DEPARTMENT OF BUSINESS ECONOMICS

Summer Internship Project

PROJECT ON
FUNDAMENTAL ANALYSIS
OF
STOCK MARKET

SESSION 2007-09

Submitted By
SUMAN

Company Guide Faculty Guide

Mr.SUNNY ROHILA MR.SANJAY NANDAL
HIRA STOCKS SOLUTION PVT.LTD.
(Shareholding Company)

MAHARSHI DAYANAND UNIVERSITY,ROHTAK

 Acknowledgement
This section has provided me a chance to express my deep gratitude to all the
people involved in the development of this project.
First of all, I express my deep sense of gratitude to this esteemed
organization DEPARTMENT OF BUSINESS ECONOMICS, for enriching me
with such a courage and knowledge to undertake this project. Further, I also want
to thank HIRA STOCKS SOLUTION PVT.LTD. for providing me an opportunity
to learn and attain first corporate experience.
In particular, I want to express my gratitude to Mr.Sunny Rohila and
Mr.Ritesh Gaur for providing me consistent guidance and valuable critical
counsel for the completion of this project and all the people in Hira stocks
solution pvt.ltd. Without whom this project wont have achieved its completion.
Their valuable insight made the entire training an extremely learning experience.

With great happiness and gratitude,I would also like to extend my sincere
thanks to my mentor Mr.Sanjay Nandal, for all his support and guidance.

Suman

MBA(BE)III SEMESTER
(2007-09)
 INDEX
Executive Summary
Objective
Companys Profile Hira stocks solution pvt.ltd.
SWOT analysis of
Introduction to fundamental analysis
Research Methodology
Economy and industry analysis
Company analysis
limitations
Recommendations
Conclusion
Learning
Bibliography
 EXECUTIVE SUMMARY

Indian Capital Market is vibrant and alive. Its growth in last two decades has
been phenomenal. Share market can make a person wealthy beyond their
wildest dream. After many scams (Harshad Mehta and Ketan Parekh) today
also, share are bought and sold on the basis of tips and for the short term. My
Project i.e. Fundamental Analysis will introduce you to the rational aspect of
this share market. Fundamental Analysis is for rational man. This project will
take us to the world of Fundamental Analysis and guide us through the
factors that we should look at before we buy any share.

This report is divided into four parts. In first part, I have explained the
quantitative (various ratios like EPS, P/E ratio) as well as qualitative aspect
(management, corporate governance, competition, customers) for analysis.
Part second deals with economic analysis, retail industry analysis and
company (Vishal Mega Mart) analysis. Part third provide the comparison
between Vishal and other companies like Pantaloon, Provogue, Shoppers
stop, Trent in retail industry. Last part summarizes the report and provides
recommendations based upon interpretation of analysis.

Research methodology adopted by me is descriptive in nature. Research is done

through secondary data.
 OBJECTIVE

Fundamental analysis is performed on historical and present data, but with the
goal of making financial forecasts. There are several possible objectives:

To make projection on its business performance,

To conduct a company stock valuation and predict its probable price
evolution,
To evaluate its management and make internal business decisions,
To analyze the factors which give the firm a competitive advantage in its
sector (low cost producer, technological superiority, distribution channels,
etc.)

At the company level, fundamental analysis may involve examination of

financial data, management, business concept and competition.
At the industry level, there might be an examination of supply and demand
forces for the products offered.
For the national economy, fundamental analysis might focus on economic data to
assess the present and future growth of the economy.

COMPANYS PROFILE
 Hira stocks solution is one of the emerging stock broking companies in India.
The company is the master franchisee of well known companies
IL&FS(Investment leasing and financial services) and India Info line. It
provides trading and investment solution to the investors. Hira stock is
catering to a gamut of investors including individual, corporate, retail and
high net worth clients.

Hira stocks provide research facility to their customers. The company

provides their research based tips on the newspaper

SERVICES
Trading
Online trading NSE (Cash and F&O), BSE,NCDEX,MCX
Internet trading NSE (Cash and F&O) & BSE

Depository
NSDL Depository Participant
Speed E & IDEAS for online punching
Holdings available on NET at hirastocks.com
Lowest transaction charges in India

Distribution of Financial Products & related Services

IPOs
Mutual Funds
Bonds
Fixed Deposits
IPO Assessment Reports
NFO Analysis Reports
Customized Mutual Funds Portfolio
Monthly/ bi- monthly dispatch of consolidated portfolio statement of
clients.

Quick Services
Instant stock transfer from pool account to clients Demat account
 Instant corporate benefits to clients (Dividend/Bonus/Rights issue)
Instant payments
Instant cheque credit to clients account

Online Back Office

Client accounts / reports on hirastocks.com
Weekly dispatch of SOA to clients through e-mail

Leveraging
Margin trading facility
F&O margin against approved securities

Knowledge Based Services

Research based tips through SMS with highest accuracy
Online fundamental analysis support
Company profiles available at hirastocks.com
Industry reports available online
Investment helpline 24X7

Web based Services

Online chat for customized research services
Online technical analysis support info@.hirastocks.com

Investor Education Seminars on:

Effective stock selection
Hedging & Arbitrage
Option strategies
Technical analysis
Fundamental analysis

SWOT ANALYSIS OF HIRA STOCKS

 Hira stocks solution pvt. ltd. is a renowned and customer focused financial
market intermediary in the fast expanding financial sector and has achieved
significant success and visibility in the market.

STRENGTHS:
1. Hira stocks with its trading and investment solution facility it also provide
research facility.
2. Managing Director of the company is a research analyst.
3. Next strength is its associated business model. Their business model
includes sub-brokers, Business Associates, Franchisee and branches in
various parts of country.

WEAKNESS:

New player in the stock market.

OPPORTUNITIES:
There are lots of areas which are still to be probed by hira stocks like

Direct marketing: company is attempting to reach to new customers

by the use of direct marketing which includes direct mail, e-mail and
telemarketing.
Corporate selling: there is a large scope for retaining customers by
tying up with corporate houses.
Branding (through T.V. & newspaper ads): its marketing team
is planning to use marketing techniques like T.V. advertisement.
Sponsorship: company is also thinking to sponsor events or
programs to publicity.

THREATS:
1. Competition in stock market is going to increase as more and more new
players keen on entering the market. The PWC report said that various
shareholding companies are set to make their presence felt in India in a big
way. Some of them are known globally for their specialization in structured
products and offering an array of different choices and facilities to their
 clients. So new Indian as well as global players are coming to Market to
give a threat to exiting players.
2. Investors education and cost effectiveness are the major issues and
challenges before Mutual Funds industry.
3. Direct marketing may pose a threat to the company by cutting existing
customer base of various business associate and may create rivalry among
them in order to excel from each other.
 INTRODUCTION
Fundamental Analysis is the cornerstone of investing. In fact, some would say
that you aren't really investing if you aren't performing fundamental analysis.
Because the subject is so broad, however, it's tough to know where to start. There
are an endless number of investment strategies that are very different from each
other, yet almost all use the fundamentals.
The biggest part of fundamental analysis involves delving into the financial
statements. Also known as quantitative analysis, this involves looking at revenue,
expenses, assets, liabilities and all the other financial aspects of a company.
Fundamental analysts look at this information to gain insight on a company's
future performance. A good part of this project will be spent learning about the
balance sheet, income statement, cash flow statement and how they all fit
together.
But there is more than just number crunching when it comes to analyzing a
company. This is where qualitative analysis comes in - the breakdown of all the
intangible, difficult-to-measure aspects of a company.
Fundamental analysis serves to answer questions, such as:
Is the companys revenue growing?
Is it actually making a profit?
Is it in a strong-enough position to beat out its competitors in the future?
Is it able to repay its debts?
Is management trying to cook the books?

The Concept of Intrinsic Value

Before we get any further, we have to address the subject of intrinsic value. One
of the primary assumptions of fundamental analysis is that the price on the stock
market does not fully reflect a stocks real value. After all, why would you be
doing price analysis if the stock market were always correct? In financial jargon,
this true value is known as the intrinsic value.
For example, lets say that a companys stock was trading at $20. After doing
extensive homework on the company, you determine that it really is worth $25.
In other words, you determine the intrinsic value of the firm to be $25. This is
clearly relevant because an investor wants to buy stocks that are trading at prices
significantly below their estimated intrinsic value.
This leads us to one of the second major assumptions of fundamental analysis: in
the long run, the stock market will reflect the fundamentals. There is no point in
buying a stock based on intrinsic value if the price never reflected that value.
Nobody knows how long the long run really is. It could be days or years.
This is what fundamental analysis is all about. By focusing on a particular
business, an investor can estimate the intrinsic value of a firm and thus find
opportunities where he or she can buy at a discount. If all goes well, the
investment will pay off over time as the market catches up to the fundamentals.
The big unknowns are:
1) You dont know if your estimate of intrinsic value is correct; and
2) You dont know how long it will take for the intrinsic value to be reflected in
the marketplace.

Fundamental analysis propounds that the intrinsic value is and has to be based on
the benefits that accrue to investors in the share. As the return to shareholders is
in the form of dividends, under strict fundamental analysis, the present value of
future dividends discounted on the basis of its perceived safety or risks is its
intrinsic value. The intrinsic value is based on the dividend because that is what a
shareholder or investor receives from a company.

