INTRODUCTION

FINANCIAL STATEMENTS RATIOS

CASH FLOW
FUND FLOW

COST OF CAPITAL
LEVERAGE

FUTURE GROWTH
STOCK MARKET ANALYSIS RECOMMEDATIONS/ COMMENTS

Bajaj Auto is a major Indian automobile manufacturer started by a Rajasthani merchant by Jamnalal Bajaj at Rajasthan in the 1930s. Bajaj Auto came into existence on November 29, 1945 as M/s Bachraj Trading Corporation Private Limited.

It is based in Pune, Maharashtra, with plants in Chakan (Pune), Waluj (Aurangabad) and Pantnagar in Uttaranchal.
Over the last decade, the company has successfully changed its image from a scooter manufacturer to a two-wheeler manufacturer. Bajaj Auto, is ranked as the world's fourth largest two- and three- wheeler manufacturer and the Bajaj brand is well-known across several countries in Latin America, Africa, Middle East and South East Asia The present Chairman of the group, Rahul Bajaj, took charge of the business in 1965. Under his leadership, the turnover of the Bajaj Auto the flagship company has gone up from INR.72 million to INR. 120 billion, its product portfolio has expanded and the brand has found a global market.

Particulars
INCOME : Sales Turnover Excise Duty Net Sales Other Income Stock Adjustments Total Income EXPENDITURE : Raw Materials Power & Fuel Cost Employee Cost Other Manufacturing Expenses Selling and Administration Expenses Miscellaneous Expenses Less: Pre-operative Expenses Capitalised Total Expenditure Operating Profit Interest Gross Profit Depreciation Profit Before Tax Tax Fringe Benefit tax Deferred Tax Reported Net Profit

Mar12 (In cr) Mar12 (In cr)

20,475.74 946.76 19,528.98 608.04 94.15 20,231.17 14,196.69 101.85 515.39 225.27 702.65 344.72 49.43 16,037.14 4,194.03 22.24 4,171.79 145.62 4,026.17 1,003.39 0 18.73 3,004.05 17,331.64 933.41 16,398.23 1,403.33 82.79 17,884.35 11,880.30 86.61 476.78 165.97 553.87 265.2 16.66 13,412.07 4,472.28 1.69 4,470.59 122.84 4,347.75 980 0 28.02 3,339.73

1. Turnover crossed the Rs 20,000 crore mark 2. Net sales and other operating income grew by 19% to Rs 19k crore

3. Record sales of 4.35 million units with over a million units being sold in each of the four quarters
4. Other Operating Income is reduced by 762 crores

5. Direct expenditure has increased by Selling & Distribution is decreased. This means company has speant less on Marketing activities which could have resulted in more sales.

6. On the whole turnover has increased by 3000 crores and Expenditure has been increased by 2,597 crores. This is the reased why even after increase in volume of sales the Operating profit has increased just by 478 crores. 7. Even after rise in sales the PBDIT has gone down by 284 crores. This is mainly due to rise in expenses. Company should curtail expenditure. 8. Depereciation has been increased due to increase in fixed assets 9. Over all Expenses has to be reduced and company should take advantage of large scale production.

Particulars

Sources Of Funds Total Share Capital Equity Share Capital Share Application Money Preference Share Capital Reserves Revaluation Reserves Networth Secured Loans Unsecured Loans Total Debt Total Liabilities Application Of Funds Gross Block Less: Accum. Depreciation Net Block Capital Work in Progress Investments Inventories Sundry Debtors Cash and Bank Balance Total Current Assets Loans and Advances Fixed Deposits Total CA, Loans & Advances Deffered Credit Current Liabilities Provisions Total CL & Provisions Net Current Assets Miscellaneous Expenses Total Assets Contingent Liabilities Book Value (Rs)

Mar '12 (In cr)

289.37 289.37 0 0 5,751.70 0 6,041.07 0 97.48 97.48 6,138.55 3,425.94 1,914.33 1,511.61 343.15 4,882.81 678.53 423.2 446.49 1,548.22 1,744.82 1,208.36 4,501.40 0 2,925.53 2,174.89 5,100.42 -599.02 0 6,138.55 1,445.67 208.77

Mar '11 (In cr)

289.37 289.37 0 0 4,620.85 0 4,910.22 23.53 301.62 325.15 5,235.37 3,395.16 1,912.45 1,482.71 149.34 4,795.20 547.28 362.76 155.45 1,065.49 3,891.66 401.04 5,358.19 0 2,624.35 3,925.72 6,550.07 -1,191.88 0 5,235.37 959.66 169.69

1. Entire Share Capital is Equity Share Capital which means compay will have to pay dividend depending only on profitability 2. No fixed debenture borrowings. Company doesn't have to pay fixed interest which is obligatory 3. Reserves and surplus have increased by 1,131 crores. This is lucrative for shareholders 4. Secured Loans are completely written-off & Unsecured which is interest free is also partially paid-off. This reduces dependancy on outsiders. 5. Gross Block (Fixed Assets) are increased by 31 crores. Not a very big rise but this is in favour of company

