1

A PROJECT REPORT ON
EQUITY ANALYSIS OF LARSEN & TOUBRO USING
CAPITAL ASSET PRICING MODEL
Submitted in partial fulfilment of the requirement for the Award of the
degree of
MASTER OF BUSINESS ADMINISTRATION
Submitted By
ILE.MALAVIKA
(Roll No. : 132312672039)
UNDER THE GUIDANCE
Mrs: SWATI MATHUR
(Associate Professor)


Department of Business Management
Swami Vivekananda P.G. College, Secunderabad.
(Approved by AICTE &Affiliated to Osmania University)
(2012-2014)
2

DECLARATION


I, ILE.MALAVIKA the undersigned, hereby declare that the project report entitled
EQUITY ANALYSIS OF LARSEN & TOUBRO USING CAPITALASSET PRICING
MODEL, has carried out by me and submitted by me in partial fulfillment of Master of
Business Administration of (Osmania University). I also declared that this project has not
been submitted in any other university or institution for the award of any other
degree/diploma.


Place: (ILE.MALAVIKA)
Date:

















3

ACKNOWLEDGEMENT

This project bars imprint of all those to have directly or indirectly helped and extended their
kind support in completing this project. My sincere thanks to Dr.KeshmoniSrinivas,
Director of SVPG, for giving me and opportunity to complete this project. I would, specially
like to mention about my project guide, and my mentor, Mrs. Swati Mathur whom I, owe a
profound sense of obligation respect for guiding me and playing a pivotal role, right from the
start till the completion of the project. I also thank for her for motivating, encouraging and
making me a person, I am today and making me capable of completing of this project.
However, I accept the sole responsibility for any possible errors of omission and would be
extremely, grateful to the leaders of this project, if they bring such mistakes to my notice.



Place: ILE.MALAVIKA
Date: H.T.NO: 132312672039












4

INDEX

S.NO TITLE

P.no
CHAPTER-1

Introduction
Need for the study
Scope of the study
Objectives of the study

2
4
4
4

CHAPTER-2 INDUSTRY PROFILE
Company profile
Major business
Major competitors
Major clients
Growth rate

6
8
14
14
15
CHAPTER-3 REVIEW OF LITERATURE 20
CHAPTER-4 RESEARCH METHODOLOGY 32
CHAPTER-5 DATA ANALYSIS& INTERPRETATION 34
CHAPTER-6
Findings,
Suggestions &
Conclusion

48
49
50

APPENDIX BIBLIOGRAPHY








5

LIST OF TABLES

Table no Title Page no
5.1 Equity shares 35
5.2 share prices 38
5.3 Calculations of returns 39
5.4 Calculations of return on Sensex 40
5.5 Calculation of Beta 40
5.6 Capital Asset Pricing Model 41
5.7 Return of investment 42
5.8 Net profit after interest and tax 43
5.9 Shareholders funds 44
5.10 Equity shares 45
5.11 Assets 46
5.12 Earnings per share 47












6

GRAPHS

Graph no title Page no
2.1 Electrical & electronics segment growth 15
2.2 IT & Technology Services 16
2.3 Financial Services 17
2.4 Development Projects 18
2.5 Machinery & Industrial Products Segment 18
2.6 Engineering & Construction Segment 19
5.1 Market portfolio 37
5.2 Price for L&T 38
5.3 Return 39
5.4 Return on investments 42
5.5 Net profit after interest and tax 43
5.6 Shareholders fund 44
5.7 Equity shares 45
5.8 Assets 46
5.9 Earnings per share 47









7

ABSTRACT

The title equity shares of capital asset pricing model of LARSEN & TOUBRO LIMITED.
The main idea behind this study is to analyse the capital asset pricing position of the
company.
This capital asset pricing model is the most important factor to manage and utilize the share
price, capital asset and position of the LARSEN & TOUBRO Ltd in the security market in
effective manner. Thus the aim of the study is to analyse the efficiency of the shares in
LARSEN & TOUBRO LIMITED.
This research is done with the help of secondary data and the secondary data is generated
from the internet of the company profile. The financial efficiency can be measured by using
various financial tools such as risk, return, systematic risk and Asset valuation, Value of the
firm all this analysis is projected with the help of a chart.















8













CHAPTER-I
INTRODUCTION












9

INTRODUCTION
Capital Asset pricing model presents a very simple theory that delivers a simple result. The
theory says that the only reason an investor should earn more, on average, by investing in one
stock rather than another is that one stock is riskier. Not surprisingly, the model has come to
dominate modern financial theory. But does it really work?
It's not entirely clear. The big sticking point is beta. When Professors Eugene Fama and
Kenneth French looked at share returns on the Bombay Stock Exchange, the American Stock
Exchange and Nasdaq between 1963 and 1990, they found that differences in betas over that
lengthy period did not explain the performance of different stocks. The linear relationship
between beta and individual stock returns also breaks down over shorter periods of time.
These findings seem to suggest that CAPM may be wrong.
While some studies raise doubts about CAPM's validity, the model is still widely used in the
investment community. Although it is difficult to predict from beta how individual stocks
might react to particular movements, investors can probably safely deduce that a portfolio of
high-beta stocks will move more than the market in both direction, and a portfolio of low-
beta stocks will move less than the market.

This is important for investors - especially fund managers - because they may be unwilling to
or prevented from holding cash if they feel that the market is likely to fall. If so, they can
hold low-beta stocks instead. Investors can tailor a portfolio to their specific risk-return
requirements, aiming to hold securities with betas in excess of 1 while the market is rising,
and securities with betas of less than 1when the market is falling.

Not surprisingly, CAPM contributed to the rise in use of indexing - assembling a portfolio of
shares to minimise a particular market - by risk averse investors. This is largely due to
CAPM's message that it is only possible to earn higher returns than those of the market as a
whole by taking on higher risk (beta).

Valuation is the process of converting a forecast into an estimate of the value of the firm or
some component of the firm. At some level, nearly every business decision involves
valuation within the firm Capital budgeting involves consideration of how a particular project
10

will affect firm value. Strategic planning focuses on how value is influenced by larger sets of
actions.

Outside of the firm, security analysts conduct valuation to support their buy/sell decisions,
and potential acquirers estimate the value of target firms and the synergies they might offer.
Valuation is necessary to price an initial public offering and to inform parties to sales, estate
statements, and divisions of property involving on-going business concerns.

Return on Equity is growth to reduce forecast horizons for estimating the equity value-to-
book multiple. Firm long-term ROEs are affected by such factors as barriers to entry in their
industries, change in production or delivery technologies, and quality of management.
































11

NEED FOR THE STUDY

The Capital asset pricing model is used to predict prices and invest in the stock market
accordingly.

The present study will be helpful to the investors for forecasting the future market prices and
invest accordingly.

Research needs data on expected prices to test it.




SCOPE

Capital asset pricing model and stock return analysis are helpful to the investors and
organisation.

CAPM helpful to forecast future through the Expected return.

Investors requires for assuming the risk of holding shares.

The internal risks and external risks of the company guide the investors to make an
appropriate investment on the stocks.

Investors needs to know about expected rate of return and capital asset pricing and position
of the company.

