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Shares & Weightages

IISL
-----
Products
&
Outstanding Nifty Shares & Weightages
Services As on June 22, 2004
-----
IISL Security Issue Capital Close Price Mkt. Cap. (Rs. crores) Weig
Indices
ABB LTD. 42381675 625.50 2650.97
-----
What's ASSOCIATED CEMENT CO LTD 178067091 234.70 4179.23
New BAJAJ AUTO LTD 101183510 899.55 9101.96
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BHARAT PETROLEUM CORP LT 300000000 348.30 10449.00
Index
Concepts BHARTI TELE-VENTURES LTD 1853366767 132.50 24557.10
----- BHEL 244760000 498.30 12196.40
Statistics
----- BRITANNIA INDUSTRIES LTD 25112050 604.95 1519.15
Index CIPLA LTD 299861745 197.00 5907.28
Funds
COLGATE PALMOLIVE (I) LTD 135992817 114.15 1552.36
-----
IISL DABUR INDIA LTD 286249052 63.30 1811.96
Press DR. REDDY'S LABORATORIES 76518949 733.15 5609.99
Releases
----- GAIL (INDIA) LTD 845651600 167.20 14139.30
FAQs GLAXOSMITHKLINE PHARMA LT 74475000 593.25 4418.23
-----
GRASIM INDUSTRIES LTD 91669649 943.60 8649.95
Contact
Us GUJARAT AMBUJA CEMENT LTD 176571322 260.65 4602.33
----- HCL TECHNOLOGIES LTD 296030550 292.25 8651.49
HDFC BANK LTD 285843813 375.80 10742.00
HDFC LTD 246617121 579.30 14286.50
HERO HONDA MOTORS LTD 199687500 474.85 9482.16
HINDALCO INDUSTRIES LTD 92475275 961.00 8886.87
HINDUSTAN LEVER LTD 2201243793 128.40 28264.00
HINDUSTAN PETROLEUM CORP 339330000 322.50 10943.40
ICICI BANK LTD. 724904366 252.35 18293.00
INDIAN HOTELS CO LTD 45114695 342.40 1544.73
INDIAN PETROCHEMICALS COR 248225622 139.20 3455.30
INFOSYS TECHNOLOGIES LTD 66641056 5375.45 35822.60
ITC LTD 247678851 860.65 21316.50
MAHANAGAR TELEPHONE NIGAM 630000000 130.25 8205.75
MAHINDRA & MAHINDRA LTD 116008599 430.05 4988.95
MARUTI UDYOG LIMITED 288910060 376.50 10877.50
NATIONAL ALUMINIUM CO LTD 644309628 130.35 8398.58
OIL AND NATURAL GAS CORP. 1425933992 622.25 88728.70
ORIENTAL BANK OF COMMERCE 192539700 229.20 4413.01
PUNJAB NATIONAL BANK 265302500 244.90 6497.26
RANBAXY LABS LTD 185698526 878.10 16306.20
RELIANCE ENERGY LTD 157924713 536.40 8471.08
RELIANCE INDUSTRIES LTD 1396377536 431.75 60288.60
SATYAM COMPUTER SERVICES 316561865 293.30 9284.76
SHIPPING CORP OF INDIA LT 282302430 90.25 2547.78
 STATE BANK OF INDIA 526298878 424.15 22323.00
STEEL AUTHORITY OF INDIA 4130400545 24.30 10036.90
SUN PHARMACEUTICALS IND. 185511356 359.40 6667.28
TATA CHEMICALS LTD 180638651 118.80 2145.99
TATA IRON AND STEEL CO LT 368980727 279.60 10316.70
TATA MOTORS LIMITED 355678329 385.30 13704.30
TATA POWER CO LTD 197897864 230.75 4566.49
TATA TEA LTD 56219857 333.85 1876.90
VIDESH SANCHAR NIGAM LTD 285000000 141.15 4022.78
WIPRO LTD 232795707 1557.55 36259.10
ZEE TELEFILMS LTD 412505012 123.15 5080.00

Other Statistics: Daily Index Values | Top 10 Holdings | Daily Total Returns Index Values
Industry-wise market capitalisation of NIFTY stocks and their weightage
NIFTY Market Capitalisation, Weightage, Beta etc.
Div Yield, Index P/E, P/B | NIFTY securities - monthly impact cost | Monthly Index Returns
Details of past changes to S&P CNX NIFTY Constituents

Method of Computation, Base Date & Value, Criteria for Selection of Stocks | Index Maintenance
Hedging Effectiveness | Trading in Nifty | Total Returns Index

