Analyzing the Financial Performance of Top 5 NBFCs in India: An Analytical Study

Abstract

NBFCs play supplement the role of banking sector in meeting the increasing financial needs of the corporate sector, delivering credit to the unorganized sector and to small local borrowers. NBFCs are often called shadow banks as they function a lot like banks but with fewer regulatory controls. Barring a few, they cannot accept deposits from people and so raise money from bonds or borrow from banks. NBFCs have a more flexible structure than banks. NBFCs are classified as Asset Finance Company, Investment Finance Company and Loan Company. The aim of the study is to find out the financial performance of selected NBFCs for a period of five years from year 2017 to year 2021. This study also helps in understanding the present financial status of the selected companies. Earning per Share, Net Profit, Debt to Equity, Return on Equity and Price to Earning Ratio are used in the present study. analysis like Trend analysis and correlational analysis are done using the financial software named SPSS v20. As a conclusion it can be said that financial performances of Muthoot Finance and Bajaj Finance are up to the par and helpful for growth of companies as well as growth of shareholder's wealth for the period of study.

Full text

International Journal for Multidisciplinary Research (IJFMR)
E-ISSN: 2582-2160 ● Website: www.ijfmr.com ● Email: editor@ijfmr.com
Analyzing the Financial Performance of Top 5
NBFCs in India: An Analytical Study
Roshan Raj Prajapati 1, Puja Kumari 2, Dr. Meenakshi Kumari 3
1, 2 Final Year BBA Student, 3 Assistant Professor
Faculty of Business Management & Commerce, Usha Martin University, Angara, Jharkhand, India
Abstract
NBFCs play supplement the role of banking sector in meeting the increasing financial needs of the
corporate sector, delivering credit to the unorganized sector and to small local borrowers. NBFCs are
often called shadow banks as they function a lot like banks but with fewer regulatory controls. Barring a
few, they cannot accept deposits from people and so raise money from bonds or borrow from banks.
NBFCs have a more flexible structure than banks. NBFCs are classified as Asset Finance Company,
Investment Finance Company and Loan Company. The aim of the study is to find out the financial
performance of selected NBFCs for a period of five years from year 2017 to year 2021. This study also
helps in understanding the present financial status of the selected companies. Earning per Share, Net
Profit, Debt to Equity, Return on Equity and Price to Earning Ratio are used in the present study.
analysis like Trend analysis and correlational analysis are done using the financial software named SPSS
v20. As a conclusion it can be said that financial performances of Muthoot Finance and Bajaj Finance
are up to the par and helpful for growth of companies as well as growth of shareholder’s wealth for the
period of study.
Keywords: NBFC, Financial Performance, Ratio Analysis, Financial Analysis
Introduction
A Non-Banking Financial Company (NBFC) is a firm or organization listed under the Companies Act,
1956 and are involved in the business of loans, acquisition of stock, shares, bonds, debentures, securities
issued by the government or local authority or other marketable securities of a like nature, leasing, hire
purchase, insurance business but does not include any institution whose principal business is that of
agriculture activity, industrial activity, purchase or sale of any goods (other than securities) or providing
any services and sale or purchase or construction of immovable property (Kumar, Reddy & Dhanunjaya,
2016). NBFC constitutes as important segment of the financial system in India. The financial system of
India comprises of financial markets that provide an effective payment and credit system and thereby
facilitate channelizing of funds from savers to investors of the economy. NBFC have turnout to be
engines of growth and are important part of Indian financial system (Soranganesh & Soris, 2013).
NBFCs are the financial intermediaries engaged primarily in the business of accepting deposits and
delivering credits. They play an important role in channelizing the limited financial resources to capital
formation. NBFCs supplement the role of banking sector in meeting the increasing financial needs of the
corporate sector, delivering credit to the unorganized sector and to small local borrowers. NBFCs have a
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more flexible structure than banks. As compared to banks, they can take quick decisions, assume greater
risks, tailor make their services and changes according to the needs of the clients. Their flexible structure
helps in broadening the market by providing the saver and investor a bundle of services on a competitive
basis (Biswas, 2019).
