A Project Report on Assessing potential for Indo-European trade and developing tailor-made strategies to ensure bank achieves highest mindshare and wallet-share Submitted in partial fulfillment of the requirements for the award of MASTERS OF MANAGEMENT STUDIES (M.M.S) AT
SUBMITTED BY Name: Ratul Ghosh Roll No: M-13-12 Batch: MMS 20132015
IES Management College and Research Centre Bandra (W), Mumbai Page | 2 Srei Infrastructure Finance Limited Students Declaration
I hereby declare that this report, submitted in partial fulfillment of the requirement for the award for the Master of Management Studies, to IES Management College and Research Centre is my original work and not used anywhere for award of any degree or diploma or fellowship or for similar titles or prizes.
I further certify that without any objection or condition subject to the permission of the company where I did my summer project, I grant the rights to IES Management College and Research Centre to publish any part of the project if they deem fit in journals/Magazines and newspapers etc without my permission.
Place : Mumbai
Date : --------------------------------- Signature
Name : Ratul Ghosh
Class : MMS, Sem- III
Roll No: M-13-12
Page | 3 Srei Infrastructure Finance Limited Certificate from the company
This is to certify that the dissertation submitted in partial fulfillment for the award of Master of Management Studies of IES Management College and Research Centre is a result of the bonafide research work carried out by Mr. Ratul Ghosh under my supervision and guidance. No part of this report has been submitted for award of any other degree, diploma, fellowship or other similar titles or prizes. The work has also not been published in any journals/Magazines.
Date: Industry guide Signature of the Industry Guide: ______________ Name of Industry Guide: ____________________ Company : _______________________ Place: Mumbai Designation : _______________________
Page | 4 Srei Infrastructure Finance Limited Certificate from the Faculty Guide
This is to certify that the dissertation submitted in partial fulfillment for the award of Master of Management Studies of IES Management College and Research Centre is a result of the bonafide research work carried out by Mr. Ratul Ghosh under my supervision and guidance. No part of this report has been submitted for award of any other degree, diploma, fellowship or other similar titles or prizes. The work has also not been published in any journals/Magazines.
Date: Faculty guide Signature of the Faculty Guide: ______________
Name of Faculty Guide: ____________________ Place: Mumbai IES Management College and Research Centre
It is with a sage sense of gratitude that I acknowledge the efforts of all well-wishers who have in some way or another contributed towards the success and completion of this summer internship project.
This report documents the work done during the summer internship at SREI Infrastructure Finance Limited under the supervision of my mentor, Mr. Nalin Kumar, President, International Strategies and Alliances, who was kind enough to give me an opportunity to learn how to set up a bank in India. I sincerely thank him for his valuable suggestions, motivation and encouragement.
I express my sage sense of gratitude and indebtedness to Dr. Minu Mehta, my mentor, from the bottom of my heart, for her unprecedented support and faith in me.
I sincerely express my appreciation to my project guide Prof. Svetlana Tatuskar for her valuable guidance and intellectual suggestions during this project.
I have tried my best to keep report simple yet technically correct.
-Ratul Ghosh
Page | 6 Srei Infrastructure Finance Limited Table of Contents
INTRODUCTION TO THE INDUSTRY India is one of the top 10 economies globally, with vast potential for the banking sector to grow. The last decade witnessed a tremendous upsurge in transactions through ATMs, and Internet and mobile banking. In 2014, the countrys Rs 81 trillion (US$ 1.34 trillion) banking industry is set for a greater change. Two new banks have already received licences from the government. Furthermore, the Reserve Bank of Indias (RBI) new norms will provide incentives to banks to spot potential bad loans and take corrective steps that will curb the practices of rogue borrowers. The Indian governments role in expanding the banking industry has been significant. Through the Financial Inclusion Plan (FY 1013), banking connectivity in the country increased more than three-fold to 211,234 villages in 2013 from 67,694 at the beginning of the plan. Banks are also looking at new ways to attract customers. In September, 2013, ICICI bank leveraged the popularity of the social platform, and launched its Facebook banking service, Pockets. The service enables customers to transfer funds and pay bills from within the website.
Market Size The revenue of Indian banks increased four-fold from US$ 11.8 billion to US$ 46.9 billion during the period 20012010. In the same period, the profit after tax increased from US$ 1.4 billion to US$ 12 billion. In 201213, Indian banks had 170 overseas branches (163 in 201112) while foreign banks had 316 branches in India (309 in 201112). Credit to housing sector grew at a compound annual growth rate (CAGR) of 11.1 per cent during the period FY 200813. Total banking sector credit is expected to grow at a CAGR of 18.1 per cent (in terms of INR) to touch US$ 2.4 trillion by 2017.
Page | 8 Srei Infrastructure Finance Limited Recent Developments Infrastructure Development Finance Company (IDFC) and Bandhan Financial Services Pvt Ltd have been chosen among a field of 25 banks by the RBI to set up banks. In-principle approval has been given to the banks, which are both non-banking finance companies. While Mumbai-based IDFC is categorized as an infrastructure finance company, Kolkata-based Bandhan is a microfinance establishment.
Government Initiatives The RBI has issued extra guidelines for banks giving gold metal loans (GMLs). To safeguard against fraud, the central bank has asked lenders to check the credit worthiness of borrowers; collateral securities against the loan; and trade cycle of the manufacturing activity, before sanctioning the loans. "Lack of proper monitoring mechanism and not ensuring end use of GML has resulted in certain instances of frauds/misuse related to GML by certain unscrupulous jewellers," stated the RBI in a notification. The Cabinet Committee on Economic Affairs (CCEA) has given the green signal to a proposal to increase foreign holding in Axis Bank from 49 per cent to 62 per cent. The move could bring in overseas investment of nearly Rs 7,250 crore (US$ 1.20 billion) into the country. The CCEA nod is dependent on FIIs holding capped at 49 per cent.