Calculation of Intrinsic value

How does one calculate the intrinsic value of a share? Let us assume that one
expects a return of 20% on an investment every year for 3 years. Let us also
assume that the company would pay dividends of 20%, 25% and 30% on its
Rs.10 share. The dividend received on a share would therefore be Rs.2.00 in the
first year, Rs.2.50 in the second, and Rs.3.00 in the third. Let us also assume that
the share can be sold at Rs.200 at the end of 3 years. The
Intrinsic value of the share will be:
2/1.2+2.5/ (1.2) ^2+ (3+200)/ (1.2) ^3
=Rs.120.88

If the market price of the share is below Rs.120.88 then the share is below its
intrinsic value and therefore well worth purchasing. If, on the other hand, the
market price is higher, it is a sell signal and the share should be sold.
Fundamental analysis is divided into three distinct parts:
1. The economy
2. The industry within which the company operates
3. The company

Fundamentals: Quantitative and Qualitative

We could define fundamental analysis as researching the fundamentals, but that

doesnt tell you a whole lot unless we know what fundamentals are. As we
mentioned in the introduction, the big problem with defining fundamentals is that
it can include anything related to the economic well-being of a company.
Obvious items include things like revenue and profit, but fundamentals also
include everything from a companys market share to the quality of its
management.
The various fundamental factors can be grouped into two categories: quantitative
and qualitative.

Quantitative capable of being measured or expressed in numerical

terms.
Qualitative related to or based on the quality or character of
something, often as opposed to its size or quantity.

In our context, quantitative fundamentals are numeric, measurable

characteristics about a business. Its easy to see how the biggest source of
quantitative data is the financial statements. We can measure revenue, profit,
assets and more with great precision.

Turning to qualitative fundamentals, these are the less tangible factors

surrounding a business - things such as the quality of a companys board
members and key executives, its brand-name recognition, patents or
proprietary technology.

Fundamental Analysis: Qualitative Factors - The Company

Fundamental analysis seeks to determine the intrinsic value of a company's stock.
But since qualitative factors, by definition, represent aspects of a company's
business that are difficult or impossible to quantify, incorporating that kind of
information into a pricing evaluation can be quite difficult. On the flip side, as
we've demonstrated, you can't ignore the less tangible characteristics of a
company.
In this section we are going to highlight some of the company-specific qualitative
factors that you should be aware of.

Business Model
Even before an investor looks at a company's financial statements or does any
research, one of the most important questions that should be asked is: What
exactly does the company do? This is referred to as a company's business model
it's how a company makes money. You can get a good overview of a company's
business model.
Sometimes business models are easy to understand. Take McDonalds, for
instance, which sells hamburgers, fries, soft drinks, salads and whatever other
new special they are promoting at the time. It's a simple model, easy enough for
anybody to understand.

Competitive Advantage
Another business consideration for investors is competitive advantage. A
company's long-term success is driven largely by its ability to maintain a
competitive advantage - and keep it. Powerful competitive advantages, such as
Coca Cola's brand name and Microsoft's domination of the personal computer
operating system, create a moat around a business allowing it to keep competitors
at bay and enjoy growth and profits. When a company can achieve competitive
advantage, its shareholders can be well rewarded for decades.

Management
Just as an army needs a general to lead it to victory, a company relies upon
management to steer it towards financial success. Some believe that management
is the most important aspect for investing in a company. It makes sense - even the
best business model is doomed if the leaders of the company fail to properly
execute the plan. So how does an average investor go about evaluating the
management of a company?
This is one of the areas in which individuals are truly at a disadvantage compared
to professional investors. We can't set up a meeting with management if you want
to invest a few thousand dollars. On the other hand, if we are a fund manager
interested in investing millions of dollars, there is a good chance we can schedule
a face-to-face meeting with the upper brass of the firm.
Every public company has a corporate information section on its website. Usually
there will be a quick biography on each executive with their employment history,
educational background and any applicable achievements.
Instead, here are a few ways for you to get a feel for management:
1. Conference Calls
The chief executive officer (CEO) and the Chief Financial Officer (CFO) host
quarterly conference calls. (Sometimes we'll get other executives as well.) The
first portion of the call is management basically reading off the financial results.
What is really interesting is the question-and-answer portion of the call. This is
when the line is open for analysts to call in and ask management direct questions.
Answers here can be revealing about the company, but more importantly, listen
for candor. Do they avoid questions, like politicians, or do they provide forthright
answers?

2. Management Discussion and Analysis (MD&A)

the Management Discussion and Analysis is found at the beginning of the annual
report. In theory, the MD&A is supposed to be frank commentary on the
management's outlook. Sometimes the content is worthwhile, other times its
boilerplate. One tip is to compare what management said in past years with what
they are saying now. Is it the same material rehashed? Have strategies actually
been implemented?

3. Ownership and Insider Sales

Just about any large company will compensate executives with a combination of
cash, restricted stock and options. While there are problems with stock options it
is a positive sign that members of management are also shareholders. The ideal
situation is when the founder of the company is still in charge. Examples include
Bill Gates (in the '80s and '90s), Michael Dell and Warren Buffett. When you
know that a majority of management's wealth is in the stock, we can have
confidence that they will do the right thing. As well, it's worth checking out if
management has been selling its stock. This has to be filed with the Securities
and Exchange Commission (SEC), so it's publicly available information.

4. Past Performance
Another good way to get a feel for management capability is to check and see
how executives have done at other companies in the past. We can normally find
biographies of top executives on company web sites. Identify the companies they
worked at in the past and do a search on those companies and their performance.

Corporate Governance

Corporate governance describes the policies in place within an organization

denoting the relationships and responsibilities between management, directors
and stakeholders. These policies are defined and determined in the company
charter and its bylaws, along with corporate laws and regulations. The purpose of
corporate governance policies is to ensure that proper checks and balances are in
place, making it more difficult for anyone to conduct unethical and illegal
activities.

Customers
Some companies serve only a handful of customers, while others serve millions.
In general, it's a red flag (a negative) if a business relies on a small number of
customers for a large portion of its sales because the loss of each customer could
dramatically affect revenues. For example, think of a military supplier who has
100% of its sales with the U.S. government. One change in government policy
could potentially wipe out all of its sales.

Market Share
Understanding a company's present market share can tell volumes about the
company's business. The fact that a company possesses an 85% market share tells
us that it is the largest player in its market by far. Market share is important
because of economies of scale. When the firm is bigger than the rest of its rivals,
it is in a better position to absorb the high fixed costs of a capital-intensive
industry.

Industry Growth
One way of examining a company's growth potential is to first examine whether
the amount of customers in the overall market willgrow. This is crucial because
without new customers, a company has to steal market share in order to grow.

In some markets, there is zero or negative growth, a factor demanding careful

consideration. For example, a manufacturing company dedicated solely to
creating audio compact cassettes might have been very successful in the '70s, '80s
and early '90s. However, that same company would probably have a rough time
now due to the advent of newer technologies, such as CDs and MP3s. The current
market for audio compact cassettes is only a fraction of what it was during the
peak of its popularity.

Competition
Simply looking at the number of competitors goes a long way in understanding
the competitive landscape for a company. Industries that have limited barriers to
entry and a large number of competing firms create a difficult operating
environment for firms.

One of the biggest risks within a highly competitive industry is pricing power.
This refers to the ability of a supplier to increase prices and pass those costs on to
customers. Companies operating in industries with few alternatives have the
ability to pass on costs to their customers. A great example of this is Wal-Mart.
They are so dominant in the retailing business, that Wal-Mart practically sets the
price for any of the suppliers wanting to do business with them. If you want to
sell to Wal-Mart, you have little, if any, pricing power.

Regulation
Certain industries are heavily regulated due to the importance or severity of the
industry's products and/or services. As important as some of these regulations are
to the public, they can drastically affect the attractiveness of a company for
investment purposes.

In industries where one or two companies represent the entire industry for a
region (such as utility companies), governments usually specify how much profit
each company can make. In these instances, while there is the potential for
sizable profits, they are limited due to regulation.

In other industries, regulation can play a less direct role in affecting industry
pricing. For example, the drug industry is one of most regulated industries. And
for good reason - no one wants an ineffective drug that causes deaths to reach the
market. As a result, Food and Drug Administration (FDA) requires that new
drugs must pass a series of clinical trials before they can be sold and distributed
to the general public. However, the consequence of all this testing is that it
usually takes several years and millions of dollars before a drug is approved.
Keep in mind that all these costs are above and beyond the millions that the drug
company has spent on research and development.

Fundamental Analysis: Quantitative Factors - The Company

You can gain valuable insights about a company by examining its income
statement. Increasing sales offers the first sign of strong fundamentals. Rising
margins indicate increasing efficiency and profitability. Its also a good idea to
determine whether the company is performing in line with industry peers and
competitors. Look for significant changes in revenues, costs of goods sold and
SG&A to get a sense of the companys profit fundamentals.
Fundamental Analysis Tools
These are the most popular tools of fundamental analysis. They focus on
earnings, growth, and value in the market.
The articles are:

1. Earning Per Share (EPS)

2. Price To Earning Ratio (P/E Ratio)
3. Protected Earning Growth PEG
4. Price To Book Value P/B
5. Debt To Equity Ratio
6. Return On Capital Employed (ROCE)
7. Return On Net Worth (RONW)
8. Current Ratio
9. Assets Turnover Ratio
10.Debtor Turnover Ratio
11.Inventory Turnover Ratio
12.Interest Coverage Ratio
13.Beta

EARNING PER SHARE

Earning per share is generally considered to be the single most important variable
in determining a share's price. It is also a major component of the price-to-
earnings valuation ratio.

EPS = Net Earnings / Outstanding Shares

For example, Company A had earnings of $100 and 10 shares outstanding, which
equals an EPS of 10 ($100 / 10 = 10). Company B had earnings of $100 and 50
shares outstanding, which equals an EPS of 2 ($100 / 50 = 2).
So, we should go buy Company A with an EPS of 10, right? Maybe, but not just
on the basis of its EPS. The EPS is helpful in comparing one company to another,
assuming they are in the same industry, but it doesnt tell you whether its a good
stock to buy or what the market thinks of it. For that information, we need to look
at some ratios also.