In today time, the total number of NBFCs registered under RBI is 9,507. The vast majority of over nine
thousand NBFCs belonged to the non-deposit taking category (Keelery, 2022). NBFCs (Non-Banking
Financial Company) plays a vital role in supporting Indian economy as well as in normal persons lives.
It is emerging as an alternative of banking industry, almost every facility provided by banking industry
is now delivered by NBFCs. NBFCs have become the fundamental part of Indian Financial System.
NBFCs have grown drastically in last few years despite of the slowdown in the economy due to COVID.
As per 2021, the share of non-banking financial companies – micro finance institution surge from 29.8%
to 33.4%. The actual problem faced by citizens are in choosing the right NBFC for their need. For
choosing right NBFC may analysis need to be done. Through this study, we have tried to highlight the
financial performance of selected NBFCs from 2017 to 2021. This paper contains several analyses like
trend analysis, ratio analysis, variance analysis, solvency analysis and regression analysis. This paper
also aims to provide an overall subjective assessment of current status and financial performance of top
5 NBFCs.
Conceptual Framework of the Study
Figure 1: Framework of the Study
Significance of the Study
The study has a great significance it provides the benefits to numerous people who is directly or
indirectly interact with this company, because this project shows the growth of the few selected
company, so investors who are interested in investing on this company will also get benefited by going
through this study and the investor can easily take a decision whether to invest or not in the company.
The project was showing the expected future growth and present and past growth of the company, so the
people have to take a decision about the investment on this companies. It shows the which company
growth was best and which company growth was worst, so according to the various analysis the growth
of the company will find on this project so the investor or other people who want to invest on this
company they have to go through this study it may help them for the better result.
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Literature Review
Author Sample Size Objective Methodology Findings
Srinivas
Gumparthin
The extending of
the commercial
vehicle and the
different
construction
equipment for the
use of finance is
totalled to 10 and
the overall offices
whom the
judgemental
survey was
initiated is totalled
to 19.
The Objective of
the paper is to
build a Risk
management
model for Non-
Banking Financial
Companies related
on the both
qualitative and
quantitative
characteristic of
the client.
Sampling Design,
objective of the study,
primary objective,
secondary objective.
The finding of the
paper is the risk
calibration on the risk
management model it
says that the customers
were high score and
low risk was the
promoter payers and
the second one the
customer with high
risk and low score was
the defaulter.
Dr. Bhaskar
Biswas
The sampling is
done on multi-
stage pattern and
finally the data
was collected from
three cities Jaipur,
Jodhpur and
Udaipur.
The objective of
the paper is to find
out the
relationship
between earning,
profitability,
liquidity of the 10
selected NBFC
companies from
the period of 10
years from 2007
to 2016.
Selection of the data,
Collection of the data,
Analysis of the data.
Mahindra & Mahindra
financial services the
connection. In
Sundaram finance
there is Association
among eps and current
ratio, quick ratio and
cash earnings retention
ratio. Company there
is numerous
correlation co-efficient
between net profit,
return on capital
employed, arrival on
assets and the
EPS. EPS and return
on assets in situation
of Bajaj Finance.
R.
Vimaladevi,
S.
Vennilashree
Up to 90 samples
collected from
employees of
NBFC from the
city Chennai, the
selected NBFCs
were, Equitas
Finance Ltd.
The basic
objective extract
social security
scheme, analysing
the satisfaction of
the NBFCs
employees in
current social.
The data is carried out
on the present study
and it consists of both
primary and secondary
data and this primary
Data is carried out by
simple random
sampling method.
The finding says that
NBFCs are providing
medical care facilities,
Maternity benefits and
accidents benefits
among various social
security schemes. It is
true that social.
