Fundamental Analysis of Aviation Sector

8/15/2019 Fundamental Analysis of Aviation Sector

http://slidepdf.com/reader/full/fundamental-analysis-of-aviation-sector 1/34

A

Project Report On:

“Fundamental Analysis of Aviation Sector”

For

Reliance Capital

By-

Abhay KapkotiDMS, Bhimtal

Under the !idance o"

Mr Neeraj Mishra



Acknowledgement

#hi$ project on %!ndamental Analy$i$ o" A&iation Sector 'a$ beyond imaination "or a rookie, $!ch a$ me ,

in the &a$t "ield o" %inance( A lot o" people ha&e contrib!ted immen$ely to'ard$ it$ competition( ) 'o!ld $tart

by thankin My Parents 'ho entr!$ted me 'ith the re$pon$ibility to o to alien condition$ to learn a ne '

cra"t(

Mr *eeraj Mi$hra +O!r Mentor 'ho did all he co!ld, both academically and per$onally, to et !$ into a

con$tr!cti&e en&ironment, in 'hich 'e co!ld learn ro'( #hank yo! $ir, 'itho!t yo! thi$ project 'o!ld notha&e been po$$ible(

) 'o!ld al$o like to thank Dr .(K( Sinh 'ho $hared hi$ &al!able ad&ice 'ith !$ both a$ o!r pro"e$$or

mentor in thi$ project(

Pro"( P(/( Ka&idayal 'a$ ha$ al'ay$ moti&ated !$ to 'hom 'e $eek in tro!bled time$(

.a$tly ) 'o!ld like to thank my "riend$ 'ho ha&e been there al'ay$ $!pportin helpin me thro!ho!t the co!r$e o" thi$ project li"e ineneral(



Contents

Sn( *o o!ic Page

No"

#$ %&ecutive Summary

#' Com!any Profile

#( )*jectives of Project

#+ ,esearch Methodology

#-



/hapter 01



%&ecutive Summary

This project has been quite a learning curve in my pursuit for knowledge. It has made me more familiar with the practical

world of Finance, which as it turns out is much more complicated, and thus much more interesting.

The Fundamental analysis is an eective tool of valuation of any sector, as it uses all the information from multiple

environments to come to a precise decision.

In this I project I have tried to touch various factors that aect the viation industry. The a&iation ind!$try is particularly

susceptible to e!ternal economic "actor$ because it aects and depends on a substantial number of industries.

It is no secret that the Indian viation Industry has been going through a turbulent phase over the past several years, be it the

policy paralysis of the government or the depreciation rupee" high oil prices and limited pricing power contributed by industry

wide over capacity and periods of subdued demand growth. #ver the near term the challenges facing the airline operators are

related to high debt burden and liquidity constraints $ most operators need signi%cant equity infusion to eect a meaningful

improvement in balance sheet. Improved %nancial pro%le would also allow these players to focus on steps to improve long

term viability and brand building through dierentiated customer service.



Today the industry contributes around &.'( to the )ross *omestic +roduct )*+- and employs some ./ million people. #ther

than this direct contribution to the economy, the aviation industry also contributes by facilitating domestic 0 international

tourism thereby improving the performance and contribution of tourism industry.

#ver the long term the operators need to focus on improving cost structure, through rationali1ation at all levels including mi!

of 2eet and routes, aimed at cost e3ciency. t the industry level, long term viability also requires return of pricing power

through better alignment of capacity to the underlying demand growth.

This projects tries to throw some light on the prospective future of our aviation industry, and to know whether Indian viation

has it in it to 2y high 0 reach its 1enith. *oes the 45( F*I would be a game changer in the industry6 7ow much of it can be

blamed on the government6 8hich companies are likely to make out these testing time6

Fundamental Analysis



%!ndamental Analy$i$ i$ a $tock &al!ation techni2!e 'hich look$ into the economic financial po$ition o" the company to predict it$ ro'th in

a certain period( )t take$ into acco!nt the "inancial in"ormation the non-"inancial in"ormation $!ch a$ the ro'th in demand, ind!$try

compari$on$, o&ernment policie$ etc(

#he o!tcome o" a "!ndamental analy$i$ i$ a &al!e, or rane o" &al!e$ kno'n a$ the intrinsic value" #o a "!ndamental in&e$tor the $tock price$tend to re&ert to'ard$ it$ intrin$ic &al!e(

%!ndamental Analy$i$ i&e$ an$'er$ to the 2!e$tion$ like-

• )$ the company3$ re&en!e ro'in4

• )$ it act!ally makin a pro"it4

• )$ it in a $tron-eno!h po$ition to beat o!t it$ competitor$ in the "!t!re4

• )$ it able to repay it$ debt$4

•)$ manaement tryin to 5cook the book$54

Need For Fundamental Analysis.

%ffective Market /y!othesis 0 6M% $tate$ that it i$ impo$$ible "or an in&e$tor to 7beat the market”, beca!$e the $tock$ are al'ay$ bo!ht

$old at a "air price in con$i$tency 'ith the in"ormation a&ailable in the market(

A$ $!ch, it $ho!ld be impo$$ible to o!tper"orm the o&erall market thro!h e8pert $tock $election or market timin and that the only 'ay an

in&e$tor can po$$ibly obtain hiher ret!rn$ i$ by p!rcha$in ri$kier in&e$tment$

)n other 'ord$ 6M% $ay$ that e&ery in"ormation in the $tock market, be it the earlier per"ormance o" the company, or the c!rrent economic policie$ 'hich 'o!ld be re$pon$ible "or "!rther ro'th o" the company are all in the p!blic domain, $o to reap o!t pro"it "rom the in"ormation'hich i$ a&ailable to all i$ impo$$ible( )" the in&e$tor 'i$he$ to make "ort!ne in $tock market, he ha$ to in&e$t in more ri$kier in&e$tment$, that3$ the only 'ay into it(

Arguments against /y!othesis. 6""ecti&e Market 9ypothe$i$ miht be one o" the corner $tone to'ard$ "inance, b!t it ha$ been pro&en in

the la$t "e' decade$ that the market$ are rea$onably e""icient b!t beatin them i$ 2!ite po$$ible(#he beha&io!ral $cienti$t attrib!te thi$ to'ard$ thecombination o" "inancial market$ and coitati&e bia$e$ $!ch a$ o&ercon"idence, o&erreaction, repre$entati&e bia$e$, in"ormation bia$ and other bia$e$( The market often appears to be driven by buyers operating on irrational exuberance, who take little notice of underlying value.