Investors have to compare company performance with the standards through the previous
year share price of the company.




OBJECTIVES OF THE STUDY

To find market capitalisation of LARSEN& TOUBRO.

To find intrinsicvalue of the shares using Capital asset pricing model.

To compare intrinsic value with market price of share and advice the investor.





12














CHAPTER-II

INDUSTRY PROFILE






















13

Company Profile

Larsen & Toubro is a US$14 billion technology, engineering, construction and manufacturing
company, with global operations. The Company addresses critical needs in key sectors
including infrastructure, construction, hydrocarbon, defence and power.

A strong, customer-focused approach, conformance to global HSE standards and the constant
quest for top-class quality have enabled the Company to sustain leadership in its major lines
of business for over 75 years.

L&T is ranked 4th by Newsweek in the global list of green companies in the industrial sector.
Forbes rates L&T the 9th Most Innovative Company in the world.

History

The evolution of L&T into a major engineering and construction organization is among the
more remarkable success stories in Indian industry. It was founded in Mumbai (then
Bombay) in 1938 by two Danish engineers, Henning Holck-Larsen and SorenKristian
Toubro. Beginning with the import of machinery from Europe, L&T took on engineering and
construction assignments of increasing sophistication. Today, the company sets engineering
benchmarks in terms of scale and complexity.

Vision

L&T shall be a professionally-managed Indian multinational, committed to total customer
satisfaction and enhancing shareholders value.

L&T-its shall be an innovative, entrepreneurial and empowered team constantly creating
value and attaining global benchmarks.

L&T shall foster a culture of caring, trust and continuous learning while meeting expectations
of employees, stockholders and society.




14

Corporate Sustainability

L&T was the first company in India in the engineering & construction space to publicly
disclose its sustainability performance. The Companys annual Sustainability Reports
highlight achievements and objectives across the traditional three Ps of Planet, People and
Profits. All our Reports are rated A+ by the Netherlands-based Global Reporting Initiatives,
indicating the highest level of disclosure. The recognition that the Company has secured from
forums around the world affirm public perception of L&T as an organization that contributes
significantly to the wellbeing of people.



Record of Achievements

The prestigious Terminal 3 of New Delhi airport - constructed in a record 36 months.
Indias first monorail in Mumbai.
Building major infrastructure projects including ports and metro rail systems.
Technological support for Chandrayaan I - Indias maiden moon mission, and for INS
Arihant -Indias first nuclear powered submarine.
The world's largest coal gasifies made in India and exported to China.
The worlds biggest EO reactor for a petrochemical complex in the Gulf.
The worlds largest FCC regenerator for a refinery.



















15

MAJOR BUSINESS

Hydrocarbon

L&T Hydrocarbon delivers 'design to build' engineering and construction solutions on a
turnkey basis in the oil & gas, petroleum refining, chemicals & petrochemicals and fertilizer
sectors. In-house expertise, experience, and strategic partnerships enable it to deliver a single
point solution for all projects from front end design through engineering, fabrication,
project management, construction, installation and commissioning. Modular fabrication
facilities at Hazira (India, west coast), Kattupalli (India, east coast) and Sohar (Oman) give
L&T all-weather delivery capability.

The Companys operations are characterized by an overriding emphasis on safety, on-time
delivery; cost competitiveness, high quality standards with focus on best in class IT security
practices. Integrated strengths coupled with experienced and highly skilled work force, are
key enablers in delivering critical and complex projects.

Transportation Infrastructure

L&T is engaged in the turnkey construction of major infrastructure projects - expressways,
bridges, runways and railway projects. The Company has been a leading player in rail
infrastructure development for more than three decades, and has brought in new technologies
and mechanized construction. L&T is the only private organization in India qualified to
undertake integrated rail construction projects of the Indian Railways.

Heavy Civil Infrastructure

The company undertakes heavy civil constructions-underground metro rail corridors docks,
container terminals, wharves and berths, jetties, breakwater and shore protection and
caissons. It has the expertise to design special launching and erection techniques, including
special systems formwork for concrete deck on top of steel and concrete structures.

Comprehensive engineering, procurement and construction services are offered for
hydropower projects. L&T has also played a critical role in the development of technology
for the Indian nuclear power sector.

16

Building & Factories

L&T occupies leadership position in the construction of major airports, IT parks, turnkey
hospitals and residential buildings. Building & Factories Business undertakes projects on a
concept to commissioning basis. Its technological capabilities encompass tall towers and
eco-friendly green buildings. Major projects executed include Terminal 3 of the Delhi
International Airport. Its track record also includes landmarks structures such as the Bahai
Temple in New Delhi.

Power Transmission & Distribution

The focus is on sub-stations, industrial electrification, transmission line projects and railway
construction on the domestic front, and power transmission and distribution projects. L&T
has an extensive track record in the Middle East, and is recognized as a major player in the
region.

Water Projects & Solar Energy

L&Ts Water & Solar business caters to the entire value chain of water and solar EPC
businesses. The water and effluent treatment business covers water intake, transmission,
treatment and distribution including industrial waste water treatment & disposal and ordinary
waste water treatment & reuse segments. The water technology business uses advanced water
treatment technologies for complex treatment projects largely in the Middle East. L&Ts
solar EPC business comprises solar photovoltaic (PV), concentrated solar power (CSP).

Metallurgical & Material Handling

This Company undertakes turnkey construction contracts for projects in minerals & metals
sector, and bulk material handling projects. It is a leader in all its areas of operations. It has a
structural steel fabrication unit at Kanchipuram to meet the customized needs of its wide
client base.

Power

L&T offers turnkey solutions for the power sector with a wide capability spectrum covering
supercritical coal and gas based projects. The supercritical technology that L&T propagates is
greener than conventional techniques and represents a major advantage for industry. L&Ts
17

integrated capabilities and in-house expertise encompass virtually every aspect of design,
engineering, manufacture, construction and project management. The Companys integrated
manufacturing facility at Hazira near Surat is among the most advanced in the world for
manufacturing state of the art equipment for power plants - boilers, steam turbines,
pulverizes, pressure piping, coaxial fans, air-pre-heaters and electrostatic precipitators. The
complex also includes a modern casting and foundry shop.

Heavy Engineering

L&T is acknowledged as one of the top five manufacturing companies in the world in the
heavy engineering space. Operating at the higher end of the technological spectrum, L&Ts
offerings straddle the segments of process plants and the strategic sectors of defence, nuclear
and aerospace. New processes, products and materials have been introduced in
manufacturing. The Company also has the logistics capabilities of fabricating and supplying
over-dimensional equipment to tight delivery schedules. Globally-benchmarked workshops
are located at Powai in Mumbai, Hazira and Baroda in Gujarat, Talegaon in Maharashtra, and
Sohar in Oman.

