Project Report On Valuation of Shares

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
r No.
I
II
III
IV
V
VI
Sub.
Chapter Chapter Name
No
Introduction
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
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
Profile of five Companies under Study
3.1
Meaning & Definition of Company
3.2
Profile of Company
Analysis & Interpretation of Data
4.1
Intrinsic Value
4.2
Market Value
4.3
Fair Value
Observation & Testing of Hypotheses
Suggestions
Bibliography
CHAPTER NO.1
INTRODUCTION OF STUDY
Page
No
1 to 4
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.

2.
3.
4.
5.
To Study theoretical aspects of valuation.

To explain the different methods or valuation of equity shares.
To ascertain the value of share of companies.
To study the valuation of assets & liabilities of the company.
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 CapitalThe 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 CapitalIt 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 CapitalIt 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 CapitalIt means that part of the allotted share capital which has been called
up by the company.
E. Paid up CapitalPaid 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.
2.
3.
4.
5.
6.
7.
For estate duty and wealth tax purpose.

For amalgamation and absorption schemes.
For gift Tax purpose.
For discharge of debts & liabilities in exceptional nature.
Conversion of preference share in to equity shares.
Advancing loans on the security of shares.
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.
Intrinsic Value of Each share =
Net Asset
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
Market Value =
Rate of Divided
Normal rateof return X Paid up value of share
Example:Market Value =
12
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.
Example:-
Market Value =
Rate of profit
Normal rateof return
Rate of Profit =
Profiy Available
100
Paid up Valueof Share
Paid up value of share
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
Rate of Profit =
Profit Available
100
20000
100
80000
= 25%
Market Value =
25
8
20
=10each per share

1. Capitalization Method
There is another method of calculating the market value which may be
termed as capitalization method.
Market Value =
Profit Available for equity share holder
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
Market Value =
Profit Available for equity share holder
Normal rate of return
100
150000
100
10
= 1500000
Market Value Per share =
Capital Value
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.
Fair value per share =
Intrinsic value+ Market value

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 moneys
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)
iii)
Registered Office
Telephone
Mumbai- Pune Road Akurdi Pune -411035

(020)-27472851
Fax
E-Mail ID
Board of Directors
27406063
(020)-27407380
Investo@bajaauto.co.in
Rahul Bajaj (Chairman)
iv)
v)
vi)
Madhur Bajaj (Vice Chairman)

Rajiv Bajaj (MD)
J.N.Godrej (Director)
SumanKirloskar (Director)
Shekhar Bajaj (Director)
vii)
viii)
Equity Share Capital

Rate of Dividend
D.S. Metha (Director)

289367020 equity shares of Rs.10 each
Rs 40 Per Share
2] SUDARSHAN CHEMICAL INDUSTRIES LIMITED
i)
Name of Company
ii)
iii)
Registered Office
Telephone
SUDARSHAN CHEMICAL
INDUSTRIES LIMITED
162,Wellesley Road Pune 411001
(020)-260588888
iv)
v)
vi)
Fax
E-Mail ID
Board of Directors
(020)-26058222
contact@sudarshan.com.
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)
vii)
viii)
Mr. N.J.Rathi (Director)

6922775 equity shares of Rs.10 each fully
Rate of Dividend
paid up
Rs 12.50 Per Share
3] MELSTAR INFORMATION TECHNOLOGIES LIMITED
i)
Name of Company
MELSTAR
INFORMATION
ii)
Registered Office
TECHNOLOGIES LIMITED
Melstar House, G4, MIDC Cross Road
iii)
Telephone
A Anderi (East Mumbai -400093

