Chapter-3- DATA ANALYSIS AND...

67

CHAPTER – 3

Data Analysis and Interpretation

Framework of Analysis 1. Financial health

a. Profitability Ratios

i. Gross Profit Ratio

ii. Net Profit Ratio

iii. Return on Assets

iv. Return on Equity

v. Return on Capital employed

b. Financial Leverage Ratios

i. Debt – Equity Ratio

ii. Total Capitalisation

c. Capital Market Ratios

i. Earning per share

ii. Price Earning ratio

2. Synergies a. Financial Synergy Standards

i. Current Ratio

ii. Quick Ratio

iii. Interest Coverage

iv. Total assets turnover ratio

b. Managerial Synergy Standards

i. Investment turnover ratio

ii. Fixed assets turn over ratio

iii. Total assets turn over ratio

c. Operating synergy standards

i. Operating Profit Margin

3. Firm Value ( Economic Value Added Model)

4. Value Added / Shortfall ( Economic Value Added Model)

5. Comparative study of overall performance

68

Figure: 3.1 Framework of Analysis

M&A Impact Analysis Model

Financial Health Firm Value

Ratio Analysis Economic Value Added Model

Profitability

Synergies

Leverage

- DER

- Total

Capitalisation

Capital

Market

- EPS

- PER

Financial

- GPR

- NPR

- ROA

- ROE

- ROCE

Managerial

Operational

- CR

- QR

- Interest

Coverage

-Market

Capitalisation

- ITOR

- FATOR

-TATOR

- OPM

- Economic Value Added

- Firm Value

-Value Added / Short Fall

Value added or shortfall

Financial Performance Standards

Synergy Performance Standards

69

This chapter intends to evaluate pre and post performance of select Mergers

and Acquisitions in terms of financial health, synergies, firm value and value addition

or shortfall. The analysis ensures long term survival. In this chapter, an analysis has

been done based on table 4.1. The individual objectives of the study are carried out in

the same order as during the study period. In this context, Mean and Co – efficient of

Variation are used to test volatility in pre and post period performance of the selected

companies.

Analysis of Financial Health

In order to identify the financial health in terms of changes in profitability, leverage

and capital market position after Mergers and Acquisitions studies have been made

separately for each group. However few ratios are used to identify the financial

performance. For convenience, the changes in financial health are identified and

called as financial performance metrics.

Financial performance metrics provide a relative basis for comparing a company over

a time. This analysis is to identify quantitative relations are to diagnose internal

strengths and weakness and help predict future financial performances. There are no

boundaries and hence useful to assessing the company’s performance throughout the

world.

Financial performance metrics considers strategic and economic developments for the

firm’s long-run success. These metrics should quickly provide actionable feedback to

improve the operations of the firm. A company is required to focus on these metrics

and represent the most important drivers of value creation. Long term induced

compensation was tied to attaining reliable levels of performance measured through

financial performance metrics.

Pre and post acquisition period financial performance metrics are computed for the

entire set of selected sample firms. This study involves relevant financial ratios which

are identified and categorised into various groups. Each group of ratios are deals with

important ratios by comparing the pre and post acquisition financial performance and

are shown as follows:

70

Table: 3.1 Financial Health Performance Standards

Profitability Standards

Ratio Description Standard

Gross Profit Margin % Gross profit/Sales High

Net Profit Margin % Net Profit/Sales High

Return on Assets % PAT/Total Assets High

Return on Equity % Net earnings/Equity High

Return on Capital Employed EBIT/Capital Employed High

Financial Leverage Standards

Debt-to Equity Ratio Debt/Equity Low

Total Capitalisation Ratio Total Debt/Total Capital Low

Capital Market Ratio Standards

Earnings per Share Net earnings/No.of equity shares High

Price Earnings ratio Average stock price/ EPS High

(HIGH: Higher the ratio better the performance)

(LOW: Lower the ratio better the performance)

Synergy Analysis

The combined entity values exceeding the sum of two stand alone as an entity

value. Therefore, the buy & build strategy gives more value than individual separate

entities. Synergy is the magic force that allows enhancing the cost efficiencies of

business organisations. These synergies consist of the strategies which help increase

the revenue and cost reductions. Synergies are results from the idea that value and

performance in combining two entities will be greater than the value of separate

entities.

In this study synergies are computed for the entire set of selected sample firms.

This study involves relevant ratios to identify the synergetic value of firms.

In order to identify the financial changes, managerial changes and operational

changes after Mergers and Acquisitions studies are made separately for each group.

However, few ratios are used to identify the synergetic change. For convenience the

changes are identified and called by names like: Financial synergies, Managerial

synergies and Operational synergies.

71

The below mentioned table indicates the positive changes. The referred ratios are

higher than the pre acquisition ratios of individual firms.

Table: 3.2 Synergy Ratio Standards

Financial Synergy Standards

Ratio Description Standard

Current Ratio Current Assets/Current Liabilities High

Liquid Ratio Liquid Assets/Current Liabilities High

Interest Coverage EBIT/interest Charges High

Market Capitalisation Stock Price x outstanding Shares High

Managerial Synergy Standards

Investment turnover Ratio Sales/ Investment High

Fixed assets turnover ratio Sales/ Fixed Assets High

Total assets turnover ratio Sales/Total Assets High

Operational Synergy Standards

Operating Profit Margin EBIT/Total Sales High

(HIGH: Higher the ratio better the performance)

Economic Value Added (EVA)

Economic Value Added is defined as “the incremental difference in rate of

return over a firms overall cost of capital. In other words, Economic Value Added is

calculated as a sum of excess return made on investment and invested capital.

Economic Value Added may be positive or negative. Negative Economic Value

Added indicates that the firm is destroying the value of funds invested. In case of

Economic Value Added negative means firm is destroying the value of funds

invested. Economic Value Added is a yardstick for an investment to measure the

value addition or shortfall.

Economic Value Added is calculated by using the following formula;

Economic Value Added = (Return on invested capital) – (Cost of Capital) (Capital

invested)

72

Economic Value Added improved measure of the Net Present Value rule. In

calculations of Economic value Added considered the present value of Economic

value Added is considered throughout the project life. The following formula is used

to evaluate the project or investment feasibility.

NPV = EVA t

(1+Kc) t

Where,

EVA t = Economic Value Added of project in year t

K c = Overall Cost of Capital

NPV = Net Present Value

The Economic Value Added and Net Present Value will result in a link

between value of the firm and Economic value Added of the firm. The calculation has

a simple formulation of firm value by the use of value of assets in place and

anticipated growth.

Firm Value = Value of assets in place + Value of expected future growth

There are two types of firm value calculation under Economic Value Added.

1) Discounted cash flow model - in this model both of the assets in place and the

expected future growth are ascertained by the use of Net Present Value created in the

preceding year. The following formula is used to evaluate the firm value by

considering the Net Present Value.

Firm Value = Capital invested Asset in place + Net Present Value Assets in place

+ Net Present Value

2) Economic Value Added model – this model is a substitute for discounted cash flow

model. In this model, instead of Net Present Value results, the calculation considers

Economic Value Added into this equation. The following formula is used to evaluate

firm value by using Economic Value Added.

Firm Value = Capital invested Assets in place +EVA Assets in place + EVA t Future projects

(1+Kc)t (1+Kc)

t

73

Thus, Firm Value is written as the total of following three components. Those are

• Capital investment assets in place

• Present value of Economic Value Added of assets in place

• Expected present value of Economic Value Added from the future investment.

Economic Value Added definitions outlines mainly depend on three basic inputs

that are-1) Invested capital 2) The return on net assets 3) Cost of capital of the firm.

Economic Value Added positive means the management has increased the firm’s total

worth. In other words, the firms profit is higher than that of the creditors and investors

expectations. If, Economic Value Added is negative it means the overall cost of

capital is more than the profit accumulated by the company which a means decline in

the firm value over a period. In other words, the profit of the firm is lower than that of

the Creditors and investors expectations.

Economic Value Added is performance metric. Economic Value Added is the

most preferable measure to evaluate a firm’s performance. The increase in Economic

Value Added will maximise the firm’s market value. It covers both the capital costs

and the operating costs. Hence it presents the best outcomes of the firms. Economic

Value Added of the firm will evaluate independently identify the feasibility of the

investment.

74

1. Analysis of Financial Health of selected Mergers and Acquisitions

Analysis of financial health measures the ability of the management and a

company’s accomplishments. Capital market performance ensures short term survival.

Profitability and leverage position ensures long term survival. Both are essential for

any company to long run survival. In order to identify the financial health changes

after Mergers and Acquisitions studies are made separately for each group. However,

few ratios are used to measure the financial health. For convenience the changes are

identified and called by names like: profitability ratios, leverage ratios and capital

market ratios. In this heading, an analysis has been done with the help of ratios like

gross profit margin, net profit margin, debt equity ratio, earnings per share and return

on capital employed by using the statistical tools like mean, standard deviation and

co- efficient of variation to examine the financial health of selected Mergers and

Acquisitions during the study period.

Table: 3.1.1 Gross Profit Margin of Selected Companies

Companies Mean Standard Deviation

Co - efficient of Variation

Pre Post Pre Post Pre Post

BAL 28.63 18.12 1.001 4.15 3.50 22.90

HGSL 22.15 12.82 0.60 2.59 2.71 20.20

HZL 63.86 53.19 14.10 2.17 22.08 4.08

LIL 17.10 10.05 3.35 3.29 19.59 32.74

FHL -8.92 -2.53 15.43 4.48 -172.98 -177.08

JSPL 31.17 24.50 2.887 5.475 9.26 22.35

M&ML 10.15 10.95 3.98 1.74 39.21 15.89

TCL 12.04 10.04 1.74 0.300 14.45 2.99

GTLIL -6.58 2.49 9.92 34.16 150.76 1371.89

RPL 0 481.18 0 399.09 0 82.94 (Source: AGM reports of selected companies & moneycontrol.com database)

During the study period, the average Gross Profit Margin from 2007 to 2009 is

considered to be pre-acquisition period whereas 2010 to 2013 to be considered as post

acquisition period. The comparison of the pre and post-acquisition, Gross Profit

Margin of selected companies is shown in table – 3.1.1

75

During pre acquisition period (2007 – 2009) it is observed from the table that the pre

acquisition average Gross Profit Margin ranges between -8.92% and 63.86%. The

highest average of Gross Profit Margin is found in Hindustan Zinc Ltd and the lowest

is found in Fortis Health Care Ltd.

During post acquisition period (2011- 2013) it also observed that the post acquisition

Gross Profit margin ranges between – 2.53% to 481%.The highest average of Gross

Profit Margin is found in Reliance Power Ltd and the lowest is found in Fortis

Healthcare Ltd.

During pre acquisition period (2007 – 2009) the Standard deviation of Gross Profit

Margin ranges between 0 and 15.43. The highest standard deviation is found in Fortis

Healthcare Ltd and the lowest is found in Reliance power Ltd.

During post acquisition period (2011 – 2013) the Standard deviation of Gross Profit

Margin ranges between 0.300 and 399. The highest standard deviation is found in

Reliance Power Ltd and the lowest is found in Tata Chemicals Ltd.

Comparing the Co-efficient of Variation of Selected companies in the pre and post

acquisition period from 2007 to 2013 the post acquisition Co-efficient of Variation is

high with respect to Bharti Airtel, Hinduja Global Solutions Ltd, Lanco Infratech Ltd,

Jindal Steel & Power Ltd, GTL Infrastructure Ltd and Reliance Power Ltd. The study

observed that the Gross Profit Margin Co-efficient of Variation is considerably

increased in the post acquisition.

The analysis of Gross Profit Margin of Selected companies reveals the facts which are

as follows:

• Lower the ratio – while comparing the average of Gross Profit Margin in pre and

post acquisition period Bharti Airtel Ltd, Hinduja Global Solutions Ltd, Hindustan

Zinc Ltd, Lanco Infratech Ltd, Jindal Steel & Power Ltd and Tata Chemicals Ltd

have considerably decrease performance due to high operational and financial

charges in post acquisition.

76

• Higher the ratio – Fortis Healthcare Ltd, Mahindra & Mahindra Ltd, GTL

Infrastructure Ltd and Reliance Power Ltd have considerably increase in Gross

Profit Margin due to low co-efficient of variation in post acquisition period.

Table: 3.1.2 Net Profit Margin of Selected Companies




BAL 23.01 14.85 0.85 4.75 3.69 31.99

HGSL 14.38 10.37 1.66 3.18 11.54 30.67

HZL 48.42 45.99 5.73 0.85 11.83 1.85

LIL 10.72 2.10 3.70 2.31 34.51 110.00

FHL -12.44 28.57 19.83 23.43 -159.41 82.01

JSPL 20.68 15.79 1.83 5.36 8.85 33.95

M&ML 8.68 9.40 2.15 1.55 24.77 16.49

TCL 12.98 6.90 8.92 0.43 68.72 6.23

GTLIL -24.87 11.17 22.53 96.01 -90.59 859.53

RPL 60.66 120.46 46.44 75.74 76.56 62.88 (Source: AGM reports of selected companies & moneycontrol.com database)

During the study period, the average Net Profit Margin from 2007 to 2009 is


acquisition period. The comparison of the pre and post-acquisition, Net Profit Margin

of selected companies is shown in table – 3.1.2


acquisition average Net Profit Margin ranges between -24.87% and 60.66%. The

highest average of Net Profit Margin is found in Reliance Power Ltd and the lowest is

found in GTL Infrastructure Ltd.


Net Profit margin ranges between 2.10% to 120.46%.The highest average of Net

77

Profit Margin is found in Reliance Power Ltd and the lowest is found in Lanco

Infratech Ltd.

During pre acquisition period (2007 – 2009) the Standard deviation of Net Profit

Margin ranges between 0.85 and 46.44. The highest standard deviation is found in

Reliance Power Ltd and the lowest is found in Bharti Airtel Ltd.

During post acquisition period (2011 – 2013) the Standard deviation of Net Profit

Margin ranges between 0.43 and 96.01. The highest standard deviation is found in

GTL Infrastructure Ltd and the lowest is found in Tata Chemicals Ltd.



high with respect to Bharti Airtel, Hinduja Global Solutions Ltd, Lanco Infratech Ltd,

Jindal Steel & Power Ltd, GTL Infrastructure Ltd and Reliance Power Ltd. The study

observed that the Net Profit Margin Co-efficient of Variation is considerably

increased in the post acquisition.

The analysis of Net Profit Margin of Selected companies reveals the facts which are

as follows:

• Lower the ratio – while comparing the average of Net Profit Margin in pre and

post acquisition period Bharti Airtel Ltd, Hinduja Global Solutions Ltd, Hindustan

Zinc Ltd, Lanco Infratech Ltd, Jindal Steel & Power Ltd and Tata Chemicals Ltd

have considerably decrease performance due to high financial charges in post

acquisition.

• Higher the ratio – Fortis Healthcare Ltd, Mahindra & Mahindra Ltd, GTL

Infrastructure Ltd and Reliance Power Ltd have considerably increase in Net

Profit Margin due to low co-efficient of variation in post acquisition period.

78

Table: 3.1.3 Return on Assets of Selected Companies




BAL 103 129 42.48 13.22 41.24 10.25

HGSL 294.88 317.20 45.71 5.69 15.50 1.79

HZL 266.91 64.45 80.49 11.55 30.16 17.92

LIL 72.46 14.77 10.87 0.43 15.00 2.91

FHL 29.89 77.48 6.09 2.65 20.37 3.42

JSPL 467.80 113.70 300.85 19.64 64.31 17.27

M&ML 173.94 201.66 22.63 35.50 13.01 17.60

TCL 139.23 196.05 24.39 11.30 17.52 5.76

GTLIL 11.97 12.49 2.70 5.03 22.56 40.27


During the study period, the average Return on Assets from 2007 to 2009 is


acquisition period. The comparison of the pre and post-acquisition, Return on Assets



acquisition average Return on Assets ranges between 11.97% and 467.80%. The

highest average of Return on Assets is found in Jindal Steel and Power Ltd and the

lowest is found in GTL Infrastructure Ltd.


Return on Assets ranges between 12.49% to 317.20%.The highest average of Return

on Assets is found in Hinduja Global Solutions Ltd and the lowest is found in GTL

Infrastructure Ltd.

During pre acquisition period (2007 – 2009) the Standard deviation of Return on

Assets ranges between 2.70 and 300.85. The highest standard deviation is found in

Jindal Steel and Power Ltd and the lowest is found in GTL Infrastructure Ltd.

79

During post acquisition period (2011 – 2013) the Standard deviation of Return on

Assets ranges between 0.43 and 35.50. The highest standard deviation is found in

Mahindra and Mahindra Ltd and the lowest is found in Lanco Infratech Ltd.



high with respect to GTL Infrastructure Ltd. The study observed that the Return on

Assets Co-efficient of Variation is considerably decreased in the post acquisition.

The analysis of Return on Assets of Selected companies reveals the facts which are as

follows:

• Lower the ratio – while comparing the average of Return on Assets in pre and post

acquisition period Hindustan Zinc Ltd, Lanco Infratech Ltd and Jindal Steel &

Power Ltd have considerably decrease performance due to low utilisation of

available resources.

• Higher the ratio – Bharti Airtel Ltd, Hinduja Global Solutions Ltd,Fortis

Healthcare Ltd, Mahindra & Mahindra Ltd, GTL Infrastructure Ltd, Tata

Chemicals Ltd and Reliance Power Ltd have considerably increase in Return on

Assets due to low co-efficient of variation in post acquisition period.

Table: 3.1.4 Return on Equity of Selected Companies

Companies Mean Standard Deviation Co - efficient of

Variation Pre Post Pre Post Pre Post

BAL 31.47 12.83 3.64 4.18 11.57 32.58

HGSL 8.62 9.81 4.01 1.81 46.52 18.45

HZL 37.81 20.14 20.09 2.52 53.13 12.51

LIL 10.67 3.92 4.73 3.97 44.33 101.28

FHL -3.68 3.84 5.96 2.97 -161.96 77.34

JSPL 29.84 18.70 2.70 5.47 9.05 29.25

M&ML 23.91 24.11 7.21 1.52 30.15 6.30

TCL 19.21 10.80 7.07 1.91 36.80 17.69

GTLIL -4.83 -23.68 4.03 13.66 -83.44 -57.69


80

During the study period, the average Return on Equity from 2007 to 2009 is


acquisition period. The comparison of the pre and post-acquisition, Return on Equity



acquisition average Return on Equity ranges between -4.83% and 37.81%. The

highest average of Return on Equity is found in Bharti Airtel Ltd and the lowest is



Return on Equity ranges between -23.68% to 24.11%.The highest average of Return

on Equity is found in Mahindra and Mahindra Ltd and the lowest is found in GTL

Infrastructure Ltd.


Equity ranges between 0.046 and 20.99. The highest standard deviation is found in

Jindal Steel and Power Ltd and the lowest is found in Reliance Power Ltd.


Equity ranges between 0.715 and 13.66. The highest standard deviation is found in

GTL Infrastructure Ltd and the lowest is found in Reliance Power Ltd.



high with respect to Lanco Infratech Ltd and Jindal Steel and Power Ltd. The study

observed that the Return on Equity Co-efficient of Variation is considerably

decreased in the post acquisition.

The analysis of Return on Equity of Selected companies reveals the facts which are as

follows:

• Lower the ratio – while comparing the average of Return on Equity in pre and

post acquisition period Bharti Airtel, Hindustan Zinc Ltd, Lanco Infratech Ltd,

Jindal Steel & Power Ltd, Tata Chemicals Ltd have considerably decrease

performance due to decline in profits.

81

• Higher the ratio – Hinduja Global Solutions Ltd,Fortis Healthcare Ltd, Mahindra

& Mahindra Ltd, GTL Infrastructure Ltd, Tata Chemicals Ltd and Reliance Power

Ltd have considerably increase in Return on Equity due to low co-efficient of

variation in post acquisition period.

Table: 3.1.5 Return on Capital Employed of Selected Companies




BAL 28.47 13.95 0.558 2.339 1.96 16.77

HGSL 9.93 11.41 5.63 1.81 56.70 15.86

HZL 51.56 24.45 30.56 1.96 59.27 8.02

LIL 13.41 9.02 4.80 1.34 35.79 14.86

FHL 1.59 3.92 1.31 1.14 82.39 29.08

JSPL 22.19 12.69 3.35 2.83 15.10 22.30

M&ML 19.41 25.59 5.91 1.83 30.45 7.15

TCL 14.55 13.38 3.98 3.02 27.35 22.57

GTLIL 0.77 0.66 0.23 3.26 29.87 493.94


During the study period, the average Return on Capital Employed from 2007 to 2009

is considered to be pre-acquisition period whereas 2010 to 2013 to be considered as

post acquisition period. The comparison of the pre and post-acquisition, Return on

Capital Employed of selected companies is shown in table – 3.1.5


acquisition average Return on Capital Employed ranges between 0% and 51.56%. The

highest average of Return on Capital Employed is found in Hindustan Zinc Ltd and

the lowest is found in Reliance Power Ltd.