6. Capital Work in Progress has increased by 193 crores. This means some fixed asset are being created and are yet to be converted into fixed assets
7. Investments have been increased by 88 crores. This is a good sign especially when there is no preference Capital, debentures and outside loan. The loan which is pending is interest free. 8. Inventories has increased by 131 crores. It has increased by 24% considerering last year's inventories 9. Debtors are increased by 60 crores. This is our asset but may lead to baddets if not recovered. Higher the debtor higher the requirement of working capital as liquidity goes low. 10. Cash & Bank have been increased by 291 crores. This is perhaps due to the payment received from Debtors. This is a good sign 11. Total Current assets are increased by 483 crores. This is good. 12. Loans & Advances are reduced by 2147 crores. This is still high. Instead of giving loans company can look at investing. Advances reduction is not an issue. 13. Liabilities has been increased by 301 crores. It is better to pay-off the liabilities. Net Current assets are in negative. This is not a good picture. Paying-off creditors may bring back Current assets to positive.

Balance Sheet Ratios:

2011

2012

Current ratio

0.80

0.88

Quick Ratio

0.71

0.72

Proprietors Ratio

0.025

0.027

Capital Gearing Ratio

0.066

0.016

Debt Equity Ratio

0.07

0.02

Income Ratios Gross profit Ratio Net Profit Ratio

Operating Ratio Earning per share Administrative Expense Ratio Selling & Distribution Expense Ratio Finance Expense Ratio Stock turnover Ratio Price Earning Ratio

2011 19.03 19.8

19.78% 115.42 1.50% 2.70% 0.01% 32.8 11.1

2012 18.39 15.11

19.14% 103.81 1.80% 1.40% 0.11% 30.97 14.92

Particulars
I. Operating activities Profit before tax Adjustments: Add: i) Depreciation ii) Provision for diminution in value of investment in the companys subsidiary, PT. Bajaj Auto Indonesia iii) Valuation losses of derivative hedging instruments iv) Amount written off against technical know-how v) Amount written off against leasehold land vi) Loss on assets sold, demolished, discarded and scrapped vii) Provision for doubtful debts and advances viii) Amortisation of premium/discount on acquisition of fixed income securities ix) Interest expense Less: i) Investment income included in above: Interest on long-term investments Interest on fixed deposits and others Profit on sale of investments, net Surplus/(Loss) on redemption of securities, net Dividend on long-term investments 0.14 0.47 Amortization of premium/discount on acquisition of fixed income securities

2012 (in cr)

4,026.17 145.62 134 2.14 0.65 7.49 9.95 18.64 22.24 340.73 275.56 42.76 33.09 (6.03) (18.64) 326.88 1.86 9.65 (338.39) 4028.51

2011 (in cr)

4,347.75 122.84 102.27 2.14 0.65 20.12 0.34 15.91 1.69 265.96 320.88 6.16 52.82 1.39 (15.91) 365.81 2.22 9.37 826.82 (1204.22) 3409.49

ii) Provision for doubtful debts and advances written back iii) Surplus on sale of assets iv) Surplus on pre-payment of sales tax deferral liability/loan

Change in assets and liabilities i) Inventories ii) Trade receivable (62.10) iii) Loans and advances and other assets iv) Liabilities and provisions Annuity payments (net) to VRS optees Net cash from operating activities before income tax Income tax paid Net cash from operating activities Carried forward Brought forward II. Investment activities i) (Increase)/decrease in investment in subsidiaries, associates, etc. ii) (Increase)/decrease in other investments, net iii) (Increase)/decrease in other bank balances iv) Capital expenditure v) Sales proceeds of assets/adjustment to gross block vi) Capital expenditure on development of technical know-how vii) Investment income Interest on long-term investments Interest on fixed deposits and others Profit on sale of investments, net Surplus/(Loss) on redemption of securities, net Dividend on long-term investments Amortisation of premium/discount on acquisition of fixed income securities

(131.25) (62.1) (5.59) 297.81 98.87 (19.2) 4,108.18 (1148.27) 2,959.91 2,959.91 2,959.91

(101.07) (90.94) (1068.45) 457.52 (802.94) (18.58) 2,587.97 (974.25) 1,613.72 1,613.72 1,613.72

(68.14) (112.57) (474.96) (108.98) 22.97 (29.88) (771.56) 275.56 42.76 33.09 (6.03) 0.14 (18.64) 326.88

(210.08) (608.49) 0.16 (200.63) 39.21 (6.42) (986.25) 320.88 6.16 52.82 1.39 0.47 (15.91) 365.81