S!dden market cra$he$ are my$terio!$ "rom the per$pecti&e o" e""icient market$ and thro' market e""iciency to the 'ind$( Other e8ample$ are o"in&e$tor$, 'ho ha&e con$i$tently beaten the market o&er lon period$ o" time, 'hich by de"inition $ho!ld not be probable accordin to the 6M9(

Fundamental Analysis1 does it work2

Recent year$ ha&e 'itne$$ed a ne' 'a&e o" re$earcher$ 'ho ha&e pro&ided tho!ht pro&okin, theoretical ar!ment$ and pro&ided $!pportinempirical e&idence to $ho' that $ec!rity price$ co!ld de&iate "rom their e2!ilibri!m &al!e$ d!e to p$ycholoical "actor$, "ad$, and noi$e tradin(#hat3$ 'here in&e$tor$ thro!h "!ndamental analy$i$ and a $o!nd in&e$tment objecti&e can achie&e e8ce$$ ret!rn$ and beat the market(

Ste!s involved in Fundamental Analysis.

%!ndamental analy$i$ con$i$t$ o" a $y$tematic $erie$ o" $tep$ to e8amine the in&e$tment en&ironment o" a company and then identi"yopport!nitie$( Some o" the$e are:

Macroeconomic analy$i$ - 'hich in&ol&e$ analy$in capital "lo'$, intere$t rate cycle$, c!rrencie$, commoditie$, indice$ etc(

)nd!$try analy$i$ - 'hich in&ol&e$ the analy$i$ o" ind!$try and the companie$ that are a part o" the $ector

Sit!ational analy$i$ o" a company

%inancial analy$i$ o" the company

;al!ation

echni3ues of Fundamental Analysis.

%!ndamental Analy$i$ can incl!de e&erythin related to the economic 'ellbein o" the company( Ob&io!$ item$ incl!de thin$ like re&en!e and pro"it, b!t "!ndamental$ al$o incl!de e&erythin "rom a company3$ market $hare to the 2!ality o" it$ manaement(



#he t'o techni2!e$ !$ed to e&al!ate a company !$ed in thi$ project are <

4uantitative echni3ues.#he$e techni2!e$ deal 'ith the more n!merical or mea$!rable characteri$tic$ o" the b!$ine$$( #he$e may incl!de the

pro"it earned, total re&en!e, and other 2!alitati&e data "rom "inancial doc!ment$(

4ualitative echni3ues. #he$e techni2!e$ re"er i$ to the character or 2!ality o" the company( #he intanible thin$ like brand name, market

$hare, 2!ali"ication o" board o" e8ec!ti&e$(

)*jectives of Study.

1( Primary Objecti&e- #o analy=e the pre$ent trend$ in the a&iation ind!$try(

>( Secondary Objeci&e$-

• #o predict the "!t!re o" A&iation )nd!$try "or comin "i&e year$(

• #o $elect pro"itable companie$, "rom a lon term in&e$tor3$ per$pecti&e(

P%,5)6 )F S768

#he $t!dy 'a$ cond!cted "or ?@ day$ "rom >--1 to 10-C-1(

95M5A5)NS )F S768

s the 9apanese saying goes :There is always a better a way;. <ooking back, even after all my eorts , this project do have

some shortcomings. These are my real takeaways from this project. =ome of them are listed below$

- >espondent?s unavailability.

@- >ookie to the ways of %nance.

A-Time unavailability, because there was so much to learn in this alien environment.

A- Bourtesy bias.



Sco!e of Study.



,%S%A,C/ M%/)6)9):8

Re$earch compri$e$ de"inin and rede"inin problem$, "orm!latin hypothe$i$ or $!e$ted $ol!tion$ collectin, orani=in and

e&al!atin data makin ded!ction and reachin concl!$ion$ and at la$t care"!lly te$tin the concl!$ion$ to determine 'hether they

"it the "orm!latin hypothe$i$ < Clifford ;ood"

,esearch methodology

)t i$ a 'ay to $y$tematically $ol&e the re$earch problem( )t may be !nder$tood a$ $cience o" $t!dyin ho' re$earch i$ done $cienti"ically(

)n it 'e $t!dy the &ario!$ $tep$ that are enerally adopted by the re$earcher in $t!dyin hi$ re$earch problem alon 'ith the loic behind

them( )n eneral methodoloy i$ an optional "rame'ork 'ithin 'hich the "act$ are placed $o that the meanin may be $een more clearly( #he

$o!rce$ o" data $ho'n that de$inin o" a re$earch plan call$ "or deci$ion on the data $o!rce$ are re$earch approache$ +primary and $econdary

data re$earch in$tr!ment$ +ob$er&ation $!r&ey e8periment $amplin plan and contact method$ +per$onal inter&ie'$(

,esearch design

A re$earch de$in i$ the determination and $tatement o" the eneral re$earch approach or $tratey adopted "or the partic!lar project( )t i$ the

heart o" the plannin( )" the de$in adhere$ to the re$earch objecti&e$, it 'ill en$!re that the client need 'ill be $er&ed(

