X

Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2017 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.


Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
Bajaj Auto - Stockmarkets is the new focus area! - Views on News from Equitymaster
 
 
  • PRINT
  • E-MAIL
  • FEEDBACK
  • A  A  A
  • Jul 18, 2000

    Bajaj Auto - Stockmarkets is the new focus area!

    Bajaj Auto (BAL), India's largest two wheeler manufacturer is also a keen speculator on the bourses. During FY2000, BAL 'traded' in 50 stocks. The purchase price of these 50 stocks was Rs 887 m and they were sold at a profit of Rs 640 m, earning BAL a return of 72%.

    What is a manufacturer of scooters and motorcycles doing in the stock markets? Speculating. Atleast that's what its balance sheet seems to suggest. And we agree.

    This profit on sale of shares accounts for 13% of BAL's other income for FY2000. In terms of profits it accounts for 10.4% of the company's bottomline for the year, not a small amount. This is clear speculation and raises doubts on the company's future performance, credibility and management strategy.

    As per the FY2000 balance sheet of BAL, the total of investments, cash and loans and advances is Rs 38 bn and this is 70% of its total balance sheet size. Though the company has decided to use a portion of this to finance the buyback of shares, it is still sitting on a huge surplus of funds.

    The issue here is that why should a scooter company use shareholder's funds for such speculative activities. Shareholders will obviously not be comfortable investing in a company which uses its funds in risk taking businesses and not for its mainline business activities. In this case though the company has made a profit in trading on shares, it is very likely that at times the losses could exceed the profits resulting in a sheer waste of the surplus funds on hand.

    From a shareholders point of view the surplus funds of the company should be used in research and development activities and higher dividend payouts rather than on speculative activities. BAL has been lacking on its focus in research & development. The company does not seem keen on increasing its investment in R&D. R & D accounted for only 1.1% of net sales as of March'2000.

    This new focus area for the company is a key concern for investors, as it indirectly exposes them to the vagaries of stock markets. Investors must take note of this development before making their investment decisions.

    On the current price of Rs 361, BAL is trading at 7.0 x on its FY2000 EPS of Rs 51.4.

     

     

    Equitymaster requests your view! Post a comment on "Bajaj Auto - Stockmarkets is the new focus area! ". Click here!

      
     

    More Views on News

    Tata Motors Ltd: Another Disappointing Quarter, Management fails to Perform! (Quarterly Results Update - Detailed)

    Aug 14, 2017

    Tata Motors Ltd disappoints again for both India and JLR business. Management commentary indicates a slow year ahead.

    Maruti Suzuki Ltd: Bumpy First Quarter. GST dents Margins! (Quarterly Results Update - Detailed)

    Aug 2, 2017

    GST realted cost impacts Margins, Management expects good year ahead.

    Hero Motocorp Ltd: Riding on the Scooters Growth, Maintains Margins! (Quarterly Results Update - Detailed)

    Aug 1, 2017

    Good Recovery in the Scooters market, expects pick up in exports too.

    Bajaj Auto Limited: Recovery in Exports but Domestic Disappoints! (Quarterly Results Update - Detailed)

    Aug 1, 2017

    New Export Markets picking up, Management expects good recovery in domestic Three wheeler market.

    Bajaj Auto Limited: Finishes the Year with Headwinds. Poised for a Recovery Ahead? (Quarterly Results Update - Detailed)

    Jul 6, 2017

    Ends the year on a Flat note. Expects good recovery in the exports market.

    More Views on News

    Most Popular

    Demonetisation Barely Made Any Difference to Tax Collections(Vivek Kaul's Diary)

    Aug 7, 2017

    The data tells us quite a different story from the one the government is trying to project.

    Proxy Plays: A Smart Way to Bet on 'Off Limits' Companies(The 5 Minute Wrapup)

    Aug 4, 2017

    The small-cap space is full of small players that are clear proxies to great growth stories and Indian megatrends.

    Should You Invest In Bharat-22 ETF? Know Here...(Outside View)

    Aug 8, 2017

    Bharat-22 is one of the most diverse ETFs offered so far by the Government. Know here if you should invest...

    Signs of Life in the India VIX(Daily Profit Hunter)

    Aug 12, 2017

    The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.

    7 Financial Gifts For Your Sister This Raksha Bandhan(Outside View)

    Aug 7, 2017

    Raksha Bandhan signifies the brother-sister bond. Here are 7 thoughtful financial gifts for sisters...

    More
    Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
    Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

    LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.

    SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

    Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
    Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407
     

    Become A Smarter Investor In
    Just 5 Minutes

    Multibagger Stocks Guide 2017
    Get our special report, Multibagger Stocks Guide (2017 Edition) Now!
    We will never sell or rent your email id.
    Please read our Terms

    BAJAJ HOLDINGS & INVSTMENT SHARE PRICE


    Aug 16, 2017 (Close)

    TRACK BAJAJ HOLDINGS & INVSTMENT

    • Track your investment in BAJAJ HOLDINGS & INVSTMENT with Equitymaster's Portfolio Tracker. Set live price alerts, get research alerts and more. Get access now...
    • Add To MyStocks

    MARKET STATS