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ANNEXURE-V-COVER PAGE FOR ACEDEMIC TASK

Course Code: FIN302 Course Title: BASIC FINANCIAL

MANAGEMENT
Course Instructor: Dr. Atif Ghayas Section:Q1904
Academic Task No:03 Academic Task Title: Bajaj Electricals Ltd.
Date of Allotment: 27/03/2021 Date of submission: 18/04/2021
Student’s Roll no:B 50 Student’sReg.no:11917856

Learning Outcomes:

Declaration:
I declare that this Assignment is our group work. I have not copied it from any other student’s
work or from any other source except where due acknowledgement is made explicitly in the
text, nor has any part been written for me by any other person.
Student’s Signature: Khalid Khan

Evaluator’s Comments (For Instructor’s use only)

General Observations Suggestions for Improvement Best Part of Assignment

Evaluator’s Signature and Date:

Marks Obtained: _______________ Max. Marks: ______________
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INTRODUCTION OF BJAJ ELECTICALS LTD:

Bajaj Electricals Limited (BEL), a globally re

renowned
nowned and trusted company with a turnover of
₹4,987 crores (FY 19-20)
20) is a part of Bajaj Group. Bajaj Electricals business is spread across
– Consumer Products (Appliances, Fans, Lighting), Exports, and EPC (Illumination,
Transmission Towers and Power Dis
Distribution).
tribution). With 20 branch offices and approximately
500 customer care centres, we are scattered in different parts of the country. We also have a
presence in premium home appliances and cookware segments with brands like Morphy
RichardsandNirlep. But to know
now Bajaj Electricals, one must understand our core principles.
We get a Gandhian set of values by our founding father, Jamnalal Bajaj which our current
leaders follow and aim to carry forward, as a legacy. Our tagline 'Inspiring Trust' is a value
we strongly
gly associate with and try to fulfil in our everyday endeavours. Apart from work, we
also believe in bringing change in the society through our philanthropic work. Our Corporate
Vision

Our vision has always been to be the leader in the industry and a consumer's original choice. We
strive to fulfil this everyday by being open to change and constantly improving ourselves.
ourselves
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Management of the Company (BOD)

NAME DESIGNATION

N S Sekhsaria Chairman

Sridhar Balakrishnan Managing Director & CEO

D Sundaram Non Exe. & Ind. Director

Martin Kriegner Non Exe.Non Ind.Directo

Jan Jenisch Non Exe.Non Ind.Director

Competitors:

Rank Company Net Profit

1 UltraTechCement 2,455.72
2 Shree Cements 951.05
BAJAJ ELECTICALS
3 Cements 1,528.54
4 Odisha Cement 89.69

6 Ramco Cements 505.89

7 Dalmia Bharat 101

8 J. K. Cement 324.9
9 India Cements 69.44

10 Star Cement 255.89

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SOURCES OF FINANCE:
Some sources of finance are short term and must be paid back within a year. Other sources of
finance are long term and can be paid for the period of more than 5 years 10, 15, 20 years or
may be more depending upon other factors.

Internal sources of finance are funds found inside the business. For example, profits can be
kept back to finance expansion. Alternatively the business can sell assets (items it owns) that
are no longer really needed to free up cash.
External sources of finance are found outside the business, eg from creditors or banks.

Short term sources of external finance:

Sources of external finance to cover the short term include:

 An overdraft facility, where a bank allows a firm to take out more money than it has in its
bank account.
 Trade credits, where suppliers deliver goods now and are willing to wait for a number of days
before payment.
 Factoring, where firms sell their invoices to a factor such as a bank. They do this for some
cash right away, rather than waiting 28 days to be paid the full amount.