Return on Capital Employed ranges between 0.66% to 25.59%.The highest average of

82

Return on Capital Employed is found in Mahindra and Mahindra Ltd and the lowest is



Capital Employed ranges between 0 and 30.55. The highest standard deviation is

found in Mahindra and Mahindra Ltd and the lowest is found in Reliance Power Ltd.


Capital Employed ranges between 0.959 and 2.34. The highest standard deviation is

found in Bharti Airtel Ltd and the lowest is found in Reliance Power Ltd.



high with respect to Bharti Airtel Ltd, GTL Infrastructure Ltd and Reliance Power

Ltd. The study observed that the Return on Capital Employed Co-efficient of

Variation is considerably decreased in the post acquisition.

The analysis of Return on Capital Employed of Selected companies reveals the facts

which are as follows:

• Lower the ratio – while comparing the average of Return on Capital Employed in

pre and post acquisition period Bharti Airtel, Hindustan Zinc Ltd, Lanco Infratech

Ltd, Jindal Steel & Power Ltd, Tata Chemicals Ltd have considerably decrease

performance due to decline in profits earned and Capital Employed.

• Higher the ratio – Hinduja Global Solutions Ltd,Fortis Healthcare Ltd, Mahindra

& Mahindra Ltd, GTL Infrastructure Ltd, Tata Chemicals Ltd and Reliance Power

Ltd have considerably increase in Return on Capital Employed due to low co-

efficient of variation in post acquisition period.

During the study period, the average Debt Equity Ratio from 2007 to 2009 is


acquisition period. The comparison of the pre and post-acquisition, Debt Equity Ratio


83

Table: 3.1.6 Debt Equity Ratio of Selected Companies




BAL 0.440 0.2533 0.147 0.032 33.41 12.63

HGSL 0.097 0.167 0.084 0.058 86.60 34.73

HZL - - - - - -

LIL 0.397 1.07 0.303 0.110 76.32 10.28

FHL 0.57 0.27 0.428 0.106 75.09 39.26

JSPL 1.14 1.41 0.24 0.147 21.05 10.43

M&ML 0.61 0.237 0.15 0.021 24.59 8.86

TCL 0.70 0.53 0.29 0.088 41.43 16.60

GTLIL 2.70 2.86 0.39 0.30 14.44 10.49



acquisition average Debt Equity Ratio ranges between 0:1 and 1.14:1.The highest

average of Debt Equity Ratio is found in Jindal Steel & Power Ltd and the lowest is

found in Reliance Power Ltd.


Debt Equity Ratio ranges between 0.07:1 to 1.41:1 The highest average of Debt

Equity Ratio found in Jindal Steel and Power Ltd and the lowest is found in Reliance

Power Ltd.

During pre acquisition period (2007 – 2009) the Standard deviation of Debt Equity

Ratio ranges between 0 and 0.428. The highest standard deviation is found in Fortis

Healthcare Ltd and the lowest is found in Reliance Power Ltd.

During post acquisition period (2011 – 2013) the Standard deviation of Debt Equity

Ratio ranges between 0.032 and 0.147. The highest standard deviation is found in

Jindal Steel and Power Ltd and the lowest is found in Bharti Airtel Ltd.

84



high with respect to Reliance Power Ltd. The study observed that the Debt Equity

Ratio Co-efficient of Variation is considerably decreased in the post acquisition.

The analysis of Debt Equity Ratio of Selected companies reveals the facts which are

as follows:

• Lower the ratio – while comparing the average of Debt Equity Ratio in pre and

post acquisition period Bharti Airtel Ltd, Fortis Healthcare Ltd, Ltd, Mahindra and

Mahindra Ltd and Tata Chemicals Ltd have considerably decreased indicating

lower leverage policy by infusing more equity funds in its capital structure.the

raised equity capital was devoted for long term investment purposes and

acquisition of long term assets. Over the years the debt amount decreased on

account of effective borrowing policies. The analysis indicates that the claims of

lenders are less than the shareholders funds or networth.

• Higher the ratio – Hinduja Global Solutions Ltd, Lanco Infratech Ltd, Jindal Steel

& Power Ltd, GTL Infrastructure Ltd and Reliance Power Ltd have considerably

increase in Debt Equity Ratio due to low co-efficient of variation in post

acquisition period.

Table: 3.1.7 Total Capitalisation of Selected Companies




BAL 0.2633 0.2000 0.051 0.017 19.37 8.50

HGSL 0.083 0.143 0.072 0.046 86.75 32.17

HZL 0.74 0.42 0.37 0.026 50.00 6.19

LIL 0.26 0.53 0.16 0.04 61.54 7.55

FHL 0.30 0.21 0.16 0.07 53.33 33.33

JSPL 0.52 0.58 0.051 0.023 9.81 3.97

M&ML 0.38 0.19 0.060 0.17 15.79 89.47

TCL 0.40 0.35 0.10 0.038 25.00 10.86

GTLIL 0.72 0.74 0.026 0.017 3.61 2.30


85

During the study period, the average Total Capitalisation from 2007 to 2009 is


acquisition period. The comparison of the pre and post-acquisition, Total

Capitalisation of selected companies is shown in table – 3.1.7


acquisition average Total Capitalisation ranges between 0:1 and 0.74:1.The highest

average of Total Capitalisation is found in Hindustan Zinc Ltd and the lowest is found

in Reliance Power Ltd.


Total Capitalisation ranges between 0.063:1 to 0.74:1 The highest average of Total

Capitalisation found in GTL Infrastructure Ltd and the lowest is found in Reliance

Power Ltd.

During pre acquisition period (2007 – 2009) the Standard deviation of Total

Capitalisation ranges between 0 and 0.37. The highest standard deviation is found in

Hindustan Zinc Ltd and the lowest is found in Reliance Power Ltd.

During post acquisition period (2011 – 2013) the Standard deviation of Total

Capitalisation ranges between 0.017 and 0.17. The highest standard deviation is found

in Mahindra and Mahindra Ltd and the lowest is found in GTL Infrastructure Ltd.



high with respect to Mahindra and Mahindra Ltd and Reliance Power Ltd. The study

observed that the Total Capitalisation Co-efficient of Variation is considerably


The analysis of Total Capitalisation of Selected companies reveals the facts which are

as follows:

• Lower the ratio – while comparing the average of Total Capitalisation in pre and

post acquisition period Bharti Airtel Ltd, Fortis Healthcare Ltd, Ltd, Mahindra and

Mahindra Ltd and Tata Chemicals Ltd have considerably decreased. It indicates

that the proportion of debt is low compared to equity funds reflecting use under

leveraging to fund the business operation. To fulfil operating and strategic plans

86

above companies depended on equity financing as a result leading to debt trap

where in future earnings are enough to meet obligations.

• Higher the ratio – Hinduja Global Solutions Ltd, Lanco Infratech Ltd, Jindal Steel

& Power Ltd, GTL Infrastructure Ltd and Reliance Power Ltd have considerably

increase in Total Capitalisation due to low co-efficient of variation in post

acquisition period.

Table: 3.1.8 Earnings per Share of Selected Companies




BAL 31.65 16.28 9.82 3.59 31.03 22.05

HGSL 47.86 31.05 32 5.17 66.86 16.65

HZL 91.23 13.67 23.12 2.42 25.34 17.70

LIL 8.07 0.57 4.39 0.56 54.40 98.25

FHL -0.92 2.97 1.45 2.32 -157.61 78.11

JSPL 136 20.57 80.50 3.07 59.19 14.92

M&ML 40.57 48.29 8.58 5.75 21.15 11.91

TCL 26.81 21.44 11.93 4.81 44.50 22.43

GTLIL -0.49 -2.77 0.46 1.22 -93.88 -44.04


During the study period, the average Earnings per Share from 2007 to 2009 is


acquisition period. The comparison of the pre and post-acquisition, Earnings per

Share of selected companies is shown in table – 3.1.8


acquisition average Earnings per Share ranges between -0.92 and 136.The highest

87

average of Earnings per Share is found in Jindal Steel and Power Ltd and the lowest is

found in Fortis Healthcare Ltd.


Earnings per Share ranges between -2.77 to 48.29. The highest average of Earnings

per Share found in Mahindra and Mahindra Ltd and the lowest is found in GTL

Infrastructure Ltd.

During pre acquisition period (2007 – 2009) the Standard deviation of Earnings per

Share ranges between 0.46 and 80.50. The highest standard deviation is found in

Jindal Steel and Power Ltd and the lowest is found in GTL Infrastructure Ltd.

During post acquisition period (2011 – 2013) the Standard deviation of Earnings per

Share ranges between 0.46 and 5.75. The highest standard deviation is found in

Mahindra and Mahindra Ltd and the lowest is found in Reliance Power Ltd.



high with respect to Lanco Infratech Ltd and Fortis Healthcare Ltd. The study

observed that the Earnings per Share Co-efficient of Variation is considerably


The analysis of Earnings per Share of Selected companies reveals the facts which are

as follows:

• Lower the ratio – while comparing the average of Earnings per Share in pre and

post acquisition period Bharti Airtel Ltd, Hinduja Global Solutions Ltd, Lanco

Infratech Ltd, Jindal Steel & Power Ltd, GTL Infrastructure Ltd and Tata

Chemicals Ltd have considerably decreased. It indicates that the decline in

Earning per Share attributed to higher operating expences and proportionate

decrease in sales revenue.

• Higher the ratio – Fortis Healthcare Ltd, Mahindra and Mahindra Ltd and

Reliance Power Ltd have considerably increase in Earnings per Share due to low

co-efficient of variation in post acquisition period.

88

Table: 3.1.9 Price Earning Ratio of Selected Companies




BAL 25.56 20.84 19.66 3.86 76.92 18.52

HGSL 9.11 12.26 5.65 5.74 62.02 46.82

HZL 9.95 9.59 7.99 1.28 80.30 13.35

LIL 107.42 2.73 130.11 4.73 121.12 173.26

FHL 21.60 95.23 498.26 124 2306.76 130.21

JSPL 28.62 18.55 33.68 2.82 117.68 15.20

M&ML 20.13 17.63 14.66 2.10 72.83 11.91

TCL 13.61 15.25 8.42 4.31 61.87 28.26

GTLIL -57.53 -2.66 67.67 3.07 -117.63 -115.41


During the study period, the average Price Earning Ratio from 2007 to 2009 is


acquisition period. The comparison of the pre and post-acquisition, Price Earning

Ratio of selected companies is shown in table – 3.1.9


acquisition average Price Earning Ratio ranges between -57.53 and 144.90.The

highest average of Price Earning Ratio is found in Reliance Power Ltd and the lowest

is found in GTL Infrastructure Ltd.


Price Earning Ratio ranges between -2.66 to 95.23. The highest average of Price

Earning Ratio found in Fortis Healthcare Ltd and the lowest is found in GTL

Infrastructure Ltd.

During pre acquisition period (2007 – 2009) the Standard deviation of Price Earning

Ratio ranges between 5.65 and 498.26. The highest standard deviation is found in

Fortis Healthcare Ltd and the lowest is found in Hinduja Global Solutions Ltd.

89

During post acquisition period (2011 – 2013) the Standard deviation of Price Earning

Ratio ranges between 1.28 and 124. The highest standard deviation is found in Fortis

Healthcare Ltd and the lowest is found in Hindustan Zinc Ltd.



high with respect to Lanco Infratech Ltd. The study observed that the Price Earning

Ratio Co-efficient of Variation is considerably decreased in the post acquisition.

The analysis of Price Earning Ratio of Selected companies reveals the facts which are

as follows:

• Lower the ratio – while comparing the average of Price Earning Ratio in pre and

post acquisition period Bharti Airtel Ltd, Hindustan Zinc Ltd, Lanco Infratech

Ltd, Jindal Steel & Power Ltd, Mahindra and Mahindra Ltd and Reliance Power

Ltd have considerably decreased. It indicates decreasing trend reflects lower

market price was paid by the investors and reported less earning per share during

the post acquisition period. Less dividend payments in post acquisition period

which lead to decrease in investor’s expectation and market appraisal.

• Higher the ratio – Hinduja Global Solutions Ltd, Fortis Healthcare Ltd, Tata

Chemicals Ltd and GTL Infrastructure Ltd have considerably increased in Price

Earning Ratio due to low co-efficient of variation in post acquisition period.

90

2. Analysis of Financial, Managerial and Operational Synergies

Analysis of financial, managerial and operational performance measures the

synergetic value of the firms. Liquidity ensures short term survival and credibility and

marketability ensures long term survival. Both are essential for any company in the

long run. In order to identify the financial changes, managerial changes and

operational changes after Mergers and Acquisitions, studies are made separately for

each group. However, few ratios are used to identify the synergetic change. For

convenience the changes are identified and called by names like: Financial synergies,

Managerial synergies and Operational synergies. Under this heading, an analysis has

been done with the help of ratios like current ratio, liquid ratio, interest coverage,

operating profit margin and investment turn over ratio by using statistical tools like

mean, standard deviation and co- efficient of variance to examine the financial

soundness of selected Mergers and Acquisitions during the study period.

Table: 3.2.1 Current Ratio of Selected Companies




BAL 0.568 0.767 0.11 0.22 19.37 28.68

HGSL 0.88 1.13 0.26 0.30 29.55 26.55

HZL 1.90 3.18 0.55 0.33 28.95 10.38

LIL 1.09 0.68 0.21 0.050 19.27 7.35

FHL 2.03 8.06 0.593 9.27 29.21 115.01

JSPL 0.99 0.73 0.29 0.038 29.29 5.21

M&ML 1.02 0.99 0.25 0.025 24.51 2.53

TCL 0.78 1.18 0.28 0.17 35.90 14.41

GTLIL 3.49 1.02 2.55 1.13 73.07 110.78


During the study period, the average Current Ratio from 2007 to 2009 is considered

as pre-acquisition period and 2010 to 2013 is considered as post acquisition period.

91

The comparison of the pre and post-acquisition Current Ratio of selected companies is

shown in table – 3.2.1


acquisition average Current Ratio ranges between 0.57:1 and 63.4:1. The highest

average of Current Ratio is found in Reliance Power Ltd., and the lowest average of

Current Ratio is found in Bharti Airtel Ltd.

During post acquisition period (2011- 2013) it is observed that the post acquisition

Current Ratio ranges between 0.68:1 to 20.13:1.The highest average of Current Ratio

is found in Reliance Power Ltd and the lowest average of Current Ratio is found in

Lanco Infratech Ltd.

During pre acquisition period (2007 – 2009) the Standard deviation of Current Ratio

ranges between 0.11 and 90.36. The highest standard deviation is found in Reliance

Power Ltd. The lowest standard deviation is found in Bharti Airtel Ltd.

During post acquisition period (2011 – 2013) the Standard deviation of Current Ratio


Power Ltd. The lowest standard deviation is found in Mahindra & Mahindra Ltd.



more in Bharti Airtel, Fortis Healthcare Ltd and GTL Infrastructure Ltd. The study

observed that Current Ratio Co-efficient of Variation considerably decreased in the

post acquisition. It indicates infuse of resources to pay its debt over the short term

period and easy to meet short term obligations. Over the years percentage increase in

current liabilities is greater than percentage increase in current assets.

The analysis of Current Ratio of Selected companies reveals the following facts:

• Lower the ratio – while comparing the average of Current Ratio in pre and post

acquisition period Lanco Infratech Ltd, Jindal Steel & Power Ltd, Mahindra &

Mahindra Ltd, GTL Infrastructure Ltd and Reliance Power Ltd have considerable

decrease performance due to high variation in post acquisition. It indicates infuse

of resources to pay its debt over the short term period and easy to meet short term

92

obligations. Over the years percentage increase in current liabilities is greater than

percentage increase in current assets.

• Higher the ratio – Bharti Airtel Ltd, Hinduja Global Solutions Ltd, Hindustan Zinc

Ltd, Fortis Healthcare Ltd and Tata Chemicals Ltd have considerable increase in

Current Ratio due to low co-efficient of variation in post acquisition period.

Table: 3.2.2 Liquid Ratio of Selected Companies




BAL 0.563 0.95 0.09 0.36 15.99 37.89

HGSL 1.19 1.88 0.54 0.06 45.38 3.19

HZL 1.51 2.86 0.60 0.31 39.74 10.84

LIL 1.09 0.90 0.066 0.102 6.06 11.33

FHL 4.52 12.09 2.58 6.06 57.08 50.12

JSPL 0.93 0.98 0.186 0.160 20.00 16.33

M&ML 1.02 0.99 0.25 0.025 24.51 2.53

TCL 0.98 1.05 0.05 0.205 5.10 19.52

GTLIL 3.66 1.15 2.65 1.03 72.40 89.57


During the study period, the average Liquid Ratio from 2007 to 2009 is considered to

be pre-acquisition period whereas 2010 to 2013 to be considered as post acquisition

period. The comparison of the pre and post-acquisition, Liquid Ratio of selected

companies is shown in table – 3.2.2


acquisition average Liquid Ratio ranges between 0.563:1 and 63.04:1.The highest

average of Liquid Ratio is found in Reliance Power Ltd and the lowest is found in

Bharti Airtel Ltd.

93


Price Earning Ratio ranges between 0.90:1 to 65.29:1 The highest average of Liquid

Ratio found in Reliance Power Ltd and the lowest is found in Lanco Infratech Ltd.

During pre acquisition period (2007 – 2009) the Standard deviation of Liquid Ratio


Power Ltd and the lowest is found in Tata Chemicals Ltd.

During post acquisition period (2011 – 2013) the Standard deviation of Liquid Ratio

ranges between 0.06 and 29.99. The highest standard deviation is found in Fortis

Healthcare Ltd and the lowest is found in Hindustan Zinc Ltd.



high with respect to Bharti Airtel Ltd, Tata Chemicals Ltd and GTL Infrastructure

Ltd. The study observed that the Liquid Ratio Co-efficient of Variation is

considerably decreased in the post acquisition.

The analysis of Liquid Ratio of Selected companies reveals the facts which are as

follows:

• Lower the ratio – while comparing the average of Liquid Ratio in pre and post

acquisition period Lanco Infratech Ltd, Mahindra and Mahindra Ltd and GTL

Infrastructure Ltd have considerably decreased. It indicates lower liquidity

positions and inability to meet immediate current liabilities. The results show less

than the standards in the post acquisition. It is also observed that Current Ratio is

much greater than the Quick Ratio. It suggests current assets are not highly

dependent on inventory and sundry creditors.

• Higher the ratio – Bharti Airtel Ltd, Hinduja Global Solutions Ltd, Hindustan Zinc

Ltd, Fortis Healthcare Ltd, Jindal Steel and Power Ltd, Tata Chemical Ltd and

GTL Infrastructure Ltd have considerably increased in Liquid Ratio due to low


94

Table: 3.2.3 Interest Coverage of Selected Companies




BAL 34.70 12.94 11.42 12.99 32.91 100.39

HGSL 39.41 9.31 25.06 5.399 63.59 57.99

HZL 370 1800 232.62 2508.11 62.87 139.34

LIL 7.30 1.49 4.03 0.66 55.21 44.30

FHL 0.68 1.93 0.56 1.26 82.35 65.28

JSPL 8.58 6.89 1.68 3.51 19.58 50.94

M&ML 30.52 31.40 31.89 14.33 104.49 45.64

TCL 17.85 5.08 12.64 0.925 70.81 18.21

GTLIL 0.66 0.13 0.38 0.65 57.58 500.00


During the study period, the average Interest Coverage from 2007 to 2009 is


acquisition period. The comparison of the pre and post-acquisition, Interest Coverage



acquisition average Interest Coverage ranges between 0 and 370.The highest average

of Interest Coverage is found in Hindustan Zinc Ltd and the lowest is found in

Reliance Power Ltd.


Interest Coverage ranges between 0.13 to 1800 The highest average of Interest

Coverage found in Hindustan Zinc Ltd and the lowest is found in GTL Infrastructure

Ltd.

During pre acquisition period (2007 – 2009) the Standard deviation of Interest

Coverage ranges between 0 and 232.62. The highest standard deviation is found in


During post acquisition period (2011 – 2013) the Standard deviation of Interest

Coverage ranges between 0.65 and 2508.11. The highest standard deviation is found

in Hindustan Zinc Ltd and the lowest is found in GTL Infrastructure Ltd.

95



high with respect to Bharti Airtel Ltd, Hindustan Zinc Ltd, Jindal Steel and Power

Ltd, GTL Infrastructure Ltd and Reliance Power Ltd. The study observed that the

Interest Coverage Co-efficient of Variation is considerably increased in the post

acquisition.

The analysis of Interest Coverage of Selected companies reveals the facts which are

as follows:

• Lower the ratio – while comparing the average of Interest Coverage in pre and

post acquisition period Bharti Airtel Ltd, Hinduja Global Solutions Ltd, Lanco

Infratech Ltd, Jindal Steel and Power Ltd, Tata Chemicals Ltd and GTL

Infrastructure Ltd have considerably decreased. It indicates inability to honour its

debt payments due to less profit margin reported over the post three years. Post

acquisition Interest Coverage was low indicating possibility of default to creditors.