Road Ahead Indias banking sector has the potential to become the fifth largest banking sector globally by 2020 and the third largest by 2025. The industry has witnessed discernable development, with deposits growing at a CAGR of 21.2 per cent (in terms of INR) in the period FY 0613; in FY 13 total deposits stood at US$ 1,274.3 billion. Today, banks are turning their focus to servicing clients. Banks in the country, including those in the public sector, are emphasising on enhancing their technology infrastructure, in order to improve customer experience and gain a competitive edge. The popularity of internet and mobile banking is higher than ever before, with Customer Relationship Management (CRM) and data warehousing expected to drive the next wave of technology in banks. Indian banks are also progressively adopting an integrated approach to risk management. Most banks already have in place the framework for asset liability match, credit and derivatives risk management. Page | 9 Srei Infrastructure Finance Limited INTRODUCTION TO THE COMPANY
The Industrial Development Bank of India (IDBI) is one of Indias leading public sector banks and 4 th largest Bank in overall rating. RBI categorized IDBI as an Other public sector bank. It was established on July 1, 1964 by an Act of Parliament. The main aim behind setting up of IDBI was to provide credit and other facilities for the Indian Industry, which was still in the initial phase of growth and development. The IDBI was established under the Act of Parliament as a wholly owned subsidiary of the Reserve Bank of India. Headquartered in Mumbai, IDBI Bank today rides on the back of a robust business strategy, a highly competent and dedicated workforce and a state-of-the-art information technology platform, to structure and deliver personalized and innovative Banking services and customized financial solutions to its clients across various delivery channels. IDBI has also set up an overseas branch at Dubai and has plans to open representative offices in various other parts of the Globe, for en-cashing emerging global opportunities. It is currently the tenth largest development bank in the world in terms of reach with- 1140 ATMs, 689 Branches, and 458 centers. Some of the Institutions built by IDBI are the National Stock Exchange of India (NSE), The National Securities depository Services Ltd (NSDL), The Stock Holding Corporation of India Ltd (SHCIL), and IDBI bank, which today is owned by the government of India, though for a brief period it was a private scheduled bank. On 16 February 1976, the ownership of IDBI was transferred to the government of India and was made the principal financial institution for coordinating the activities of the institutions engaged in financing, promoting and developing industry in the country. Although Government shareholding in the bank came down below 100% following IDBIs public issue in July 1995, the former continues to be the major shareholder.
Page | 10 Srei Infrastructure Finance Limited INTRODUCTION TO THE PROJECT
Project Title: Assessment of working capital financing-MPBF Method
The project aims to do the following
Paint sector Analysis Financial Analysis of Asian Paints Assessment of working capital- MPBF Method Credit Monitoring Arrangement Analysis Observations on CMA analysis Recommendations to Bank and the Company Report Writing
To accumulate and analyze the data of paint sector. Also to understand the demand and supply, customers and competitors, emerging trends, critical factors and the future prospects in the paint sector industry To accumulate the information regarding the company (Asian Paints), its products and services. Also to know their group subsidiaries and their international operations and to check their growth priorities. To understand the financial position of the company with the help of their income statement and balance sheets. Also analyzing the cash flow statements and carry out the Ratio analysis of the company. To make the Assessment of the Working capital financing (MPBF method) with the help of Credit Monitoring Arrangement sheets. To comment on the CMA sheets and making recommendations to both the company and the Bank.
Methodology: A secondary research was done to gather the data regarding the paint sector industry. This data is used in structuring the industry profile. A company (Asian Paints Ltd) is selected from the paint industry & identified as a target for providing working capital facility. Financial analysis is done using Comparative statement analysis, Common size analysis and Trend analysis of Income Statement and Balance Sheet on Microsoft Excel Based on the data gathering from various resources Then the Assessment of working capital is done with the help of Credit Monitoring Arrangement Sheets and the comments are made on CMA sheets Finally Recommendation is given to the Bank and the Company on the basis of the analysis
Page | 12 Srei Infrastructure Finance Limited Understanding Working Capital Financing
Introduction For running an industry or a concern, two types of capital are required namely fixed capital and working capital. Working capital is the funds invested in current assets and is needed for meeting day to day expenses. Working Capital refers to that part of the firms capital, which is required for financing short term or current assets such as debtors, inventory and cash & marketable securities. Funds thus invested in current assets keep revolving fast and are constantly converted into cash and this cash flow out again in exchange for other current assets Working Capital is also known as revolving or circulating capital or Short-term capital Current Assets represent gross working capital. The excess of Current Assets over Current Liabilities is Net Working Capital Working capital is the cash needed to pay for the day to day operations of the business. In other words, working capital is needed by the business to Pay suppliers and other creditors (for raw material purchases) Pay employees (salary and wages) Financing the gap between the supply of goods and the receipt of payment thereafter (trade credit). Thus, Working Capital Finance is the fund required to meet the cost involved during the working capital cycle or operating cycle.
Operating Cycle/Working Capital Cycle Operating cycle is the period involved from the time raw materials are purchased to the time they are converted into finished goods and the same are finally sold and realized. The need for current assets arises because of operating cycle. The operating cycle is a continuous process and therefore the need for current assets is felt constantly. Each and every current asset is nothing but blockage of funds. Therefore, these current assets need to be financed which is done through Working Capital Financing. Page | 13 Srei Infrastructure Finance Limited Fixed Portion of working/Trade Cycle
Factors determining Working Capital Nature of the industry Demand of industry Cash requirements Nature of the business Manufacturing time Volume of sales Terms of purchase and sales Inventory Turnover Business Turnover
Cash Wages & Overheads Work-in-Progress Trade Creditors Raw Material Stock Finished Goods Trade Debtors Selling Expenses Sale Taxation Fixed Assets Lease Payments Loan Creditors Shareholders Page | 14 Srei Infrastructure Finance Limited Working Capital Cycle
Time & Money Concepts in Working Capital Each component of working capital has 2 dimensions namely time and money, when it comes to managing working capital. You can get money to move faster around the cycle or reduce the amount of money tied up. Then business will generate more cash or it will need to borrow less money to fund working capital. As a consequence, you could reduce the cost of bank interest or you will have additional free money available to support additional sales growth or investment. Similarly, if you can negotiate improved terms with suppliers you can effectively create free finance to help fund future sales.
