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A

Project Report
On
A STUDY ON FUNDAMENTAL ANALYSIS OF MINING INDUSTRY IN
INDIA

Submitted
to
Yashwantrao Chavan, Maharashtra Open University, (Nashik)

In partial fulfillment for award of Degree of

Master of Commerce

(Course codeM17)

Submitted by

Miss. Priya Apkaje


( PRN No. 2015017000558001)

Under the Guidance of


Prof Shreya Sharma

Through

City Premier College, YCMOU Study Centre (44234)


Nagpur

(2016-17)
CERTIFICATE

This is to certify that the project entitled A STUDY ON FUNDAMENTAL


ANALYSIS OF MINING INDUSTRY IN INDIA " in partial fulfillment for
award of Degree of Master of Commerce examination, had not been submitted
for any other examination and does not form part of any other course undergone
by the candidate.

It is further certified that she has completed his project as prescribed by

Yashwantrao Chavan Maharashtra Open University.

Project Guide

Prof Shreya Sharma

Place:

Date:
DECLARATION

I here-by declare that the project entitled A STUDY ON FUNDAMENTAL


ANALYSIS OF MINING INDUSTRY IN INDIA has been completed by me in
partial fulfillment for award of Degree of Master of Commerce examination, as
prescribed by Yashwantrao Chavan Maharashtra Open University and had not
been submitted for any other examination and does not form the part of any
other course undergone by me.

(Miss. Priya Apkaje)

Place:

Date:
ACKNOWLEDGEMENT

With immense pride and sense of gratitude, I take this golden opportunity
to express my sincere regards to City Premier College, Study Centre
YCMOU Nagpur.

I am extremely thankful to my Project Guide Prof Shreya Sharma


for her project guideline throughout the project. I tender my sincere
regards to them for giving me their outstanding guidance, enthusiastic
suggestions and invaluable encouragement which helped me to the
completion of the project.

I will be failing in my duty if I do not thanks to the Head of Study Centre &
Staff members of College Nagpur for their kind Co-operation.

I would like to thank all who helped me in making this project complete
and Successful one.

Miss. Priya Apkaje


PAGE NO.
Sr. No. PARTICULARS

Introduction
1. Topic
Company Profile
2. Literature review

3. Objectives of the study

4. Scope of the study

5. Research Methodology

6. Data analysis and Interpretation

7. Findings

8. Conclusion

9. Suggestions

10. Limitations of the study

11. Bibliography

Index
Introduction:-
Fundamental analysis, in finance, is the analysis of a business's financial
statements (usually to analyze the business's assets , liabilities, and earnings); health and
its competitors and markets. When applied to futures and forex , it focuses on the overall state
of the economy, and considers factors including interest rates, production, earnings,
employment, GDP, housing, manufacturing and management. When analyzing a stock,
futures contract, or currency using fundamental analysis there are two basic approaches one
can use: bottom up analysis and top down analysis.Fundamental analysis is performed on
historical and present data, but with the goal of making financial forecasts.Fundamental
analysis comes under the heading security analysis.
Security analysis is the analysis of tradeable financial instruments called securities. These
can be classified into debt securities,equities, or some hybrid of the two. More
broadly, futures contracts and tradeable credit derivatives are sometimes included. Security
analysis is typically divided into fundamental analysis, which relies upon the examination of
fundamental business factors such as financial statements, and technical analysis, which
focuses upon price trends and momentum. Quantitative analysis may use indicators from both
areas.
Fundamental analysis is performed on historical and present data, but with the goal of making
financial forecasts. There are several possible objectives:

to conduct a company stock valuation and predict its probable price evolution;
to make a projection on its business performance;

to evaluate its management and make internal business decisions;

and/or to calculate its credit risk.

Fundamental analysis includes:

1. Economic analysis

2. Industry analysis
3. Company analysis

The intrinsic value of the shares is determined based upon these three analyses. This value is
considered the true value of the share. If the intrinsic value is higher than the market price, it
is recommended to buy the share. If it is equal to market price, it is recommended to hold the
share; if it is less than the market price, then one should sell the shares.