• Higher the ratio – Hindustan Zinc Ltd, Fortis Healthcare Ltd, Mahindra and

Mahindra Ltd and Reliance Power Ltd have considerably increased in Interest

Coverage due to low co-efficient of variation in post acquisition period.

Table: 3.2.4 Market Capitalisation of Selected Companies




BAL 129100.2 125426.1 63423.78 5012.75 49.13 4.00

HGSL 470.39 747.89 436.99 232.22 92.90 31.05

HZL 33422.28 54584.08 18511.22 3785.22 55.39 6.93

LIL 11682.90 2463.99 7721.61 726.58 66.09 29.49

FHL 2189.83 4074.64 826.68 627.20 37.75 15.39

JSPL 24103.58 36200.70 20240.49 10223.13 83.97 28.24

M&ML 18848.50 52343.83 11542.41 9088.81 61.24 17.36

TCL 6773.50 7994.67 2601.88 1007.95 38.41 12.61

GTLIL 2752.65 563.20 467.24 260.91 16.97 46.33


96


acquisition average Market Capitalisation ranges between 470.39Crores and

1,29,100.20Crores.The highest average of Market Capitalisation is found in Bharti

Airtel Ltd and the lowest is found in Hinduja Global Solutions Ltd.


Market Capitalisation ranges between 563.20Crores to 1,25,426.10Crores. The

highest average of Market Capitalisation found in Bharti Airtel Ltd and the lowest is


During pre acquisition period (2007 – 2009) the Standard deviation of Market

Capitalisation ranges between 436.99 and 63,423.78. The highest standard deviation

is found in Bharti Airtel Ltd and the lowest is found in Hinduja Global Solutions Ltd.

During post acquisition period (2011 – 2013) the Standard deviation of Market

Capitalisation ranges between 232.22 and 10.223.13. The highest standard deviation

is found in Jindal Steel and Power Ltd and the lowest is found in Hinduja Global

Solutions Ltd.



high with respect to GTL Infrastructure Ltd. The study observed that the Market

Capitalisation Co-efficient of Variation is considerably decreased in the post

acquisition.

The analysis of Market Capitalisation of Selected companies reveals the facts which

are as follows:

• Lower the ratio – while comparing the average of Market Capitalisation in pre and

post acquisition period Bharti Airtel Ltd, Lanco Infratech Ltd, GTL Infrastructure

Ltd and Reliance Power Ltd have considerably decreased. It reflects on investors

by way of quoting lower prices to outstanding equity shares in the capital market.

Future growth prospects are uncertain on account of intense competition and

decrease in equity funds in the capital structure.

97

• Higher the ratio – Hinduja Global Solutions Ltd, Hindustan Zinc Ltd, Fortis

Healthcare Ltd, Jindal Steel and Power Ltd, Mahindra and Mahindra Ltd and Tata

Chemicals Ltd have considerably increased in Market Capitalisation due to low


Table: 3.2.5 Investment Turnover Ratio of Selected Companies




BAL 0.997 0.68 0.064 0.025 6.42 3.68

HGSL 0.520 0.823 0.197 0.051 37.88 6.20

HZL 0.73 0.42 0.364 0.025 49.86 5.95

LIL 0.78 0.89 0.46 0.32 58.97 35.96

FHL 0.15 0.073 0.010 0.006 6.67 8.22

JSPL 0.69 0.49 0.076 0.032 11.01 6.53

M&ML 1.65 2.07 0.25 0.20 15.15 9.66

TCL 0.99 0.993 0.271 0.159 27.37 16.01

GTLIL 0.047 0.10 0.0057 0.036 12.13 36.00


During the study period, the average Investment Turnover Ratio from 2007 to 2009 is


acquisition period. The comparison of the pre and post-acquisition, Investment

Turnover Ratio of selected companies is shown in table – 3.2.5


acquisition average Investment Turnover Ratio ranges between 0.013times and

1.65times. The highest average of Investment Turnover Ratio is found in Mahindra

and Mahindra Ltd and the lowest is found in Reliance Power Ltd.


Investment Turnover Ratio ranges between 0.033times to 2.07times. The highest

98

average of Investment Turnover Ratio found in Mahindra and Mahindra Ltd and the

lowest is found in Reliance Power Ltd.

During pre acquisition period (2007 – 2009) the Standard deviation of Investment

Turnover Ratio ranges between 0.0057 and 0.46. The highest standard deviation is

found in Lanco Infratech Ltd and the lowest is found in GTL Infrastructure Ltd.

During post acquisition period (2011 – 2013) the Standard deviation of Investment


found in Lanco Infratech Ltd and the lowest is found in Reliance Power Ltd.



high with respect to GTL Infrastructure Ltd. The study observed that the Investment

Turnover Ratio Co-efficient of Variation is considerably decreased in the post

acquisition.

The analysis of Investment Turnover Ratio of Selected companies reveals the facts


• Lower the ratio – while comparing the average of Investment Turnover Ratio in

pre and post acquisition period Bharti Airtel Ltd, Hindustan Zinc Ltd, Fortis

Healthcare Ltd and Jindal Steel and Power Ltd have considerably decreased. It

indicates that there is an inefficiency to utilise the investment to improving the

turnover.

• Higher the ratio – Hinduja Global Solutions Ltd, Lanco Infratech Ltd, Mahindra

and Mahindra Ltd, Tata Chemicals Ltd, GTL Infrastructure Ltd and Reliance

Power Ltd have considerably increased in Investment Turnover Ratio due to low


During the study period, the average Fixed Assets Turnover Ratio from 2007 to 2009


post acquisition period. The comparison of the pre and post-acquisition, Fixed Assets


99

Table: 3.2.6 Fixed Assets Turnover Ratio of Selected Companies




BAL 1.21 1.00 0.25 0.064 20.66 6.40

HGSL 2.027 3.21 0.592 0.406 29.21 12.65

HZL 2.09 1.02 1.44 0.025 68.90 2.45

LIL 10.21 6.55 2.12 3.66 20.76 55.88

FHL 1.28 2.29 0.081 1.04 6.33 45.41

JSPL 0.89 0.81 0.17 0.066 19.10 8.15

M&ML 3.98 4.44 1.66 0.36 41.71 8.11

TCL 1.59 1.77 0.629 0.162 39.56 9.15

GTLIL 0.107 0.147 0.012 0.006 11.21 4.08



acquisition average Fixed Assets Turnover Ratio ranges between 0.107times and

10.21times. The highest average of Fixed Assets Turnover Ratio is found in Lanco

Infratech Ltd and the lowest is found in GTL Infrastructure Ltd.


Fixed Assets Turnover Ratio ranges between 0.147times to 6.55times. The highest

average of Fixed Assets Turnover Ratio found in Lanco Infratech Ltd and the lowest

is found in GTL Infrastructure Ltd.

During pre acquisition period (2007 – 2009) the Standard deviation of Fixed Assets


found in Reliance Power Ltd and the lowest is found in GTL Infrastructure Ltd.

During post acquisition period (2011 – 2013) the Standard deviation of Fixed Assets


found in Lanco Infratech Ltd and the lowest is found in GTL Infrastructure Ltd.

100



high with respect to Lanco Infratech Ltd and Fortis Healthcare Ltd. The study

observed that the Fixed Assets Turnover Ratio Co-efficient of Variation is


The analysis of Fixed Assets Turnover Ratio of Selected companies reveals the facts


• Lower the ratio – while comparing the average of Fixed Assets Turnover Ratio in

pre and post acquisition period Bharti Airtel Ltd, Hindustan Zinc Ltd, Lanco

Infratech Ltd and Jindal Steel and Power Ltd have considerably decreased. It

indicates that lack of operational efficiency and revenue generating activities.

• Higher the ratio – Hinduja Global Solutions Ltd, Fortis Healthcare Ltd, Mahindra


Power Ltd have considerably increased in Fixed Assets Turnover Ratio due to low


Table: 3.2.7 Total Assets Turnover Ratio of Selected Companies




BAL 1.14 0.77 0.136 0.127 11.93 16.49

HGSL 0.434 0.682 0.186 0.043 42.86 6.30

HZL 0.74 0.42 0.37 0.027 50.00 6.43

LIL 0.78 0.89 0.462 0.321 59.23 36.07

FHL 0.15 0.073 0.010 0.006 6.67 8.22

JSPL 0.68 0.49 0.077 0.032 11.32 6.53

M&ML 1.66 2.09 .25 0.205 15.06 9.81

TCL 0.993 0.993 0.271 0.159 27.29 16.01

GTLIL 0.05 0.10 0.010 0.036 20.00 36.00


101

During the study period, the average Total Assets Turnover Ratio from 2007 to 2009


post acquisition period. The comparison of the pre and post-acquisition, Total Assets



acquisition average Total Assets Turnover Ratio ranges between 0.013times and

1.66times. The highest average of Total Assets Turnover Ratio is found in Mahindra

and Mahindra Ltd and the lowest is found in Reliance Power Ltd.


Total Assets Turnover Ratio ranges between 0.033times to 2.09times. The highest

average of Total Assets Turnover Ratio found in Mahindra and Mahindra Ltd and the


During pre acquisition period (2007 – 2009) the Standard deviation of Total Assets



During post acquisition period (2011 – 2013) the Standard deviation of Total Assets





high with respect to Bharti Airtel Ltd, Fortis Healthcare Ltd and GTL Infrastructure

Ltd. The study observed that the Total Assets Turnover Ratio Co-efficient of

Variation is considerably decreased in the post acquisition.

The analysis of Total Assets Turnover Ratio of Selected companies reveals the facts


• Lower the ratio – while comparing the average of Total Assets Turnover Ratio in

pre and post acquisition period Bharti Airtel Ltd, Hindustan Zinc Ltd, Fortis

Healthcare Ltd and Jindal Steel and Power Ltd have considerably decreased. It

102

indicates lower sales revenue. The notion of low profit margin tends to have

negative impact on assets turnover.

• Higher the ratio – Hinduja Global Solutions Ltd, Lanco Infratech Ltd, Mahindra


Power Ltd have considerably increased in Total Assets Turnover Ratio due to low


Table: 3.2.8 Operating Profit Margin of Selected Companies




BAL 40.25 32.52 1.359 2.70 3.38 8.30

HGSL 24.02 18.89 4.06 3.38 16.90 17.89

HZL 63.86 53.19 14.10 2.17 22.08 4.08

LIL 18.30 11.74 3.86 3.65 21.09 31.09

FHL 5.50 2.47 1.94 3.25 35.27 131.58

JSPL 39.04 31.40 4.29 5.60 10.99 17.83

M&ML 10.50 12.73 0.85 1.73 8.10 13.59

TCL 23.91 12.91 10.31 0.57 43.12 4.42

GTLIL 59.06 29.99 11.03 57.95 18.68 193.23

RPL 0 -469 0 386.99 0 -82.51 (Source: AGM reports of selected companies & moneycontrol.com database)

During the study period, the average Operating Profit Margin from 2007 to 2009 is


acquisition period. The comparison of the pre and post-acquisition, Operating Profit

Margin of selected companies is shown in table – 3.2.8


acquisition average Operating Profit Margin ranges between 0% and 63.86%. The

highest average of Operating Profit Margin is found in Hindustan Zinc Ltd and the


103


Operating Profit Margin ranges between -469% to 53.19% . The highest average of

Operating Profit Margin found in Hindustan Zinc Ltd and the lowest is found in

Reliance Power Ltd.

During pre acquisition period (2007 – 2009) the Standard deviation of Operating

Profit Margin ranges between 0and 14.10. The highest standard deviation is found in


During post acquisition period (2011 – 2013) the Standard deviation of Operating

Profit Margin ranges between 0.57 and 386.99. The highest standard deviation is

found in Reliance Power Ltd and the lowest is found in Tata Chemicals Ltd.



high with respect to Bharti Airtel Ltd, Hinduja Global Solutions Ltd, Lanco Infratech

Ltd, Fortis Healthcare Ltd, Jindal Steel and Power Ltd, Mahindra and Mahindra Ltd

and GTL Infrastructure Ltd. The study observed that the Operating Profit Margin Co-

efficient of Variation is considerably increased in the post acquisition.

The analysis of Operating Profit Margin of Selected companies reveals the facts


• Lower the ratio – while comparing the average of Operating Profit Margin in pre

and post acquisition period overall selected firms have considerably decreased

however, Mahindra and Mahindra Ltd was the exception. It indicates worsened on

account of lower cash flow streams generated by operating activities.

• Higher the ratio –Mahindra and Mahindra Ltd has considerably increased in

Operating Profit Margin due to low co-efficient of variation in post acquisition

period.

104

3. Examine the impact of Mergers and Acquisitions on value of the firms.

On analysis of examining the firm value measures, the total networth of the firms

in long run is explained herewith. Value added / shortfall ensures the percentage of

value addition and firm value ensures long term survival. In order to identify the

changes in Value added/Shortfall, economic value added and firm value after Mergers

and Acquisitions studies are made separately for each group. However, economic

value added model is used to identify the firm value. In this heading, an analysis has

been done with the help of Value added/Shortfall, economic value added and firm

value by using statistical tools like mean, standard deviation and co- efficient of

variance to examine the firm value of selected Mergers and Acquisitions during the

study period.

Table: 3.3.1 Value Addition/Shortfall of Selected Companies




BAL 16.65 2.97 1.74 5.55 10.45 186.87

HGSL 4.79 1.60 7.39 3.63 154.28 226.88

HZL 30.58 14.77 18.70 1.18 61.15 7.99

LIL 3.30 -0.52 5.06 0.16 153.33 -30.77

FHL -7.72 -2.88 1.50 2.96 -19.43 -102.78

JSPL 14.22 4.75 6.44 2.00 45.29 42.11

M&ML 52.40 47.16 43.06 12.51 82.18 26.53

TCL 9.51 0.35 6.47 0.765 68.03 218.57

GTLIL -2.73 -8.42 0.75 4.23 -27.47 -50.24

RPL -0.793 -2.87 4.61 0.48 -581.34 -16.72 (Source: AGM reports of selected companies & moneycontrol.com database)

During the study period, the average Value Addition/Shortfall from 2007 to 2009 is

considered to be pre-acquisition period whereas 2010 to 2013 is to be considered as

post acquisition period. The comparison of the pre and post-acquisition, Value

Addition/Shortfall of selected companies is shown in table – 3.3.1

105


acquisition average Value Addition/Shortfall ranges between (7.72%) and 52.40%.

The highest average of Value Addition is found in Mahindra & Mahindra Ltd and the

highest average of shortfall is found in Fortis Healthcare Ltd.


Value Addition/Shortfall ranges between (8.42%) and 47.16%.The highest average of

Value Addition is found in Mahindra & Mahindra Ltd and the Highest average of

Shortfall is found in GTL Infrastructure Ltd.

During pre acquisition period (2007 – 2009) the Standard deviation of Value

Addition/Shortfall ranges between 0.75 and 43.06. The highest standard deviation is

found in Mahindra & Mahindra Ltd. The lowest standard deviation is found in GTL

Infrastructure Ltd.

During post acquisition period (2011 – 2013) the Standard deviation of Value

Addition ranges between 0.16 and 12.51. The highest standard deviation is found in

Mahindra & Mahindra Ltd. The lowest standard deviation is found in Lanco Infratech

Ltd.



high with respect to Bharti Airtel, Hinduja Global Solutions Ltd and Tata Chemicals

Ltd. The study observed that the Value Addition Co-efficient of Variation is


The analysis of Value Addition / Shortfall of Selected companies reveals the facts


Lower the ratio – while comparing the average of Value Addition in pre and post

acquisition period overall selected companies have considerably decrease

performance due to high cost of capital in post acquisition. It indicates that

acceleration of the funds failed to increase its value addition.

106

Table: 3.3.2 Economic Value Added of Selected Companies




BAL 4974.96 1737.72 2079.52 3564.20 41.80 205.11

HGSL 31.18 11.79 46.50 28.42 149.13 241.05

HZL 3084.70 4099.19 951.03 767.36 30.83 18.72

LIL 81.84 -37.94 104.15 10.55 127.26 -27.81

FHL -77.08 -118.80 5.79 127.73 -7.51 -107.52

JSPL 1236.45 1182.04 652.87 276.11 52.80 23.36

M&ML 876.44 2909.13 253.29 646.01 28.90 22.21

TCL 524.56 23.76 411.03 60.34 78.36 253.96

GTLIL -83.25 -329.51 82.69 99.92 -99.33 -30.32

RPL -170.24 -501.95 155.32 98.90 -91.24 -19.70 (Source: AGM reports of selected companies & moneycontrol.com database)

During the study period, the average Economic Value Added from 2007 to 2009 is

considered to be pre-acquisition period whereas 2010 to 2013 is to be considered as

post acquisition period. The comparison of the pre and post-acquisition, Economic

Value Added of selected companies is shown in table – 3.3.2


acquisition average Economic Value Added ranges between (170.24)Crores and

4,974.96Crores. The highest average of Economic Value Added is found in Bharti

Airtel Ltd and the lowest average is found in Reliance Power Ltd.


Economic Value Added ranges between (501.95)Crores and 4099.19Crores.The

highest average of Economic Value Added is found in Hindustan Zinc Ltd and the

Lowest average is found in Reliance Power Ltd.

During pre acquisition period (2007 – 2009) the Standard deviation of Economic

Value Added ranges between 5.79 and 2079.52. The highest standard deviation is

107

found in Bharti Airtel Ltd. The lowest standard deviation is found in Fortis Healthcare

Ltd.

During post acquisition period (2011 – 2013) the Standard deviation of Economic


found in Bharti Airtel Ltd. The lowest standard deviation is found in Lanco Infratech

Ltd.



high with respect to Bharti Airtel, Hinduja Global Solutions Ltd and Tata Chemicals

Ltd. The study observed that the Economic Value Added Co-efficient of Variation is


The analysis of Economic Value Added of Selected companies reveals the facts which

are as follows:

• Lower the ratio – while comparing the average of Economic Value Added in pre

and post acquisition period overall selected firms have considerably decreased

however, Hindustan Zinc Ltd and Mahindra & Mahindra Ltd was the exception. It

indicates worsened on account of lower cash flow streams generated by operating

activities.

• Higher the ratio – Hindustan Zinc Ltd and Mahindra and Mahindra Ltd has

considerably increased in Economic Value Added due to low co-efficient of

variation in post acquisition period.

108

Table: 3.3.3 Firm Value of Selected Companies




BAL 31,032.92 63,356.63 11371.45 3987.58 36.64 6.29

HGSL 622.00 772.20 107.29 34.58 17.25 4.48

HZL 14,176.21 31,094.05 2554.44 5550.73 18.02 17.85

LIL 2,375.77 7,300.36 875.83 412.16 36.87 5.65

FHL 932.58 3,883.55 129.89 425.51 13.93 10.96

JSPL 9,235.51 26,865.20 2731.39 5624.99 29.57 20.94

M&ML 7,963.11 17,911.67 1828.09 3019.59 22.96 16.86

TCL 6,068.77 7,674.45 2056.49 146.38 33.89 1.91

GTLIL 3,005.10 5,427.08 1840.56 1227.13 61.25 22.61

RPL 9,012.03 16,941.16 7643.87 1247.68 84.82 7.36 (Source: AGM reports of selected companies & moneycontrol.com database)

During the study period, the average Firm Value from 2007 to 2009 is considered to

be pre-acquisition period whereas 2010 to 2013 is to be considered as post acquisition

period. The comparison of the pre and post-acquisition, Firm Value of selected

companies is shown in table – 3.3.3


acquisition average Firm Value ranges between 622Crores and 31,032.92Crores. The

highest average of Firm Value is found in Bharti Airtel Ltd and the lowest average is

found in Hinduja Global Solutions Ltd.


Firm Value ranges between 722Crores and 65,356.63Crores.The highest average of

Firm Value is found in Bharti Airtel Ltd and the Lowest average is found in Reliance

Hinduja Global Solutions Ltd.

During pre acquisition period (2007 – 2009) the Standard deviation of Economic

Value Added ranges between 107.29 and 11,371.45. The highest standard deviation is

109

found in Bharti Airtel Ltd. The lowest standard deviation is found in Hinduja Global

Solutions Ltd.

During post acquisition period (2011 – 2013) the Standard deviation of Economic


found in Jindal Steel and Power Ltd. The lowest standard deviation is found in

Hinduja Global Solutions Ltd.



low with respect to overall selected companies. The study observed that the Firm

Value Co-efficient of Variation is considerably decreased in the post acquisition.

The analysis of Economic Value Added of Selected companies reveals the facts which

are as follows:

• Higher the ratio – All selected firms have considerably increased in Firm Value

due to low co-efficient of variation in post acquisition period.