An important aspect of EPS that's often ignored is the capital that is required to
generate the earnings (net income) in the calculation. Two companies could
generate the same EPS number, but one could do so with less equity (investment)
- that company would be more efficient at using its capital to generate income
and, all other things being equal would be a "better" company. Investors also
need to be aware of earnings manipulation that will affect the quality of the
earnings number. It is important not to rely on any one financial measure, but to
use it in conjunction with statement analysis and other measures

PRICE TO EARNING RATIO

The P/E looks at the relationship between the stock price and the companys
earnings. The P/E is the most popular metric of stock analysis, although it is far
from the only one you should consider.
You calculate the P/E by taking the share price and dividing it by the companys
EPS.
P/E = Stock Price / EPS
For example, a company with a share price of $40 and an EPS of 8 would have a
P/E of 5 ($40 / 8 = 5).

This also translates to yield of 20% (100/5)

What does P/E tell you? The P/E gives you an idea of what the market is willing
to pay for the companys earnings. The higher the P/E the more the market is
willing to pay for the companys earnings. Some investors read a high P/E as an
overpriced stock and that may be the case, however it can also indicate the
market has high hopes for this stocks future and has bid up the price.
Conversely, a low P/E may indicate a vote of no confidence by the market or it
could mean this is a sleeper that the market has overlooked. Known as value
stocks, many investors made their fortunes spotting these diamonds in the
rough before the rest of the market discovered their true worth.
What is the right P/E? There is no correct answer to this question, because part
of the answer depends on our willingness to pay for earnings. The more we are
willing to pay, which means we believe the company has good long term
prospects over and above its current position, the higher the right P/E is for that
particular stock in our decision-making process.

PROJECTED EARNING GROWTH (PEG)

A ratio used to determine a stock's value while taking into account earnings
growth. You calculate the PEG by taking the P/E and dividing it by the projected
growth in earnings.
PEG = P/E / (projected growth in earnings)
For example, a stock with a P/E of 30 and projected earning growth next year of
15% would have a PEG of 2 (30 / 15 = 2).
What does the 2 mean? Like all ratios, it simply shows you a relationship. In
this case, the lower the number the less we pay for each unit of future earnings
growth. So, even a stock with a high P/E, but high projected earning growth may
be a good value.
Looking at the opposite situation; a low P/E stock with low or no projected
earnings growth, we see that what looks like a value may not work out that way.
For example, a stock with a P/E of 8 and flat earnings growth equals a PEG of 8.
This could prove to be an expensive investment.
PEG is a widely employed indicator of a stock's possible true value. The PEG
ratio of 1 represents a fair trade-off between the values of cost and the values of
growth, indicating that a stock is reasonably valued given the expected growth.
Similar to PE ratios, a lower PEG means that the stock is undervalued more. It is
favored by many over the price/earnings ratio because it also accounts for
growth. If a company is growing at 30% a year, then the stock's P/E could be 30
to have a PEG of 1. PEG ratios between 1 and 2 are therefore considered to be in
the range of normal values. A crude analysis suggests that companies with PEG
values between 0 to 1 may provide higher returns

Price-To-Book Ratio - P/B Ratio

A ratio used to compare a stock's market value to its book value. It is calculated
by dividing the current closing price of the stock by the latest quarter's book
value per share.

Calculated as:
P/B = Share Price / Book Value Per Share
A lower P/B ratio could mean that the stock is undervalued. However, it could
also mean that something is fundamentally wrong with the company. As with
most ratios, be aware that this varies by industry. On the other hand high P/B
ratio signifies that investors have tremendous confidence in the growth prospects
of the company. It can also suggest that the assets may be understated.

DEBT TO EQUITY RATIO

The debt to equity ratio (D/E) is a financial ratio indicating the relative
proportion of debt and equity used to finance a company's assets. This ratio is
also known as Risk, Gearing or Leverage. It is equal to total debt divided by
shareholders equity The two components are often taken from the firm's balance
sheet or statement of financial position (so-called book value),
This is calculated by the followiong formula:
D/E = Debt (Liabilities)/ Equity

A high debt/equity ratio generally means that a company has been aggressive in
financing its growth with debt. This can result in volatile earnings as a result of
the additional interest expense.
The debt/equity ratio also depends on the industry in which the company
operates. For example, capital-intensive industries such as auto manufacturing
tend to have a debt/equity ratio above 2, while personal computer companies
have a debt/equity of under 0.5.

Return on Capital Employed ROCE

Ratio, which indicates the efficiency and profitability of a company's capital
investments.

Calculated as:

ROCE should always be higher than the rate at which the company borrows;
otherwise any increase in borrowing will reduce shareholders' earnings.

Return on Equity ROE

A measure of a corporation's profitability that reveals how much profit a
company generates with the money shareholders have invested.

Calculated as:

Also known as "return on net worth" (RONW).

The ROE is useful for comparing the profitability of a company to that of other
firms in the same industry.
A healthy company may produce an ROE in the 13% to 15% range. Like all
metrics, compare companies in the same industry to get a better picture.
While ROE is a useful measure, it does have some flaws that can give us a false
picture, so never rely on it alone. For example, if a company carries a large debt
and raises funds through borrowing rather than issuing stock it will reduce its
book value. A lower book value means were dividing by a smaller number so,
the ROE is artificially higher.
High ROE yields no immediate benefit. Since stock prices are most strongly
determined by earnings per share (EPS), we will be paying twice as much (in
Price/Book terms) for a 20% ROE company as for a 10% ROE company. The
benefit comes from the earnings reinvested in the company at a high ROE rate,
which in turn gives the company a high growth rate.

Current Ratio
A liquidity ratio which measures the company's ability to pay short-term
obligations.

Calculated as:

The ratio is mainly used to give an idea of the company's ability to pay back its
short-term liabilities (debt and payables) with its short-term assets (cash,
inventory, receivables). The higher the current ratio, the more capable the
company is of paying its obligations. . A ratio under 1 suggests that the
company would be unable to pay off its obligations if they came due at that
point. While this shows the company is not in good financial health,
The current ratio can give a sense of the efficiency of a company's operating
cycle or its ability to turn its product into cash. A high number may suggest that
management has so much cash in hand means they are doing poor job of
investing it.

Asset Turnover
The amount of sales generated for every dollar's worth of assets. It is calculated
by dividing sales by assets.

Formula:
Asset turnover measures a firm's efficiency at using its assets in generating sales
or revenue - the higher the number the better. It also indicates pricing strategy:
companies with low profit margins tend to have high asset turnover, while those
with high profit margins have low asset turnover.

Inventory Turnover
A ratio showing how many times a company's inventory is sold and replaced over
a period.

A low turnover implies poor sales and, therefore, excess inventory. A high ratio
implies either strong sales or ineffective buying.

High inventory levels are unhealthy because they represent an investment with a
rate of return of zero. It also opens the company up to trouble- should prices
begin to fall.

Receivables Turnover Ratio

An accounting measure used to quantify a firm's effectiveness in extending credit
as well as collecting debts. The receivables turnover ratio is an activity
ratio, measuring how efficiently a firm uses its assets.

Formula:
By maintaining accounts receivable, firms are indirectly extending interest-free
loans to their clients. A high ratio implies either that a company operates on a
cash basis or that its extension of credit and collection of accounts receivable is
efficient.

A low ratio implies the company should re-assess its credit policies in order to
ensure the timely collection of imparted credit that is not earning interest for the
firm.

Interest Coverage Ratio

Ratio used to determine how easily a company can pay interest on outstanding
debt. The interest coverage ratio is calculated by dividing a company's earnings
before interest and taxes (EBIT) of one period by the company's interest
expenses of the same period:

The lower the ratio, the more the company is burdened by debt expense. When a
company's interest coverage ratio is 1.5 or lower, its ability to meet interest
expenses may be questionable. An interest coverage ratio below 1 indicates the
company is not generating sufficient revenues to satisfy interest expenses.

BETA
Beta is a measure of a stock's volatility in relation to the market. By definition,
the market has a beta of 1.0, and individual stocks are ranked according to how
much they deviate from the market. A stock that swings more than the market
over time has a beta above 1.0. If a stock moves less than the market, the stock's
beta is less than 1.0. High-beta stocks are supposed to be riskier but provide a
potential for higher returns; low-beta stocks pose less risk but also lower returns.
 RESEARCH METHODOLOGY

Research Methodology is a way to systematically solve the problem. One can

define research as a scientific and systematic search for pertinent information on
a specific topic. In it the various steps that are generally adopted by a researcher
in studying his research problem along with the logic behind him are studied.

(A) Research Design:- Decision regarding what, where, when, how

much, by what means concerning an inquiry or a research study constitute a
research design. A research design is the arrangement of conditions for collection
and analysis of data in a manner that aims to combine relevance to the research
purpose with economy in procedure. In fact, research design is the conceptual
structure within which the research is conducted.

The research design used for the present study is descriptive in nature. The major
purpose of descriptive study is description of the state of affairs as it exits at
present. The main characteristics of this design are that is used when researcher
has no control over the variables.

(B) SAMPLING DESIGN: A sampling design is that in which decision

need to be taken about target population, sampling unit, sampling size and
sampling procedures.

Sampling Unit
The sampling unit is individual.
Sampling Procedure
Sampling procedure is convenience sampling.
(C) Tools and Techniques of Analysis:
Data is analyzed using:-
Tables
Figures
Graphs

(D) Source of Data:-

There are two types of data.

Primary Data:

Secondary Data:

Primary Data: Primary data is the data which is collected afresh. The
data is collected directly from the customers or target audiences. It is not
used by me in this project. These data are more reliable but more costly.
Secondary Data: Secondary data is the data which is used from a
source which has already been used by someone else in his research. These
data are less costly but less reliable.
I have used secondary data in form of-
Books

Annual Reports

Newspapers

Websites
ECONOMY AND INDUSTRY ANALYSIS
A wise man once said, No man is an island. No person can work and live in
isolation. External forces are constantly influencing an individuals actions
and affecting him. Similarly, no industry or company can exit in isolation. Its
sales and costs are affected by many factors, some of which are beyond its
control- the world economy, price inflation, taxes etc. So it is important to
have knowledge about the political-economic factors of a country.