Top

Financial Daily from THE HINDU group of publications

Monday, Oct 27, 2003

Mentor - Accountancy Stories in this Se

 Home Plot the returns of
 News savings pot
 News Update
Plot the returns of the savings pot
Recommended tax
Mentor CA wannabes
V. Pattabhi Ram
 Mentor
 Index V. Pattabhi Ram discusses a model paper on management
 Archives accounting and financial analysis for CA (Final)

Features

 Investment
World
 eWorld
 Catalyst
 Mentor MR SAMPATH Kumar (SK) has saved Rs 2 lakh. Of this, he has
  Life
 Canvas invested Rs 1 lakh in 6 per cent RBI Bonds. The balance is
 Praxis spread out in shares of four listed companies as shown in Table
 Urban Pulse 1. Consider each situation independently.
 Brand Quest
Required: i) Calculate the expected return and value of SK's
Stocks
savings portfolio;
 Quotes
 SE Diary ii) Compute Rm, that is, expected return on market portfolio;
 Scoreboard
 Open-End iii) SK now wants a return of 12 per cent on his savings
Mutual Fund portfolio, by selling some investment in risk-free asset, and
investing the proceeds in market portfolio. Show a) the change
Port Info in composition of savings portfolio to achieve this return; and
b) what the beta of this portfolio is?

 Ships in Ports iv) If SK were to invest only in RBI Bonds and in the market
portfolio, what should be the composition of portfolio that will
Archives give him a return of 10.32 per cent?

 Yesterday v) If SK were to choose between portfolio as in (i), and the one

 Datewise
constructed in (iv) which one would you advise, and why? (14
 Resources marks)

Group Sites
Solution: i) Computation of expected return and beta value of
the portfolio.
 The Hindu
 Business Line
 The Sportstar Step I: His portfolio is made up of not only the four shares in
 Frontline listed companies, but also his investment in RBI Bonds, which
is risk-free and, hence, its beta value is zero.
 The Hindu
eBooks Step II: The E(r) and beta value of his savings portfolio would
be the value-weighted average return on all investments, and
the value-weighted average of betas of independent
investments in the portfolio. Returns and beta would be as
follows:

Step III: Computation of weighted values, returns, and

portfolio beta is presented in Table 2.
Portfolio return — 10.32 per cent; portfolio beta — 0.54

ii) Computing expected return on market portfolio (Rm): Take

the case of security A. Risk-free rate of return is given at 6 per
cent

Expected return on Security A (Let Rm be "x")

7.60 = Rf + beta (Rm - Rf)

= 6 + 0.20 (x - Rf)

= 6 + (0.20x - 1.20)

= 0.20x + 4.80

= 0.20X

0.2x = 2.80

x = Rm= 14 per cent

iii) Change in composition of savings portfolio: Average return

on the portfolio of Rs 2,00,000 at 10.32 per cent works out to
Rs 20,640; desired return on this portfolio at 12 per cent is Rs
24,000; incremental return required is (Rs 24,000 less 20,640)
= Rs 3,360; for each Rs 100 invested in market portfolio, SK
will get 14 per cent; however, the corresponding reduction in
risk-free investment will be 6 per cent; hence, for each Rs 100,
the incremental return is 8 per cent; and capitalising Rs 3,360
at 8 per cent (3,360/0.08), we get Rs 42,000.

SK will require to sell the risk-free asset for Rs 42,000 and

invest this in market portfolio to get a return of 12 per cent on
his portfolio.

Change in the composition of portfolio: The computation of

weighted values, returns and portfolio beta change is shown in
Table 3.
Portfolio return — 12 per cent; portfolio beta — 0.75

iv) Investment in RBI Bonds and in market portfolio — to yield

a return of 10.32 per cent

Total funds available: Rs 2,00,000

Return at 10.32 per cent: Rs 20,640

Let the value of investment in market, with a return of 14 per

cent be: X

0.14x + 0.06 (200,000 - x) = Rs 20,640

0.14x + 12,000 (-) 0.06x = Rs 20,640

0.08x = 20,640 - 12,000 = Rs 8,640

x = Rs 1,08,000

Return on portfolio = 14 per cent of Rs 1,08,000 + 6 per cent

of Rs 92,000 = Rs 20,640

Value weightage of the portfolio = 54:46

Portfolio beta= 1 x (0.54) + 0 (0.46) = 0.54

The beta of the portfolio is worked out in Table 4.

v) Selection: A comparative summary of two portfolios under

(i) and (iv) is shown in Table 5.