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The Top Five NBFCs Chosen in this Study
(1) Bajaj Finance Limited (Market cap: 3,53,379 crores)₹
(2) Cholamandalam Investment and Finance Company (Market cap: 53,706 crores)₹
(3) Muthoot Finance Limited (Market cap: 43,078 crores)₹
(4) Mahindra & Mahindra Financial Services Limited (Market cap: 22,592 crores)₹
(5) L&T Finance Holding Limited (Market cap: 18,735 crores)₹
Objectives of the Study
(1) This study seeks to evaluate the financial performance of selected NBFCs from 2017 to 2021.
(2) This research aims to portray a brief comparison among selected NBFCs using trend analysis and
correlational analysis.
(3) This study aims to provide an overall subjective assessment of current status and financial
performance of top 5 NBFCs.
Hypotheses
H1: There is no significant positive or negative correlation of EPS and Net Profit.
H0: There is significant positive or negative correlation of EPS and Net Profit.
H2: There is no significant positive or negative correlation of EPS and Return on Equity.
H0: There is significant positive or negative correlation of EPS and Return on Equity.
H3: There is no significant positive or negative correlation of EPS and Debt to Equity.
H0: There is significant positive or negative correlation of EPS and Debt to Equity.
H4: There is no significant positive or negative correlation of EPS and Price to Earning.
H0: There is significant positive or negative correlation of EPS and Price to Earning.
Scope of the Study
(1) These analyses help the people to analyze the NBFCs companies for better result, because the
NBFCs is a non-banking financial company is a company registered under the companies act 1956.
(2) It shows the growth of the companies, which company is best for the future investment and which
company growth is high and which company growth is low according to that the people have to
take a decision for the investment.
(3) To evaluate the company performance, because it knows the performance of the company which
company goes to debt to equity, return on equity, net profit, P/E (Price to Earning) ratio, according
to that this research help to people to reach their investment company without any problem.
(4) It shows the financial ranking of the company which company growth is high and which company
growth is low according to the ranking the investor decided the position of the company in market.
(5) It shows the growth of the company in financial market for that the investors and others people help
to decide the which company have more financial instrument and what’s the current growth in
financial market.
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Research Design
The present study based on quantitative research. The data of selected companies (for a period of five
years from 2017 to 2021) has been collected from annual report and the balance sheet published by the
companies and the websites of the respective firms.
Sampling Design
The study is done with special reference to NBFCs. The reason being that the data or financial statement
are readily available for them. Also, NBFCs are bound to disclose all their facts and figures publicly.
Thus, the technique of Judgmental and Purposive Sampling is adopted for the study. The selection of
sample companies is made on the basis of market capitalization. Five NBFCs were chosen as a sample
size for the study on account of having highest market capitalization, these are Bajaj Finance Limited,
Shriram Transport Finance Company Limited, Aditya Birla Capital Limited, L&T Finance Holding
Limited, Mahindra & Mahindra Financial Services Limited.
Data Collection Method(s)
Secondary data is used for this study which is collected from the annual report of respective company
and several financial websites like MoneyControl.com, Investing.com, NSE.com, BSE.com. No primary
data was used in this study.
Secondary Data
Secondary data refers to data that is collected by someone other than the user. Common sources of
secondary data for social science include censuses, information collected by government departments,
organizational records and data that was originally collected for other research purposes. Primary data,
by contrast, are collected by the investigator conducting the research. In this project, we have used
secondary data which has been collected from following sources:
(1) Annual reports
(2) Books
(3) Internet
(4) Other material and report published by the companies
Analysis of Data: Tools & Techniques
To analyze this data, we used a data analyzing software named SPSS v20. The analysis done through
this software is Trend analysis and correlational analysis. The evaluation of these analysis constitutes of
five ratios like Earning per share, Net Profit, Return on Equity, Debt to Equity and Price to Earnings
ratio. This research is done with the confidence level of 95% and 5% margin of error.