India's economy is diverse, encompassing agriculture, handicrafts, textile,

manufacturing, and a multitude of services. Although two-thirds of the Indian
workforce still earn their livelihood directly or indirectly through agriculture,
services are a growing sector and play an increasingly important role in India's
economy. Behind China, India is the second fastest growing economy. According
to a survey by Goldman Sachs, India will become the 3rd largest economy by
2035.

Furthermore, despite the rapid growth, poverty remains a real problem, especially
in rural India. In 2008 and beyond India faces the real challenge of making sure
that all sections of the population continue to benefit. Current estimates suggest
that 27% of the Indian population live below the poverty line. Oil and food
shortages combined with rising inflation have created a sense of economic crisis
in India. Gross domestic product growth is now expected to moderate to 7.5-7.8
per cent in 2008-09, lower than the previous forecasts of 8-8.5 per cent,

Strengths of Indian Economy

FDI. India is one of the worlds largest recipients of FDI. India has become
the favored location of outsourcing labor intensive work such as call
centers.
India benefits from a well educated middle class, fluent in English.
The economy is reaping some of the benefits of greater market
liberalization and privatization
Rich in Natural resources such as gold, Coal, iron, diamonds. (However a
net importer of oil. only produces 25% of its energy demands.

Indian Retail Industry is ranked among the ten largest retail markets in the world.
The attitudinal shift of the Indian consumer in terms of 'Choice Preference',
'Value for Money' and the emergence of organized retail formats have
transformed the face of Retailing in India. As per CRIS INFAC Report, 2007, the
Indian retail industry is currently estimated to be a US$200 billion industry and
organized Retailing comprises of 3 per cent (or) US$6.4 Billion of the retail
industry. With a growth over 20 percent per annum over the last 5 years,
organized retailing is projected to reach US$ 30 Billion by 2010.

Retailing in India is gradually inching its way to becoming the next boom
industry. The whole concept of shopping has altered in terms of format and
consumer buying behavior, ushering in a revolution in shopping. Modern retail
has entered India as seen in sprawling shopping centers, multi-storied malls and
huge complexes offer shopping, entertainment and food all under one roof.

Retail is India's largest industry, accounting for over 10 percent of the country's
GDP and around 8 percent of employment. Retail in India is at the crossroads. It
has emerged as one of the most dynamic and fast paced industries with several
players entering the market.

The Indian retailing sector is at an inflexion point where the growth of organized
retail and growth in. Consumption by Indians is going to adopt a higher growth
trajectory. The Indian population is witnessing a significant change in its
demographics. A large young working population with median age of 24 years,
nuclear families in urban areas, along with increasing working-women population
and emerging opportunities in the services sector are going to be the key growth
drivers of the organized retail sector.

Organized Retail Penetration:

2004- 2005- 2006- 2007-

Unit 05E 06E 07E 08P
Total Retail Industry Rs.Billion 9990 10659 11374 12136
Growth Rate Percent 6.7 6.7 6.7 6.7
Organized Rs.Billion 350 441 556 700
Penetration Percent 3.5 4.1 4.9 5.8
Organized Retail Y-O-Y
Growth Percent 24 26 26 26

E - Estimated
P - Projected
Source: CRIS INFAC, 2007

SWOT ANALYSIS OF RETAIL

INDUSTRY
STRENGTHS:
1) Higher Disposable Income: The disposable income of Indian consumers has
increased steadily. The proportion of the major consuming class (population that
has an annual income that is higher than Rs. 90,000) is expected to grow at a
CAGR of 9.3 per cent (2005-2010) over the next 5 years and will result in higher
spending capacity and eventually into greater consumption.

2) Change in outlook on branded products and Growth in the number of

retail malls: In the last 4-5 years, Indian markets have witnessed a strong shift
towards branded products as Indian consumers have started feeling that branded
goods offer better quality and greater value for money. This increase in the
awareness of branded goods has been the highest in the case of apparel. Increased
exposure to international consumerism trends and fast changing lifestyles can
result in a 10-15 per cent growth in branded goods, which will, in turn, provide a
platform for the growth of organized retail. The last 2-3 years have also
witnessed a proliferation in malls in India, particularly in the metros and mini
metros. The growth in retail malls provides more options for retailers, as it
reduces the time required to set up a retail outlet. It also provides retail space,
which can be leased by retailers instead of investing in building up their own
store. This significantly reduces the capital intensity of the retail industry.
Typically, a retail chain would prefer to lease store space in a mall instead of
setting up a standalone store, since this reduces capital investment, which can be
employed in their core business of retailing.

3) Higher growth in urban population: At present, organized retailing is

focused in metros and is expected to expand to Tier-II and Tier-III cities. For the
next 10 years, growth in organized retailing is expected to take place in urban
areas. Thus, the target market for organized retail players is the urban population.
Urbanization has increased at a rate of 2.7 per cent over the last 10 years (1990-
2000) and is expected to increase at 2.4 per cent from 2000 to 2015. In 2015, the
population in urban areas is expected to touch 401 million, accounting for about
32.2 percent of the total population.

Year Population (Percent)

Urban Rural
Population Population
1990 26 74
1995 27 73
2000 28 72
2005 29 71
2010 30 70
2015 32 68

4) Higher income levels in urban population: The share of the major

consuming class in the urban region has increased at a higher rate, from 45 per
cent in 1998-99 to 51 per cent in 2001-02, and it is expected to touch 63 per cent
by 2009-10. Further, the income levels of the urban middle class are also
expected to register a strong growth in the medium term.

5) Increased Acceptance of "mall culture"

The organized retail boom was given a boost with the concept of shopping malls.
Currently, India has 179 operational malls and is expected to have 412 malls by
2010. These malls attract footfalls in ten of thousands everyday and have become
family destinations to shop, eat and for entertainment.

6) Consumers want quality product

The new Indian consumer is now up to date with the latest developments in other
parts of the world and is now looking for quality products. Organized retail with
its corporate background will be able to provide the customer with quality as well
as accountability.

WEAKNESS:
1) Limited Reach: Although big retail stores are going to set up their outlets in
rural and remote areas. Still there are places where there is no retail store.
Pantaloon is toying with the idea based on a study conducted in Mumbai where
two-third of the population lives in slums and 60% of them are migrants. The
study analyzed the lifestyle, earnings, spending behaviour, consumption pattern
and attitude toward shopping destinations and brands. The study found that the
slum dwellers dont visit the modern shopping stores as its time and money
consuming, perceived expensive. Also, they dont feel comfortable
among educated and middle-class people and are apprehensive about kids
reactive demands

2) Lack of Trained & Professional Workforce: 85% of shoppers would leave a

store in favour of competition when sales staffs were unable to meet their
standards of product knowledge and customer service. The report reveals the
huge impact that staff training can have on the profitability of a business and
indicates that the only way retailers are going to continue to maintain the loyalty
of their customers is to seek new ways to meet their expectations. The telephone
survey, commissioned by the Adult Learning Inspectorate (ALI), asked 1000
people about their expectations of retail staff and found that over two-thirds of
those questioned (67%) said they had gone home without buying a product
because they found that the sales staffs were not helpful enough.

OPPORTUNITIES:
1) Rural Retaining: The Indian rural market with its vast size and demand base
offers great opportunities to marketers. Two-thirds of countries consumers live in
rural areas and almost half of the national income is generated here. The Indian
rural market with its vast size and demand base offers a huge opportunity that
MNCs cannot afford to ignore. Companies like DSCL and Godrej who had
significant agri-business interests, set them up to meet the needs of farmers in a
stores catchments area.

2) Higher level of working women: According to the 2001 census report, the
population of working women has increased from 22 per cent in 1991 to 26 per
cent in 2001. The purchasing habit of a working woman is different from that of a
housewife, since the former has lesser time to devote to the task. Working women
would prefer a one-stop shop for purchasing their regular products. Also, a
working woman's propensity for spending is higher than that of a housewife.
3) Increase in nuclear families: In the recent past, nuclear families as a
percentage of the total household population have increased. Average household
sizes have decreased from 5.57 in 1991 to 5.36 in 2001. Per capita consumption
increases in the case of a nuclear family. The rise in the number of nuclear
families will, thus, drive consumption and boost the retail industry.

4) Baby boomer effect: There has been a strong demographic shift in India's
population distribution. The percentage of the earning population (15 to 60 yrs) in
the total population is rising. This will increase the overall purchasing capacity in
the country, propelling growth in the retail segment.

Year Age (Percent)

<15 15-60 >60
years years years
1990 37 57 7
1995 36 57 7
2000 34 58 8
2005 32 60 8
2010 30 62 8
2015 36 63 10

Source: CRIS INFAC

5) Increased use of credit cards and availability of cheap finance: The use of
plastic money (credit and debit cards) has increased significantly in the last 4-5
years. In fact the ease of payments (ability to spend without cash) due to the use
of credit and debit cards, has also led to an increase in total spending on shopping
and eating out. With the acceptance of and the increase in the number of
electronic data converter machines installed in retailing outlets, we believe credit
and debit cards will provide further, fillip to organized retail.

6) Low penetration provides growth potential: According to Crisil, the total

size of the retail industry in India is about US$320 bn, of which only 3-4% is
organized. This provides significant potential for growth, in our opinion. Over the
next few years, penetration levels of organized retail are expected to double and
reach approximately 9% of the total retail industry by 2011.

THREATS:
1) Delays in mall construction may delay launch plans of retailers: A survey
by ICICI Property and Technopak suggested that malls would account for half of
the total organized sector retail space demand in the next five years. However, the
rising cost of retail space in India is affecting the growth plans of retailers. Real
estate costs are hampering their margins, which are already not very high.
Retailers, in order to get prime real estate, have even started to look at residential
properties located at prime locations to convert them into retail outlets/malls.
They are also entering into long-term lease arrangements with mall developers as
anchor tenants in order to reduce lease costs and also entering into revenue
sharing agreements.

