The document provides financial information for XXX Constructions Pvt. Ltd for the fiscal years 2013 through 2016. It includes key metrics such as net sales, operating profit, PAT, cash profit, margins, tangible net worth, total liabilities, and ratios such as TOL/TNW. XXX Constructions is an Indian mining and construction company that diversified into Africa in 2012 by establishing a subsidiary in Zambia. The financial position of the company appears stable with consistent sales growth and profits over the period analyzed.

1. Financial Statements…
Simplified

2. Balance Sheet
 Its Content Items
 A Portray of Financial Position
 & Profit, Loss a/c
 Risk Parameters in Decision Making
 Live Case Study Analysis

3. Share Capital
Current liabilities
&
Provisions
Reserves
&
Surplus
Unsecured
Loans
Receivables
Secured Loans
Non Current
Assets
Loans
&
Advances
Investments
Current Assets
In-Tangible Assets
Fixed Assets
z
Liabilities
Assets
(Application of Funds)
(Sources of Funds)
Content Items

4. Capital Structure
Working Capital Policy
Credit Management
Inventory Management
Security Analysis
Capital Budgeting
Share Capital (Equity)
Reserves & Surplus
Secured Loans
Loans & Advances
Unsecured Loans
Current Liabilities & Provisions
Trade Creditors
Provisions
Fixed Assets (Net)
Investments
Current Assets
Loans & Advances
Cash & Bank
Receivables
Inventories
Cash Management
Balance Sheet..!!
A portray of financial
Position of the company

5. Revenue Risk
Return On Equity
Gross Profit Margin
Dividend Policy
Depreciation Policy
Business Risk
Cost of Goods Sold
Stocks
Wages & Salaries
Other Manf. Exp.
Profit After Tax
Operating Profit
Non Operating
Surplus/Deficit
Depreciation
Tax
Net Sales
Dividends
Tax Planning
Profit & Loss a/c ..!!
a Translate of
Sales Revenues to Earnings

6. Key Financial Risk Parameters in Decision Making
Funding
Terminology
Road Taxes
EMI
Debt Service -
Coverage Ratio
Debt / Equity Ratio
Current Ratio
Dr. & Cr. Days
Sales Growth
EBIDTA
Cash Profit
Tangible Net Worth

7. Net worth is the amount by which Assets exceeds Liabilities.( Credit Worthiness of the Company / Individual ). In general
terms…Assets include Cash, & Bank balance, Property (Residential / Commercial {Land,Buildings) etc..along with Jewelery,
Movable Assets) Tangible(Which can be physically seen )
The concept is of all about..how much the company/entity is worth. A consistent increase in Networth is a sign of good
financial health. In business ||ence, this is also termed as Book Value / Share holders equity.
To calculate your tangible net worth, take the sum of Equity from the balance sheet and subtract the “intangible assets”.
These are assets that don’t physically exist like (patents, trademarks, goodwill etc). These items can be very valuable,
however, unlike cash, building, machines, etc., they do not physically exist.
Why do banks track Tangible Net Worth?
Banks are very concerned about protecting their downside risk with the ultimate risk being that client go bankrupt. Your
tangible net worth represents an amount that they could reasonably expect to recover if something unforeseen happens.
Extracting value from intangible assets like trademarks, or goodwill from a bankrupt company typically isn’t feasible
regardless of how valuable they are. It is also a means to insure that there is a reasonable amount of cash in the business to
prevent a future cash crunch, as cash withdraws by an owner have the effect of reducing equity and tangible net worth.