110

4. Determining the Value Addition/ Short fall of selected Mergers and Acquisitions

This is an analysis to determine the Value Added or short fall measures of the

value addition or value destroyed. Value creation is essential for any company for

long run survival. In order to identify the value added/ shortfall, economic value

added and firm value of selected Mergers and Acquisitions during the study period

from 2007 to 2013, the studies are made separately for each group. However, few

calculations are used to identify the value creation. In this heading, an analysis has

been done with the help of the following calculations:

• Calculation of NOPAT

• Calculation of Adjusted Capital

• Calculation of WACC

• Calculation of Ke and Kd

• Consolidated EVA annual Summary

• Calculation of value added or shortfall

• Calculation of Firm Value

In this context, the value addition/ shortfall and firm value are determined through

Economic Value Added model. The value added / Short and firm value has been done

for all selected companies in such a way as to measure the different components of

Economic Value Added model namely; Economic Value Added, value added/shortfall

and firm value.

111

Table: 3.4.1 Calculation of NOPAT (Bharti Airtel Ltd)

(Rs. in Crore) Particulars 2007 2008 2009 2010 2011 2012 2013

EBDIT 7,366.16 10,766.45 11,953.93 15,084.80 13,661.50 14,268.40 14,933.80

-Depreciation 2,353.30 3,166.58 3,206.28 3,890.08 4,611.60 5,916.00 6,826.70

EBIT 5,012.86 7,599.87 8,747.65 11,194.72 9,049.90 8,352.40 8,107.10

Tax Rate (%) 12.31% 9.19% 3.98% 11.06% 11.560% 17.23% 21.05% EBIT (1-t) or

NOPAT 4,395.78 6,901.44 8,399.49 9,956.58 8,003.73 6,913.28 6,400.56

Table: 3.4.2 Calculation of Adjusted Capital (BA) (Rs. in Crore)

Years 2007 2008 2009 2010 2011 2012 2013

Equity 11443.27 20241.49 27643.97 36737.18 44111.60 49429.60 54146.20

Debt 5310.81 6570.34 7713.65 5038.92 10233.10 14129.40 12979.80

Total CE 16754.08 26811.83 35357.62 41776.10 54344.70 63559.00 67126.00

(+) Depreciation 2353.30 3166.58 3206.28 3890.08 4611.60 5916.00 6826.70

Adjusted capital 19107.38 29978.41 38563.90 45666.18 58956.30 69475.00 73952.70

112

Table: 3.4.3 Calculation of WACC (BA)

Years

Equity Rs

in Crores

Debt Rs in

Crores Total CE

Weight of

Equity

Weight of

Debt Kd Ke WACC Ko

2007 11443.27 5310.81 16,754.08 0.68 - 0.000 0.12160 0.083 8.31

2008 20241.49 6570.34 26,811.83 0.75 0.25 0.060 0.05748 0.058 5.81

2009 27643.97 7713.65 35,357.62 0.78 0.22 0.056 0.03219 0.037 3.74

2010 36737.18 5038.92 41,776.10 0.88 0.12 0.056 0.04594 0.047 4.72

2011 44111.60 10233.10 54,344.70 0.81 0.19 0.032 0.06182 0.056 5.61

2012 49429.60 14129.40 63,559.00 0.78 0.22 0.099 0.04900 0.060 6.01

2013 54146.20 12979.80 67,126.00 0.81 0.19 0.127 0.11400 0.117 11.66 Table: 3.4.4 Calculation of Ke and Kd (BA)

Years 2007 2008 2009 2010 2011 2012 2013

Beta -0.56 0.006 -0.103 -0.19 -0.07 -0.1 0.36

Market return -0.05 -0.36 0.33 0.134 0.034 0.17 0.21

Risk free rate 0.06 0.06 0.06 0.06 0.06 0.06 0.06

Interest in Crores 282.07 393.43 434.16 283.35 324.1 1396.2 1652.3

Kd 5.31 5.99 5.63 5.62 3.17 9.88 12.73

Ke 0.122 0.057 0.032 0.046 0.062 0.049 0.114

113

Table: 3.4.5 Consolidated EVA Annual Summary (BA) (Rs.in Crore)

Years 2007 2008 2009 2010 2011 2012 2013

NOPAT 4395.77 6901.44 8399.49 9956.58 8003.73 6913.28 6400.56

Capital cost 1586.95 1740.79 1444.08 2154.60 3309.99 4173.65 8620.76

Annual EVA 2808.82 5160.65 6955.41 7801.98 4693.74 2739.63 -2220.20

Table: 3.4.6 Calculation of Value Added or Shortfall (BA)

Years 2007 2008 2009 2010 2011 2012 2013

NOPAT return on adjusted capital (%) 23.006 23.021 21.781 21.803 13.576 9.951 8.655

Return Hurdle or Cost of capital (%) 8.31 5.81 3.74 4.72 5.61 6.01 11.66

Value Added or Short fall (%) 14.700 17.215 18.036 17.085 7.961 3.943 (3.002)

Table: 3.4.7 Calculation of Firm Value (Rs.in Crore)

Years 2007 2008 2009 2010 2011 2012 2013

Total Assets (Rs) 16,754.08 26,811.83 35,357.62 41,776.10 543,44.70 63,559.00 67,126.00

Annual EVA (Rs) 2,808.82 5,160.65 6,955.41 7,801.98 4,693.74 2,739.63 -2,220.20

Ko (%) 8.31 5.81 3.74 4.72 5.61 6.01 11.66

Firm Value (Rs) 19,347.51 31,689.26 42,061.98 49,226.56 58,788.93 66,143.38 65,137.58

Table: 3.4.8 Calculation of Firm Value in Pre and Post Period from 2007

Particulars

Firm Value Pre-3 years from (2007-2009)

Firm Value Post-3 years from (2011-2013)

Chart: 3.1 Total Firm Value of Bharti Airtel

2007

Firm Value in Crores 19,347.51

19,347.51

0.00

10,000.00

20,000.00

30,000.00

40,000.00

50,000.00

60,000.00

70,000.00

80,000.00

Rs.

in C

rore

s

114

Calculation of Firm Value in Pre and Post Period from 2007-2009 to 2011-2013

Firm Value (Rs.in Crore)

49,333.96

71,929.94

Total Firm Value of Bharti Airtel Ltd from 2007-2013

2008 2009 2010 2011

31,689.26 42,061.98 49,226.56 58,788.93

49,226.56

Firm Value of Bharti Airtel LtdFirm Value in Crores Poly. (Firm Value in Crores)

2013

2012 2013

66,143.38 65,137.58

65,137.58

115

The value added of Bharti Airtel is shown in the table 3.4.6 . It is observed from the

table that the value added for 2007 to 2013 ranges between (3.002%) – 17.215%. The

highest Shortfall is found in the year 2013 and highest value added is found in 2008.

During pre merger period (2007 – 2009) it shows an increase in value addition results,

14.700%, 17.215%, and 18.036% respectively. In the year of acquisition (2010) there

is a decrease in the value added compared to the previous year, (2009) and the results

shows a decrease from 18.036% to 17.085%. During post merger period (2011- 2013)

it shows decline in the value added resulting in 7.961%, 3.943% and in the year 2013

found a Shortfall at (3.002%) respectively. Value added is positive in both pre and

post acquisition period except in the year 2013. It indicates that there is value addition

in Bharti Airtel Ltd.

The results show that there is more than 14% decrease in value addition compared to

the pre acquisition period. It indicates decrease in NOPAT to Adjusted capital in the

consecutive analysis period. From this analysis, conclusion can be drawn that there is

value addition in Bharti Airtel throughout the period of observation except in the year

2013, but the percentage declined.

The Firm Value of Bharti Airtel is shown in Chart – 3.1. It is observed from the Chart

that the firm value has an increasing trend from 2007-2013. The lowest firm value is

found in the year 2007 and highest in 2013.

During the pre merger period (2007 – 2009) shows increase in firm value. In the year

of acquisition (2010), there is an increase in the firm value compared to the previous

year (2009) and the result shows an increase from 42,061.98Crores to

49,226.56Crores. During post merger period (2011- 2013) it shows an increase in the

firm value. Firm Value increased in both the pre and post acquisition period. It

indicates that there is increase in the firm value in Bharti Airtel Ltd.

The results show that there is more than 50% increase in the firm value year on year

compared to the pre acquisition period. It indicates increase in the investment for the

consecutive analysis period. From this analysis conclusion can be drawn that there is

increase in firm value in Bharti Airtel throughout the period of observation, and the

amount of firm value increased.

116

Table: 3.4.9 Calculation of NOPAT (Hinduja Global Solutions Ltd) (Rs.in Crore)

Particulars 2007 2008 2009 2010 2011 2012 2013

EBDIT 31.62 89.24 109.98 142.58 129.95 117.32 133.43

-Depreciation 11.43 23.37 28.15 33.60 38.04 36.14 38.60

EBIT 20.19 65.87 81.83 108.98 91.91 81.18 94.83

Tax Rate (%) -0.05% 10.90% 17.09% 6.41% 14.970% 13.29% 30.33%

EBIT (1-t) or NOPAT 20.20 58.69 67.85 101.99 78.15 70.39 66.07

Table: 3.4.10 Calculation of Adjusted Capital (HGSL) (Rs.in Crore)

Years 2007 2008 2009 2010 2011 2012 2013

Equity 504.22 539.00 564.87 613.70 641.19 653.47 664.61

Debt 0.00 74.74 87.02 51.41 61.21 130.61 131.37

Total CE 504.22 613.74 651.89 665.11 702.40 784.08 795.98

(+) Depreciation 11.43 23.37 28.15 33.60 38.04 36.14 38.60


117

Table: 3.4.11 Calculation of WACC (HGSL)

Years

Equity Rs

in Crores

Debt Rs in

Crores Total CE

Weight of

Equity

Weight of

Debt Kd Ke WACC Ko

2007 504.22 0.00 504.22 1.00 - 0.000 0.04810 0.048 4.81

2008 539.00 74.74 613.74 0.88 0.12 0.018 -0.04730 -0.039 -3.93

2009 564.87 87.02 651.89 0.87 0.13 0.099 0.07550 0.079 7.86

2010 613.70 51.41 665.11 0.92 0.08 0.149 0.05320 0.061 6.06

2011 641.19 61.21 702.40 0.91 0.09 0.091 0.05560 0.059 5.87

2012 653.47 130.61 784.08 0.83 0.17 0.084 0.05580 0.061 6.06

2013 664.61 131.37 795.98 0.83 0.17 0.132 0.09750 0.103 10.32 Table: 3.4.12 Calculation of Ke and Kd (HGSL)

Years 2007 2008 2009 2010 2011 2012 2013

Beta 0.220 0.220 0.070 -0.090 0.069 -0.033 0.200

Market return 0.010 -0.430 0.270 0.133 -0.004 0.189 0.246

Risk free rate % 0.06 0.06 0.06 0.06 0.06 0.06 0.06


Kd 0.00 1.81 9.87 14.88 9.13 8.44 13.18

Ke 0.048 -0.047 0.076 0.053 0.056 0.056 0.098

118

Table: 3.4.13 Consolidated EVA Annual Summary (HGSL) (Rs.in Crore)

Years 2007 2008 2009 2010 2011 2012 2013

NOPAT 20.20 58.69 67.85 1,01.99 78.15 70.39 66.07

Capital cost 24.80 (25.06) 53.45 42.34 43.47 49.67 86.09

Annual EVA (4.60) 83.75 14.40 59.65 34,68 20.72 (20,02)

Table: 3.4.14 Calculation of Value Added or ShortFall (HGSL)

Years 2007 2008 2009 2010 2011 2012 2013


Return Hurdle or Cost of capital (%) 4.81 -3.93 7.86 6.06 5.87 6.06 10.32

Value Added or Short fall (%) (0.893) 13.146 2.117 8.539 4.683 2.526 (2.399)

Table: 3.4.15 Calculation of Firm Value (HGSL) (Rs.in Crore)

Years 2007 2008 2009 2010 2011 2012 2013

Total Assets 504.22 613.74 651.89 665.11 702.40 784.08 795.98

Annual EVA -4.60 83.75 14.40 59.65 34.68 20.72 -20.02

Ko 4.81 -3.93 7.86 6.06 5.87 6.06 10.32

Firm Value 499.83 700.92 665.24 721.36 735.15 803.62 777.83


Particulars Firm Value Pre-3 years from (2007-2009) Firm Value Post-3 years from (2011-2013)

Chart: 3.2 Total Firm Value of Hinduja Global Solutions L

2007

Firm Value in Crores 499.83

499.83

0

100

200

300

400

500

600

700

800

900

Rs.

in C

rore

s

Firm Value of Hinduja Global solutions Ltd

119


Firm Value(Rs.in Crore) 748.23 828.30

l Firm Value of Hinduja Global Solutions Ltd from 2007-2013

2008 2009 2010 2011

700.92 665.24 721.36 735.15

721.36

Firm Value of Hinduja Global solutions LtdFirm Value in Crores Poly. (Firm Value in Crores)

2012 2013

803.62 777.83

777.83

Firm Value of Hinduja Global solutions LtdPoly. (Firm Value in Crores)

120

The value addition of Hinduja Global Solutions Ltd is shown in the table – 3.4.14. It

is observed from the table that the value added for 2007 to 2013 ranges between

(2.399%) – 13.146%. The highest Shortfall is found in the year 2013 and highest

value added is found in 2008. During pre merger period (2007 – 2009), results found

in the year 2008 and 2009 declined in value added from 13.146% to 2.117%, and the

firm had Shortfall in the year 2007 at (0.893%). In the year of acquisition (2010),

there is an increase in the value added compared to the previous year, (2009) and the

result shows an increase from 2.117% to 8.539%. During post merger period (2011-

2013), results found in the year 2010 and 2011 decline in the Value Added from

4.683% to 2.526% and the firm has Shortfall in the year 2013 at (2.399%). The firm

has Value Addition in both pre and post acquisition period except in the year 2007

and 2013. It indicates that more Value Added and less Shortfall in Hinduja Global

Solutions Ltd.

The results show that there is decrease in value added comparatively to the pre

acquisition period. It indicates high variations in NOPAT to Adjusted Capital and cost

of overall capital for the consecutive analysis period. From this analysis conclusion

can be drawn that there is less value addition in Hinduja Global Solutions throughout

the period of observation, but percentage of value added is less and the firm not

improved the performance in the post period compared to the pre acquisition period.

The Firm Value of Hinduja Global Solutions is shown in the Chart 3.2. It is observed

from the Chart that the firm value has an increasing trend from 2007-2013. The

lowest firm value is found in the year 2007 and highest firm value in 2013. During pre

merger period (2007 – 2009) it shows increase in firm value. In the year of acquisition

(2010), there is an increase in the value added compared to the previous year (2009)

and the result shows an increase from 665.24Crores to 721.36Crores. During post

merger period (2011- 2013) it shows an increase in the firm value. Firm Value

increased in both the pre and post acquisition period. It indicates that there is increase

in firm value in Hinduja Global Solutions Ltd (HGSL).

The results show that there is more than 50% increase in firm value year on year

comparatively to the pre acquisition period. It indicates increase in the investment and

decrease in the cost of capital for the consecutive analysis period. From this analysis

conclusion can be drawn that there is increase in firm value in HGSL throughout the

period of observation and the amount of firm value increased.

121

Table: 3.4.17 Calculation of NOPAT (Hindustan Zinc Ltd) (Rs. in Crore)

Particulars 2007 2008 2009 2010 2011 2012 2013

EBDIT 6,630.43 6,082.31 3,657.24 5,381.65 6,450.55 7,569.16 8,496.26

-Depreciation 156.08 220.51 285.27 334.25 474.74 610.67 647.04

EBIT 6,474.35 5,861.80 3,371.97 5,047.40 5,975.81 6,958.49 7,849.22

Tax Rate (%) 31.44% 27.52% 19.56% 19.40% 17.500% 20.33% 11.65%

EBIT (1-t) or NOPAT 4,438.81 4,248.63 2,712.41 4,068.20 4,930.04 5,543.83 6,934.79

Table: 3.4.18 Calculation of Adjusted Capital (HZL) (Rs. in Crore)

Years 2007 2008 2009 2010 2011 2012 2013

Equity 7627.06 11848.19 14357.58 18123.97 22533.19 26881.26 32275.74

Debt 0.39 0.39 8.69 60.47 0.39 0.39 0.39

Total CE 7627.45 11848.58 14366.27 18184.44 22533.58 26881.65 32276.13

(+) Depreciation 156.08 220.51 285.27 334.25 474.74 610.67 647.04


122

Table: 3.4.19 Calculation of WACC (HZL)

Years Equity (Rs in Crores)

Debt (Rs in Crores) Total CE

Weight of Equity

Weight of Debt Kd Ke WACC Ko

2007 7627.06 0.39 7,627.45 1.00 0.00 0.143 0.06082 0.061 6.08

2008 11848.19 0.39 11,848.58 1.00 0.00 0.143 0.08585 0.086 8.59

2009 14357.58 8.69 14,366.27 1.00 0.00 0.143 0.04336 0.043 4.34

2010 18123.97 60.47 18,184.44 1.00 0.00 0.143 0.06549 0.066 6.57

2011 22533.19 0.39 22,533.58 1.00 0.00 0.143 0.05703 0.057 5.70

2012 26881.26 0.39 26,881.65 1.00 0.00 0.143 0.06722 0.067 6.72

2013 32275.74 0.39 32,276.13 1.00 0.00 0.143 0.05925 0.059 5.92 Table: 3.4.20 Calculation of Ke and Kd (HZL)

Years 2007 2008 2009 2010 2011 2012 2013

Beta 0.137 -0.055 -0.104 0.061 0.053 0.056 -0.004

Market return 0.066 -0.41 0.22 0.15 0.004 0.189 0.248

Risk free rate % 0.06 0.06 0.06 0.06 0.06 0.06 0.06


Kd (%) 14.25 14.25 14.25 14.25 14.25 14.25 14.25

Ke (%) 6.09 8.59 4.33 6.52 5.70 6.73 5.92

123

Table: 3.4.21 Consolidated EVA Annual Summary (HZL) (Rs. in Crore)

Years 2007 2008 2009 2010 2011 2012 2013

NOPAT 4,438.81 4,248.63 2,712.41 4,068.20 4,930.04 5,543.83 6,934.79

Capital cost 473.44 1,036.15 636.17 1,217.53 1,312.24 1,848.17 1,950.67

Annual EVA 3,965.37 3,212.48 2,076.24 2,850.67 3,617.80 3.695.66 4,984.12

Table: 3.4.22 Calculation of Value Added or Shortfall (HZL)

Years 2007 2008 2009 2010 2011 2012 2013



Value Added or Short fall (%) 50.946 26.617 14.171 15.393 15.724 13.443 15.139

Table: 3.4.23 Calculation of Firm Value (HZL) (Rs. in Crore)

Years 2007 2008 2009 2010 2011 2012 2013

Total Assets 7,627.45 11,848.58 14,366.27 18,184.44 22,533.58 26,881.65 32,276.13

Annual EVA 3,965.37 3,212.48 2,076.24 2,850.67 3,617.80 3.695.66 4,984.12

Ko (%) 6.08 8.59 4.34 6.57 5.70 6.72 5.92

Firm Value 11,365.45 14,807.07 16,356.11 20,859.25 25,956.18 30,344.51 36,981.46


Particulars

Firm Value Pre-3 years from (2007-2009) Firm Value Post-3 years from (2011-2013)

Chart: 3.3 Total

2007


11,365.45

0.00

5,000.00

10,000.00

15,000.00

20,000.00

25,000.00

30,000.00

35,000.00

40,000.00

Rs.

in C

rore

s

Firm Value in Crores

124


Firm Value (Rs. in Crore)

22,838.27 43,682.25

otal Firm Value of Hindustan Zinc Ltd from 2007-2013

2008 2009 2010 2011

14,807.07 16,356.11 20,859.25 25,956.18

20,859.25

Firm Value of Hindustan Zinc LtdFirm Value in Crores Poly. (Firm Value in Crores)

2012 2013

30,344.51 36,981.46

36,981.46

Poly. (Firm Value in Crores)

125

The value addition of Hindustan Zinc Ltd is shown in table – 3.4.22. It is observed

from the table that the value added for 2007 to 2013 ranges between 14.171% -

50.946%. The lowest value added is found in the year 2009 and highest value added

in 2007.

During the pre merger period (2007 – 2009) it shows decline in value addition

resulting in 50.946%, 26.617%, and 14.171% respectively. In the year of acquisition

(2010), there is an increase in the value added compared to the previous year (2009),

and the result shows an increase from 14.171% to 15.393%. During post merger

period (2011- 2013) it shows decline in the value added resulting in 15.724%,

13.443% and 15.139% respectively. Value added is positive in both the pre and post

acquisition period. It indicates that there is value addition in Hindustan Zinc Ltd.

The results show that there is more than 15% decrease in value added compared to the

pre acquisition period. It indicates decrease in NOPAT to Adjusted capital for the


value addition in Hindustan Zinc Ltd throughout the period of observation, but

percentage of value added has been on the decline.