2) FDI: Currently, foreign direct investment in retail chain stores is restricted in

India. Companies that entered prior to 1997 have been allowed to continue with
their existing foreign equity components. Currently, a foreign company can
conduct business through the following channels:
2.1 Franchising
2.2 cash and carry wholesale
2.3 joint venture

3) Protests from small shop keepers: retail industry is facing a great threat from
kirana stores, convenience stores. Reliance, which plans to spend US$6bn on
expansion over the next four years, has seen its ambitions take a hit from
opposition from local traders wary of competition in India's fast-growing retail
sector.
The state government in Uttar Pradesh, India's most populous state ordered the
closure of ten Reliance Fresh outlets last month following the protests.
 Segments in Retail
Retail as a whole can be broken into various categories, depending on the types
of products serviced. Food and groceries has the biggest share in the retail pie,
accounting for the around 76%. However, it has the lowest organized retail
penetration. This is indicative of the opportunity for organized retail growth in
this segment. The footwear and clothing segments have the highest penetration of
organized retail.

Category A B C D E
Food, beverage and tobacco 7738 75.8 65 19 1
Clothing and textile 716 7 141 40 20
Consumer durables 416 4.1 43 13 10
Jewelleries 416 4.1 25 7 6
Home dcor and furnishing 300 2.9 25 7 8
Beauty care products 214 2.1 7 2 3
Footwear 104 1 32 9 31
Books, music and gifts 87 0.8 11 3 13
Total 9990 100 349

Source: CRIS INFAC Annual Review, 2007

A = Total Retail - Market Size (Rs. billion)

B = Total Retail - Market Shares (per cent)
C = Organized Retail - Market Size (Rs. billion)
D = Organized Retail - Market Shares (per cent)
E = Organized Retail - Penetration (per cent)
Home decor and food and grocery are emerging as the fastest-growing segments.
The proliferation of hypermarkets and supermarkets has led to a growth in food
and grocery retail; thus, value retailing is seen to be gaining ground in India. The
other high growth verticals are apparel and durables. Impulse goods like books
and music are also gaining a larger share in the organized retail market, with
players making stores more accessible to consumers.
 COMPANY ANALYSIS

At the final stage of fundamental Analysis, company analysis includes:

1. How has the company performed in comparison to earlier years and

2. How has the company performed vis--vis other similar companies?

INTRODUCTION OF VISHAL MEGA MART

Vishal is a leading player in the Indian Retail Industry focused on value retailing
in Tier II and Tier III cities of the country. Its business is modeled on the on the
concept of 'value for money' retailing and has established a strong customer
connect with the middle and lower middle income consumer groups. Its Key
strategy is to offer quality products, at the minimum possible cost, with a focus
on private label and quasi private label products and fashion at affordable price.

What started as a humble one store enterprise in 1986 in Kolkata (erstwhile,

Calcutta) is today a conglomerate encompassing 108 showrooms in 73 cities / 20
states. Indias first hyper-market has also been opened for the Indian consumer by
Vishal. Situated in the national capital Delhi this store boasts of the single largest
collection of goods and commodities sold under one roof in India. Currently, it
sell ready-made apparels and a wide range of household merchandise and other
consumer goods such as footwear, toys, watches, toiletries, grocery items, sports
items, crockery, gift and novelties.

In order to reduce costs and take advantage of economies of scale it has

embarked on backward integration of our products. Its apparel manufacturing
plant is located at Gurgaon, Haryana. For ensuring efficiency in supply chain, it
has set up seven regional distribution centres located around Kolkata (West
Bengal), Thane (Maharashtra), Jaipur (Rajasthan), Ghaziabad (Uttar Pradesh),
Ludhiana (Punjab), Gurgaon (Haryana) and Delhi. Further, they have focused on
developing a cost and time efficient distribution and logistics network, which
currently comprises seven distribution centers and a fleet of trucks for
transportation.
Vishal achieved total sales of Rs. 6,026.53 million for fiscal 2007, as opposed to
a turnover of Rs. 2,884.43 million for fiscal 2006 and Rs. 1,463.12 million for
fiscal 2005. During the same period their profit after tax was Rs.249.83 million,
Rs. 124.74 million and Rs. 30.20 million, respectively. As a result, their sales
increased between fiscal 2004 and fiscal 2007 at a CAGR of 89.83% and their
profit after tax increased between fiscal 2004 and fiscal 2007 at a CAGR of
302.89%.

Segment Wise Performance

%
Category Fiscal 2007 Fiscal 2006 growth
Apparel 3800968337 2043676792 85.98
FMCG 905884507 257489344 251.32
Non Apparel 1314429767 580538128 124.41
Grand Total 6021282611 2881064264 108.92

MANAGEMENT

The group had a turnover of Rs. 1463.12 million for fiscal 2005, under the
dynamic leadership of Mr.Ram Chandra Aggarwal. The groups prime focus is on
retailing. The Vishal stores offer affordable family fashion at prices to suit every
pocket.
The groups philosophy is integration and towards this end has initiated
backward integration in the field of high fashion by setting up a state of the art
manufacturing facility to support its retail endeavors.

COMPANYS GOAL
Company goal is to provide a range of fashion wear to suit every pocket. Our
product mix represents the most current fashion trends in tops, bottoms, formals
and accessories for men, women and kids. Our courteous staff will ensure that
consumers get a perfect fit.

INFRASTRUCTURE
Vishal Retail Ltd. has a factory in Gurgaon, Haryana. This factory has more than
700 imported machines that have a capacity to manufacturer 1,50,000 pieces a
month. The factory occupies 80000 sq ft of covered space. The Vishal group
indirectly gives employment to more than a 1000 people. These people work in
ancillaries that supply finished goods to the company.

Their 10 warehouses cater to 108 showrooms in 20 states/73 cities. It is covering

about 20, 59,292 sq. ft. in 20 states across India.

PRODUCT CATEGORIES

Home Furnishing

Food Mart

Sports & Fitness

Footwear

Telemart

Mens Wear

Ladies Accessories

Infants

Women

Kids Boy

Kids Girl

Travel Accessories

Household

Lifestyle

Toys & Games

 Stationary

SWOT ANALYSIS OF VISHAL MEGA MART

STRENGTHS:
1) Understanding of the 'value retail' segment: Its business plan involves
implementation of the concept of the 'value retailing', targeting the middle and
lower middle income groups, which constitute majority of the population in
India. They intend to provide quality products at competitive prices. Their
emphasis has been to maximize the value that the customers derive in spending
on goods bought in our stores. They endeavor to continuously reduce their costs
through a variety of measures, such as, in-house production of apparels,
procurement of goods directly from the small and medium size vendors and
manufacturers, efficient logistics and systems along with customized product mix
at their stores depending on the regional customer behavior and preferences.
Central to its value retail strategy is to pass on the benefits of cost reduction
measures to customers.

2) Supply chain management: Its supply chain management involves planning,

merchandizing, sourcing, standardization, vendor management, production,
logistics, quality control, 'pilferage' control replacement and replenishment. Its
supply chain management provides flexibility to adapt to changing patterns in
consumer behaviour and ability to add value at various steps/levels. In particular,
its supply chain management gains strength from its ability to undertake in-house
manufacture, design and development of apparels.

3) Logistics and distribution network: Its distribution and logistics network

comprises seven distribution centers. Besides, it has its own fleet of 41 trucks,
which helps to transport and deliver its products in a cost and time efficient
manner. They believe that their distribution and logistics set up is well networked
and allows them to fulfill the store requisition within short time period of
generation and receipt of order, which has helped us to optimize in-store
availability of merchandise and minimize transportation costs. Their strong
distribution and logistics network has enabled them to dispense with the
requirement of a dedicated storage space at every store, which is an industry
practice, and instead undertake periodical replenishment of depleted stock. Due
to adoption of an efficient racking system, they are able to benefit from optimum
utilization of the space allocated for display in their stores. This provides them
assistance in maintaining a low working capital requirement and less carrying
cost.

4) Geographical spread: Their stores and distribution centers are spread in

various parts and regions of the country. This has not only enabled them to build
their brand value but also facilitated us to explore cost-effective sourcing from
different locations, identify potential markets and efficiently establish new stores
in different locations. An aggregate of 45 of 53 of their existing stores are located
in Tier II and Tier 111 cities, which, they believe, enables them to capture market
share in locations where a majority of their target customers are located.

5) Identifying new locations: They believe that they possess the ability to
identify locations with potential for growth, in particular in Tier II and Tier III
cities. They have an exclusive site identification and assessment team, which
undertakes systematic analysis of the business prospects, taking into account
factors such as population, literacy levels and nature of occupation, income
levels, accessibility, basic infrastructure and establishment and running costs.
Further, they have a dedicated warehouse for the purposes of storing the materials
essential for setting up of new stores.

6) Information technology systems: They are constantly upgrading their

technology and have invested around Rs. 50 mn in the implementation of SAP in
the organization. This package, implemented by Tata Consultancy Services is
capable of supporting 1,000 users, thus providing enough scope to scale up their
operations. To further ensure the profitability and sustained growth, the company
is in the process of revamping its current IT set up to implement more advanced
applications and integrate all its business process right from planning to
implementation and material management, to finance. The stores and warehouses
facilities are linked through a company vide Virtual Network Connection together
with hotlines to ensure online connectivity. All of our stores are linked with
broadband technology for online and video conferencing connectivity to ensure
proper centralized and control over stores and monitoring of inventory, ensuring a
pilferage level of less than 1.5%..

7) Sales promotion and Customer Service: Their Category management team

plans promotional schemes on a weekly basis. Apart from general sales
promotion, the category management team formulates promotional plans for
'slow movers'. In addition, to promote sales, the company focuses on the layout
of its stores and positioning, presentation and display of merchandise, in order to
appeal to the customers. Under arrangements and merchandise manufactures,
they also receive payment on account of display of their products.