Both the portfolios provide the same return and the same beta.
The evaluation parameter for selection of either of the two
portfolios, would be as follows:

 So long as it can be proved that the portfolio represents full

diversification, beta alone is relevant. In this case although
both carry same risk and same return, it will not necessarily
mean an indifference as to choice.

 If the portfolios were not fully diversified then, standard

deviation would be the more appropriate indicator of risk.

Based on this parameter, we have to evaluate which of the two

(X or Y) is a well-diversified portfolio.

Recommended selection for SK (choice (iv)), that is, the fully

diversified portfolio

Reasons: Portfolio X contains (besides the risk-free asset) four

independent securities with a weighted average beta of 1.08.
Portfolio Y (besides the risk-free asset), contains market
portfolio itself. Given the risk-reduction effect of diversification,
the market portfolio represents the ultimate diversified
portfolio; it contains risky assets in which all the risk that is
possible to eliminate has been eliminated. This may not be true
in practice. But we have to limit ourselves to the assumption
given in the question that the investment is in market portfolio.
Hence, the choice falls on portfolio marked Y [item iv].

Project study

ESTIMATES in respect of an investment are as follows: outlay

— Rs 1,000; life of project — three years; annual revenues —
Rs 2,000;

annual costs — Rs 1,500; discount rate — 10 per cent.

Compute the NPV of the project. Determine the sensitivity of

the project to changes in each of the following: a) outlay, b)
life, and c) discount rate.

(2 + 8 = 10 marks)

Solution: The computation showing NPV is given in Table 6.

Initial outflow (1,000); annual flows three years — Rs 500;
applying annuity factor for 10 per cent discount rate (500 x
2.486) = 1,243; Present value of inflows — 1,243; surplus, or
NPV — 243; NPV is Rs 243.

Determining sensitivity: The focus of sensitivity is to determine

at what point the NPV will be zero.

a) Outlay: The outlay can be as high as Rs1,243 before the

decision to go ahead with the investment is rendered
inappropriate. In other words, the original estimate can
increase by Rs 243 — 243/1000 = 24.3 per cent.

Life: Let the life of the project be X years.

For a three-year life the NPV is positive at Rs 243

For a two-year life, the NPV will be negative (500 x 1.735 =

868) - 132

The NPV will be zero at a point beyond two years but shorter
than three.

Using interpolation, we find that:

X = 2 + [132 / (243 + 132) x (3 - 2)] = 2.35 years (2 years +

4 months approximately)

The project life can even be 2.35 years, before the decision to
go ahead with the investment is rendered inappropriate. In
other words, the original estimate about the project life can be
shortened by 0.65 years or 0.65/3.00 = 21.7 per cent

c) Discount rate: To determine the sensitivity of the project to

discount rate, the project IRR has to be ascertained.

IRR can be computed by using the interpolation method;

annual inflows are Rs 500, and initial outflow, Rs 1,000; this
gives a three-year annuity factor of two for an annual inflow of
Rs 500; at a discount rate of 20 per cent, the annuity factor is
2.11; at a discount rate of 25 per cent, the annuity factor is
1.95; the IRR should lie between 20 and 25 per cent

X = 0.20 + [2.11 - 2.00 / (2.11 - 1.95) x (0.25 - 0.20)] =

0.234, that is, 23.4 per cent

The discount rate can be as high as 23.4 per cent before the
decision to go ahead with the project is taken as inappropriate.
The original estimate can be increased by 13.4 per cent, that
is, 13.40/10.00 is 134 per cent.

Sensitivity of the project to changes in outlay — 24.3 per cent;

life — 21.7 per cent; discount rate — 134 per cent

Put and call

CURRENT price of one PQR share is Rs 32. A six-month call

option is now quoted at Rs 14.30, for an exercise price of Rs
24. Risk-free rate is 4 per cent. How much will you pay for a
put option on PQR's share, with an identical maturity and
exercise price? (4 marks)

How much one should pay for a put option on PQR's stock, with
identical maturity and exercise price?

The question is on determination through put call parity

formula.

Put call parity can be derived by using the following formula:

Call option price - premium (C) + Present value of Exercise

price PV of EP = Put Price (P) + Current price of share (S)

= C + PV of EP = P + S

= (-) S + C + PV of EP = Put price

PV of EP is computed based on risk-free interest rate.

Rf is 4 per cent. This is an annual rate. Hence, we have to

derive the corresponding half-yearly rate. This is 2 per cent.
The PV factor for 2 per cent = 0.98039 or 0.9804

PV of EP = 24.00 x 0.9804 = 23.5296 or say 23.53

= (-) 32.00 + 14.30 + 23.53 = Put price = Rs 5.83

The rationalised price for a put option is Rs 5.83

Straddle strategy

OPTION traders often refer to terms such as "straddles".

