082.44
Secured Loans 518.05 Add Capital

Unsecured Loans 5.77 Work in 1562.80 6645.24
Progress
Investment 1702.67
Current Liabilities Current Assets
& Provision & Loans &
Provisions 4280.30 Advance 2925.70
11273.61 11273.61
5. RELIANCE COMPNY LIMITED
Balance Sheet

Share capital equity Fixed Assets Gross
shares Preference Share 1140 Block 21705.44
0.86 Less Accumulated
Depreciation 10870.50
1140.86 10834.94
Reserve & Surplus
General Reserve 4.91
Profit & Loss A/C 330.40
Securities Premium A/c 4260.16
Capital Subsidy 80.00 4657.47
Secured Loans 8797.73 Add Capital Work in
Unsecured Loans 22.75 Progress 155.15
Assets Held for
Diseorsal 18.42 11008.51
Deferred Tax Liabilities 1093.13 Investment 1736.43
Deferred Tax (Net) 467.98
Current Liabilities & Current Assets &
Provision 6046.37 Loans &
Provisions 219.94 Advance Inventories
Sundry Debtors 2707.01
Cash and Bank 5935.21

Balance
Loans and Advance 202.41
874.66 9719.29
22464.23 22464.23
1. Bajaj Auto Limited
Balance Sheet

Gross Block 3395.16
Less Depreciation 1912.45 1482.71
Reserve & Surplus 4620.85 Capital Work in 69.86
Progress
Deferred Tax 29.71 Investment 4721.91
Liabilities
Secured Loans 133.84 321.43 Current Assets &
Unsecured Loan 157.84 Loans & Advance
Inventories 574.28
Current Liabilities Cash & Bank 228.78
& Provision Balance
Liabilities Provision 670.82
Trade Payable 1555.8
1789.26 4015.88
Other Current 618.05
Assets Loans &
Advance
1219.05 2973.05
9247.53 9274.53
2. SUDARSHAN CHEMICAL INDUSTRIES LIMITED
Balance Sheet

Share capital 69227250 Fixed Assets Gross 4264104198
Block
Less Depreciation 2092628779 2171475379
Reserve & Surplus
Deferred Tax 263295626 Capital Work in
Liabilities 212310169 Progress 167466556
Unsecured Loans 27770460
Current Assets &

Loans & Advance
Inventories Sundry 1569123196
Debtors
Current Liabilities & 823157861 Cash & Bank 1842772784
Provision Liabilities 192896199 1964566494 Balance
Provision 948512434 338335313
Other Current
Assets Loans &
Advance 71642266
778460194 4600333753
7191045639 7191045639
3. MELSTAR INFORMATION TECHOLOGIE LIMITED
Balance Sheet

Share capital 142831390 Fixed Assets Gross
Block 174924902
Less Accumulated
Depreciation 66402807 108522095

Unsecured Loans
Current Assets &
Loans & Advance
Sundry Debtors
Current Liabilities & Cash & Bank
Provision Balance 185476162
Liabilities 10900102
Provisions 2966648 Other Current 2127955
Trade payable 10216510 Assets Loans &
24083260 Advance
7564744
2599214 197768075
330784003 330784003
4. ACC LIMITED
Balance Sheet

Gross Block 9645.37
Less
Accumulated 3437.84
Depreciation
Reserve & Surplus 7004.32 6207.53
Secured Loans 506.50 Add Capital

Unsecured Loans 4.23 Work in 435.32 6642.85
Progress
Investment 1624.95
Current Liabilities Current Assets
& Provision & Loans &
Provisions 4357.25 Advance 3792.45
12060.25 12060.25
5. RELIANCE COMPNY LIMITED
Balance Sheet

Share capital equity Fixed Assets Gross
shares Preference Share 1140 Block 23495.79
0.86 Less Accumulated
Depreciation 12884.14
1140.86 10611.65
Reserve & Surplus
General Reserve 4.91
Profit & Loss A/C 1537.18
Securities Premium A/c 4260.16
Capital Subsidy 80.00 5882.25
Secured Loans 6450.01 Add Capital Work in
Unsecured Loans ---- Progress 315.28
Assets Held for
Diseorsal 18.42 10945.35
Deferred Tax Liabilities 992.19 Investment 1736.43
Deferred Tax (Net) 313.25
Current Liabilities & Current Assets &
Provision 9016.39 Loans &
Provisions 339.98 Advance Inventories
Cash and Bank 7133.48

Balance
Loans and Advance 403.81
802.77 11453.15
24134.93 24134.93
Thus in this chapter 20 Balance sheets of five companies of study for two years
have been collected & presented.
CHAPTER NO.5
ANALYSIS OF DATA
Analysis of Data:-
Valuation of Shares:
1. BAJAJ AUTO LIMITED
Net Assets
A. Intrinsic Value Method = No of Equity Shares
a. Net Assets Rs. Rs.