Re$earch de$in i$ a plan $tr!ct!red and $trateie$ o" in&e$tiation( )t i$ the arranement o" condition and analy$i$ o" data in a manner to

combine rele&ance to the re$earch p!rpo$e 'ith economy in proced!re(



)n order to achie&e the objecti&e it 'a$ nece$$ary to talk to the c!$tomer$ and p!blic to dra'$ the concl!$ion$ reardin the

objecti&e(

%or &i$itin the c!$tomer$ and p!blic$ to collect the rele&ant in"ormation a 2!e$tionnaire ha$ to be de$ined( #he 2!e$tionnaire 'a$

de$ined in $!ch a manner to achie&e the objecti&e o" the re$earch(

#he $ample $i=e taken i$ 100 c!$tomer$ and p!blic$(

y!e of research

)n thi$ project ) ha&e !$ed De$cripti&e to et a holi$tic &ie'point o" A&iation )nd!$try(

6escri!tive ,esearch<

#hi$ i$ kind o" re$earch $tr!ct!re 'hich i$ concerned 'ith de$cribin the characteri$tic$ o" the problem( )n thi$ 'ay the main p!rpo$e o" $!ch a

re$earch de$in i$ to pre$ent a de$cripti&e pict!re abo!t the in&e$tor$ problem on the ba$i$ o" act!al "act$( %or thi$ it i$ important to obtain the

complete and act!al in"ormation abo!t the $!bject$(

M%/)6S )F C)99%C5N: P,5MA,8 6AA

4uestionnaire Method

)n thi$ project ) ha&e taken the 2!e$tionnaire method "or collectin nece$$ary in"ormation( )n thi$ method a 2!e$tionnaire i$ i&en to the per$on

concerned 'ith 2!e$tion to an$'er$ the 2!e$tion and ret!rn the 2!e$tionnaire( A 2!e$tionnaire con$i$t$ o" n!mber o" 2!e$tion printed in a

de"inite order on a "orm or a $et o" "orm(

Nature of research

4uantitative type o" re$earch ha$ been !$ed( A$ all the data 'a$ ba$ed on n!merical "i!re$ obtained in the $!r&ey(

y!e of 3uestions



#he 2!e$tion$ 'ere $el"-admini$tered, 'ith a &ie' to obtain ma8im!m in"ormation "rom the re$pondent that i$ 'hy the 2!e$tion$ 'ere

straightforward"

8P% )F 47%S5)NNA5,%

#he entire 2!e$tionnaire 'a$ standardi=ed and formali=ed"

S)7,C% )F 6AA

Primary 6ata

Secondary 6ata

S%9%C5)N )F /% SAMP9%>SAMP95N: P9AN

#hi$ i$ one o" the mo$t important $tep$ o" a re$earch de$in proced!re( Eenerally in mo$t o" the marketin $t!die$ on $ample or mo$t o" the

$!b ro!p o" the total pop!lation pertainin to the $!bject i$ incl!ded on the place o" the !ni&er$e(

#he "ollo'in thin$ are primarily con$idered in the $ample:-

• Sam!le Si=e 0 Sample $i=e i$ taken o" 100 con$!mer$"

• Sam!le Po!ulation 0 6elhi1 dehradun1 Nainital"

• Sam!ling Methods . /on&ience $amplin i$ !$ed(

S%C)N6A,8 6AA C)99%C5)N

Secondary data i$ collected "rom &ario!$ $o!rce$ $!ch a$ internet, ne'$paper$, book$, etc(





Cha!ter 'BUS)*6SS O;6R;)6F

Reliance /apital, a con$tit!ent o" /*G *i"ty H!nior and MS/) )ndia, i$ a part o" the Reliance Ero!p( )t i$ one o" )ndiaI$ leadin and amon$t

mo$t &al!able "inancial $er&ice$ companie$ in the pri&ate $ector(

Reliance /apital ha$ intere$t$ in a$$et manaement and m!t!al "!nd$ li"e and eneral in$!rance commercial "inance e2!itie$ and commoditie$

brokin in&e$tment bankin 'ealth manaement $er&ice$ di$trib!tion o" "inancial prod!ct$ e8chane$ pri&ate e2!ity a$$et recon$tr!ction proprietary in&e$tment$ and other acti&itie$ in "inancial $er&ice$(

Reliance M!t!al %!nd i$ amon$t top t'o M!t!al %!nd$ in )ndia 'ith o&er $i8 million in&e$tor "olio$( Reliance .i"e )n$!rance and Reliance

Eeneral )n$!rance are amon$t the leadin pri&ate $ector in$!rer$ in )ndia( Reliance Sec!ritie$ i$ one o" )ndia3$ leadin retail brokin ho!$e$(

Reliance Money i$ one o" )ndia3$ leadin di$trib!tor$ o" "inancial prod!ct$ and $er&ice$(

Reliance /apital ha$ a net 'orth o" R$( 11,JJ1 crore +US >(> billion and total a$$et$ o" R$( ?0,@CC crore +US (@ billion a$ on March 1, >01(

B!$ine$$ mi8 o" Reliance /apital

A$$et

Manaement

M!t!al %!nd, O""$hore %!nd, Pen$ion "!nd, Port"olio Manaement

)n$!rance .i"e )n$!rance, Eeneral )n$!rance

/ommercial

%inance

Mortae$, .oan$ aain$t Property , SM6 .oan$, .oan$ "or ;ehicle$,

.oan$ "or /on$tr!ction 62!ipment, B!$ine$$ .oan$, )n"ra$tr!ct!re

"inancin



Brokin and

Di$trib!tion

62!itie$, /ommoditie$ and Deri&ati&e$, Fealth Manaement Ser&ice$,

Port"olio Manaement Ser&ice$, )n&e$tment Bankin, %orein 68chane,

#hird Party Prod!ct$

Other B!$ine$$e$ Pri&ate 62!ity, )n$tit!tional Brokin, A$$et Recon$tr!ction, ;ent!re

/apital

/OMPA*L 9)S#ORL

Reliance /apital .imited +R/. 'a$ incorporated in year 1JC at Ahmedabad in E!jarat a$ Reliance /apital %inance #r!$t .imited( #he name

