+ All Categories
Home > Documents > Sip Report Ananya Das

Sip Report Ananya Das

Date post: 30-May-2018
Category:
Upload: chiranjit32
View: 226 times
Download: 0 times
Share this document with a friend
80
 Project Report by :- Ananya Das
Transcript
Page 1: Sip Report Ananya Das

8/9/2019 Sip Report Ananya Das

http://slidepdf.com/reader/full/sip-report-ananya-das 1/80

 

Project Reportby :-

Ananya Das

Page 2: Sip Report Ananya Das

8/9/2019 Sip Report Ananya Das

http://slidepdf.com/reader/full/sip-report-ananya-das 2/80

A REPORT

On

  Financial products available in thecommercial market.Project Financing.

At

Tata Metaliks limited (Headquaters)Kolkata

Tata Centre. 43 Jawarharlal Nehru Road.Kolkata-700071.West Bengal.India.

For the time period of 

8 weeks (28-04-08 to 20-06-08 )

Under the guidance of 

Mr. A.Mukherjee, Mr.B.Sen, Mr. K.Ghosh, Mr.A.Dey

Faculties & Project Mentors.

Mr.Subhasish DeyFinancial Controller

2

Page 3: Sip Report Ananya Das

8/9/2019 Sip Report Ananya Das

http://slidepdf.com/reader/full/sip-report-ananya-das 3/80

Project Guide

  Acknowledgement 

 This project would not have been possible without the helpof some people. I would like to take this opportunity to thankthem for their invaluable inputs and constant support.

I would like to express my deepest appreciation to

Mr.Subhasis Dey- CS & GM.Tata Metaliks Ltd for having thefaith in me and giving me the opportunity to work in hisorganization.

My sincere thanks to my project guide Mr.Subhasish Dey –Financial Controller,Kolkata,Tata Metaliks Ltd. Without hisguidance and persistant help this dissertation would nothave been possible.

Prof. R.C Bhattachraya for providing the excellentopportunity to work in a corporate environment.

My deep gratitude to my project mentor members, MrA.Mukherjee, Mr.A.Dey, Mr.B.Sen, Mr.K.Sen of GBS for alwaysextending their humble support.

I would also like to thank all executives of Tata Metaliks Ltd ,Kolkata, who have come forward with their helping handswhenever any assistance has been sought.

My sincere thanks to CRP team of GBS.

I thank my parents and friends for their love and supportwhile I decided to be a professional student.

3

Page 4: Sip Report Ananya Das

8/9/2019 Sip Report Ananya Das

http://slidepdf.com/reader/full/sip-report-ananya-das 4/80

23 April,2008 Mr.Subhabrata Mazumder Corporate Relations & PlacementGlobsyn Business SchoolSalt Lake Electronics ComplexKolkata-700091 

Dear Sir,

Re: Summer Training Project for PGDIB Student at TML from your institution We are pleased to accept Ms.Ananya Das from your institution for doing her summer training project work towards partial fulfillment of your requirement for the award of her degree/diploma. The project duration will be from 28th April to 28th June, 2008.Please advise your student to report to Mr.Subhasish Dey, Financial Controller at our kolkata office, alongwith a copy of this letter on the mentioned date. During the project work at TML, the student will be bound by such norms and discipline

and conduct as may be prescribed by TMl.TML reserves the right to cancel the projectwork of any student who do not comply with the company's code of conduct & do notdemonstrate the academic seriousness necessary for successful completion of the projectwork. If the candidate fails to report by the above date, this letter shall stand automaticallywithdrawn. With warm regards, For TATA METALIKS LIMITED

 

Subhasis DeyCFO & CS

4

Page 5: Sip Report Ananya Das

8/9/2019 Sip Report Ananya Das

http://slidepdf.com/reader/full/sip-report-ananya-das 5/80

Declaration

I, Ananya Das,student of Globsyn Business School, PGDIB -01,state that I have completed my 8 week internship at TataMetaliks Ltd,Kolkata and that the topic of my project reportsis stated as under :

Financial Products available in the commercialmarket.

Project Financing.

I had the opportunity to have a close interaction with thefinance department and I have used the valuable inputsfrom them in my project report.

All the information that I have provided in my report aretrue and fair to the best of my knowledge.

 

5

Page 6: Sip Report Ananya Das

8/9/2019 Sip Report Ananya Das

http://slidepdf.com/reader/full/sip-report-ananya-das 6/80

 1. INTRODUCTION 9

1.1 History of pig-iron in India 10

1.2 Overall Scenario-Recent India 10

1.3 Profile of the Company 11

1.4 Kharagpur Plant 13

1.5 Redi Plant 14

1.6 Focus Market,Customer & Competitors 15

2. FINANCIAL MARKET 16

2.1 Capital Market 19

A. Stock Market 20

B. Debt Market 22

A.American Depository Receipts 25B.Global Depository Receipts 26

2.2 Money Market 28

2.3 Commodity Market 30

2.4 Foreign Exchange Market 31

2.5 Derivative Market 32

3. PROJECT FINANCING 35

3.1 Presentation and Analysis of Data 36

A. Initiation 36

B. Planning and Design 37

C. Executing 39

D. Monitoring and Controlling 43

E. Closing 45

6

TABLE OF CONTENTS

Page 7: Sip Report Ananya Das

8/9/2019 Sip Report Ananya Das

http://slidepdf.com/reader/full/sip-report-ananya-das 7/80

4. SUGGESTIONS AND CONCLUSIONS 46

5. ANNEXURE 47

6. BIBLIOGRAPHY 54

List Of Figures

1. Vision and Value Statement 12

2. Kharagpur Plant Layout 13

3. Redi Plant Layout 14

4. Types of Financial Market 18

5. Formation of Capital Market 19

6. Division of Capital Market 20

7. Bond Formation 23

8. Project Development Stages 36

9. Financial projection of TML in a chart form 37

10. Chart showing the calculation of Beta 44

 

7

Page 8: Sip Report Ananya Das

8/9/2019 Sip Report Ananya Das

http://slidepdf.com/reader/full/sip-report-ananya-das 8/80

List of Tables

1.Table illustrating where Financial markets fit in therelationship between lenders and borrowers

17

3. Calculation of Capital which can be raised by rights issue 40

8

Page 9: Sip Report Ananya Das

8/9/2019 Sip Report Ananya Das

http://slidepdf.com/reader/full/sip-report-ananya-das 9/80

1.1 History of Pig-Iron in India1.2 Overall Scenario1.3 Profile Of the Company1.4 Kharagpur Plant1.5 Redi Plant1.6 Focus Market, Customer and

Competitors

9

Page 10: Sip Report Ananya Das

8/9/2019 Sip Report Ananya Das

http://slidepdf.com/reader/full/sip-report-ananya-das 10/80

1.1 HISTORY OF PIG IRON BUSINESSININDIA

Around 1920, pig iron production was started in India & around 1930, it started attractingattention. From 1930 to 1933, production stood at 1 million tons p.a.& in the period from

1936 to 1938 production increased to 1.6 million tons p.a. Much of this production wasexported. The growing production & export of pig iron was of much interest that time.Great Britain was a major importer of pig iron for which India was given a preferentialaccess to the British market. Also price of pig iron fluctuated a great deal. After asubstantial rise in the price at 1937, pig iron production became profitable in India.

1.2 OVERALL SCENARIO-RECENTINDIA

Foundry Grade Pig Iron is one of the principal charge components for many Gray IronFoundries.

Major Pig Iron producers are: TML, KFIL, Sesa Goa, Neco, Dempo, KISCO(Kudremukh), VISA, Satavanaha, Lanco Ferro, IISCO, Kajaria Iron Ltd., Nilachal Ispat,Kalinga Iron, KIC Metaliks Ltd., etc.

Pig iron being the basic raw material for the foundries, any change in the iron and steelconsumption has a direct impact on the pig iron industry. Moreover, healthy growth

forecasts for the future are indicators of a good growth opportunity for the pig ironindustry and therefore for the performance of any Company.

Several new pig iron producers were setting up production units in West Bengal. It ishoped that once the new producers start manufacturing there would be an adequatesupply of pig iron in the market.With the growth of the economy, demand for pig iron is also increasing. The global steelindustry, for which pig iron is a basic raw material, continues to grow at an impressiverate.A continuous rise in the price of pig iron is being recorded.