(022)-40566464
iv)
v)
vi)
Fax
E-Mail ID
Board of Directors
(022)-28310520
info@melstar.com.
Mr. Yeshvardhan Birla (Chairman)
Mr. M.S.Adige (Director)
Mr. P.V.R. Murthy (Director)
Mr. Rajesh Shah (Director)
vii)
viii)
Mr.AnojMenon (Director)
14283139 equity shares of Rs.10 each fully
Rate of Dividend
paid up
Nil
4] ACC LIMITED
i)
ii)
Name of Company
Registered Office
ACC LIMITED
Cement House 121, MaharahiKarve Road
iii)
Telephone
Mumbai - 400020
(022)-33024321
iv)
v)
vi)
Fax
E-Mail ID
Board of Directors
(022)-33617440
info@melstar.com.
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)

Share 18795000 equity shares of Rs.10 each fully paid
vii)
Equity
viii)
Capital
Rate of Dividend
up
Nil
5] RELIANCE COMPNY LIMITED
i)
ii)
Name of Company
Registered Office
RELIANCE COMPNY LIMITED

3rd Floor Maker Chambers, 222, Nariman Point
iii)
Telephone
Mumbai - 4000020
(022)-22785000
iv)
v)
vi)
Fax
E-Mail ID
Board of Directors
(022)-22785111
invester relation@rill.com.
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)

Share 1140000 equity shares of Rs.10 each fully paid
vii)
Equity
viii)
Capital
Rate of Dividend
up
Nil
CHAPTER NO.5
DATA COLLECTION & PRESNTATI
4.1 Data Presentation:1. Bajaj Auto Limited

Balance Sheet
as on 31st March 2013

Liabilities
Share capital
Reserve & Surplus

General Reserve
Hedge Reserve
Amt.
Amt.
289.37
2084.6
20.77
Profit & Loss A/c

Secured Loans
Unsecured Loans
Deferred Tax
Liabilities Less
Deferred Tax Assets
2515.48
23.53
301.62
Current Liabilities
& Provision
Liabilities Provision
167.99
197.7
(Rs. In lacks)
Assets
Fixed Assets
Gross Block
Less Depreciation
Add Capital Work
in Progress
Expenditure to
date
Technical Know
How Investment
Amt.
Amt.
3390.88
1912.45
1478.43
1548.29
69.86
4.28
4946
Current Assets &
Loans & Advance
29.71 Inventories
Sundry Debtors
Cash & Bank
Balance Other
3955.28 Current Assets
Loans & Advance
2426.65
1528.63
9220.36
4775.20
547.28
362.76
556.49
216.42
1189.64
2872.59
9220.36
2. SUDARSHAN CHEMICAL INDUSTRIES LIMITED

Balance Sheet
Liabilities
Amt.
Share capital
Amt.
69227250
Reserve & Surplus

Deferred Tax
Liabilities
23710457036
120974039
Secured Loans
Unsecured Loans
1451997582
511859180
Current Liabilities &

Provision Liabilities
Provision
1004824094
176644931
1181469025
(Rs. In lacks)
Assets
Fixed Assets Gross

Block
Less Depreciation
Add Capital Work in
Progress
Expenditure to date
Investment
Current Assets &

Loans & Advance
Inventories Sundry
Debtors
Cash & Bank
Balance
Amt.
Amt.
3322103747
1992628779
1329474968
38553227
1715028495
218574915
1374554262
1746882158
123498124
Other Current
Assets Loans &
Advance
57069884112
65221227
463224931
3773380702
57069884112
3. MELSTAR INFORMATION TECHOLOGIE LIMITED

Balance Sheet
Liabilities
Amt.
Share capital
(289367020 equity
shares of Rs.10 each)
142831390
Reserve & Surplus

