Report : Financial analysis of aanjaneya life care


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Report : Financial analysis of aanjaneya life care

  1. 1. “FINANCIAL ANALYSIS OF Submitted To: Dr. ASHOK PANIGRAHI Associate Professor NMIMS College School of Pharm SHIRPUR, MAHARASHTRA A REPORT ON “FINANCIAL ANALYSIS OF AANJANEYA LIFECARE : Submitted By SWAPNIL CHAVAN Associate Professor SHREYASH PIMPARKAR MBA Pharma Tech 2 Roll No. A026 & A028 macy and Technology Manag SHIRPUR, MAHARASHTRA 1 AANJANEYA LIFECARE LTD” Submitted By: SWAPNIL CHAVAN SHREYASH PIMPARKAR MBA Pharma Tech 2nd yr Roll No. A026 & A028 gement
  2. 2. 2 CERTIFICATE This is certify that Mr. Swapnil Chavan & Mr Shreyash Pimparkar worked during the period w.e.f. 10.03.2014 to 21.03.2014 on the development of the project “Financial analysis of Aanjaneya Lifecare Limited”, in the partial fulfillment of the requirement for the degree of MBA Pharma Tech under my guidance & supervision. To the best of my knowledge, the matter represented in this project is a bonafide & genuine piece of work. During his association with the project I found him to be sincere & motivated individual. He has shown keen interest in this project & him conduct was excellent. I wish him all success in his career. Place: Mumbai Date: 21-3-2014 Dr Kannan Vishwanath MANAGING DIRECTOR Aanjaneya Lifecare Ltd. Chembur
  3. 3. 3 Guided by: Dr Kannan Vishwanath Managing Director Aanjaneya Lifecare Ltd. Chembur DECLARATION We, SWAPNIL CHAVAN & SHREYASH PIMPARKAR are bonafied students of M.B.A.Pharma Tech at NARSEE MONJEE INSTITUTE OF MANAGEMENT STUDIES. Our enrollment number are A026 &A028. I hereby declare that present summer internship report titled Account of assets is my original work. I conducted this study at AANJANEYA LIFECARE LTD” during 10 March to 21March, 2014. This report has not been submitted earlier either with NARSEE MONJEE INSTITUTE OF MANAGEMENT STUDIES and any other educational organization as an essential requirement for the award of any Diploma/ Degree. Date- 21/03/2014 Signature: - SWAPNIL CHAVAN SHREYASH PIMPARKAR
  4. 4. 4 PREFACE Someone has rightly said that practical knowledge is far better than classroom teaching. During this project I fully realized this and I came to know about how a retailer chooses among a varied range of products available to him. The subject of my study is Financial Analysis of Aanjaniya Lifecare Ltd., which has slowly but steadily evolved from a beginner to a corporate giant earning laurels and kudos throughout. The report contains first of all brief introduction about the company. Finally there comes data presentation and analysis in the end of my project report. I also put forward some of my suggestion hoping that they will help Aanjaniya Lifecare Ltd. Move a step forward to being the very best.
  5. 5. 5 ACKNOWLEDGEMENT I acknowledge my deep sense of gratitude for giving me this opportunity to undergo my project with Aanjaniya Lifecare Ltd. At this moment of successful completion of the project, I would like to express my sincere thankfulness and indebtedness to all those who extended their kind help by spending their precious time in explaining the various intricacies of the subject and suggesting the correct approach to me. To start with I would like to thank not once but twice MR.KANNAN VISHWANATH (Chairman) AND MR. PRABHAT GOYAL (M.D.) whose contribution to the project is beyond my capacity of expression. I would like to thank Mr. LALIT SHUKLA (GM), Mr. BHANU PANDEY who had been my project guide for their understanding, gracious and constructive advice which played a major in completion of this project. At last but not least I would also like to thanks Mr. ASHOK PANIGRAHI (Lecturer) Guide for providing insights about performing our work. This Project has been a great learning outcome for me and without his help it would not have possible for me to this project.
  6. 6. 6 CONTENTS: 1. Introduction • Company overview 8 • Executive Summary 9 • Vision,Mission,Values 10 • Enviornmental Policy 12 • Board of directors 13 2. Awards 15 3. Journey and Subsidiaries 4. SWOT Analysis 5. Competitors 6. Product Profile • Formulations 17 • Others- API 18 7. Research and Development 19 8. Annual Report (2012-2013) • Balance Sheet 21 • Profit and loss sheet 22 9. Financial Analysis • Introduction 24 • Nature of financial analysis 25 • Objective of financial analysis 25
  7. 7. 7 • Type of financial analysis 25 10. Ratio Analysis • Financial ratios 26 • Utility of financial ratios 26 • Advantages 26 • Role of financial ratios 28 11. Classification of Ratios 29 • Liquidity ratios 29 • Leverage ratios 30 • Turnover ratios 32 • Profitability ratios 34 • Profitability ratios based on investment 34
  8. 8. 8 OVERVIEW Aanjaneya. Just what makes us different. We are an Research driven pharmaceutical company based in India. • We are the third-largest quinine salts manufacturer in the world and among the-largest controlled substances quota in India. The result: global respect in a competitive business. • We manufacture Finished Dosage Forms (branded and generic) as well as their raw materials (Active Pharmaceutical Ingredients). The result: an extended value chain. • We transformed lozenges into a Novel Drug Delivery System (NDDS) for common illnesses with two dedicated Lines for Hard Boiled Lozenges. The result: excellent patient compliance. • We created an infringing route of synthesis for three complex anti-cancer drugs (Docetaxel, Gemcitabine Hydrochloride and Capcitabine). The result: global patents and the prospects of attractive long-term revenues. • We undertake custom manufacture of APIs and advanced Intermediates CRAMS. The result: offering a competitive advantage to its clients over the entire life cycle of the products. • We undertake Technology Transfer Services & Dossier Development Services. The result: revenues generated from long term contracts.