10

Page 11: Sip Report Ananya Das

8/9/2019 Sip Report Ananya Das

http://slidepdf.com/reader/full/sip-report-ananya-das 11/80

1.3 PROFILE OF THE COMPANY 

Tata Metaliks Limited was incorporated on 10th October,1990 under the Companies' Act,1956, and obtained certificate for commencement of business on 14th December,1990.The company was incorporated under the name of Tata Korf Metals West BengalLtd and began its commercial production in 1994. The name of the company wassubsequently changed to Tata Metaliks Ltd. With effect from 16th January, 1992.TML is a public limited company. It was promoted by Tata Steel Limited (formerly, The Tata Ironand Steel Company Limited) and assisted by The West Bengal Industrial DevelopmentCorporation. The promoter company, Tata Steel, and resident individuals each hold 47%of the shares, the balance being held by West Bengal Industrial DevelopmentCorporation, corporate bodies and financial institutions (including Foreign InstitutionalInvestors).The company entered into an agreement with Tata Korf services Ltd.for technical knowhow and consultancy services for the project.The agreement gurantees

 production of hot metal at 265 tonnes a day.Another agreement was entered into withM/s. CESCON Ltd., for consultancy on captive power plant and M/s. United ConsultantsIndia Ltd. for overall civil construction and structural work.

TML is the manufacturer & seller of Pig Iron - 1. Basic Grade & 2. Foundry Grade.Recently, TML is the largest & lowest cost producer of pig iron in India.In India, onlyTata Metaliks has two manufacturing units of nearly same size, in the Eastern(Kharagpur) and Western (Redi) part of the country, consisting of 5 Mini Blast Furnacesand related facilities including Captive Power Plants.

The Company is aware of its social responsibilities in protecting the Environment in and

around its factory.The Company constructed a metalled link Road from NationalHighway 6 to the factory at Gokulpur(Kharagpur) as a goodwill gesture with a view toimprove infrastructural development of the region.In 1998 Tata Metaliks Limitedengaged in manufacturing high-quality pig iron and has been awarded ISO-9002certificate by IRQS, an agency accredited by RVC Dutch Council.The Company won thefirst prize in the Indian Institute of Metals' National Quality Competition in the categoryof Pig-Iron.

11

Page 12: Sip Report Ananya Das

8/9/2019 Sip Report Ananya Das

http://slidepdf.com/reader/full/sip-report-ananya-das 12/80

 

12

VISION

STATEMENT

VALUES

Page 13: Sip Report Ananya Das

8/9/2019 Sip Report Ananya Das

http://slidepdf.com/reader/full/sip-report-ananya-das 13/80

Page 14: Sip Report Ananya Das

8/9/2019 Sip Report Ananya Das

http://slidepdf.com/reader/full/sip-report-ananya-das 14/80

1.5 REDI PLANTIn January, 2006, the Company had taken over Usha Ispat Limited, Rediunit, Maharashtra. The three blast furnaces of this unit would double the

 production capacity from 3,00,000 tpa in 2006 to 650,000 tpa of hot metal  by 2007-08. In the meanwhile, the second blast furnace has becomeoperational and already started contributing to the annual production. Theincreased volume would help us strengthen our national as well as global

 presence and make us the largest player among the foundry grade pigmanufacturers in not just the country but also the world. Production in theFY08 was 1,78,140 tons.

14

Page 15: Sip Report Ananya Das

8/9/2019 Sip Report Ananya Das

http://slidepdf.com/reader/full/sip-report-ananya-das 15/80

Page 16: Sip Report Ananya Das

8/9/2019 Sip Report Ananya Das

http://slidepdf.com/reader/full/sip-report-ananya-das 16/80

MAJOR COMPETITORS

Sesa Goa

KFIL

 Neco

Dempo

KISCO (Kudremukh)

VISA

Satavanaha

Lanco Ferro

MAJOR CUSTOMERS

Kamal Iron

Kaushalya Iron

Shivam Corporation India

Telco Construction Equipment Co.

Tata Motors & Tractors Ltd.

Steel Syndicate

Tata International Ltd. (Export is done through this company)

16

Page 17: Sip Report Ananya Das

8/9/2019 Sip Report Ananya Das

http://slidepdf.com/reader/full/sip-report-ananya-das 17/80

2.1 Capital Market

2.2 Money Market

2.3 Commodity Market

2.4 Foreign Exchange Market

2.5 Derivative Market

2. FINANCIAL MARKET

In economics, a financial market is a mechanism that allows people to easily buy and sell(trade) financial securities (such as stocks and bonds), commodities (such as preciousmetals or agricultural goods), and other fungible items of value at low transaction costsand at prices that reflect the efficient market hypothesis.

The basic needs in the financial world, are the following :-

The need to invest excess money (supply).

The need to borrow money (demand) where there is shortage of money.

Financial markets could mean:1. Organizations that facilitate the trade in financial products. i.e. Stock exchangesfacilitate the trade in stocks, bonds and warrants.

17

Page 18: Sip Report Ananya Das

8/9/2019 Sip Report Ananya Das

http://slidepdf.com/reader/full/sip-report-ananya-das 18/80

Page 19: Sip Report Ananya Das

8/9/2019 Sip Report Ananya Das

http://slidepdf.com/reader/full/sip-report-ananya-das 19/80

TYPES OF FINANCIAL MARKETS

2.1 CAPITAL MARKET

Capital markets are the mechanism that allows the exchange of money betweencompanies and investors, companies and banks, and investors and banks as each partyseeks to raise capital or capital to work.

19

FINANCIALMARKET

CAPITALMARKET

MONEY MARKET

DERIVATIVESMARKET

COMMODIT Y MARKET

FOREIGNEXCHANGE

MARKET

Page 20: Sip Report Ananya Das

8/9/2019 Sip Report Ananya Das

http://slidepdf.com/reader/full/sip-report-ananya-das 20/80

Fig : Formation of Capital Market

The market in which corporate equity and longer-term debt securities (those maturing inmore than one year) are issued and traded.Financial instruments traded in the capital market include shares, and bonds issued by theAustralian Government,State governments, corporate borrowers and financialinstitutions.

There are actually two levels of the capital markets in which investors participate : the primary markets and the secondary markets.The initial public offering market is a subsetof the primary market.Here firms go public by offering shares to the public for the first

time.Secondary markets are markets in which existing,already outstanding,securities aretraded among investors.

The main benefits of Capital markets are :-

(i) They support the mobilisation of domestic savings by providing investors withalternatives for investment and risk divrsification.

(ii) They permit companies and governments to raise long-term esources at lower cost.

(iii) They promote efficiency competitiveness in the financial system.(iv) They create an avenue for population to participate in the corporate sector and

share in its wealth through the ownership of securities.

20

Page 21: Sip Report Ananya Das

8/9/2019 Sip Report Ananya Das

http://slidepdf.com/reader/full/sip-report-ananya-das 21/80

Fig : Segmentation of Capital Market

In domestic capital market we shall see the equity(stock) market and the debt marketwhich is described in detail below.

A. Stock (Equity) Market 

A stock market or (equity market) is a private or public market for the trading of 

company stocks or derivatives of company stock at an agreed price :both of these aresecurities listed on a stock exchange as well as those only traded privately.Stock marketcan be further divided into 2 types :-

1. Equity Shares

2. Preference Shares

1.Equity Shares

Equity share capital means :-

With voting rights

With differential rights.The expression “shares with differential voting rights” isdefined as a share that is issued with differential rights as to “dividend,voting or otherwise” in accordance with such rules and subject to such as may be prescribed.

21

Page 22: Sip Report Ananya Das

8/9/2019 Sip Report Ananya Das

http://slidepdf.com/reader/full/sip-report-ananya-das 22/80

The important characteristics of equity shares are as follows :

Equity shares carry voting rights at the general meetings of the company and havethe right to control the management of the company.

Equity shares carry the right to share in the profits of the company in the form of distribution of dividend and bonus shares.

In the event of winding up of the company,equity share capital is repayable onlyafter repayment of the claims of the creditors and preference share capital.

Equity shareholders enjoy various rights as members, which include, inter alia,the following rights :

Right of pre-emption in the matter of fresh issue of capital.

Right to apply to the Court to have any variation of their rights set aside.

Right to receive a copy of the statutory report.

Right to apply to the Central Government to call an annual generalmeeting when the company fails to call such a meeting.

Right toapply to the Company Law Board for calling an extraordinarygeneral meeting of the comapany.

Right to receive copies of annual accounts along with auditors report.