Shipbuilding

Two modern shipyards - one on the west coast of India at Hazira, and the other on the east
coast at Kattupalli near Chennai establish L&T as a major shipbuilder. A state-of-the-art
Marine Design Centre is located at Chennai. L&T Shipbuilding focuses on four major
business segments: Building warships, submarines and auxiliary vessels; Building specialized
commercial ships; Repairs and re-fits of submarines as well as naval and commercial ships;
Ship conversions. The Hazira Shipyard has the capability to build sophisticated mid-sized
ships up to 20,000 t deadweight capacity, of 10 metres in length. The mega shipyard at
Kattupalli also includes a container port and an offshore modular fabrication yard. It has a
waterfront of 2.2 km, depth of 10m at berths and channel depths of 16 m.

Electrical & Automation

L&T is a major international manufacturer of a wide range of electrical and electronic
products and systems. In the electrical segment, the Company holds leadership position in
low tension switchgear in India, and is rapidly establishing itself in international markets.
18

The product range also includes custom-engineered LV and MV switchboards for industrial
sectors like power, refineries, petrochemical, cement. In the electronic segment are a wide
range of meters and complete control and automation systems for industries.

Information Technology

Larsen & Toubro InfoTech, a 100 per cent subsidiary of the L&T, offers comprehensive, end-
to-end software solutions and services with a focus on Manufacturing, BFSI and
Communications & Embedded Systems. It provides a cost cutting partnership in the realm of
offshore outsourcing, application integration and package implementation. Leveraging the
heritage and domain expertise of the parent company, its services encompass a broad
technology spectrum, catering to leading international companies across the globe.

Technology Services

L&T Technology Services provides leading-edge engineering solutions to multiple industry
sectors like automotive, aerospace, consumer electronics, consumer packaged goods, marine,
medical devices, off-highway equipment, railways, pharmaceuticals, oil & gas, utilities,
infrastructure and industrial products. With its global headquarters at Vadodara, the Company
operates through dedicated engineering centers in tandem with onsite teams worldwide. Its
client base includes several Fortune 500 companies.

Machinery & Industrial Products

The Company manufactures markets and provides service support for industrial products,
industrial machinery as well as construction and mining machinery. This includes a wide
range of industrial valves for critical applications, rubber processing machinery, surface
miners, hydraulic excavators, aggregate crushers and application-engineered welding alloys
and cutting tools.

Infrastructure Development

L&T Infrastructure Development Projects Limited, a subsidiary, leverages domain expertise
in construction and financial services, and is a major player in Public-Private-Projects in
India. L&T IDPL develops projects in various models - Build Own Transfer, Build Own
Operate Transfer, Build Own Operate Share Transfer, and other variants including the
19

annuity model. Major projects being executed by the Company include Hyderabad Metro
Rail - the largest public-private rail project in the world, and ports at Dhamra and Kattupalli.
Multiple highway projects around the country have established L&T IDPL as the leader in
the space.

Financial Services

L&T Financial Services - a publicly listed subsidiary - is a key player in Indias financial
services sector. Its subsidiaries include L&T Finance Limited, L&T Infrastructure Finance
Company Limited, L&T Asset Management Company Limited and L&T General Insurance
Company Limited.

L&Ts Financial Performance for the year ended March 31, 2013

L&T recorded Gross Revenue of Rs. 61471 cr for the year ended March 31, 2013, registering
an increase of 14.4% on a y-o-y basis over the corresponding previous year. International
Revenue at Rs. 12110 cr doubled as compared to the previous year.

The Gross Revenue for the quarter ended March 31, 2013 at Rs. 20485 cr recorded 10%
growth over the corresponding quarter of the previous year, as certain sect oral bottlenecks
moderated the pace of execution.

The Company successfully garnered fresh orders worth ` 88035 cr during the year 2012-13,
recording a healthy y-o-y growth of 25%. The order Inflow during the quarter January-March
2013 was Rs. 27929 cr and recorded an impressive increase of 32%, despite challenging
economic environment. International order inflow constituted 17% of the total order inflow
for the year 2012-13. The major orders during the year came from Building & Factories,
Power Transmission & Distribution, Transportation Infrastructure and Power sectors.

The Order Book is Rs. 153604 cr as at March 31, 2013. International Order Book constituted
13% of the total Order Book. Profit after tax (PAT) for the year April-march 2013 stood at Rs
4911 sr, recording an increase of 10.2% over the corresponding previous year.The Board of
Directors recommended a dividend of Rs. 18.50 per equity share. The Board of Directors
recommended the issue of bonus equity shares in the ratio of 1:2 [one bonus equity share of
Rs. 2 each for every two equity shares of Rs. 2 each held].
20

AWARDS

The awards listed below are drawn from those received in 2013 and 2012. For more
comprehensive information including awards for Most Respected Company presented by
leading publications, please visit our website www.larsentoubro.com.

Ranked first in the industrial category in India in an International Emission Disclosure study
conducted by the UK-based organization Environment Investment Organization (EIO).
Further, the report ranked L&T second in the industrial category among BRICS (Brazil,
Russia, India, China and South Africa) countries, 12th amid BRICS 300 companies and 84th
globally. (May 11, 2013).
Ranked among Indias Top 10 Most Attractive Employers in a survey conducted by
Randstad, the leading career advisory services firm. In fact, L&T is the only engineering,
construction and manufacturing company in India to have featured in the list. L&T also
earned special recognition as the most attractive employer in the countrys infrastructure
sector. (April 22, 2013).
NDTV Profit Business Leadership Award in the Infrastructure category. (April 9, 2013.)
Corporate Governance and Sustainability Vision Award 2013 from the Indian Chamber of
Commerce in the Water Stewardship category. (February 23, 2013).
UK-based Carbon Disclosure Project (CDP) ranked L&T among the Top 10 companies in its
annual assessment of Green House Gas (GHG) emissions and climate change strategies of
Indian companies. (January 23, 2013).
Ranked fourth by Newsweek in its Green Rankings of global companies in the Industrial
Goods category. (November 1, 2012).
Forbes ranked L&T the 9th most innovative company in a global study. (September 10,
2012).
L&Ts Hydrocarbon business was presented the infrastructure excellence Award by Indians
leading business channel, CNBC TV18. (May 05, 2012).
L&Ts Heavy Engineering business won the prestigious National Award for Export
Excellence, presented by the Engineering Export Promotion Council of India. (March 31,
2012).
21

The Indian Chamber of Commerce (ICC) awarded L&T, the Corporate Governance and
Sustainability Vision Award 2012 in the Sustainability Reporting category. (February 23,
2012).
Ranked third in Green Index of the Bombay Stock Exchange. (February 22, 2012).
Ranked 10th by Business Today among the Best Companies to Work For. (February 16,
2012).
Ranked among the Top 10 in Standard & Poors (S&P) ESG India index of companies in
terms of Environment, Social and Governance performance. (January 20, 2012).

MAJOR COMPETITORS

Larsen&Toubro is a 14 billion USD company. Also, it is Indians largest construction
company. Considering only its engineering and construction wing, the competitors of L&T
are:
Punj Lloyd- Punj Lloyd ltd (1988)
SP Groups-ShapoorjipallonjiCompany (1865)
HCC limited-Hindustan Construction Company (1926)
Lanco infratech-Lagadapati Amarappa Naidu andCompany Infratech (1986)
NCC -NAGARJUNA CONSTRUCTION COMPANY LIMITED (1978)
IVRCL-Iragavarapu Venkata Reddy Construction Limited (1987)

MAJOR CLIENTS

The international market provides opportunities to bid for projects in the emerging national.
Apart from established contacts in Middle East and South Korea, LTSL intends to build
business relationship with clients located in other identified countries such as
Turkey,
Brazil,
South Africa,
Indonesia and
Malaysia.
L&T will continue its thrust on new areas of business viz. project and construction
management services at site, transmission and distribution and solar projects.

