B11066

Long Term Financing, EVA & MVA

Dewan housing finance limited
a) Long term financing of DHFL1,2,3- (in lacs Rs)

year

2011-2010

2010-2009

2009-2008

2008-2007

2007-2006

Internal sources

4993.01

1378.7

1139.73

888.25

504.69

PAT

26512.68

15069.28

9176.49

8,257.74

4,840.17

(dividends plus dividend taxes)

-4392.67

-2973.28

-1778.31

-1857.21

-1680.17

(transfer reserves)

-17500

-11000

-6500

-5725

-2850

retained earnings

4620.01

1096

898.18

675.53

310

373

282.7

241.55

212.72

194.69

641,540.98

335,237.20

190,695.40

83,579.43

95,820.61

issue of equity shares

2,239.99

2,150.35

1,040.05

0.00

premium on equity shares

46,973.35

28,046.21

6,760.30

0.00

Issue of new share capital

49,213.34

30,196.56

0.00

7,800.35

0.00

loans from banks/ institutions

439716.12

275750.25

181953.77

85266.52

84295.36

non convertible debentures

55350.03

15761.68

13744.13

5527.48

513.33

unsecured loans

97261.49

13528.71

-5002.5

-15014.92

11,011.92

New debts

592327.64

305040.64

190695.4

75779.08

95820.61

Depriciation
External sources

b) Long term financing of GRUH financing limited1,2,3

(in Rs)

year

2011-2010

2010-2009

2009-2008

2008-2007

2007-2006

Internal sources

171966186

196733703

877994192

116715602

7745610

PAT

915117611

689585678

502759530

423409334

296068349

(dividends plus
dividend taxes)
(transfer reserves)

-449471881

-263201662

194597091

-162144302

-121564350

-312000000

-244000000

171000000

-153000000

-175000000

retained earnings

153645730

182384016

868356621

108265032

-496001

Depriciation

18320456

14349687

9637571

8450570

8241611

6,503,302,20
8.00
4324830

791,359,77
6.00
731900

4,721,399,02
7.00
42,610

36,949,151,41
3.00
125010

2,860,150,95
6.00
81351980

66883496

10938194

242877

712557

527306286

71,208,326.0
0
5187717000

11,670,094.
00
388550031

285,487.00

837,567.00

7434031664

1742373883

608,658,266.
00
1131174666

-350000000

100000000

-350000000

-650000000

1400000000

1594376882

291139651

-2362918124

35855939963

-279681976

6432093882

779689682

4721113540

36948313846

2251492690

External sources
issue of equity shares
premium on equity
shares
Issue of new share
capital
loans from banks/
institutions
non convertible
debentures
unsecured loans
New debts

C) Reasons behind the long term financing of the two companies

DHFL-The Company derives its long term financing from both internal as well as
external resources. Most of the financing needs of the company are met by external
sources. Within external sources most of the funding is by the way of new debts
acquired by the company. Company did not even issue equity in two years in the last
5 year period. The reason could be that the cost of debt provided to the company by
banks and NBH is lower than the cost of equity. But in the last two years the company
has issued greater amount of equity as compared to the new debts acquired. This
could be because of the fact that the company has been doing good and the public
perception of the company has also been good, may be because of this reason the
company has decided to raise more money by equity. Also the sector has been really
good in terms of growth.

GRUH Finance Limited- the Company derives most of the financing needs from
external sources. The proportion of money raised via external sources when
compared to internal sources is very high. The company acquires most of its financing
needs from outside because of the sector it operates in, the finance required by a
housing finance company is huge so the company raises most of the money by
acquiring new debts. The cost of debt is less as compared to the cost of equity.
Because of this reason company fulfils its financing needs via acquiring new debt. The
company has increased the amount of money raised by equity over the years. This
could be due to the segment of population that the company caters to i.e. middle to
lower income class. This segment has shown tremendous growth potential in the
housing finance sector.

PART B
d) compute EVA & MVA for DHFL for the past five years1,2,3

(in lacs Rs)

ECONOMIC VALUE
ADDED
NOPAT
EBIT
TAX
WACC
CAPITAL INVESTED
TOTAL ASSETS
CASH AND BANK
BALANCES
INVESTMENTS
Loans and Advances
CAPITAL CHARGE
BOOK VALUE OF
EQUITY
Share Capital
free reserves and
surplus
share application
money
equity share warrant
Share price
Highest share price
Lowest share price
No of equity shares
MARKET VALUE OF
EQUITY
MARKET VALUE
ADDED
Return on Operating
assets
Retur on OP assets/
WACC
P/BV ratio
Book value per share