R/. came into e""ect "rom Han!ary @, 1JJ@( )n >00>, R/. $hi"ted it$ rei$tered o""ice to Hamnaar in E!jarat be"ore it "inally mo&ed to M!mbai

in Mahara$htra, in >00(

)n >00, Reliance /apital ;ent!re$ .imited mered 'ith R/. and 'ith thi$ merer the $hareholder ba$e o" R/. ro$e "rom 0(1@ million

$hareholder$ to 1( million(

R/. entered the /apital Market 'ith a maiden p!blic i$$!e in 1JJ0 and in $!b$e2!ent year$ "!rther tapped the capital market thro!h riht$ i$$!e

and p!blic i$$!e$( #he e2!ity $hare$ 'ere initially li$ted on the Ahmedabad Stock 68chane and #he Stock 68chane M!mbai( Pre$ently the

$hare$ are li$ted on #he Stock 68chane M!mbai and the *ational Stock 68chane o" )ndia(



R/. in the initial year$ enaed it$el" in $teady ann!ity yieldin b!$ine$$e$ $!ch a$ lea$in, bill di$co!ntin, and inter-corporate depo$it$( .ater,

in 1JJ di&er$i"ied it$ b!$ine$$ in the area$ o" port"olio in&e$tment, lendin aain$t $ec!ritie$, c!$todial $er&ice$, money market operation$,

project "inance ad&i$ory $er&ice$, and in&e$tment bankin(

R/. 'a$ accredited a /ateory 1 Merchant banker by the Sec!ritie$ 68chane Board o" )ndia +S6B)( )t had lead manaedNco-manaed 1@ i$$!e$o" an areate &al!e o" R$( ?00 crore and had !nder'ritten i$$!e$ "or an areate &al!e o" R$( @@0 crore( All the$e companie$ 'ere li$ted on

&ario!$ e8chane$(

R/. obtained it$ rei$tration a$ a *on-bankin %inance /ompany +*B%/ in December 1JJC( )n &ie' o" the re!latory re2!irement$ R/.

$!rrendered it$ Merchant Bankin .icen$e(

R/. ha$ $ince di&er$i"ied it$ acti&itie$ in the area$ o" a$$et manaement and m!t!al "!nd li"e and eneral in$!rance con$!mer "inance and

ind!$trial "inance $tock brokin depo$itory $er&ice$ pri&ate e2!ity and proprietary in&e$tment$ e8chane$, a$$et recon$tr!ction di$trib!tion o"

"inancial prod!ct$ and other acti&itie$ in "inancial $er&ice$(

/9A)RMA* O% R6.)A*/6 /AP)#A.

Shri Anil D( Ambani, rearded a$ one o" the "oremo$t corporate leader$ o" contemporary )ndia, Shri Anil D( Ambani, i$ the /hairman o" Reliance

/apital .imited, Reliance )n"ra$tr!ct!re .imited, Reliance /omm!nication$ .imited and Reliance Po'er .imited( 9e i$ al$o on the Board o"

Reliance )n"ratel .imited and Reliance Anil Dhir!bhai Ambani Ero!p .imited( 9e i$ the Pre$ident o" the Dhir!bhai Ambani )n$tit!te o"

)n"ormation and /omm!nication #echnoloy, Eandhinaar, E!jarat(



#OP MA*AE6M6*# O% R6.)A*/6 /AP)#A.

Reliance /apital i$ anchored by a team o" e8perienced and committed &i$ionarie$ 'ho arededicated to'ard$ $calin the company to reater heiht$ thro!h inno&ation and e8cellencethereby creatin &al!e "or all o!r $takeholder$(

Amit Bapna +/hie" %inancial O""icer, Reliance /apital

Amitabh Mohanty +9ead - Debt Stratey

An!p Ra! - +/hie" 68ec!ti&e O""icer and 68ec!ti&e Director, Reliance .i"e )n$!rance

Ar!n 9ariharan +Pre$ident, !ality and Kno'lede Manaement, Reliance /apital

A$okan Ar!m!am +/hie" /ompliance O""icer, Reliance /apital

K( Ach!than +/hie" People O""icer, Reliance /apital

K( ;( Srini&a$an +/hie" 68ec!ti&e O""icer, Reliance /ommercial %inance

.a& /hat!r&edi +/hie" Ri$k O""icer, Reliance /apital

Madh!$!dan Kela +/hie" )n&e$tment Stratei$t, Reliance /apital

Rake$h Hain +/hie" 68ec!ti&e O""icer, Reliance Eeneral )n$!rance

Sam :hosh ?Chief %&ecutive )fficer1 ,eliance Ca!ital@

Shiri$h /hitte +/hie" #echnoloy O""ice, Reliance /apital

S!ndeep Sikka +/hie" 68ec!ti&e O""icer, Reliance /apital A$$et Manaement



;( R( Mohan +Pre$ident and /ompany Secretary

;ikrant E!nani +/hie" 68ec!ti&e O""icer, Reliance Sec!ritie$ .imited

;)S)O*

Reliance /apitalI$ &i$ion i$ that:

By >01@, it 'ill be a company that i$ kno'n a$:

5#he mo$t pro"itable, inno&ati&e, and mo$t tr!$ted "inancial $er&ice$ company in )ndia and

in the emerin market$5(

)n achie&in thi$ &i$ion, the company 'ill be both c!$tomer-centric and inno&ation-dri&en(

,eliance Ca!ital has interests in

• A$$et manaement(

• M!t!al "!nd$(

• .i"e and eneral in$!rance(

• Pri&ate e2!ity and proprietary in&e$tment$(

• Stock brokin(

• Reliance PMS(



• Depo$itory $er&ice$ and "inancial prod!ct$(

• /on$!mer "inance and other acti&itie$ in "inancial $er&ice$(

5C%

/ommodity market$ re!lator %M/ $aid it ha$ i&en appro&al to the Anil Ambani Ero!p to ac2!ire > per cent $take in )ndian /ommodity