  9. 9. 9 EXECUTIVE SUMMARY Our Approach Ever since our inception, we committed ourselves to the highest standards of corporate governance. We believe that a robust corporate governance policy drives healthy business growth and reinforces vibrant markets, besides serving an important instrument of investor protection. Governance also provides an appropriate framework for the Board and the Management to set corporate objectives to enhance shareholder value. Core Values Our corporate governance is defined by clear, established values, standards of business conduct and code of ethics. Business Ethics Our business code reaffirms our adherence to core values and serves as a practical guide to everyday work life. Constantly accommodating new legal and regulatory developments, this code is a valuable resource in assisting employees with decision making to ensure that business is conducted with integrity. This business code also helps in preventing, detecting, reporting and addressing any allegation of misconduct and violations of law. Transparency Adhering to the principle of fair disclosure, we regularly provide information on the company’s position and significant changes in business activities to all our stakeholders.
  10. 10. 10 Vision, Mission, Values & Philosohy Vision Dr. Datsons strives to be the premier provider to the pharmaceutical industries for development and commercialization of new medical therapies in Anti Cancer and Anti Malarial worldwide. Mission To combine the strength of our expertise, experience and innovation to advance in the worldwide success of the pharmaceutical industries in preventing and curing disease. Values We value doing what's right and demand honesty, maintenance of confidentiality and adherence to professional standards of excellence. We strive to understand our clients' requirements and meet or exceed their expectation with high quality deliverables and service. We are flexible and always look for proactive, responsible solutions to ensure client satisfaction. Philosophy Innovation drives growth. Sensitive to market needs and committed to innovation, here at Dr. Datsons we focus on niche product manufacturing platforms, combining cutting-edge technology and the best minds in the business. Valuing People We value individuality and creativity. Our unique “People and Process Paradigm” helps achieve the twin objective – emphasis on regulatory and compliance on one hand, while fostering – innovation and creativity on the other.
  11. 11. 11 Peak Performance We seek to build a sustainable organizational eco-system where one is constantly motivated to attain new heights and empowered to discover new avenues for growth. Quality Quality has always been a strong part of Dr. Datsons’s proposition. Our quality initiative covers all aspects including product quality, operational quality, environmental quality and finally a good quality of life for our people. Harmony with Society We seek to balance environmental impact and economic interest in all our business activities. Committed to the development of the society, culture and economy, we dutifully observe laws; demonstrate high ethical standards and endeavour to preserve the environment.
  12. 12. 12 ENVIROMENTAL POLICY Sustainability is one of our core values, and integral to our overall vision in shaping a dream. As a responsible member of the society, we realise that we cannot alienate ourselves from the eco-system and we have to give back to the world what we take. We know we operate in a sector that can have a significant impact on the environment, which means we have an even greater responsibility to make sure we use our resources wisely, and manage our waste and emissions effectively. We have been awarded the coveted ISO 14001-Quality Certification for our Quality Environment Management Systems. Our facilities are the first and among the few 'zero- discharge' pharmaceutical facilities in Hyderabad, India. We also have sophisticated technologies for vent gas condensation, solvent re-circulation and reverse osmosis. Significant resources have also been invested in putting up world-class effluent treatment infrastructure � regarded as a showcase in the Indian pharmaceutical industry. In addition, we also have a mobile vehicle equipped with state-of-the-art monitoring equipments to constantly measure the quality of ambient air in and around our manufacturing facilities. Our green policies have earned us the reputation of being a pioneer in Environmental Management Systems and have won appreciation from various delegates including the European Society for Quality Research (ESQR) and t=The prestigiousIMC Ramkrishna National Quality Award in 2012. In Defense of Animals (IDA) The Company actively supports IDA, which focuses on the elimination of animal abuse. We support IDA programs that provide critical care and medication to stray animals. Women Education The Company is committed to the cause of ‘Education for All’, especially women as they represent the back bone of a family. It supports initiatives for educating women in rural and backward areas in Mahad (Raigad Dist) through government-recognized institutes, facilitating rural employment.
  13. 13. 13 BOARD OF DIRECTORS (As on 31.03.2013) Mr. Chandulal Shah (Chairman Emeritus) Mr. Chandulal Shah is Chairman Emeritus of the Company. He was awarded Dalit Mitra Award from Government of Maharashtra. Dr. Kannan Vishwanath (Vice Chairman and Managing Director) Dr. Kannan K. Vishwanath, 38 years, is the Founder and the Vice Chairman and Managing Director of our Company. Mr. Prabhat K. Goyal (Non Executive Director) Mr. Prabhat K. Goyal, 59 years, is the Whole Time Non Executive Director of our Company. He is a Postgraduate in Organic Chemistry from Vikram University, Ujjain.