Methods of issue :-

There are various methods of issuing equity capital.They are :

Issue through prospectus

Offer of sale

Private stock placing

Rights issue

2. Preference shares

A preference share is said to be a hybrid financial instrument.It is a capital stock which provides a specific dividend that is paid before any dividends are paid to common stock holders, and which takes precedence over common stock in the event of a liquidation.Like common stock, preference shares represent partial ownership in a company,although preferred stock shareholders do not enjoy any of the voting rights of commonstockholders. Also unlike common stock, preference shares pay a fixed dividend thatdoes not fluctuate, although the company does not have to pay this dividend if it lacks thefinancial ability to do so.The main benefit to owning preference shares are that the

investor has a greater claim on the company's assets than common stockholders.Preferred shareholders always receive their dividends first and, in the event the companygoes bankrupt, preferred shareholders are paid off before common stockholders.

There are various types of preferred stocks that are common to many corporations :-

Cumulative preferred stock - If the dividend is not paid, it will accumulate for future payment.

 Non-cumulative preferred stock - Dividend for this type of preferred stock willnot accumulate if it is unpaid

22

Page 23: Sip Report Ananya Das

8/9/2019 Sip Report Ananya Das

http://slidepdf.com/reader/full/sip-report-ananya-das 23/80

Convertible preferred stock - This type of preferred stock carries the option toconvert into a common stock at a prescribed price.

Exchangeable preferred stock - This type of preferred stock carries the option to be exchanged for some other security upon certain conditions.

Participating preferred stock - This type of preferred stock allows the possibilityof additional dividend above the stated amount under certain conditions.

Perpetual preferred stock - This type of preferred stock has no fixed date on whichinvested capital will be returned to the shareholder, although there will always beredemption privileges held by the corporation. Most preferred stock is issuedwithout a set redemption date.

Puttable preferred stock - These issues have a "put" privilege whereby the holder may, upon certain conditions, force the issuer to redeem shares.

B. DEBTS 

Debt Markets are markets for the issuance, trading and settlement in fixed incomesecurities of various types and features. Fixed income securities can be issued by almostany legal entity like central and state governments, public bodies, statutory corporations, banks and institutions and corporate bodies.

Types of debt :-

1. Simple loan2. Syndicated loan3. Bond4. Term Loan

1. SIMPLE LOAN A basic loan is the simplest form of debt. It consists of an agreement to lend a principalsum for a fixed period of time, to be repaid by a certain date. In commercial loansinterest, calculated as a percentage of the principal sum per annum, will also have to be paid by that date.

In some loans, the amount actually loaned to the debtor is less than the principal sum to be repaid; the additional principal has the same economic effect as a higher interest rate.

2. SYNDICATED LOAN Syndicated lending is an arrangement under which two or more banks (referred as ‘the

syndicate’)come together and agree to grant a loan to a borrower on similar terms andconditions, through a single document or a set of documents,administered by an ‘agent’

23

Page 24: Sip Report Ananya Das

8/9/2019 Sip Report Ananya Das

http://slidepdf.com/reader/full/sip-report-ananya-das 24/80

 bank.It is a principal source of finance for major borrowers, whether corporates or sovereign.

Advantages to the borrower :-

Amount of money to be borrowed is usually very large, such large sums can be

In case of borrowing from syndicate (instead of multiple banking) it is convenientfor the borrower to have single-point (centralised) negotiation providingflexibility and speed.

Single set of documentation/uniform terms and conditions.

Borrower is able to raise resources at competitive rates.

Advantages to the participating Bank :-

Credit risk is spread/distributed among many banks.In view of exposure limit andhigher capital, adequacy ratio is not considered prudent for one bank to undertakesuch lending.

Syndicated loan facility strengthens the relationship between the borrowers and a bank, thereby providing oppurtunity to enter new market segments of high networth borrowers.

A small bank can also participate in lending to the large corporates therebyenhancing its market possibility.

With syndicated loan being administrated by a common ‘agent’ bank administration of the credit facility is convenient for the participating banks.

There is a secondary market for the syndicated loan- any bank can at a later stagesell its share to the other banks.

3. BONDS 

Fig : Bond formation

Bond is a debt security, similar to an I.O.U. When you purchase a bond, you are lendingmoney to a government, municipality, corporation, federal agency or other entity knownas the issuer. In return for the loan, the issuer promises to pay you a specified rate of interest during the life of the bond and to repay the face value of the bond (the principal)when it “matures,” or comes due.Among the types of bonds you can choose from are: U.S. government securities,municipal bonds, corporate bonds, mortgage and asset-backed securities, federal agencysecurities and foreign government bonds.

24

Page 25: Sip Report Ananya Das

8/9/2019 Sip Report Ananya Das

http://slidepdf.com/reader/full/sip-report-ananya-das 25/80

(i) Municipal Bonds - Municipal bonds are debt obligations issued by states, cities,counties and other governmental entities to raise money to build schools, highways,hospitals and sewer systems, as well as many other projects for the public good.When you purchase a municipal bond, you are lending money to an issuer who promisesto pay you a specified amount of interest (usually paid semiannually) and return the principal to you on a specific maturity date.

(ii) Government Bonds - One of the world’s largest and most liquid bond markets iscomprised of debt securities issued by the U.S. Treasury, by U.S. government agenciesand by U.S government-sponsored enterprises. U.S. Treasury securities, used to financethe federal government debt, are also considered to have the bond market’s lowest risk  because they are guaranteed by the U.S. government’s “full faith and credit” or, in other words, its taxing authority. Government agencies and government-sponsored enterprisessuch as Ginnie Mae, Fannie Mae and Freddie Mac also issue debtto support their role in financing mortgages that enable more Americans to own homes.These agency securities are also popular investments because of their high credit ratings.In general,fixed income securities are classified according to the length of time before

maturity.these are the three main categories :-Bills- debt securities maturing in less than one year.

 Notes-debt securities maturing in one to ten years.Bonds-debt securities maturing in more than ten years.

(iii) Corporate Bonds - Corporate bonds (also called corporates) are debt obligations,

or IOUs, issued by private and public corporations. They are typically issued in multiplesof $1,000 and/or $5,000. Companies use the funds they raise from selling bonds for avariety of purposes, from building facilities to purchasing equipment to expanding the business.

When you buy a bond, you are lending money to the corporation that issued it. Thecorporation promises to return your money, or principal, on a specified maturity date.Until that time, it also pays you a stated rate of interest, usually semiannually. Theinterest payments you receive from corporate bonds are taxable. Unlike stocks, bonds donot give you an ownership interest in the issuing corporation.

(iv) Mortgage-backed securities - Mortgage-backed securities (MBS) are primarily

“agency” securities issued by a government agency such as Ginnie Mae or a government-sponsored enterprise such as Fannie Mae or Freddie Mac. These agencies typicallyguarantee the interest and principal payments on their securities and are considered tooffer strong credit quality due to their access to lines of credit from the U.S. Treasury.The mortgage-backed securities market also includes “private-label” mortgage securitiesissued by subsidiaries of investment banks, financial institutions and home builders, butthese represent a small portion of the total mortgage-backed securities outstanding.

(v) Asset-backed securities - Asset-backed securities (ABS) usually carry some form

of credit enhancement such as bond insurance, to make them attractive to investors.

25

Page 26: Sip Report Ananya Das

8/9/2019 Sip Report Ananya Das

http://slidepdf.com/reader/full/sip-report-ananya-das 26/80

4. Term LoanA term loan is a secured commercial loan made to business concerns for a specific period(normally three to ten years).It is repaid with interest, usually with regular periodical payments.Term Loan usually are granted for the purchase of longer-term fixed assets ( land, buildings and equipment etc. ). Other purposes may include working capital, businessexpansion investments and company acquisitions.The repayment term of an individual loan will vary depending on the useful life of theasset being financed and the lending policy of the financial institution (e.g. 3 years for acomputer, 10 years for machinery etc.).The interest rate on a term loan will be higher than the rate on an operating loan to reflectthe risk associated with the longer term.

 Advantages :-

• Fixed interest rate for the full term. The interest rate risk is removed and the borrowers interest cost is pre-determined thus simplifying the budget process.

• Flexible term and amortization gives the borrower the ability to structure afinancing suitable to its specific circumstances.

• Loan cannot be recalled by the lender unless default has occurred. 

 Diaadvantages :-

• Loan amount is limited to a percentage of the asset being financed. The exact amountwill depend on the individual transaction.

• Term Loan usually have prepayment restrictions and if allowed at all, will attract aninterest penalty. Lender may require security from the borrower which is in addition

to security on the asset(s) being financed.• Typically Term Loan command a one-time processing fee of +/- 1% of the value of 

the loan.

In the international capital market we can find the financial instruments like AmericanDepository Receipts and Global Depository Receipts which is explained below.