68chane +)/6G "rom one o" it$ promoter$, )ndiab!ll$ ro!p( 5Fe ha&e i&en permi$$ion to Anil Ambani Ero!p to b!y > per cent $take in

)/6G "rom )ndiab!ll$,5 %or'ard Market$ /ommi$$ion +%M/ /hairman B / Khat!a $aid(At pre$ent, )ndiab!ll$ hold$ ?0 per cent in )/6G, o"'hich it 'ant$ to $ell > per cent $take in the bo!r$e to ADAE( MM#/ ha$ > per cent $take in )/6G, 'hich i$ the co!ntryI$ "o!rth national

commodity e8chane la!nched late la$t year( 5Fe entered the e8chane b!$ine$$ in late >00J( Fe ha&e already $tarted a $pot e8chane and ha&e a

> per cent $take in a commoditie$ e8chane,5 ADAE Ero!p /hairman Anil Ambani had $aid ye$terday at the AEM o" ro!p "irm Reliance

/apital( #he Ero!p had al$o anno!nced it$ intention to enter all $ement$ o" the e8chane b!$ine$$( Reliance /apital i$ already in the $pot

commodity $pace( Another ro!p "irm Reliance Money al$o ha$ $take in the national commodity e8chane *M/6()/6G, a national-le&el

commodity bo!r$e, o""er$ "!t!re$ tradin in 1C commoditie$, incl!din b!llion, metal$ and aric!lt!ral item$( #he e8chane clocked a b!$ine$$ o"

10 billion +US>(> billion in the "ir$t "ortniht o" September(

Reliance M!t!al %!nd i$ )ndiaI$ no(1 M!t!al %!nd( Reliance .i"e )n$!rance i$ one o" )ndiaI$ "a$te$t ro'in li"e in$!rance company and amonthe top ? pri&ate $ector in$!rer$( Reliance Eeneral )n$!rance i$ one o" )ndiaI$ "a$te$t ro'in eneral in$!rance company and amon the top

pri&ate $ector in$!rer$( Reliance Money i$ the lare$t brokerae and di$trib!tor o" "inancial prod!ct$ in )ndia 'ith o&er >( million c!$tomer$ and

ha$ the lare$t di$trib!tion net'ork( Reliance /on$!mer "inance ha$ a loan book o" o&er CJ billion +US1(@ billion at the end o" December

>00C(

Reliance /apital ha$ a net 'orth o" >(@ billion +US1(> billion and total a$$et$ o" >>(? billion +US(C billion a$ o" December 1, >00C(

Reliance /apital i$ a con$tit!ent o" SP /*G *i"ty and MS/) )ndia and al$o "eat!re$ in the %orbe$ l i$t o" Forld3$ lare$t >000 p!blic

companie$(



Reliance Sec!ritie$, $!b$idiary o" Reliance /apital achie&ed a pan-)ndia pre$ence 'ith o&er @,000 o!tlet$ and the a&erae daily t!rno&er had

increa$ed to > billion +US?00 million in >010(

/ORPORA#6 SO/)A. R6SPO*S)B).)#L

Orani=ation$, like indi&id!al$, depend "or their $!r&i&al, $!$tenance and ro'th on the $!pport and ood'ill o" the comm!nitie$ o" 'hich theyare an interal part, and m!$t pay back thi$ enero$ity in e&ery 'ay they can(((

#hi$ ethical $tandpoint, deri&ed "rom the &i$ion o" o!r "o!nder, lie$ at the heart o" the /SR philo$ophy o" the Reliance Ero!p(

Reliance Ero!p i$ committed to bein an ideal corporate citi=en and doin more than it$ "air $hare to $!pport &ario!$ de$er&in ca!$e$, in the"ield o" medicine in partic!lar $ettin !p and operatin Kokilaben Dhir!bhai Ambani 9o$pital( Reliance /apital $!pport$ thi$ and other /SR

&ent!re$(

6ach o" Reliance /apital3$ di""erent b!$ine$$e$ &ioro!$ly implement$ their o'n /SR initiati&e$( )ndeed, their /SR e""ort$ are co!nted 'hencalc!latin the b!$ine$$3$ per"ormance( Some o" the 'ork done by them incl!de blood donation camp$, donation o" old comp!ter$ to &ario!$$chool$, donation$ are i&en to *EO$ 'orkin 'ith children or the aed or to the Mi$$ionarie$ o" /harity acro$$ the co!ntry, direct ca$h aid "or payin the medical e8pen$e$ o" li"e threatenin re2!irement$ "or $ome !nder-pri&ileed people etc(

Other b!$ine$$e$ 'ork 'ith $el"-help ro!p$ to pro&ide them 'ith "!ndin and other ad&ice to "!nction better( Some other b!$ine$$e$ ha&e al$o'orked 'ith ed!cational in$tit!tion$ to promote "inancial literacy and "inancial incl!$i&ene$$(

#hi$ i$ in addition to $!pportin the charitable acti&itie$ o" the Reliance Ero!p, both in healthcare and in carin "or older people < Sil&er$( #he/ompany al$o "ollo'$ an acti&e proram o" enery abatement( #hi$ i$ not j!$t in it$ corporate o""ice, b!t al$o in other lare o""ice$ in bi citie$(



INDUSTRY PROFILE



Valuation

Methodologies

There is two ways of valuation of a company-

Top Down Approach-In the top-down approach, an analyst investigates both international and domestic economic indicators, such as GDP

growth rates, energy prices, inflation, interest rates etc.

Bottom p approach- In the bottom-up approach, the analyst starts the search with specific businesses, irrespectiveof their industry!region.



I have adopted the top down approach as I fnd it more ecient way o evaluating a sector. The stoc"

mar"et does not operate in a vacuum. It is an integral part of the whole economy of a country.