8) Focus on private labels: Their objective has always been to offer quality
products at the minimum possible cost. Thus, the company strives to offer
differentiated products that are not available elsewhere at very competitive prices,
by either manufacturing them in house or directly sourcing them from
manufacturers. Their Core strength lies in garment manufacturing and the ability
to understand the apparel business, which has translated into an active and strong
Private label offering. Further, in house manufacturing (private labels)
contributed 9.68% of their total sales in fiscal 2007 aggregating Rs.583.58
million.

9) Experienced and skilled management team: They have an experienced

management team which is complemented by a committed workforce. Their
management team comprises of talented professionals who are skilled in the
retail sector. This has assisted them in management of their stores. They believe
they have created the right balance of performance bonuses and other incentives
for their employees.

OPPORTUNITIES:
1) Presence in Tier II and Tier III cities: They are operating 45 Stores out of 53
Stores in India in the Tier II and Tier III cities. They are having strong presence in
these cities. Big players have not ventured into these cities. In Future, they would
be operating more stores in such cities and aid in the development of the
organized Retail Industry in such cities

2) New Retail Format: They are in the process of launching Convenient Stores
and Specialty stores all over India, by which we would be able to reach every
consumer and also gain a wide spread geographical presence all over the India.
These stores would be spread in the area of approximate 5,000-10,000 Sq. Ft.
They have already identified some of the suitable locations for the same and
have entered into Memorandum of Understanding with some of the owners
for running these stores from their premises.

3) Booming Industry Scenario: The Retail Industry, which was a few time back
at the nascent stage, is progressively moving forward to become the biggest
industry contributing a large chunk of resources in the development of economy.
The Industry is having a CAGR of 25%, which is supposed to increase further.
They, being one of the major Retailers in the Industry, will be garnering a strong
share in the Retail Industry growth and providing value for money to their
stakeholders.

4) Private Labels: Their objective has always been to offer quality products at
the minimum possible costs. Thus, they strives to offer differentiated products
that are not available elsewhere at very competitive prices, by either
manufacturing them in house or directly sourcing them from manufacturers.
They have a number of in house brands which are contributing significantly to
our total revenues. They would be launching more products under their private
labels, which will pave the way for their margins and create a strong value for
their stakeholders.

5) De risking our Business Model: They are working on de-risking their

business model. While keeping their products range wide, they have ensured a
balanced mix of in house manufactured products (private labels) and products
sourced from manufacturers (quasi private labels) to optimize margins and
minimize risks. Currently, apparels contribute a significant portion to their
revenues. In order to reduce their dependence on the apparels business and de-
risk their business from the seasonality of apparel retailing, they are focusing
more on non-apparels and FMCG retailing. This segment would be contributing
significantly to their revenues in future, thereby minimizing the risk.

6) HUMAN RESOURCES: Their human resource policies are aimed towards

creating a skilled and motivated workforce. They have 6,801employees both
employed in their stores as well as in their manufacturing unit and other facilities,
on April 30, 2007.

The following tables provide a classification of their employees on the basis of

their age and education.

No. of
Age Employees
18-24 3793
25-35 2178
35 and
above 830
Total 6801

No. of
Education Employees
Under
Graduates 4060
Graduates 2498
Post Graduates 243
Total 6801

7) Compensation and Performance Based Incentives: Their compensation

policy is performance based and they believe it is competitive with industry
standards in India. They endeavour to recognize talent and potential in their
employees and encourage them to take additional responsibilities. Based on
performance, they calibrate their employees and reward loyalty by preferring in-
house promotions.

8) Training: Their Key focus has been to change the mindset from 'human
resource utilization' to 'nurturing and leveraging talent'. They believe in investing
in people competencies for the business requirements of tomorrow. In essence,
they wish to train their employees to become next generation entrepreneurs, who
can effectively lead the growth of our business. They have created a favourable
work environment that encourages innovation and meritocracy. They are in the
process of putting up a scalable recruitment and human resource management
process, which will enable them to attract and retain high caliber employees &
meet the challenges of the Retail Industry.

9) Internal Control System and their adequacy: The Company has installed
adequate internal control systems and procedures commensurate with the size and
nature of the business. The Company has implemented SAP to ensure that proper
checks and balances are in place to ensure the functioning of Internal Control
Systems. The discrepancies pointed out by their Internal Control System are
taken care of and proper actions are taken on the same, after taking approval of
the Audit Committee on the same.
CONCERNS OR THREATS
1) Execution Risks: Although the Industry growth potentially appears to be
immense and they are having a tract record of capturing such opportunities, we
have to steadily keep up with the pace of Industry growth. We face two type of
Execution Risk.

* The pace of New Stores Roll out

* Managing the profitability of these stores

2) Retaining existing talent and acquiring new talent will present a huge
challenge: The Organized Retail Industry is expected to reach US$ 30bn by
2010, for which it will be requiring 0.5mn of people. With the entry of new big
players into the market, such as Wal-Mart, Reliance and the huge expansion of
existing big Retailers, they would be witnessing a huge amount of poaching
leading to an increase in employee cost thereby impacting margins.

3) Concentrated Geographical Presence: Currently, they are having strong

presence in central and northern India, wherein they derive 61.93% of our
revenues. Further all our manufacturing and warehousing facilities are located in
this region. Their aggressive plans for the next two years in other regions of the
country may pose a concern in terms of the company's execution skills and
logistic set up.

4) Increase in competition to impact Margins: Considering the industry's huge

growth potential, new players, both domestic and international, are likely to enter
the market. Groups such as Reliance Industries, Bharti etc., and foreign players
like Wal-Mart, Tesco, Carrefour and Metro have already expressed their keenness
to operate in India. Increased Competitive pressure is likely to alter the dynamics
of business quite dramatically, further staining land and manpower resources.
Further, the advent of competition may also dent the high level of profitability
enjoyed by them.

5) Retail Landscape: According to Images 2007, organized retail is set to grow

at a 35% CAGR over the next few years and will reach US 30bn by 2010.
However, in order to reach this target, several initiatives and huge investments
would be required on the part of retailers. They estimate that Retail Industry
would be requiring 145-060 mn sq. ft. of space to reach this target. Further, in
view of large expansion plans of Pantaloon, Reliance and Wal-Mart making a
foray into Indian Retail Industry with Bharti, prominent land space would be a
big threat to the industry.

Vishal Retail Ltd.

Financial Performance (Rs Cr) Latest Results (Rs Cr)
Period- Var.
Year End 200703 200603 200503 Ended 200803 (%)
Equity 18.32 16.49 14.82 Sales 318.41 NA
Networth 126.76 67.09 30.31 Other Income 3.41 NA
Enterprise Value 0 0 0 PBIDT 38.06 NA
Capital Employed 369.97 127.75 52.97 PBDT 25.66 NA
Gross Block 132.93 46 24.01 PBIT 28.6 NA
Sales 602.65 288.44 146.31 PBT 16.2 NA
Other Income 2.39 0.65 0.14 RPAT 10.4 NA
PBIDT 70.37 27.06 8.9 EPAT 0 NA
PBDT 54.64 23.98 7.92 APAT 10.4 NA
PBIT 55.08 21.7 5.98 CP 19.86 NA
PBT 39.35 18.62 5 Shareholding Pattern
RPAT 25.06 12.39 3.02 (as on 31-Mar-2008) Shares (%)
APAT 25.06 12.53 3.02 Foreign 2160249 9.64
CP 40.35 17.75 5.94 Institutions 723703 3.23
Rev. Earnings in
FE 0 0 0 Govt Holding 0 0
Rev. Expenses in Non Promoter Corp.
FE 37.44 8.97 0 Hold. 3840542 17.15
Book Value (Rs) 69.19 40.69 20.45 Promoters 14320000 63.93
EPS (Rs.) 13.68 7.51 2.04 Public & Others 1354375 6.05
Dividend (%) 0 0 0 Totals 22398869 100
Payout (%) 0 0 0 Share Price Graph
Ratio Analysis
Debt-Equity 1.5 0.75 0.71
Current Ratio 1.54 1.84 2.7
Invtry Turnover 3.68 4.99 5.07
Debtors Turnover 5739.52 6409.78 0
Interest Cover 3.5 7.05 6.1
PBIDTM (%) 11.68 9.38 6.08
PBDTM (%) 9.07 8.31 5.41
APATM (%) 4.16 4.3 2.06
ROCE (%) 22.13 24.02 16.11
RONW (%) 25.86 25.44 13.89
EV/EBIDTA 0 0 0
Rate of Growth (%) Market Data (As on 26-Jun-2008 )
52 W 1001 /
Net Worth 88.94 121.35 129.8 Price (Rs) 644.8 H/L(Rs) 423
 Lat.
Sales 108.93 97.14 66.07 Lat. P/E 35.5 EPS(Rs) 18.14
Mkt. Cap.(Rs Lat.Eqty
PAT 102.26 310.26 694.74 Cr) 1444.35 (Rs Cr) 22.4
Div. Yield
M Cap 0 0 0 Lat. BV(Rs) 21.11 (%) 0

SOURCE: SOFTWARE CAPITALINE NEO VERSION

KEY FINANCIAL RATIOS:

RATIOS KEY FINANCIAL RATIOS -
Vishal Retail Ltd

200703 200603 200503

Key Ratios
Debt-Equity Ratio 1.5 0.75 0.71
Long Term Debt-
Equity Ratio 0.54 0.3 0.71
Current Ratio 1.54 1.84 2.7

Turnover Ratios
Fixed Assets 6.74 8.24 8.06
Inventory 3.68 4.99 5.07
Debtors 5739.52 6409.78 0
Interest Cover
Ratio 3.5 7.05 6.1
PBIDTM (%) 11.68 9.38 6.08
PBITM (%) 9.14 7.52 4.09
PBDTM (%) 9.07 8.31 5.41
CPM (%) 6.7 6.15 4.06
APATM (%) 4.16 4.3 2.06
ROCE (%) 22.13 24.02 16.11
RONW (%) 25.86 25.44 13.89

