DO-PONT & CASH FLOW ANALYSIS OF J P ASSOCIATES

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DO-PONT & CASH FLOW ANALYSIS OF J P ASSOCIATES

  1. 1. INSTITUTE OF PROFESSIONAL EDUCATION ANDRESEARCH (IPER), BHOPALASSIGNMENT OF FINANCIAL MANAGEMENT ONJP ASSOCIATE MBA SEC-II GROUP-12Submitted to-Prof. Priya DwivediSubmitted by-Sandeep PatelSandeep RaiSanjeev Malviya
  2. 2. CONTENTSS.NO. TOPICS1 INTRODUCTION2 DU-PONT ANALYSIS3 CASH FLOW STATEMENT4 PROFIT & LOSS A/C5 BALANCE SHEET6 INERPRETATION
  3. 3. INTRODUCTIONCivil EngineeringInitially, the Jaypee Group started as civil engineering contractors. Jaiprakash Associates Ltd.,the flagship company of the Group, is a leader in Construction of river valley and hydropowerprojects on turnkey basis for more than 4 decades. The company is currently executing variousprojects in hydropower / irrigation / other infrastructure fields and has had the distinction ofexecuting simultaneously 13 hydropower projects spread over 6 states and the neighboringcountry Bhutan for generating 10,290 MW of power. Jaypee Group undertakes projectsinvolving:-Large quantities of rock excavation (both surface and underground)Controlled earth/rock fillConcrete manufacture and placement (including chilling)Fabrication and erection of penstock linersHydro-mechanical equipment procurement and erectionSteel StructuresExpressway ConstructionReal Estate DevelopmentThe projects that have been commissioned or in the advance stages of completion have beenundertaken by it either as a successful EPC contractor or as a Non EPC contractor. The groupalso has secured three BOT contracts in the private hydropower generation sector after theopening up of the doors by the Government of India in 1991 for private sector power generationcompanies.It is not an embellishment to state that over the past three decades the company has not onlysuccessfully executed large and prestigious projects, but in this process has acquired a pool ofknowledge, skills and experience in their field of technological excellence.The company has been assigned "CR 1" grade by ICRA Ltd indicating Very Strong ContractExecution Capacity with best prospects of timely completion of projects without cost overruns,etc. for hydropower EPC contracts of value greater than Rs.2500 Crores.Civil Engineering
  4. 4. CASH FLOW STATEMENT ANALYSISThe cash flow statement explains the change during the period in cash and cashequivalents.Cash includes currency on hand and demand deposits. Cash equivalents are short-term,highlyLiquid investments those are readily convertible to cash.The cash flow statement will summarize the cash flows so that net cash provided or usedby each of the three types of activities is reported. Beginning and ending cash must bereconciled based on the net effect of these activities.Components of a cash flow statementOperating ActivitiesThe statement provides information about the cash generated from a company’sdaily operating activities. Operating activities are those which produce eitherrevenue or are the direct cost of producing a product or service.Operating activities which generate cash inflows include customer collections fromsales of their primary products or services, receipts of interest and dividends, andother operating cash receipts.Operating activities which create cash outflows include payments to suppliers,payments to employees, interest payments, payment of income taxes and otheroperating cash payments.Investing ActivitiesInvesting activities include buying and selling noncurrent assets which will be usedto generate revenues over a long period of time; or buying and selling securities notclassified as cash equivalents.Cash inflows generated by investing activities include sales of noncurrent assetssuch as property, plant, and equipment. Investing activities can also include thepurchase or sale of stock and securities.Lending money and receiving loan payments would also be considered investingactivities.Financing ActivitiesFinancing activities include borrowing and repaying money, issuing stock (equity)and paying dividends.For example, if you borrow funds to purchase equipment or pay off a loan, the cashflow statement will enable you to determine how much cash was either generated orused as a result of those transactions.