Fixed Assets 1478.43
Capital Work in Progress 69.86
Technical Know How 4.28
Investment 4795.28
Cash & Bank Balance 556.49
Other Current Assets 216.42
Loan & Advances 1189.64
Inventories 547.28 9920.36
Less- Liabilities
Deferred Tax Liabilities 29.71
Current Liabilities 2526.65
Provision 1528.63 4084.99
Net Assets 5235.37
b. No of Equity Shares = 289367020

523537000
Intrinsic Value = 289367020
= 1.80
Rate of Profit
×
B. Market Value Method = Rate of return Paid up value of share
Profit available = Profit during the year 333670000
Profit available
a:Rate of Profit = Paid up value of share × 100
333670000
= 2893670200 × 100
= 11.54%
Profit available
×
b:Rate of Return = Net Assets 100
333670000
= 2893670200 × 100
= 63.73%
11.54
×
Market Value = 263.54 10
=1.80

C:Fair Value = 2
1.80+1.81
= 2
=1.80
2. SUDRSHAN CHEMICAL INDUSTRIES LIMITED
Net Assets
A.Intrinsic Value Method = No of Equity Shares

Fixed Assets 1329474968
Capital Work in Progress 385553527
Technical Know How 218574915
Investment 1374554262
Sundry Debtors 1746882158
Cash & Bank Balance 123498124
Other Current Assets 65221227
Loan & Advances 46322491
570698411
2
Less- Liabilities
Deferred Tax Liabilities 120974039
Current Liabilities 1004824094
Provision 176644931 130244306
4
Net Assets 440454104
8

4404541048
= 636.23
Rate of Profit
×

Profit available
324299577
×
= 69227750 100
= 468.45%
Profit available
×
324299577
= 4404541048 × 100
= 7.36%
468.45
×
=636.48

C:Fair Value = 2
6366.23+ 636.48
= 2
=636.35
3. MELSTAR INFORNMATION TECHNOLOGIES LIMITED
Net Assets

Investment 2000000
Loan & Advances 32534292 197134385
Less- Liabilities
Provision 549257 48423327
Net Assets 48423337

148711058
= 10.39
Rate of Profit
×

Profit available
14626249
= 142831390 × 100
= 10.24%
Profit available
×
14626249
= 148711058 × 100
= 9.83%
10.24
×
=10.41
Intrinsic val ue+ Market value

C:Fair Value = 2
1041+1041
= 2
=10.41
4.ACC LIMITED
Net Assets

Investment 1702.67
Loan & Advances 2925.70 11273.61
Less- Liabilities
Current Liabilities
Provision 4280.30
Net Assets 6993.31

699331000
= 37.20
Rate of Profit
×
Profit available
112094000
×
= 187950000 100
= 59.64%
Profit available
×
112094000
= 699331000 × 100
= 16.02%
59.64
Market Value = 16.02 × 10
=37.22

C:Fair Value = 2
37.20+ 37.22
= 2
=37.21
5.RELIANCE COMPANY LIMITED
Net Assets

Assets Held for Disposal 18.42
Investment 1736.43
Inventories 2707.01
Loan & Advances 874.66 22464.23
Less- Liabilities
Deferred Sales Tax 1093.13
Provision 219.94 7827.42
Net Assets 14636.81

1463681000
= 128.39
Rate of Profit
×
Profit available
33040000
= 11400000 × 100
= 2.89%
Profit available
×
33040000
= 1463681000 × 100
= 2.25%
2.89
Market Value = 2.2 5 × 10
=128.44

C:Fair Value = 2
128.39+128.44
= 2
=128.41
1. BAJAJ AUTO LIMITED

Net Assets
Investment 4721.91
Other Current Assets 618.05
Loan & Advances 1219.05
Inventories 547.28 9247.53
Less- Liabilities
Provision 1555.8
Trade Payable 1789.26
Net Assets 5201.94
c. No of Equity Shares = 289367020

52194000
= 1.79
Rate of Profit
×
Profit available
333973000
= 2893670200 × 100
= 11.54%
Profit available
×
333973000
= 520194000 × 100
= 64.20%
11.54
=1.79

C:Fair Value = 2
1.79+1.79
= 2
=1.79
2. SUDRSHAN CHEMICAL INDUSTRIES LIMITED
Net Assets
c. Net Assets Rs. Rs.