  14. 14. 14 Mr. Shashikant B. Shinde (Executive Director) Mr. Shashikant B. Shinde, 61 years, is the Whole Time Director of our Company. Mr. Shinde holds a Masters degree in management from Marathwada University. Mr. Minaj Khan (Non-Executive Director) Mr. Minhaj Khan 33 years, is an Independent Director of our Company. Mr. Khan is a chartered accountant with broad experience in all aspects of accounting. Mr. Giridhar G. Pulleti (Non-Executive Director) Mr. Giridhar G. Pulleti, 45 years, is an Independent Director of our Company. Mr. Pulleti holds a Masters degree in science. More
  15. 15. 15 Awards and Accolades Dr. Datsons’s global accolades... position it differently. We started the tough way. We proactively institutionalized best-in-league systems and processes. And the globe vindicated our approach. The result: we are partners with global pharma leaders. 2009 • Our Chairman, Mr Kashi Vishwanathan received the Excellence Award from the Former Hon. Dy. Prime Minister of Thailand Mr Korn Dabaraasi at the Indo - Thai Economic Cooperation Summit held in Delhi in April 2009. • The Company received the Business Excellence Award at World Summit of Emerging India in July 2009. • The Company received the Quality Award from Europe Business Assembly in Vienna in December 2009. 2010 • The Green Business of the Year Award at Emerging India Awards by ICICI Bank, CNBC TV18 & Crisil. 2011 • Dr Kannan Vishwanath, Managing Director, received The Outstanding Entrepreneur of the Year 2011 at the second edition of Asia Pacific Entrepreneurship Awards 2011. • The Company was nominated Emerging Company of The Year 2011 and India’s Most Technically & Scientifically Advanced Pharmaceutical Manufacturing Unit of the Year 2011 at 4th Annual Pharmaceutical Leadership Summit & Awards 2011. • The Company received India's Best Companies To Work for 2011 and ranked among Top 100. 2012
  16. 16. 16 • The Company received the Corporate Governance Award for Best Practices 2012 By European Institute of Quality Research at Amsterdam on April 12th 2012. • The Company received The IMC Ramakrishna Bajaj Quality Award "Certificate of Merit" in SME Category. • The Golden Peacock National Quality Award. • The BSE Award of Best Returns to Investors by Pharmaleaders. • The Pharmexcil Best Exporter of Year (Silver) by Ministry of Commerce & Pharmexcil. • The Company received the India's Most Valuable Company in "Corporate Governance, Ethical Practice & Sustainability Vision" Award on April 6th 2012. 2013 • The Council of Fair Business Practices (CFB - Jamnalal Bajaj Award 2013). • The DSIR – ASSOCHAM "Emerging Pharmaceutical Company of Year". • The ICC Corporate Governance & Sustainability Award.
  17. 17. 17 Aanjaneya Lifecare Limited Corporate Office: Plot No 34, Postal Colony, Chembur Mumbai 400071, India Ph: +91-22-25264500 Fax: +91-22-25223251 Email: Manufacturing Facilities and Plant R&D: Regd Office & Unit I K-4/1 Additional MIDC, Mahad - 403209, Dist. - Raigad, Maharashtra Ph.: + 91 - 2145 - 235600 Fax: + 91 - 2145 - 235602 Unit II Gat. No. 123, Pirangut, Taluka - Mulshi, Dist. - Pune - 412108, Maharashtra Ph.: + 91 - 20 - 67908400 Fax: + 91 - 20 - 67908403 Contact Details: New Business Mr. Shashikant Shinde Executive Director Email: Investors CS. Yogesh Patel Company Secretary & Compliance Officer Email: Formulations Mrs. Jayanthi Moily DGM Email: APIs-New Business Mr. Pramod Nanu GM Email:
  18. 18. 18 Our Journey and Subsidiaries Our Company was originally incorporated as Anjaneya Biotech Private Limited on January 03, 2006 under theCompanies Act, 1956 vide Certificate of Incorporation bearing CIN: U24230MH2006PTC158589 issued by the Registrar of Companies, Maharashtra, Mumbai. The name of our Company was changed to Aanjaneya Biotech PrivateLimited vide fresh Certificate of Incorporation dated March 08, 2007. Our Company was converted into a publiclimited company vide fresh Certificate of Incorporation dated April 12, 2010 and subsequently the name of our Company was changed to ‘Aanjaneya Biotech Limited’. Our Company has been allocated CIN: U24230MH2006PLC158589. The name of ourCompany was then changed ‘Aanjaneya Lifecare Limited’ vide fresh Certificate of Incorporation dated June 19, 2010. The current Promoters of our Company are Aasda Life Care Limited and Dr. Kannan K. Vishwanath. Our company was incorporated in the year 2006 and began its commercial production of APIs of salts of quinine a secondgeneration anti malarial, in the year 2007. In December 2009, pursuant to the acquisition of the then entire paid up capital of our Company by Aasda Life Care Limited, our Company became a wholly owned subsidiary of Aasda Life Care Limited. Thereafter, from time to time further shares were issued to our individual promoter and our Company then ceased to be a wholly owned subsidiary of Aasda Life Care Limited. In the year 2010 our Company ventured into manufacturing of Finished Dosage Forms by acquiring the assets of Prophyla Biologicals (P) Limited (including plant, machinery, land and building, furniture and fixtures, trade marks and other movables) situated at Gut No. 123, Pirangut, Taluka – Mulshi, district, Pune – 411 004, Maharashtra, India, through an Asset Purchase Agreement dated March 30, 2010 and Deed of Assignment for trademarks dated April 01, 2010. These assets constitute our formulation unit at Pune.