SOURCE: CAPITALINE NEO VERSION

CALCULATION OF IMPORTANT RATIOS
EPS (EARNING PER SHARE)

=PAT/OUTSTANDING SHARES

= 25.06/1.832=13.67

P/E RATIO (PRICE TO EARNING RATIO)

=MARKET PRICE/EPS

=644.8/18.14=35.55

PEG (PROJECTED EARNING GROWTH)

=P/E/EPS GROWTH

=35.55/32.6=1.09

D/E RATIO (DEBT TO EQUITY RATIO)

=DEBT/EQUITY

=216.3/126.76=1.70

ROCE (RETURN ON CAPITAL EMPLOYED)

=PBIT/TOTAL CAPITAL EMPLOYED

=55.08/248.86=22.13

RONW (RETURN ON NET WORTH)

=PAT/NET WORTH

=25.06/96.925=25.86

DIVIDEND YIELD

=DIVIDEND PAID/MARKET PRICE

=0/644.8=0

P/B VALUE (PRICE TO BOOK VALUE)

 =644.8/21.11=30.54

Comparison of Fiscal year 2007 and Fiscal year 2006:

Some of the significant events that took place during the Fiscal year 2007 were as
follows:

1) 27 new stores were opened, aggregating to an area of 770,890 square feet. Our
store at Hyderabad has been shifted to another location at the same place with a
higher area and also we have closed our operations at Siliguri First store and have
opened another store 'Siliguri Second' with a higher area. Our stores located at
Meerut, Agra were closed due to fire in such store.

2) We have made preferential allotment of 1,450,000 Equity Shares in month of

June and July 2006 at an issue price of Rs. 200 per Equity Share.

3) During Fiscal year 2007 we have tested and partly implemented SAP ERP
package for management information system. During the transition face from old
information package to new ERP system, we faced operational difficulties in
terms of delayed and improper receipt of operational data particularly of sales.
This has even led to over stocking of the materials to overcome the replenishment
requirements of the company.

4) Profit after Tax: Net profit increased by 102.36% to Rs. 250.67 mn in Fiscal
year 2007 from Rs. 123.87 mn in Fiscal year 2006-07. The increase was mainly
on account of increase in sales due to opening of new stores, change in sales mix
with an increase sales mix of non apparel goods with better net margins and
FMCG products.

5) Other Income: Other income earned in Fiscal year 2007 was Rs. 23.90
million in comparison to Rs. 6.46 million in Fiscal year 2006, an increase of
254.80%. This increase was mainly on account of increase in display charges on
account of FMCG goods, receipt of commission on account of issuance of credit
card under the co-branded card agreement with SBI Cards & Payment Services
Private Limited
6) Capital Employed: The total capital employed in the business increased by
Rs. 242,208,720/- in 2006-07. This is reflected in the liabilities side of the
balance sheet of the company through an increase in borrowing by Rs.
1,881,592,013/- and an increase in share capital by Rs. 540,616,707/-.

7) Capital Structure:
*The Company has authorized equity share capital of Rs. 25.00 Crores
comprising 2.50 Crores equity shares of Rs. 10/- each and authorized preference
share capital of Rs. 5.84 Crores divided into 4.00 Lacs preference shares of
Rs.146/- each.
*The paid up equity share capital of the Company increased from Rs.164,906,050
in financial year 2005-06 to 183,247,950/- in 2006-07. Further 3, 84,190
Preference Shares of Rs.146/- were converted in to equity shares at a price of Rs.
146/- each during the year under review. The company has issued and allotted
12,50,000 equity shares of Rs. 10/- each at a premium of Rs. 190/- each to 49
investors on July 02, 2006 and further 2,00,000 equity shares of Rs.10/- each
were allotted to HDFC Ltd. at a premium of 190/-each.

8) Loan Profile:
* Loans increased from Rs. 550,480,922/- to Rs. 2,432,072,935/- during the
financial year 2006-07.The secured loans increased from Rs. 476,105,922/- in
2005-06 to Rs. 2,162,954,208/- in the financial year 2006-07. The unsecured
loans increased from Rs. 74,375,000/- in 2005-06 to Rs.269,118,727/- in 2006-
07. The secured loan is primarily on account of working capital facility and cash
credit limit to finance the operations and to maintain the liquidity of the company.

*The total Debt equity ratio stood at 1.71:1 in 2006-07 as compared to 0.76:1 in
2005-06. The debt is primarily consists of working capital facility and cash credit
limit

9) Capital Expenditure: During 2006-07, the Company incurred Capital

expenditure of Rs.885,786,143/- (inclusive of addition to WIP). The capital
expenditure incurred during the year is primarily on account of adding up new
stores to the Company's Portfolio of Stores and renovating existing stores.

10) Intra Group Transaction: There were no Intra group transactions during the
financial year 2006-07. Gross Block Size and Nature of Assets:
*The Company's gross block of assets increased from Rs. 459,934,501/-in the
financial year 2005-06 to Rs. 1,329,272,543/-exclusive of Capital work in
progress.
The Capital Work in progress decreased from Rs. 46,404,301/- in the financial
year 2005-06 to Rs.10,877,703/- in the financial year 2006-07.The ratio of sales
to gross block has declined from 6.24 in 2005-06 to 4.53 in 2006-07

11) Depreciation: The Company provided for depreciation of Rs. 152,928,667/-

in the financial year 2006-07 as compared to Rs. 53,612,792/- in the financial
year 2005-06. The accumulated depreciation of the company comprised 19.38%
of its gross assets. The Company uses Written down Value Method for computing
depreciation on the company's assets.

12) Staff Costs: Staff costs increased in Fiscal year 2007 to Rs. 274.08 million as
compared to Rs. 135.44 million in Fiscal year 2006. The increase in employee
cost is mainly on account of recruitment of employees for new stores opened
during fiscal year 2007 and administrative staff in the head office. As a
percentage of total sales, it decreased from 4.70% in Fiscal year 2006 to 4.55% in
Fiscal year 2007.

13) Manufacturing and Administrative Expenses: Manufacturing and

administrative expenses increased in Fiscal year 2007 to Rs. 301.94 million as
compared to Rs. 179.90 million in Fiscal year 2006. As a percentage of total
sales, it decreased from 6.24% in Fiscal 2006 to 5.01 % in Fiscal year 2007. This
is mainly due to decrease in overall fabrication and other manufacturing expenses
from 4.44% (as percentage of sales) in fiscal year 2006 to 3.39% (as percentage
of sales) in fiscal year 2007.

14) Interest Outflow: Interest and finance charge has increased from Rs.
29,115,275 in the Fiscal year 2006 to Rs. 147,536,359 in the Fiscal year 2007.
The increase is due to loans taken from the banks/Financial Institutions for
financing the future expansion plans of the Company.

15) Foreign exchange earnings and outgo:

* There were no foreign exchange earnings during the last year under review.
* The Company has incurred foreign outgo Rs. 36,58,25,813/- in the Fiscal year
2007, which was primarily on account of capital goods and purchase of goods.

16) Earning per Share:

* During Fiscal year 2007, Earning per Share (EPS) was Rs. 13.97 as compared
to Rs. 7.92 in Fiscal year 2006.
 COMPETITIVE ANALYSIS:
INDUSTRY SCORE CARD
Pantaloon Provogue Vishal Shopper's
Retail (India) Retail Stop Trent
Equity 30.96 22.85 22.4 34.86 19.53
B.V. Rs. 96.5 249 21.1 86.9 301.4
52 W-H 875 1460 1001 629 829
52 W-L 369 462 423 333 333
Mkt. Cap. 6226.06 2519.9 1544.37 1359.54 979.14

SALES 4843.22 303.71 1005.31 1206.91 495.1

NP 99.9 24.57 40.64 6.97 30.7
NP% 46 35 62 -73 -3

KEY RATIOS

EPS Rs. 6.45 10.75 18.1 2 15.72

P/E Ratio 62.29 102.58 38.1 195 31.87
P/BV 4.17 4.43 3.265 4.49 1.66

Debt-Equity Ratio 0.3 0.31 1.5 0.3 0.2

Long Term Debt-
Equity Ratio 0.01 0.1 0.54 0.01 0.2
Current Ratio 1.54 2.19 1.54 1.54 1.4
Beta 1.0308 .4962 .7252 .4974 .6183
TURNOVER
RATIOS
Fixed Assets 4.99 6.25 6.74 4.99 4.65
Inventory 9.94 2.78 3.68 9.94 7.24
Debtors 144.74 5.68 5739.52 144.74 219.65
Interest Cover Ratio 12.07 4.61 3.5 12.07 10.2
ROCE (%) 14.42 12.48 22.13 14.42 10.25
RONW (%) 9.27 10.79 25.86 9.27 8.78
SOURCE: CAPITALINE NEO VERSION

ANALYSIS
1) Althogh in sales terms, if we see Pantaloon is leading with sales of
4843.22, then Shoppers stop with 1206.91 and then Vishal,
Provogue and Trent with 1005.31, 303.71 and 495.1 sales
respectively. But it does not tell whether Pantaloon is a good
company or the other company unless we have a look on other
figures like NP (net profit) and NP% (net profit percentage).

2) In net profit terms, this scorecard shows that again pantaloon is a

good company. But again it does not tell the whole story. As looking
at NP% which is calculated by dividing profit/expenditure telling
some useful figure which shows that although it is Pantaloon which
is making good sales, but along with sales, its expenditure are also
increasing. Vishal Mega Mart is making good profit along with
reducing expenditure. This increase was mainly due to opening of
new stores, change in sales mix with an increase sales mix of non
apparel goods with better net margins and FMCG products.

3) Looking at EPS, we should go buy company Provogues share.

Right? May be, but not just on the basis of its EPS. The EPS is
helpful in comparing one company to another, assuming they are in
the same industry, but it doesnt tell you whether its a good stock to
buy or what the market thinks of it. For that information, we need to
look at some other ratios also.