8. FY’12 Topline Rs. 200 Crs.
FY’12 Topline Rs. 100 Crs.
FY’12 Topline Rs. 500 Crs.
FY’14 Topline Rs.300 Crs.
FY’16 Topline Rs. 500 Crs.
FY’15 Topline Rs. 400 Crs.
FY’13 Topline Rs. 200 Crs.
FY’13 Topline Rs. 400 Crs.
FY’14 Topline Rs.300 Crs.
FY’15 Topline Rs. 200 Crs.
FY’16 Topline Rs. 100 Crs.
Sales Growth/ Turn Over is the company’s total revenue, both
invoice, Cash Payments and other revenues.
It represents the value of goods and services provided to client /
customers during a specified time period / accounting year (Apri’XX
To March’YY.
Sales turnover is identified to be of total revenue generated from
operations / services / Work Order executed. Hence this doesn’t
include gains from financial or other activities,(Interest Income on
Fixed deposits, gains on the sale of fixed assets, or the receipt of
payments related to insurance claims, tax refund etc..) and these are
reported as other income .
The amount of Sales Turn-over recognized by a company can vary,
depending on whether it uses the accrual basis of accounting or
the cash basis. Revenue is recorded under the accrual basis when
units are shipped or services provided, whereas revenue is recorded
under the cash basis when cash is received from customers (which
usually delays recognition, except when there is a prepayment).
Example:
Year March-12 March-13 March-14 March-15 March-16
Audited Audited Audited Audited Audited
Sales Turn over Rs. In Crs. 100 200 300 400 500
Sales Growth% - 100% 50% 33% 25%
Sales Turn over Rs. In Crs. 500 400 300 200 100
Sales Growth% - -20% -25% -33% -50%
Growth % Calculation : (Current year Sales / Previous Year Sales) -1*100

9. Debt Service Coverage Ratio (DSCR), one of the leverage / coverage ratios, calculated in order to know the cash profit
availability to repay the debt including interest. Essentially, DSCR is calculated when a company / firm takes loan from bank.
This ratio suggests the capability of cash profits to meet the repayment of the financial loan. DSCR is very important from
the view point of the financing authority as it indicates repaying capability of the entity taking loan.
DSCR less than 1, suggests inability of firm’s profits to serve its debts. Where as a DSCR greater than 1, means not only
serving the debt obligations but also the ability to pay the dividends.
The ratio is of utmost use to lenders of money such as banks, financial institutions etc. There are two objectives of any
financial institution behind giving loan to a business viz. earning interest and not letting the account go bad.
Let’s take an example where the DSCR is coming to be less than 1, which directly indicate negative views about the repayment
capacity of the firm. Does this mean that the bank should not extend loan? No, absolutely not. It is because the bank will
analyze the profit generating capacity and business idea as a whole and if the business is strong in both of them; the DSCR
can be improved by increasing the term of loan. Increasing the term of loan will reduce the denominator of the ratio and
thereby enlarge the ratio to greater than 1.
Note: Just a year’s analysis of DSCR does not lead to any concrete conclusion about the 'Debt Servicing Capability.'
DSCR is relevant only when it is seen for the entire remaining period of loan.
DSCR > 1
Ability to serve / No
Stress in Payment
DSCR < 1
In ability to serve /
Stress in Payment
DSCR =
PAT + Depreciation + Deferred Tax +interest on Term Loan
Interest on Term Loan + Repayment of Other Term Debt

10. Debt To Equity Ratio =
Long Term Debts
Total Equity
Debt to Equity Ratio (DEQ Ratio) is a financial, liquidity ratio that compares a company's total long term debt to total
equity. The DEQ ratio shows the percentage of company financing that comes from Creditors and Investors. A higher DEQ
ratio indicates that more creditor financing (bank loans) is used than investor financing (shareholders).
Formula
Analysis
Each industry has different debt to equity ratio benchmarks, as some industries tend to use more
debt financing than others. A debt ratio of .5 means that there are half as many liabilities than there
is equity. In other words, the assets of the company are funded 2-to-1 by investors to Creditors.
A debt to equity ratio of 1 would mean that investors and creditors have an equal stake in the business assets.
A lower debt to equity ratio usually implies a more financially stable business. Companies with a higher debt to equity ratio
are considered more risky to creditors and investors than companies with a lower ratio. Unlike equity financing, debt must be
repaid to the lender. Since debt financing also requires debt servicing or regular interest payments, debt can be a far more
expensive form of financing than equity financing. Companies leveraging large amounts of debt might not be able to make the
payments.
Creditors view a higher debt to equity ratio as risky because it shows that the investors haven't funded the operations as
much as creditors have. This further could mean that investors don't want to fund the business operations because the
company isn't performing well. Lack of performance might also be the reason why the company is seeking out extra debt
financing.
Example
Assume a company has Rs.1,00,000 of Term loan and Rs.5,00,000 mortgage on its property. The shareholders of the company
have invested Rs.12,00,000. Here is how you calculate the debt to equity ratio.
1,00,000 + 5,00,000
= 0.5
12,00,000
Debt
`