Deferred Tax
Liabilities
Secured Loans
Unsecured Loans

Provision
Liabilities
Provisions
Amt.
(Rs. In lacks)
Assets
Fixed Assets Gross

Block
Less Accumulated
Depreciation
Amt.
Amt.
194083826
77402807
116681019
2136361
26474966
Investment
Current Assets &
Loans & Advance
Sundry Debtors
Cash & Bank
Balance
42974070
5449257
48423327
219866044
Other Current
Assets Loans &
Advance
Profit & Loss A/c
2000000
43351828
2567246
32534292
78453366
22731659
219866044
4. ACC LIMITED
Balance Sheet
Liabilities
Share capital
Amt.
Amt.
187.95
Reserve & Surplus
6281.54
Secured Loans
Unsecured Loans
518.05
5.77
Current Liabilities
& Provision
Provisions
4280.30
11273.61
(Rs. In lacks)
Assets
Fixed Assets
Gross Block
Less
Accumulated
Depreciation
Amt.
Amt.
8076.95
2994.51
5082.44
Add Capital
Work in
Progress
Investment
Current Assets
& Loans &
Advance
1562.80
6645.24
1702.67
2925.70
11273.61
5. RELIANCE COMPNY LIMITED

Balance Sheet
Liabilities
Share capital equity
shares Preference Share
Amt.
Amt.
(Rs. In lacks)
Assets
Fixed Assets Gross

Block
Less Accumulated
Depreciation
1140
0.86
1140.86
Reserve & Surplus

General Reserve
Profit & Loss A/C
Securities Premium A/c
Capital Subsidy
Secured Loans
Unsecured Loans
Deferred Tax Liabilities

Deferred Tax (Net)
Provision
Provisions
4.91
330.40
4260.16
80.00
4657.47
8797.73
22.75
1093.13
467.98
6046.37
219.94
Add Capital Work in

Progress
Assets Held for
Diseorsal
Investment
Current Assets &
Loans &
Advance Inventories
Sundry Debtors
Cash and Bank
Balance
Loans and Advance
22464.23
Amt.
Amt.
21705.44
10870.50
10834.94
155.15
18.42
11008.51
1736.43
2707.01
5935.21
202.41
874.66
9719.29
22464.23
1. Bajaj Auto Limited

Balance Sheet
Liabilities
Share capital
Amt.
Reserve & Surplus

Deferred Tax
Liabilities
Secured Loans
Unsecured Loan
Current Liabilities
& Provision
Liabilities Provision
Trade Payable
29.71
133.84
157.84
(Rs. In lacks)
Amt.
289.37
Assets
Fixed Assets
Gross Block
Less Depreciation
4620.85 Capital Work in
Progress
Investment
321.43
Current Assets &

Loans & Advance
Inventories
Sundry Debtors
Cash & Bank
Balance
Amt.
3395.16
1912.45
1482.71
69.86
4721.91
574.28
359.89
228.78
670.82
1555.8
1789.26 4015.88
Other Current
Assets Loans &
Amt.
618.05
Advance
1219.05
9247.53
2973.05
9274.53
2. SUDARSHAN CHEMICAL INDUSTRIES LIMITED

Balance Sheet
Liabilities
Amt.
Share capital
Reserve & Surplus

Deferred Tax
Liabilities
Secured Loans
Unsecured Loans

Provision Liabilities
Provision
Amt.
69227250
263295626
212310169
2284775640
27770460
823157861
192896199
948512434
1964566494
(Rs. In lacks)
Assets
Fixed Assets Gross

Block
Less Depreciation
Amt.
2092628779
Capital Work in
Progress
Investment
Current Assets &

Loans & Advance
Inventories Sundry
Debtors
Cash & Bank
Balance
2171475379
167466556
251769915
1569123196
1842772784
338335313
Other Current
Amt.
4264104198
Assets Loans &

Advance
71642266
778460194
7191045639
4600333753
7191045639
3. MELSTAR INFORMATION TECHOLOGIE LIMITED

Balance Sheet
Liabilities
Share capital
Amt.
Amt.
142831390
Reserve & Surplus
160231693
Secured Loans
Unsecured Loans
3637660
(Rs. In lacks)
Assets
Fixed Assets Gross

Block
Less Accumulated
Depreciation
Investment
Current Assets &
Loans & Advance
Sundry Debtors
Amt.
Amt.
174924902
66402807
108522095
24493833