Explain the meaning of this term, with an example of buying
options. (4 marks)

Students are expected to cover three salient points: a) buying

or selling; b) put and call; c) same expiration date/exercise
price.

Straddle is a strategy which involves buying or selling (writing),

both a call and a put option, on the same stock, with both the
options having the same exercise price.

Example: Assume that Mr Arvind is buying call and put options

at a premium of Rs 10 and Rs 8 respectively per share, for 100
shares of XYZ Ltd at an exercise price of Rs 250.

Step I: The initial cost will be:

Premium paid for call options, 100 shares at Rs 10 = Rs 1,000

(100 x 10)

Premium paid for put options, 100 shares at Rs 8 = Rs 800

(100 x 8)

Total = Rs 1,800

Step II: If the price goes up to Rs 280

Call option will be exercised (buy under the option and sell in
market)

Gain is 280 - 250 = Rs 30 per share

Total gain for 100 shares = Rs 3,000

Less initial cost incurred = Rs 1,800

Net gain = Rs 1,200

Step III: If the price goes down to Rs 230

Put option will be exercised (sell under the option and buy from
market)

Gain is 250 - 230 = Rs 20 per share

Total gain for 100 shares = Rs 20 x 100 - Rs 2,000

Less initial cost = Rs 1,800

Net gain — Rs 200

Step IV: Range of movements:

Downward or upward movement in price exactly by Rs 18 per

share, will be break-even.

Any movement above Rs 18 per share will lead to a gain of Re

1 per share.

Any movement up to Rs 17 per share will result in a net loss.

Payoff table

RJ SHAH has purchased a three-month call option on ABC's

shares for Rs 3. The exercise price is Rs 50. Required:

Present a pay-off table to show the value of the call option at

expiration if the share price turns to be a) Rs 47; b) Rs 50, c)
Rs 53, d) Rs 56; and e) Rs 59. (8 marks)

RJ Shah's payoff table is presented in Table 8.

Soft takeover

HARDWARE LTD proposes acquiring Software Ltd. The directors

of Hardware are trying to justify the acquisition to the
shareholders of both the companies on the grounds that it will
increase the wealth of all shareholders. The supporting financial
evidence produced by Hardware directors is summarised in
Table 9.

Required: i) Show how the directors of Hardware produced

their estimates of post-acquisition value.

ii) If you do not agree with the computation of the directors, as

given in the table, produce revised estimates of post-
acquisition values. All calculations must be shown. State clearly
any assumptions that you make.

iii) What is the maximum reasonable price that Hardware can

offer to Software, without resulting in any erosion of wealth to
existing shareholders of Hardware? (8 + 4 + 3 = 15 marks)

The director's estimate of post-acquisition values emerge as

per the computations shown in Table 10.

Step IV: Computing post-acquisition earnings

Assumption: There is no growth or are no synergies from

merger.

Step IV: Computing post-acquisition earnings

Assumption: There is no growth or are no synergies from

merger

Hardware — Rs 51,80,000; Software — Rs 23,40,000; Total (a)

— Rs 75,20,000; Total number of new shares (b) — Rs
470,000; Estimated earnings per share (a)/(b) — Rs 16.

Step V: Estimate of Hardware directors:

Post-acquisition EPS — Rs 16
PE ratio (pre acquisition PE ratio)(old PE) — Rs 15

Estimate of market price — Rs 240

Estimated price of Software (because of exchange ratio of 3/2)

— Rs 360

Step V: Estimate of directors of Hardware

Post acquisition EPS — Rs 16

PE ratio (pre-acquisition PE ratio) (old PE) — 15

Estimate of market price — Rs 240

Estimated price of Software (because of exchange ratio of 3/2)

— Rs 360

Step VI: Analysis and findings

 The estimates prepared by the directors of Hardware are

not realistic

The reason is that it is not correct to assume that the post-

acquisition PE ratio of the merged company will be the same as
the PE ratio of Hardware as it existed prior to takeover.

The company being taken over is Software. The PE ratio of

Software is lower than Hardware.

Directors of Hardware should expect that, on merger, overall

(merged) PE ratio will fall, though not to the level of Software.

The estimate prepared by directors of Hardware is

inappropriate (cannot be agreed to)

Part II: New estimate: Better estimate is to arrive at the

weighted average of pre-acquisition PE ratios.