(Increase)/decrease in investment income receivable Net cash from investment activities Carried forward Brought forward III. Financing activities i) Short-term bank loan taken/(repaid) ii) Cash credit from banks iii) Interest expense iv) Deferral/(repayment) of sales tax deferral liability/loan v) Pre-payment of sales tax deferral liability/loan vi) Dividend paid vii) Corporate dividend tax paid Net cash from financing activities Net change in cash and cash equivalents Cash and cash equivalents as at 1 April 2011 [Opening balance] Cash and cash equivalents as at 31 March 2012 [Closing balance]

(0.76) 326.12 (445.44) 2,514.47 2,514.47 (134.31) (23.53) (22.24) (31.88) (10.39) (1154.26) (187.77) (1564.38) 950.09 228.74 1,178.83

(2.75) 363.06 (623.19) 990.53 990.53 134.31 10.55 (1.69) 36.68 (368.14) (577.58) (96.12) (861.99) 128.54 100.2 228.74

Sources Of Funds
By Interest/Dividends from Investment

Statement of Fund flow Amt (In cr) Application Of Funds

326.88 Paid-off Secured Loans Paid-off Unsecured Loans Addition in Assets Decrease in Working Capital

Amt (In cr)

23.53 204.14 926.06 181.55
1335.28

Fund From Operations

1,008.40
1335.28

Particulars
To Depreciation

Adjusted P & L Amt (In cr) Particulars

145.62 BY Bal b/d By Interest/Dividends from Investment Fund From Operations

Amt (In cr)

2,515.48 326.88 1,008.40 3,850.76

To Bal c/d

3,705.14 3,850.76

Particulars
Current Assets Inventories

Statement of Changes in Working Capital 2012 (In cr)

678.53

2011 (In cr)

547.28

Sundry Debtors
Cash and Bank Balance

423.2
446.49 1548.22

362.76
155.45 1065.49 2624.35 -1558.86

Less: Current liabilities

2925.53 -1377.31

Particulars Equity Share Capital

Reserves & Surplus

Amount Percentage Interest/Dividend (In cr) 289.37 5% 450%

WACC

21.56%

5751.7

95%

450%

428.44%

6041.07

100%

450.00%

Operating Leverages =

Contribution Earning before interest & tax

4,600.85 4,149.57

= 1.11

Financial Leverages =

Earning before interest & tax Earning before tax

4,149.57 4,127.33

= 1.01

Combined Leverages = Operating Leverages x Financial Leverages

= 1.11

The company expects a strong 30+% growth in exports volume continuing in FY13 as well. It implies a higher profitability and provides room for increasing promotion costs to push sales in the sluggish domestic market. In our view, monthly export numbers and new Pulsar launch in Q4FY12 are key near term triggers. Steady exports to offset domestic weakness. The company has not seen any slowdown in demand from Nigeria. It expects growth momentum in exports to continue in FY13 as well and Africa to be the key market. It should make up for poor domestic demand which is going through a soft patch due to weak consumer sentiments. The company is pinning hopes on the launch of new Pulsar in Q4FY12 to bring back the demand momentum.

 The company expects 5%6% growth in domestic two wheeler industry in Q4 of FY12. It targets monthly sales of 18,00019,000 units of threewheeler in the next six months. The run rate can be higher if permit opens up in Karnataka and Delhi. Export markets The company has not experienced any slowdown in exports so far. It has maintained its earlier guidance (for exports) of 1.5mn units in FY12. Further, it has given a healthy guidance of +30 % growth in FY13 as well. Africa contributes 45% to total exports and will remain the key growth market for the company Forex cover

Average USD/INR rate was 49.4 in Q3FY12 compared to 47.8 in Q2FY12 for exports realizations. 70% of FY13 exports have already been covered. Earlier, USD/INR contracts were taken at 4749 (H2FY12) and later at 4751.
Other highlights

RE60: The management seemed very much optimistic on the success of RE60. They are on track to commercially launch the product in exports markets though, no time line is set for India due to uncertainty in government approvals. They maintained their faith on low spend in normal ad expenses except for new launches. This is despite heavy ad expenses from Hero Motocorp, its closest competitor.

BSE 20TH July 2011 to 20th July 2012

Open High Low Prev. Close Price Quantity

1590.6

41.40 (2.67%) 1539.95 1595 1528.85 1549.2 Vol 52 Week 133310 1839

BSE : Jul 20, 17:00

52 Week 1351.25

Bid
1590.6 257

Offer
0 0

NSE 20TH July 2011 to 20th July 2012

Open High

1592.1

44.30 (2.86%) 1523.05 1596 Vol 1168722

NSE : Jul 20, 17:00

52 Week 1843.35

Low
Prev. Close Price Quantity

1523.05
1547.8 Bid 1592.1 242

52 Week
Offer 0 0

1356

Year
2012

Month
May

Dividend (%)
450

2011
2010 2009 2008

May
May May May

400
400 220 200

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Price* Volume* MF holdings Sales

* Computed on last 15 days' trading figures.

Thanks