Title: Relationship of Nifty and Piramal Enterprises Ltd.
Author: Prateesh Bhambhani
Introduction:
The Piramal Group is an Indian multinational diversified global business conglomerate, that has presence across various sectors such as healthcare, life sciences, drug discovery, healthcare information management, financial services and real estate. Piramal Enterprises Limited (PEL) is one of India’s leading diversified companies, with a presence in Financial Services and Pharmaceuticals. PEL’s consolidated revenues were ~US$1.7 Billion in FY2020, with around ~34% of revenues generated from outside India. Driven by both organic as well as inorganic strategy, PEL has steered dynamic business growth over the three decades of its existence.
Objective:
To calculate Beta of Piramal Enterprises Ltd. and find its significance.
Views and Reviews:
According to Business Standards Piramal Enterprises is thinly covered by analysts but it stands tall when it comes to ROE and other key metrics. It has delivered 30%+ returns over the past several years. It’s run like a venture fund because Ajay Piramal doesn’t limit himself when it comes to compelling investment opportunities that go beyond the traditional competencies. PEL’s bets in financing have done well and are a bigger chunk of the profitability than healthcare, its core business.
Data Collection:
The NIFTY and Piramal Enterprises Ltd. data was collected via the NSE website and downloaded in an excel sheet from 1-March-2021 to 28-February-2022. The final prices were discovered. The data was filtered on a weekly basis, and weekly returns for both the NIFTY and the Piramal Enterprises Ltd. were calculated. The returns of the companies have been regressed on the returns of the nifty.
Data Analysis:
Predicted Y = -0.0237342804233226 + -0.0237342804233226 X
N=46, R Square= 0.0582199716364876, F= 2.7200393667901
Tstat(beta)= 1.64925418501519
Tstat (0.05,45)= 2.0141
The above regression equation tells us the relationship between X and Y. Where X is NIFTY’s weekly returns and Y is Piramal Enterprise’s weekly returns.
The positive sign of Beta tells us the that there is a negative relationship between NIFTY and Piramal Enterprise’s weekly returns.
From the equation, it can be seen that if X rises by 1 unit, Y will decrease by 0.0237 units.
T calculated is more that T tabulated which means, β is statistically insignificant at 5% confidence level.
R^2 is 0.0582199716364876 which means 5.8% of Y (Piramal Enterprise) is explained by X. And the balance is explained by error.
F is 2.72 which is more than table value which means model is statistically significant at 5% level.
CONCLUSION:
β is statistically insignificant in case of NIFTY and Piramal Enterprise. Also, it can be concluded that Piramal Enterprise is a low beta share. Since it is less than 1.