Limitations to the Study
(1) This research is limited to only top five performing NBFCs of the year 2021.
(2) This paper only uses data of previous five years, i.e. from 2017 to 2021.
(3) The study is confined to India, no foreign countries were encompassed.
(4) Only secondary data was used to build this research paper.
(5) This includes companies only from NBFC background.
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Results and Discussion
Findings of the Study
Descriptive Analysis
EPS
Earning per Share is calculated as company’s profit divided by the outstanding share of its common
stock. It shows the value of earning per outstanding share of common stock of company. EPS designate
the organization profitability through display the how much money a business produce for each share of
its stock. EPS have higher indicated great value because if the investors realize or think the company
growth or relative share price going in higher profit, so the investor will pay more for the company.
Formula: It is calculated as Net Income divided by Available Shares.
Earning per Share = (Net Income - Preferred Dividends) ÷ End-of-Period Common Share Outstanding
Table 1: Earning per Share (EPS)
Year
Bajaj
Finance
Limited
Cholamandalam
Investment and
Finance
Company
Muthoot
Finance
Limited
Mahindra &
Mahindra
Financial
Services
Limited
L&T
Finance
Holding
Limited
2017 34.01 46.01 44.48 7.09 0.71
2018 47.54 58.75 49.27 18.52 1.46
2019 67.52 75.87 75.31 25.33 1.34
2020 83.25 13.37 92.79 14.74 1.33
2021 65.85 18.48 98.55 3.03 0.54
Minimum 34.01 13.37 44.48 3.03 .54
Maximum 83.25 75.87 98.55 25.33 1.46
Mean 59.6340 42.4960 72.08 13.7420 1.0760
Std. Deviation 19.11411 26.53044 24.607 8.90369 .419
Variance 365.349 703.864 605.514 79.276 .176
Source: MoneyControl.com
Trend Analysis
Source: From Data Analysis by Self
IJFMR2205025 Volume 4, Issue 5, September-October 2022 6

Earning Per Share
120
100
80
60
40
20
0
2017 2018 2019 2020 2021
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Inference
The chart EPS Showing the return on capital Earning per share of selected non-banking financial
companies in India from year 2017-21. The year 2017 to 2019, the Cholamandalam Investment and
Finance Company growth was high, but in 2019 to 2021, the growth of the Muthoot Finance Limited
and remaining all company like Bajaj Finance Limited, Mahindra & Mahindra Financial Services
Limited, L&T Finance Limited, these all companies' growth was very low, and in the future, the
Muthoot Finance expectation future growth was going to be high. Accordingly, the return of the
Muthoot Finance was very high compared to other 4 companies.
Net Profit Margin
Net profit margin represent the money the business earns after deducting all operating, interest over a
given period of time. It shows net profit after taxes to the net sales of a firm. All the efforts and decisions
making in the business is to achieve a higher net profit margin with an increase in net profit. It is a short-
term profit measurable; and in long term, it was not able to measure immediately, it does not revels
profit in that period.
Formula: It is measured by Net Profit divided by Net Sales into hundred.
Net Profit Margin = (Net Profit ÷ Net Sales) × 100
IJFMR2205025 Volume 4, Issue 5, September-October 2022 7

Net Prot Margin
6000
5000
4000
3000
2000
1000
0
2017 2018 2019 2020 2021
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Table 2: Net Profit Margin
Year
Bajaj
Finance
Limited
Cholamandalam
Investment and
Finance
Company
Muthoot
Finance
Limited
Mahindra &
Mahindra
Financial
Services
Limited
L&T
Finance
Holding
Limited
2017 1836 718 3954 400 248
2018 2646 918 3722 1076 266
2019 3890 1186 3018 1557 267
2020 4881 1052 3722 906 266
2021 3955 1514 3954 335 116
Minimum 1836 718 3018.0 335 116.00
Maximum 4881 1514 3954 1557.0 267.00
Mean 3441.60 1077.6 3674 854.8 232.60
Std. Deviation 1198.69149 299.01304 384.62 505.38866 65.66430
Variance 1436861.300 89408.800 147936.0 255417.700 431.800
Source: MoneyControl.com
Source: From Data Analysis by Self
Inference
The chart net profit margin shows the actual profit of the company. Muthoot Finance gained the highest
profit in years 2017 to 2018, but after that the growth is negative from 2019 to 2021. Bajaj Finance
Limited gained the highest profit, but in next years, the chart shows the profit growth was negative.