 A. American Depository Receipts

Introduced to the financial markets in 1927, an American depository receipts is a stock that trades in the united states but represents a specified number of shares in a foreign

26

Page 27: Sip Report Ananya Das

8/9/2019 Sip Report Ananya Das

http://slidepdf.com/reader/full/sip-report-ananya-das 27/80

Page 28: Sip Report Ananya Das

8/9/2019 Sip Report Ananya Das

http://slidepdf.com/reader/full/sip-report-ananya-das 28/80

Global Depository Receipts facilitate trade of shares, and are commonly used to invest incompanies from developing or emerging markets - especially Russia.Prices of GDRs are often close to values of related shares, but they are traded and settledindependently of the underlying share.Foreign Investment through GDRs is treated as Foreign Direct InvestmentIndian companies are allowed to raise equity capital in the international market throughthe issue of Global Depository Receipt (GDRs). GDRs are designated in dollars and are

not subject to any ceilings on investment. An applicant company seeking Government'sapproval in this regard should have consistent track record for good performance(financial or otherwise) for a minimum period of 3 years.These instruments are alsocalled euro depository receipts when private markets are attempting to obtain euros.

Use of GDRs :-

The proceeds of the GDRs can be used for financing capital goods imports, capitalexpenditure including domestic purchase/installation of plant, equipment and buildingand investment in software development, prepayment or scheduled repayment of earlier external borrowings, and equity investment in JV/WOSs in India.

 Advantages of GDRs to Investors :-

(i) Convenient means to hold foreign shares and diversify risk 

(ii) Listed on european stock exchange.(iii) Market-making mechanism ensures continuous liquidity-can be(iv) exchanged for the underlying shares.Cross-border fungibility.

 Advantages of a GDR issue to the issuer :-

(i) Access to a broader and deeper market

(ii) issuer receives money in foreign currency.However there is no foreign exchangerisk as the securities are denominated in domestic currency.(iii) It is possible to get finer prices.(iv) Cost effective(v) The investor base is broader and more diversified.(vi) Administratively simpler for corporate actions.The issuer has to deal with thedepository bank alone instead of dealing with the multitude of investors.(vii) issuers visibilty enhanced globally.

2.2. MONEY MARKET

28

Page 29: Sip Report Ananya Das

8/9/2019 Sip Report Ananya Das

http://slidepdf.com/reader/full/sip-report-ananya-das 29/80

The money market is the global financial market for short-term borrowing and lending. It provides short-term liquid funding for the global financial system.Common money market instruments are :-

(i) Treasury Bills - Short-term debt obligations of a national government that

are issued to mature in 3 to 12 months.Treasury bills are short term government debt instruments. In the United States, for example, the market for short term central government debt is mainly comprised of Treasury bills with a maturity of one year or less. Standard maturities are 3 months, 6months and, in some cases, 1 year.Liquidity in short-term government debt is usually high. This is because of :

The high credit standing/low default risk of the issuer i.e. government

The homogeneity of the instruments

The high (and regular) volume and low denomination size of the debt.Treasury bills are usually issued at a discount and are redeemed at their full face value atmaturity.

(ii )Bankers’ Acceptance - A draft issued by a bank that will be

accepted for payment, effectively the same as a cashier's check.A Bankers’ Acceptance (BA) is a vehicle created to facilitate commercial tradetransactions and a specific BA relates to a specific transaction with underlying goods.The value of the underlying goods is reflected in the face value of a bill or term draft -which represents the promise of the counterparty to the transaction to pay for the goods ata specific time in the future.The bill becomes a Bankers’ Acceptance when a bank accepts the responsibility to paythe creditor, (the holder of the term draft), if the debtor (the counterparty) fails to repay.This is called discounting the term draft.Bankers Acceptances are seen as very safe investments as not only do they carry theirrevocable obligation of a least one bank to honour payment, they also represent anatural business transaction with underlying goods.Being such a creditworthy debt security Bankers Acceptances are a relatively low yieldinstrument. In fact, because BA’s are guaranteed by banks, rates closely follow those onnegotiable CDs. BAs tend to trade slightly lower than CDs because of their slightlyhigher liquidity.As with CDs, the market can be tiered. This is because some bank names are perceived asa better credit risk than others, and some goods are not as resalable as others.A bank which discounts an accepted term draft for an exporter can offer to sell the paper direct to investors.

(iii) Commercial Paper - An unsecured promissory notes with a fixed

maturity of one to 270 days; usually sold at a discount from face value.Commercial Paper (CP) is short term unsecured debt issued by companies in the form of  promissory notes as an obligation of the issuer.CP is typically issued at a discount to face value - but interest bearing notes can berequested. If paper is issued as interest bearing it will still be quoted on a discount basis.CP can be issued in bearer or registered form.

29

Page 30: Sip Report Ananya Das

8/9/2019 Sip Report Ananya Das

http://slidepdf.com/reader/full/sip-report-ananya-das 30/80

The scale of any CP issue makes it exclusively a wholesale market, attracting banks,money market funds, insurance companies and other large cash rich firms as investors.

(iv) Certificate of Deposit - A time deposit at a bank with a specific

maturity date; large-denomination certificates of deposits can be sold before maturity.Certificates of Deposit (CDs) are securitised bank time deposits.

The CD market is a tiered market offering securities backed by different ‘names’ and so arange of liquidities and yields. The creditworthiness of a bank is evaluated by impartialrating agencies such as Moodys and Standard and Poors.

(v) Repurchase Agreements - Short-term loans—normally for less

than two weeks and frequently for one day—arranged by selling securities to an investor with an agreement to repurchase them at a fixed price on a fixed date.Repurchase(repo) agreement can be seen as a short term swap between cash andsecurities. Repurchase agreements, or repos, are specialised but important aspects of many markets, especially those for government securities.In essence, if a security holder wants to maintain his or her long-term position but needs

cash for a short period, he or she can enter into a repo contract whereby the securities aresold together with a binding agreement to repurchase them at a future date, usually fairlynear-term.The effect is to provide the security holder with a short-term loan based on the collateralof the government securities he or she owns. In major markets with repo systems, it is acheap, simple and effective way to raise short-term funds.

UsesofRepo

It helps banks to invest surplus cashIt helps investor achieve money market returns with sovereign risk.

It helps borrower to raise funds at better ratesAn SLR surplus and CRR deficit bank can use the Repo deals as a convenient way of adjusting SLR/CRR positions simultaneously.RBI uses Repo and Reverse repo as instruments for liquidity adjustment in the system.

2.3 COMMODITY MARKET

30

Page 31: Sip Report Ananya Das

8/9/2019 Sip Report Ananya Das

http://slidepdf.com/reader/full/sip-report-ananya-das 31/80

A commodity futures contract is a type of derivative, or financial contract, in which two parties agree to transact a set of financial instruments or physical commodities for delivery at a particular price at a later date. If you buy a commodity contract, you are basically agreeing to buy something, for a set price, that a seller has not yet produced. But participating in the commodity market doesnot necessarily mean that you will be responsible for receiving or delivering largeinventories of physical commodities, remember, buyers and sellers in the futures market

 primarily enter into futures contracts to hedge risk or speculate rather than edelivery(which is the primary activity of the cash/spot market). That is why Commodities areused as financial instruments by not only producers and consumers but also speculators.A commodity exchange is an exchange where various commodities and derivatives  products are traded.Commodities exchanges,usually trade future contracts oncommodities.Most commodity market across the world trade in agricultural products andother raw materials(like wheat,barley,sugar,maize,cotton,cocoa,coffee,oil[crudeOil,kerosene,gasoline],metals[gold,silver,platinum,alluminium,palladium],etc)andcontracts based on them.these contracts can include spots,forwards,futures.Under suchtraded future contracts for example,a farmer raising an agricultural product,say wheat,can sell a future contract on his wheat which would be harvested after several months

and the future contract guarantees the price he will be paid when he delivers.Similarly,the prospective buyer of the agricultural product who buys the future contract gets theguarantee of the price which will not go up when it is delivered.This protects the farmer from price fall and the buyer from price rises.Future contracts are useful for the producer  because he can get an idea of the price likely to prevail and thereby help them quote arealistic price and hedge risk.In case of physical delivery is to be made when the contractmatures,such physical delivery requires stringent application of quality standards tosafeguard the interest of the buyers.The consensus in the investment world is that the Commodities market is a major financial hub, providing an outlet for intense competition among buyers and sellers and,more importantly, providing a center to manage price risks. The commodity market is

extremely liquid, risky, and complex by nature, but it can be understood if we break down how it functions.Futures contracts perform two important functions:price discovery and hedging of pricerisk in a commodity.In international bourses traders can also use financial instruments like call and putoptions,not yet allowed in India.Speculators also buy and sell the futures contracts tomake a profit and provide liquidity to the system.

