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CAPITAL STRUCTURE ANALYSIS

Jatin Rakesh Jitendra Kumar Tiwari Leena Bhatia Mahesh Singh Mehar Azam

INTRODUCTION
Provogue is a Mumbai based Indian company incorporated on November 11, 1997 as Acme Clothing Private Limited. The brand Provogue was launched in March 1998 and is currently one of the biggest retail apparel brands in India based in Mumbai. As of March 31, 2009, Provogue fashions and accessories were available across 126 Provogue stores and 110 shopin shops. They have a subsidiary called Prozone which recently got funded from Liberty International. Prozone is a chain of malls initiated by provogue. The first shopping mall is scheduled for launch in May 2010. After the launch, Prozone mall in Aurangabad will be one of the largest mall in the country in terms of size and Gross Leasable Area.

DEBT EQUITY RATIO ANALYSIS

Debt Equity Ratio
2.5

1.5

0.5

0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

The debt equity ratio of the company is quite high in the year 2003 and 2004 as it can be seen from the figures the company is in a risky position in those years as the debt is higher than the equity capital, and thats why company was not able to generate more profits from the capital employed. While in 2005 the company raised funds from the market through debt as well as through equity capital in a certain proportion therefore the company was able to generate more profits from that proportion. But after that the company has maintained the same ratio of raising funds through equity and share capital. They are applying a conservative approach in the market as they are maintaining a lesser ratio of debt than the equity capital and thus able to generate profits from that ratio. Although it can be notice that in recent years that the company was able to meet its debt through the debt, while the equity shares remained constant and no further shares were issued in the market.

ROI & Kd ANALYSIS

ROI & Kd
140 120 100 80 60 40 20 0 2003 2004 2005 2006 2007 ROI 2008 Kd 2009 2010 2011 2012

The companys ROI has decreased in the year 2004 which can be seen from the figures as the ratio has decreased tremendously from 22.07 in 2003 to 7.71 in 2004 as it can be seen that the companys sales turnover has decreased as well as the companys debt has also increased, which has caused an adverse effect on the companys ROI, whereas its operating profit is low which has an adverse impact on the companys ROI. While in the year 2005 the company is able to utilize its funds more efficiently therefore an increase in sales can be seen from the figures and the debt ratio as well as the issued capital has also increased. In the year 2006 the companys profit had increased but the capital employed has also increased but in a greater proportion. Therefore there is downfall which can be noticed from the figures in the year 2006 & 2007 consequently. But in 2008 the company was able to manage & utilize its volume of debt which it had raised from the market, well enough to meet the capital demanded in the business, while an increase in operating profit can also be noticed from the figures.

In 2009 the ROI has decreased by approximately 50% as the companys operating profit had decreased while the other figures have not shown much change while the growth of the company is somewhat constant, the operating profit have also not shown a tremendous change but in the year 2012 the increased in cost of debt has shown a change as its figures have changed from 11 to 121. This shows that the companys riskiness has affected as it is acquiring debt at a higher rate for its operations.