  19. 19. 19 Competitors Revenue Rank 2008 Company Country Employees 2006 1 Pfizer USA 122,200 2 Novartis Switzerland 138,000 3 Merck & Co. USA 74,372 4 Bayer Germany 106,200 5 GlaxoSmithKline United Kingdom 106,000 6 Johnson and Johnson USA 102,695 7 Sanofi France 100,735 8 Hoffmann–La Roche Switzerland 100,289 9 AstraZeneca United Kingdom 50,000+ 10 Abbott Laboratories USA 66,800 11 Bristol-Myers Squibb USA 60,000 12 Eli Lilly and Company USA 50,060 13 Amgen USA 48,000 14 Boehringer Ingelheim Germany 43,000 15 Schering-Plough USA 41,500 16 Baxter International USA 38,428 17 Takeda Pharmaceutical Co. Japan 15,000 18 Genentech USA 33,500 19 Procter & Gamble USA 44,500
  22. 22. 22 Research and Development Infrastructure Our core competence has always been in state-of-the-art development and manufacturing infrastructure. We have three R&D divisions dedicated to process research, NDDS and development, pharmaceutical Formulation development These research facilities are in the vanguard of creating generic product pipelines, novel processes and formulations, each aimed at building valuable intellectual property. We are capable of conducting all research activities in-house. Sophisticated equipment and modern bioinformatics provide an edge to Dr. Datsons’s research activities. The National Good Laboratory Practices (GLP) has also certified our R&D facilities for GLP compliance. Our end-to-end connected infrastructure, which enables complete value-chain integration, remains a key driver of our growth in the diverse and differentiated arenas of generic research, encompassing the entire pharmaceutical spectrum. Process Research: Our process research team is focused on developing patentable non-infringing processes for the company's operations in the regulated markets. Pharma Research: The pharma research division covers both the antibiotic and non-antibiotic segments with specific departments for the domestic markets, other emerging markets and regulated markets. A specialised veterinary formulations program is also underway. New Drug Delivery Systems Pioneering research to devise newer strategies for effectively delivering the drugs in the body or improvise the existing technologies to enhance their efficiency is the need of the hour. The ever improving delivery systems are not only beneficial to the patients as they are less cumbersome and easy to abide by but also reduce the complications associated with the induction of the drug in the body. At Dr. Datsons, we focus on developing novel drug delivery systems (NDDS) for select molecules. A few platform and product specific technologies with six prototype formulations have been successfully developed.
  23. 23. 23 Areas of NDDS Research • Drug specific • Platform technologies • Disease conditions Intellectual Property Management We have been a leading generator of intellectual property in the Indian pharmaceutical industry. The IPM department supports development of patent applications, files patents, supports the development of patent applications and identifies potential new products and markets for APIs and formulations besides supporting research activities. Dr. Datsons’s Intellectual Property Management (IPM) department comprise of qualified and experienced personnel to support its operations. Several filings have been made in the areas of new drug discovery (NDD) and novel drug delivery systems (NDDS) across various national and international patent offices. Several patents have been published and granted in the areas of drug discovery and other cutting- edge spaces. In the near future, further acceleration in the filing process with the publication and grant of patents is expected.
  25. 25. 25 INTRODUCTION The ever changing, external & internal environment in which the organization operates to achieve its goal has often leaded to change in the financial structure of the firm. This change may be in the assets structure, capital structure or any other such type of the change have often been found out of bring changes in the liquidity position, level of activity & profitability of organization. To be aware of various positions parties concerned with the organization often go for the various type of analysis one of them being financial analysis, that is done to know about the present performance of the firm in which they are either going to invest or do business, with. The responsibility of management to look after the effective & efficient utilization of resources of the overall sound financial situation of the organization, increase their requirement to have a detailed report on probably each & every aspect of financial position which may be liquidity, activity, profitability. The presentation of an elaborate system of ratio analysis was made in 1909 by Alexander wall, who criticized the bankers for its lopsided development owing to their decisions regarding the grant of credit on current ratios alone. Wall, one of the foremost proponents of ratio analysis, pointed out that, in order to get a complete picture, it is necessary to consider relationship in financial statement other than that of current assets to current liabilities – relationship that might be measured quantitatively and used as checks on current ratio. Since then, comprehensive analysis by means of calculation of a series rapidly became all the range. Based upon their wide range of requirement the general trend is of going for the financial ratio analysis, which is also considered to be the most effective one capable of giving detailed & accurate information, more detailed & accurate than any other type of financial analysis. Financial ratio analysis is an arithmetic relationship between two figures. Financial ratio analysis is a study of ratio between various items of groups of items in financial statement. It also based upon various financial ratios, which are calculated from the data provided in company‟s balance sheet & profit and loss account.
  26. 26. 26 As per I.M. Pandey “Financial ratio in the relationship between two accounting figures, expressed mathematically “. In addition to the analysis based on current year financial ratio comparison with previous year help us in establishing various methods. Which are further helpful in predicting the future of the concern as well as present financial situation? This report has been prepared for the management purpose to make them aware of the unit in the various fields of finance. Detailed analysis is also a part of this report, which is based upon various ratios calculated & various trends seen. Each & every ratio has been analyzed briefly & adequately followed by various inferences & suffusions based on this analysis, which is beneficial for the Top- level Management in the better financial control & planning for future. This report is just a part of feedback to the Top-level Management for the various plans they made regarding allocation of financial resources etc, which were implemented, in the current financial year. This report can give a deep insight into various matters if any implementation of the plans for achieving the objective of the firms. Various other factors are there which limit the accuracy & correctness of the report. Even then a great effort has been kind of analysis & interpretation on personal level.