2.4 FOREIGN EXCHANGE MARKET

31

Page 32: Sip Report Ananya Das

8/9/2019 Sip Report Ananya Das

http://slidepdf.com/reader/full/sip-report-ananya-das 32/80

The foreign exchange (currency or forex or FX) market exists wherever one currency istraded for another. It is by far the largest financial market in the world, and includestrading between large banks, central banks, currency speculators, multinationalcorporations, governments, and other financial markets and institutions. The averagedaily trade in the global forex and related markets currently is over US$ 3 trillion.

Features of Foreign Exchange Market :-

♦ Market where foreign currencies are traded♦ Round the clock 

♦ Global Market

♦ Large volume of transactionsParticipants of foreign exchange market

♦ Individuals : tourists, migrants

♦ Firms : importers and exporters

♦ Banks : short position, long position, square position

♦ Governments/monetary authorities : market intervention

♦ International agencies : lending

♦ Two-tier market :- First tier : ultimate customer and banker - Second tier : between banks

Classification of participants :-

♦  Non-banking entitities: business transactions and hedging

♦ Banks: foreign exchange dealers

♦ Arbitrageurs: profit seeking from variations in rates in different markets

♦ Speculators: profit seeking from movements in exchange ratesTypes of market in foreign exchange are :-

♦ Spot market

♦ Forward market

♦ Derivatives markets: currency futures and options

In the foreign exchange market the derivative products like the forward contracts,futurecontracts,options and swaps are traded round the clock at huge volumes which areexplained in the next section and the spot market is explained below.

Spot Market

♦ Currencies traded for immediate delivery at rates prevailing at the time of transaction

♦ Actual delivery (electronic transfer) may take two working days

♦ Currency arbitrage: buying a currency at cheaper rate in one market and

selling at a higher rate in another market –Two point arbitrage –Triangular (three point) arbitrage – three currencies

♦ Currency speculation: buying and holding a currency for sale at a higher 

rate in the near future

32

Page 33: Sip Report Ananya Das

8/9/2019 Sip Report Ananya Das

http://slidepdf.com/reader/full/sip-report-ananya-das 33/80

2.5 DERIVATIVES MARKET

Derivatives are financial instruments whose value changes in response to the changes inunderlying variables.The Derivatives Market is meant as the market where exchange of derivatives takes place. Derivatives are one type of securities whose price is derived fromthe underlying assets. And value of these derivatives is determined by the fluctuations in

the underlying assets. These underlying assets are most commonly stocks, bonds,currencies, interest rates, commodities and market indices.The Derivatives can beclassified as Future Contracts, Forward Contracts, Options, Swaps and CreditDerivatives.

(i) Future contracts – A futures contract is a standardized contract, traded

on a futures exchange, to buy or sell a certain underlying instrument at a certain date inthe future, at a specified price. The future date is called the delivery date or finalsettlement date. The pre-set price is called the futures price. The price of the underlyingasset on the delivery date is called the settlement price.A futures contract gives the holder the obligation to buy or sell, which differs from anoptions contract, which gives the holder the right, but not the obligation. In other words,the owner of an options contract may exercise the contract, but both parties of a "futurescontract" must fulfill the contract on the settlement date. The seller delivers thecommodity to the buyer, or, if it is a cash-settled future, then cash is transferred from thefutures trader who sustained a loss to the one who made a profit. To exit the commitment prior to the settlement date, the holder of a futures position has to offset their position byeither selling a long position or buying back a short position, effectively closing out thefutures position and its contract obligations.Futures contracts, or simply futures, are exchange traded derivatives. The exchange'sclearinghouse acts as counterparty on all contracts, sets margin requirements, andcrucially also provides a mechanism for settlement.

(ii)Forward contracts - A forward contract is an agreement between two

 parties to buy or sell an asset (which can be of any kind) at a pre-agreed future point intime. Therefore, the trade date and delivery date are separated. It is used to control andhedge risk, for example currency exposure risk (e.g., forward contracts on USD or EUR)or commodity prices (e.g., forward contracts on oil).One party agrees (obligated) to sell, the other to buy, for a forward price agreed inadvance. In a forward transaction, no actual cash changes hands. If the transaction iscollateralized, exchange of margin will take place according to a pre-agreed rule or schedule. Otherwise no asset of any kind actually changes hands, until the maturity of the

contract.The forward price of such a contract is commonly contrasted with the spot price, which isthe price at which the asset changes hands (on the spot date, usually two business days).The difference between the spot and the forward price is the forward premium or forwarddiscount.

(iii) Options - Options are financial instruments that convey the right, but not the

obligation, to engage in a future transaction on some underlying security, or in a futurescontract. In other words, the holder does not have to exercise this right, unlike a forward

33

Page 34: Sip Report Ananya Das

8/9/2019 Sip Report Ananya Das

http://slidepdf.com/reader/full/sip-report-ananya-das 34/80

or future. For example, buying a call option provides the right to buy a specified quantityof a security at a set strike price at some time on or before expiration, while buying a putoption provides the right to sell. Upon the option holder's choice to exercise the option,the party who sold, or wrote, the option must fulfill the terms of the contract.

The financial types of financial options are :-

♦ Exchange traded options (also called "listed options") are a class of exchange

traded derivatives. Exchange traded options have standardized contracts, andare settled through a clearing house with fulfillment guaranteed by the creditof the exchange. Since the contracts are standardized, accurate pricing modelsare often available. Exchange traded options include:stock options,commodity options, bond options and other interest rate optionsindex (equity) options, andoptions on futures contracts

♦ Over-the-counter options (OTC options, also called "dealer options") aretraded between two private parties, and are not listed on an exchange. The

terms of an OTC option are unrestricted and may be individually tailored tomeet any business need. In general, at least one of the counterparties to anOTC option is a well-capitalized institution. Option types commonly tradedover the counter include:interest rate optionscurrency cross rate options, andoptions on swaps or swaptions.Employee stock options are issued by a company to its employees ascompensation.

(iv) Swaps - Traditionally the exchange of one security for another to change thematurity,or quality of issues (stocks or bonds),or because investment objectives havechanged.recently swaps have grown to include currency swaps and interest rate swaps.If firms on different countries have comparitive advantages on interest rates ,then a swapcould benefit both the firms.For example one firm may have a lower fixed interestrate,while another has access to lower floating interest rate.Thses firms could swap totake advantage of lower rates.

♦ Currency swap-Involves the exchange of principal and interest in onecurrency for the same in another currency. It is considered to be a foreignexchange transaction and is not required by law to be shown on the balance

sheet.

♦ Interest rate swap –An agreement between two parties (known ascounterparties) where one stream of future interest payments is exchanged for another based on a specified principal amount. Interest rate swapsoften exchange a fixed payment for a floating payment that is linked to aninterest rate (most often the LIBOR). A company will typically use interestrate swaps to limit, or manage, its exposure to fluctuations in interest rates, or to obtain a marginally lower interest rate than it would have been able to getwithout the swap.

34

Page 35: Sip Report Ananya Das

8/9/2019 Sip Report Ananya Das

http://slidepdf.com/reader/full/sip-report-ananya-das 35/80

(v) Credit Derivatives - Privately held negotiable bilateral contracts that

allow users to manage their exposure to credit risk. Credit derivatives are financial assetslike forward contracts, swaps, and options for which the price is driven by the credit risk of economic agents (private investors or governments).For example, a bank concerned that one of its customers may not be able to repay a loan

can protect itself against loss by transferring the credit risk to another party while keepingthe loan on its books.

The main use of derivatives is to reduce risk for one party.the diverse range of potentialunderlying assets and pay-off alternatives leads to a huge range of derivatives contractsavailable to be traded in the market.The Derivative Market can be classified as Exchange Traded Derivatives Market andOver the Counter Derivative Market.

35

Page 36: Sip Report Ananya Das

8/9/2019 Sip Report Ananya Das

http://slidepdf.com/reader/full/sip-report-ananya-das 36/80

PROJECTFINANCING

36

Page 37: Sip Report Ananya Das

8/9/2019 Sip Report Ananya Das

http://slidepdf.com/reader/full/sip-report-ananya-das 37/80

PRESENTATION AND ANALYSISOF DATA

Tata Metaliks Ltd is now on their way of diversifying their business.They have come upwith a project which they are planning to start from the financial year 2008-2009.This is

going to extend till the financial year 2015-2016.To have a good and successful project,Tata Metaliks has to develop a good project management plan.For this they have tofollow the project development stages and plan accordingly.

Regardless of the methodology used project development stages will have some major stages as shown in the diagram.