The Firm Value of Hindustan Zinc Ltd is shown in Chart 3.3. It is observed from the

Chart that the firm value has an increasing trend from 2007-2013. The lowest firm

value is found in the year 2007 and highest firm value in 2013.

During pre merger period 2007 – 2009 it shows an increase in firm value. In the year



20,859.25Crores. During post merger period (2011- 2013) it shows increase in the


indicates that there is an increase in firm value of Hindustan Zinc Ltd.

The results show that there is more than 2times increase in the firm value year on year

comparatively to the pre acquisition period. It indicates increase in the investment for

the consecutive analysis period. From this analysis conclusion can be drawn that there

is increase in firm value of Hindustan Zinc Ltd throughout the period of observation,

and the amount of firm value increased.

126

Table: 3.3.25 Calculation of NOPAT (Lanco Infratech Ltd) (Rs. in Crore)

Particulars 2007 2008 2009 2010 2011 2012 2013

EBDIT 125.82 342.35 582.18 977.81 830.12 712.83 738.03

-Depreciation 3.69 11.62 40.53 59.77 72.06 101.44 127.49

EBIT 122.13 330.73 541.65 918.04 758.06 611.39 610.54

Tax Rate 27.53% 32.62% 34.28% 32.46% 33.690% -8.85% -30.43%

EBIT (1-t) or NOPAT 88.51 222.85 355.97 620.04 502.67 665.50 796.33

Table: 3.4.26 Calculation of Adjusted Capital (LIL) (Rs. in Crore)

Years 2007 2008 2009 2010 2011 2012 2013

Equity 1379.26 1593.10 1861.51 3160.64 3439.45 3595.50 3632.24

Debt 159.51 552.86 1343.14 2733.75 3797.08 3392.84 4148.40

Total CE 1538.77 2145.96 3204.65 5894.39 7236.53 6988.34 7780.64

(+) Depreciation 3.69 11.62 40.53 59.77 72.06 101.44 127.49


127

Table: 3.4.27 Calculation of WACC (LIL)

Years

Equity( Rs

in Crores)

Debt( Rs in

Crores) Total CE

Weight of

Equity

Weight of

Debt Kd Ke WACC Ko

2007 1379.26 159.51 1,538.77 0.90 0.10 0.133 0.06157 0.069 6.89

2008 1593.10 552.86 2,145.96 0.74 0.26 0.062 -0.00110 0.015 1.52

2009 1861.51 1343.14 3,204.65 0.58 0.42 0.103 0.07544 0.087 8.71

2010 3160.64 2733.75 5,894.39 0.54 0.46 0.072 0.04385 0.057 5.71

2011 3439.45 3797.08 7,236.53 0.48 0.52 0.089 0.06042 0.075 7.54

2012 3595.50 3392.84 6,988.34 0.51 0.49 0.149 0.05246 0.099 9.93

2013 3632.24 4148.40 7,780.64 0.47 0.53 0.145 0.05780 0.104 10.41 Table: 3.4.28 Calculation of Ke and Kd (LIL)

Years 2007 2008 2009 2010 2011 2012 2013

Beta 0.157 0.13 0.093 -0.19 0.14 -0.26 -0.01

Market return 0.07 -0.41 0.226 0.145 0.063 0.089 0.28

Risk free rate 0.06 0.06 0.06 0.06 0.06 0.06 0.06

Interest 21.17 34.47 138.61 197.94 337.74 505.12 600.32

Kd (%) 13.27 6.23 10.32 7.24 8.89 14.89 14.47

Ke (%) 6.157 -0.110 7.544 4.385 6.042 5.246 5.780

128

Table: 3.4.29 Consolidated EVA Annual Summary (LIL) (Rs. in Crore)

Years 2007 2008 2009 2010 2011 2012 2013

NOPAT 88.51 222.85 355.97 620.04 502.67 665.50 796.33

Capital cost 106.34 32.90 282.57 3,39,95 550.98 703.81 823.54

Annual EVA (17.83) 189.95 73.40 280.09 (48,31) (38,31) (27,21)

Table: 3.4.30 Calculation of Value Added or ShortFall (LIL)

Years 2007 2008 2009 2010 2011 2012 2013



Value Added or Short fall (%) (1.156) 8.804 2.262 4.704 (0.661) (0.540) (0.344)

Table: 3.4.31 Calculation of Firm Value (LIL) (Rs. in Crore)

Years 2007 2008 2009 2010 2011 2012 2013

Total Assets 1,538.77 2,145.96 3,204.65 5,894.39 7,236.53 6,988.34 7,780.64

Annual EVA (17.83) 189.95 73.40 280.09 (48,31) (38,31) (27,21)

Ko (%) 6.89 1.52 8.71 5.71 7.54 9.93 10.41

Firm Value 1,522.08 2,333.06 3,272.18 6,159.36 7,191.60 6,953.49 7,755.99


Particulars



Chart: 3.4 Total Firm Value of Lanco Infratech

2007


1,522.08

0.00

1,000.00

2,000.00

3,000.00

4,000.00

5,000.00

6,000.00

7,000.00

8,000.00

9,000.00

Rs.

in C

rore

s

129


Firm Value(Rs. in Crore)

3,443.66

7,679.36

alue of Lanco Infratech Ltd from 2007-2013

2008 2009 2010 2011

2,333.06 3,272.18 6,159.36 7,191.60

6,159.36

Firm Value of Lanco Infratech LtdFirm Value in Crores Poly. (Firm Value in Crores)

2012 2013

6,953.49 7,755.99

7,755.99

130

The value addition of Lanco Infratech Ltd is shown in table – 3.4.30. It is observed

from the table that the value added for 2007 to 2013 ranges between (1.156%) –

8.804%. The Highest short fall is found in the year 2007 and the highest value added

is found in 2008. During pre merger period (2007 – 2009) results found in the year

2007 have Shortfall (1.156%) but in the year 2008 and 2009 the value addition was

resulted 8.804% and 2.262%. In the year of acquisition (2010), there is an increase in

the value added compared to the previous year (2009) and the result shows an

increase from 2.262% to 4.704%. During post merger period (2011- 2013) it shows

decreasse in the shortfall resulting in (0.661%), (0.540%) and (0.344%) respectively.

Value added is negative in the post acquisition period. It indicates that there is no

value addition in Lanco Infratech Ltd after the acquisition period.

The results show that there is decrease in value added comparatively to the pre

acquisition period. It indicates high variations in NOPAT to Adjusted capital and cost

of overall capital for the consecutive analysis period. From this analysis, conclusion

can be drawn that there is less value addition in Lanco Infratech Ltd throughout the

period of observation, but percentage of value added is less and the firm has improved

performance in the pre period compared to the post acquisition period.

The Firm Value of Lanco Infratech Ltd is shown in the Chart – 3.4 . It is observed



merger period (2007 – 2009) shows increase in firm value. In the transaction

occurring year of acquisition (2010), there is an increase in the firm value compared

to the previous year 2009 and the result shows an increase from 3,272.18Crores to

6,159.36Crores. In the post merger period during (2011- 2013) it shows an increase in

the firm value. Firm Value increased in both the pre and post acquisition period. It

indicates that there is increase in firm value in Lanco Infratech Ltd.

The results show that there is more than two times increase in firm value added year

on year compared to the pre acquisition period. It indicates increase in the investment

and decrease in cost of capital for the consecutive analysis period. From this analysis

conclusion can be drawn that there is increase in firm value in Lanco Infratech Ltd

throughout the period of observation, wherein the amount of firm value increased.

131

Table: 3.4.33 Calculation of NOPAT (Fortis Healthcare Ltd) (Rs. in Crore)

Particulars 2007 2008 2009 2010 2011 2012 2013

EBDIT 13.40 43.33 26.31 63.44 200.73 316.43 189.40

-Depreciation 10.57 10.64 11.54 10.79 10.40 12.11 23.47

EBIT 2.83 32.69 14.77 52.65 190.33 304.32 165.93

Tax Rate (%) 0.70% 17.01% 8.00% 0.13% 0.035% 0.00% 46.24%

EBIT (1-t) or NOPAT 2.81 27.13 13.59 52.58 190.26 304.32 89.20

Table: 3.4.34 Calculation of Adjusted Capital (FHL) (Rs. in Crore)

Years 2007 2008 2009 2010 2011 2012 2013

Equity 443.66 885.05 800.07 1582.40 3019.25 3206.14 3205.05

Debt 413.39 182.60 284.95 1242.06 449.29 1102.44 998.00

Total CE 857.05 1067.65 1085.02 2824.46 3468.54 4308.58 4203.05

(+) Depreciation 10.57 10.64 11.54 10.79 10.40 12.11 23.47


132

Table: 3.4.35 Calculation of WACC (FHL)

Years Equity (Rs

in Crores)

Debt (Rs

in Crores) Total CE

Weight of

Equity

Weight of

Debt Kd Ke WACC Ko

2007 443.66 413.39 857.05 0.52 0.48 0.120 0.07602 0.097 9.73

2008 885.05 182.60 1,067.65 0.83 0.17 0.162 0.07581 0.091 9.06

2009 284.95 284.95 569.90 0.50 0.50 0.077 0.09200 0.085 8.45

2010 1582.40 1242.06 2,824.46 0.56 0.44 0.018 0.05498 0.039 3.87

2011 3019.25 449.29 3,468.54 0.87 0.13 0.119 0.06008 0.068 6.78

2012 3206.14 1102.44 4,308.58 0.74 0.26 0.093 0.07643 0.081 8.08

2013 3205.05 998.00 4,203.05 0.76 0.24 0.134 0.06854 0.084 8.41 Table: 3.4.36 Calculation of Ke and Kd (FHL)

Years 2007 2008 2009 2010 2011 2012 2013

Beta -0.237 -0.034 0.16 -0.067 -0.004 0.191 0.044

Market return -0.0076 -0.405 0.26 0.135 0.04 0.146 0.254

Risk free rate 0.06 0.06 0.06 0.06 0.06 0.06 0.06

Interest 49.65 29.62 21.95 22.28 53.65 102.93 133.86

Kd % 12.01 16.22 7.70 1.79 11.94 9.34 13.41

Ke % 7.6 7.6 9.2 5.5 6.0 7.6 6.9

133

Table: 3.4.37 Consolidated EVA Annual Summary (FHL) (Rs. in Crore)

Years 2007 2008 2009 2010 2011 2012 2013

NOPAT 2.81 27.12 13.58 52.58 190.26 304.32 89.20

Capital cost 84.41 97.67 92.68 109.69 235.75 348.94 355.50

Annual EVA (81.60) (70.55) (79.10) (57.11) (45.49) (44.62) (266.29)

Table: 3.4.38 Calculation of Value Added or Shortfall (FHL)

Years 2007 2008 2009 2010 2011 2012 2013



Value Added or Short fall (%) (9.405) (6.543) (7.212) (2.014) (1.308) (1.033) (6.300) Table: 3.4.39 Calculation of Firm Value (FHL) (Rs. in Crore)

Years 2007 2008 2009 2010 2011 2012 2013

Total Assets 857.05 1067.65 1085.02 2824.46 3468.54 4308.58 4203.05

Annual EVA (81.60) (70.55) (79.10) (57.11) (45.49) (44.62) (266.29)

Ko (%) 9.73 9.06 8.45 3.87 6.78 8.08 8.41

Firm Value 782.69 1,002.96 1,012.10 2,769.48 3,425.94 4,267.29 3,957.42


Particulars


Firm Value Post-3 years from (2011-2013) Chart: 3.5 Total Firm V

2007


782.69

0

500

1000

1500

2000

2500

3000

3500

4000

4500

5000

Rs.

In

Cro

res

Firm Value of Fortis Healthcare LtdFirm Value in Crores

134



879.64

3,876.24

Total Firm Value of Fortis Healthcare ltd from 2007-2013

2008 2009 2010 2011

1,002.96 1,012.10 2,769.48 3,425.94

2,769.48

Firm Value of Fortis Healthcare LtdFirm Value in Crores Poly. (Firm Value in Crores)

2012 2013

4,267.29 3,957.42

3,957.42

135

The value addition of Fortis Healthcare Ltd is shown in table – 3.4.38. It is observed

from the table that the value added for 2007 to 2013 ranges between (9.405%) -

(1.033%). The high shortfall is found in the year 2007 and highest value added is

found in 2012. During pre merger period (2007 – 2009) results found in the pre

acquisition period declined in shortfall from (9.405%) to (7.212%) and the firm had

lowest short fall in the year 2008 at (6.543%). In the year of acquisition (2010), there

was a decrease in the Shortfall compared to the previous year 2009 and the result

shows a decrease from (7.212%) to (2.014%). During post merger period (2011-

2013) results found in the year 2010 and 2011 decreased in the Shortfall from

(1.308%) to (1.033%), and the firm had Short fall in the year 2013 at (6.300%). The

Firm had a short fall in both the pre and post acquisition period. It indicates that there

is no value addition in Fortis Healthcare Ltd.

The results show that there is decrease in value added compared to the pre acquisition

period. It indicates high variations in NOPAT to Adjusted capital and cost of overall

capital for the consecutive analysis period. From this analysis conclusion can be

drawn that there is negative value addition in Fortis Healthcare Ltd throughout the

period of observation, but percentage of value added is less and the firm improved the

performance in the post period compared to the pre acquisition period.

The Firm Value of Fortis Healthcare Ltd is shown in the Chart – 3.5. It is observed



merger period (2007 – 2009) it shows an increase in firm value in 2008 and firm value

decrease in 2009. In the year of acquisition (2010), there is an increase in the firm

value compared to the previous year (2009) and the result shows an increase from

1,012.10Crores to 2,769.48Crores. During post merger period (2011- 2013) it shows

an increase in the firm value. Firm Value increased in both the pre and post

acquisition period. It indicates that there is an increase in firm value in Fortis

Healthcare Ltd.

The results show that there is more than four times increase in firm value added year

on year comparatively to the pre acquisition period. It indicates increase in the

investment and decrease in cost of capital for the consecutive analysis period. From

this analysis conclusion can be drawn that there is increase in firm value throughout

the period of observation, and the amount of firm value increased.

136

Table: 3.4.41 Calculation of NOPAT (Jindal Steel & Power Ltd) (Rs. in Crore)

Particulars 2007 2008 2009 2010 2011 2012 2013

EBDIT 1,453.67 2,208.65 2,692.54 2,748.35 3,725.71 4,246.97 4,097.73

-Depreciation 336.47 451.51 433.03 512.16 687.77 867.19 1048.46

EBIT 1,117.20 1,757.14 2,259.51 2,236.19 3,037.94 3,379.78 3,049.27

Tax Rate 25.60% 17.60% 23.25% 22.43% 25.00% 25.76% 28.54%

EBIT (1-t) or NOPAT

831.20 1,447.88 1,734.17 1,734.61 2,278.46 2,509.15 2,179.01

Table: 3.4.42 Calculation of Adjusted Capital (JSPL) (Rs. in Crore)

Years 2007 2008 2009 2010 2011 2012 2013

Equity 2496.73 3756.38 5415.32 6746.00 8689.34 10845.41 12348.07

Debt 3507.72 3863.35 4962.65 8383.26 11441.70 14372.46 19500.94

Total CE 6004.45 7619.73 10377.97 15129.26 20131.04 25217.87 31849.01

(+) Depreciation 336.47 451.51 433.03 512.16 687.77 867.19 1048.46


137

Table: 3.4.43 Calculation of WACC (JSPL)

Years

Equity(Rs

in Crores)

Debt (Rs in

Crores) Total CE

Weight of

Equity

Weight of

Debt Kd Ke WACC Ko

2007 2496.73 3507.72 6,004.45 0.42 0.58 0.049 0.06224 0.055 5.47

2008 3756.38 3863.35 7,619.73 0.49 0.51 0.063 -0.11680 -0.026 -2.57

2009 4962.65 4962.65 9,925.30 0.50 0.50 0.054 -0.02360 0.015 1.52

2010 6746.00 8383.26 15,129.26 0.45 0.55 0.040 0.06021 0.049 4.88

2011 8689.34 11441.70 20,131.04 0.43 0.57 0.025 0.06720 0.043 4.32

2012 10845.41 14372.46 25,217.87 0.43 0.57 0.037 0.05832 0.046 4.64

2013 12348.07 19500.94 31,849.01 0.39 0.61 0.042 0.03647 0.040 3.99 Table: 3.4.44 Calculation of Ke and Kd (JSPL)

Years 2007 2008 2009 2010 2011 2012 2013

Beta 0.32 0.34 -0.38 0.021 -0.24 -0.016 -0.233

Market return 0.067 -0.46 0.28 0.07 0.03 0.165 0.161

Risk free rate 0.06 0.06 0.06 0.06 0.06 0.06 0.06

Interest 173.19 243.02 267.89 331.66 285 536.77 820.77

Kd (%) 4.94 6.29 5.40 3.96 2.49 3.73 4.21

Ke (%) 6.20 -11.7 2.40 6.00 6.70 5.80 3.60

138

Table: 3.4.45 Consolidated EVA annual Summary (JSPL) (Rs. in Crore)

Years 2007 2008 2009 2010 2011 2012 2013

NOPAT 831.19 1,447.88 1,734.17 1,734.61 2278.46 2,509.15 2,179.01

Capital cost 347.00 (207.32) 164.23 762.81 898.61 1,209.48 1,312.91

Annual EVA 484.19 1,655.21 1,569.95 971.80 1,379.85 1,299.67 866.10

Table: 3.4.46 Calculation of Value Added or Shortfall (JSPL)

Years 2007 2008 2009 2010 2011 2012 2013




Table: 3.4.47 Calculation of Firm Value (Rs. in Crore)

Years 2007 2008 2009 2010 2011 2012 2013

Total Assets 6004.45 7619.73 10377.97 15129.26 20131.04 25217.87 31849.01

Annual EVA 484.19 1,655.21 1,569.95 971.80 1,379.85 1,299.67 866.10

Ko 5.47 -2.57 1.52 4.88 4.32 4.64 3.99

Firm Value 6,463.53 9,318.57 11,924.42 16,055.87 21,453.79 26,459.94 32,681.87


Particulars


Chart: 3.6 Total Firm V

2007


6,463.53

0.00

5,000.00

10,000.00

15,000.00

20,000.00

25,000.00

30,000.00

35,000.00

Rs.

In

Cro

res

Firm Value of Jindal Steel Power LtdFirm Value in Crores

139


Firm Value in Crore

14,058.53 35,191.96

Total Firm Value of Jindal Steel & Power Ltd from 2007-2013

2008 2009 2010 2011

9,318.57 11,924.42 16,055.87 21,453.79

16,055.87

Firm Value of Jindal Steel Power LtdFirm Value in Crores Poly. (Firm Value in Crores)

2012 2013

26,459.94 32,681.87

32,681.87

140

The value added of Jindal Steel & Power Ltd is shown in table -3.4.46. It is observed


20.507%. The lowest value added is found in the year 2013 and the highest value

added is found in 2008.

During pre merger period (2007 – 2009) it shows fluctuating value addition results -

7.636%, 20.507%, and 14.522% respectively. In the year of acquisition (2010), there

is an increase in the value added compared to the previous year (2009) and the result

shows an increase from 14.522% to 6.213%. During post merger period (2011- 2013)

it shows a decline in the value added resulting in 6.628%, 4.982% and 2.633%

respectively. Value added is positive in both the pre and post acquisition period. It

indicates that there is value addition in Jindal Steel Power Ltd.

The results show that there is more than 9% decrease in value added comparatively to

the pre acquisition period. It indicates decrease in NOPAT to Adjusted capital for the


value addition in Jindal Steel & Power Ltd throughout the period of observation, but

percentage of value Added has been on a decline.

The Firm Value of Hindustan Zinc Ltd is shown in the Chart – 3.6. It is observed

from the Chart that the firm value has increasing trend from 2007-2013. The lowest

firm value is found in the year 2007 and the highest firm value in 2013.

During pre merger period (2007 – 2009) it shows increase in firm value. In the year of

acquisition (2010), there is an increase in the firm value compared to the previous



firm value. Firm Value increased in both pre and post acquisition period. It indicates

that there is an increase in firm value of Jindal Steel & Power Ltd.

The results show that there is more than two times increase in firm value paired event

comparatively to the pre acquisition period. It indicates increase in the investment for

the consecutive analysis period. From this analysis conclusion can be drawn that there

is increase in firm value in Jindal Steel & Power Ltd throughout the period of

observation, the amount of firm value increased.