Capital Work in Progress 167466556
Investment 251769915
Inventories 1569123196
Other Current Assets 71642266
Loan & Advances 778460194 719104563
9
Less- Liabilities
Provision 192896199
Trade Payable 948512434 196456649
4
Net Assets 522647914
5
d. No of Equity Shares = 6922775

5126479145
= 754.97
Rate of Profit
×
Profit available
361510643
= 5226479145 × 100
= 522.20%
Profit available
×
361510643
×
= 5226479145 100
= 6.91%
522.20
×
=755.71

C:Fair Value = 2
754.91+755.71
= 2
=755.34
3. MELSTAR INFORNMATION TECHNOLOGIES LIMITED
Net Assets

Investment 24493833
Loan & Advances 2599214
Other Current Assets 7564744 330784003
Less- Liabilities
Provision 2966648
Trade Payable 10216510 24832060
Net Assets 89951943

89951943
= 6.29
Rate of Profit
×

Profit available
14617030
= 142831390 × 100
= 10.23%
Profit available
×
14617030
= 89951943 × 100
= 16.24%
10.23
=6.29

C:Fair Value = 2
6.29+ 6.29
= 2
=6.29
4.ACC LIMITED
Net Assets

Investment 1624.95
Loan & Advances 3792.55 12060.25
Less- Liabilities
Current Liabilities
Provision 4337.25
Net Assets 7703.00

770300000
= 40.98
Rate of Profit
×
Profit available
132675000
×
= 187950000 100
= 70.59%
Profit available
×
132675000
= 770300000 × 100
= 17.22%
70.59
=40.99

C:Fair Value = 2
40.98+40.99
= 2
=40.98
5.RELIANCE COMPANY LIMITED
Net Assets

Assets Held for Disposal 18.42
Investment 1736.43
Inventories 3133.09
Loan & Advances 802.77 24134.93
Less- Liabilities
Deferred Sales Tax 992.19
Provision 339.98 10661.81
Net Assets 13473.12

1347312000
= 118.85
Rate of Profit
×
Profit available
153822000
×
= 11400000 100
= 13.49%
Profit available
×
153822000
= 1347312000 × 100
= 11.41%
13.39
=118.22
C:Fair Value = 2
118.85 +118.22
= 2
=118.53
CHAPTER NO. 6
OBSERVATIONS & TESTING OF
HYPOTHESE
Observations & Testing of Hypotheses:-
A. Observations
The ranking of companies is as follows
For the Financial year 2012-13
Sr.No. Name of Intrinsic Market Fair Value Rank

Companies Value of Value of of Share
Shares (Rs) Shares (Rs) (Rs)
2 Sudarshan 636.23 636.48 636.35 1
Chemical
Industiries Ltd.
5 Reliance 128.39 128.44 128.41 2
Company Ltd
4 ACC Ltd 37.20 37.22 37.21 3
3 Melstar 10.41 10.41 10.41 4
Information
Technologies
Ltd.
1 Bajaj Auto Ltd. 1.80 1.81 1.80 5
For the Financial year 2013-14
Sr.No. Name of Intrinsic Market Fair Value Rank

Companies Value of Value of of Share
Shares (Rs) Shares (Rs) (Rs)
2 Sudarshan 754.97 755.71 755.34 1
Chemical
Industiries Ltd.
5 Reliance 118.85 118.22 118.53 2
Company Ltd
4 ACC Ltd 40.98 41.04 41.01 3
3 Melstar 6.29 6.29 6.29 4
Information
Technologies
Ltd.
1 Bajaj Auto Ltd. 1.79 1.79 1.79 5
Comment:
1. First ranking company is the Sudarshan Chemical Industries Ltd.