GROWTH RATES OF DIFFERENT BUSINESS UNITS
22



2.1 Electrical & Electronics Segment (E&E)

At Group level, E&E segment recorded gross segment revenue ofRs. 4846 crore for the year
ended March 31, 2013 registering 12.6% growth over the previous year. The revenue growth
at the group level was driven by the Tamco Group of subsidiary companies. The Group
Segment recorded EBITDA Margin of 16.5%during the year ended March 31, 2013 vis--vis
13.3%in 2011-12.




GRAPHS 2.1







2.2 IT & Technology Services (IT&TS)

At Group level, IT&TS segment recorded segment gross revenue of Rs4999 crore for the
year ended March 31, 2013 registering an impressive 25.7%growth over the previous year.
Most of its revenue is from international customers. Integrated Engineering Services
business, a SBU at L&T showed a robust growth of 43.6% in revenue for 2012-13 at Rs1253
crore. Enhanced business volumes coupled with favorable foreign currency rates enabled the
segment to post growth in its revenue. In USD terms, IES registered a healthy 24.9% growth
2931
3101
3494
1055
1202
1352
0
1000
2000
3000
4000
5000
6000
2010-11 2011-12 2012-13
c
r
o
r
e
s

E&E GROWTH
international
domestic
23

in its revenue over the previous year. There was a net addition of 1097 employees by IES
during 2012-13. L&T InfoTech group recorded total income ofRs 3862 crores during the year
ended March 31, 2013, registering 22% growth over the previous year. There was a net
addition of around 1270 employees by L&T InfoTech Group during 2012-13.The segment
recorded a healthy EBITDA margin of 25.1% during the year ended March 31, 2013 as
against 21% during the previous year.

GRAPHS 2.2







2.3 Financial Services (FS)

FS Segment continued its growth momentum during the year ended March 31, 2013 with an
impressive 34.9% growth in its revenue atRs 4080 crore. The segment recorded net interest
margin of 5.44% as against 5.51% in the previous year. The loan book of the segment at
Rs33310 crore as at March 31, 2013, registered a healthy growth of 29.8% over the previous
year with increased focus on project and long maturity term loans. The FS segment disbursed
fresh loans and advances of Rs22995 crore during the year 2012-13, recording moderate
growth of 6.1% over the previous year. Net Non-performing Assets (NPA) of the segment
stood at1.26% of loan assets as at March 31, 2013 as against 1.17% as on March 31, 2012

GRAPHS 2.3
2945
3975
4999
0
1000
2000
3000
4000
5000
6000
2010-11 2011-12 2012-13
C
R
O
R
E
S

years
IT & TECHNOLOGY SERVICES
Series1
24








2.4 Development Projects (DP)

The Company has diversified Infrastructure development business portfolio with a mix of
projects under development across various sectors such as roads and bridges, ports and metro.
The Company owns 22 concessions in transportation infrastructure development space under
its fold out of which 18 are roads and bridges, 3 are ports and 1 is a metro project with total
estimated project cost ofRs 43711 crore. As on March 31, 2013, 3 projects are under
development, 6 projects are under construction while 13 projects are completed and
commissioned. In addition, the Company has 5 power project under
development/implementation, of which 1 is thermal power project and 4 are hydel power
projects with total estimated project cost of Rs21934 crore.DP Segment recorded gross
segment revenue ofRs1406 crore for the year ended March 31, 2013, registered a growth of
26.2% over the previous year. The segment recorded EBITDA of Rs979 crore for the year
2012-13 vis--vis Rs536 crore for the corresponding period of the previous year.







2144
3024
4080
0
500
1000
1500
2000
2500
3000
3500
4000
4500
2010-11 2011-12 2012-13
c
r
o
r
e
s

34.90%
financial services
Series2
Series1
25

GRAPHS 2.4






2.5 Machinery & Industrial Products Segment (MIP)

MIP Group segment recorded gross segment revenueofRs2880 crore, lower as compared to
Rs3374 crore for 2011-12. At the Group level the performance was adversely impacted due
to slow-down in manufacturing and mining sectors in India and divestment of stake from
L&T Plastics Machinery Limited. Amongst the group companies, EWAC Alloys Limited
registered a y-o-y increase of 9% in revenue at Rs400 crore. The MIP Segment recorded an
EBITDA Margin of 16.7% during the year 2012-13 as against 18.3% during the previous
year.
GRAPHS 2.5




1010
1114
1406
0
200
400
600
800
1000
1200
1400
1600
2010-11 2011-12 2012-13
c
r
o
r
e
s

26.30%
development projects
Series2
Series1
2698 2818
2294
303
556
586
0
1000
2000
3000
4000
2010-11 2011-12 2012-13
C
R
O
R
E
S

Machinery & Industrial Products
Segment

INTERNATIONAL
DOMESTIC
26



2.6 Engineering & Construction Segment (E&C)

Group level order inflows in the E&C segment grew by 20.4% to Rs83484 crore for the year
ended March 31, 2013. The growth was driven by subsidiary companies operating in the
Heavy Engineering and Infrastructure sectors. At Group level, E&C segment recorded gross
segment revenue of Rs58616 crore for the year ended March 31, 2013 registering 13.8%
growth over the previous year driven by subsidiaries operating in Hydrocarbon, Buildings &
Factories and Infrastructure sectors. The subsidiary companies operating in the Power, Power
distribution and Transmission businesses however recorded decline in sales reflecting adverse
business environment and slow pace of execution. The Group Segment recorded EBITDA
Margin of 12.3% during the year ended March 31, 2013 vis--vis 13.1% in 2011-12.



GRAPHS 2.6











68094
53745
67899
9104
15584
15585
0
10000
20000
30000
40000
50000
60000
70000
80000
90000
2010-11 2011-12 2012-13
C
R
O
R
E
S

20.4%
Engineering & Construction Segment
INTERNATIONAL
DOMESTIC
27






















CHAPTER III
REVIEW OF LITERATURE
























28


CAPITAL ASSET PRICING MODEL (CAPM)

The Capital Assert Pricing Model (CAPM) describes the relationship between risk and
expected return, and it serves as a model for the pricing of risky securities.
CAPM says that the expected return of a security or a portfolio equals the rate on a risk-free
security plus a risk premium. If this expected return does not meet or beat our required return,
the investment should not be undertaken.

Assumptions

1) There are no taxes or transaction cost.
2) All investors have identical investment horizons.
3) All investors have identical opinions about expected returns, volatilities and correlations of
available investments.

THE MARKET PORTFOLIO

Definition: The market portfolio is the portfolio of all risky assets traded in the market.