Fig : Project development stages

A. Initiation

The initiation stage determines the nature and scope of the development. If this stage isnot performed well, it is unlikely that the project will be successful in meeting the business’s needs. The key project controls needed here are an understanding of the business environment and making sure that all necessary controls are incorporated intothe project. Any deficiencies should be reported and a recommendation should be madeto fix them.

The initiation stage should include a cohesive plan that encompasses the following areas: Study analyzing the business needs in measurable goals.

Review of the current operations.

Conceptual design of the operation of the final product.

Equipment requirement.

Financial analysis of the costs and benefits including a budget.

Select stake holders, including users, and support personnel for the project.

Project charter including costs, tasks, deliverables, and schedule.

37

Page 38: Sip Report Ananya Das

8/9/2019 Sip Report Ananya Das

http://slidepdf.com/reader/full/sip-report-ananya-das 38/80

Page 39: Sip Report Ananya Das

8/9/2019 Sip Report Ananya Das

http://slidepdf.com/reader/full/sip-report-ananya-das 39/80

Can be produced within time and budget constraints.

So after the initiation stage Tata Metaliks will plan for the project to be carried on. Thetotal project will cost the company Rs. 1,784 for the seven years with cash flows in theindividual years. Tata Metaliks is planning to finance the project with its own resourcesand with the aid of the financial instruments in the commercial market.Tata Metaliks plans to raise the capital for its own project financing. In such a situation,it

may issue a part or the whole of its unissued share capital.The best possible way tofinance the huge amount needed for the project is from the capital market.In the domesticcapital market the company can raise the capital for project financing by issuing rightshares to the existing shareholders.By issuing right shares to the existing shareholder thecompany can increase the paid-up capital of the company and finance the project thatthey are planning.The amount to be generated from the issue of rights shares or the proportion of rightsissue to the existing issue has to be decided by the company after planning and designingvarious methodologies.

SHARE CAPITAL2007  

(Rupees in Lacs)

 

Authorised :  

4,00,00,000 Ordinary Shares of Rs. 10 each 4,000.00

 

Issued, Subscribed and Paid - Up

2,52,88,000 Ordinary Shares of Rs. 10 each 2,528.80

 

Remaining amount can be furtherissued for rights share 1,472

 Fig : Calculation of Capital which can be raised by rights issue

So we can see that Rs. 1472 lacs can be raised by further issue of capital and after that the proportion to which the rights shares will be issued in relation to the existing shares hasto be calculated.The ratio of existing shares to right shares has to be taken i.e (2528.8 :1472.00) and this after calculation comes down to 2:1.Tata Metaliks can issue 1 rightsshare for every 2 existing shares to the shareholders holding the shares before or on therecord date. Now that a part of the project has been planned and designed to be financed by the helpof the capital market instrument,so the remaining part has to be planned to be financealso.

(Rs. In Lacs)Project Cost - 1,784Rights Issue - 1,472Remaining to be raised

 by finance - 312

39

Page 40: Sip Report Ananya Das

8/9/2019 Sip Report Ananya Das

http://slidepdf.com/reader/full/sip-report-ananya-das 40/80

This remaining amount needed for the project can be raised by the debt market by usingthe instrument term loan as it is the best method to finance a long term projectexpenditure.Tata Metaliks has to give application for the term loan to the various banksfor getting the cheapest interest rate and a good payment structure.

C. Executing

Executing consists of the processes used to complete the work defined in the projectmanagement plan to accomplish the project's requirements. Execution process involvescoordinating people and resources, as well as integrating and performing the activities of the project in accordance with the project management plan. The deliverables are produced as outputs from the processes performed as defined in the project management plan.

From the above project management plan and design we can see the major source of 

finance is by issuing rights share.Tata Metaliks has to intergrate and perform lots of activities for rights issue.

A consent of the existing shareholders who have the pre-emptive right to purchase theadditional shares of the company contemplated to issue under the provisions of Sec81 of The Companies Act, 1956.Under the provisions of the Act, when shares are offered to theexisting shareholders it is called the Right issue.The issue of right shares require thefollowing norms to be fulfilled :

1. Compliance under Section 81 of the Companies Act, 1956.2. Approval of Financial Institutions for Right issue.

3. Compliance under FERA,if applicable to the subject company.4. Compliance of the Central Government/SEBI guidelines issued from time to

time.5. Compliance of the Stock Exchange requirements.

Some of the above compliance are precisely narrated below :

(1) Compliances under the Companies Act,1956

(2) Approval of financial institutions for rights issue : Where the company has availed of term loans from financial institutions/banks,it is required to obtain their prior approval for 

making the rights issue in terms of the loan agreement entered into with them.

(3) Compliance under FERA,if applicable to the subject company : For FERA companiesRBI permission is required for issuing right shares to non-residents vide Section 19(i)(d)or to any foreigners(whether resident or non-resident)or to any company with more than40 percent non-resident interest.

(4) SEBI Guidelines on Rights Issue :

40

Page 41: Sip Report Ananya Das

8/9/2019 Sip Report Ananya Das

http://slidepdf.com/reader/full/sip-report-ananya-das 41/80

Page 42: Sip Report Ananya Das

8/9/2019 Sip Report Ananya Das

http://slidepdf.com/reader/full/sip-report-ananya-das 42/80

(i) unless shareholders in General Meeting decide otherwise to lose the

transfer books at such a date or in such a manner as is suitable in the settlement of 

transactions in consultation with the exchange.

(ii) To make such issue or offers in a form to be approved by the exchange

and forward supply of the renunciation forms promptly to the exchange.

(iii)To issue where necessary,coupons or fractional certificates or provide

for the payment to the equivalent value in cash as the compny’s General

Meeting or as the Exchange decides.

(iv) The minimum time for which the rights issue is to be kept open is not

stipulated.As per the listing requirements with the stock exchange,rights

issue are to be kept open for at least 4 weeks although a minimum time of 2

weeks has been stipulated under section 81 of the Companies Act.

(v) To issue letters of allotment or letters of right within 6 weeks of the

record date or date of reopening of transfer books after their closure for the purpose of making a bonus or rights issue and to issue allotment letters or 

certificates within 6 weeks of the last date fixed by the company for 

submission of list of renunciation or application for new securities.

Steps to be taken by a company in respect of issue further shares :-

(a) Check whether the rights issue is within the authorised share capital of 

company.

(b) In case of a listed company,notify the stock exchange concerned the date of 

Board Meeting at which the rights issue is proposed to be considered.(c) rights issue and public issues should not exceed 30 days.Therefore if the

company has made a simultaneous issue of public and rights share,it should

ensure that the gap between the closure dates of these two does not exceed 30

days.

(d) As per the SEBI guidelines for rights issue of listed companies exceeding

Rs.50 lakhs, the appointment of merchant broker is mandatory. Therefore,

the steps should be taken to appoint a merchant broker where the issue

exceeds Rs.50 lakhs.Appointment of Underwriters, as per SEBI guidelines is

now optional.

(e) Convene the Board meeting and place before it the proposal for rights issue.

The Board should decide the following matters :

(i)Quantum of issue and the proportion of rights shares.(ii) Whether the shares shall be issue at par or premium keeping in view of the SEBIguidelines.The price is to be fixed by the Board of Directors in consultation with the leadmanager to the issue.(iii) Alteration of share capital,if necessary, and offering shares to persons other thanexisting holders of shares in terms of Section 81 (1A).

42

Page 43: Sip Report Ananya Das

8/9/2019 Sip Report Ananya Das

http://slidepdf.com/reader/full/sip-report-ananya-das 43/80

Page 44: Sip Report Ananya Das

8/9/2019 Sip Report Ananya Das

http://slidepdf.com/reader/full/sip-report-ananya-das 44/80

Page 45: Sip Report Ananya Das

8/9/2019 Sip Report Ananya Das

http://slidepdf.com/reader/full/sip-report-ananya-das 45/80

CALC ULATION OF B

y = 0.8743x + 0.0

R2 = 0.243

-0.25

-0.2

-0.15

-0.1

-0.05

0

0.05

0.1

0.15

0.2

-0.1 -0.08 -0.06 -0.04 -0.02 0 0.02 0.04 0.06

S & P NIFT

   S   T   O   C   K

   P   R   I   C   E

45

Page 46: Sip Report Ananya Das

8/9/2019 Sip Report Ananya Das

http://slidepdf.com/reader/full/sip-report-ananya-das 46/80

Interpretation - From the above plotted graph we can see that the beta for this stock is

0.8743 in the regression.This beta represents that the stock moves in a way similar to themarket, but is less volatile, and the R-squared is 0.243, which indicates that the variance

of the stock returns are highly related to the variance of the S & P Nifty returns.So the beta has helped Tata Metaliks to know the stocks volatility in the stock market.