  27. 27. 27 Nature Ratio analysis is a powerful tools a financial analysis. In financial analysis, a ratio is used as a benchmark. For evaluating the financial position & performance of the firm. The relationship between two accounting figures, expressed mathematically, is known as a financial ratio. Ratio helps to summarized large quantity of financial data & to make qualitative judgment about the firm‟s financial performance. This relationship is an index or yardstick, which permits qualitative judgments to be, formed about the firm‟s ability to, meets its current obligations. It measured the firm‟s liquidity. The greater the ratio, the greater the firm‟s liquidity & vice-versa. The point to be note is that a ratio reflecting a quantitative relationship helps to form qualitative judgments. Such is the nature of all financial ratios.
  28. 28. 28 USES OF FINANCIAL ANALYSIS FOR DIFFERENT PARTIES The analysis and interpretation of financial is an important accounting activity. The end users of business statement are interested in these statements primarily as an aid to determine the financial position and the results of the operations. There are different parties interested in the financial analysis of their statement and their aims and to different parties: To the financial executives : The first party interested in the financial statements analysis is the finance department of the business concern itself to the financial managers such analysis provides a deep insight into the financial condition of the enterprises and the view of the past performance which helps in future decision making. The financial statements give vital information concerning the position of the enterprise as well the result of the operations. To the top management: The top management of the concern is also increase in the analysis of these statements because it helps them reaching conclusions regarding: • Performance appraisal of overall business activities. • Enquire about current financial position and long-term strategic planning. • Queries concerning the relationship of earning to trends in sales etc. • Queries concerning the relationship of earning to investment.
  29. 29. 29 To the creditors: The analysis of these statements is very essential to the creditors. Also some aspect of enterprises operations are of interested to creditors in regard to liquidity of funds, soundness of financial structure, profitability of the operations, effectiveness of working capital management etc. To the investors and others: Investors presents as well as prospects are also interested in the measurement of earning capacity of the securities. Investors have been increasingly concerned with the cash generation capability of an enterprise, primarily in term of the flexibility available to such enterprise to acquire other business and new assets on an advantage basis for Thai purpose.
  30. 30. 30 BALANCE SHEET (As on 31 march 2013) Balance Sheet of Dr. Datson Labs ------------------- in Rs. Cr. -------------------Mar '12 Mar '11 Mar '10 Mar '09 Mar '08 12 mths 12 mths 12 mths 12 mths 12 mths Sources Of Funds Total Share Capital 13.89 7.58 5.78 4.95 2.00 Equity Share Capital 13.89 7.58 5.78 4.95 2.00 Share Application Money 0.00 0.00 0.00 0.00 0.00 Preference Share Capital 0.00 0.00 0.00 0.00 0.00 Reserves 335.91 126.81 44.00 7.36 2.29 Revaluation Reserves 0.00 0.00 0.00 0.00 0.00 Networth 349.80 134.39 49.78 12.31 4.29 Secured Loans 193.94 123.35 49.59 31.41 11.70 Unsecured Loans 104.64 15.50 10.10 6.22 0.74 Total Debt 298.58 138.85 59.69 37.63 12.44 Total Liabilities 648.38 273.24 109.47 49.94 16.73 Mar '12 Mar '11 Mar '10 Mar '09 Mar '08 12 mths 12 mths 12 mths 12 mths 12 mths
  31. 31. 31 Application Of Funds Gross Block 233.72 74.55 48.55 13.95 10.97 Less: Accum. Depreciation 19.87 4.21 1.62 0.74 0.23 Net Block 213.85 70.34 46.93 13.21 10.74 Capital Work in Progress 144.24 46.68 4.20 0.00 0.00 Investments 0.78 0.05 0.05 0.05 0.05 Inventories 137.52 82.37 36.04 15.34 2.79 Sundry Debtors 200.58 90.46 43.30 30.92 12.31 Cash and Bank Balance 4.40 0.14 0.26 0.73 0.08 Total Current Assets 342.50 172.97 79.60 46.99 15.18 Loans and Advances 16.59 4.30 3.49 0.46 1.63 Fixed Deposits 0.00 0.53 0.49 0.00 0.00 Total CA, Loans & Advances 359.09 177.80 83.58 47.45 16.81 Deffered Credit 0.00 0.00 0.00 0.00 0.00 Current Liabilities 56.78 1.10 18.78 8.25 10.20 Provisions 12.78 20.56 6.51 2.51 0.67 Total CL & Provisions 69.56 21.66 25.29 10.76 10.87 Net Current Assets 289.53 156.14 58.29 36.69 5.94 Miscellaneous Expenses 0.00 0.00 0.00 0.00 0.00 Total Assets 648.40 273.21 109.47 49.95 16.73 Book Value (Rs) 251.89 177.37 86.16 24.88 21.44
  32. 32. 32 PROFIT AND LOSS (Rupees in Crores) Consolidated Profit & Loss account ------------------- in Rs. Cr. ------------------- Mar '13 Mar '12 12 mths 12 mths Income Sales Turnover 520.76 479.96 Excise Duty 0.00 0.00 Net Sales 520.76 479.96 Other Income -40.15 2.36 Stock Adjustments 11.99 16.75 Total Income 492.60 499.07 Expenditure Raw Materials 400.28 371.69 Power & Fuel Cost 3.16 4.67 Employee Cost 6.73 5.64 Other Manufacturing Expenses 5.12 3.00 Selling and Admin Expenses 0.00 0.00 Miscellaneous Expenses 11.76 6.34 Preoperative Exp Capitalised 0.00 0.00 Total Expenses 427.05 391.34 Mar '13 Mar '12 12 mths 12 mths
  33. 33. 33 Operating Profit 105.70 105.37 PBDIT 65.55 107.73 Interest 42.65 29.05 PBDT 22.90 78.68 Depreciation 20.22 15.66 Other Written Off 0.00 0.00 Profit Before Tax 2.68 63.02 Extra-ordinary items -0.04 0.00 PBT (Post Extra-ord Items) 2.64 63.02 Tax 2.22 22.02 Reported Net Profit 0.43 40.99 Minority Interest 0.00 0.00 Share Of P/L Of Associates 0.00 0.00 Net P/L After Minority Interest & Share Of Associates 45.33 40.99 Total Value Addition 26.76 19.65 Preference Dividend 0.00 0.00 Equity Dividend 0.14 0.00 Corporate Dividend Tax 0.47 0.00 Per share data (annualised) Shares in issue (lakhs) 138.87 138.87 Earning Per Share (Rs) 0.31 29.52 Equity Dividend (%) 0.00 0.00 Book Value (Rs) 222.73 251.88
  34. 34. 34 Types of Financial Analysis Financial analysis may be classified into different categories dependency upon