IMPLICATIONS OF CAPM

1) The market portfolio is the tangent portfolio.
2) Combining the risk-free asset and the market portfolio gives the portfolio frontier
3) The risk of an individual asset is characterized by its covariability with the market
portfolio.
4) The part of the risk that is correlated with the market portfolio, the systematic risk, cannot
be diversified away.

*Given the premium of market portfolio, the riskless rate and assets market betas,
equation determines the premium of all assets.

*Researcher thus have an asset pricing model the CAPM.
*The relation between an assets risk premium and its market beta is called the
Security Market Line (SML)
29


To calculate the beta, the returns have to be calculated. Then using the formula the beta and
alpha co-efficient can be calculated.

Monthlys security return = current month price-previous month price/previous month price
Monthlys market return = current month index-previous month index/previous month index

The manual calculation seems to be laborious. At present beta can be calculated with the help
of hand calculators and computers very easily. When an investor has to calculate for a long
period computer would be of great use. Along with beta, other information also can be got.
Beta (Systematic Risk)
The systematic risk affects the entire market. Often we read in the newspaper that the stock
market is in the bear hug or in the bull grip this indicates that the entire market is moving in a
particular direction either downward or upward.
The economic conditions, political situations and the sociological changes affect the security
market.
The recession in the economy affects the profit prospect of the industry and the stock market.
The 1998 recession experienced by developed and developing countries has affected the
stock markets all over the world. These factors are beyond the control of the corporate and
the investor.
They cannot be entirely avoided by the investor. It drives home the point that the systematic
risk is unavoidable.

30


Beta>1- aggressive shares These share tend to go up faster than the market in a
rising (bull) market and fall more than the market in a
declining (bear) market.
Beta<1- defensive shares These shares will generally experience smaller than
average gains in a rising market and smaller than
average falls in a declining market.
Beta=1- neutral shares These shares are expected to follow the market


CAPITAL MARKET LINE (CML)
It represents linear relationship between the required rate of return for efficient portfolios and
standard deviation in case of leveraged portfolios.
When the market portfolio is combined with the risk free asset, the result is a capital market
line. All points along the CML have superior risk-return profiles to any portfolio on the
efficient frontier.
If the risk-free rate is assumed to be5%, and the tangent line called capital market line has
been drawn to the efficient frontier passing through the risk-free rate.

31


SECURITY MARKET LINE
The linear relationship between expected return and their covariance with the market
portfolio is called SML.
The relationship between the Beta & required return is plotted on the security market line,
which shows the expected return as functional of Beta.
The intercept is the risk free rate available in the market while the slope is (R
m
-R
f
)







CAPITAL ASSET PRICING MODEL
Once the expected/required rate of return, E(R), is calculated using CAPM, we can compare
this required rate of return to the asset's estimated rate of return over a specific investment
horizon to determine whether it would be an appropriate investment. To make this
comparison, you need an independent estimate of the return outlook for the security based on
either fundamental or technical analysis techniques.
In LARSEN & TOUBROthe Expected rate of return is 9.05%we can compare this return to
the assets estimated rate of return over a specific investment to determine whether it would be
an appropriate investment.
32

In theory, therefore, an asset is correctly priced when its estimated price is the same as the
required rates of return calculated using the CAPM. If the estimate price is higher than the
CAPM valuation, then the asset is undervalued (and overvalued when the estimated price is
below the CAPM valuation.
The CAPM assumes that the risk-return profile of a portfolio can be optimized - an optimal
portfolio displays the lowest possible level of risk for its level of return. Additionally, since
each additional asset introduced into a portfolio further diversifies the portfolio, the optimal
portfolio must comprise every asset, (assuming no trading costs) with each asset value-
weighted to achieve the above (assuming that any asset is infinitely divisible). All such
optimal portfolios, i.e., one for each level of return, comprise the efficient frontier.
Because the unsystematic risk is diversifiable, the total risk of a portfolio can be viewed as
beta.


RISK
Risk refers to the probability to that of the return and therefore to the value of an asset or security
may have alternative outcomes. Risk is the uncertainty (today) surrounding the eventual outcome
of an event which will occur in the future. Risk is uncertainty of the income/capital appreciation
or loss of booth. All investments are risky. The higher the risk taken, the higher is the return. But
proper management of risk involves the right choice of investments.

RETURN
Return yield or return differs from the nature of instruments, maturity period and the creditor or
debtor nature of the instrument and a host of other factors. The most important factor influencing
return and risk return is measured by taking the price income plus the price change.
Portfolio risk
Risk on portfolio is different from the risk on individual securities. This risk is reflected by the
variability of the returns from
RISKS ON PORTFOLIO
The expected returns from individual securities carry some degree of risk. Risk on the portfolio is
different from the risk on individual securities. The risk is reflected in the variability of the
returns from zero to infinity. Risk of the individual assets or a portfolio is measured by the
33

variance of its return. The expected return depends on the probability of the returns and their
weighted contribution to the risk of the portfolio. These are two measures of risk in this context
one is the absolute deviation and other standard deviation.
Most investors invest in a portfolio of assets, because as to spread risk by not putting all
eggs in one basket. Hence, what really matters to them is not the risk and return of stocks in
isolation, but the risk and return of the portfolio as a whole. Risk is mainly reduced by
Diversification.
RETURNS ON PORTFOLIO
Each security in a portfolio contributes return in the proportion of its investments in security.
Thus the portfolio expected return is the weighted average of the expected return, from each of
the securities, with weights representing the proportions share of the security in the total
investment. Why does an investor have so many securities in his portfolio? If the security ABC
gives the maximum return why not he invests in that security all his funds and thus maximize
return?

RISK AND EXPECTED RETURN

There is a positive relationship between the amount of risk and the amount of
expected return i.e., the greater the risk, the larger



Y

E(r)

RETURN


R (f)
RISK
34

Risk is measured along the horizontal axis and increases from the left to right.
Expected rate of return is measured on the vertical axis and rises from bottom to top.
The line from 0 to R (f) is called the rate of return or risk less investments commonly
associated with the yield on government securities.
The diagonal line from R (f) to E (r) illustrates the concept of expected rate or return
increasing as level of risk increases.

TYPES OF RISK
Risk consists of two components. They are
1. Systematic risk
2. Unsystematic risk

1. SYSTEMATIC RISK
The risk inherent to the entire market or an entire market segment. Systematic risk, also
known as undiversifiable risk, volatility or market risk, affects the overall market, not
just a particular stock or industry. This type of risk is both unpredictable and impossible to
completely avoid. It cannot be mitigated through diversification, only through hedging or by
using the right asset allocation strategy.
MARKET RISK
The possibility for an investor to experience losses due to factors that affect the overall
performance of the financial markets. Market risk, also called "systematic risk," cannot be
eliminated through diversification, though it can be hedged against. The risk that a major
natural disaster will cause a decline in the market as a whole is an example of market risk.
Other sources of market risk include recessions, political turmoil, changes in interest rates
and terrorist attacks.
INTEREST RATE RISK
The risk that an investment's value will change due to a change in the absolute level of
interest rates, in the spread between two rates, in the shape of the yield curve or in any other
interest rate relationship. Such changes usually affect securities inversely and can be reduced
by diversifying
35

PURCHASING POWER LOSS/GAIN
An increase or decrease in how much consumers can buy with a given amount of money.
Consumers lose purchasing power when prices increase, and gain purchasing power when
prices decrease. Causes of purchasing power loss include government regulations, inflation
and natural and man-made disasters. Causes of purchasing power gain include deflation and
technological innovation.