11. Current Ratio is a liquidity ratio that measures the ability of a company to pay its current liabilities when they come due with
only quick assets. Quick assets are current assets that can be converted to cash within 30/60/90 days or in the short-term.
Cash, cash equivalents, short-term investments or marketable securities, and current accounts receivable are considered
quick assets.
The quick ratio is often called the acid test ratio in reference to the historical use of acid to test metals for gold by the
early miners. If the metal passed the acid test, it was pure gold. If metal failed the acid test by corroding from the acid, it
was a base metal and of no value.
The acid test of finance shows how well a company can quickly convert its assets into cash in order to
Pay off its current liabilities. It also shows the level of quick assets to current liabilities.
Formula
Current Ratio =
Cash + Cash Equivalents + Short Term Investments + Current Receivables
Current Liabilities
Higher quick ratios are more favorable for companies because it shows there are more quick assets than current liabilities. A
company with a quick ratio of 1 indicates that quick assets equal current assets. This also shows that the company could pay
off its current liabilities without selling any long-term assets. Ratio of 2 shows that the company has twice as many current
assets than current liabilities.
Obviously, as the ratio increases so does the liquidity of the company. More assets will be easily converted into cash if need
be. This is a good sign for investors, but an even better sign to creditors because creditors want to know they will be paid
back on time.
Example
Cash: Rs.10,000
Accounts Receivable: Rs.5,000
Stock Investments: Rs.1,000
Prepaid taxes: Rs.500
Current Liabilities: Rs.5,000
10000+5000+1000-500
= 3.1
5000

12. EBITDA
This is a formula that plays into how much you can expect someone to pay for your business in the future. Code:
E = Earnings
B = Before
I = Interest
T = Taxes
D = Depreciation
A = Amortization.
The higher the EBITDA margin value, the less operating expenses and the bigger company’s earnings are. An increasing
EBITDA ratio indicates better performance of the company. A higher value would indicate that the company is able to keep
its’ income at a sufficient level. Therefore it rather clearly indicates company’s operating profitability
This measure is also of interest to a company's creditors, since EBITDA is essentially the income that a company has free
for interest payments. In general, EBITDA is a useful measure only for large companies with significant assets, and/or for
companies with a significant amount of debt financing. It is rarely a useful measure for evaluating a small company with no
significant loans. Sometimes also called Operational Cash Flow.
EBITDA Level

13. A “Debtor” is a person or enterprise that owes money to another party. (The party to whom the
money is owed is often a supplier or bank that will be referred to as the Creditor.)
A “Creditor “is a person, bank, or other enterprise that has lent money or extended credit to
another party. (The party to whom the credit has been granted is often a customer that will now
be referred to as a Debtor.)
Example: If Company X borrowed money from its bank, Company X is the Debtor and the bank is
the Creditor. If Supplier A sold merchandise to Retailer B, then Supplier A is the Creditor and
Retailer B is the Debtor.
Creditor days is a measure of the number of days on average that a company requires to pay its creditors (accounts payable ),
while Debtor days is a measure of the number of days on average that it takes a company to receive payment for what it
sells. It is also called (accounts receivable) days.
Why They Are Important
Creditor days is an indication of a company’s creditworthiness in the eyes of its suppliers and creditors, since it shows how
long they are willing to wait for payment. Within reason, the higher the number, the better because, all companies want to
conserve cash. At the same time, a company that is especially slow to pay its bills (100 or more days, for example) may be a
company having trouble generating cash, or one trying to finance its operations with its suppliers’ funds. Ultimately,
companies whose creditor days soar have trouble obtaining supplies.
Debtor days are determined to know, how long it takes an organization to receive payment from their Debtors. It is an
indication of a company’s efficiency in collecting monies owed. In this case, obviously, the lower the number the better. An
especially high number is a telltale sign of inefficiency or worse. It may indicate bad debts, dubious sales figures, or a
company being bullied by large customers out to improve their own cash position at another company’s expense. Customers
whose credit terms are abused also risk higher borrowing costs and related charges.
Dr. & Cr. Days = What They Measure ?