Cash RM WIP FG Sales Debtors Page | 15 Srei Infrastructure Finance Limited Types of Working Capital
Methods of Assessment of Working Capital 1. Turnover Method Mainly used for small trading companies Not appropriate for manufacturing and big trading companies 2. MPBF Method (Maximum Permissible Banking Finance) This method is mainly used by the bank for assessment of working capital finance 3. Cash Budget Method Mainly used for service sector companies Cash inflow Cash outflow= Bank finance in form of working capital
Types of Working Capital Concept Basis Gross Working Capital Net Working Capital Time Basis Fixed Working Capital Reserve Working Capital Regular Working Capital Variable Working Capital Seasonal Working Capital Special Working Capital Page | 16 Srei Infrastructure Finance Limited Sources of Working Capital
Main Source Owned Funds Bank Borrowigs Additional Source Existing Cash Reserves Profits Payables New Equity Loan From Shareholders Bank Overdraft Page | 17 Srei Infrastructure Finance Limited Credit Monitoring Arrangement Tool (CMA) CMA data is a tool used by the bankers to assess the requirement of working capital It is divided into six parts as follows Form1. Particulars of existing and proposed limits Form2. Operating System Form3. Analysis of Balance Sheet Form4. Working Capital Assessment Form5. Summary of financial position Form6. Funds Flow Statement Form7. Cash Flow Statement
Nature of Credit Facilities Credit Facilities can be Funds based or Non-fund based. The fund limits are those where outlay of the Banks funds is involved. Non-fund limits are those where the bank endorses the committee/promise made by the borrower and the bank need to meet only if the borrower fails to honor it. Main types of the facilities under the fund based limits and the related guidelines for granting advances against them are discussed below in brief. Working Capital Finance is expressed in different forms based on the requirement as follows: 1. Inventory Limits (Pre-sales) Cash Credit (CC) Export Packing Credit (EPC) Overdraft Vendor Financing 2. Finance Against Receivables (Post-sales) Book debts Bills Purchased/Discounted/Negotiated 3. Non Fund-based Limits Letter of credit (LC) Trade Credit Bank Guarantee (TCBG) Bank Guarantee (BG) Loan Equivalent Risk (LER) Page | 18 Srei Infrastructure Finance Limited Important Financial Parameters The Ratio analysis provides a useful mechanism by which inter-relationship of various items can be established. It provides valuable interpretation of financial strengths and weaknesses of the concern. Studied over a period of time, the analysis reveals trends in the financial position and operational efficiency of the business.
A. LIQUIDITY RATIOS
B. WORKING CAPITAL MANAGEMENT
Page | 19 Srei Infrastructure Finance Limited C. PROFITABILITY ANALYSIS
D. SOLVENCY RATIOS
Key Ratio Levels Particulars Low Risk Medium risk High Risk Current Ratio >1.40 1.20-1.40 <1.20 TOL/TNW >2.00 2.00-3.50 <3.50 Interest Coverage >3.50 2.00-3.50 <2.00 PAT/Sales (%) >10.00 4.00-10.00 <4.00 Inventory (No of days) <60 60-90 >90 Debtors (No of days) <45 45-90 >90 Debt Equity Ratio <1.25 1.25-1.75 >1.75 Page | 20 Srei Infrastructure Finance Limited Credit Rating The credit risk of the company is broken down into risk categories as under: 1. Business Risk 2. Management Risk 3. Financial Risk 4. Industry Risk
These risks are measured on scale of 1-10 points, 10 being the highest score and results in 10 grades as under Grade Description AAA Investment Grade-Very strong credit quality-Highest Safety AA+ Investment Grade-Strong Credit Quality-Highest Safety AA Investment Grade-Strong Credit Quality-High Safety A Investment Grade-Above Average credit quality-Adequate safety BBB Investment Grade BB+ Sub-Investment Grade-Week credit quality BB Sub-Investment Grade-Near Default credit B Sub Investment Grade-Default Credit C Sub Investment Grade-High Risk D Default-Credit Loss
Page | 21 Srei Infrastructure Finance Limited Lending Arrangement for Working Capital Facilities
Page | 22 Srei Infrastructure Finance Limited Importance of Adequate Working Capital Every business concern should have adequate working capital to run its business operations. It should have neither redundant or excess working capital nor inadequate or shortage of working capital Both excess as well as shortage of working capital situations are bad for any business. However out of the two, inadequacy or shortage og working capital is more dangerous from the point of view of the firm
Disadvantages of Inadequate Working Capital Idle funds, Non-profitable business, poor ROI Unnecessary purchasing and accumulation of inventories over required level Excessive debtors Defective credit policy Higher incidence of bad debts Cant pay short term liabilities in time Day-to-day liquidity worsens Economies of scale are not possible Improper utilization of Fixed Assets resulting in decrease of ROI/ROA When there is Overall inefficiency in the organization
Sign of potential liquidity Problems Buildup of inventories and declining inventory turnover Increase in debt and debt ratios Increase in costs that cannot be passed on Increase in accounts receivables and collection period Decline in net working capital and daily cash flows
INDUSTRY STRUCTURE The Indian Paint industry can be divided as the organized sector comprising of large and medium size units and the unorganized or the small scale sector The organized sector has a market share of 60%, valued at 23.4 bn. This is in contrast to the 55% share that the sector commanded a few years back. There are around 25 units in this segment. The unorganized sector comprises of around 2,000 units with a combined market share of around 40%. Major companies in this segment include Asian Paints, Goodlass Nerolac, Berger Paints, Shalimar Paints, and Rajdoot Paints High excise duties, low technology and low capital costs for production led to the incidence of a high number of units in the small scale sector. However, since 1992 the government has been consistently lowering duties from 40.5% in 1992 to around 16% currently. This has led to lowering of price differential between the organized and unorganized sector. Moreover the paints sector was also allowed to claim MODVAT credit on petro-based products, thus lowering the excise incidence further The application of paints can be broadly divided into three categories viz. decoratives, industrial and automotive. The decorative segment is broadly divided into interior paints (emulsions, enamels, wood finishes) and exterior paints The industrial and automotive paint manufacturing however, is technology intensive wherein domestic majors have tied up with select global majors like Nippon Paints, DuPont, PPG and Kansai for technology. The paint industry is expected to grow at 12-13% annually over the next five years from Rs 280 bn in FY13 to around Rs 500 bn by FY18. FY13 was a challenging year for the industry as a whole due to subdued demand across key sectors and rising inflation. The unorganised sector controls around 35% of the paint market, with the organised sector accounting for the balance. In the unorganised segment, there are about 2,000 units having small Page | 24 Srei Infrastructure Finance Limited and medium sized paint manufacturing plants. Top organised players include Asian Paints, Kansai Nerolac, Berger Paints and ICI The paints sector is raw material intensive, with over 300 raw materials (50% petro-based derivatives) involved in the manufacturing process. Since most of the raw materials are petroleum based, the industry benefits from softening crude prices.
Indian Paint Industry Decorative Paint (70%) Premium Ranges Metros & Large cities Medium Ranges Small Cities Distemper Ranges Sub-Urban & Rural Areas Industrial Paint (30%) Automobile Sector Consumer Durables Marines Paint Page | 25 Srei Infrastructure Finance Limited KEY POINTS Supply- Supply exceeds demand in both the decorative as well as the industrial paints segments. Industry is fragmented. Demand-Demand for decorative paints depends on the housing sector and good monsoons. Industrial paint demand is linked to user industries like auto, engineering and consumer durables. Barriers to entry- Brand, distribution network, working capital efficiency and technology play a crucial role. Bargaining power of suppliers- Price increase constrained with the presence of the unorganised sector for the decorative segment. Sophisticated buyers of industrial paints also limit the bargaining power of suppliers. It is therefore that margins are better in the decorative segment. Bargaining power of customers- High due to availability of wide choice. Competition- In both categories, companies in the organised sector focus on brand building. Higher pricing through product differentiation is also followed as a competitive strategy.