Applying this PE ratio of 13.758, an estimated post-acquisition

market price of Hardware shares would be 13.7598 x 16 = Rs
220 each. This would make the post-acquisition equivalent of
Software into Rs 330 each

Post-acquisition estimate of market price of Hardware — Rs

220

Post-acquisition estimate of equivalent market price of

Software — Rs 330

A relevant assumption that has been made is: No synergies; no

growth

Part III: Maximum offer (See also step IV)

For a combined market value of Rs 10,34,60,000, and taking

into account the total number of shares at 4,70,000 — there is
already a marginal erosion of value of Hardware's shareholders
as under.

Current market price of Hardware — Rs 222

Combined value 10,346/47 — Rs 220.12

As per the present scheme, protection can be given to the

extent of Rs 220 per share (that is, a loss of Rs 2 per share is
inevitable to existing shareholders, if the share-exchange ratio
is to be maintained).

Full protection is possible if the share-exchange ratio can be

modified

Combined market value — Rs 10,34,60,000

Per share value to be protected — Rs 222

Total number of shares that can emerge 4,66,036 (or, say,

466,000)

Existing number of shares — 350,000

New shares that can be exchanged — 116,036 (or, say,

116,000)

Current market value of Software — Rs 25,760

New shares to be issued for this value — 116,000

Maximum per share value — Rs 222.06

Share exchange ratio will therefore be: For every 80 shares in
Software 116 shares in Hardware, leading to a price of Rs 222.

Currency options

A CURRENCY option is an agreement involving a right, but not

an obligation, to buy or to sell a certain amount of currency at
a stated rate of exchange (the exercise price) at some time in
the future, for a non-refundable fee known as premium.

In options contract, the option-buyer, though has a right, does

not carry any obligation to perform the contract, that is, only
the option writer is obligated under the contract.

There are two types of option contracts: a) over-the-counter;

and b) exchange traded (ET). (See Table 12.)

OTC options are generally written by banks to incorporate

tailor-made conditions to suit the needs of customers. The
major users are medium enterprises, which may not have
adequate expertise to evaluate the price for an option.

ET options are standardised both as to delivery dates and

contract size. However, an element of negotiability is built in, in
the area of option premium and the rate at which option will be
exercised.

Standardization: In ET options, the contract-size, as also the

time to maturity (tenor), are standardised. For example, the
Philadelphia Stock Exchange, where currency options are
traded in large volumes, offers the following contract sizes:

Australian dollars — 50,000; pounds — 31,250; Canadian

dollars — 50,000; euro — 62,500; yen — 6,250,000; Swiss
francs — 62,500.

In India, the facility of hedging transaction risks through

foreign currency rupee options have been introduced by the
RBI with effect from July 7, 2003. In terms of Circular No. AP
DIR 108 of June 21, 2003, the RBI has permitted authorised
dealers (who qualify under minimum capital adequacy ratio of 9
per cent, continuous profitability for three years, net NPAs not
exceeding 5 per cent of total advances, and a minimum net
worth of Rs 200 crores), to `write' options for customers. The
customers can buy either a call or put option. Customers
cannot write options.

The maximum permissible cap for hedging instruments

(including forward cover, option contracts, and so on) per
customer is restricted to Rs 100 crore, or 25 per cent of
average of past three-year turnover, whichever is lower. These
foreign currency rupee options fall under the OTC category (see
the July 2003 issue of the CA Journal (p 107)).

Forward vs hedge

GRASSROOTS PLC is a London-based company. They will

require making a payment of $250,000 in six months. The
market information is presented in Table 14. Grassroots is
evaluating whether to execute a forward contract, or to go for
money-market hedge. Give your reasoned recommendations on
the best alternative. (9 marks)

 Grassroots will buy dollars to meet the liability. The

appropriate forward rate is 1.5455;
 The Pound Sterling cost of this liability is £161,760 (that is,
$ 250,000/1.5455);
 To meet a liability, a matching asset has to be created;
 Investment should be in dollars;
 Dollar liability after six months is $250,000;
 Dollar interest rate is 4.5 per cent annually. The applicable
rate therefore is 2.25 per cent;
 At 2.25 per cent, the present value of dollar payment is
$2,44,499;
 This amount is required to be borrowed in pounds at spot
rate, which is 1.5617. Amount to be borrowed in pounds is
156,560;
 The Dollar amount received (against pounds) will be placed
in dollar deposits at an interest of 2.25 per cent, yielding
maturity proceeds of $250,000. This sum will be used to pay
the overseas liability;
 Principal amount of Sterling loan (rounded off) will be
£156,560. Applying interest at 3.5 per cent, principal and
interest at the end of six months is £162,039.60 (rounded off
to 162,040)

The recommendation is given in Table 15.

