- Aarti Industries is an Indian company that manufactures chemicals and pharmaceuticals. It was founded in 1975 and has since expanded to 16 manufacturing plants in India. - The company produces dyes, pigments, agrochemicals and active pharmaceutical ingredients. It also has operations in the US, Europe, and Japan. - Financial ratios show the company has maintained stable liquidity, debt levels, and profitability over the past 5 years. Key metrics like return on assets, return on equity and return on capital employed have also remained healthy.

1. • By: Ashish Sharma
I am ONN
ashish.sh30@gmail.com
Financial Modelling

2. Company Intro
• Aarti has started its operations in the year 1975 in the name of
alchemie labs with a single product namely Dimethyl sulphate
• In 2003, the Company's Shares also got listed on the NSE and
Ahmedabad Stock Exchange
• Aarti is One of the leading supplier to global manufacturers of
Dyes, Pigments, Agrochemicals, Pharmaceuticals & rubber
chemicals

3. Company Intro
• It has sixteen manufacturing units spread across Maharashtra
and Gujarat and also has a research and development facility
• It operates in United States of America, Europe, Japan and
India
• Aarti Drugs Limited (ADL) has a Subsidiary Aarti Healthcare
Limited (AHCL), which is engaged in manufacturing of
Active pharma ingredients ranging from Ace Inhibitors,
Broncodialators to Steroids

4. Current Ratio
2015 2014 2013 2012 2011
1.10
1.05 1.02 1.13
1.29
Current Ratio
• The current ratio is a liquidity
ratio that measures a company's
ability to pay short-term
and long term obligations
• To gauge this ability, the current
ratio considers the
total assets of a company
(both liquid and illiquid)
relative to that company’s
total liabilities
Current Assets/Current Liabilities

5. Quick Ratio
2015 2014 2013 2012 2011
0.6
0.54 0.56
0.68
0.75
Quick Ratio
• The quick ratio measures a
company’s ability to meet its
short-term obligations with its
most liquid assets
• For this reason, the ratio
excludes inventories from
current assets
(Current Assets - Inventories)/Current Liabilities

6. Return on Assets
2015 2014 2013 2012 2011
15%
13% 14%
11%
9%
Return on Assets
• ROA gives an idea as to how
efficient management is at using
its assets to generate earnings
Net Income/Average Total Assets

7. Interest Coverage Ratio
2015 2014 2013 2012 2011
2.79
2.71
2.93
2.71
2.67
Interest Coverage Ratio
• A debt ratio and profitability
ratio used to determine how
easily a company can
pay interest on outstanding debt
EBIT/Finance Cost

8. Gross Profit Ratio
2015 2014 2013 2012 2011
34% 33% 36%
32%
14%
Gross Profit Ratio
• Important metric for evaluating
a company's profitability
• It measures the amount of each
revenue dollar that remains as
profit after accounting for those
expenses that are required in
order to produce goods or
services for sale.
Total Revenue-COGS/Net Sales

9. Net Profit Ratio
2015 2014 2013 2012 2011
14%
9%
15%
13%
9%
Net Profit Ratio
• Important metric for evaluating a
company's profitability
• Measure how much out of every
dollar of sales a company actually
keeps in earnings
Net Income/Net Sales

10. Debt Equity Ratio
2015 2014 2013 2012 2011
1.17
1.21
1.19
1.14
1.11
Debt Equity Ratio
• Used to measure a company's
financial leverage
• The D/E ratio indicates how
much debt a company is using
to finance its assets
Debt/Equity

11. Return on Equity
2015 2014 2013 2012 2011
46%
32%
47%
42%
30%
Return on Equity
• ROE is a ratio that provides
investors insight into how
efficiently a company is
managing the equity that
shareholders have contributed
to the company
Net income/Equity

12. ROCE
2015 2014 2013 2012 2011
22% 23%
26%
23%
19%
ROCE
• ROCE is a financial ratio that
measures a company's
profitability and the efficiency
with which its capital is employed
• Higher the ROCE is better, which
means company is using capital
more efficiently
EBIT/Total Asset -CL

13. PE Ratio
2015 2014 2012 2013 2011
22.71
17.77
6.8
5.26 6.05
PE Ratio
• P/E ratio is a ratio for valuing a
company that measures its
current share price relative to
its EPS
• It shows how much investors
are willing to pay per dollar of
earnings
MPS/EPS

14. Dividend Payout Ratio
2015 2014 2013 2012 2011
26%
27% 27%
31%
29%
Dividend Payout Ratio
• It is the percentage of earnings
paid to shareholders in
dividends
Dividend Per Share/ EPS

15. Dividend Yield Ratio
2015 2014 2013 2012 2011
1%
2%
4%
6%
5%
Dividend Yield Ratio
• A financial ratio that indicates
how much a company pays out
in dividends each year relative
to its share price
Dividend Per Share/MPS

16. Debtors Turnover Ratio
2015 2014 2013 2012 2011
59 62
73 81
75
Debtors Turnover Ratio
• An accounting measure used to
quantify a firm's effectiveness in
extending credit and in
collecting debts on that credit
Avg Debt/Sales

17. Cost Of Equity (Ke)
2015
Dividend per share 5.5
MPS 481.55
Growth Rate of
Dividend 17%
Ke 18.22%
(DPS/MPS)+Growth Rate of Dividend

18. WACC
2015
E=Equity+R&S 90783.68
V=Share
Capital+Debt+R&S 162692.25
Ke 18.22%
D=LTB+STB 106624.13
Kd=Finance Cost/D 13%
t=Current Tax/PAT*100 23.70%
WACC 16.61%
E/V*Ke+D/V*Kd*(1-t)