Provision
Liabilities
Provisions
Trade payable
Cash & Bank

Balance
10900102
2966648
10216510
24083260
Other Current
Assets Loans &
Advance
185476162
2127955
7564744
2599214
330784003
197768075
330784003
4. ACC LIMITED
Balance Sheet
Liabilities
Share capital
Amt.
Amt.
187.95
(Rs. In lacks)
Assets
Fixed Assets
Gross Block
Less
Accumulated
Depreciation
Amt.
9645.37
3437.84
Amt.
Reserve & Surplus
7004.32
Secured Loans
Unsecured Loans
506.50
4.23
Current Liabilities
& Provision
Provisions
4357.25
6207.53
Add Capital
Work in
Progress
Investment
Current Assets
& Loans &
Advance
435.32
6642.85
1624.95
3792.45
12060.25
12060.25
5. RELIANCE COMPNY LIMITED

Balance Sheet
Liabilities
Share capital equity
shares Preference Share
Amt.
1140
Amt.
(Rs. In lacks)
Assets
Fixed Assets Gross

Block
Amt.
23495.79
Amt.
0.86
Less Accumulated
Depreciation
1140.86
Reserve & Surplus

General Reserve
Profit & Loss A/C
Securities Premium A/c
Capital Subsidy
Secured Loans
Unsecured Loans

Deferred Tax (Net)
Provision
Provisions
4.91
1537.18
4260.16
80.00
5882.25
6450.01
----
992.19
313.25
9016.39
339.98
Add Capital Work in

Progress
Assets Held for
Diseorsal
Investment
Current Assets &
Loans &
Advance Inventories
Sundry Debtors
Cash and Bank
Balance
Loans and Advance
24134.93
12884.14
10611.65
315.28
18.42
10945.35
1736.43
3133.09
7133.48
403.81
802.77
11453.15
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
Fixed Assets
Capital Work in Progress
Technical Know How
Investment
Sundry Debtors
Cash & Bank Balance
Other Current Assets
Loan & Advances
Inventories
LessLiabilities
Current Liabilities
Provision
Net Assets
Rs.
Rs.
1478.43
69.86
4.28
4795.28
362.76
556.49
216.42
1189.64
547.28 9920.36
29.71
2526.65
1528.63 4084.99
5235.37
b. No of Equity Shares = 289367020

523537000
Intrinsic Value = 289367020
= 1.80
B. Market Value Method =
Rate of Profit
Rate of return
Profit available = Profit during the year 333670000

Profit available
a:Rate of Profit = Paid up value of share 100

333670000
= 2893670200 100
= 11.54%
b:Rate of Return =
Profit available
100
Net Assets
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
a. Net Assets
Fixed Assets
Technical Know How
Investment
Sundry Debtors
Cash & Bank Balance
Loan & Advances
Rs.
Rs.
1329474968
385553527
218574915
1374554262
1746882158
123498124
65221227
46322491
570698411
2
Less-
Liabilities
Current Liabilities
Provision
120974039
1004824094
176644931 130244306
4
440454104
Net Assets
8
Intrinsic Value =
4404541048
6922775
= 636.23
Rate of Profit
Rate of return
Profit available
324299577
100
69227750
= 468.45%
b:Rate of Return =
Profit available
100
Net Assets
324299577
= 4404541048 100
= 7.36%
Market Value =
468.45
10
7.36
=636.48

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

Net Assets

a. Net Assets
Fixed Assets
Investment
Sundry Debtors
Cash & Bank Balance
Loan & Advances
LessLiabilities
Current Liabilities
Provision
Net Assets
Rs.
Rs.
166681019
2000000
43351828
2567246
32534292 197134385
42974070
549257 48423327
48423337
148711058

= 10.39
Rate of Profit
Rate of return
Profit available

14626249
= 142831390 100
= 10.24%
Profit available
100
Net Assets
b:Rate of Return =
14626249
= 148711058 100
= 9.83%
Market Value =
10.24
10
9.83
=10.41
Intrinsic val ue+ Market value