E. Closing

Closing includes the formal acceptance of the project and the ending thereof.Administrative activities include the archiving of the files and documenting lessonslearned. Closing phase consist of two parts:Close project: to finalize all activities across all of the process groups to formally close

the project or a project phaseContract closure: necessary for completing and settling each contract, including theresolution of any open items, and closing each contract applicable to the project or a project phase.

In this stage Tata Metaliks after planning and monitoring all the activities will now present all the documents before the Board of Directors to get their approval in the Boardmeeting.In this meeting the Board of Directors will go through the project management plan.After scrutinising the plan, if everything falls into place, then they will approve the plan and implement the project.For implementation Tata Metaliks will have to perform

46

Page 47: Sip Report Ananya Das

8/9/2019 Sip Report Ananya Das

http://slidepdf.com/reader/full/sip-report-ananya-das 47/80

and intergrate a lot of activities like filing aaplications to the SEBI for further issue of shares and sending this information with the help of media to the existingshareholders.Tata Metaliks also has to perform a lots of administrative duties in relationto the successful closure of this project.

Suggestions and Conclusions

As because the project financing involves both equity and debt capital financing, so weneed to calculate the weighted average cost of capital for the firm.

(Rs. In Crore)The Market Value of Debt - 90The Market value of Equity - 428The Cost of Debt - 9.5%The Cost of Equity - 21.68%The Corporate Tax Rate - 33.99%

The Weighted Average Cost of Capital for the company is

90 : 428*9.5%*(1-33.99%)+ 428 : 90*21.68%

19.5 % is the weighted average cost of capital of the firm.

47

Page 48: Sip Report Ananya Das

8/9/2019 Sip Report Ananya Das

http://slidepdf.com/reader/full/sip-report-ananya-das 48/80

Here,the market value of debt,the cost of equity and the corporate tax rate is taken fromthe books of account.The estimated cost of debt is taken by adding long term bond rate i.e8% with the estimated default spread i.e 1.5%,hence the output gives 9.5%.The marketvalue of equity we get by multiplying the number of shares outstanding i.e Rs.2.53 Croreand the market price per share i.e Rs.169(average stock price from Bombay Stock Exchange).

After viewing the entire project management plan I came to a conclusion that thisupcoming project will help Tata Metaliks diversify its business activities and touch newhorizons.The proposal of reinvesting and expanding its units in Kharagpur and Redi plantwill fetch more revenue for the company in the form of more production.The company isgoing to export its large production of foundry grade pig iron and the by-products to theother countries to earn huge revenues.

To expand its activities at the various plants the company need huge financing which itshall get from the capital market in the procedure described in the previous section.I havesuggested capital market instrument as the best possible way of financing the project

strategy of Tata Metaliks after taking in consideration the other types of financialmarkets.In the previous section the I have given the whole structure for issuing rightsshare and the method of taking the loan.

Annexure

Annexure 1

Items of Capital Addition (Rs.Cr.) Y-1 Y-2 Y-3 Y-4 Y-5 Y-6 Y-7

 Total08-09 09-10 10-11 11-12 12-13 13-14 14-15

KGP PLANT  

Sinter Plant25 40 - - - - - 65

Steel Plant 20 125 200 105 - - - 450

Expansion of Housing colony 1 3 2 - - - - 6

Coal Dust Injection 3 8 5 16

New Oxygen Plant - 2 4 - - - - 6

Foundry 25 50 - - - - - 75

48

Page 49: Sip Report Ananya Das

8/9/2019 Sip Report Ananya Das

http://slidepdf.com/reader/full/sip-report-ananya-das 49/80

REDI PLANT -

Power Plant 7 27 6 40

Sinter Plant - 30 10 - - - - 40

Foundry 20 43 25 - - 88

 Jetty [ BOO basis] -

Mining 3 2 5 2 12

KARNATAKA PLANT -

Steel Plant (Phase - I) 6 100 130 100 - - - 336

Steel Plant (Phase -II) 25 125 150 300

Steel Plant (Phase - III) 50 150 150 350

Total90 387 407 375 225 150 150

1,784

Financial projection of TML’s project

Annexure 2

Table showing the S & P Nifty price and Stock Price and thecalculated returns for the following financial year 2007-08

MONTH S & P NIFTY STOCK PRICE

S & P NIFTYs STOCK PRICE

RETURN

 