Fundamental Analysis Tools

These are the most popular tools of fundamental analysis. They focus on earnings, growth,
and value in the market. For convenience, I have broken them into separate articles. Each
article discusses related ratios. There are links in each article to the other articles and back to
this article.

Use by different portfolio styles

Investors may also use fundamental analysis within different portfolio management styles.

Buy and hold investors believe that latching onto good businesses allows the
investor's asset to grow with the business. Fundamental analysis lets them find 'good'
companies, so they lower their risk and probability of wipe-out.
Value investors restrict their attention to under-valued companies, believing that 'it's
hard to fall out of a ditch'. The values they follow come from fundamental analysis.

Managers may use fundamental analysis to correctly value 'good' and 'bad' companies.
'Bad' companies' stock price will eventually fluctuate, creating opportunities for profit.

Managers may also consider the economic cycle in determining whether conditions
are 'right' to buy fundamentally suitable companies.

Contrarian investors hold that "in the short run, the market is a voting machine, not a
weighing machine".Fundamental analysis allows a broker to make his or her own
decision on value, while ignoring the opinions of the market.
In addition, managers may use fundamental analysis to determine future growth rates
for buying high priced growth stocks.

Lastly, managers may include fundamental factors along with technical factors in
computer models (quantitative analysis).

Top-down and bottom-up approaches

Investors using fundamental analysis can use either a top-down or bottom-up approach.

The top-down investor starts their analysis with global economics, including both
international and national economic indicators; such as GDP growth
rates, inflation, interest rates, exchange rates, productivity, and energy prices. They
subsequently narrow their search to regional/industry analysis of total sales, price levels,
the effects of competing products, foreign competition, and entry or exit from the
industry. Only then do they refine their search to the best business in the area being
studied.
The bottom-up investor starts with specific businesses, regardless of their
industry/region, and proceeds in reverse of the top-down approach.

Procedures

The analysis of a business' health starts with a financial statement analysis that
includes financial ratios. It looks at dividends paid, operating cash flow, new equity issues,
and capital financing. The earnings estimates and growth rate projections published widely
by Thomson Reuters and others can be considered either 'fundamental' (they are facts) or
'technical' (they are investor sentiment) based on your perception of their validity.

Determined growth rates (of income and cash) and risk levels (to determine the discount rate)
are used in various valuation models. The foremost is the discounted cash flow model, which
calculates the present value of the future

dividends received by the investor, along with the eventual sale price; (Gordon model)
earnings of the company;

or cash flows of the company.


The amount of debt a company possesses is also a major consideration in determining its
health. It can be quickly assessed using the debt ratio and the current ratio (current
assets/current liabilities).

The simple model commonly used is the P/E ratio (price-to-earnings ratio). Implicit in this
model of a perpetual annuity money is that the 'flip' of the P/E is the discount rate appropriate
to the risk of the business. The multiple accepted is adjusted for expected growth (which is
not built into the model).

Growth estimates are incorporated into the PEG ratio. Its validity depends on the length of
time analysts believe the growth will continue. IGAR models can be used to impute expected
changes in growth from current P/E and historical growth rates for the stocks relative to a
comparison index.

Computer modelling of stock prices has now replaced much of the subjective interpretation
of fundamental data (along with technical data) in the industry. Since about year 2000, with
computers now able to crunch vast amounts of data, a new career has been invented. At some
funds (called Quant Funds) the manager's decisions have been replaced by proprietary
mathematical models.

Automation

The process of fundamental analysis has significantly dropped in difficulty over the past 10
years. Ever since computers became a household product, people have built software
designed to make the investor's life easier. Fundamental analysis is one of the most time
consuming forms of analysis and with the fast paced trading style of the 21st century, where
markets are dominated by HFT firms and day traders, it is difficult to keep up with the market
in a timely fashion. One way to go about cutting down analysis time, is to subscribe to either
free or paid screening services. Screening services will allow you to search the entire market
for stocks that match the quantitative fields you are looking for. These software then
automatically give you results, cutting down on time spent sifting through SEC
Company Profile:-

1. National Mineral Development Corporation

NMDC Limited (NMDC or the Company) is under the administrative control of the
Ministry of Steel, Government of India. Since it was established in 1958, the Company is
involved in the exploration of a wide range of minerals including iron ore, copper, rock
phosphate and lime.