14. How They Work in Practice
To determine creditor days, divide the cumulative amount of unpaid suppliers’ bills (also called trade creditors) by sales, then
multiply by 365. So the formula is:
Creditor days = Trade creditors ÷ Sales × 365
For example, if suppliers’ bills total Rs.800,000 and sales are Rs.9,000,000, the calculation is:
800,000 ÷ 9,000,000 × 365 = 32.44 i.e. ( 32 days )
The company takes 32 days on average to pay its bills.
To determine debtor days, divide the cumulative amount of accounts receivable ( also called
Trade Debtors ) by sales, then multiply by 365.
Debtor days = Trade debtors ÷ Sales × 365
For example, if accounts receivable total Rs. 600,000 and sales are Rs. 9,000,000, the
calculation is:
600,000 ÷ 9,000,000 × 365 = 24.33 i.e. ( 24 days)
The company takes 24 days on average to collect its debts.

15. Case Study
XXX Constructions Pvt.Ltd is a professionally managed Mining and Construction company specialized in over burden removal
operations and civil works. The company began its operations in the year 1984 as a proprietary concern and completed several
projects in the railways as well as coal mining.
During FY’12, the company diversified its operations to Zambia (Africa) by establishing its fully owned subsidiary “XXX
Constructions Zambia Ltd”.
Financial Position Summary - Analysis (Rs. In Crs.)
Mar'13 Mar'14 Mar'15 Mar'16
Audited Audited Audited Provisional
Net Sales 123.65 153.42 158.53 133.92
Sales Growth% 24.08% 3.33% 15.52%
Operating Profit 68.44 75.77 67.54 82.23
Other Income 1.71 1.99 4 3.32
PBDIT 70.15 77.76 71.54 85.55
Depreciation 14.31 15.07 23.13 19.1
Interest 1.93 0.96 4.75 4.98
PBT 53.91 61.73 43.66 61.47
PAT 36.39 40.44 29.55 41.15
Cash Profit 49.63 54.74 49.52 59.56
Operating Profit Margin% 55.35% 49.39% 42.60% 61.40%
PBDIT Margin % 55.96% 50.04% 44.02% 62.34%
PAT Margin% 29.03% 26.02% 18.18% 29.98%
Tangible Networth(TNW) 86.65 126.31 149.61 190.1
Total Term Liability 0.89 2.82 41.05 18.94
Net Fixed Assets 62.77 82.3 123.44 103.87
TOL (TTL+Current Liabilities) 16.53 31.05 70.67 67.49
TOL/TNW 0.19 0.25 0.47 0.36
TTL/TNW 0.01 0.02 0.27 0.1
Current Ratio 2.1 1.2 0.59 0.67
DSCR 26.72 30.11 7.17 12.96
Debtor Days 12 34 46 48
Creditor Days 32 52 46 82

16. •Sale of Products comprising: Export sale of machinery spare parts ref. to XXX constructions Zambia Ltd., regd in
Zambia.
•Sale of Services : OB Removal
•Other Operating Revenue: Machinery Lease Rentals along with other Interest Income etc.
FY 13 FY 14 FY 15 FY 16
Sale of Services 60.5 92.3 139.1 119.9
Sale of Products 1.2 4.9 2 2.2
Other Operating Revenue 67 70 41 28.6
(-) Sevice Tax -5.1 -13.8 -23.4 -16.8
60.5
92.3
139.1
119.9
1.2 4.9 2 2.2
67 70
41
28.6
-5.1
-13.8
-23.4
-16.8
-40
-20
0
20
40
60
80
100
120
140
160
Income Breakup