Muthoot Finance gains the previous place and they acquire their position in future means the expected
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net profit growth of the company was Muthoot Finance according to remaining 4 companies like,
Cholamandalam Investment and Finance Company, Mahindra & Mahindra Financial Services Limited,
L&T Finance Holding Limited.
ROE
Return on equity sometimes it called as return on net worth. It is a measure of profitability that calculate
how many dollars of profit a company generates with each dollar of shareholder equity. ROE Ratio help
to compare with other firms in the same industry and evaluate the financial performance and asset
valuation of the company. Generally, it shows the company how well uses their fund for growth and
how much they will gain.
Formula = ROE measure by Total Liabilities divided by Total Shareholders' Equity.
ROE = Total Liabilities ÷ Total Shareholders' Equity
Table 3: Return on Equity (ROE)
Year
Bajaj
Finance
Limited
Cholamandalam
Investment and
Finance Company
Muthoot
Finance
Limited
Mahindra &
Mahindra
Financial
Services
Limited
L&T
Finance
Holding
Limited
2017 19.13 16.77 22.75 6.17 6.04
2018 16.02 18.01 20.13 11.18 3.46
2019 19.88 19.2 26.08 14.27 3.41
2020 15.34 12.87 24.42 7.97 3.4
2021 11 15.84 21.55 2.27 1.05
Minimum 11 12.87 20.13 2.27 1.05
Maximum 19.88 19.20 26.08 14.27 6.04
Mean 16.2740 16.5380 22.986 8.372 3.4720
Std. Deviation 3.53242 2.4108 2.340 4.607 1.765
Variance 12.478 5.812 5.476 21.229 3.117
Source: MoneyControl.com
IJFMR2205025 Volume 4, Issue 5, September-October 2022 9

Return on Equity
90
80
70
60
50
40
30
20
10
0
2017 2018 2019 2020 2021
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Source: From Data Analysis by Self
Inference
The chart Return on equity is a measure of the profitability of a business in relation to the equity. ROE
can also be thought of as a return on assets minus liabilities. The chart shows the profit on the business
according to chart the L&T Finance Holding Limited shows the highest profitability in 2017 to 2021 but
in 2021 the profitability growth was going the downward but in 2021 the 3 company combine with each
other and these 3 companies were L&T Finance Holding Limited, Mahindra & Mahindra Financial
Service Limited, Muthoot Finance Limited and there have very confusion with 3 companies for the
growth of the companies which companies achieve the highest future profitability growth.
Debt to Equity Ratio
It is dividing a company’s total liabilities through its shareholder equity; it is used to evaluate a
company’s financial leverage. Higher Debt-to-Equity ratio indicates higher risk of closure. Generally,
this ratio was used in corporate finance. It is difficult to compare across industry groups where debt
amount will vary. Generally, the information available of debt to equity in a company balance sheet.