NMDC produces about 30 million tonnes of iron ore from 3 fully mechanized mines, 2 of
which are in Chhattisgarh State (Bailadila Deposit) and another one in Karnataka (Donimalai
Iron Ore Mines). The Company, one of the largest producer of the primary steel-making raw
material in the country, produced 175.56 lakh tonnes of iron ore during the first nine months
of the current fiscal, a 13.3% dip over 202.79 lakh tonnes produced a year ago.
The Company's customers name includes: JSW Steel, Essar Steel, Rashtriya Ispat Nigam,
MMTC, Ispat Industries and Welspun Max Steel.

2 . COAL INDIA

Coal India Limited (CIL) is an Indian state-controlled coal mining company headquartered
in Kolkata, West Bengal, India. It is the largest coal producer company in the world and
contributes around 82% of the coal production in India. It produced 494.24 Million tonnes of
coal during FY 201415 and earned a revenue of INR 954.35 billion from sale of coal in the
same financial year. As on 14 October 2015,Union Government of India owns 79.65% of the
shares in CIL and controls the operations of CIL through Ministry of Coal. In April 2011, CIL
was conferred the Maharatna status by the Union Government of India. As on 14 October
2015, its market capitalisation was INR 2.11 trillion (US $32.59 billion) making it India's 8th
most valuable company by market value.
3 . MOIL

MOIL Limited (formerly Manganese Ore


India Limited) is a miniratna state-
owned manganese-ore mining company headquartered in Nagpur , India. With a market
share of 50%, it was the largest producer of manganese ore in India in the fiscal year 2008.
MOIL Limited has been ranked #486 among the 500 top companies in India and 9th in the
Mines and Metals Sector of the Fortune India 500 list for 2011. MOIL operates 10 mines, six
located in Nagpur and Bhandara districts of Maharashtra and four in the Balaghat district
of Madhya Pradesh. Of the 10, seven are underground mines (Kandri, Munsar, Beldongri,
Gumgaon, Chikla, Balaghat and Ukwa mines) and three are opencast mines (Dongri Buzurg,
Sitapatore, and Tirodi). Its Balaghat mine is the deepest underground manganese mine in
Asia.

In December 2010, the government divested about 20% of its equity through an IPO. Of the
20%, the Government of Indias share will be 10%, and the governments of Maharashtra and
Madhya Pradesh will each divest 5% of the total equity. At present, the Government of India
holds 81.57% share in the company, Maharashtra government has 9.62%, and Madhya
Pradesh Government holds 8.81.

Literature Review:-

Before doing the analysis following papers were referred.

Abarbanell, J., and Bushee, B. (1998). Abnormal returns to a fundamental analysis strategy.
Accounting Review 73(1): 19-45.
This paper examines empirical relations between rules of fundamental analysis and actual
future earnings changes, analysts earnings forecast revisions, and contemporaneous stock
returns. Our results indicate that many of the fundamental signals are related to future
earnings and forecast revisions in the same way they are related to returns, however some
significant exceptions are noted. Conditioning the relations on variables reflecting the
macroeconomic, firm-specific and industry-specific contexts in which firms operate provides
some further refinement to our understanding of the information contained in the fundamental
signals. Additional tests suggest analysts forecast revisions display generalized under
reaction to the future earnings information contained in some of the fundamental signals.