Debenture conversion

CML LTD is a leading manufacturer of cars. They had issued

convertible debentures with a coupon rate of 12 per cent. Each
debenture with a face value of Rs 100 is presently traded in the
market at Rs 108. These debentures are convertible into 20
ordinary shares. Current market price of one share of CML is Rs
4.80. Compute the (i) conversion premium and (ii) conversion
value.

Conversion terms can be expressed as one debenture = 20

shares (1 to 20 is conversion ratio), or, Rs 5 face value worth
of debenture = one share.

Assuming the debentures are divisible, the cost of buying from

the market Rs 5 face value of debenture is Rs 5.40 (108/20)

Cost of buying one share = Rs 4.80

Conversion premium is therefore (5.40 - 4.80) / 4.80 =

0.60/4.80 = 12.50 per cent.

It is more expensive to buy a debenture, and then offer the

same for conversion, than to buy the shares directly.

Conversion premium can also be computed from the conversion

value. (This is computed as the market value of ordinary shares
that equals one unit of convertible debenture. Conversion value
= conversion ratio x MPS of shares; 20 = 4.80 = Rs 96, the
conversion value.)

That is, 108 - 96/96 = 12.5 per cent.

Interest rate swap

GRADES LTD is a company enjoying a high credit rating and is

capable of raising term funds either at a fixed rate of 10 per
cent per annum, or at a rate floating 40 basis points over
MIBOR. Levels Ltd is another company enjoying a relatively
lower credit rating, and they are able to borrow at 0.60 basis
points over MIBOR, or at a fixed rate of 11 per cent. Draw up
an interest rate swap arrangement, for both the parties to
derive benefits. Assume that there are no intermediary fees or
commission. (Note: MIBOR means Mumbai Inter Bank Offered
Rate, and this rate changes continuously and varies for tenor to
tenor). (6 marks)

Solution: It is possible for both the parties to benefit from a

swap arrangement.

Grades will borrow at 10 per cent

Levels will borrow at MIBOR + 0.60

Both parties swap their commitments, by i) Levels agreeing to

pay to Grades interest at 10.10 per cent, and ii) Grades
agreeing to pay to Levels a rate equivalent to MIBOR.

The effect of this swap arrangement will emerge as:

For Grades: Borrow at 10 per cent

Receive from Levels — 10.10 per cent

Pay to Levels — MIBOR

Net interest cost — MIBOR minus 0.10 per cent

Relative to a floating rate of MIBOR + 0.40, there is a savings

of 0.50 per cent

For Levels: Borrow at MIBOR + 0.60

Receive from Grades — MIBOR

Pay to Grades — 10.10 per cent

Net interest cost — 10.70 per cent

Relative to a fixed rate of 11 per cent, there is a savings of

0.30 per cent

In many cases, the terms of swap arrangement will be so

aligned that the benefits to both parties will be equal. In this
case, the benefits are shown to differ, in the context of credit
ratings enjoyed by the parties.

How to judge the social desirability of a project

IN THE Indian context, the social desirability indicators of a

project, which are relevant for taking an investment decision,
are:

Employment potential criterion: Under this, the impact of the

proposed project on the employment situation is considered.
Projects are, therefore, ranked according to the number of
persons expected to find additional employment per unit of
capital investment. The projects having higher employment
potential are naturally preferred in developing countries.

Capital-output ratio: This shows the value of expected output in

relationship with the capital employed. In developing countries,
where the capital resources are scarce, this ratio would be a
good indicator of the desirability of a project, by indicating
whether the project gives enough output or not in terms of
capital employed.

This is an important aspect, as the production of goods and

services has to be accelerated within the constraint of capital
resources. Under this criterion, a project that gives a higher
output per unit of capital is ranked higher.

Value added per unit of capital: This is comparable to capital-

output ratio, except that one reckons the estimates of value
added by a project, rather than output per se. The main
advantage under this method is that, it takes into account the
net contribution of a company to the national economy insofar
as it does not include bought-out materials, and so on. Value
added can be computed by reckoning the value of salaries,
rent, interest and profit in an operating year, as these
constitute payments after the use of various factors of
production.

In some cases, even depreciation, subsidies and indirect taxes

may be included. The concept of value added is a significant
indicator of the likely contribution of a project to the national
economy, and as such, can be a good indicator for ranking
projects according to their economic importance.

Foreign exchange benefit: This seeks to evaluate the likely

impact of a project on the overall balance of payments of the
country. The projects which promise to earn the largest net
benefits in foreign exchange are given preference. In countries
 such as India, where foreign exchange is a necessary input for
development, this criterion may be a crucial factor in project
appraisal.