Formula = Total Personal Liabilities divided by Personal Asset minus Liabilities
Debt to Equity = Total Personal Liabilities ÷ (Personal Assets - Liabilities)
IJFMR2205025 Volume 4, Issue 5, September-October 2022 10

Debt to Equity
25
20
15
10
5
0
2017 2018 2019 2020 2021
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Table 4: Debt to Equity
Year
Bajaj
Finance
Limited
Cholamandalam
Investment and
Finance Company
Muthoot
Finance
Limited
Mahindra &
Mahindra
Financial
Services
Limited
L&T
Finance
Holding
Limited
2017 4.38 5.63 2.71 4.2 0.24
2018 3.25 7.52 2.74 4.17 0.06
2019 4.41 8.19 3.21 4.84 0.15
2020 3.28 6.73 3.02 5.23 0.44
2021 2.78 6.67 2.03 3.98 0.16
Minimum 2.78 5.63 2.03 3.98 .06
Maximum 4.41 8.19 3.21 5.23 .44
Mean 3.6200 6.9480 2.7420 4.4840 .2100
Std. Deviation .73481 .96588 .44841 .52833 .14353
Variance 5.40 9.33 .201 .279 .021
Source: MoneyControl.com
Source: From Data Analysis by Self
Inference
The Chart Debt equity indicates the how much debt a company is using to finance its assets relatives to
the value of shareholders equity, according to this the company are in high debt L&T Finance Holding
Limited to equity from the year 2017 to 2021 according to others companies like Mahindra & Mahindra
Financial Service Limited, Muthoot Finance Limited, Cholamandalam Investment and Finance
Company, Bajaj Finance Limited, and the future expected growth of debt to equity according to chart it
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shows the Muthoot finance growth in highest in debt to equity according to remaining 4 companies
which are shortlisted by us.
P/E Ratio
The price earning ratio, often called as P/E ratio, can be calculated only for listed companies. It is the
ratio of company stock price to the earning per share. Market price per share and earning per share after
that P/E ratio was formed.
It helps the investors to compare between market share with the company growth. It shows the how
much company have to pay for a company company’s growth. Before investing in any company
investors want to know about the growth of the company and worth of the equity share of the company
so, that’s why company analyze the company as a P/E Ratio.
Formula = Share Price divided by Earning per Share.
P/E Ratio = Share Price ÷ Earning per Share
Table 5: P/E Ratio
Year
Bajaj
Finance
Limited
Cholamandalam
Investment and
Finance Company
Muthoot
Finance
Limited
Mahindra &
Mahindra
Financial
Services
Limited
L&T
Finance
Holding
Limited
2017 34.43 4.19 9.16 27.08 161.99
2018 37.57 4.94 12.49 15.25 100.08
2019 44.8 18.97 8.14 10.14 105.89
2020 26.62 11.42 13 6.09 35.87
2021 78.21 30.12 13.51 65.66 177.5
Minimum 26.62 4.19 8.14 6.09 35.87
Maximum 78.21 30.12 13.51 65.66 177.50
Mean 44.3260 13.9280 11.2600 24.8440 116.2660
Std. Deviation 20.03389 10.83404 2.43657 24.13975 56.28821
Variance 401.357 117.376 5.937 582.728 3168.363
Source: MoneyControl.com
IJFMR2205025 Volume 4, Issue 5, September-October 2022 12

Price to Earning
400
350
300
250
200
150
100
50
02017 2018 2019 2020 2021
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Source: From Data Analysis by Self
Inferences
The price to earnings ratio, also known as P/E ratio, is the ratio of a company’s share price to the
company’s earning earnings per share. The chart Price to earning shows the share earning price so
according to chart the highest earning per share of the company is L&T Finance Holding Limited
because in year 2017 to 2021 the only this company growth will higher and in future the excepted
growth will be also the L&T Holding Limited company according to remaining 4 companies which are
Mahindra & Mahindra Financial Services Limited, Muthoot Finance Limited, Cholamandalam
Investment and Finance Company, Bajaj Finance Limited. Their growth was below to L&T Finance
Holding Limited.