17. Sales Growth/Turn Over
FY’15 topline of Rs. 159.53 Crs. against 153.42 Crs. in FY’14. YOY increment growth@ 3.33%. Major income ware generated
from Western Coal fields, Singareni Collieries co. forming part of OB removal amt. rs. 139.10 Crs. In apart rs. 41 Crs. Was
forming part of other operating income in the form of Machinery Lease rentals and other interest income. To note: 88% of
the top line is from OB removal.
As per the provisional financials FY’16, company having booked top line of rs.133.92 Crs with drop in overall top line by
15.52%. This includes drop in OB removal works a well ref. to machinery lease rentals and spare part sales. To observe, major
work order being closed in Jan’16, post which client having waited for new works to be assigned. In ref. to XXX Constructions
(Zambia)Ltd as this being a separate entity and inturn 90% of the work-order being executed…and fresh works being allotted
recently by Zambia govt.
Note: XXX Constructions Zambia being a separate entity with FY16 key topline of rs. 70 crs. Approx with no bebt as all the
machinery being lease rented by XXX Constructions (India) and so forth the lease rentals / exp.
Share Capital, Tangible Networth and Gearing:
The TNW of the company increased from Rs. 51.34 Crs in Fy 12 to Rs. 149.61 Crs in FY15 and for FY 16 this if of rs. 190.10
Crs as forms the base of retention of the whole profit amount in the business . Gearing for the company has improved from
0.19 in FY13 to 0.47 in FY15.
Profitability
Though net revenue witnessed an increase of 3.33% in FY15, the PBDIT margin declined from
50.04% in FY14 to 44.02% in FY15 mainly on account of rise in expenses relating to provision for
depreciation backed by increase in fixed assets through secured loans and its interest component
etc. Consequently PAT margin also declined to 18.18% in FY15 from 26.02% in FY14. How-ever as
per provisional’s FY16, PBDIT margins increased to 62.34% and PAT to 29.98% basis of reduction
in interest on loan component as well reduce in other operating expenses.

18. Other Long Term Liabilities
As on dt. Secured Term loan obligation of Rs. 38 Crs. Among which accounts worth rs. 19.49 Crs to be closed in next 13
months. Further to note, rs. 14.06 Crs being the new addition of Secured Loan in FY16 funded by HDFC Bank and Rs. 6.54 Crs
and rs 7.52 Crs by SREI in replace and sale of OLD fleet.
DSCR
The comfortable at 7.17x in FY15. This was down by 22.94x (FY-14) basis of the fact, client having procured additional
secured loan exposure. How-ever this was improved to 12.96x in FY16(provisional) basis run-down of secured loan and other
interest component as well increment growth in PAT and add back of same as Capital…improving TNW.
Dr. & Cr. Days: Both being of much comfort as client getting the bills realized with in 46 days. Further as of Mar’16
receivables position stood at rs. 15.53 Crs and same being realized as on dt.
Liquidity
The company follows method of ploughing back of profit in the business @ 100%. Interest coverage
ratio of the company also stands good considering the service industry. The company has estimated its
liquidity at comfortable level at part with the last FY15. Current ratio was maintained at 0.59% in FY15
Vs 1.20 in FY14. Major current liability comprising Creditors by rs. 14.59 crs, Interest on Term Loans
Rs. 17.07 Crs, Rs. 2.20 crs and rs. 3.13 Crs allocated towards provisions and other current liabilities. As
of FY’16, same being improved to 0.67x.

19. What to be collected / looked for at regular intervals {High Value exposures}
 Latest Audited / Provisional Financial Statements
 Year to date Turn over along with
Latest Work Order / Book Order Position
Latest Debtors (Receivables Position) along with Ageing report
Latest Secured Loan Position
Latest Fund Based and Non Fund Based Limits along with Utilization Position
 Billing reflecting Bank Statements
 External Ratings…if any.
 Certified Networth Statements of the Promoters
 Industry / Mkt. Peers performance understanding reports
 Repayment Performance - Competitor Mkt. Feed back
Overall Industry Out-look (Local/Domestic/State/National / International) in ref. to Social, Political, Economic
factors at large.

20. 20
Prashanth Ravada