One method of evaluating the net benefit in foreign exchange is

to compute the IRR on foreign exchange investment. In this
evaluation, the likely savings in foreign exchange arising out of
the implementation of the project and the likely expenditure in
foreign exchange are taken into account.

Cost-benefit ratio: This attempts to measure the total effect of

all the social benefits and costs involved in the project. Social
benefits in the broadest sense can be defined as any benefit to
society whether economic or non-economic, internal or
external.

It is a comprehensive analysis, which seeks to examine the

total impact of the project. Obviously, a project, which gives
the most favourable cost-benefit ratio is given the highest
preference.

Article E-Mail :: Comment :: Syndication

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Research, Select, & Monitor Saturday, January 22, 2005 8:39:14 AM ET

Portfolio Stocks Community Picks Screen Events News

(: BEERF) N/A $.00 .00%

Quote | Discussion | Chart | News | Valuations | Earnings |

Analysts | Picks | Sentiment | Technicals | Profile | Industry |
News Selects | Insiders | Options | Fundamentals | Financials | Ticker Lookup
Sec Filings

Industry Name: Beverages-Brewers

Add BEERF to your
Portfolio Industry Percentage
Company Total of Industry
Sales 15 Mil 53,465 Mil .0%
What's Your
Market Cap 15 Mil 85,547 Mil .0%
Recommendation?
Short Interest Shares: 9,793,625 .0%
Number of Analysts: N/A 27 N/A
Your 12-month Number of Institutions: 4 2,709 .1%
Target Price? Industry Percentage
Company Average Difference
Historical Growth Rate: N/A N/A N/A
Estimated Growth Rate: N/A N/A N/A
Average Analyst Moderate
N/A N/A
Recommendation: Buy
Number of Analysts: N/A 5 N/A
PE Ratio: (3.5)
PE Based on Fiscal Year
N/A 11.9 N/A
Estimate:
PE Based on Next Year's
N/A 15.6 N/A
Estimate:
Insider Ownership: N/A N/A N/A
Institutional Ownership: 3.3% 21.0% (84.3%)
Short Interest Ratio: .0 4.9 (100.0%)
PEG Ratio: N/A 2.7 N/A
Price to Book Value: N/A 2.2 N/A
Dividend Yield: .0% 1.3% (100.0%)
Return on Equity: 5.8% 15.9% (63.5%)
Return on Assets: 3.5% 1.5% 127.5%
Debt-to-Equity: .1 .4 (67.2%)
Profit Margin: 5.4% .9% 510.4%
Beta: .6 .4 65.3%
One Year Return: (21.4%) (15.9%) 34.2%
Five Year Return: (70.8%) (14.8%) 379.9%
Market Cap: 15 Mil 6,581 Mil .2%
Other companies within the industry.
Company Description
COMPANHIA DE Engaged in the production and sale beer and
BEB AMBEV C soft drinks in Brazil and other South American
countries.

BASS PLC ADR Principal activities are ownership, management,

leasing or franchising of public houses, hotels,
restaurants, bingo clubs, betting shops and
bowling centers; manufacture, supply and
operation of amusement and gaming machines
and production of soft drinks.

COMPANHIA Engaged in the production and sale beer and

CERVEJARIA BRH soft drinks in Brazil and other South American
countries.

ANHEUSER- Anheuser-Busch Companies is the holding

BUSCH COS INC company parent of Anheuser-Busch,
Incorporated and to a number of subsidiaries
that conduct various other business operations.
The company's operations are comprised of the
following business segments: domestic beer,
international beer, packaging, entertainment and
other.
 COMPANIA Diversified beverage company operating
CERVECERIAS principally in Chile and Argentina. The
company's products in its beer and soft drinks
UNI business include a range of proprietary, licensed
and imported brands.

DIAGEO PLC ADS Diageo is an multinational branded food and

drinks company that operates in more than 200
countries through fourbusinesses - UDV,
Pillsbury, Guinness and Burger King.(Press
Release)

FOMENTO Engages in the production, distribution and

ECONOMICO MEX marketing of beer, soft drinks and packaging
materials. It also participates in the Mexican
retail industry through operating subsidiaries of
its subholding companies and provides logistics
management services.