2. UNSYSTEMATIC RISK

Unsystematic risk is the portion of total risk that is unique to a firm or industry. Factors such as
management capability, consumer preferences, and labor strikes cause unsystematic variability of
return in a firm. Unsystematic factors are largely independent of factors affecting securities
markets in general. Because these factors affection e firm, they must be examined from each
firm.
Unsystematic risk is that portion of risk that is unique or peculiar to a firm or industry, above and
beyond that affecting securities markets in general. Factors such as management capability,
consumer preferences, and labor strikes can cause unsystematic variability of return for a
companys stock
BUSINESS RISK

Business risk is that portion of the unsystematic risk caused by the operating environment of
the business. Business risk arises from the inability of a firm to maintain its competitive edge
and growth or stability of the earnings. The volatility in stock prices due to factors intrinsic
to the company itself is known as Business risk is concerned with the difference between
revenue and earnings before interest and tax. Business risk can be divided into
Internal Business Risk.
External Business Risk.

Internal business risk is associated with the operational efficiency of the firm. The
operational efficiency differs from company to company. The efficiency of operation is
36

reflected on the companys achievement of its pre-set goals and the fulfilment of the promises
to its investors.
External business risk is the result of operating conditions imposed on the firm by
circumstances beyond its control. The external environments in which it operates exert some
pressure on the firm. The external factors are social and regulatory factors, monetary and
fiscal policies of the government, business cycle and the general economic environment
within which a firm or an industry operates.


FINANCIAL RISK

The possibility that shareholders will lose money when they invest in a company that
has debt, if the company's cash flow proves inadequate to meet its financial obligations. When a
company uses debt financing, its creditors will be repaid before its shareholders if the company
becomes insolvent. Financial risk also refers to the possibility of a corporation or government
defaulting on its bonds, which would cause those bondholders to lose money.

RETURN

Return is a reward for a investor for forgoing some amount called as investment.
Components of return

Periodic cash income in the form interest, dividend etc
The appreciation or depreciation in the price of the asset.
Return is of 2 types
Historical return
expected return

Historicalreturn is a return from an asset that investors anticipate or expect to earn over some
future period.
The expected return is subjected to some uncertainty or risk and may or may not occur.

37


Return on Investment (ROI)
It measures the sufficiency or otherwise of profit in relation to capital employed. Return on
capital is calculated by using the following formula

R.O.I =


100

The term operating profit means profit before interest and tax.
The term capital employed has been interpreted in different ways by different accountants
and authors.
Return on Investment is used to measure the operational and managerial efficiency. A
comparison of ROI with that of similar firms, with that of industry and with past ratio will be
helpful in determining how efficiency the long-term funds of owners and creditors being put
into use. Higher the ratio, the more efficient is the use of the capital employed.
Return on Investment can be computed for measuring the return for various purposes.

Return on equity shares holders funds
ROE determines the profitability from the shareholders point view

RETURN ON SHAREHOLDERS FUND =


100


The net profit here is net income after payment of interest and tax and it includes net non-
operating income also
The term shareholders funds include equity share capital, preference share capital and all
reserves and profits belonging to shareholders.
ROE is a comprehensive indicator of a firms performance because it provides an indication
of how well managers are employing the funds invested by the firms shareholders to
generate returns.
In the long run, the value of the firms equity is determined by the relationship between its
ROE and its cost of Equity capital. That is, those firms are expected over the long run to
generate ROEs in excess of the cost of equity capital should have market values in excess of
book value.
38


Return on Equity (or) Return on Net worth
The return on equity shareholders funds. The profit considered for computing the ratio is
taken after payment of preference dividend.

RETURN ON EQUITY SHARES =


100

The term equity shareholders funds (or) Equity (or) net worth refers to equity share capital +
Reserves + Profits Accumulated losses

Return on Assets (ROA)
It is calculated to measure the productivity of total assets.

RETURN ON ASSETS =


100

Return on assets tells how much profit a computer is able to generate for each rupee of assets
invested. Financial leverage indicates how many rupees of assets the firm is able to deploy
for each rupees invested by its shareholders.

EarningsperShare (EPS)
EPS is highlights the overall success of the concern from owners point of view and it is
helpful in determining market price of equity shares. It reflects upon the capacity of the
concern to pay divided to its equity shareholders. EPS is calculated by dividing the net profit
after tax and preference dividend by number of equity shares.

EARNING PER SHARE =








39












CHAPTER IV
RESEARCH METHODOLOGY














40

Methodology
Research methodology implies a systematic attempt by the research to obtain knowledge
about subject understudy. This systematic way to show the problem and it is important
components of the study without which a research may not able obtain the facts and figures
from employees.
RESEARCH DESIGN
The research has been based on secondary data analysis .The research design has been
exploratory as it aims at examining the secondary data for analyzing the previous researches
that have been done in the area of equity analysis of L&T using capital asset pricing model.
The knowledge thus gained from this preliminary study forms the basis for the further
detailed descriptive research. In the exploratory study, the returns have been selected for
analyzing.

Secondary data: - The secondary data is the data which is gathered from publications and
websites.
Statistical tools:
The graphs in the analysis are done using bar and line graphs.
A bar chart or bar graph is a chart with rectangular bars with lengths proportional to the
values that they represent. The bars can be plotted vertically or horizontally. A vertical bar
chart is sometimes called a column bar chart.

A line chart or line graph is a type of chart which displays information as a series of data
points called 'markers' connected by straight line segments.


LIMITATIONS OD THE STUDY

Capital asset pricing model is based on a number of assumptions that are far from the reality
Most of the data are derived through internet.

Due to the time constrain limited analysis has been utilised. So the findings may not be
accurate



41















CHAPTER V
DATA ANALYSIS
&
INTERPRETATION







42

5.1 CAPITAL ASSET PRICING MODEL (CAPM)
TABLE NO: 5.1
No. of Equity Shares Amount
Authorized capital
325 equity shares of Rs. 2/- each

Total

6500

650

Issued, subscribed and paid up capital
123.08 equity shares of Rs. 2/- each

Total

246.16

246.16

(Note: The values of shares are in corers)

Market Capitalisation Rate
L&t market price per share is 1069.90

L&t no. of shares outstanding 123.08

Market Capitalization = (price per share) (No of shares outstanding).

= 1,069.90 1, 23, 00,000.08

= Rest. 13,15,97,70,085.592
The total market capitalization of all risky assets of L&t is
= Rest. 13,15,97,70,085.592


A NUMERICAL ILLUSTRATION OF CAPM

CAPM requires that in equilibrium total asset holdings of all investors must equal the total
supply of assets.

Researcher shows this through the L&t below.