Altman, E. (1968). Financial ratios, discriminant analysis and the prediction of corporate
bankruptcy. The Journal of Finance 23(4): 589-609
This paper examine whether the application of fundamental analysis can yield significant
abnormal returns. Using a collection of signals that reflect traditional rules of fundamental
analysis related to contemporaneous changes in inventories, accounts receivables, gross
margins, selling expenses, capital expenditures, effective tax rates, inventory methods, audit
qualifications, and labor force sales productivity, we form portfolios that earn an average 12-
month cumulative size-adjusted abnormal return of 13.2 percent. We find evidence that the
fundamental signals provide information about future returns that is associated with future
earnings news. Moreover, a significant portion of the abnormal returns is generated around
subsequent earnings announcements. These findings are consistent with the underlying focus
of fundamental analysis on the prediction of earnings. Significant abnormal returns to the
fundamental strategy are not earned after the end of one year of return cumulation, indicating
little support for the idea that the signals capture information about multiple-year-ahead
earnings not immediately impounded in price or about long-term shifts in firm risk.
Additional analysis on a holdout sample suggests that the strategy continues to generate
abnormal returns in a period subsequent to the introduction of the fundamental signals in the
literature, and contextual analyses indicate that the strategy performs better for certain types
of firms (e.g., firms with prior bad news).
Objective of the study:-
To evaluate Indian Economy through economy analysis.

To evaluate the process of mining industry in economy through economy analysis.

To valuate the mining industry .

To evaluate the position of selected companies in comparison with other company of


mining industry through industry analysis.

To assess the performance of selected public companies listed in BSE and NSE
through company analysis.
Scope of the study:-

To conduct a company stock valuation and predict its probable price evolution.
To make a projection on its business performance.
Methodology and database:-
Two methods are used for data collection:-

Primary data collection :- A primary source is the original sources from which the
data is directly collected. It is the first hand data collected from the field.

Secondary data collection :- A secondary source is a publication reporting the data


which have been gathered by the authority and for which other are responsible.

The study is based on secondary data.


Evaluation of Indian economy through Economy analysis:-
Economy analysis
India GDP:-
Year GDP GVA at basic Private Investment
price consumption demand
2012-13 5.6 5.1 5.3 4.9
2013-14 6.6 6.4 6.8 3.4
2014-15 7.2 7.1 6.2 4.9
2015-16 7.6 7.3 7.6 5.3

Interpretation:-
The above graph shows the growth rate of GDP GVA at basic price Private consumption and
Investment demand respectively. Tremendous increase in the GDP is seen over the last 5
financial years. The current GDP is noticed to accelerate to 7.6%. Gross Value Added at basic
price is seen to increase from 5.1% in the year 2012-13 to 7.6 in 2015-16. Private
consumption growth was surprisingly projected at 7.6% during the financial year from 6.2%
a year ago, mostly supported by urban demand and despite a rural slump. Investment demand
remained weak, although it is estimated to pick up to grow 5.3% in 2015-16 from 4.9% in the
previous year.
India Economy:-
Particular 2011 2012 2013 2014 2015

1,211 1,227 1,243 1,260 1,276

GDP per capita (USD) 1,534 1,491 1,504 1,623 -

GDP (USD bn) 1,857 1,829 1,870 2,044 -

Economic Growth (GDP, annual variation in 6.7 5.6 6.6 7.2 -


%)