Top-Down Valuation

Economy

To gain an insight into the comple#ities of the stoc" mar"et one needs to develop a sound economic understanding and be able to

interpret the impact of important economic indicators, which may be studied to assess the national economy as a whole. Theleading indicators predict what is li"ely to happen to an economy. $n overall growing or a contracting economy affects every industry in

the country positively or negatively. %ne can seldom find flourishing industries in an otherwise stagnant economy.

Economic Indicators-

$n economic indicator &or business indicator' is a statistic about the economy.

Procyclic $ procyclic &or procyclical' economic indicator is one that moves in the same direction as the economy. Therefore, if the

economy is doing well, this number is usually increasing, whereas if we are in a recession this indicator is decreasing.

!ounter cyclic $ counter-cyclic &or countercyclical' economic indicator is one that moves in the opposite direction as the economy.

"cyclic $n acyclic economic indicator is one that is not related to the health of the economy and is generally of little use.

(ach of the statistics in these categories helps create a picture of the performance of the economy and how the economy is

li"ely to do in the future-

Total #utput$ Income$ and %pending

These tend to be the broadest measures of economic performance and include such statistics as the Gross Domestic Product which is usedto measure economic activity and thus is both procyclical and a coincident economic indicator. The Implicit Price Deflator is a measure ofinflation.

Employment$ &nemployment$ and 'ages The unemployment rate is a lagged, countercyclical statistic. The level of

civilianemployment measures how many people are wor"ing so it is procyclic.Production and (usiness "ctivity

These statistics cover how much businesses are producing and the level of new construction in the economy. )hanges in businessinventories is an important leading economic indicator as they indicate changes in consumer demand.

Prices

This category includes both the prices consumers pay as well as the prices businesses pay for raw materials and include*• Producer Prices +monthly

• )onsumer Prices +monthly

• Prices eceived $nd Paid By armers +monthly



)oney$ !redit$ and %ecurity )ar*ets

These statistics measure the amount of money in the economy as well as interest rates and include*• /oney stoc" &/0, /1, and /2' +monthly

• Ban" )redit at all commercial ban"s +monthly

• )onsumer credit +monthly• Interest rates and bond yields +wee"ly and monthly

• 3toc" prices and yields +wee"ly and monthly

+overnment ,inance

These are measures of government spending and government deficits and debts*

• Budget eceipts &evenue'+yearly

• Budget %utlays &(#penses' +yearly

• nion Government Debt +yearly

Industry

undamental analysis consists of a detailed analysis of a specific industry4 its characteristics, past record, present state and futureprospects. The purpose of industry analysis is to identify those industries with a potential for future growth and to invest in e5uity sharesof companies selected from such industries. 6e loo" at the product lifecycle phase and competitive outloo"in a particular industry togauge the overall growth and competitive rivalry amongst the players in the industry.

Company

$t the final stage of fundamental analysis, the investor analyses the company. This analysis has two thrusts*0. 7ow has the company performed vis-a-vis other similar companies8 and1. 7ow has the company performed in comparison to earlier yearsIt is imperative that one completes the economic analysis and the industry analysis before a company is analysed because the company9s

performance at a period of time is to an e#tent a reflection of the economy, the political situation and the industry.

The different issues regarding a company that should be e#amined are*0. The /anagement

1. The )ompany2. The $nnual eport:. )ash flow;. atios



Economic Analysis



Following the slowdown induced by the global %nancial crisis in @&&C$&5, the Indian economy responded strongly to %scal andmonetary stimulus and achieved a growth rate of C.D per cent and 5.A per cent respectively in @&&5$& and @&&$, but dueto a combination of both e!ternal and domestic factors, the economy decelerated growing at D.@( and an estimated '( in@&$@ and @&@$A respectively. The Economic =urvey @&@$A, presented by the Finance inister =hri +. Bhidambaram inthe <ok =abha predicts that the global economy is also likely to recover in @&A and various government measures will help inimproving the Indian economy?s outlook for @&A$4. 8hile India?s recent slowdown is partly rooted in e!ternal causes,domestic causes are also important.

The slowdown in the rate of growth of services in @&$@ at C.@(, and particularly in @&@$A to D.D percent from the double$digit growth of the previous si! years, contributed signi%cantly to slowdown in the overall growth of the economy, while someslowdown could also be attributed to the lower growth in agriculture and industrial activities. Gut despite the slowdown, theservices sector has shown more resilience to worsening e!ternal conditions than agriculture and industry. For improvedagricultural growth, the survey underlines the need for stable and consistent policies where markets play an appropriate role,private investment in infrastructure is stepped up, food price, food stock management and food distribution improves, and apredictable trade policy is adopted for agriculture. F*I in retail allowed by the government can pave the way for investment innew technology and marketing of agricultural produce in India. Fast agricultural growth remains vital for jobs, incomes andfood security.



Aviation 5ndustry< An 5ntroduction"

Air tran$port ind!$try i$ a $er&ice ind!$try caterin to the need$ o" air tran$port( Airport$ and airline$ are the major con$tit!ent$ o" the ind!$try

'ho are interdependent a$ 'ell a$ interlinked in carryin on their b!$ine$$( #he ind!$try ha$ direct impact on the $ocial, economic and political proce$$e$ ()t "acilitate$ the economic de&elopment o" a reion and $er&e$ a$ cataly$t "or the to!ri$m and technoloy ind!$try( Elobali=ation era$e$the national bo!ndarie$ "or economic p!rpo$e$( 6&erythin i$ tran$"ormed into a lobal $cenario and create$ need "or the mo&ement o" people andood$ bet'een co!ntrie$( )n thi$ increa$ed economic acti&ity air line$ play a &ital role in carriae o" pa$$ener and "reiht(