Long term sources of finance:

Sources of external finance to cover the long term include:
 Owners who invest money in the business. For sole traders and partners this can be
their savings. For companies, the funding invested by shareholders is called share capital.
 Loans from a bank or from family and friends.
 Debentures are loans made to a company.
 A mortgage, which is a special type of loan for buying property where monthly payments are
spread over a number of years.
 Hire purchase or leasing, where monthly payments are made for use of equipment such as a
car. Leased equipment is rented and not owned by the firm. Hired equipment is owned by the
firm after the final payment.
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ANALYSIS OF SOURCES OF FINANCE OF BAJAJ ELECTICALS:

ELECTICALS

BALANCE SHEET OF ACC (in 19-Dec 18-Dec 17-Dec 16-Dec 15-Dec

Rs. Cr.)
12 mths 12 mths 12 mths 12 mths 12 mths
EQUITIES AND LIABILITIES
SHAREHOLDER'S FUNDS
Equity Share Capital 187.99 187.99 187.99 187.99 187.95
TOTAL SHARE CAPITAL 187.99 187.99 187.99 187.99 187.95
Reserves and Surplus 11,333.29 10,339.67 9,177.47 8,473.45 8,255.09
TOTAL RESERVES AND 11,333.29 10,339.67 9,177.47 8,473.45 8,255.09
SURPLUS
TOTAL SHAREHOLDERS 11,521.28 10,527.66 9,365.46 8,661.44 8,443.04
FUNDS
NON-CURRENT
CURRENT LIABILITIES

Long Term Borrowings 0 0 0 0 0

Deferred Tax Liabilities [Net] 642.21 663.09 541.36 558.14 469.16

Other Long Term Liabilities 0 0 0 0 0

Long Term Provisions 234.13 139.52 142.03 131.68 119.86

TOTAL NON-CURRENT 876.34 802.61 683.39 689.82 589.02

LIABILITIES

DEBT-EQUITY
EQUITY MIX FOR BAJAJ ELECTICALS:
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COMPETITORS

ANALYSIS OF SOURCES OF FINANCE BAJAJ ELECTICALS CEMENT LIMITED

BALANCE SHEET OF 19-Dec 18-Dec 17-Dec 16-Dec 15-Dec

BAJAJ
ELECTICALS(in Rs.
Cr.)
12 mths 12 mths 12 mths 12 mths 12 mths
EQUITIES AND
LIABILITIES
SHAREHOLDER'S
FUNDS
Equity Share Capital 397.13 397.13 397.13 397.13 310.38
TOTAL SHARE 397.13 397.13 397.13 397.13 310.38
CAPITAL
Reserves and Surplus 21,808.05 20,615.40 19,576.08 18,959.74 9,996.49
TOTAL RESERVES 21,808.05 20,615.40 19,576.08 18,959.74 9,996.49
AND SURPLUS
TOTAL 22,205.18 21,012.53 19,973.21 19,356.87 10,306.87
SHAREHOLDERS
FUNDS
NON-CURRENT
LIABILITIES
Long Term Borrowings 35.28 39.68 24.12 15.73 22.68
Deferred Tax Liabilities 216.06 372.16 458.36 497.25 564.9
[Net]
Other Long Term 36.45 8.35 8.94 7.95 5.99
Liabilities
Long Term Provisions 50.34 38.53 35.23 43.28 35.4
TOTAL NON- 338.13 458.72 526.65 564.21 628.97
CURRENT
LIABILITIES
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DEBT-EQUITY
EQUITY MIX FOR BAJAJ ELECTICALS LIMITED

Calculation 2019 2018 2017 2016 2015

Equity% 1.79 1.89 1.99 2.05 3.01

Debt% 10.43 8.65 4.58 2.79 3.61

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For both the companies they are using debt financing more than that of equity financing.
There are advantages and disadvantages of using debt financing, since both of them are using
debt financing the outsiders power in company’s decision making is less, then the lender has
no control over your business once you pay the loan back, your relationship with the financier
ends. Although the mix of debt equity for the companies are same, during 2016 the
competitor (Bajaj Electricals) was having comparatively high equity financing but for ACC it
is somewhat is similar throughout the 5 years. So if the company’s switches to equity
financing the advantages they will have are no obligation to repay the money acquired
through it, Equity financing places no additional financial burden on the company, however,
the downside is quite large. Also since they are using debt financing they are required to pay
interests.

COST OF CAPITAL CALCULATIONS

COST OF CAPITAL: Cost of capital is concerned with what a firm has to pay for the
capital it has obtained through various sources of finance. The capital of the firm may be in
the form of debt, equity shares, preference shares and retained earnings.