Consumption (annual variation in %) 9.2 5.3 6.8 6.2 -

Investment (annual variation in %) 12.6 4.9 3.4 4.9 -

Industrial Production (annual variation in %) 3.0 1.1 -0.1 2.8 -

Public Debt (% of GDP) 68.1 67.5 65.8 66.1 -

Money (annual variation in %) 6.0 7.5 12.3 10.2 -

Inflation Rate (CPI, annual variation in %) 9.0 10.5 8.2 5.3 -

Inflation Rate (CPI, annual variation in %) 8.5 10.2 10.0 5.9 -

Inflation (PPI, annual variation in %) 9.0 7.4 6.0 2.0 -

Policy Interest Rate (%) 8.50 7.50 8.00 7.50 -

Stock Market (annual variation in %) -10.5 8.2 18.9 24.9 -

Exchange Rate (vs USD) 50.88 54.28 60.02 62.29 -

Exchange Rate (vs USD, aop) 47.89 54.37 60.42 61.14 -

Current Account (% of GDP) -4.2 -4.8 -1.8 -1.4 -

Current Account Balance (USD bn) -78.8 -87.4 -32.8 -27.6 -

Trade Balance (USD billion) -183.8 -189.5 -136.6 -137.6 -

Exports (USD billion) 306 300 314 310 -

Imports (USD billion) 490 490 451 448 -

Exports (annual variation in %) 21.7 -1.8 4.6 -1.2 -

Imports (annual variation in %) 32.4 0.1 -8.0 -0.6 -


Interpretation:-
The above chart shows the Indian Economy for last 4 financial years. It is seen that GDP
grows with economic growth every year. The economic growth affects the GDP. Whereas the
public debt decreases with every year. In the year 2011 it was 68% which dropped till 66% in
2014. The drastic fluctuation is seen in the stock market every year. In 2011 it was -10.5%
but then managed to convert that percentage into a positive digit of 8.2% in the next year.
After that it managed to increase with every year till 24.9% in 2014. The exchange rate is
seen to increase every year. The export shows a fluctuation with every here it was highest in
2013. Whereas the importing rate keeps on decreasing with every year.

Position of metal and mining industry in Indian Economy


The Mining industry in India is a major economic activity which contributes significantly
to the economy of India.
The GDP contribution of the mining industry varies from 2.2% to 2.5% only but going by the
GDP of the total industrial sector it contributes around 10% to 11%. Even mining done on
small scale contributes 6% to the entire cost of mineral production. Indian mining industry
provides job opportunities to around 700,000 individuals. Indias metal and mining industry
was estimated to be $106.4bn (68.5bn) in 2010.
Future of the mining industry in India

Despite the slowdown, India is still the second-fastest growing economy, after China.
Demand for minerals, as well as for mining services, is robust in the country.
Mining in India is becoming more structured, and companies have started outsourcing
part of the project to mining service companies.

The largest mining company in India, i.e., Coal India Limited (CIL), plans to invest
around INR254 billion during the Twelfth FYP (201217).

Contract mining could prove to be a solution to the on-going current coal deficit in
country.
The industry contributes 10-11% in the total GDP as India is the largest producer of sheet
mica, the third largest producer of iron ore and the fifth largest producer of bauxite in the
world. Indias metal and mining industry was estimated to be $106.4bn (68.5bn) in
2010.India has significant sources of coal (fourth-largest reserves in the world), bauxite,
titanium ore, chromite, natural gas, diamonds, petroleum, and limestone. According to the
2008 Ministry of Mines estimates: India has stepped up its production to reach the second
rank among the chromite producers of the world. Besides, India ranks 3rd in production of
coal & lignite, 2nd in barites, 4th in iron ore, 5th in bauxite and crude steel, 7th in manganese
ore and 8th in aluminium.

The valuation of mining industry

Industry analysis
Interpretation:-

The above graph shows the correlation of mining industry with other industries in account
with current commodity prices. It is seen that the mining industry is leading with 0.86.
whereas oil and gas is at 0.50 flat steel with 0.49 and pulp with 0.46 respectively .Which
indicates that mining industry leads over the other three industries with huge gap of 0.36.

Comparison of selected public companies with another companies of

metal and minig industry


Interpretation:-
The above chart shows the position of the three selected companies with comparison to other
companies of metal and mining industry.
It is seen that Coal India tops the chart with market capitalization of Rs.229,883.92 Cr.
Followed by NMDC with market capitalization of 64,902.14. Coal India and NMDC are
among the top 5 companies in mining industry. Whereas MOIL is among the top 10
companies holding the 6th position in metal and mining industry.

Assessing the performance of selected public companies listed in BSE

and NSE.
Company analysis
1. Coal India
coal based electricity
Years coal production generation
2009-2010 20000 84193
2010-2011 40000 93918
2011-2012 60000 112022
2012-2013 80000 130022
2013-2014 100000 145475
2014-2015 120000 166686
`

Interpretation:-
The above graph shows the link between coal production and coal based electricity generation for last 6
financial years. It is clearly seen that the electricity generation increases with the production of coal with
every year. It means that the coal based electric generation increases with the production of coal every
year