  35. 35. 35 (a) According to material used Internal analysis – this is performed by the corporate finance and accounting Department and is more detailed than external analysis. These departments have available more details and current information that is available to outsiders. They are able to prepare perform or future statements and are able to produce a more accurate and analysis of the firm‟s strength and weakness. External analysis – outsiders to the firm such as creditors, stock-holders or investment analysis perform this. It makes use of existing financial statement and involves a limited access to confidential information on a firm. (b) According to modus operation of analysis Horizontal analysis – this method of classified is based on the modus operandi of analysis. Horizontal analysis refers to the comparison of the trend of each item in the financial statement over a number of years or companies. The figures of this type of analysis are presented horizontally over a number of columns. Such a column represents a year of a company. This type of analysis is also called „dynamic analysis‟ as it is based on data from year to year, rather than on data of any one year. Vertical analysis – it is frequently used for referring to ratios developed for one data or one accounting period. Vertical analysis is also called static analysis. This is not very conductive to a proper analysis of the firm‟s financial position and its interpretation as it does not enable to study data in respective. This can only be provided by a study conducted over a number of years so that comparison can be affected. Therefore, vertical analysis is not very useful.
  36. 36. 36 Financial Ratio & Utility A ratio may be defined as a fixed relationship in degree or number between two numbers. In finance, ratios are used to point out relationship that is not obvious from the row data. Some uses financial ratios are following (1) To Compare Different Companies in Some Industry: ratio can high light the factors association with successful and unsuccessful firms. They can reveal strong firms and weak firms, overvalued undervalued firms. (2) To Compare Different Industries: Every industry has its own unique set of operating and financial characteristics. These can be identified with the help of ratios. (3) To Compare Performance In The Different Time Periods: Over a period of years, a firm or a industry develop certain forms that may indicate future success or failure. If relationship changes in firms data over different time periods, the ratio may provide clues and trends of future problems.
  37. 37. 37 Utility of Financial Analysis Following are the advantages of Financial Analysis With the help of ratios we can determine the ability of the firms to meet its current- obligation. Overall operating efficiency and performance of the firm. Efficiency with which firms is utilizing its various assets in generating sales Revenue. Ratios help in inter-firm and intra-firm comparison. They help in determining the financial strength by highlighting the liquidity. They are useful in comparison of performance. They are also useful in forecasting purpose.
  38. 38. 38 ADVANTAGES OF RATIOS The ratio analysis is one of the most powerful tools of financial analysis. It is use as a device to analysis and interprets the financial health of enterprise. Just like a doctor examines his conclusion regarding the illness and before giving his treatment, a financial analyst analyses the financial statement with various tools of analysis before commenting upon the financial bearlth or weakness of an enterprise. „A ratio is known as a symptom like blood pressure, the pulse rate or the temperature of the individual‟. It is with help of ratios that the financial statements can be analyzed and decision made from such analysis. HELPS IN DIVISION MAKING: Financial statements are prepared primarily for decision making, but the information provided in financial statements is not an end in itself and no meaningful conclusions can be drawn from these statements alone. Ratio analysis helps in making decisions from the information provided in these financial statements. HELPS IN FINANCIAL FORCASTING AND PLANNING: Ratios analysis is of much help in financial forecasting and planning. Planning is looking ahead and the ratios calculated for a number of year‟s work as a guide for the future. Meaningful conclusions can be drawn for future from these ratios. Thus, ratio analysis helps in forecasting and planning. HELPS IN COMMUNICATING: The financial strength and weakness of a firm are communicated in a more easy and understandable manner by the use of ratios the information contained in a financial statements conveyed in a meaningful manner to the one for the whom it is meant. Thus, ratios help in communicating and enhance the value of financial statements. HELPS IN COORDINATION: Ratios even helps in coordinating, which is utmost important in effective business management. Better communication of efficiency and weakness of an enterprise results in better coordination in the enterprise. HELPS IN CONTROL: Ratio analysis even helps in making effective control of the business. Standard ratios can be based upon Performa Financial Statements and variance or deviations, if any, can be founded by comparing the actual with the standards so as to take corrective action at the right time. The weakness or otherwise, if any, come to the knowledge of the management which helps in effective control of the business.
  39. 39. 39 ROLE OF FINANCIAL RATIO Aid in financial forecasting: Ratio analysis is very helpful in financial forecasting. Ratio relating to the past sales, profits & financial position from the basis for setting future trends. Aid in comparison: With the help of ratio analysis ideal ratio can be composed & they can be used for comparing a firm progress & performance. Inter firm comparison with the industry averages is made possible by ratio analysis. Financial solvency of the firm: Ratio analysis indicates the trend in financial solvency of the firm. Solvency has to dimensions: • Long-term Solvency • Short-term Solvency Long term solvency refers to the financial viability of the firm Short-term solvency is the liquidity position of the firm. Communication values: Different financial ratios communicate the strength & financial standing of the firm to the internal & the external parties. They indicate overall profitability of the firm Other uses: Financial ratios are very helpful in the diagnosis & financial health of a firm. They highlight the liquidity, solvency, profitability & capital gearing etc. of the firm. They are useful tools of analysis of financial performances.