COST OF EQUITY CAPITAL:

 Every share capital is not without cost, every equity share holder expects return from the
company this expected return is the cost of equity share capital.

𝐄𝐀𝐑𝐍𝐈𝐍𝐆 𝐏𝐄𝐑 𝐒𝐇𝐀𝐑𝐄

COST OF EQUITY CAPITAL = ∗ 𝟏𝟎𝟎
𝐌𝐀𝐑𝐊𝐄𝐓 𝐏𝐑𝐈𝐂𝐄
CALCULATION:
1. FOR 2019:
EPS= 72.36, MP=954.90
.
THEREFORE, COST OF EQUITY CAPITAL (2019, ACC) = * 100 = 7.58 %
.

2. FOR 2018:
EPS= 80.23, MP=1664.45
.
THEREFORE, COST OF EQUITY CAPITAL (2019, ACC) = *100 = 4.82 %
.
3. FOR 2017:
EPS=48.75, MP=1553.40
.
THEREFORE, COST OF EQUITY CAPITAL (2019, ACC) = * 100 = 3.14 %
.
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4. FOR 2016:
EPS=32.08, MP= 1411.50
.
THEREFORE, COST OF EQUITY CAPITAL (2019, ACC) = * 100 =2.27 %
.
5. FOR 2015
EPS=31.51, MP= 1636.05
.
THEREFORE, COST OF EQUITY CAPITAL (2019, ACC) = * 100 = 1.93%
.

COST OF EQUITY CAPITAL [BAJAJ ELECTICALS Cement]:

CALCULATION:
1. FOR 2019:
EPS=7.70, MP=141.40
.
THEREFORE, COST OF EQUITY CAPITAL = * 100 = 5.45%
.
2. FOR 2018:
EPS=7.49, MP=235.30
.
THEREFORE, COST OF EQUITY CAPITAL = *100 = 3.18%
.
3. FOR 2017:
EPS=6.29, MP=238.65
.
THEREFORE, COST OF EQUITY CAPITAL = *100 = 2.64%
.
4. FOR 2016:
EPS=4.69, MP= 242.45
.
THEREFORE, COST OF EQUITY CAPITAL = *100 = 1.93 %
.
5. FOR 2015
EPS=5.21 , MP= 228.25
.
THEREFORE, COST OF EQUITY CAPITAL = *100 = 2.28 %
.
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COST OF RETAINED EARNINGS

The company does not distribute all the profits in form of cash dividends but distributes
only a part of net profit and the rest is invested in business so year after year the company
make sufficient funds. The company does not have to pay cash for these funds but this
does not mean that they are free of cost.

𝑫(𝟏 𝑻𝒊)(𝟏 𝑩)
COST OF RETAINED EARNINGS = * 100
𝑴𝑷(𝟏 𝑻𝒄)
𝐃𝐏𝐒
Here, = * 100
𝐌𝐏
D- Dividend which would be distributed as alternate to retained earnings.
MP- Market price per share

COST OF RETAINED EARNINGS

1. FOR 2019:
DPS =14, MP = 954.90
THEREFORE COST OF RETAINED EARNINGS = *100= 1.47 %
.
2. FOR 2018:
DPS = 14, MP = 1664.45
THEREFORE COST OF RETAINED EARNINGS = *100= 0.84 %
.
3. FOR 2017:
DPS =26, MP =1553.40
THEREFORE COST OF RETAINED EARNINGS = *100= 1.67%
.
4. FOR 2016:
DPS =17, MP =1411.50
THEREFORE COST OF RETAINED EARNINGS = *100= 1.20%
.
5. FOR 2015:
DPS = 17, MP = 1636.05
THEREFORE COST OF RETAINED EARNINGS = *100= 1.04%
.
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COST OF RETAINED EARNINGS

1. FOR 2019:
DPS =1.50, MP = 141.40
.
THEREFORE COST OF RETAINED EARNINGS = *100= 1.06 %
.
2. FOR 2018:
DPS =1.50, MP = 235.30
.
THEREFORE COST OF RETAINED EARNINGS = *100= 0.64%
.
3. FOR 2017:
DPS =3.60, MP =238.65
.
THEREFORE COST OF RETAINED EARNINGS = *100= 1.51%
.
4. FOR 2016:
DPS =2.80, MP =242.45
.
THEREFORE COST OF RETAINED EARNINGS = *100= 1.15 %
.
5. FOR 2015:
DPS =2.80, MP = 228.25
.
THEREFORE COST OF RETAINED EARNINGS = *100= 1.23 %
.