Financial statement last3 years:-


Particular March-15 March-14 March-13

Net Sales 387.12 314.25 352.25

PAT 13,383.39 15,008.54 9,794.32

Equity 6316.36 6316.36 6316.36

Reserves 10,417.83 10,128.88 14,199.80

Debt 0 0 914.39

Net worth 32,331.74 29,988.30 27,114.59

RoE/RoNW 80% 91% 48%

Debt:Equity 0 0 0.04456926

Sales growth 23%

PAT Growth -11%

Interpretation:-
The analysis is done to check whether the above company is a profitable investment.The
company has to fulfil certain criteria. Those are as under.The debt to equity ratio should
always b less than 1.The RoE/RoNW should be above 25%It should have Sales Growth and
PAT growth.And from the above analysis Coal India satisfies the above criteria as its debt to
equity ratio is less than 1 nearly equal to 0 and its RoE/RoNW is greater than 25%.And it
shows a sales growth of 23%Which means that Coal India is a safe investment. . The reason
for the growth every year was the boost from a slower pace of increase in operating costs.
Employee costs declined 2%, power and fuel expenses increased by a mere 1.5% and even
though contractual expenses increased 30%, it was below some analysts forecast.

2. MOIL
Company Performance:-
particulars 2011-12 2012-13 2013-14 2014-15
Net Sales(Cr) 899.58 967.12 1021.28 823.25
Income(Cr) 1102.90 1202.39 1324.60 1139.85
Dividend(Cr) 84.00 92.40 126.00 142.80
Return on 16.82 15.61 16.29 12.66
Equity(%)
EPS 24.45 25.70 30.33 25.48
Return on 17.23 16.78 15.45 9.60
Capital
Employed(%)

Interpretation:-
The above graph shows the performance of MOIL with respect to 4 financial years. The Net
Sales shows a gradual increase with every year till 2013-14 which goes up to 1021Cr. And
then slip down to 823Cr in the year 2014-15. Which has a reflection on the income hence it
shows a peak in the year 2013-14 and then decreased in the next year. Although the dividend
increases with every year. The return on equity , EPS return on capital employed was the
highest in the year 2013-14 then slipped down in the year 2014-15.

Financial statement for last 3 years:-


Particular March-15 March-14 March-13
Net Sales 823.25 1021.28 967.12
PAT 428.01 509.56 431.72
Equity 168 168 168
Reserves 3213.7 2959.33
Debt 11.01 0 0
Net worth 3,381.70 3,327.33 2765.04
RoE/RoNW 13% 16% 16%
Debt:Equity 0.0653371 0 0
Sales growth 11%
PAT Growth -16%

Interpretation:-
Manganese ore prices have been under pressure throughout the year. The reason for the
decrease in sales growth is the company had to reduce prices of its various grades of
manganese ores by about 27% during the year. Despite that, your company has been able to
perform quite satisfactorily. With good marketing strategy, pricing policy and better product
mix, your company has been able to maintain nearly same sales realization at ` 8233 PMT in
comparison to ` 8351 PMT previous year. However, availability and supply of High grade
Manganese Ore in international market is still a matter of concern for manganese industry in
the country which continues putting pressure on pricing of manganese. Your company has
recorded sales turnover at ` 823.25 Crores during the fi nancial year 2014-15, as compared to
` 1021.28 Crores.The analysis is done to check whether the above company is a profitable
investment.The company has to fulfil certain criteria. Those are as underThe debt to equity
ratio should always b less than 1.The RoE/RoNW should be above 25%It should have Sales
Growth and PAT growth.And from the above analysis Coal India satisfies the above criteria
as its debt to equity ratio is less than 1 nearly equal to 0 but its RoE/RoNW is less than
25%.And it shows a sales growth of 11%Which means that MOIL is a safe investment.

3. NMDC
Past three year analysis of NMDC:-
Interpretation:-
The above chart shows the growth of NMDC by every year. The net sales of this company is
increasing every year from 10704 in the year 2013 to 12184 in the year 2015.Though the net
profit of increasing slowly with every year from 6,342 to 6,696.The earning per share in the
year 2013 was 16.0 though it dropped down to 15.4 in the year 2014 but again it showed a
boom in the year 2015.