141

Table: 3.4.49 Calculation of NOPAT (Mahindra & Mahindra Ltd) (Rs. in Crore)

Particulars 2007 2008 2009 2010 2011 2012 2013

EBDIT 1,667.40 1,733.61 1,417.20 3,301.89 4,005.96 4,344.78 5,349.09

-Depreciation 209.59 238.66 291.51 370.78 413.86 576.14 710.81

EBIT 1,457.81 1,494.95 1,125.69 2,931.11 3,592.10 3,768.64 4,638.28

Tax Rate 25.00% 22.00% 13.00% 26.66% 24.36% 20.16% 24.60% EBIT (1-t) or NOPAT

1,093.36 1,166.06 979.35 2,149.68 2,717.06 3,008.88 3,497.26

Table: 3.4.50 Calculation of Adjusted Capital (M&ML) (Rs. in Crore)

Years 2007 2008 2009 2010 2011 2012 2013

Equity 3552.90 4350.07 5243.97 7830.23 10313.39 12171.09 14658.92

Debt 1636.00 2587.06 4052.76 2880.15 2321.10 3174.22 3227.07

Total CE 5188.90 6937.13 9296.73 10710.38 12634.49 15345.31 17885.99

(+) Depreciation 209.59 238.66 291.51 370.78 413.86 576.14 710.81


142

Table: 3.4.51 Calculation of WACC (M&ML)

Years Equity (Rs in

Crores)

Debt (Rs in

Crores) Total CE

Weight of

Equity

Weight of

Debt Kd Ke WACC Ko

2007 3552.90 1636.00 5,188.90 0.68 0.32 0.012 0.06210 0.046 4.63

2008 4350.07 2587.06 6,937.13 0.63 0.37 0.034 0.10608 0.079 7.91

2009 4052.76 4052.76 8,105.52 0.50 0.50 0.033 0.12614 0.080 7.96

2010 7830.23 2880.15 10,710.38 0.73 0.27 0.054 0.04640 0.049 4.86

2011 10313.39 2321.10 12,634.49 0.82 0.18 0.031 0.05954 0.054 5.43

2012 12171.09 3174.22 15,345.31 0.79 0.21 0.051 0.05028 0.050 5.05

2013 14658.92 3227.07 17,885.99 0.82 0.18 0.059 0.04950 0.051 5.13 Table: 3.4.52 Calculation of Ke and Kd (M&ML)

Years 2007 2008 2009 2010 2011 2012 2013

Beta -0.21 -0.096 0.312 -0.206 0.017 -0.143 -0.05

Market return 0.05 -0.42 0.272 0.126 0.033 0.128 0.27

Risk free rate 0.06 0.06 0.06 0.06 0.06 0.06 0.06

Interest 19.8 87.59 134.12 156.85 72.49 162.75 191.19

Kd (%) 1.21 3.39 3.31 5.45 3.12 5.13 5.92

Ke (%) 6.20 10.6 12.60 4.60 6.00 5.00 5.00

143

Table: 3.4.53 Consolidated EVA Annual Summary (M&M) (Rs. in Crore)

Years 2007 2008 2009 2010 2011 2012 2013

NOPAT 1,093.36 1,166.06 979.35 2,149.68 2,717.06 3,008.88 3,497.26

Capital cost 49.57 165.57 394.30 312.81 374.08 237.33 334.42

Annual EVA 1,043.79 1,000.49 585.04 1,836.86 2,342.98 2,771.56 3,162.84

Table: 3.4.54 Calculation of Value Added or ShortFall (M&ML)

Years 2007 2008 2009 2010 2011 2012 2013




Table: 3.4.55 Calculation of Firm Value (M&ML) (Rs. in Crore)

Years 2007 2008 2009 2010 2011 2012 2013

Total Assets 5,188.90 6,937.13 9,296.73 10,710.38 12,634.49 15,345.31 17,885.99

Annual EVA 1,043.79 1,000.49 585.04 1,836.86 2,342.98 2,771.56 3,162.84

Ko (%) 4.63 7.91 7.96 4.86 5.43 5.05 5.13

Firm Value 6,186.46 7,864.24 9,838.63 12,462.16 14,856.71 17,983.68 20,894.61

Table: 3.4.56 Calculation of Firm Value in Pre and Post Period from

Particulars


Firm Value Post-3 years from (2011-2013) Chart: 3.7 Total Firm Value of Mahindra & Mahindra L

2007


6,186.46

0.00

5,000.00

10,000.00

15,000.00

20,000.00

25,000.00

Rs.

In

Cro

res

Firm Value of Mahindra & Mahindra Ltd

144


Firm Value in Crore

11,719.12

25,640.67

m Value of Mahindra & Mahindra Ltd from 2007-2013

2008 2009 2010 2011

7,864.24 9,838.63 12,462.16 14,856.71

12,462.16

Firm Value of Mahindra & Mahindra Ltd

Firm Value in Crores Poly. (Firm Value in Crores)

2012 2013

17,983.68 20,894.61

20,894.61

145

The value added of Mahindra & Mahindra Ltd is shown in table 3.4.54. It is observed


97.565%. The lowest value added is found in the year 2009 and the highest value

added is found in 2007.

During pre merger period (2007 – 2009) it shows decrease value addition results of

97.565%, 47.824%, and 11.813% respectively. In the year of acquisitions (2010),

there is an increase in the value added compared to the previous year (2009) and the

result shows an increase from 11.813% to 28.521%. During post merger period

(2011- 2013) it shows an increase in the value added resulting in 34.035%, 58.954%

and 48.478% respectively. Value added is positive in both the pre and post acquisition

period. It indicates that there is value addition in Mahindra & Mahindra Ltd.

The results show that there is more than 5% decrease in value added comparatively to

the pre acquisition period. It indicates increase in NOPAT to Adjusted capital for the


value addition in Mahindra & Mahindra Ltd throughout the period of observation, but

percentage of value Added had been on a decreased.

The Firm Value of Mahindra & Mahindra Ltd is shown in Chart – 3.7. It is observed

from the Chart that the firm value has increasing trend from 2007-2013. The lowest

firm value is found in the year 2007 and the highest in 2013.

During pre merger period 2007 – 2009 it shows an increase in firm value. In the year


year (2009) and the result shows an increase from 9,838.63Crores to 12,462.16Crores.

During post merger period (2011- 2013) it shows an increase in the firm value. The

Firm Value increased in both the pre and post acquisition period. It indicates that

there is an increase in firm value of Mahindra & Mahindra Ltd.

The results show that there is more than two times increase in firm value paired event



increase in firm value of Mahindra & Mahindra Ltd throughout the period of

observation, and the amount of firm value increased.

146

Table: 3.4.57 Calculation of NOPAT (Tata Chemicals Ltd) (Rs. in Crore)

Particulars 2007 2008 2009 2010 2011 2012 2013

EBDIT 814.87 1,326.66 962.55 961.13 956.79 1,199.22 1,046.37

-Depreciation 150.35 148.76 163.03 187.19 204.46 224.68 214.29

EBIT 664.52 1,177.90 799.52 773.94 752.33 974.54 832.08

Tax Rate (%) 30.00% 18.00% 33.00% 26.00% 26.00% 23.00% 22.00%

EBIT (1-t) or NOPAT 465.16 965.88 535.68 572.72 556.72 750.40 649.02

Table: 3.4.58 Calculation of Adjusted Capital (TCL) (Rs. in Crore)

Years 2007 2008 2009 2010 2011 2012 2013

Equity 2392.84 3571.68 3621.91 4275.07 4740.68 5017.23 5307.32

Debt 1041.77 2345.28 3676.10 2946.51 2975.94 2459.43 2457.06

Total CE 3434.61 5916.96 7298.01 7221.58 7716.62 7476.66 7764.38

(+) Depreciation 150.35 148.76 163.03 187.19 204.46 224.68 214.29

Adjusted Capital 3584.96 6065.72 7461.04 7408.77 7921.08 7701.34 7978.67

147

Table: 3.4.59 Calculation of WACC (TCL)

Years Equity Rs in

Crores

Debt Rs in

Crores

Total CE in

crores

Weight of

Equity

Weight of

Debt Kd Ke WACC Ko

2007 2392.84 1041.77 3,434.61 0.70 0.30 0.010 0.06101 0.046 4.56

2008 3571.68 2345.28 5,916.96 0.60 0.40 0.016 -0.01965 -0.005 -0.54

2009 3676.10 3676.10 7,352.20 0.50 0.50 0.028 0.04249 0.035 3.52

2010 4275.07 2946.51 7,221.58 0.59 0.41 0.064 0.08024 0.073 7.35

2011 4740.68 2975.94 7,716.62 0.61 0.39 0.102 0.05993 0.076 7.61

2012 5017.23 2459.43 7,476.66 0.67 0.33 0.174 0.04890 0.090 9.01

2013 5307.32 2457.06 7,764.38 0.68 0.32 0.143 0.04180 0.074 7.37 Table: 3.4.60 Calculation of Ke and Kd (TCL)

Years 2007 2008 2009 2010 2011 2012 2013

Beta -0.021 0.177 -0.103 0.11 0.004 -0.15 -0.14

Market return 0.012 -0.39 0.23 0.244 0.043 0.134 0.19

Risk free rate 0.06 0.06 0.06 0.06 0.06 0.06 0.06

Interest 10.67 37.98 102.51 187.5 302.91 428.51 350.53

Kd (%) 1.02 1.62 2.79 6.36 10.18 17.42 14.27

Ke (%) 6.10 -2.00 4.20 8.00 6.00 4.90 4.20

148

Table: 3.4.61 Consolidated EVA Annual Summary (TC) (Rs. in Crore)

Years 2007 2008 2009 2010 2011 2012 2013

NOPAT 465.16 965.88 535.68 572.72 556.72 750.40 649.02

Capital cost 163.51 (33.01) 262.54 544.28 602.58 694.10 588.17

Annual EVA 301.65 998.89 273.14 28.43 (45.86) 56.29 60.85

Table: 3.4.62 Calculation of Value Added or ShortFall (TCL)

Years 2007 2008 2009 2010 2011 2012 2013



Value Added or Short fall (%) 8.414 16.468 3.661 0.384 (0.579) 0.731 0.763

Table: 3.4.63 Calculation of Firm Value (TCL) (Rs. in Crore)

Years 2007 2008 2009 2010 2011 2012 2013

Total Assets 3,434.61 5,916.96 7,298.01 7,221.58 7,716.62 7,476.66 7,764.38

Annual EVA 301.65 998.89 273.14 28.43 (45.86) 56.29 60.85

Ko 4.56 -0.54 3.52 7.35 7.61 9.01 7.37

Firm Value 3,723.11 6,921.32 7,561.87 7,248.07 7,674.00 7,528.30 7,821.05


Particulars


Chart: 3.8 Total Firm Value of Tata Chemicals L

2007


3,723.11

0.00

1,000.00

2,000.00

3,000.00

4,000.00

5,000.00

6,000.00

7,000.00

8,000.00

9,000.00

Rs.

In

Cro

res

Firm Value in Crores

149

of Firm Value in Pre and Post Period from 2007-2009 to 2011-2013

Firm Value in Crore

8,842.14 7,833.09

Firm Value of Tata Chemicals Ltd from 2007-2013

2008 2009 2010 2011

6,921.32 7,561.87 7,248.07 7,674.00

7,248.07

Firm Value of Tata Chemicals LtdFirm Value in Crores Poly. (Firm Value in Crores)

2012 2013

7,528.30 7,821.05

7,821.05

150

The value added of Tata chemicals Ltd is shown in table – 3.4.62. It is observed from

the table that the value added for 2007 to 2013 ranges between (0.579%) – 16.468%.

The lowest value added is found in the year 2011 and the highest value added is found

in 2008.

During pre merger period (2007 – 2009) it shows decline in value addition results

8.414%, 16.468% and 3.661% respectively. In the year of acquisition (2010), there is

decrease in the value added compared to the previous year (2009) and the result

shows a decrease from 3.661% to 0.384%. During post merger period (2011- 2013) it

shows an increase in the short fall resulting from (0.579%), 0.731% and 0.763%

respectively. Value added is positive in the post acquisition period, but the percentage

of value addition is comparatively less compared to pre acquisition. It indicates that

there is less value addition in Tata Chemicals Ltd.

The results show that there is more than 9% decrease in value addition compared to

the pre acquisition period. It indicates decrease in NOPAT to Adjusted capital for the


very less value addition in Tata Chemicals Ltd throughout post period of observation,

also percentage of short fall increased.

The Firm Value of Tata Chemicals Ltd is shown in the Chart – 3.8. It is observed

from the chart that the firm value has an increasing trend from 2007-2013. The lowest

firm value was found in the year 2007 and the highest firm value in 2011.

During pre merger period (2007 – 2009) it shows an increase in firm value. In the

year of acquisition (2010), there is a decrease in the firm value compared to the

previous year (2009) and the result shows a decrease from 7,561.87Crores to



indicates that there was an increase in the firm value in Tata Chemicals Ltd.

The results show that there is more than 12% decrease in the firm value paired event

compared to the pre acquisition period. It indicates decrease in the investment for the


decrease in firm value in Tata Chemicals Ltd throughout the period of observation,

and the amount of firm value decreased.

151

Table: 3.4.65 Calculation of NOPAT (GTL Infrastructure Ltd) (Rs. in Crore)

Particulars 2007 2008 2009 2010 2011 2012 2013

EBDIT 42.67 100.96 172.88 383.24 371.28 356.79 -336.10

-Depreciation 33.41 82.40 141.15 198.32 207.66 243.42 0

EBIT 9.26 18.56 31.73 184.92 163.62 113.37 -336.10

Tax Rate (%) 43.00% 39.15% 43.00% 0.00% 0.00% 15.60% 0.00%

EBIT (1-t) or NOPAT 5.28 11.29 18.09 184.92 163.62 95.68 -336.10

Table: 3.4.66 Calculation of Adjusted Capital (GTLIL) (Rs. in Crore)

Years 2007 2008 2009 2010 2011 2012 2013

Equity 318.63 932.91 1263.63 1771.64 1637.08 1267.14 1643.62

Debt 717.80 1076.69 3547.65 4470.50 5039.36 3190.62 4880.62

Total CE 1036.43 2009.60 4811.28 6242.14 6676.44 4457.76 6524.24

(+) Depreciation 33.41 82.40 141.15 198.32 207.66 243.42 0.00


152

Table: 3.4.67 Calculation of WACC (GTLIL)

Years Equity Rs.

In Crores

Debt

Rs. In crores Total CE

Weight of

Equity

Weight of

Debt Kd Ke

WACC

or Ko Ko

2007 318.63 717.80 1,036.43 0.31 0.69 0.015 0.05990 0.029 2.87

2008 932.91 1076.69 2,009.60 0.46 0.54 0.035 0.01864 0.028 2.76

2009 1263.63 3547.65 4,811.28 0.26 0.74 0.029 0.06960 0.040 3.96

2010 1771.64 4470.50 6,242.14 0.28 0.72 0.042 0.06944 0.050 4.97

2011 1637.08 5039.36 6,676.44 0.25 0.75 0.060 0.06546 0.061 6.14

2012 1267.14 3190.62 4,457.76 0.28 0.72 0.134 0.06560 0.115 11.48

2013 1643.62 4880.62 6,524.24 0.25 0.75 0.072 0.06011 0.069 6.89 Table: 3.4.68 Calculation of Ke and Kd(GTLIL)

Years 2007 2008 2009 2010 2011 2012 2013

Beta -0.016 0.088 0.06 0.111 -0.107 0.07 0.0005

Market return 0.066 -0.41 0.22 0.145 0.009 0.14 0.28

Risk free rate 0.06 0.06 0.06 0.06 0.06 0.06 0.06

Interest 10.67 37.98 102.51 187.5 302.91 428.51 350.53

Kd (%) 1.49 3.53 2.89 4.19 6.01 13.43 7.18

Ke (%) 6.00 1.90 7.00 6.90 6.50 6.60 6.00

153

Table: 3.4.69 Consolidated EVA Annual Summary (GTLIL) (Rs. in Crore)

Years 2007 2008 2009 2010 2011 2012 2013

NOPAT 5.28 11.29 18.09 184.92 163.62 95.68 (336.10)

Capital cost 30.72 57.64 196.05 320.38 422.82 539.57 449.33

Annual EVA (25.43) (46.35) (177.96) (135.46) (259.20) (443.89) (785.43)

Table: 3.4.70 Calculation of Value Added or ShortFall (GTLIL)

Years 2007 2008 2009 2010 2011 2012 2013

NOPAT return on adjusted capital (%) 0.493 0.540 0.365 2.871 2.377 2.035 (5.152)


Value Added or Short fall (%) (2.378) (2.215) (3.593) (2.103) (3.765) (9.442) (12.039)

Table: 3.4.71 Calculation of Firm Value (Rs. in Crore)

Years 2007 2008 2009 2010 2011 2012 2013

Total Assets 1,036.43 3,408.60 4,811.28 6,242.14 6,676.44 4,457.76 6,524.24

Annual EVA (25.43) (46.35) (177.96) (135.46) (259.20) (443.89) (785.43)

Ko 2.87 2.76 3.96 4.97 6.14 11.48 6.89

Firm Value 1,011.70 3,363.50 4,640.10 6,113.10 6,432.24 4,059.57 5,789.42


Particulars




2007


1,011.70

0.00

1,000.00

2,000.00

3,000.00

4,000.00

5,000.00

6,000.00

7,000.00

Rs.

In

Cro

res

154



4,570.96

5,161.16

Total Firm Value of GTL Infrastructure ltd from 2007-2013

2008 2009 2010 2011

3,363.50 4,640.10 6,113.10 6,432.24

6,113.10

Firm Value of GTL Infrastructure LtdFirm Value in Crores Poly. (Firm Value in Crores)

2012 2013

4,059.57 5,789.42

5,789.42

155

The value addition of GTL Infrastructure Ltd is shown in table -3.4.70.It is observed

from the table that the value added for 2007 to 2013 ranges between (2.103%) -

(12.039%). The lowest Short fall is found in the year 2010 and the highest Short fall is

found in 2013. During pre merger (2007 – 2009) result shows an increase in shortfall

from (2.378%), (2.215%) and (3.593%) respectively. In the year of acquisition

(2010), there is a decrease in the Short fall compared to the previous year (2009) and

the result shows a decrease from (3.593%) to (2.103%). During post merger period

(2011- 2013) it shows an increase in the short fall resulting from (3.765%), (9.442%)

and (12.039%) respectively. The Firm had a short fall in both the pre and post

acquisition period. It indicates ahuge short fall in GTL Infrastructure Ltd.

The results show that there was more than 6% increase in shortfall compared to pre

acquisition period. It indicates high variations in NOPAT to Adjusted Capital and the

cost of overall capital for the consecutive analysis period. From this analysis

conclusion it can be drawn that there was high short fall in GTL Infrastructure Ltd

(GTLIL) throughout the period of observation, but the percentage of Shortfall was

high and the firm had worsened its performance in the post period compared to the

pre acquisition period.

The Firm Value of GTL Infrastructure Ltd is shown in Chart – 3.9. It is observed from

the chart that the firm value had a flexible trend from 2007-2013. The lowest firm

value was found in the year 2007 and the in 2011. During pre merger period (2007 –

2009) it shows an increase in firm value. In the year of (2010), there is an increase in

the Firm Value compared to the previous year (2009) and the result shows an increase

from 4,640.10Crores to 6,113.10Crores. During post merger period (2011- 2013) it

shows a decrease in the firm value. Firm Value decreased in both the pre and post

acquisition period. It indicates that there was a decrease in firm value in (GTLIL)

The results show that there is more than 12% increase in firm value added Year on

Year comparatively to the pre acquisition period. It indicates increase in the

investment and decrease in cost of capital for the consecutive analysis period. From

this analysis, conclusion can be drawn that there is least increase in firm value in GTL

Infrastructure Ltd throughout the period of observation. The amount of firm value has

been increased.