  5. 5. INTERPRETATIONJaiprakash AssociatesCash Flow ------------------- in Rs. Cr. -------------------Mar 12 Mar 11 Mar 10 Mar 09 Mar 0812 mths 12 mths 12 mths 12 mths 12 mthsNet Profit Before Tax 1314.34 1754.51 2381.67 1250.98 843.35Net Cash From Operating Activities 704.77 1207.58 185.32 523.12 1007.69Net Cash (used in)/fromInvesting Activities-2948.10 -4919.20 -2949.12 -3712.66 -4225.27Net Cash (used in)/from FinancingActivities842.28 2294.97 3734.39 4259.04 3603.21Net (decrease)/increase In Cash andCash Equivalents-1401.05 -1416.65 970.59 1069.50 385.63Opening Cash & Cash Equivalents 2423.28 3879.18 2908.59 1839.09 1429.81Closing Cash & Cash Equivalents 1022.23 2462.53 3879.18 2908.59 1815.44CASH FLOW ANALYSIS OF JP ASSOCIATEOperating ActivitiesWhile analyzing cash flow, We found that Cash from operating Activity have been Decliningover the years. When compare from 2008 to 2009 almost Decrease in half the value of previousyears.It tells us the firm needs a cash infusion.Investing ActivitiesThe cash flow statement puts investing activities into perspective. At one glance, we can seewheather or not a surplus in operations is being used to grow the company.A lack of investing activities, which is few purchases of new equipment or other assets, mayindicate stagnant growth or a diversion of funds away from the company.It tells us the JP Associate Investment Activities provides Negative ReturnsFinancing ActivitiesWhile we made comparison between past periods shows a negative idea of the trend of JPAssociate’s business. Negative trends from (2008-12) in cash flow will discourage them toconsider long-term financing and also affects the ability to generate cash for repayment.Decreasing cash flow will also make it difficult to acquire financing and to negotiate withlenders.
  6. 6. Jaiprakash AssociatesProfit & Loss account ------------------- in Rs. Cr. -------------------Mar 12 Mar 11 Mar 10 Mar 09 Mar 0812 mths 12 mths 12 mths 12 mths 12 mthsIncomeSales Turnover 13,408.07 13,539.72 10,497.25 6,100.82 4,326.87Excise Duty 604.96 663.25 430.68 332.06 348.50Net Sales 12,803.11 12,876.47 10,066.57 5,768.76 3,978.37Other Income 264.49 865.04 1,595.17 389.12 271.60Stock Adjustments -97.00 162.56 -83.10 66.16 23.78Total Income 12,970.60 13,904.07 11,578.64 6,224.04 4,273.75ExpenditureRaw Materials 1,826.75 1,636.98 1,709.89 1,068.36 816.41Power & Fuel Cost 1,583.52 1,490.64 474.95 264.69 201.19Employee Cost 661.32 595.72 453.35 330.79 255.27Other Manufacturing Expenses 3,488.07 5,022.23 3,690.53 1,711.84 935.51Selling and Admin Expenses 0.00 1,431.59 956.31 620.90 537.40Miscellaneous Expenses 1,706.80 157.23 493.50 73.95 97.31Preoperative Exp Capitalised 0.00 -307.63 -217.27 0.00 0.00Total Expenses 9,266.46 10,026.76 7,561.26 4,070.53 2,843.09Mar 12 Mar 11 Mar 10 Mar 09 Mar 0812 mths 12 mths 12 mths 12 mths 12 mthsOperating Profit 3,439.65 3,012.27 2,422.21 1,764.39 1,159.06PBDIT 3,704.14 3,877.31 4,017.38 2,153.51 1,430.66Interest 1,781.74 1,515.41 1,158.28 584.75 383.70PBDT 1,922.40 2,361.90 2,859.10 1,568.76 1,046.96Depreciation 614.15 607.81 456.06 308.97 203.30Other Written Off 0.00 0.42 4.40 0.33 0.31Profit Before Tax 1,308.25 1,753.67 2,398.64 1,259.46 843.35Extra-ordinary items 23.17 32.61 3.25 12.23 -0.06PBT (Post Extra-ord Items) 1,331.42 1,786.28 2,401.89 1,271.69 843.29Tax 288.10 600.82 673.31 353.97 233.68Reported Net Profit 1,026.38 1,167.78 1,708.36 897.01 609.67Total Value Addition 7,439.71 8,389.78 5,851.37 3,002.17 2,026.68Preference Dividend 0.00 0.00 0.00 0.00 0.00Equity Dividend 106.32 170.12 190.44 127.09 114.60Corporate Dividend Tax 17.25 13.80 31.93 15.57 19.47Per share data (annualised)Shares in issue (lakhs) 21,264.33 21,264.33 21,246.35 11,838.01 11,715.22Earning Per Share (Rs) 4.83 5.49 8.04 7.58 5.20Equity Dividend (%) 25.00 40.00 54.00 50.00 50.00Book Value (Rs) 57.86 43.24 38.58 52.27 33.22