APRIL 3633.6 81.85

2007 3690.65 84.05 0.015700683 0.026878436

  3733.25 84.1 0.011542682 0.000594884

  3752 86.8 0.005022434 0.032104637  3843.5 91.6 0.024386994 0.055299539

  3848.15 94.25 0.001209835 0.028930131

  3862.65 100.4 0.003768044 0.065251989

  3829.85 103 -0.00849158 0.025896414

  3917.35 106.95 0.022846848 0.038349515

  4013.35 109.4 0.024506363 0.022907901

  3984.95 106.1 -0.007076383 -0.030164534

49

Page 50: Sip Report Ananya Das

8/9/2019 Sip Report Ananya Das

http://slidepdf.com/reader/full/sip-report-ananya-das 50/80

  4011.6 105.85 0.006687662 -0.002356268

  3997.65 104.75 -0.003477415 -0.010392064

  4083.55 105.35 0.021487624 0.005727924

  4085.1 105.15 0.000379572 -0.001898434

  4141.8 105.25 0.013879709 0.000951022

  4167.3 115.45 0.006156743 0.096912114

  4177.85 117.6 0.002531615 0.01862278  4083.5 117.55 -0.022583386 -0.00042517

  4087.9 119.8 0.001077507 0.019140791

MAY  4150.85 122 0.015399105 0.01836394

2007 4117.35 129.9 -0.008070636 0.064754098

  4111.15 120.95 -0.001505823 -0.068899153

  4077 118 -0.008306678 -0.024390244

  4079.3 116.65 0.00056414 -0.011440678

  4066.8 116.4 -0.003064251 -0.002143163

  4076.65 118.1 0.002422052 0.014604811

  4134.3 119.45 0.014141513 0.011430991  4120.3 124.85 -0.003386305 0.0452072

  4170.95 129.45 0.012292794 0.036844213

  4219.55 130.6 0.011652022 0.008883739

  4214.5 127.85 -0.00119681 -0.021056662

  4260.9 129.65 0.01100961 0.014078999

  4278.1 130.75 0.004036706 0.008484381

  4246.2 130.5 -0.007456581 -0.001912046

  4204.9 128.65 -0.009726344 -0.014176245

  4248.15 128.45 0.010285619 -0.001554606

  4256.55 130.05 0.001977331 0.012456209  4293.25 131.1 0.008622006 0.008073818

  4249.65 132.5 -0.010155477 0.010678871

  4295.8 132 0.010859718 -0.003773585

 JUNE 4297.05 132.6 0.000290982 0.004545455

2007 4267.05 133.95 -0.006981534 0.010180995

  4284.65 132.05 0.004124629 -0.014184397

  4198.25 129.65 -0.020165008 -0.018174934

  4179.5 129.8 -0.004466147 0.001156961

  4145 129.65 -0.008254576 -0.001155624

  4145.6 130.2 0.000144753 0.004242191

  4155.2 130.9 0.002315708 0.005376344

  4113.05 130.65 -0.010143916 -0.001909855

  4170 123.45 0.013846173 -0.05510907

  4171.45 121.85 0.000347722 -0.012960713

  4147.1 120.45 -0.005837299 -0.011489536

  4214.3 120.8 0.016204094 0.00290577

  4248.65 125.15 0.00815082 0.036009934

50

Page 51: Sip Report Ananya Das

8/9/2019 Sip Report Ananya Das

http://slidepdf.com/reader/full/sip-report-ananya-das 51/80

Page 52: Sip Report Ananya Das

8/9/2019 Sip Report Ananya Das

http://slidepdf.com/reader/full/sip-report-ananya-das 52/80

Page 53: Sip Report Ananya Das

8/9/2019 Sip Report Ananya Das

http://slidepdf.com/reader/full/sip-report-ananya-das 53/80

Page 54: Sip Report Ananya Das

8/9/2019 Sip Report Ananya Das

http://slidepdf.com/reader/full/sip-report-ananya-das 54/80

  5766.5 156.9 0.002669031 -0.039485767

  5985.1 162.65 0.03790861 0.036647546

  6070.75 172.85 0.014310538 0.062711343

  6081.5 181.3 0.001770786 0.048886318

  6079.7 195.95 -0.00029598 0.080805295

  6138.6 208.35 0.009687978 0.063281449

 JANUARY  6144.35 218.3 0.000936696 0.047756182008 6179.4 217.3 0.005704428 -0.004580852

  6178.55 208.45 -0.000137554 -0.040727105

  6274.3 207.2 0.015497164 -0.005996642

  6279.1 209.2 0.000765026 0.00965251

  6287.85 200.8 0.001393512 -0.040152964

  6272 205 -0.002520734 0.020916335

  6156.95 192.5 -0.018343431 -0.06097561

  6200.1 188.1 0.00700834 -0.022857143

  6206.8 195.6 0.001080628 0.039872408

  6074.25 196.8 -0.02135561 0.006134969  5935.75 176.8 -0.022801169 -0.101626016

  5913.2 195.25 -0.003799014 0.104355204

  5705.3 166.25 -0.035158628 -0.148527529

  5208.8 134.45 -0.087024346 -0.191278195

  4899.3 128.75 -0.059418676 -0.042394942

  5203.4 140.2 0.062070092 0.088932039

  5033.45 139.2 -0.032661337 -0.007132668

  5383.35 152.36 0.069514945 0.09454023

  5274.1 157.7 -0.020294055 0.035048569

  5280.8 162.55 0.001270359 0.030754597  5167.6 173.8 -0.021436146 0.069209474

  5137.45 179.95 -0.00583443 0.035385501

FEBUAR Y 

5317.25 184.25 0.034997908 0.023895527

2008 5463.5 184.6 0.027504819 0.001899593

  5483.9 176.1 0.00373387 -0.046045504

  5322.55 172.95 -0.029422491 -0.017887564

  5133.25 181.65 -0.035565659 0.050303556

  5120.35 175.3 -0.002513028 -0.034957336

  4857 165.1 -0.051432031 -0.058185967  4838.25 156.2 -0.003860408 -0.053906723

  4929.45 159.05 0.018849791 0.018245839

  5202 166.95 0.055290144 0.049669915

  5302.9 169.95 0.019396386 0.017969452

  5276.9 168.9 -0.004902978 -0.006178288

  5280.8 165.6 0.00073907 -0.019538188

  5154.45 163.8 -0.023926299 -0.010869565

54

Page 55: Sip Report Ananya Das

8/9/2019 Sip Report Ananya Das

http://slidepdf.com/reader/full/sip-report-ananya-das 55/80

  5191.8 164.35 0.007246166 0.003357753

  5110.75 163.4 -0.015611156 -0.005780347

  5200.2 159.5 0.017502324 -0.023867809

  5270.05 162.05 0.013432176 0.015987461

  5268.4 160.4 -0.00031309 -0.010182043

  5285.1 163.15 0.003169843 0.017144638

  5223.5 160.95 -0.011655409 -0.013484523MARCH 4953 157.1 -0.051785201 -0.023920472

2008 4864.25 154.95 -0.017918433 -0.013685551

  4921.4 150.4 0.011748985 -0.029364311

  4771.6 144.2 -0.030438493 -0.041223404

  4800.4 148.4 0.006035711 0.029126214

  4865.9 152.65 0.013644696 0.028638814

  4872 151.45 0.001253622 -0.00786112

  4623.6 138.85 -0.050985222 -0.083195774

4745.8 141.3 0.026429622 0.017644941

4503.1 135.5 -0.051139955 -0.0410474174533 133.4 0.00663987 -0.015498155

4573.95 130.4 0.009033752 -0.022488756

4609.85 126.45 0.007848796 -0.030291411

4877.5 131.8 0.058060457 0.042309213

4828.55 134.9 -0.010035879 0.023520486

4830.25 134.8 0.000352073 -0.00074129

4942 140.15 0.023135448 0.039688427

4734.5 139 -0.04198705 -0.008205494

Bibliography 

 The list of books from which reference has been taken are :-

1. Financial ManagementBy Prasanna Chandra

2. International Corporate Finance-Indian Institute of Banking & Finance

3. Business and Corporate LawIndian Institute of Chartered Accountants in India

4. Tata MetaliksSeventeenth Annual Report

55

Page 56: Sip Report Ananya Das

8/9/2019 Sip Report Ananya Das

http://slidepdf.com/reader/full/sip-report-ananya-das 56/80

 The list of Websites from which data and reference has beentaken are :-

1http://www.tatametaliks.com/

2. http://en.wikipedia.org/wiki/Main_Page

3. http://nseindia.com/

4. http://www.businessdictionary.com/

5. http://faculty.babson.edu/

6. http://www.investopedia.com

7. http://www.equitymaster.com

8. http://www.investorwords.com/ 

9. http://www.myiris.com

56

Page 57: Sip Report Ananya Das

8/9/2019 Sip Report Ananya Das

http://slidepdf.com/reader/full/sip-report-ananya-das 57/80

57

Page 58: Sip Report Ananya Das

8/9/2019 Sip Report Ananya Das

http://slidepdf.com/reader/full/sip-report-ananya-das 58/80

58

Page 59: Sip Report Ananya Das

8/9/2019 Sip Report Ananya Das

http://slidepdf.com/reader/full/sip-report-ananya-das 59/80

59

Page 60: Sip Report Ananya Das

8/9/2019 Sip Report Ananya Das

http://slidepdf.com/reader/full/sip-report-ananya-das 60/80

60

Page 61: Sip Report Ananya Das

8/9/2019 Sip Report Ananya Das

http://slidepdf.com/reader/full/sip-report-ananya-das 61/80

Page 62: Sip Report Ananya Das

8/9/2019 Sip Report Ananya Das

http://slidepdf.com/reader/full/sip-report-ananya-das 62/80

62

Page 63: Sip Report Ananya Das

8/9/2019 Sip Report Ananya Das

http://slidepdf.com/reader/full/sip-report-ananya-das 63/80

63

Page 64: Sip Report Ananya Das

8/9/2019 Sip Report Ananya Das

http://slidepdf.com/reader/full/sip-report-ananya-das 64/80

64

Page 65: Sip Report Ananya Das

8/9/2019 Sip Report Ananya Das

http://slidepdf.com/reader/full/sip-report-ananya-das 65/80

65

Page 66: Sip Report Ananya Das

8/9/2019 Sip Report Ananya Das

http://slidepdf.com/reader/full/sip-report-ananya-das 66/80

Page 67: Sip Report Ananya Das

8/9/2019 Sip Report Ananya Das

http://slidepdf.com/reader/full/sip-report-ananya-das 67/80

67

Page 68: Sip Report Ananya Das

8/9/2019 Sip Report Ananya Das

http://slidepdf.com/reader/full/sip-report-ananya-das 68/80

68

Page 69: Sip Report Ananya Das

8/9/2019 Sip Report Ananya Das

http://slidepdf.com/reader/full/sip-report-ananya-das 69/80

Page 70: Sip Report Ananya Das

8/9/2019 Sip Report Ananya Das

http://slidepdf.com/reader/full/sip-report-ananya-das 70/80

Page 71: Sip Report Ananya Das

8/9/2019 Sip Report Ananya Das

http://slidepdf.com/reader/full/sip-report-ananya-das 71/80

Page 72: Sip Report Ananya Das

8/9/2019 Sip Report Ananya Das

http://slidepdf.com/reader/full/sip-report-ananya-das 72/80

72

Page 73: Sip Report Ananya Das

8/9/2019 Sip Report Ananya Das

http://slidepdf.com/reader/full/sip-report-ananya-das 73/80

73

Page 74: Sip Report Ananya Das

8/9/2019 Sip Report Ananya Das

http://slidepdf.com/reader/full/sip-report-ananya-das 74/80

Page 75: Sip Report Ananya Das

8/9/2019 Sip Report Ananya Das

http://slidepdf.com/reader/full/sip-report-ananya-das 75/80

75

Page 76: Sip Report Ananya Das

8/9/2019 Sip Report Ananya Das

http://slidepdf.com/reader/full/sip-report-ananya-das 76/80

Page 77: Sip Report Ananya Das

8/9/2019 Sip Report Ananya Das

http://slidepdf.com/reader/full/sip-report-ananya-das 77/80

77

Page 78: Sip Report Ananya Das

8/9/2019 Sip Report Ananya Das

http://slidepdf.com/reader/full/sip-report-ananya-das 78/80

78

Page 79: Sip Report Ananya Das

8/9/2019 Sip Report Ananya Das

http://slidepdf.com/reader/full/sip-report-ananya-das 79/80

79

Page 80: Sip Report Ananya Das

8/9/2019 Sip Report Ananya Das

http://slidepdf.com/reader/full/sip-report-ananya-das 80/80


Recommended