156

Table: 3.4.73 Calculation of NOPAT (Reliance Power Ltd)

(Rs. in Crore)

Particulars 2007 2008 2009 2010 2011 2012 2013

EBIT 1.37 107.17 258.45 291.15 297.16 374.21 538.58

Tax Rate 69.00% 0.06% 0.03% 0.05% 0.01% 0.03% 0.01%

EBIT (1-t) or NOPAT 0.42 107.11 258.37 290.99 297.13 374.10 538.52

Table: 3.4.74 Calculation of Adjusted capital (RPL) (Rs. in Crore)

Years 2007 2008 2009 2010 2011 2012 2013

Equity 200.06 13542.67 13792.81 14066.04 15896.57 16101.33 16825.19

Debt 0 0 0 0 1554.05 0 1877.78

Total CE 200.06 13542.67 13792.81 14066.04 17450.62 16101.33 18702.97

(+) Depreciation 0 0 .20 .51 1.14 2.93 3.14

Adjusted Capital 200.06 13542.67 13793.01 14066.55 17451.76 16104.26 18706.11

157

Table: 3.4.75 Calculation of WACC (RPL)

Years Equity Rs .in

Crores

Debt Rs.in

Crores

Total CERs.in

Crores

Weight of

(Equity)

Weight of

(Debt) Kd Ke WACC Ko

2007 200.06 0 200.06 1 0 0 0.06283 0.063 6.283

2008 13,542.67 0 13,542.67 1 0 0 0.0321 0.032 3.21

2009 13,792.81 0 13,792.81 1 0 0 0.0315 0.031 3.15

2010 14,066.04 0 14,066.04 1 0 0 0.0575 0.057 5.75

2011 15,896.57 1,554.05 17,450.62 0.91 0.09 0.0273 0.0534 0.051 5.11

2012 16,101.33 0 16,101.33 1 0 0.0479 0.048 4.79

2013 16,825.19 1,877.78 18,702.97 0.9 0.1 0.0117 0.0613 0.056 5.63

Table: 3.4.76 Calculation of Ke and Kd (RPL)

Years 2007 2008 2009 2010 2011 2012 2013

Beta 0.404 0.058 -0.162 -0.0296 0.097 -0.11 0.006

Market return 0.067 -0.421 0.236 0.146 -0.008 0.17 0.27

Risk free rate 0.06 0.06 0.06 0.06 0.06 0.06 0.06

Interest 0.82 5.72 1.77 1.69 42.35 60.34 22.06

Kd =Interest*100/Debt

2.73

1.17

Ke= Rf+(Rm-Rf)β 6.28 3.21 3.15 5.75 5.34 4.79 6.13

158

Table: 3.4.77 Consolidated EVA Annual Summary (RPL) (Rs. in Crore)

Years 2007 2008 2009 2010 2011 2012 2013

NOPAT 0.42 107.10 258.37 290.99 297.13 374.10 538.52

Capital cost 12.57 434.74 434.31 808.19 890.99 771.39 10,53,23

Annual EVA (12,15) (327.64) (175.94) (517.20) (593.86) (397.29) (514.71)

Table: 3.4.78 Calculation of Value Added or ShortFall (RPL)

Years 2007 2008 2009 2010 2011 2012 2013



Value Added or Short fall (6.071) (2.419) (1.276) (3.677) (3.403) (2.467) (2.752)

Table: 3.4.79 Calculation of Firm Value (RPL) (Rs. in Crore)

Years 2007 2008 2009 2010 2011 2012 2013

Total Assets 200.06 13,542.67 13,792.81 14,066.04 17,450.62 16,101.33 18,702.97

Annual EVA (12,15) (327.64) (175.94) (517.20) (593.86) (397.29) (514.71)

Ko (%) 6.283 3.21 3.149 5.75 5.105 4.79 5.630

Firm Value 188.63 13,225.22 13,622.24 13,576.95 16,885.60 15,722.19 18,215.70


Particulars



2007


188.63

0

2000

4000

6000

8000

10000

12000

14000

16000

18000

20000

Rs.

In

Cro

res

159

of Firm Value in Pre and Post Period from 2007-2009 to 2011-2013


13,294.04 17,298.99

Total Firm Value of Reliance Power ltd from 2007-2013

2008 2009 2010 2011

13,225.22 13,622.24 13,576.95 16,885.60

13,576.95

Firm Value of Reliance Power LtdFirm Value in Crores Poly. (Firm Value in Crores)

2012 2013

15,722.19 18,215.70

18,215.70

160

The value added of Reliance Power Ltd is shown in table -3.4.78. It is observed from

the table that the Shortfall for 2007 to 2013 ranges between (1.276%) - (6.071%). The

lowest Shortfall is found in the year 2009 and the highest Shortfall is found in 2007.

During pre merger period (2007 – 2009) it shows decrease in Shortfall results

(6.071%), (2.419%) and (1.276%) respectively. In the year of acquisition (2010),

there is an increase in the Shortfall compared to the previous year (2009) and the

result shows an increase from (1.276%) to (3.677%). During post merger period

(2011- 2013) it shows decline in the Shortfall resulting in (3.403%), (2.467%) and

(2.752%) respectively. Value Addition is negative in both the pre and post acquisition

period. It indicates that there is no value addition in Reliance Power Ltd.

The results show that there is less than 2% increase in Shortfall compared to the pre

acquisition period. It is due to the decrease in NOPAT to Adjusted Capital for the


negative value addition in Reliance Power Ltd throughout the period of observation,

but percentage of Shortfall decreased in both the pre and post acquisition period.

The Firm Value of Reliance Power Ltd is shown in Chart – 3.10. It is observed from

the chart that the firm value has increasing trend from 2007-2013. The lowest firm

value is found in the year 2007 and highest in 2013.

During pre merger period (2007 – 2009) it shows less increase in firm value. In the

year of acquisition (2010), there is more or less constant in the firm value compared to

the previous year (2009) and the result shows an increase from 13,622.24Crores to



indicates that there is increase in firm value of Reliance Power Ltd.

The results show that there is more than 30% increase in Firm Value paired event



increase in Firm Value in Reliance Power Ltd throughout the period of observation,

the amount of Firm Value increased.

161

5. Comparative analysis of financial performance standards, synergy standards, firm value and value added/ shortfall in pre and post period of selected Mergers and Acquisitions.

The comparative analysis of all performance standards is receiving serious

attention to evaluate the performance by comparing the pre and post acquisition

period. Under this heading, an analysis has been done on aspects of financial health

and synergies, aspects with the help of ratios like

• Profitability ratios

• Leverage ratios

• Capital market ratios

• Financial synergy ratios

• Managerial synergy ratios

• Operational synergy ratio

Evaluation of the firm value and value added/shortfall aspects with the help of

economic value added model has also been done. During the study period the overall

performance of each selected firm has been examined by using statistical tools like

• Paired t-test

• Skewness

• Kurtosis

162

Table: 3.5.1 T –test, Skewness and Kurtosis for Gross Profit Margin

Companies T- Value P-value Skewness S E Kurtosis SE

BAL 3.359 0.078 -0.640 0.845 1.373 1.741

HGSL 5.112 0.036 -0.309 0.845 2.535 1.741

HZL 1.535 0.264 0.919 0.845 0.902 1.741

LIL 2.190 0.160 -0.085 0.845 -0.718 1.741

FHL -0.570 0.626 -2.029 0.845 4.267 1.741

JSPL 2.063 0.175 -0.719 0.845 0.026 1.741

M&ML -0.624 0.596 0.646 0.845 0.975 1.741

TCL 2.357 0.143 0.968 0.845 1.500 1.741

GTLIL -0.534 0.647 -0.303 0.845 0.622 1.741

RPL 2.088 0.172 -1.700 0.845 2.640 1.741 (Source: AGM reports of selected companies & moneycontrol.com database)

Pre and Post M&A financial performance standards of acquiring firms are

compared to see if there are any statistically significant changes in the financial

performance after M&A, using “paired sample t-test” at significance level of 0.05 or

95% and also descriptive statistics analysis has been performed to ascertain the

difference between pre and post acquisition period. The results are shown in table –

3.5.1 related to the Gross Profit Margin.

All selected companies Gross Profit margin results are more than the significance

level. Therefore null hypothesis is accepted. Hence forth null hypothesis states that

there is no significant difference between profitability in pre and post acquisition

period. The profitability ratio results indicate decline in post acquisition period

performance due to the high operational charges and financial charges.

Further, it has been observed that the skewness is not high. Whereas, it seems to be

more or less in the normal range between -2.029 to 0.968 in pre and post acquisition

period. The kurtosis is observed that it is less than 3 except in Fortis Healthcare Ltd. It

indicates that platykurtic is distributed over a wider range. The Gross Profit Margin of

Fortis Healthcare Ltd negatively decreased in the post acquisition.

163

Table: 3.5.2 T –test, Skewness and Kurtosis for Net Profit Margin


BAL 2.783 0.109 -0.858 0.845 1.334 1.741

HGSL 1.688 0.233 -0.656 0.845 0.301 1.741

HZL 0.655 0.580 0.116 0.845 0.987 1.741

LIL 6.001 0.027 0.314 0.845 -1.874 1.741

FHL -2.263 0.152 0.040 0.845 -0.112 1.741

JSPL 1.513 0.269 -1.171 0.845 0.925 1.741

M&ML -1.013 0.418 -0.642 0.845 0.401 1.741

TCL 1.18 0.360 2.053 0.845 4.304 1.741

GTLIL -0.837 0.491 1.963 0.845 4.119 1.741

RPL -1.386 0.300 0.961 0.845 2.362 1.741 (Source: AGM reports of selected companies & moneycontrol.com database)






3.5.2 related to the Net Profit Margin.

All selected companies Net Profit Margin results are more than the significance level.

Therefore null hypothesis is accepted. Hence forth null hypothesis states that there is

no significant difference between profitability in pre and post acquisition period. The

Net Profit Margin results indicate decline in post acquisition period performance due

to the high financial charges and high overheads.



period. The kurtosis is observed that it is less than three except in Tata Chemicals Ltd

and GTL Infrastructure Ltd. It indicates that platykurtic is distributed over a wider

range. The Net Profit Margin of Tata Chemicals Ltd and GTL Infrastructure Ltd have

more than two times variation in post acquisition period.

164

Table: 3.5.3 T –test, Skewness and Kurtosis for Return on Assets


BAL -1.526 0.266 -1.345 0.845 1.851 1.741

HGSL -0.767 0.523 -0.350 0.845 0.988 1.741

HZL 5.062 0.037 0.591 0.845 1.786 1.741

LIL 9.540 0.011 0.184 0.845 -2.796 1.741

FHL -23.05 0.002 -0.074 0.845 -3.019 1.741

JSPL 1.933 0.193 1.831 0.845 3.428 1.741

M&ML -2.889 0.102 0.676 0.845 1.115 1.741

TCL -5.759 0.029 -0.643 0.845 0.211 1.741

GTLIL -0.116 0.918 -0.107 0.845 0.780 1.741

RPL -0.993 0.425 -2.423 0.845 5.899 1.741 (Source: AGM reports of selected companies & moneycontrol.com database)






3.5.3 related to the Return on Assets.

Among the selected companies, Return on Assets of Bharti Airtel Ltd, Hinduja Global

Solutions Ltd, Jindal Steel and Power Ltd, Mahindra and Mahindra Ltd, GTL

Infrastructure Ltd and Reliance Power Ltd have shown more than the significance


there is no significant difference between profitability of selected firms in pre and

post acquisition period. In case of Hindustan Zinc Ltd, Lanco Infratech Ltd, Fortis

Healthcare Ltd and Tata Chemicals Ltd, the result was less than the significance level

at 0.05. Therefore null hypothesis is rejected. The Return on Assets results indicate

decline in post acquisition period performance. It indicates lower sales revenue

generated through ineffective utilisation of optimum assets.



165

period. The kurtosis is observed that it is less than three except in Jindal Steel and

Power Ltd and Reliance Power Ltd. It indicates that platykurtic is distributed over a

wider range. The Return on Assets of Jindal Steel and Power Ltd and Reliance Power

Ltd have more variation compared to pre period of acquisition.

Table: 3.5.4 T –test, Skewness and Kurtosis for Return on Equity


BAL 43.173 0.001 -0.037 0.845 2.290 1.741

HGSL -0.360 0.754 -1.515 0.845 2.180 1.741

HZL 1.529 0.266 1.588 0.845 1.946 1.741

LIL 1.349 0.310 0.121 0.845 -1.526 1.741

FHL -1.849 0.206 -1.254 0.845 2.225 1.741

JSPL 3.277 0.082 -0.639 0.845 -0.189 1.741

M&ML -0.060 0.958 -0.785 0.845 1.930 1.741

TCL 1.971 0.187 1.349 0.845 1.425 1.741

GTLIL 1.970 0.188 -0.811 0.845 1.513 1.741







3.5.4 related to the Return on Equity.

Among the selected companies, Return on Equity of Hinduja Global Solutions Ltd,

Hindustan Zinc Ltd, Lanco Infratech Ltd, Fortis Healthcare Ltd, Jindal Steel and

Power Ltd, Mahindra and Mahindra Ltd, GTL Infrastructure Ltd and Tata Chemicals

Ltd have shown more than the significance level. Therefore null hypothesis is

accepted. Hence forth null hypothesis states that there is no significant difference

between profitability of selected firms in pre and post acquisition period. In case of

Bharti Airtel Ltd and Reliance Power Ltd, the result was less than the significance

166

level at 0.05. Therefore null hypothesis is rejected. The Return on Equity results

indicate decline in post acquisition period performance due to less reserve

accumulation and declined profits in the post acquisition period.



period. The kurtosis is observed that it is less than three in all selected companies. It

indicates that platykurtic is distributed over a wider range.

Table: 3.5.5 T –test, Skewness and Kurtosis for Return on Capital Employed


BAL 12.72 0.006 -0.126 0.845 2.290 1.741

HGSL -0.439 0.704 -0.799 0.845 1.230 1.741

HZL 1.597 0.251 1.755 0.845 2.675 1.741

LIL 1.242 0.340 0.808 0.845 -1.621 1.741

FHL -1.65 0.242 -0.210 0.845 -0.138 1.741

JSPL 3.048 0.093 0.066 0.845 -1.401 1.741

M&ML -2.196 0.159 -1.068 0.845 0.103 1.741

TCL 0.294 0.797 0.397 0.845 0.019 1.741

GTLIL 0.062 0.956 -1.476 0.845 2.755 1.741

RPL -2.155 0.164 1.821 0.845 3.488 1.741

(Source: AGM reports of selected companies & moneycontrol.com database)






3.5.5 related to the Return on Capital Employed.

Among the selected companies, Return on Capital Employed of Hinduja Global

Solutions Ltd, Hindustan Zinc Ltd, Lanco Infratech Ltd, Fortis Healthcare Ltd, Jindal

167

Steel and Power Ltd, Mahindra and Mahindra Ltd, GTL Infrastructure Ltd, Tata

Chemicals Ltd and Reliance Power Ltd have shown more than the significance level.


no significant difference between profitability of selected firms in pre and post

acquisition period. In case of Bharti Airtel Ltd, the result was less than the

significance level at 0.05. Therefore null hypothesis is rejected. The Return on Capital

Employed of Bharti Airtel Ltd has decreased more than 50% in post period of

acquisition. It indicates declines in profits earned on capital employed.



period. The kurtosis is observed that it is less than three except in Reliance Power Ltd.

It indicates that platykurtic is distributed over a wider range. The Return on Capital

Employed of Reliance Power Ltd has more variation compared to pre period of

acquisition.

Table: 3.5.6 T –test, Skewness and Kurtosis for Debt Equity Ratio


BAL 2.514 0.128 1.069 0.845 0.636 1.741

HGSL -4.583 0.044 -1.190 0.845 1.411 1.741

LIL -3.892 0.060 -0.604 0.845 -1.432 1.741

FHL 0.974 0.433 2.101 0.845 4.842 1.741

JSPL -1.258 0.335 -0.466 0.845 -0.089 1.741

M&ML 3.977 0.058 0.697 0.845 1.198 1.741

TCL 0.811 0.503 1.559 0.845 2.545 1.741

GTLIL -0.421 0.715 -1.125 0.845 0.167 1.741






168


3.5.6 related to the Debt Equity Ratio.

Among the selected companies, Debt Equity Ratio of Bharti Airtel Ltd, Hindustan

Zinc Ltd, Lanco Infratech Ltd, Fortis Healthcare Ltd, Jindal Steel and Power Ltd,

Mahindra and Mahindra Ltd, GTL Infrastructure Ltd, Tata Chemicals Ltd and

Reliance Power Ltd have shown more than the significance level. Therefore null

hypothesis is accepted. Hence forth null hypothesis states that there is no significant

difference between leverage position of selected firms in pre and post acquisition

period. In case of Hinduja Global Solutions Ltd, the result was less than the

significance level at 0.05. Therefore null hypothesis is rejected. The Debt Equity

Ratio of Hinduja Global Solutions Ltd has increased in post period of acquisition. It

indicates higher leverage policy by infusing more debt funds in its capital structure.



period. The kurtosis is observed that it is less than three except in Fortis Healthcare

Ltd. It indicates that platykurtic is distributed over a wider range. The Debt Equity

Ratio of Fortis Healthcare Ltd has less variation compared to pre period of

acquisition.

Table: 3.5.7 T –test, Skewness and Kurtosis for Total Capitalisation


BAL 1.900 0.198 1.418 0.845 2.061 1.741

HGSL -3.928 0.059 -1.291 0.845 1.779 1.741

HZL 1.561 0.259 1.885 0.845 3.369 1.741

LIL -3.330 0.080 -0.993 0.845 -0.158 1.741

FHL 0.706 0.553 1.416 0.845 2.768 1.741

JSPL -1.485 0.276 -0.701 0.845 0.731 1.741

M&ML 5.03 0.037 0.442 0.845 1.809 1.741

TCL 0.680 0.566 1.072 0.845 0.846 1.741

GTLIL -0.961 0.438 -1.214 0.845 1.257 1.741


169






3.5.6 related to the Total Capitalisation.

Among the selected companies, Total Capitalisation of Bharti Airtel Ltd, Hinduja

Global Solutions Ltd, Hindustan Zinc Ltd, Lanco Infratech Ltd, Fortis Healthcare Ltd,

Jindal Steel and Power Ltd, GTL Infrastructure Ltd, Tata Chemicals Ltd and Reliance

Power Ltd have shown more than the significance level. Therefore null hypothesis is


between leverage position of selected firms in pre and post acquisition period. In case

of Mahindra and Mahindra Ltd, the result was less than the significance level at 0.05.

Therefore null hypothesis is rejected. The Total Capitalisation of Mahindra &

Mahindra Ltd has decreased in post period of acquisition. It indicates less debt

addition to the capital structure compared to the pre acquisition period.










3.5.8 related to the Earnings per Share.

170

Table: 3.5.8 T –test, Skewness and Kurtosis for Earnings per Share


BAL 1.991 0.185 -0.314 0.845 1.875 1.741

HGSL 1.062 0.399 2.449 0.845 5.998 1.741

HZL 5.28 0.034 0.359 0.845 2.533 1.741

LIL 2.630 0.119 0.916 0.845 -1.139 1.741

FHL -2.41 0.138 0.389 0.845 -0.655 1.741

JSPL 2.512 0.129 1.572 0.845 2.452 1.741

M&ML -0.949 0.443 -0.968 0.845 2.613 1.741

TCL 0.789 0.513 1.738 0.845 3.497 1.741

GTLIL -1.425 0.290 -2.100 0.845 4.421 1.741


Among the selected companies, Earnings per Share of Bharti Airtel Ltd Hinduja

Global Solutions Ltd, Lanco Infratech Ltd, Fortis Healthcare Ltd, Jindal Steel and

Power Ltd, Mahindra and Mahindra Ltd, GTL Infrastructure Ltd and Tata Chemicals

Ltd have shown more than the significance level. Therefore null hypothesis is


between capital market performance of selected firms in pre and post acquisition

period. In case of, Hindustan Zinc Ltd and Reliance Power Ltd the result was less

than the significance level at 0.05. Therefore null hypothesis is rejected. The Earnings

per Share of Hindustan Zinc Ltd and Reliance Power Ltd has more than 50% variation

in post period of acquisition. It indicates higher operating expenses and proportionate

decrease in sales revenue.



period. The kurtosis is observed that it is less than three except in Hinduja Global

Solutions Ltd and Tata Chemicals Ltd. It indicates that platykurtic is distributed over

a wider range. The Earnings per Share of Hinduja Global Solutions Ltd and Tata

Chemicals Ltd have less variation compared to pre period of acquisition.

171

Table: 3.5.9 T –test, Skewness and Kurtosis for Price Earnings Ratio


BAL 0.348 0.761 1.318 0.845 2.921 1.741

HGSL -3.607 0.069 0.124 0.845 0.863 1.741

HZL 0.068 0.952 0.993 0.845 2.354 1.741

LIL 1.446 0.285 2.284 0.845 5.309 1.741

FHL -0.212 0.852 -0.200 0.845 1.164 1.741

JSPL 0.546 0.640 2.156 0.845 4.943 1.741

M&ML 0.272 0.811 0.768 0.845 2.423 1.741

TCL -0.325 0.776 -1.139 0.845 0.726 1.741

GTLIL -1.425 0.290 -2.100 0.845 4.421 1.741







3.5.9 related to the Price Earnings Ratio.

All selected companies Price Earnings Ratio results are more than the significance


there is no significant difference between capital market performance of selected

firms in pre and post acquisition period. The Price Earnings Ratio indicates that

decreasing trend reflects lower market price paid by the investors and reported less

Earnings per Share during the post acquisition period.



period. The kurtosis is observed that it is less than three except in Hinduja Global

Solutions Ltd and Tata Chemicals Ltd. It indicates that platykurtic is distributed over

172

a wider range. The Price Earnings Ratio of Hinduja Global Solutions Ltd and Tata

Chemicals Ltd have less variation compared to pre period of acquisition.

Table: 3.5.10 T –test, Skewness and Kurtosis for Current Ratio


BAL -1.136 0.313 1.511 0.845 3.184 1.741

HGSL -0.894 0.466 -0.396 0.845 0.778 1.741

HZL -5.953 0.027 -0.457 0.845 0.484 1.741

LIL 3.030 0.094 0.881 0.845 -0.303 1.741

FHL -1.120 0.379 2.404 0.845 5.824 1.741

JSPL 1.408 0.294 1.227 0.845 0.084 1.741

M&ML 0.194 0.864 1.700 0.845 3.461 1.741

TCL -5.575 0.031 -0.319 0.845 1.319 1.741

GTLIL 1.762 0.220 0.673 0.845 1.716 1.741







3.5.10 related to the Current Ratio.