FINANCIAL YEAR 2013 FY13 was a mixed bag for the paint companies. While all the 3 players viz. Asian Paints, Kansai Nerolac and Berger Paints reported a strong growth in sales, operating margins came under severe pressure due to raw material price inflation. Top-line growth was boosted by strong demand from the rural markets. Nonetheless, the demand environment in the industrial segment continues to remain challenging due to hawkish interest rate environment Performance on the margins was impacted by the rising prices of crude oil and titanium dioxide which increased the overall expenditure, thereby impacting profitability growth. However, companies are undertaking a gradual and calibrated price increase in order to shield margins. Nonetheless, as a complete pass on of raw material price increase is not possible in the industrial segment, the blended margins continue to suffer. However, a good monsoon this year is expected to boost demand in the rural areas. A good harvest and festival season demand can boost volumes in the second half of FY14
Page | 26 Srei Infrastructure Finance Limited All the key players are in an expansion phase. Asian Paints plant in Khandala, Maharashtra has recently got comissioned. Kansai Nerolacs capacity expansion plans at Jainpur and Bawal has culminated. Berger Paints has also undertaken capacity expansion for its plants located in Andhra Pradesh (AP). Further, expansion of water based plant at Rishra and Goa is also on track. As per estimates, paint capacities are expected to go up by 50-70% in the coming 3 to 5 years
PROSPECTS The market for paints in India is expected to grow at 1.5 times to 2 times GDP in the next five years. With GDP growth expected to be between 5-6% levels, the top three players are likely to clock above industry growth rates in the future, considering they have a strong brand and good reach Decorative paints segment is expected to witness higher growth going forward. The fiscal incentives given by the government to the housing sector have immensely benefited the housing sector. This will benefit key players in the long term Although the demand for industrial paints is lukewarm it is expected to increase going forward. This is on account of increasing investments in infrastructure. Domestic and global auto majors have long term plans for the Indian market, which augur well for automotive paint manufacturers like Kansai Nerolac and Asian-PPG. Increased industrial paint demand, especially powder coatings and high performance coatings will also propel topline growth of paint majors in the medium term If the new capacities do not get utilized well, companies may face margin pressures in the near term
Page | 27 Srei Infrastructure Finance Limited ABOUT COMPANY Asian Paints Ltd. is Indias largest and Asias 3 rd largest paint company. It is the clear market leader with about 55% market share in the paints industry. It sells decorative, industrial and automotive paints and is the market leader in the decorative paints segment. The company operates in 17 countries and has 24 paint manufacturing facilities in the world servicing consumers in over 65 countries. Besides Asian Paints, the group operates around the world through its subsidiaries Berger International Limited, Apco Coatings, SCIB Paints and Taubmans, among others. It derives ~11% of its revenues from international operations.
MAJOR PRODUCTS & SERVICES Asian Paints manufactures and markets industrial and decorative coatings. Along with that the company also provides home painting services and solutions. The company's key products and brands include the following: Decorative paints: Interior wall paints, Exterior wall paints, Wood surface paints, Metals surface paints. Industrial coatings: Protective coatings, Floor coatings, Road markings. Ancillaries: Wall primer, Acrylic Wall Putty, Exterior Wall Putty, Wood Primer. Asian paints made a foray in automotive paints in the year 1997 with a joint venture with PPG Industries. The joint venture is called PPG Asian paints.[7] The company manufactures body coatings and plastic coatings.
FORBES LISTING Forbes Global magazine USA ranked Asian Paints among the 200 Best Small Companies in the World for 2002 and 2003 and presented the 'Best under a Billion' award, to the company. Asian Paints is the only paint company in the world to receive this recognition. One of the country's leading business magazine "Business Today" in Feb 2001 ranked Asian Paints as the Ninth Best Employer.It has been recognised by "Economic Times" as well. Forbes has also ranked Asian Paints among the Best under a companies in Asia in 2005, 06 and 07.
Page | 28 Srei Infrastructure Finance Limited
GENESIS OF ASIAN PAINTS
1942-1965
1.Company started its business 2.The mischevous kid was born 3.Name was Asian Paints 4.The company expanded its products range, developed its own technology, set up a distribution network penetrating in smaller towns and ploughed back a large part of earnings into creation of new facilities.
1967-1985
1.India's leading paint 2.Converted into a public limited company 3.Entered into a collaboration agreement 4.A major modernisation programme was undertaken to streamline the paint production facilities by improving the layout of machines, addition to balancing equipment and replacement of old machineryfacilities as well.
1990-2014
1.Spreads its boundary 2.Completed 70 years 3.5th largest decorative paint company in the world 4.Admired companies in India 5.Market leader of paint industry
Page | 29 Srei Infrastructure Finance Limited INTERNATIONAL OPERATIONS Asian Paints operates in 17 countries across the world. It has manufacturing facilities in each of these countries and is the largest paint company in eleven of these markets. Asian Paints operates in five regions across the world viz. South Asia, Southeast Asia, South Pacific, Middle East and Caribbean region through the five corporate brands viz. Asian Paints, Berger International, SCIB Paints, Apco Coatings and Taubmans. The countries that Asian Paints has presence are as follows: 1.Asian Paints in South Asia (India, Bangladesh, Nepal and Sri Lanka). 2.SCIB Paints in Egypt. 3.Berger in South East Asia (Singapore), Middle East (UAE, Bahrain and Oman), Caribbean (Jamaica, Barbados, Trinidad & Tobago). 4.Apco Coatings in South Pacific (Fiji, Tonga, Solomon Islands and Vanuatu). 5.Taubmans in South Pacific (Fiji and Samoa). The company has a dedicated Group R&D Centre in India and has been one of the pioneering companies in India for effectively harnessing Information Technology solutions to maximize efficiency in operations
GROUP SUBSIDIARIES 1) Apco Coatings is a subsidiary of Asian Paints in the South Pacific islands. Asian Paints operates in Australia, Fiji, Tonga, Solomon Islands and Vanuatu under the brand name of Apco Coatings.APCO COATINGS 2) Asian Paints Industrial Coatings Limited has been set up 3) In 1994, Berger units were brought under the single umbrella of the holding company 'Berger International Limited (BIL)' with headquarters in Singapore, which was also listed on the Singapore stock exchange. In November 2002, BIL became a part of the Asian Paints Group. Incidentally, Berger Paints Jamaica Limited, which is listed on the Jamaican stock exchange, is amongst the top ten companies in the country in terms of market capitalisation. In the Middle East too Berger is a well-respected brand. It is the largest paint company in Bahrain. Using its Page | 30 Srei Infrastructure Finance Limited state-of-the-art manufacturing facilities there, and in United Arab Emirates, it exps of the Company at its meeting held on 8 August 2013 have approved the infusion of Rs 997.8 million for 51% stake in Sleek International Private Limited (SIPL). Post the infusion, the company would hold 51% stake in SIPL, said statement from Asian Paints.