C:Fair Value =
2
1041+1041
2
=10.41
4.ACC LIMITED
Net Assets
a. Net Assets
Fixed Assets
Investment
Loan & Advances
LessLiabilities
Current Liabilities
Provision
Net Assets
Intrinsic Value =
699331000
1875000
= 37.20
Rs.
Rs.
5282.44
1562.80
1702.67
2925.70 11273.61
4280.30
6993.31
Rate of Profit
Rate of return

Profit available
112094000
= 187950000
100
= 59.64%
b:Rate of Return =
Profit available
100
Net Assets
112094000
= 699331000 100
= 16.02%
59.64
Market Value = 16.02 10

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

Net Assets

a. Net Assets
Fixed Assets
Assets Held for Disposal
Investment
Inventories
Rs.
Rs.
10834.94
155.15
18.42
1736.43
2707.01
Sundry Debtors
Cash & Bank Balance
Loan & Advances
LessLiabilities
Deferred Sales Tax
Current Liabilities
Provision
Net Assets
5935.21
202.41
874.66 22464.23
467.98
1093.13
6046.37
219.94 7827.42
14636.81

Intrinsic Value =
1463681000
1140000
= 128.39
Rate of Profit
Rate of return

Profit available
33040000
= 11400000 100
= 2.89%
Profit available
b:Rate of Return =
100
Net Assets
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
a. Net Assets
Fixed Assets
Investment
Sundry Debtors
Cash & Bank Balance
Loan & Advances
Inventories
LessLiabilities
Current Liabilities
Provision
Trade Payable
Net Assets
Rs.
Rs.
1482.71
69.86
4721.91
359.89
228.78
618.05
1219.05
547.28 9247.53
29.71
670.82
1555.8
1789.26
5201.94
c. No of Equity Shares = 289367020

52194000

= 1.79
Rate of Profit
Rate of return

Profit available
333973000
= 2893670200 100
= 11.54%
Profit available
b:Rate of Return =
100
Net Assets
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
Fixed Assets
Investment
Inventories
Sundry Debtors
Cash & Bank Balance
Loan & Advances
Rs.
Rs.
2171475379
167466556
251769915
1569123196
1842772784
338335313
71642266
778460194 719104563
9
Less-
Liabilities
Current Liabilities
Provision
Trade Payable
823157861
192896199
948512434 196456649
4
522647914
Net Assets
5
d. No of Equity Shares = 6922775
5126479145
= 754.97
Rate of Profit
Rate of return

Profit available
361510643
= 5226479145 100
= 522.20%
Profit available
b:Rate of Return =
100
Net Assets
361510643
= 5226479145
100
= 6.91%
Market Value =
522.20
10
6.91
=755.71

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

Net Assets

a. Net Assets
Fixed Assets
Investment
Sundry Debtors
Cash & Bank Balance
Loan & Advances
LessLiabilities
Current Liabilities
Provision
Trade Payable
Net Assets
Rs.
Rs.
108522095
24493833
185476162
2127955
2599214
7564744 330784003
10900102
2966648
10216510 24832060
89951943

89951943

= 6.29
Rate of Profit
Rate of return
Profit available

14617030
= 142831390 100
= 10.23%
b:Rate of Return =
Profit available
100
Net Assets
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
a. Net Assets
Fixed Assets
Investment
Loan & Advances
LessLiabilities
Current Liabilities
Provision
Net Assets
770300000

= 40.98
Rs.
Rs.
6207.53
435.32
1624.95
3792.55 12060.25
4337.25
7703.00
Rate of Profit
Rate of return

Profit available
132675000
= 187950000
100
= 70.59%
b:Rate of Return =
Profit available
100
Net Assets
132675000
= 770300000 100
= 17.22%
70.59

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

Net Assets
a. Net Assets
Fixed Assets
Assets Held for Disposal
Investment
Inventories
Sundry Debtors
Cash & Bank Balance
Loan & Advances
LessLiabilities
Rs.
Rs.
10611.65
315.28
18.42
1736.43
3133.09
7173.48
403.81
802.77 24134.93
313.25
Deferred Sales Tax