)ndia a&iation ind!$try promi$e$ h!e ro'th potential d!e to

• .are and ro'in middle cla$$ pop!lation

• %a&o!rable demoraphic$

• Rapid economic ro'th(

•

#o!ri$m dri&in ro'th(• 9iher di$po$able income$

• Ri$in a$piration$ o" the middle cla$$

• O&erall lo' penetration le&el$ +le$$ than



De$pite $tron ro'th, air tra&el penetration in )ndia remain$ amon the lo'e$t in the 'orld( )n "act, air tra&el penetration in )ndia i$ le$$ thanhal" o" that in /hina 'here people take 0(> trip$ per per$on per year indicatin $tron lon term ro'th potential( A comparati&e $tati$tic inUnited State$, the 'orld3$ lare$t dome$tic a&iation market $tand$ at > trip$ per per$on per year(

/istory of Aviation 5ndustry

#ata Ser&ice$ became #ata Airline$ and then Air-)ndia and $pread it$ 'in$ a$ Air-)ndia )nternational( #he dome$tic a&iation $cene, ho'e&er, 'a$chaotic( Fhen the American #enth Air %orce in )ndia di$po$ed o" it$ plane$ at thro'a'ay price$, 11 dome$tic airline$ $pran !p, $cramblin "or tra""ic that co!ld $!$tain only t'o or three( )n 1J@, the o&ernment nationali=ed the airline$, mered them, and created )ndian Airline$( %or thene8t >@ year$ HRD #ata remained the chairman o" Air-)ndia and a director on the board o" )ndian Airline$( A"ter HRD le"t, &oracio!$ !nion$m!$hroomed, $pa'ned on the pork barrel job$ created by politician$( )n 1JJJ, A-) had 00 employee$ per plane today it ha$ ?? 'herea$ other airline$ ha&e @0(

%or many year$ in )ndia air tra&el 'a$ percei&ed to be an eliti$t acti&ity( #hi$ &ie' aro$e "rom the 7MaharajahQ $yndrome 'here, d!e to the prohibiti&e co$t o" air tra&el, the only people 'ho co!ld a""ord it 'ere the rich and po'er"!l(



)n recent year$, ho'e&er, thi$ imae o" /i&il A&iation ha$ !nderone a chane and a&iation i$ no' &ie'ed in a di""erent liht - a$ an e$$ential linknot only "or international tra&el and trade b!t al$o "or pro&idin connecti&ity to di""erent part$ o" the co!ntry( A&iation i$, by it$ &ery nat!re, acritical part o" the in"ra$tr!ct!re o" the co!ntry and ha$ important rami"ication$ "or the de&elopment o" to!ri$m and trade, the openin !p o"inacce$$ible area$ o" the co!ntry and "or pro&idin $tim!l!$ to b!$ine$$ acti&ity and economic ro'th(

#he )ndian a&iation $ector 'a$ e8po$ed to inten$e competition 'ith

the ad&ent o" a low.cost airline - Air Deccan back in >00( #he $!cce$$ o" Air Deccan $p!rred the entry o" other .//$ like SpiceHet, )ndio, EoAir and $!b$e2!ently lo' "are o""erin$ "rom Het air'ay$ and Kin"i$her airline$( A$ a re$!lt, the $ector 'hich 'a$ completely dominated by "!ll-$er&ice airline$ till a decade ao i$ no' dominated by lo'-co$t airline$( 9o'e&er, loner term &iability o" .//$ model$ in )ndia remain$ to be$een +Kin"i$her e8ited the $ement recently a$ airport chare$ are $ame "or %S/$ and .//$ in )ndia(!ategories emar*s

)aor )ilestonesH 5'A ine irlines e!isted including

Indian irlines 0 ir India5'A ationali1ation of all private

airlines through ir Borporations

ctJ5CD +rivate players permitted to

operate as air ta!i operators554 ir Borporation act repealedJ

+rivate players can operate

schedule services55' 9et, =ahara, odiluft, *amania,

East 8est granted scheduled

carrier status55/ 4 out of D operators shut downJ

9et 0 =ahara continue@&& viation Turbine Fuel TF- prices

decontrolled@&&A ir *eccan starts operations as

India?s %rst <BB@&&' King%sher, =pice9et, Indigo, )o

ir, +aramount start operations

@&&/ Industry consolidatesJ 9et

acquired =aharaJ King%sher

acquired ir *eccan@&& =pice9et starts international

operations@& Indigo starts international

operations, King%sher e!its <BB

segment@&@ )overnment allows direct TF

imports, F*I proposal for allowing

foreign carriers to pick up to 45(

stake under consideratio



%ingle model o aircrat >educes maintenance and inventory

cost.#perate on secondary airport <ower charges, lower turnaround time

due to less congestion.Point to Point )odel Improves aircraft utili1ation by

reducing waiting time at airports.

%ingle class confguration ore seats per 2ight so spread costsover a larger base.

/o In-0ight services 7elps to keep the costs and hence the

fares low.,ewer employees per aircrat >educes employee cost and leads to

higher employee productivity.E-Tic*eting The traditional method of ticketing

costs around L=M 4.' per passenger

whereas the cost of an e$ticket comes

to L=M which helps reduce selling

e!penses."ncillary evenues +rimarily on$board sales. +rovides

alternate source of revenues " helps toreduce break$even +<F

6efining 9ow Cost Carriers

Simple Product

• *o meal$ drink$ and $nack$ "or "ree

• *arro' $eatin +reater capacity

• *o $eat re$er&ation "ree-$eatin

• *o "re2!ent-"lyer proram$

Positioning

• *on-b!$ine$$ pa$$ener$, lei$!re tra""ic, price-con$cio!$ b!$ine$$ pa$$ener$

• Short-ha!l point-to-point tra""ic 'ith hih "re2!encie$

• Are$$i&e marketin



• Secondary airport$

• /ompetition 'ith all tran$portation carrier$

Low perating !osts

• .o' 'ae$, lo' airport "ee$

• .o' co$t$ "or maintenance, cockpit trainin and $tandby cre'$ d!e to homoeneo!$ "leet