Growth Priorities Leadership Regions Caribbean Jamaica, Trinidad & Barbados South Pacific South Pacific Island Growth Regions Middle East UAE South Asia Nepal, Sri lanka & Bangladesh South East Asia Singapore, Malaysia & China Page | 31 Srei Infrastructure Finance Limited SWOT ANALYSIS
STRENGTHS 1.The largest paint company in India and third largest company in Asia 2.They have over 50% of market share and are clear leaders decorative paints and are strong competitors to Kansai Nerolac to be leaders in Industrial paints and coatings. 3.They operate in 17 countries and have 24 manufacturing facilities providing service to 65 countries all over the world. 4.Most renowned brand in Indian Paint Industry & its strong customer focus and innovative-spirit has made it marke 5.They have maintained their brand name and increased awareness by unique ways of advertising and roping in celebrities like Saif Ali Khan.t leader since 1968. 6.The company has strong financials.
WEAKNESS 1. Limited market share in industrial paints segment with Kansai Nerolac and Akzonobel giving stiff competition. 2.In decorative paints Industry Customer tastes and perceptions change very fast and products may become obsolete with change in trends, hence production planning and inventory problem. 3.Seasonal demand and hence in off season there can be cash flow problems 4.International presence restricted to small pockets
OPPORTUNITIES
1. Big and international standard paint company it should look for more opportunities abroad 2. There is a good scope for growth especially in industrial paints category 3. Needs to have more focus on Automobile industry in industrial paints segment 4. Competitors are going for Hi-tech process and Asian paints with good financial and intellectual capital can go for hi-tech.
THREATS
1.Growth prone to slowdown effects 2.Stringent Government rules and regulations regarding the quality of products and manufacturing facilities as Environment policies are given more emphasis 3.Raw material scarcity and volatlility in prices.
SWOT Page | 32 Srei Infrastructure Finance Limited IMPORTANT FINDINGS A. Balance Sheet
Networth The networth of the company is 3384 Cr which increased by 23% from the last year It is 21% of the total liabilities The networth shows an increasing trend in the last 5 years Total Debt Out of total debt 24% is secured whereas 76% is unsecured Secured loan increased from 42.34 Cr to 58.53 Cr compared to last year Total debt is 6.28% of the total liabilities Net Block/Fixed Assets The net block of the comopany increased from 1300 Cr to 24410 Cr ie 87% increase compared to last year The net block consist of 64% of the total assets Investments There has been decrease in the investment by 20% compared to last year Investments amounts to around 8% of the total assets Current Assets The total Current Assets increased from 3426 Cr to 4008 Cr ie by 21% compared to last year The Current Asstes amount to 28% of the total Current Assets The total Current Assets showed an increasing trend in the last 5 year Current Liabilities The total Current Liabilities increased by 9 % from 2262 Cr to 2466 Cr compared to last year The Current Liabilties amounts to 65% of the total liabilities Page | 33 Srei Infrastructure Finance Limited
B.PROFIT & LOSS A/C
Provisions The provision increased from 444 Cr to 539 Cr compared to last year The provision amounts to 14% of the total laibilities The provision shows an increasing trend in the last 5 years
Contingent Liabilities The Contingent liabilities decreased from 472 Cr to 192 Cr The Contingent liabilities shows a decreasing trend in the last 5 years Reserves The Reserves increased from 2652 Cr to 3288 Cr as comprared to last year The Reserves shows an increasing trend in the last 5 years Total Income
The total income increased from 10227 Cr to 11736 Cr ie by 14.20% compared to last year The total income has shown an increasing trend in the last 5 years
Total Expenses The total expenses increased from 8663 Cr to 9890 Cr ie by 14.15% compared to last year The total expenses have shown an increasing trend in the last 5 years Operating Profit The operating profit increased from 1544 Cr to 1731 Cr ie by 12.13% compared to last year The operating profit is 15.16% of the total sales The operating profit shows an increasing trend in the last 5 years
Page | 34 Srei Infrastructure Finance Limited
C.CASH FLOW
Profit Before Tax
The PBT increased from 1456 Cr to 1658 Cr ie by 13.88% compared to last year The PBT is 14.51% of the net sales The PBT has shown an increasing trend in the last 5 years
Net Profit
The Net profit incresed from 1020 Cr to 1159 Cr ie by 13.61% compared to last year The net profit is 10.15% of the total sales The net profit shows an increasing trend in the last 5 years Earning per Share
The EPS increased from Rs106.4 to Rs120.88 compared to last year The EPS has shown an increasing trend in the last 5 year
Net Cash from Operating Activities
The NCFO increased from 753 Cr to 1081 Cr as compared to last year The NCFO has shown an increasing trend in the last 5 years
Opening Cash and cash Equivalents
The opening cash and cash equivalents decreased from 509.23 Cr to 500.97 Cr The Opening cash and cash equivalents have shown an increasing trend in the last 5 years Closing Cash and Cash Equivalents
The closing cash and cash equivalents increased from 500.97 Cr to 566.87 Cr as compared to last year The closing cash and cash equivalents have shown a fluctuating trend in the last 5 years
The Net profit margin decreased from 9.81% to 9.65 % compared to last year The net profit margin has shown a fluctuating trend in the last 5 years