There are two categories of Shareholders in the L&t.
43

1. Shareholding of promoter and promoter group

Indian = 1,56,72,166

Foreign = 32,36,159

No.of shareholders = 8,71,520

Total no.of shares = 1, 89, 08,325

2. Public shareholding

Institutions =50,43,35,648

Non-institutions =39,53,37,175

Total No.of shareholders of public shareholding =2,43,96,171

Total no.of shares = 89,96,72,823


TOTAL NO.OF SHARES (1+2) = 91, 85, 81,148

TOTAL NO.OF SHAREHOLDERS (1+2) =2, 52, 67,691.

1) Market capitalization of Shareholding promoter and promoter group

= (price per share) x No.of shares
= 1,069.90 1, 89, 08,325
= Rs. 20,23,00,16,917.5
2) Market capitalization of public share holding

= (price per share) x No.of shares
= 1,069.90 89, 96, 72,823
= Rs. 9,62,55,99,53,327.7
The total market capitalization is
= 20,23,00,16,917.5+9,62,55,99,53,327.7
= Rs.9,82,78,99,70,245.2
44


In equilibrium, the total Rupees holding of each asset must equal its market value:


The market portfolio is equal to tangent portfolio

WM = WT

= (0.20, 0.97) = Wt
MARKET PORTFOLIO

GRAPH 5.1



Percentage of share market capitalization of shareholding promoter and promoter group
=97%
Percentage of share market capitalization of public shareholding=20%





0
0.2
0.4
0.6
0.8
1
market capitalization of
shareholding promoter
market capitalization of
shareholding
%

o
f

s
h
a
r
e
s

MARKET PORTFOLIO
45

5.2 SHARE PRICES OF L&T LTD (2009-2013)

TABLE NO: 5.2


MONTH OPENING CLOSING
2009 878.37 899.01
2010 1021.75 1075.72
2011 1013.71 1068.58
2012 768.79 777.07
2013 1079.37 1016.46



5.2 SHARE PRICE FOR L&T LTD

GRAPH 5.2






0
200
400
600
800
1000
1200
0
200
400
600
800
1000
1200
2009 2010 2011 2012 2013
r
a
n
g
e
s

years
opening and closing prices
OPENING
CLOSING
46

5.3 CALCULATION OF RETURNS
TABLE NO: 5.3

YEARS OPENING CLOSING DIVIDENT % RETURN
2009 878.37 899.01 525 2.94
2010 1021.75 1075.72 625 5.89
2011 1013.71 1068.58 725 6.12
2012 768.79 777.07 825 2.15
2013 1079.37 1016.46 616.50 -5.25
11.85


RETURN=

100 = 11.85%

(E.g.:2009 =

100 = 2.94)

GRAPH NO: 5.3




INTERPRETATION

The Return on Investment of L&T is not in a standard flow. The percentage is increasing in
2009 and 2010 but sudden decline in the year 2011and again got increased in 2012 and
decreased in 2013. So there was not good return to shareholders in 2013.

Due to sudden fall in profit has impacted the return for shareholders at 2013.
2.94
5.89
-2.31
2.15
-5.25
-6
-4
-2
0
2
4
6
8
2009 2010 2011 2012 2013
%

O
F

R
E
T
U
R
N
S

YEARS
RETURN
RETURN
47

5.4 CALCULATION OF RETURNS ON SENSEX

TABLE NO: 5.4

YEAR RETURN (R-

) (R-

)
2

2009 -37.94 -54.74 2996.46
2010 80.54 63.74 4062.78
2011 10.94 -5.86 34.33
2012 10.49 -6.31 39.81
2013 20 3.19 10.24
84.03/5=16.806 7143.62

=37.79
5.5CALCULATION OF BETA
TABLE NO: 5.5
YEAR R
m

(R
m
-

m
) (R-

) (R-

) (R
m
-

m
)
2009
2.94
0.57 -54.74 -31.2018
2010
5.89
3.52 63.74 224.3648
2011
6.12
3.75 -5.86 -20.85
2012
2.15
-0.22 -6.31 1.3882
2013
-5.25
-4.62 3.19 -14.784
11.85/5=
2.37
158.9172



= 158.9172/1428.08
= 0.11128032
48

INTERPREATTION
Beta (Systematic Risk) is the slope of the characteristic regression line. Beta describes the
Relationship between the stocks return and the index returns. In the above calculation, beta
Indicates that one present change in BSE index return would cause 0.1112832 present
changes in the LARSON&TOUBRO LTD.
One presentchanges in market index return causes 0.1112832% .change in the stock return.
The LARSON&TOUBRO LTD stock return is less volatile compared to the market.
If positive beta value indicates that the LARSON&TOUBRO LTD stock remains in the
defensive share in the market return.
A stock with a beta of 1 would provide a return of 10%, if the market return declines by 10%
and vice versa.



5.6CAPITAL ASSET PRICING MODEL



= 8.78+0.1112832(25.1-8.78)

= 10.59


E(R)= 10.59%


E(R)-expected market return

R
f
- risk free return
Rm - market risk

-systematic risk


INTERPREATTION

From the calculated expected return of CAPM compose the market value and the highest of
two will be considered as fair value.





49


5.7 CALCULATION OF RETURN ON INVESTMENT FOR L&T


RETURN ON INVESTMENTS=


100


TABLE NO: 5.7

YEARS OPERATING PROFIT CAPITAL EMPLOYED R.O.I %
2009 3940.41 13101.84 30.075
2010 5880.67 13672.84 43.009
2011 5832.91 16776.85 34.767
2012 6310.33 18075.3 34.911
2013 6633.04 23169.83 28.627




GRAPH NO: 5.4





INTERPRETATION

The Return on Investment of LARSEN&TOUDRO is not in a standard flow. The percentage
is increasing from 2009 to 2010 but sudden decline in the year 2011 later it further decreased
in the year 2013. So there was not good return to shareholders in 2013.

Due to sudden fall in profit has impacted the return for shareholders at 2013.

30.075
43.009
34.767 34.911
28.627
0
5
10
15
20
25
30
35
40
45
50
2009 2010 2011 2012 2013 %

O
F

R
E
T
U
R
N

O
N

I
N
V
E
S
T
E
M
E
N
T
S

YEARS
RETURN ON INVESTEMENTS
R.O.I %
50

5.8 CALCULATION OF NET PROFIT AFTER INTEREST AND TAX
OF L&T

TABLE NO: 5.8

NET PROFIT AFTR INTEREST AND TAX RUPEES IN CRORES
DETAILS 2009 2010 2011 2012 2013
PROFIT BEFORE INTEREST,
DEP AND TAX

(-) INTEREST

(-) DEPERECIATION

4246.04

171.82

307.30

6295.27

128.39

415.90

6432.12

335.91

600.28

6954.79

568.94

700.45

7275.56

532.69

819.42
PROFIT BEFORE TAX

(-) PROVISION TAX
3766.92

1231.21
5750.98

1640.87
5495.93

1945.86
5685.4

1853.84
5923.45

1800.50
NET OPERATING PROFIT
AFTER INTEREST AND TAX
2535.71 4110.11 3550.07 3831.57 4122.95



GRAPH NO: 5.5







INTRPRETATION

Net profit after interest and tax got increased in 2010 compared to 2009. Bit got decreased
in 2011. Later own it got increased to 4122.95 in 2013
2535.71
4110.11
3550.07
3831.57
4122.95
0
500
1000
1500
2000
2500
3000
3500
4000
4500
2009 2010 2011 2012 2013
A
M
O
U
N
T