GENESEE CORP GENESEE CORP is a holding company, with

CL B wholly-owned subsidiaries that conduct business
in the areas of malt beverage production,
dehydrated food processing & packaging,
equipment leasing & real estate investment.
Genesse's malt beverage business is conducted
by its wholly-owned subsidiary, The Genesee
Brewing Company, Inc. Malt beverage products
produced by Genesee Brewing Company are
marketed under the following trademarks:
Genesee Beer, Genesee Light Beer, Genesee
Cream Ale, Genesee 12- Horse Ale, Genesee
Bock Beer, Genesee NA, Genny Ice Beer and
Genny Red Lager, etc.

REDHOOK ALE REDHOOK ALE BREWERY, INC. is in the

BREWERY INC business of brewing, marketing and selling craft
beers.

KIRIN BREWERY Kirin is Japan's largest brewer and the 5th

LTD ADR largest in the world. It makes 2 of Japan's 3 most
popular beers: Kirin Lager and Ichiban Shibori
and distributes Budweiser beer for Anheuser-
Busch in Japan. The Company also produces
canned teas and coffees, carbonated
beverages, and sports drinks. Kirin sells
Tropicana fruit juices, Chivas Regal whiskey,
Mumm's champagne, and other wines and
liquors in Japan through 2 joint ventures with
Seagram's.

View the complete list of companies in Industry

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About BSE \ Indices...

 Beta, R2,Volatility and Returns of SENSEX scrips for one year period
(January 2004 - December 2004)

Code Name Beta Co-efficient of Avg. Returns Weights Free-

Values determination Daily (1 year) as on float
(R2) Volatility (%) 31/12/04 Adj.
(%) (%) Factor
as on
31/12/04

500410 A.C.C. 1.00 0.54 2.18 37.94 1.42 0.90

500490 BAJAJ AUTO 0.67 0.32 1.87 -0.52 2.09 0.70

532454 BHARTI TELEVENTURES 1.03 0.26 3.24 105.14 2.09 0.20

500103 BHEL 1.36 0.52 3.02 51.57 1.72 0.35

500087 CIPLA LTD. 0.78 0.34 2.14 20.42 1.49 0.60

500124 DR.REDDY'S 0.52 0.13 2.30 -39.41 1.30 0.75

500300 GRASIM IND. 0.92 0.40 2.32 31.71 2.53 0.80

500425 GUJARAT AMBUJA CEME 1.03 0.52 2.28 32.15 1.39 0.75

500010 HDFC 0.72 0.24 2.35 18.90 4.20 0.85

500180 HDFC BANK 0.98 0.38 2.54 41.51 2.91 0.75

500182 HERO HONDA 0.97 0.39 2.48 27.24 1.49 0.50

500696 HINDUSTAN LEVER 0.71 0.31 2.02 -29.90 4.12 0.50

500104 HINDUSTAN PETROLEU 0.97 0.36 2.60 -8.46 1.77 0.50

500440 HINDALCO 0.78 0.30 2.29 1.31 2.58 0.75

532174 ICICI BANK 0.94 0.37 2.49 25.38 7.12 1.00

500209 INFOSYS TECHNOLOGIE 0.91 0.47 2.11 50.19 11.69 0.80

500875 ITC LTD. 0.76 0.38 1.98 33.04 5.94 0.70

 532500 MARUTI UDYOG 1.30 0.48 3.00 22.58 1.04 0.30

500510 LARSEN & TOUBRO 0.24 0.11 2.16 54.56 3.00 0.90

500312 ONGC 1.15 0.45 2.74 2.51 4.58 0.15

500359 RANBAXY LAB. 0.53 0.28 1.60 13.95 4.25 0.70

500325 RELIANCE 1.19 0.74 2.23 -6.84 10.70 0.55

500390 RELIANCE ENERGY 1.47 0.54 3.21 2.64 1.27 0.50

500376 SATYAM COMPUTER 1.01 0.42 2.49 11.58 3.06 0.90

500112 STATE BANK OF INDIA 1.42 0.67 2.77 21.16 4.03 0.45

500570 TATA MOTORS 1.37 0.63 2.75 11.68 2.86 0.60

500400 TATA POWER 1.51 0.59 3.14 24.42 1.41 0.70

500470 TATA STEEL 1.43 0.64 2.85 30.20 4.18 0.75

507685 WIPRO LTD. 1.31 0.57 2.78 29.14 2.73 0.20

505537 ZEE TELEFILMS 0.74 0.14 3.23 14.03 1.01 0.55

SENSEX 1.00 1.59 13.08

Beta = Co-variance(SENSEX, Stock)/ Variance(SENSEX)

R2 = (Correlation)2
Avg. Daily Volatility = One standard deviation of daily returns of individual stock price for
last one year
Returns = % variation in the stock price over last one year

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