Return on Capital Employed The ROCE has decreased from 48.42% to 46.71% compared to last year The ROCE has shown a decreasing trend in the last 5 years Return on Net worth
The Return on net worth has decreased from 35.97% to 32.91% compared to last year The return on net worth has shown a decreasing trend in the last 5 years
Current Ratio
The current ratio has increased from 1.16 to 1.24 as compared to last year The current ratio has shown an increasing trend in the last 5 years
Quick Ratio
The quick ratio has increased from 0.66 to 0.72 as compared to last year The quick ratio has shown a fluctuating trend in the last 5 years Debt Equity Ratio
The Debt Equity ratio has decreased from 0.12 to 0.07 as compared to last year The debt equity ratio has shown a decreasing trend in the last 5 years
Page | 36 Srei Infrastructure Finance Limited
Inventory Turnover Ratio
The inventory turnover ratio decreased from 7.1 to 6.88 compared to last year The inventory turnover ratio shows a decreasing trend in the last 5 years
Debtors Turnover Ratio
The Debtors turnover ratio decreased from 14.62 to 12.96 compared to last year The Debtors turnover ratio shows a flucuating trend in the last 5 years Number of days in working Capital The number of days in working capital increased from 25 days to 31 days compared to last year The number of days in working capital has shown an increasing trend in last 3 years
Mar '09 Mar '10 Mar '11 Mar '12 Mar '13 Total Debt 299.3 226.84 233.88 335.85 237.66
0.00 500.00 1,000.00 1,500.00 2,000.00 2,500.00 3,000.00 3,500.00 Mar '09 Mar '10 Mar '11 Mar '12 Mar '13 Networth Networth 0 50 100 150 200 250 300 350 Mar '09 Mar '10 Mar '11 Mar '12 Mar '13 Total Debt Total Debt Page | 38 Srei Infrastructure Finance Limited
Particulars
Mar '09 Mar '10 Mar '11 Mar '12 Mar '13 Total Current Assets
1,547.71 1,591.29 1,994.24 2,937.79 3,563.15
Particulars
Mar '09 Mar '10 Mar '11 Mar '12 Mar '13 Total Current Liabilities
1,105.72 1,469.08 1,759.27 2,262.21 2,466.85
0.00 500.00 1,000.00 1,500.00 2,000.00 2,500.00 3,000.00 3,500.00 4,000.00 Mar '09 Mar '10 Mar '11 Mar '12 Mar '13 Total Current Assets Total Current Assets 0.00 500.00 1,000.00 1,500.00 2,000.00 2,500.00 Mar '09 Mar '10 Mar '11 Mar '12 Mar '13 Total Current Liabilities Total Current Liabilities Page | 39 Srei Infrastructure Finance Limited
Particulars
Mar '09 Mar '10 Mar '11 Mar '12 Mar '13 Fixed Assets
863.58 909.55 1,309.87 1,300.55 2,440.97
Particulars
Mar '09 Mar '10 Mar '11 Mar '12 Mar '13 Investments
78.4 624.11 921.95 354.74 280.68
0 500 1000 1500 2000 2500 Mar '09 Mar '10 Mar '11 Mar '12 Mar '13 Fixed Assets Fixed Assets 0 200 400 600 800 1000 Mar '09 Mar '10 Mar '11 Mar '12 Mar '13 Investments Investments Page | 40 Srei Infrastructure Finance Limited
Particulars
Mar '09 Mar '10 Mar '11 Mar '12 Mar '13 Reserves
1,107.25 1,614.06 2,091.50 2,652.58 3,288.37
Particulars
Mar '09 Mar '10 Mar '11 Mar '12 Mar '13 Provisions
180.99 315.04 336.53 444.9 539.39
0.00 500.00 1,000.00 1,500.00 2,000.00 2,500.00 3,000.00 3,500.00 Mar '09 Mar '10 Mar '11 Mar '12 Mar '13 Reserves Reserves 0 100 200 300 400 500 600 Mar '09 Mar '10 Mar '11 Mar '12 Mar '13 Provisions Provisions Page | 41 Srei Infrastructure Finance Limited B) PROFIT & LOSS A/C Particulars
Mar '09 Mar '10 Mar '11 Mar '12 Mar '13 Net Sales
5,739.65 6,944.30 7,998.01 10,002.10 11,427.35
Particulars Mar '09 Mar '10 Mar '11 Mar '12 Mar '13 Total Income 5,749.05 7,206.23 8,246.96 10,277.18 11,736.56 Total Expenses 5,026.63 5,830.95 6,849.20 8,663.82 9,890.10
0.00 2,000.00 4,000.00 6,000.00 8,000.00 10,000.00 12,000.00 Mar '09 Mar '10 Mar '11 Mar '12 Mar '13 Net Sales Net Sales 0.00 2,000.00 4,000.00 6,000.00 8,000.00 10,000.00 12,000.00 Mar '09 Mar '10 Mar '11 Mar '12 Mar '13 Total Income Total Expenses Page | 42 Srei Infrastructure Finance Limited
0 200 400 600 800 1000 1200 1400 1600 1800 2000 Mar '09 Mar '10 Mar '11 Mar '12 Mar '13 Operating Profit PBT PAT Page | 43 Srei Infrastructure Finance Limited
Particulars Mar '13 Expenses Distribution
Raw Materials
6,627.32 67.0
Power & Fuel Cost
110.28 1.1
Employee Cost
623.56 6.3
Other Manufacturing Expenses
19.59 0.2
Selling and Admin Expenses
501.74 5.1
Miscellaneous Expenses
2,007.61 20.3
Total Expenses 9,890.10 100
67.0 1.1 6.3 0.2 5.1 20.3 Expenses Distribution Raw Materials Power & Fuel Cost Employee Cost Other Manufacturing Expenses Selling and Admin Expenses Miscellaneous Expenses Page | 44 Srei Infrastructure Finance Limited
Particulars Mar '09 Mar '10 Mar '11 Mar '12 Mar '13 Current Ratio 1.09 0.94 1.01 1.16 1.24 Current Ratio 0.74 0.49 0.47 0.66 0.72
Particulars Mar '09 Mar '10 Mar '11 Mar '12 Mar '13 Debt Equity Ratio 0.25 0.13 0.11 0.12 0.07
0 0.2 0.4 0.6 0.8 1 1.2 1.4 Mar '09 Mar '10 Mar '11 Mar '12 Mar '13 Current Ratio Current Ratio 0 0.05 0.1 0.15 0.2 0.25 Mar '09 Mar '10 Mar '11 Mar '12 Mar '13 Debt Equity Ratio Page | 45 Srei Infrastructure Finance Limited
Particulars Mar '09 Mar '10 Mar '11 Mar '12 Mar '13 Inventory Turnover Ratio 8.67 8.09 6.96 7.1 6.88
Particulars Mar '09 Mar '10 Mar '11 Mar '12 Mar '13 Debtors Turnover Ratio 11.12 12.46 14.18 14.62 12.96
0 1 2 3 4 5 6 7 8 9 Mar '09 Mar '10 Mar '11 Mar '12 Mar '13 Inventory Turnover Ratio Inventory Turnover Ratio 0 2 4 6 8 10 12 14 16 Mar '09 Mar '10 Mar '11 Mar '12 Mar '13 Debtors Turnover Ratio Debtors Turnover Ratio Page | 46 Srei Infrastructure Finance Limited
C) PEER COMPARISON Particulars Asian Paints Berger Paints Kansai Nerolac Akzo Nobel Shalimar Paints Total Assets 3,069.02 1,287.45 1,346.46 1,105.30 163.12
Particulars Asian Paints Berger Paints Kansai Nerolac Akzo Nobel Shalimar Paints Sales Turnover 10,418.78 3,024.21 3,154.40 2,231.98 530.18