2011-2010
9,202.53

2010-2009
18,169.26

2009-2008
13,674.60

2008-2007
12,348.68

2007-2006
2,048.83

137,489.00
145,124.00
7635
9.11%
1,408,193.93
1,641,435.36
116,174.41

98,740.00
99255
515
9.11%
884,032.72
980,437.70
73,029.34

66,011.00
69246
3235
9.11%
574,367.85
639450.93
46544.7

50,027.37
52,342.37
2315
9.11%
413,506.26
441,449.92
11,921.38

32,124.10
33,229.46
1105.36
9.11%
330,062.18
357,997.79
14,253.94

87,066.87
30,000.15
128286.467
154,843.28

13,137.43
10,238.21
80570.7421
92,943.71

10850.77
7687.61
52336.39849
45,754.04

10,252.67
5769.61
37678.69041
44,507.02

9,631.86
4049.81
30075.26584
36,527.25

10,442.64
144,400.64

8,502.65
78,841.06

6352.3
39401.74

6752.3
37754.72

7,428.61
28,848.51

5600

0
266.15
337.3
195
104,426,402
27793086892

0
249.025
322.6
175.45
82,026,544
20426660120

0
125.25
208.45
42.05
60522975
7580502619

0
140.775
240.35
41.2
50,122,519
7055997612

250.13
73.65
89.85
57.45
50,122,519
3691523524

27,792,932,04
9.02
0.018827435

20,426,567,17
5.89
0.017046066

7,580,456,86
4.71
0.015976678

7,055,953,10
5.21
0.019970048

3,691,486,99
7.10
0.014664419

0.206667785

0.187031664

0.175336673

0.219162076

0.160935236

1.79443096
148.32

2.421009139
102.86

1.77232206
70.67

2.312715623
60.87

1.302157001
56.56

e) compute EVA & MVA for GRUH finance limited for the past five years1,2,3

(in Rs)

2011-2010

2010-2009

2009-2008

2008-2007

2007-2006

ECONOMIC VALUE ADDED

75938439.73

288038987.6

636154712.8

43097240.85

-1474160.17

NOPAT

2924268664

2491588195

2514547966

1634071950

1230658389

EBIDTA

3283200000

2760600000

2717200000

1811700000

1238900000

TAX

340610880

254662118

193014463

169177480

Depreciation

18320456

14349687

9637571

8450570

8241611

9.21%

9.21%

9.21%

9.21%

9.21%

CAPITAL INVESTED

30936572437

23933411615

20401794865

17280055492

13382562715

TOTAL ASSETS

32842694342

25877483705

24660235811

19633085017

14694789228

CASH AND BANK BALANCES

1236942775

1355952468

3748818375

1595507534

829345654

INVESTMENTS

346609125

327195511

127779263

166421520

174575743

Loans and Advances

322570005

260924111

381843308

591100471

308305116

CAPITAL CHARGE

2848330224

2203549207

1878393253

1590974709

1232132549

BOOK VALUE OF EQUITY

3179377538

2646260783

2208702571

1902665317

1642337374

Share Capital

351576330

347251500

346519600

346476990

346351980

free reserves and surplus

2827801208

2299009283

1862182971

1556188327

1295985394

share application money

equity share warrant

437.025

313.375

157.75

160.5

149.075

Highest share price

560.3

433.3

233.75

221.6

178.1

Lowest share price

313.75

193.45

81.75

99.4

120.05

No of equity shares

34938346

34671607

34649660

34640765

31483622

MARKET VALUE OF EQUITY

15268930661

10865214844

5465983865

5559842783

4693420950

MARKET VALUE ADDED

12089553123

8218954061

3257281294

3657177466

3051083576

Return on Operating assets

0.029580446

0.028812678

0.024642907

0.024502776

0.022123442

Retur on OP assets/ WACC

0.321282133

0.312943172

0.267654033

0.266132033

0.240289366

P/BV ratio

4.80300033

4.111993177

2.474898023

2.922964852

3.143715732

90.99

76.21

63.74

54.91

47.42

WACC

Share price

Book value per share

f) historical performance of the two firms: DHFL & GRUH finance limited

DHFL- the EVA of the company has been declining over the past 5 years. This
signifies that though the company has been growing by increasing its value
but it has not been able to increase the rate of growth. This could be because
of the fact that the company has recently widens its horizons to other
segments as well. This may have resulted in the decreased operational
efficiency of the firm in a new segment. Other reason could also be because of
the fact that all the segments of the housing finance sector may not be
growing at an equal pace. The MVA of the company has been constantly
increasing; it signifies that the market perception of the company is very
good. This could because of the fact that the company has now diversified its
portfolio and now it caters to almost every segment of the population. Also
because of the growth in the housing finance sector the market perception of
the company has been good.

GRUH finance limited- the EVA of the company has been positive for the
past 5 years but it has been reducing over the past two years. The reason for
such decline could be the increased amount of equity raised form the market.
The company operates in a single segment and has good operational control
so operational inefficiency could not be reason for the reduction in EVA. The
MVA of the firm has been constantly rising; it reflects a positive market
perception of the company. It could be because of the increase in the size of
the segment in which the company operates. The company also kind of
enjoys a monopoly in that segment. It could be one of the factors for a
positive market perception of the company.

g) EVA as performance indicator as compared to MVA and other financial ratios

MVA reflects the perception of the market of a particular company. Because of the
perceptive nature of MVA it is more dynamic in nature as compared to EVA and
other financial ratios. EVA on the other hand reflects the value added to the
company. It also reflects the operational efficiency of the company, capital structure
adopted by the company. EVA also helps a company to plan for the future in terms of
diversification, capital restructuring, operation restructuring. So EVA provides a
great deal of information to a company. When compared to other financial ratios
EVA is more comprehensive as it tells not only about a single parameter but tells us
about the wealth created by the company.i

B11066_6.xlsx

www.nseindia.com
2 annual report 2011 to 2007 DHFL
3 annual report 2011 to 2007 GRUH finance limited