  40. 40. 40 OBJECTIVE OF THE STUDY An analysis of financial statements with the help of „ratio‟ may be termed as “Ratio Analysis”. It implies the process of computing determining & presenting the relationship of the terms or group of items of the financial statements. It also involves the comparison & interpretation of these ratios & use of them for future projections. And the fund flow arises when the net effect of the transaction is to increase or decrease the amount of working capital. Normally, a firm will have some transactions that will change net working capital & some that will cause no change in net working capital include most of items of profit & loss account and those business events, which simultaneously effect both current & non-current balance sheet items.
  41. 41. 41 CLASSIFICATION OF RATIOS Ratio may be classified in a number of ways to suit any particular purpose. Different kinds of ratio statement are selected for different types of situations. Mostly, the purpose for which the ratios are used and the kind of the data available determine the nature of analysis. In general, the following basis of classification is in vogue. (a) Traditional classification or classification according to the statements from which ratios are derived: A basis of classification of ratios which readily suggests itself is according to the statement to which the determinants of a ratio belong. From this angle, ratios are classified as thus: (1) Balance Sheet Ratios: These ratios are also called financial ratios. They deal with the relationship between two items, or group of item, which are together in the balance sheet, example current ratio, liquid ratio, proprietary ratio, fixed assets ratio, capital gearing ratio, and debt equity ratio. (2) Profit & Loss Account Ratios: These ratios are also called operating ratios. The items used for the calculation of these ratios are usually taken out from the profit and loss statement. Example : operating ratio, expensive ratio, net profit ratio, gross profit ratio, stock turnover ratio. (3) Inter-statement ratios or combined ratios: The information required for the compilation of these ratios is normally drawn from both the balance sheet, and profit & loss account. Example : Return on capital employed, return on proprietors‟ funds or share holders‟ investment, and return on total investment, debtors Turnover ratio, creditor‟s turnover ratio, fixed assets turnover ratio, working capital turnover ratio.
  42. 42. 42 (b) Classification according to tests satisfied or functional classification:- Robert N. Anthony suggested that ratios may be grouped the basis of certain tests which satisfy needs of the parties having financial interest inventory the business concern. These tests are: • Test of liquidity • Test of profitability • Market tests (c) Classification from the point of view of financial management or classification according to nature: This standard of classification envisages the organization of accounting ratios into four fundamental types which are as follows; (1) LIQUIDITY RATIOS Liquidity refers to the ability of the firm to meet its obligations inventory the short-run, usually one year. Liquidity ratios are generally based on the relationship between current assets and current liabilities (the sources for meeting short-term obligations). Example: Current ratio, Acid test ratio. (2) LEVERAGE RATIOS • Capital structure ratio • Earnings ratio • Dividend ratio
  43. 43. 43 Financial leverage refers to the use of debt finance. While debt capital is analysis cheaper source of finance, it is analysis riskier source of finance. Leverage ratios helps inventory assessing the risk arising from the use of debt capital. They are also known as capital structure ratios. Example: Debt-to-equity ratio, fixed assets to net work, interest coverage ratio. (3) ACTIVITY RATIOS They are also called turnover ratios or asset management ratios. They measures how efficiently the assets are employed by the firm. These ratios are based on the relationship between the level of activity and the level of various assets. Example: Fixed assets turnover, Stock turnover, Debtors turnover, Creditors turnover, Total assets turnover ratio. These ratios would also indicate the profitability position of the business. (4) PROFITABILITY RATIOS Profitability reflects the final result of business operations. There are two types of profitability ratio. • Profit margin ratios • Rate of return ratios A profit margin ratio shows the relationships between profit and sales. Rates of return reflect the relationship between profit and investment. (d) Classification According To Importance: Some ratios when related to the main objective of the business purpose of analysis may be more important than others. This basis classification has been recommended by the British Institute of Management for inter-firm computations and the following types have been suggested by the instit ute:
  44. 44. 44 (1)Primary Ratios: The primary motive of any commercial under taking is profit and therefore, ratios like profit-to-sales, return on capital employed may be termed as primary ratios to such an undertaking. (2) Secondary Ratios: These ratios are mainly used to explain the primary ratios. They are also known as subsidiary or supporting ratios. Taking the ratio of return on capital employed as the primary ratio, the following ratios may be grouped as secondary ratios: (a) Profit and Earning ratios (b) Cost or expenses ratios (c) Turnover ratios