Correlation Analysis
Table 6: Correlations
EPS Net
Profit
Return on
Equity
Debt to
Equity
Price to
Earning
EPS
Pearson Correlation
1
.930*.972** .305
-
.662
Sig. (2-tailed) .022 .006 .618 .224
N 5 5 5 5 5
Net
Profit
Pearson Correlation .930*
1
.839 .031
-
.485
Sig. (2-tailed) .022 .076 .961 .407
N 5 5 5 5 5
Return
on
Equity
Pearson Correlation .972** .839
1
.419
-
.773
Sig. (2-tailed) .006 .076 .482 .125
N 5 5 5 5 5
Debt to Pearson Correlation .305 .031 .419
1
-
.782
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Equity Sig. (2-tailed) .618 .961 .482 .118
N 5 5 5 5 5
Price to
Earning
Pearson Correlation
-
.662
-
.485
-
.773
-
.782
1
Sig. (2-tailed) .224 .407 .125 .118
N 5 5 5 5 5
* Correlation is significant at the 0.05 level (2-tailed)
** Correlation is significant at the 0.01 level (2-tailed)
Inference
Correlation is a statistic that measures the degree to which two securities move in relation to each other.
Correlation is used in advanced portfolio management, computed as the correlation coefficient, which
has a value that must fall between -1.0 and +1.0. A positive correlation is a relationship between two
variable moves in which both variable move in the same direction. Therefore, when one variable
increase as the other variable increase, or one variable decrease the other variable decrease. A Negative
correlation is a relationship between two variables in which an increase in one variable is associated with
a decrease in other. We except those correlation who shows the Pearson correlation because Pearson
correlation show the two types like negative or positive which is from 0 to -1 and 0 to 1 but we focused
on 0.06 and -0.6 If the correlation between the ratio is less the 0.6 or -0.6 then the correlation between
them is weak and if the ratio is more the 0.6 and -0.6 then correlation between them is strong like the
correlation between EPS a Net Profit is .930, so the correlation between them is strong. The correlation
between EPS and ROE is .972 so the correlation between them is also strong, and between EPS and
Debt to Equity is .305 the correlation between them is negligible because it is less than 0.6 that’s why it
is negligible but the correlation between EPS and P/E ratio is -0.662 it is also form a strong correlation
bond.
Table 7: Hypothesis Testing Table
Hypothesis Pearson
Correlation (ρ)
Accept /
Reject
H1: There is significant positive or negative
correlation of EPS and Net Profit 0.93
Accept
H0: There is no significant positive or negative
correlation of EPS and Net Profit Reject
H2: There is significant positive or negative
correlation of EPS and Return on Equity 0.972
Accept
H0: There is no significant positive or negative
correlation of EPS and Return on Equity Reject
H3: There is significant positive or negative 0.305 Reject
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E-ISSN: 2582-2160 ● Website: www.ijfmr.com ● Email: editor@ijfmr.com
correlation of EPS and Debt to Equity
H0: There is no significant positive or negative
correlation of EPS and Debt to Equity Accept
H4: There is significant positive or negative
correlation of EPS and Price to Earning
-
0.662
Accept
H0: There is no significant positive or negative
correlation of EPS and Price to Earning Reject
Discussion on Findings of the Study
Discussion on Trend Analysis
Trend analysis is a technique used in technical analysis that attempts to predict future stock price
movements based on recently observed trend data.
We find a result after doing a trend analysis is:
(1) After doing a trend analysis we analyze the EPS shows the Earning Per Share, according to the
minimum growth of the company is Bajaj Finance Limited, Mahindra & Mahindra Financial
Services Limited, L&T Finance Holding Limited, Cholamandalam Investment and Finance
Company and the highest growth company is Muthoot Finance Limited.
(2) In Net Profit Ratio we analyze that the maximum profit of the company is Bajaj Finance Limited,
Muthoot Finance and the minimum profit company is Cholamandalam Investment and Finance
company, Mahindra & Mahindra Financial Services Limited, L&T Finance Holding Limited.