0.00 500.00 1,000.00 1,500.00 2,000.00 2,500.00 3,000.00 3,500.00 Asian Paints Berger Paints Kansai Nerolac Akzo Nobel Shalimar Paints Total Assets Total Assets 0.00 2,000.00 4,000.00 6,000.00 8,000.00 10,000.00 12,000.00 Asian Paints Berger Paints Kansai Nerolac Akzo Nobel Shalimar Paints SalesTurnover Slaes Turnover Page | 47 Srei Infrastructure Finance Limited Particulars Asian Paints Berger Paints Kansai Nerolac Akzo Nobel Shalimar Paints
Net Profit 1,169.06 209.8 206.6 218.83 11.02
Particulars Asian Paints Berger Paints Kansai Nerolac Akzo Nobel Shalimar Paints Last Price 536.5 237.3 1,243.00 821.85 80.7
0.00 200.00 400.00 600.00 800.00 1,000.00 1,200.00 1,400.00 Asian Paints Berger Paints Kansai Nerolac Akzo Nobel Shalimar Paints Net Profit Net Profit 0 200 400 600 800 1000 1200 1400 Asian Paints Berger Paints Kansai Nerolac Akzo Nobel Shalimar Paints Last Price Last Price Page | 48 Srei Infrastructure Finance Limited
Particulars Market Capitalization (Cr) Asian Paints
51,460.96 Berger Paints
8,221.88 Kansai Nerolac
6,698.77 Akzo Nobel
3,834.78 Shalimar Paints
152.75 Total Mkt Cap
70,369.14
51,460.96 8,221.88 6,698.77 3,834.78 152.75 Market Capitalization (Cr) Asian Paints Berger Paints Kansai Nerolac Akzo Nobel Shalimar Paints Page | 49 Srei Infrastructure Finance Limited INTERPRETATION OF FINANCIAL ANALYSIS
The profitability of the company is quite high and is increasing year by year which is a good sign for the companys growth The networth of the company is increasing every year whereas the debt is decreasing every year, this shows that the company is having a more proportion of own funds than the borrowed funds in its share capital The current ratio of the company is 1.24, this shows that the short term solvency position of the company is quite good The working capital of the company is quite good, this shows that the company has good liquidity to carry out the day to day operations in the company The company makes provision of around 14% of the total liabilities, this shows that the company has good liquidity in case of any financial emergency Page | 50 Srei Infrastructure Finance Limited CORPORATE HIGHLIGHTS FOR FY 2013-2014
Ceased manufacturing activity at the Bhandup plant with effect from 5 th May 2014 Impact of about Rs.28 Cr in FY 2014-2015 for total Volunatary Retirement/Seperation scheme/Relocation Compensation Agreement signed in April 2014 with Kadisco Chemical industry PLC, Ethiopia to acquire either directly or through subsidiaries 51% stake Agreement signed in May 2014 with ESS Bathroom Products Pvt Ltd to acquire its front end sales business including brands, network and sales infrastructure Increased stake in BIL to 96.79% during the year Final dividend of Rs 4.20 per equity share (420% of face value) Page | 51 Srei Infrastructure Finance Limited IMPORTANT POINTS FROM ANNUAL REPORT
Joint Venture with PPG Industries INC, USA -New 50:50 Joint venture between Asian Paints and PPG Industries on 10 th April,2013 Capacity Expansion - New manufacturing facility commissioned at Khandala, Maharashtra with an installed capacity of 3,00,000 KL per annum Energy Conservation measures taken by company -Replacement of old equipment with the new equipment -Reduction in specific fuel consumption for electricity generation -Optimization of electrical equipment Research and Development -Development of new and upgradation of existing products -Collaborative development with vendors and institutes -Import substitution and identification of new raw material for development Corporate Governance -Fairness, Accountabitlity, disclosures and transparency are the 4 strong pillars supporting the foundation of the companys philosophy of Corporate governance -Responsible governance is imbibed in the companys work culture which has enabled it to achieve sustainable growth on its journey to continued success
Instrument Category Rating Rating Outlook Long Term CRISIL AAA Stable Short Term CRISIL A1+
Credit rating agency, CRISIL has reaffirmed AAA rating to long-term bank facilities of Asian Paints. The rating agency has also reaffirmed A1+ rating to the companys short term bank facilities. The company has received the said rating reaffirmation on the back of its leadership position in the domestic paints sector, healthy operating margin, and robust financial risk profile, marked by healthy capital structure and surplus liquidity. However, the rating strengths are partially offset by Asian Paints susceptibility to volatility in raw material prices.
TOL/TNW The Tangible Net worth (TNW) of the company increased from 3577.73 cr in FY 2013 to 4102.46 cr in FY 2014. The increase in TNW was mainly due to plough back of profit. The gearing ratio of the company has increased from level of 0.88 as on March 31, 2013 to 0.90 as on March 31, 2014 mainly on account of increased short term bank borrowings & increase in level of sundry creditors. Total Outside Liabilities (TOL) of the company have increased from 3135.94 cr as on March 31, 2013 to 3706.13 cr as on March 31, 2014. The increase in TOL is mainly because of increase in the level of sundry creditors from 1441.57 cr as on March 31, 2013 to 1745.72 cr as on March 31, 2014.
FIXED ASSETS The net block of the company marginally decreased from 2424.89 cr as on March 31, 2013 to 2402.34 cr as on March 31, 2014 due to depreciation. The same is expected to increase further to 2501.94 cr as on March 31, 2015.
INCOME/SALES During FY 2014, the company has registered net sales of 13392.88 cr as against sales of 11424.87 cr in FY 2013 which is a growth of 14.57 %.