  45. 45. 45 SHORT-TERM SOLVENCY OR LIQUIDITY RATIOS Liquidity ratios play analysis key role in the analysis of the short-term financial position of analysis business. Commercial banks and other short-term creditors are generally interested in such an analysis. However, managements can employ these ratios to ascertain how efficiently they utilize the working capital in the business. Shareholders and debenture-holder and long-term creditors can use these ratios to assets the prospects of dividend and interest payments. This type of ratios normally indicates the ability of the business to meet the maturing or current debts, the efficiency of the management inventory utilizing the working capital and the progress attained inventory the current financial position. Description of Principal Ratios:- 1. Current Ratio Current ratio may be defined as the ratio of current assets to current liabilities. It is also known as working capital ratio or 2 to 1 ratio. Current ratio shows the relationship between total current assets and total current liabilities. Components Current assets normally include cash in hand or at bank, marketable securities other short-term high quality investment bills receivable, prepaid expenses, work- in-progress, sundry debtors and inventories. While current liabilities are composed of sundry creditors, bills payable, outstanding and accrued expenses, income tax payable. Expressed as a formula, the current ratio is as follows: Current Ratio = Current Assets/ Current Liablities
  46. 46. 46 Acid Test Ratio or Liquid Ratio Acid test Ratio or Liquid ratio, as it is sometimes called is concerned with the relationship between liquid assets and liquid liabilities to supplement the information given by the current ratio. In many lines of business a concern whose current assets consist largely of inventory can very early become technically, if not actually; insolvent within analysis very short period of time and this is the rationale of the term „Acid-Test Ratio‟ Components: Liquid Assets = Current Assets – Inventory. Generally, this ratio is considered to be good if it is 1:1. It shows the relationship of quick cash-yielding assets to current liabilities. Expressed as a formula, the liquid ratio is as follows: Liquid Ratio= Quick Assets/Current Liablities
  47. 47. 47 LONG-TERM SOLVENCY ANALYSIS Bankers and other short-term creditors are most interested in the current debt-paying ability of business, so the share holders and debenture holders are mainly concerned with the long-term financial prospects. However, neither group may logically ignore the financial aspects of primary interest to the other so that both these groups concern themselves with current and prospective earnings. Some selected solvency ratios are discussed below: (a)Debt-Equity-Ratio Debt-to-equity ratio relates all external liabilities to owners recorded claims. It is also known as „External-Internal Equity Ratio‟. It is determined to measure the firm‟s obligations to creditors in relation to the funds invested by the owners. Components: The term external equities refers to total outside liabilities Debt-to-equity ratio 2:1 is acceptable. (b) Proprietary Ratio This is a variant of the debt-equity ratio. This ratio relates the share holders‟ funds to total assets. It is calculated by dividing the share holder‟s funds by the total tangible assets. This ratio indicates the long-term or future solvency position of the business. It is also known as Equity to total assets ratio or Net Worth to total Assets ratio. This ratio throws light on the general financial strength of the company. Higher the ratio, the better it is for all concerned. Proprietary Ratio =Shareholder Fund/ Total Assets (c) Ratio of Fixed Assets to Proprietors‟ funds: This ratio establishes the relationship between fixed assets and shareholders‟ funds. The purpose of this ratio is to indicate the percentage of the owners‟ funds invested in fixed assets. Fixed Assets = Fixed Assets/ Proprietors Fund
  48. 48. 47 Findings: 1. Current ratio: 2012 2013 50.6054 / 56.86 = 0.89 156.14/110.0=1.41 Interpretation: Ideal current ratio should be 2:1. So, we can say that the company’s financial position is not satisfactory but as compared to 2012, the current ratio of 2013 is more. Which means , Curent assets are less than current liabilities 2. Quick ratio: 2012 2013 485.0/110=4.41 359.09/110=3.19 Interpretation Ideally, it should be 1:1. So, it can be concluded that company’s financial position in 2012 was more sound compared to 2013. Debt equity ratio: 2012 2013 138.85/134.39=1.03 298.58/351.27=0.85
  49. 49. 48 Interpretation Ideally, it should be 1:1. So, it can be said that the organization’s repayment capacity of long-term debts has increased for the year 2013 as compared to 2012 3. Total assets to debt ratio: 2012 2013 273.21/138.85=1.96 648.4/298.5=2.17 Interpretation: Total assets in both the years is more than sufficient to repay in cash the total debts. 4. Proprietor’s ratio: 2012 2013 117.48/273.21=0.43 188.05/648.46=0.29 Interpretation: Since Ratio for the year 2013 is decreased, it can be concluded that the financial condition of the company is not sound. 5. Capital gearing ratio: 2012 2013 134.39/127.65=1.05 348.8/210.53=1.66 Interpretation: A low gearing is not beneficial to equity shareholders when rate of interest/dividend payable on fixed cost bearing capital is higher than the rate of return on investment in business
  50. 50. 49 5.Interest coverage ratio: 2012 2013 54.63 / 13.65 = 4 63.06 / 29.05 = 2.17 Interpretation: from the findings, it can be said that the business will earn sufficiently. 6. Fixed assets turnover ratio: 2012 2013 320.26/117.07=2.73 479.96/358.87=1.33 Interpretation: it can be concluded that the fixed assets are being utilized properly as the ratio remain intact. 9. Current assets turnover ratio: 2012 2013 320.26/156.14=2.04 479.96/289.53=1.65 Interpretation: since there is decrease in the ratio in 2013, it can be said that the working capital has not been utilized efficiently in making sales.
  51. 51. 50 10.Net profit ratio: 2012 2013 36.01 /320.26*100 =11.24 41.03/479.96*100 =8.54 Interpretation: the increase in ratio in 2013 implies managerial efficiency shows beeter performnce. 11.Return on Capital employed: 2012 2013 54.63/134.39=25.11 63.06349.80=14.20 Interpretation: the capital employed in the business is being utilized properly as there is a increase in the ratio in 2013.
  52. 52. 51 CONCLUSION In balance sheet:- Net worth has increase substantially Total debt decreases following year. Total liabilities increase with relation to 2012. Current liabilities decreases. Current assets and Total assets both increases . In Profit/Loss a/c:- Total Income increases. Total expenses increases. Net profit increases. Net sales increases.