I
N

C
R
O
R
E
S

YEARS
NET PROFIT AFTER INTEREST AND TAX
NET OPERATING PROFIT
AFTER INTEREST AND TAX
51


5.9 CLACULATION OF SHARE HOLDERS FUNDS FOR L&T



RETURN ON SHAREHOLDERS FUND =


100


TABLE NO: 5.9


YEAR NET PROFIT
AFTER TAX
SHAREHOLDERS
FUND
RETURN ON S.H
FUND%
2009 2535.71 12459.69 20.35
2010 4110.11 18311.64 22.44
2011 3550.07 21846.26 16.25
2012 3831.57 25223.02 15.19
2013 4127.95 2914.72 141.62



GRAPH NO:5.6





INTERPRETATION


Return on shareholders funds of the company is increasing in 2010 compared to 2009. This
was the good return for the shareholders but in 2011shareholders funds is decrease compare
to previous years. Suddenly it got increased in 2013.

20.35
22.44
16.25 15.19
141.62
0
20
40
60
80
100
120
140
160
2009 2010 2011 2012 2013
%

O
F

S
H
A
R
E
H
O
L
D
E
R

F
U
N
D

years
RETURNS ON SHAREHOLDERS FUND

return on s.h fund%
52


5.10 CALCULATION OF EQUITY SHARES FOR L&T


RETURN ON EQUITY SHARES =


100


TABLE NO: 5.10

YEAR NET PROFIT
AFTER TAX
EQUITH SHARES RETURN ON
EQUITH SHARES
2009 2535.71 117.14 2164.68
2010 4110.11 120.44 3412.57
2011 3550.07 121.77 2915.38
2012 3831.57 122.48 3128.32
2013 4127.95 123.08 3353.87


GRAPH NO: 5.7





INTERPRETATION

LARSEN&TOUDRO ltd ROE showed an improvement from 2009 to 2010. But in 2011 that
company performance can be viewed as being below. Later it focused on profit improvement
is beginning to show positive result.



2164.68
3412.57
2915.38
3128.32
3353.87
0
500
1000
1500
2000
2500
3000
3500
4000
2009 2010 2011 2012 2013
%

R
E
T
U
R
N

O
N

E
Q
U
I
T
H

S
H
A
R
E
S

YEARS
RETURN ON EQUITY SHARES
R.O EQUITY SHARES
53

5.11 CALCULATION OF ASSETS OF L&T



RETURN ON ASSETS =


100

TABLE NO: 5.11

YEAR NET PROFIT
AFTER TAX
TOTAL ASSETS RETURN ON
ASSETS
2009 2535.71 22324.39 11.35
2010 4110.11 26395.26 15.57
2011 3550.07 34951.14 10.15
2012 3831.57 67632.40 5.66
2013 4127.95 72174.21 5.71



GRAPH NO: 5.8






INTERPRETATION

The percentage of Return on Assets goes on increasing till 2010. The percentage of 2010 is
15.57%., 2010 shows extensive growth for Larsen&Toubro.
So we conclude that the Return On total Assets is good till 2010. In 2011 the company met
decline stage in market.
11.35
15.57
10.15
5.66 5.71
0
2
4
6
8
10
12
14
16
18
2009 2010 2011 2012 2013
%

R
E
T
U
R
N
S

O
N

A
S
S
E
T
S

YEARS
RETURNS ON TOTAL ASSETS
RETURN ON ASSETS
54


5.12 CALCULATION OF EARNING PER SHARE OF L&T

EARNING PER SHARE =




TABLE NO: 5.12

YEAR NET PROFIT
AFTER TAX
NO. OF EQUITY
SHARES
EARNING PER
SHARE
2009 2535.71 21289375 1.191
2010 4110.11 17551015 2.341
2011 3550.07 13953309 2.544
2012 3831.57 11428854 3.352
2013 4127.95 8745451 4.720




GRAPH NO: 5.9







INTERPRETATION

The Earning Per Share of LARSEN&TOUBRO LTD is having an increase value since 2009-
2013.


1.191
2.341
2.544
3.352
4.72
0
0.5
1
1.5
2
2.5
3
3.5
4
4.5
5
2009 2010 2011 2012 2013
N
O
.
O
F

E
Q
U
I
T
Y

S
H
A
R
E
S

YEARS
EARNING PER SHARE
EARNING PER SHARE
55

FINDINGS

The Larsen&toubro Ltd company systematic risk is 0.11128.32% in the period of 2012-13.
The company stock return is less volatile compared to the market.
The return is 11.85%
The return on Sensex is 37.796 % in the period of 2012-13.
CAPM ofexpected return is 10.59%.
The company stock return is not in a standard flow. In 2009 the stock return is 2.94.
In 2011 the stock return falls in negative -2.31%. In 2012 the company
stock return is high 2.15% compare to 2013 of stock return is -5.25%.
Return on Investment is increasing in 2010. In 2011 ROI sudden fall down from 43.009% to
34.767% further it got decreased to 28.627% in 2013.
Calculation of NPA interest and tax of L&T
Return on Equity shareholdersfunds decreased from 2010 to 2011. In that period of time there
is no good return in shareholders. In 2013 the Return on shareholders has got increased from
15.19% to 141.62%.
Return on Equity shares shows the positive results from 2009 to 2010 but in the recession
period of time 2013 company performance can be viewed as below average and got increased
to 3353.87%.
When compare to 2009 (11.35%), 2010(15.57%) shows growth of Return on Assets but after
that it fall to 5.71% in 2013.
The Earning per Share is in an increasing value since 2009-2013. It shows that company is in
a position to give increased earnings in the shareholders.























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SUGGESTIONS

Based on the analysis and interpretation of the Capital Asset Pricing Model and Business
valuation of Larsen&toubroltd, the researcher likes to offer the following suggestions for
theimprovement of financial performance.




In the recession period of time 2008-09 the company met decline stage. So now the company
has to improve production and has to increase theirsales

The company systematic risk is 0.11128.32 in the 2012-13. In future the investors can
preferably invest in the company.

Earnings per Share are the owners earnings. So it should be given more importance. The
Earnings per Share can be increased by increasing the net profit available for shareholders.






























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CONCLUSION

The presents study Capital Asset Pricing Model and Business Valuation of L&TLtd reveals
that the companys Return On Investment, Equity shares, Return on shareholders funds,
assets which was showing a positive growth till 2010, showed sudden decline in the growth
ofthe company because of the recession phase which occurred in the year 2011-12. So
thecompany has to undertake a lot of improvement measures for the coming years. So
themanagement has to take necessary steps to increase the sales. The investors expected rate
ofreturn is moderate in the period of 2012-13. So the company has to concentrate in share
marketto attract investors. Earningsper Share had got and very high.






































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BIBLIOGRAPHY























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REFERENCE

WWW.Moneycontrol.com

www.larsentoubro.com

WWW.BSE.COM