WEIGHTED AVERAGE COST OF CAPITAL

Capital structure of any business enterprise or a company is not made of single security
but it is an appropriate mixture of the number of securities. The managers of the firm
obtain capital from various sources after taking into consideration a number of factors
such as ownership, control and income. The financial analysts have developed a concept
of weighted average cost of capital it may be defines as the average of the cost of each
source of finance employed by the company properly weighted by the proportion they
held in capital structure.
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WEIGHTED AVERAGE COST OF CAPITAL (WACC)

WACC= ((E/V)*Re) + [((D/V)*Rd*(1-T)]

Where,
E= market value of the company’s equity
D= market value of the company debt
V= total market value of the company
Re= cost of equity
Rd= cost of debt
T = Tax rate

WEIGHTED AVERAGE COST OF CAPITAL

1. FOR 2019

THEREFORE WACC= 5.64%

2. FOR 2018

THEREFORE WACC (2O18) = 8.82%

3. FOR 2017

THEREFORE WACC (2017) =6.03 %

4. FOR 2016

THEREFORE WACC (2016) = 9.07%

5. FOR 2015

THEREFORE WACC (2015) = 1.90638.77%

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WEIGHTED AVERAGE COST OF CAPITAL

1. FOR 2019

THEREFORE WACC (2O19) = 8.44%

2. FOR 2018

THEREFORE WACC (2O18) = 9.32 %

3. FOR 2017

THEREFORE WACC (2017) = 7.03 %

4.FOR 2016

THEREFORE WACC (2016) = 6.84 %

5. FOR 2015

THEREFORE WACC (2015) = 7.22 %

ANALYSIS BASED ON THE CALCULATED COST OF CAPITAL:

 FOR COST OF EQUITY CAPITAL:

YEAR BAJAJ ELECTICALS BAJAJ ELECTICALS
LIMITED
2019 7.58% 5.45%
2018 4.82% 3.18%
2017 3.14% 2.64%
2016 2.27% 1.935
2015 1.93% 2.28%
ANALYSIS:

 Cost of equity capital is actually decreasing over years for BAJAJ Electricals which is a good
sign because the cost for equity is decreasing the returns given should be less.
 Cost of equity capital is comparatively more during 2019 and maximum during 2016, during
2017 the cost of equity capital was comparatively low for Bajaj Ltd.
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 So based on this the analysis is that the cost of equity capital for BAJAJ ELECTICALS is
good because it has lower cost of equity capital compared to that of BAJAJ ELECTICALS
CEMENT.

 FOR COST OF RETAINED EARNINGS:

YEAR BAJAJ ELECTICALS BAJAJ ELECTICALS
CEMENT
2019 1.47% 1.06%
2018 0.84% 0.64%
2017 1.67% 1.51%
2016 1.20 1.15%
2015 1.04% 1.23%

ANALYSIS:
 Cost of retained earnings is low for BAJAJ ELECTICALS for all of the years from 2015 to
2019, only during 2017 it was comparatively high for the company but then also it was not so
high.
 Cost of retained earnings is generally high for BAJAJ ELECTICALS because during 2019 its
high and during 2015 only it was low
 So based on this analysis BAJAJ ELECTICALS is having a good perfomance because when
compared to the cost of retained earnings of BAJAJ ELECTICALS CEMENT cost of
retained earnings is less for BAJAJ ELECTICALS CEMENT.