  7. 7. DU PONT ANALYSIS OF JP ASSOCIATES------------- in Rs. Cr. ------- -----YEAR Mar’2102 Mar’2011 Mar’2010 Mar’2009 Mar’200812 mths 12 mths 12 mths 12 mths 12 mthsEAT 1,026.38 1,167.78 1,708.36 897.01 609.67EQUITY 106.32 170.12 190.44 127.09 114.6TOTAL ASSETS 59,794.99 58,444.75 43,812.91 26,683.08 17,262.95NETWORTH 11,478.03 12,181.22 8,540.27 6,596.29 4,977.17DIVIDENT 106.32 170.12 190.44 127.09 114.6ROA 0.017165 0.019980922 0.03899216 0.033617184 0.035316675ROE 9.653687 6.864448625 8.970594413 7.058069085 5.319982548RETENTIONRATIO0.8964126 0.854321876 0.888524667 0.85831819 0.812029459ROI 0.0894213 0.095867245 0.20003583 0.135987047 0.122493304IGR 0.0156274 0.017366589 0.035888884 0.029711544 0.029524901SGR -1.130656 -1.20557314 -1.143459788 -1.197703903 -1.301206403
  8. 8. INTERPRETATIONSDU PONT ANALYSISThe DuPont Analysis is an approach that breaks down ROE (Return on Equity) into a functionof 3 or 5 ratios that helps to see the impact of each ratio on ROE.Return on assets (ROA)It is a financial ratio that shows the percentage of profit that a company earns in relation to itsoverall resources (total assets). Return on assets is a key profitability ratio which measures theamount of profit made by a company per dollar of its assets.It is decreasing over the period of time. The company is unable to utilise its resources.Calculation (formula)Return on assets is calculated by dividing a companys net income (usually annual income) byits total assets, and is displayed as a percentage. There are two acceptable ways to calculatereturn on assets: using total assets on the exact date or average total assets:ROA = Net Income after tax / Total assets (or Average Total assets)Return on equity (ROE)is the amount of net income returned as a percentage of shareholders equity. It reveals how muchprofit a company earned in comparison to the total amount of shareholder equity found on thebalance sheet.It shows positive trend as it is increasing. The shareholders are receiving fare enoughthrough the investment in the JP Associate Company.Calculation (formula)Return on equity is calculated by taking a year’s worth of earnings and dividing them by theaverage shareholder equity for that year, and is expressed as a percentage:ROE = Net income after tax / Shareholders equity
  9. 9. Definition of Retention RatioThe per cent of earnings credited to retained earnings. In other words, the proportion of netincome that is not paid out as dividends.Calculated as:Retention Ratio is increasing over the years. This might be due to the fact that company isdiversifying itself.Definition of Internal Growth Rate(IGR)The highest level of growth achievable for a business without obtaining outside financing. Afirms maximum internal growth rate is the level at which growth from general businessoperations can continue to fund and grow the company. For start-up firms and small business theinternal growth rate is an important ratio to follow, since it measures a firms profitable increasein top-line revenues.IGR is declining over the period of time because of the ROA is also decreasing company isstruggling to make optimum uses of its internal Resources.Definition of Sustainable Growth Rate –( SGR ):The maximum growth rate that a firm can sustain without having to increase financial leverage.SGR = ROE *b/ 1 – (ROE*b)Where b is Retention RatioSGR is also negative over the years. It also affects the overall efficiency of the business.With the Help of Du Pont Analysis, we have calculated ROI, ROE,ROA, RETENTION RATIO,IGR, SGR.

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