• 9ih re$o!rce prod!cti&ity: $hort ro!nd 'ait$ d!e to $imple boardin proce$$e$, no air "reiht, no h!b $er&ice$, $hort cleanin time$

• .ean $ale$ +hih percentae o" online $ale$

/hallene$ "aced by )ndian A&iation ind!$try-

#he dome$tic airline$ ind!$try i$ "acin $ini"icant operatin +$lo'in ro'th, ri$in "!el co$t$ and non-operatin +intere$t co$t$, r!peedepreciation challene$ a$ e&ident in the 2!arterly per"ormance trend$ o" li$ted airline companie$(

Sales :rowth< A"ter a $tron rebo!nd in >010, the ta8 ro'th ha$ been moderatin o&er the la$t "e' 2!arter$ d!e to moderatin economicro'th and 'eak ind!$trial acti&ity( Be$ide$, $e&ere competiti&e pre$$!re "rom dome$tic .// player$ +rapidly ainin market $hare and Air )ndia +tryin to maintain market $hare ha&e re$!lted in price 'ar$ +at time$ belo' co$t pricin, lo'ered yield$ and moderated $ale$ ro'th "or the airline$(

,ising AF Prices B Stee! ,u!ee 6e!reciation< #he airline$ ind!$try had been $e&erely impacted by the $ini"icant increa$e in A#% price$ +!p@ in la$t 1C month$ a$ )ndian /arrier$ do not hede "!el price$ and ha&e e8hibited limited ability to chare "!el $!rchare$ d!e to irrationaland !ndi$ciplined pricin dictated by competition rather than co$t$ N demand(

Profit Margins< Fith combined impact o" 1 moderatin ta8 ro'th > lo'er yield$ d!e to e8ce$$i&e competiti&e ri$in A#% price$ ? $teepr!pee depreciation and @ ri$in debt le&el$ and intere$t co$t$, the pro"itability marin$ o" the airline$ ind!$try ha&e been $e&erely impacted()ndian carrier$ co!ld be po$tin $taerin lo$$e$ o" >(@ billion +R$ 1>,@00 crore in >011-1>, 'or$e than the lo$$e$ o" >00C-0J 'hen tra""ic'a$ declinin and cr!de oil price$ $piked to 1@0 per barrel(

O&erall, the ind!$try ha$ been marred by co$t ine""iciencie$ and i$ bearin the br!nt o" are$$i&e price c!t$, ri$in co$t$, e8pen$i&e jet "!el, a

'eaker r!pee, hih intere$t payment$ and hence mo!ntin lo$$e$( #he o&ernment $!pport re2!ired to bailo!t the lo$$ makin Air )ndia ha$increa$ed $!b$tantially 'hile the leadin pri&ate player$ like Kin"i$her Airline$, Het Air'ay$ and SpiceHet are makin $ini"icant lo$$e$( FithBank$ !n'illin to enhance their e8po$!re to the ind!$try, reca$t their loan$ or pick !p e2!ity $take$ 'itho!t &iable b!$ine$$ plan$, ind!$try need$to come o!t 'ith $tron e2!ity in"!$ion plan$(



F65 in Aviation< Feasi*ility and 5m!act Analysis for various stakeholders

FDI Poposal! #he /i&il A&iation Mini$try i$ e8pected to $oon circ!late a propo$al be"ore the !nion cabinet to con$ider allo'in !p to ?J

e2!ity in&e$tment by "orein carrier$ in dome$tic airline$( )n ca$e o" li$ted airline$, i" the propo$al doe$ not et a 'ai&er "rom S6B)3$ #akeo&er /ode, "orein carrier$ may ha&e to "ir$t make an open o""er o" > $take to p!blic $hareholder$ and later ac2!ire !p to > $take +"rom promoter$ or "re$h e2!ity, $!ch that their $take remain$ 'ithin the ?J cap(

Indian Caies! #he %D) propo$al, i" appro&ed, 'o!ld certainly be an important mile$tone in the a&iation $ector and may pro&ide m!ch-neededrelie" to the dome$tic a&iation ind!$try reelin !nder the pre$$!re o" mo!ntin lo$$e$ and ri$in debt b!rden( Be$ide$, the mo&e 'ill help brinlobal e8perti$e and be$t ind!$try practice$ o&er the medi!m term(

Foeign Caies! )t 'ill not j!$t pro&ide entry into one o" the "a$te$t ro'in a&iation market lobally b!t al$o an opport!nity to e$tabli$h )ndiaa$ their h!b "or connection$ bet'een USN6!rope and So!th-6a$t A$ian co!ntrie$( Fhile "!ll-$er&ice airline$ co!ld help them "!rther con$olidate

their market po$ition on international ro!te$ +and impro&e connecti&ity 'ithin )ndia, ac2!i$ition o" lo'-co$t airline$ co!ld help them compete ina market 'here tra&eller$ are hihly price $en$iti&e(

Consu"es! *e' player$ co!ld enter the market a$ they co!ld no' ha&e a $trateic "orein player 'ith deep pocket$ to $!pport the airline indi""ic!lt time$( Be$ide$, it 'o!ld pro&ide more "le8ibility in international tra&el$ 'hen one tra&el$ thro!h the $ame airline dome$tically a$ 'ella$ internationally( O&erall, thi$ co!ld increa$e competition, o""er more alternati&e$, red!ce tari""$ and impro&e c!$tomer $er&ice $tandard$ o&er themedi!m term(

/OMPA*L-

)n thi$ project ) ha&e taken the &al!ation o" three companie$ in-

• Het Air'ay$

• Spice jet

Another company 'hich $eem$ to be doin ood in the-



Date post:	05-Jul-2018
Category:	Documents
Upload:	abhay-kapkoti
View:	224 times
Download:	0 times

Fundamental Analysis of Aviation Sector

Documents