 FOR WEIGHTED AVERAGE COST OF CAPITAL

YEAR BAJAJ ELECTICALS BAJAJ ELECTRICALS
2019 5.64% 8.44%
2018 8.825 9.32%
2017 6.03% 7.03%
2016 9.07% 6.84%
2015 8.77% 7.22%

ANALYSIS:
 Weighted Average Cost of Capital (WACC) is low for BAJAJ ELECTICALS in years from
2015 to 2019, only during 2016 it was comparatively high for the company but then also it
was not so high.
 WACC generally high for BAJAJ ELECTICALS Cement because during 2018 its high and
during 2016 only it was low
 So based on this analysis BAJAJ ELECTICALS Cement is having a good performance
because when compared to the BAJAJ ELECTICALS WACC is more for BAJAJ
ELECTRICALS.
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CAPITAL STRUCTURE
Capital structure is the combination of the capital raised by the company. This combination
or mix influences the overall cost of capital. Normally capital structure will be the mix of
equity and debt. The proportion of this equity and debt to the total capital is decided by the
company according to the financial position and ability to raise such capital. The decision
regarding the capital structure is very important because it affects the earnings per share or
wealth of the shareholders. Capital structure is the crucial decision to be taken by every
business, the positives and negatives of these decisions plays a important role in determining
the future of every business. Capital structure decision is one of the key decisions to be
undertaken by every company at the time of raising their capital. Poor decisions would result
in adverse effects. Many firms which are financially healthy have lost because of poor
decisions. This paper focuses on the capital structure of the company during 2004 to 2013
and will examine the results of various capital structures.

Factors which influences Capital Structure

 Business Risk: Excluding debt, business risk is the basic risk of the company's operations.
The greater the business risk, the lower the optimal debt ratio.
 Company's Tax Exposure: Debt payments are tax deductible. As such, if a company's tax
rate is high, using debt as a means of financing a project is attractive because the tax
deductibility of the debt payments protects some income from taxes. Therefore, debts form
to be the cheaper source of capital. And in the period of prosperity the debenture holders or
creditors cannot participate in the profits, through which the company can retain major part
of its M. Sekar et al. / Procedia Economics and Finance 11 (2014) 445 to 458 447 earnings.
And the existing equity shareholders will be the beneficiaries.
 Financial Flexibility: This is essentially the firm's ability to raise capital in bad times. It
should come as no surprise that companies typically have no problem raising capital when
sales are growing and earnings are strong. However, given a company's strong cash flow in
the good times, raising capital is not as hard. Companies should make an effort to be
prudent when raising capital in the good times, not stretching its capabilities too far. The
lower a company's debt level, the more financial flexibility a company has. A company
which is too debt ridden may not be in a position to raise its capital as debt.
 Management Style: Management styles range from aggressive too conservative. The more
conservative a management's approach is, the less inclined it is to use debt to increase
profits. An aggressive management may try to grow the firm quickly, using significant
amounts of debt to ramp up the growth of the company's earnings per share (EPS).
 Growth Rate: Firms that are in the growth stage of their cycle typically finance that
growth through debt, borrowing money to grow faster. The conflict that arises with this
method is that the revenues of growth firms are typically unstable and unproven. As such, a
high debt load is usually not appropriate. More stable and mature firms typically need less
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debt to finance growth as its revenues are stable and proven. These firms also generate cash
flow, which can be used to finance projects when they arise.
 Market Conditions: Market conditions can have a significant impact on a company's
capital-structure condition. Suppose a firm needs to borrow funds for a new plant. If the
market is struggling, meaning investors are limiting companies' access to capital because of
market concerns, the interest rate to borrow may be higher than a company would want to
pay. In that situation, it may be prudent for a company to wait until market conditions
return to a more normal state before the company tries to access funds for the plant.

SUGGESTIONS
The financial performance of BAJAJ ELECTICALS, doing the study period (2015-19) is
satisfactory position, with the available data in the annual report, is able to give opinion with
regards to company performance for the analysis of balance sheet.

 The long term borrowing may be utilized to optimum level.

 The company can increase its profit margin.
 The company may try to maintain good cash position. The effective utilization of
borrowing may be improved the company.

CONCLUSION
The analysis of financial performance of BAJAJ ELECTICALS is improved. The liquidity position
of the company is satisfactory hence; the company can meet out its short term liabilities. Solvency
ratio indicates that the company is also in strong solvency as there may not be a problem in fulfilling
long term liabilities. However the production, over all the BAJAJ ELECTICALS is efficient as far as
per the performance.