Among the selected companies, Current Ratio of Bharti Airtel Ltd, Hinduja Global

Solutions Ltd, Lanco Infratech Ltd, Fortis Healthcare Ltd, Jindal Steel and Power Ltd,

Mahindra and Mahindra Ltd, GTL Infrastructure Ltd, and Reliance Power Ltd have

shown more than the significance level. Therefore null hypothesis is accepted. Hence

forth null hypothesis states that there is no significant difference between financial

synergies of selected firms in pre and post acquisition period. In case of, Hindustan

Zinc Ltd and Tata Chemicals Ltd the result was less than the significance level at

0.05. Therefore null hypothesis is rejected. The Current Ratio of Hindustan Zinc Ltd

and Tata Chemicals Ltd have increased in post period of acquisition. It indicates over

173

the year’s relative decrease in current liabilities is greater than the increase in current

assets.


more or less in the normal range between - 0.457 to 2.404 in pre and post acquisition


Ltd and Reliance Power Ltd. It indicates that platykurtic is distributed over a wider

range. The Current Ratio of Fortis Healthcare Ltd and Reliance Power Ltd have more

variation compared to pre and post period of acquisition.

Table: 3.5.11 T –test, Skewness and Kurtosis for Liquid Ratio


BAL -1.826 0.209 1.862 0.845 4.003 1.741

HGSL -2.445 0.134 -1.751 0.845 3.250 1.741

HZL -5.482 0.032 -0.558 0.845 0.465 1.741

LIL 2.381 0.140 -0.315 0.845 -1.320 1.741

FHL -1.859 0.204 1.249 0.845 1.569 1.741

JSPL -0.370 0.747 -0.067 0.845 -0.766 1.741

M&ML 1.485 0.276 1.832 0.845 3.333 1.741

TCL -0.461 0.690 0.804 0.845 1.563 1.741

GTLIL 1.657 0.239 0.655 0.845 1.983 1.741







3.5.11 related to the Liquid Ratio.

Among the selected companies, Liquid Ratio of Bharti Airtel Ltd, Hinduja Global

Solutions Ltd, Hindustan Zinc Ltd, Lanco Infratech Ltd, Fortis Healthcare Ltd, Jindal

Steel and Power Ltd, Mahindra and Mahindra Ltd, GTL Infrastructure Ltd, and

174



difference between financial synergies of selected firms in pre and post acquisition

period. In case of, Tata Chemicals Ltd the result was less than the significance level at

0.05. Therefore null hypothesis is rejected. The Liquid Ratio of Tata Chemicals Ltd

has increased in post period of acquisition. It indicates that current assets are not

highly dependent on inventory and sundry debtors.


more or less in the normal range between – 1.751 to 1.862 in pre and post acquisition

period. The kurtosis is observed that it is less than three except in Bharti Airtel Ltd. It

indicates that platykurtic is distributed over a wider range. The Liquid Ratio of Bharti

Airtel Ltd has more variation compared to pre period of acquisition.

Table: 3.5.12 T –test, Skewness and Kurtosis for Interest Coverage


BAL 1.596 0.252 0.010 0.845 1.179 1.741

HGSL 2.471 0.132 1.041 0.845 0.890 1.741

HZL -0.942 0.445 2.408 0.845 5.835 1.741

LIL 2.432 0.140 1.412 0.845 1.690 1.741

FHL -1.195 0.354 1.520 0.845 3.542 1.741

JSPL 0.567 0.628 -0.423 0.845 -0.631 1.741

M&ML -0.086 0.939 1.044 0.845 0.113 1.741

TCL 1.726 0.226 1.813 0.845 3.039 1.741

GTLIL 3.323 0.080 -1.071 0.845 1.386 1.741







3.5.12 related to the Interest Coverage.

175

Among the selected companies, Interest Coverage of Bharti Airtel Ltd, Hinduja


Jindal Steel and Power Ltd, Mahindra and Mahindra Ltd, Tata Chemicals Ltd and

GTL Infrastructure Ltd have shown more than the significance level. Therefore null



period. In case of, Reliance Power Ltd the result was less than the significance level at

0.05. Therefore null hypothesis is rejected. The Interest Coverage of Reliance Power

Ltd has increased in post period of acquisition. It indicates ability to honour its debt

payments due to high profit margin over the post 3 years.



period. The kurtosis is observed that it is less than three except in Hindustan Zinc Ltd

and Fortis Healthcare Ltd. It indicates that platykurtic is distributed over a wider

range. The Interest Coverage of Hindustan Zinc Ltd and Fortis Healthcare Ltd have

increased more than 3 times compared to pre period of acquisition.

Table: 3.5.13 T –test, Skewness and Kurtosis for Market Capitalisation


BAL 0.104 0.927 -0.164 0.845 2.237 1.741

HGSL -2.266 0.152 -0.140 0.845 1.417 1.741

HZL -1.848 0.206 -1.449 0.845 1.441 1.741

LIL 1.927 0.194 1.234 0.845 -0.130 1.741

FHL -2.901 0.101 -0.216 0.845 -1.391 1.741

JSPL -1.270 0.332 -0.228 0.845 -2.472 1.741

M&ML -3.799 0.063 -0.228 0.845 1.421 1.741

TCL -0.621 0.598 -1.590 0.845 2.877 1.741

GTLIL 12.805 0.006 0.144 0.845 2.642 1.741




176




3.5.13 related to the Market Capitalisation.

Among the selected companies, Market Capitalisation of Bharti Airtel Ltd, Hinduja


Jindal Steel and Power Ltd, Mahindra and Mahindra Ltd, Tata Chemicals Ltd and




period. In case of, GTL Infrastructure Ltd the result was less than the significance

level at 0.05. Therefore null hypothesis is rejected. The Market Capitalisation of GTL

Infrastructure Ltd has increased in post period of acquisition. It indicates future

growth prospects are uncertain on account of intense competition and decrease in

equity funds in the capital structure.



period. The kurtosis is observed that it is less than three in all selected firms. It







3.5.14 related to the Investment Turnover Ratio.

177

Table: 3.5.14 T –test, Skewness and Kurtosis for Investment Turnover Ratio


BAL 12.095 0.007 0.181 0.845 2.563 1.741

HGSL -3.418 0.076 -1.265 0.845 1.476 1.741

HZL 1.599 0.251 1.856 0.845 3.213 1.741

LIL -0.271 0.812 0.113 0.845 -1.238 1.741

FHL 23 0.020 0.060 0.845 -3.006 1.741

JSPL 4.462 0.047 0.420 0.845 -2.064 1.741

M&ML -1.60 0.251 -0.276 0.845 0.489 1.741

TCL -0.015 0.989 -1.073 0.845 0.714 1.741

GTLIL -2.219 0.157 1.385 0.845 1.634 1.741

RPL 0 0 0.075 0.845 1.550 1.741 (Source: AGM reports of selected companies & moneycontrol.com database)

Among the selected companies, Investment Turnover Ratio of Hinduja Global

Solutions Ltd, Hindustan Zinc Ltd, Lanco Infratech Ltd, Mahindra and Mahindra Ltd,

GTL Infrastructure Ltd, and Reliance Power Ltd have shown more than the

significance level. Therefore null hypothesis is accepted. Hence forth null hypothesis

states that there is no significant difference between managerial synergies of selected

firms in pre and post acquisition period. In case of Bharti Airtel Ltd, Fortis Healthcare

Ltd, Jindal Steel and Power Ltd and Tata Chemicals Ltd, the result was less than the

significance level at 0.05. Therefore null hypothesis is rejected. The Investment

Turnover Ratio of Bharti Airtel Ltd, Fortis Healthcare Ltd, Jindal Steel and Power Ltd

and Tata Chemicals Ltd have decreased in post period of acquisition. It indicates that

there was an inefficiency to utilise the investment to improving turnover.





178

Table: 3.5.15 T –test, Skewness and Kurtosis for Fixed Assets Turnover Ratio


BAL 1.907 0.197 0.683 0.845 1.873 1.741

HGSL -4.387 0.048 -0.500 0.845 0.596 1.741

HZL 1.293 0.325 2.237 0.845 5.068 1.741

LIL 1.670 0.237 -0.717 0.845 -0.810 1.741

FHL -1.169 0.247 2.130 0.845 4.764 1.741

JSPL 0.911 0.458 0.616 0.845 -0.187 1.741

M&ML -0.40 0.728 0.310 0.845 0.341 1.741

TCL -0.530 0.649 0.362 0.845 0.675 1.741

GTLIL -4 0.057 -0.245 0.845 2.414 1.741







3.5.15 related to the Fixed Assets Turnover Ratio.

Among the selected companies, Fixed Assets Turnover Ratio of Bharti Airtel Ltd,

Hindustan Zinc Ltd, Lanco Infratech Ltd, Fortis Healthcare Ltd, Jindal Steel and

Power Ltd, Mahindra and Mahindra Ltd, Tata Chemicals Ltd and Reliance Power Ltd

have shown more than the significance level. Therefore null hypothesis is accepted.

Hence forth null hypothesis states that there is no significant difference between

managerial synergies of selected firms in pre and post acquisition period. In case of,

Hinduja Global Solutions Ltd and GTL Infrastructure Ltd the result was less than the

significance level at 0.05. Therefore null hypothesis is rejected. The Fixed Assets

Turnover Ratio of Reliance Power Ltd has increased in post period of acquisition. It

indicates lack of operational efficiency and lack of revenue generating activities.



179


and Fortis Healthcare Ltd. It indicates that platykurtic is distributed over a wider

range. The Fixed Assets Turnover Ratio of Hindustan Zinc Ltd and Fortis Healthcare

Ltd have more variation in the pre and post period of acquisition.

Table: 3.5.16 T –test, Skewness and Kurtosis for Total Assets Turnover Ratio


BAL 41.57 0.01 0.005 0.845 1.373 1.741

HGSL -2.853 0.104 -1.547 0.845 2.659 1.741

HZL 1.561 0.259 1.885 0.845 3.369 1.741

LIL -0.278 0.807 0.121 0.845 -1.260 1.741

FHL 23 0.020 0.060 0.845 -3.006 1.741

JSPL 3.929 0.059 0.491 0.845 -1.808 1.741

M&ML -1.646 0.242 -0.244 0.845 0.548 1.741

TCL 0 1.00 -1.049 0.845 0.839 1.741

GTLIL -1.987 0.185 1.367 0.845 1.844 1.741

RPL 0 1.00 0.075 0.845 1.550 1.741

(Source: AGM reports of selected companies & moneycontrol.com database)






3.5.16 related to the Total Assets Turnover Ratio.

Among the selected companies, Total Assets Turnover Ratio of Hinduja Global

Solutions Ltd, Hindustan Zinc Ltd, Lanco Infratech Ltd, Jindal Steel and Power Ltd,

Mahindra and Mahindra Ltd, Tata Chemicals Ltd, GTL Infrastructure Ltd and



difference between managerial synergies of selected firms in pre and post acquisition

period. In case of Bharti Airtel Ltd and Fortis Healthcare Ltd the result was less than

the significance level at 0.05. Therefore null hypothesis is rejected. The Total Assets

180

Turnover Ratio of Reliance Power Ltd has increased in post period of acquisition. It

indicates lack of operational efficiency and lack of revenue generating activities.





Table: 3.5.17 T –test, Skewness and Kurtosis for Operating Profit Margin


BAL 7.104 0.019 -0.401 0.845 -1.518 1.741

HGSL 1.322 0.317 0.643 0.845 0.323 1.741

HZL 1.535 0.264 0.919 0.845 0.902 1.741

LIL 1.828 0.209 -0.215 0.845 -0.178 1.741

FHL 1.060 0.400 -0.530 0.845 -1.339 1.741

JSPL 2.722 0.113 -0.344 0.845 -0.977 1.741

M&ML -4.274 0.051 1.254 0.845 2.225 1.741

TCL 1.954 0.190 0.960 0.845 1.842 1.741

GTLIL 0.977 0.432 -2.231 0.845 5.201 1.741







3.5.17 related to the Operating Profit Margin.

Among the selected companies, Operating Profit Margin of Hinduja Global Solutions

Ltd, Hindustan Zinc Ltd, Lanco Infratech Ltd, Fortis Healthcare Ltd, Jindal Steel and

Power Ltd, Mahindra and Mahindra Ltd, Tata Chemicals Ltd, GTL Infrastructure Ltd

and Reliance Power Ltd have shown more than the significance level. Therefore null


181

difference between operating synergies of selected firms in pre and post acquisition

period. In case of Bharti Airtel Ltd the result was less than the significance level at

0.05. Therefore null hypothesis is rejected. Operating Profit Margin of Bharti Airtel

Ltd has increased in post period of acquisition. It indicates that lower cash flow

streams generated by operating activities.



period. The kurtosis is observed that it is less than three except in GTL Infrastructure

Ltd. It indicates that platykurtic is distributed over a wider range. The Operating

Profit Margin of GTL Infrastructure Ltd has decreased more than 2 times compared to

pre period of acquisition.

Table: 3.5.18 T –test, Skewness and Kurtosis for Value Addition/Shortfall


BAL 3.311 0.08 -0.635 0.845 -1.018 1.741

HGSL 0.675 0.569 -0.140 0.845 -1.417 1.741

HZL 1.501 0.272 1.918 0.845 4.459 1.741

LIL 1.315 0.319 1.982 0.845 3.884 1.741

FHL -2.303 0.148 0.483 0.845 -1.509 1.741

JSPL 2.172 0.162 1.014 0.845 -0.031 1.741

M&ML 0.174 0.878 0.664 0.845 1.555 1.741

TCL 2.484 0.131 1.384 0.845 1.331 1.741

GTLIL 2.610 0.121 -1.038 0.845 -0.904 1.741

RPL 0.871 0.476 0.249 0.845 -0.875 1.741 (Source: AGM reports of selected companies & moneycontrol.com database)






3.5.18 related to the Value Addition.

182

All selected companies Value Addition results that more than the significance level.


no significant difference between value addition in pre and post acquisition period.

The Value Addition results indicate decline in post acquisition period performance

due to the increase in cost of overall capital.




and Lanco Infratech Ltd It indicates that platykurtic is distributed over a wider range.

The Value Addition of Hindustan Zinc Ltd and Lanco Infratech Ltd have decreased

more than 2 times compared to pre period of acquisition.

Table: 3.5.19 T –test, Skewness and Kurtosis for Economic Value Added


BAL 0.060 0.420 -1.136 0.845 1.865 1.741

HGSL 0.636 0.590 0.985 0.845 1.398 1.741

HZL -1.039 0.408 -0.273 0.845 1.487 1.741

LIL 2.069 0.174 1.530 0.845 1.629 1.741

FHL 0.573 0.624 -2.247 0.845 5.256 1.741

JSPL 0.112 0.921 -0.926 0.845 -0.281 1.741

M&ML -3.940 0.059 0.403 0.845 -1.653 1.741

TCL 2.233 0.155 1.795 0.845 3.526 1.741

GTLIL 2.933 0.099 -0.305 0.845 -0.663 1.741

RPL 2.265 0.152 0.449 0.845 -0.726 1.741 (Source: AGM reports of selected companies & moneycontrol.com database)






3.5.19 related to the Economic Value Added.

183

All selected companies Economic Value Added results that more than the significance


there is no significant difference between Economic Value Added in pre and post

acquisition period. The Value Addition results indicate decline in post acquisition

period performance due to the high cost of capital.




Ltd and Tata Chemicals Ltd It indicates that platykurtic is distributed over a wider

range. The Economic Value Added of Fortis Healthcare Ltd and Tata Chemicals Ltd

have decreased more than 2 times compared to pre period of acquisition.

Table: 3.5.20 T –test, Skewness and Kurtosis for Firm Value


BAL -6.674 0.022 -0.474 0.845 -1.633 1.741

HGSL -3.521 0.072 -1.376 0.845 2.166 1.741

HZL -9.029 0.012 0.382 0.845 -1.603 1.741

LIL -13.148 0.006 -0.123 0.845 -2.788 1.741

FHL -16.457 0.004 0.096 0.845 -3.017 1.741

JSPL -10.477 0.005 0.347 0.845 -1.750 1.741

M&ML -14.335 0.005 0.252 0.845 -1.882 1.741

TCL -1.364 0.306 -2.254 0.845 5.179 1.741

GTLIL -1.609 0.249 -0.782 0.845 0.652 1.741







3.5.20 related to the Firm Value.

184

Among the selected companies, Firm Value of Bharti Airtel Ltd, Hindustan Zinc Ltd,

Lanco Infratech Ltd, Fortis Healthcare Ltd, Jindal Steel and Power Ltd and Mahindra

and Mahindra Ltd have shown more than the significance level. Therefore null


difference between operating synergies of selected firms in pre and post acquisition

period. In case of Hinduja Global Solutions Ltd, Tata Chemicals Ltd, GTL

Infrastructure Ltd and Reliance Power Ltd the result was less than the significance

level at 0.05. Therefore null hypothesis is rejected. Operating Profit Margin of

Hinduja Global Solutions Ltd, Tata Chemicals Ltd, GTL Infrastructure Ltd and

Reliance Power Ltd have increased in post period of acquisition. It indicates that

lower cash flow streams generated by operating activities.




Ltd, Tata Chemicals Ltd and Reliance Power Ltd. It indicates that platykurtic is

distributed over a wider range. The Firm Value of Fortis Healthcare Ltd, Tata

Chemicals Ltd and Reliance Power Ltd have increased more than 2 times compared to

pre period of acquisition.

185

Table: 3.5.21 Overall Analysis of Selected Companies on Overall Performance Standards

Ratios Mean Co-efficient of variance

t- Value P value Pre Post Pre Post

Profitability Ratios

GPM 16.96 -34.09 78.34 -18.42 1.554 0.131

NPM 16.22 26.56 57.03 56.18 -1.491 0.147

ROA 160.03 118.54 98.12 126.98 1.473 0.151

ROE 15.03 8.27 92.55 60.45 3.13 0.004

ROCE 16.19 11.63 93.26 136.98 1.94 0.062

Leverage Ratios

DER 0.67 0.69 84.07 80.05 -0.271 0.788

TC 0.367 0.342 139.02 159.81 0.671 0.508

Capital Market Ratios

EPS 62.13 15.34 41.84 97.83 1.783 0.085

PER 32.14 25.49 21.15 57.31 0.208 0.836

Financial Synergies

CR 7.58 3.78 25.02 49.28 0.670 0.508

QR 7.83 8.79 25.87 41.78 -0.269 0.790

In Cv 50.97 187.45 40.59 21.90 -0.914 0.368

M cp 25,289.19 30,660.63 61.09 80.27 -1.312 0.200

Managerial Synergies

ITOR 0.657 0.656 125.38 110.44 0.01 0.992

FAOR 2.55 2.77 86.44 111.24 -0.521 0.607

TAOR 0.664 0.655 122.96 108.99 0.141 0.889

Operational Synergy

OPM 28.44 -26.41 130.88 -14.46 1.723 0.096

EVA Model – Firm Value

VASF 12.02 5.69 179.53 276.63 2.139 0.041

EVA 1047.96 897.54 167.71 200.23 0.407 0.687

FV 8442.40 18122.63 112.78 101.09 -5.173 0.0001

186

The Pre and Post M&A financial performance standards of acquiring firms are

compared to see if there are any statistically significant changes in the overall

financial performance after M&A, using “paired sample t-test” at significance level of

0.05 or 95%. Also, descriptive statistics analysis has been performed to ascertain the

mean difference. The results are shown in table – 3.5.21 related to overall analysis of

selected companies.

Pre and post acquisition period overall analysis table evolves that overall profitability

ratio had drastically decreased in the post acquisition period. Among the profitability

ratios results, statistically were not significant except in the case of Return on Equity.

In the case of leverage ratios it increased from 0.67 to 0.69. It indicates increased

leverage in capital structure. The paired t-test results showed more than the

significance level. The capital market performance declined compared to the pre

acquisition period and statistical t-test proved that there was no significant difference

in leverage ratio compared to the pre and post acquisition period.

The synergy ratios were not able to improve their performance in the post acquisition

period. Financial synergy ratios results increased in the post period performance

except current ratio. Managerial synergy ratio decreased except on fixed assets

turnover ratio. Operational synergy ratio also declined in performance in post

acquisition period. The paired t-test results statistically were not significant in all the

synergy ratios.

Economic value added model shows increasing trend in respect to economic value

added and firm value except value addition. The analysis found more variation in the

post period of acquisition. The paired t-test results that evolved were statistically not

significant at 5% except in firm value and value addition.

Chapter-3- DATA ANALYSIS AND...

Documents

Transcript of Chapter-3- DATA ANALYSIS AND...