2. Last ranking company is the Bajaj Auto Ltd.
B) Testing of Hypotheses
1. The performance relating to valuation of shares all companies is good.

The hypotheses are partly proved because as per the ranking of
shares value two companies is good. And remaining three companies
performance is not as per ranking shown on page no.57
2. Intrinsic value of all five companies is fair
The hypothesis is partly proved because three companies intrinsic
value is good as it is more than face value.
But remaining two companies intrinsic value is less than face value
as indicated in chapter –VI
CHAPTER NO.7
SUGGESTIONS
SUGGESTIONS
The following suggestions can be made after study of valuation of shares of five
companies.
Out of five companies under study first two companies are having good
performance relating to shares, because their fair value of shares is less than sufficient. So
their improve their profit to increase share value.
Intrinsic value of six companies is not sufficient, so they should improve
value of shares.
BIBLOGRAPHY
BOOKS :-
1. Jain P.K. and Khan M.Y. Financial Management text, problems & Cases, Tata
McGraw –Hill Publishing Company Limited, 5th Edition, New Delhi
2. Dr. Maheshwari S.K. and Dr. Maheshwari S.N. Advanced Accountancy, 8 th
Revised Edition 2001, Vikas Publication house Private Limited ,New Delhi.
3. Dr. Joshi C.M. and PatkarM.G. ,Advanced Accounting , 1 st Edition as per new
syllabus, Feb-2003.
4. Agrawal T.S., Gupta S.C. and Shukla M.C. , Advanced Accounting.
5. S.K.R. Paul, Corporate Accounting , New Central Agency Public Ltd. Published
May 2005

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A

“VALUATION OF EQUITY SHARES OF FIVE

Mr. Vivek A. Bale

Submitted for the requirement of Master of Business Administration

Aditya Institute of Management

Affiliated to University of Pune,

Academic Year, 2014-15

work entitled. “VALUATION OF EQUITY SHARES OF FIVE

COMPANIES”. For the requirement of Master of Business Administration at

Place :- Pune Mr. VIvek A. Bale

1.1 Introduction of Study : -

1.2 Objectives of Study :-

2.2 Features of Equity Shares:

1. An equity share/ ordinary share which is not preference share.

2. The rate of dividend on equity shares is not fixed.

3. The board of directors recommends the rate of dividend which is declared

2.3 Types of Shares:-

There are two types of shares.

2.4 Share Capital:-

1. Equity share capital

1. Equity share capital:

2. Preference share capital:

Classification of Shares Capital:

“Accordingto Schedule -6 of the companies Act, 1956 share capital of the

“Paid up capital has been defined V/s 2(32) as paid up capital or

2.5 Valuation of Shares:-

Valuation of share is one of the most perplexing problems that confront

2.6 Need of Valuation:-

The necessity for valuation of a share arises in the following circumstances.

1. For estate duty and wealth tax purpose.

2.7 Methods of Valuation:-

a. Net Assets Method

1. While taking third party liabilities, even contingent liabilities are to be

B. Market Value Method of Yield Basis Method

Under this method, prospective earning of the company are considered.

1. On the basis of dividend declared by the company

2. On the basis of earning

=10each per share

Profit Available for equity share holder

If the company has subscribed capital of Rs.10000 equity share of Rs.100

Profit Available for equity share holder

= 150 each share

C. Fair value Method

Intrinsic value+ Market value

In common Parlance Company means an association of person formed for the

A Company can be formed for purpose such as charity, research advancement of

In the Word of Justice Lindley:

“ A Company it an association of main person who contribute money or money’s

1] BAJAL AUTO LIMITED

i) Name of Company BAJAL AUTO LIMITED

i) Name of Company SUDARSHAN CHEMICAL

i) Name of Company MELSTAR INFORMATION

i) Name of Company ACC LIMITED

i) Name of Company RELIANCE COMPNY LIMITED

4.1 Data Presentation:-

1. Bajaj Auto Limited

Liabilities Amt. Amt. Assets Amt. Amt.

as on 31st March 2013 (Rs. In lacks)

Liabilities Amt. Amt. Assets Amt. Amt.

Current Assets &

as on 31st March 2013 (Rs. In lacks)

Liabilities Amt. Amt. Assets Amt. Amt.

as on 31st March 2013 (Rs. In lacks)