4) Now talking about P/E ratio, it seems that public has more
confidence in Provogue than other companies. But industry P/E
shows that it is 62.33. So, looking at industry P/E ratio it is
pantaloon indicating that market has high hopes for this stocks
future and has bid up the price. Provogue and Pantaloon seems to be
overpriced and Vishal is striving to achieve industry P/E.

5) Looking at D/E ratio shows that among these five companies it is

Vishal Mega Mart whose D/E ratio is greatest which is showing that
major of its assets are financed through debt and 15.73 Cr were paid
as interest burden which is high as comparison to other retail
companies which is 6.43, 8.58, 4.40 for Pantaloon, Provogue, Trent
respectively. Simultaneously looking at interst coverage ratio, it is
Vishal who is more burdened by debt expenses. But more than short
term debt, it is long term debt- equity ratio which is worth to be seen
and all the companies are doing quite well in this regard.
 6) Curerent ratio is indicating all companies have sufficient cash to pay
its short term liabilities because of increasing sales.

7) Beta is a measure of stocks volatility in relation to market. Above 1

beta of pantaloon signifying that although it is little bit riskier but
will give higher returns. Provogue and Pantaloon having below .5
signifying low risk with low return. Looking at Vishal it is in normal
range having a beta of .7252.

8) Fixed assets ratio shows efficiently companies use its assets. Higher
the ratio, better it is. It is showing that Vishal and Provogue is using
efficiently its assets.

9) Lookin at inventory turnover ratio signifies Pantaloon and Shoopers

s stop are doing it better than other retail companies. It means these
companies stock are sold and replaced easily over a period of time.
It is very low for Vishal showing that it has locked up lots of cash
in inventory because of their expansion plan in various other cities.

10) Debtors ratio indicating that Vishal is most efficient in extending

credit as well as colleting debts.

11) ROCE and RONW both are indicating that Vishal is doing a good
job. But here we can also deduce that Vishal is using more debt
than any other companies which is making RONW a bright figure
among them.

PROJECTION ON FUTURE
PERFORMANCE

Financial Statement & Income Statement

% Change
Particulars FY'07 FY'08 YOY
 Un-
Audited audited
Net Income From Operations 6026.5 10053.1 67
Other Operational Income 23.9 91.4 283
Total Revenue 6050.4 10144.6 68
Total Expenditure 5356.1 8853.6 65
Consumption Of Raw Materials 5124.9 8520 66
Increase/decrease in Stock In Trade -1662.1 -2903.3 75
Employee Cost 274.1 687.8 151
Other Expenditure 1619.3 2548.4 57
EBITDA 694.3 1291 86
Depreciation & Amortization 152.9 277.2 81
EBIT 541.4 1013.8 87
Interest 147.5 378.5 157
PBT 393.8 635.3 61
Tax 143.2 228.4 60
Net Profit After Tax 250.7 406.9 62
Basic & Diluted EPS (Rs.) 14 19 36
Paid Up Equity Share Capital 183.2 224 22

ANALYSIS
Strong Growth in Revenues with Improvement in
Profitability
1. Total Revenues up 68% from Rs. 6,050.4mn to Rs 10,144.6mn
driven by addition in retail space, increased footfalls &
increased conversion ratio

1.1. Added retail space of 902,346 sq. ft. taking the total to 2,161,902 sq. ft.
1.2. Daily footfalls increased by 103% from 89,829 to 182,396
1.3. Conversion ratio improved from 42.2% to 43.1%
1.4. Average ticket size declined by 25.3% from Rs 550 to Rs 410.6 due to
increased focus on FMCG Sales
2. EBITDA up 86% from Rs. 694.3mn to Rs. 1,291.0mn
EBITDA margin increased by 120bps from 11.5% to
12.7% (in spite of marginal decline in sales per sq ft from
Rs 7,023 to Rs 6,785) due to:
Increase in private labels sales from 9.8% of FY07 sales to 14.9% of FY08

3. Net Profits up 62% from Rs 250.7 to Rs 406.9mn

GROWTH PLANS

Number of stores increases to 100 and app. 1mn sq. ft. of

retail space
FOCUS ON TIER II AND TIER III CITIES
EXPANDING NATIONAL FOOTPRINT
Growing contribution from east and west: Expanded to
untapped tier 3 cities including Jammu, Rudrapur, Phagwara,
Shillong, Sirsa, Tinsukhia etc.

GROWING FMCG SALES

INCREASED FOCUS ON PRIVATE LABELS

 LIMITATIONS
1) Time Constraints
Fundamental analysis may offer excellent insights, but it can be extraordinarily
time-consuming. Time-consuming ratios & models often produce valuations that
are contradictory to the current price prevailing in the share market. This is not to
say that there are not misunderstood companies out there, but it is quite brash to
imply that the market price, and hence Stock Market, is wrong.

2) Industry/Company Specific
Valuation techniques vary depending on the industry group and specifics of each
company. For this reason, a different technique and model is required for
different industries and different companies. This can get quite time-consuming,
which can limit the amount of research that can be performed.

3) Subjectivity
Fair value is based on assumptions. Any changes to growth or multiplier
assumptions can greatly alter the ultimate valuation. Intrinsic value of a share can
and will be different for different individuals and also the assumptions expected
price at the end of a period are subjective.

4) Analyst Bias
The majority of the information that goes into the analysis comes from the
company itself. Companies employ investor relations managers specifically to
handle the analyst community and release information. Only buy-side analysts
tend to venture past the company statistics. Buy-side analysts work for mutual
funds and money managers. They read the reports written by the sell-side
analysts who work for the big brokers These brokers are also involved in
underwriting and investment banking for the companies. When reading these
reports, it is important to take into consideration any biases a sell-side analyst
may have. The buy-side analyst, on the other hand, is analyzing the company
purely from an investment standpoint for a portfolio manager. If there is a
relationship with the company, it is usually on different terms. In some cases this
may be as a large shareholder.
5) Definition of Fair Value
When market valuations extend beyond historical norms, there is pressure to
adjust growth and multiplier assumptions to compensate. If We values a stock at
50 times earnings and the current assumption is 30 times, the analyst would be
pressured to revise this assumption higher. There is an old adage: the value of any
asset (stock) is only what someone is willing to pay for it (current price). Just as
stock prices fluctuate, so too do growth and multiplier assumptions. Are we to
believe stock price or the analyst and market assumptions?

6) Technical Analysts View

Put simply, technical analysts base their investments (or, more precisely, their
trades) solely on the price and volume movements of securities. Using charts and
a number of other tools, they trade on momentum, not caring about the
fundamentals. While it is possible to use both techniques in combination, one of
the basic tenets of technical analysis is that the market discounts everything.
Accordingly, all news about a company already is priced into a stock, and
therefore a stocks price movements give more insight than the underlying
fundamental factors of the business itself.
 RECOMMENDATIONS

1) Vishal Retails inventory days shot up from 99 to 151 days in FY07. This pile
up of inventory locks up working capital and may result in the inventory having
to be sold at low prices. It should manage zero (minimum) inventory level and
maintain good relationship with supplier so that whenever they require inventory,
it should be replenished soon.
2) Owing to the competition in the retail sector the company will have to witness
poaching. To confront this situation, company should provide efficient salary and
compensation plans, a good ambience and growth opportunities by providing
efficient training programmes.
3) Vishal has concentrated geographical location in northern parts. To face the
coming competition, it should start planning to set up manufacturing and
warehousing facilities in other regions of the India otherwise it will pose problem
in supply and logistics system.
 CONCLUSION
Fundamental analysis holds that no investment decision should be made without
processing and analyzing all relevant information. Its strength lies in the fact that
the information analyzed is real as opposed to hunches or assumptions. On the
other hand, while fundamental analysis deals with tangible facts, it does tend to
ignore the fact that human beings do not always act rationally. Market prices do
sometimes deviate from fundamentals. Prices rise or fall due to insider trading,
speculation, rumors, and a host of other factors. A dozen experts will arrive at 12
different conclusions. It often happens that a few moments later each would alter
his verdict if given a chance to reconsider because of a changed condition.
This is true to an extent but the strength of fundamental analysis is that an
investment decision is arrived at after analyzing information and making logical
assumptions and deductions. One should buy a share only if its intrinsic value is
higher than its book value. This also protects one against possible loss since one
would dispose of a share whose market value is higher than its intrinsic value.
Hence fundamental analysis supports and encourages safe investing.
Valuation:
At a CMP (Current Market Price on 26th june2008) of Rs.644.8, the stock is
trading at 38.1x which is at a steep discount to peers like Pantaloon, Provogue,
Shoppers stop which are trading at 62.29, 102.58, 195 consensus earning
respectively. Considering the 20 yr long industry experience of the management
and good understanding of important markets, focus on tier II and III locations
which are expected to see a major growth in consumption and spending patterns
in the longer term thus giving VRL a distinct first mover advantage and
increasing share of its private label sales, we have a positive bias on the stock.
Vishal has grown at a scorching pace over the last few years. We feel this growth
will continue, going forward. We recommend investors BUY Vishal Retail with a
price target of Rs.644.8.

Happy Investing
 LEARNINGS

1. Summer Training and this project have enabled me to get Knowledge

about share market, their operations and their risk profile.
2. Learned how to face customers and how to answer their queries and has
added great amount of confidence in me.
3. I learned that real world scenario is all together different from those in
theories, but theories help in guiding you in tough situations.
4. Due to continuous interaction at different levels, I have learned how to
interact with different people.
5. I learned that convince people and get the desired work done.
 BIBLIOGRAPHY

BOOKS

Raghu Palat.; Fundamental Analysis For Investors

Kothari C.R.; Research Methodology;

Financial Management By I.M. Pande

WEBSITES

www.vishalmegamart.net

www.investopedia.com

www.wikipedia.com

www.nseindia.com

Annual Report of Vishal Mega Mart (2006-07)