Financial statement for last 3 years:-


Particular March-15 March-14 March-13

Net Sales 12,347.67 12,058.30 10,704.27

PAT 6,421.86 6,420.08 6,342.37

Equity 396.47 396.47 396.47

Reserves 31,935.27 29,591.83 27,114.59

Debt 0 0 0

Net worth 32,331.74 29,988.30 27,114.59

RoE/RoNW 20% 21% 23%

Debt:Equity 0 0 0

Sales growth 2%

PAT Growth 1%

Interpretation:-
The analysis is done to check whether the above company is a profitable investment.The
company has to fulfil certain criteria. Those are as under . The debt to equity ratio should
always b less than 1. The RoE/RoNW should be above 25%.It should have Sales Growth and
PAT growth. And from the above analysis Coal India satisfies the above criteria as its debt to
equity ratio is less than 1 equal to 0 but its RoE/RoNW nearly equal 25%. And it shows a
sales growth of 2% Which means that NMDC is a safe investment.

Findings:-
The findings are based on the analysis and the study done on the three public sector
companies. The information is collected from the secondary data.All the four
objectives were effectively satisfied.
According to the analysis-
The debt to equity ratio of the three companies are:
NMDCS average long term debt to equity ratio for the last three financial
years is almost equal to zero which indicates that the company operates with
low level or no debt.
Coal Indias average long term debt to equity ratio for the last three financial
years has been 0.045times which indicates that the company believes in
operating with low level debt.
MOILs average long term debt to equity ratio for the last three financial years
has been 0.06 which indicates that the company operates with low level
debt.

And the RoE/RoNW of


NMDC is nearly equal for 25% for the last three financial years.
Coal India is more than 25% throughout the three financial years.
MOIL is comparatively low than the other two companies and its RoE/RoNW keeps
fluctuating between 10-15% for the last three financial years.

Conclusion:-
Companies operating with high debt to equity on their balance sheets are vulnerable
to economic cycles.

Debt to equity ratio higher than 0.6 - 0.8 could affect the business of a company and
its results of operations hence debt to equity ratio should be less than 1.

The RoE/RoNW should always be greater than 25% for better returns and
investments.

The company should be listed in BSE or NSE.

When the company satisfies the above criteria only then the company is safe to invest.

From the above points and the findings the conclusion can be made that the
RoE/RoNW of NMDC and Coal India is greater than or nearly equal to 25%.Whereas
MOIL lags behind with 16% in the three financial years.

But the debt to equity ratio of all the three companies is less than 1 which means that
the companies operates with low level of debt. Which satisfies the second criteria.

We can also see the effective sales growth after every year.

The sales growth of NMDC is not that remarkable it grows by only 2%.
But Coal India shows a tremendous growth of 23% in a year.Which satisfies the third
criteria.

The PAT growth is also seen.


Hence one should invest in the above three companies because-
Its debt to equity ratio is less than 1.
RoE/RoNW is greater than or nearly equal to 25%
The companies shows sales growth.
The PAT growth can also be seen in the three years.

Suggestions:-
According to the analysis done I would like to suggest that coal India is the best
investment for long term point of view.
MOIL should strive hard to convert its PAT and Sales growth into positive digits. And
it should lower its debt also.
NMDC will be considered as a better option for investment than MOIL because it has
a sales growth with PAT growth though it is minimal but still it is growing.

Limitation of study:-

The study is restricted to three years only.


The sample is limited to public sector only listed in BSE and NSE.

Study is based on secondary data only.

Bibliography:-

Abarbanell, J., and Bushee, B. (1997). Fundamental analysis, future earnings, and stock
prices. Journal of Accounting Research 35(1)
Abarbanell, J., and Bushee, B. (1998). Abnormal returns to a fundamental analysis strategy.
Accounting Review 73(1): 19-45.
Altman, E. (1968). Financial ratios, discriminant analysis and the prediction of corporate
bankruptcy. The Journal of Finance 23(4): 589-609

NO ABSTRACT AVAILABLE

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Books Referred:-
Sr. No. Book Name Authors Name Edition
1 Security Analysis & Portfolio Prasanna Chandra First Edition
management 2002
2 Security Analysis & Portfolio V.A Avadhani 2007
management

Websites referred:-
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www.bseindia.com
www.nse-india.com
www.google.com
Wikipedia free encyclopedia
Economic times

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