(3) In Debt-to-Equity the company which are going to debt is L&T Finance Holding Limited and the
remaining companies which are minimum in debt-to-equity according to L&T Finance Holding
Limited is Mahindra & Mahindra Financial Service Limited, Muthoot Finance Limited,
Cholamandalam Investment and Finance Company, Bajaj Finance Limited.
(4) In Return to Equity the highest return of the company is L&T Finance Holding Limited and
Mahindra & Mahindra Financial Service Limited minimum return in equity is L&T Finance
Holding Limited, Cholamandalam Investment & Finance Company, Muthoot Finance Limited.
(5) In Price-to-Earning Ratio we analyze the highest earning share price of the company is L&T
Finance Holding Limited and minimum earning per share company is Mahindra & Mahindra
Financial services Limited, Muthoot Finance Limited, Cholamandalam Investment and Finance
Company, Bajaj Finance Limited.
Discussion on Correlation Analysis
(1) It was found that there was very strong positive correlation between EPS and ROE (ρ = 0.972).
(2) The correlation between EPS and Net Profit was strong as well as positive correlation with ρ =
0.930.
(3) The correlation between EPS and Debt-to-Equity was found to be almost negligible with ρ = 0.305.
(4) EPS and Price to Earning Ratio had a correlation of ρ = -0.662 which signifies negative correlation
between them.
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International Journal for Multidisciplinary Research (IJFMR)
E-ISSN: 2582-2160 ● Website: www.ijfmr.com ● Email: editor@ijfmr.com
Conclusions
It can be concluded from the above analysis that in case of trend analysis, the company which showed
highest rate of earning per share was Muthoot Finance, followed by Bajaj Finance Limited, then
Cholamandalam Investment and Finance Company, Mahindra & Mahindra Financial Services Limited
and lastly, L&T Finance Holding Limited. After analyzing the Net Profit Ratio, it was found that the
high net profit was accumulated by Bajaj Finance Limited and remaining companies lied below it. In
term of ROE, Muthoot Finance Limited outperformed, followed by Bajaj Finance Limited, then
Cholamandalam Investment and Finance Company, then Mahindra & Mahindra Financial Services
Limited and lastly, L&T Finance Holding Limited. Graph of Debt-to-Equity reflects that in the year
2021, Cholamandalam Investment and Finance Company has maximum amount of debt. The company
which has least amount debt is L&T Finance Holding Limited. L&T Finance Holding Limited has
maximum amount of Price-to-Earning Ratio, followed by Bajaj Finance Limited, then Mahindra &
Mahindra Financial Services Limited, then Cholamandalam Investment and Finance Company and
lastly, Muthoot Finance Limited.
Second analysis of this paper is correlational analysis which tells about the correlation between ratios.
EPS had maximum positive correlation with ROE (ρ = 0.972). Correlation between Net Profit and EPS
was (ρ = 0.930) which is also strong as well as positive whereas correlation between P/E Ratio and EPS
is (ρ = -0.662) which is negative correlation. Lastly, correlation between EPS and Debt-to-Equity is
almost negligible (ρ = 0.305).
Suggestions
(1) Research should input the data carefully, one mistake in feeding data may cause whole result to
diverge.
(2) Investors and stakeholders should analyse the data properly before reaching to any decisions.
(3) Companies should also take the analyses part seriously and should be more concerned about their
companies’ growth.
(4) Researchers should look after accurate result as some the websites might mislead and display
manipulated data.
(5) Companies should make their financial data easily available for the researchers to conduct research.
Directions for Future Research
(1) Future researcher can conduct research on international basis, companies across the world can be
considered for the study.
(2) Time frame of the study can be extended to 10 or more years to get more accurate result.
(3) Companies from other background can also be taken for research in the future.
(4) Exploration of more new analyses can be done like regression analysis, solvency analysis, bivariate
analysis and many more.
(5) Primary data can be used for analyses that can be collected from stakeholder, worker and normal
people.
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