Current Liabilities
Provision
Net Assets
992.19
9016.39
339.98 10661.81
13473.12
1347312000
= 118.85
Rate of Profit
Rate of return

Profit available
153822000
100
11400000
= 13.49%
b:Rate of Return =
Profit available
100
Net Assets
153822000
= 1347312000 100
= 11.41%
13.39

=118.22

2
C:Fair Value =
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
Companies
2
5
4
3
Sudarshan
Chemical
Industiries Ltd.
Reliance
Company Ltd
ACC Ltd
Melstar
Information
Technologies
Ltd.
Bajaj Auto Ltd.
Intrinsic
Value of
Shares (Rs)
636.23
Market
Value of
Shares (Rs)
636.48
Fair Value
of Share
(Rs)
636.35
Rank
128.39
128.44
128.41
37.20
10.41
37.22
10.41
37.21
10.41
3
4
1.80
1.81
1.80
For the Financial year 2013-14

Sr.No. Name of
Companies
2
5
4
3
Sudarshan
Chemical
Industiries Ltd.
Reliance
Company Ltd
ACC Ltd
Melstar
Information
Technologies
Ltd.
Bajaj Auto Ltd.
Intrinsic
Value of
Shares (Rs)
754.97
Market
Value of
Shares (Rs)
755.71
Fair Value
of Share
(Rs)
755.34
Rank
118.85
118.22
118.53
40.98
6.29
41.04
6.29
41.01
6.29
3
4
1.79
1.79
1.79
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

Project Report On Valuation of Shares

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A

Mr. Vivek A. Bale

COMPANIES. For the requirement of Master of Business Administration at

Mr. VIvek A. Bale

1. The value of an asset depends on the returns it is expected to provide

1.2 Objectives of Study :1.

To Study theoretical aspects of valuation.

1.3 Hypothesis of Study : 1. The intrinsic value of shares is fair.

2.3 Types of Shares:There are two types of shares.

applications call for a considerable degree of knowledgeof the various

For estate duty and wealth tax purpose.

2.7 Methods of Valuation:a. Net Assets Method

B. Market Value Method of Yield Basis Method

Normal rateof return

Paid up value of share

=10each per share

Profit Available for equity share holder

Normal rate of return

Profit Available for equity share holder

Normal rate of return

= 150 each share

Intrinsic value+ Market value

3.2 Profile of Companies

BAJAL AUTO LIMITED

Mumbai- Pune Road Akurdi Pune -411035

Madhur Bajaj (Vice Chairman)

Equity Share Capital

D.S. Metha (Director)

2] SUDARSHAN CHEMICAL INDUSTRIES LIMITED

Equity Share Capital

Mr. N.J.Rathi (Director)

3] MELSTAR INFORMATION TECHNOLOGIES LIMITED

A Anderi (East Mumbai -400093

Equity Share Capital

Miss. AshwiniDani (Director)

5] RELIANCE COMPNY LIMITED

RELIANCE COMPNY LIMITED

Mr. Dipak C. Jain (Director)

4.1 Data Presentation:1. Bajaj Auto Limited

as on 31st March 2013

Reserve & Surplus

Profit & Loss A/c

2. SUDARSHAN CHEMICAL INDUSTRIES LIMITED

Reserve & Surplus

Current Liabilities &

Fixed Assets Gross

Current Assets &

3. MELSTAR INFORMATION TECHOLOGIE LIMITED

Reserve & Surplus

Current Liabilities &

Fixed Assets Gross

Reserve & Surplus

5. RELIANCE COMPNY LIMITED

Fixed Assets Gross

Reserve & Surplus

Deferred Tax Liabilities

Add Capital Work in

1. Bajaj Auto Limited

Reserve & Surplus

Current Assets &

2. SUDARSHAN CHEMICAL INDUSTRIES LIMITED

Reserve & Surplus

Current Liabilities &