PROFITABILITY The company has registered PBDIT of 2890.04 cr in FY 2014 against 2541.64 cr in FY 2013 registering a growth of 21.58 %. The PBDIT margin has decreased marginally from 22.25 % in FY 2013 to 21.58 % in FY 2014. During FY 2014, the company has registered PAT of 2217.51 cr in FY 2013 against PAT of 2075.97 cr in FY 2013 registering a growth of 16.56 %. The PAT margin has decreased from 18.17 % in FY 2012 to 16.56 % in FY 2013. Company has explained that the dip in profit is mainly because of increase in cost of labor, increase in finance expenses and increase in cost of import of raw materials.
Recommendations to the banks are as follows From the above financials we can come to a conclusion that the company is a cash rich company and has a huge net worth and is enjoying very high profit margins The company is not taking the help of outsiders liability and is making use of its own funds in its day to day transactions in the organization This will make it difficult for the bank to start the business with the company by providing fund based limits to the company The company would rarely make use of facilities like cash credit, overdraft facility, Export Packing credit and vendor financing Thus the bank should go ahead with the following facilities:
A. Non-Fund based Facility 1. Letter of credit 2. Trade Credit Bank Guarantee 3. Bank Guarantee 4. Loan Equivalent Risk
B. Cash Management Services The CMS are mainly divided into collections, payment and debt. As per clients perspective, Collection products are aimed at pooling the customers' receivables from multiple locations into a single pooling account, disbursement products are aimed at providing the customer various payment options through a single window. Further, distribution of dividend / interest / refund / redemption payments, enables outsourcing of routine tasks.
Page | 55 Srei Infrastructure Finance Limited C. Tax Payment Service The bank may also help the company to pay various taxes like Value Added Tax (VAT), Sales Tax, Excise and also many other types of taxes and can charge a minimal rate of interest on it which may help to improve the profitability of the bank
D. Maintain Salary Accounts The bank may also maintain salary accounts of the employees working in the company and pay them a certain interest on this savings made by the people and then lend the money at a higher rate of interest
E. Dividend Payment The bank may help the company to make the payment of the dividend to the various shareholders across the country
F. Asset Financing Every year the company is investing huge amount In the purchase of fixed assets such as plant and machinery, land and building etc. The bank can help the company by financing these assets
G. International Transactions Bank can facilitate foreign exchange transactions and provide trade financing. This will help the company by mitigating the impact of currency and price fluctuations
H. Insurance Facilities Bank can offer insurance to their large scale clients. The insurance can cover corporate activites as well as staff and management activities
I. Asset Custody Bank can protect their clients corporate assets. This includes setting up accounts to store them, making regular audits to make sure that they remain intact and issuing report that assess the assets status on annual basis Page | 56 Srei Infrastructure Finance Limited Recommendations to the company are as follows The above financial showed that the company is financially sound company and is making huge amount of sales turnover every year and thus earning huge amount of profits The company export sales is just 2% of the total gross sales. So the company should take some measures in improving their export sales The employee turnover in the company is huge and hence there is increase in the labour cost every year. So steps should be taken by the company in reducing the labour turnover The company is having huge amount of cash reserves in their account. The company should make investment in various other schemes in order to enjoy more profits The company must also look to do lateral expansion as they have huge amount of own funds, but a very less amount of outsiders fund is being used by the company The company is facing losses on FOREX and is increasing every year. Thus steps need to be taken by the company like using facilities like hedging and factoring in order to control these losses The company is not investing much in the advertisement and promotional activities. So the company must look forward to invest some amount in advertisement In order to increase their sale The company can also tie up with the builders and contractors and may take some large scale projects
Every business concern should have adequate working capital to run its business operations. It should have neither excess working capital nor inadequate of working capital. Both excess as well as shortage of working capital situations are bad for any business. However out of the two, inadequacy or shortage of working capital is more dangerous from the point of view of the firm. Any change in the working capital will have an effect on a business's cash flows. A positive change in working capital indicates that the business has paid out cash, for example in purchasing or converting inventory, paying creditors etc. Hence, converting inventory, paying creditors etc will have a negative effect on the business's cash holding. However, a negative change in working capital indicates lower funds to pay off short term liabilities (current liabilities), which may have bad repercussions to the future of the company.
Page | 58 Srei Infrastructure Finance Limited
Chapter- 5 ANNEXURES
FINANCIAL STATEMENTS
Increase Percentage
Decrease Percentage Consolidated Balance Sheet (Rs in Crores)- Trend Analysis Increase/Decrease in % (Taking base year as 2009 )
Particulars
Mar '13 Mar '12 Mar '11 Mar '10 Mar '09 Mar '13 (in %) Mar '12 (in %) Mar '11 (in %) Mar '10 (in %) Mar '09 (in %) 12 mths 12 mths 12 mths 12 mths 12 mths 12 mths 12 mths 12 mths 12 mths 12 mths Sources Of Funds
Particulars Mar '13 Mar '12 Mar '11 Mar '10 Mar '09 Mar '13 Mar '12 Mar '11 Mar '10 Mar '09 12 mths 12 mths 12 mths 12 mths 12 mths 12 mths 12 mths 12 mths 12 mths 12 mths
Mar '13 Mar '12 Inc/Dec Inc/Dec 12 mths 12 mths 12 mths 12 mths Application of Funds
Gross Block 3,429.37 2,145.82 1,283.55 59.82 Less: Accum. Depreciation 988.4 845.27 143.13 16.93 Net Block 2,440.97 1,300.55 1,140.42 87.69 Capital Work in Progress 59.21 845.93 -786.72 -93.00 Investments 280.68 354.74 -74.06 -20.88 Inventories 1,830.29 1,598.89 231.40 14.47 Sundry Debtors 980.88 782.76 198.12 25.31 Cash and Bank Balance 751.98 556.14 195.84 35.21 Total Current Assets 3,563.15 2,937.79 625.36 21.29 Loans and Advances 444.95 420.97 23.98 5.70 Fixed Deposits 0 68.17 -68.17 -100.00 Total CA, Loans & Advances 4,008.10 3,426.93 581.17 16.96 Deffered Credit 0 0 0.00 0.00 Current Liabilities 2,466.85 2,262.21 204.64 9.05 Provisions 539.39 444.9 94.49 21.24 Total CL & Provisions 3,006.24 2,707.11 299.13 11.05 Net Current Assets 1,001.86 719.82 282.04 39.18 Minority Interest 0 0 0.00 0.00 Group Share in Joint Venture 0 0 0.00 0.00 Miscellaneous Expenses 0 0 0.00 0.00 Total Assets
3,782.72 3,221.04 561.68 17.44 Contingent Liabilities 192.96 472.61 -279.65 -59.17 Book Value (Rs) 352.83 286.54 66.29 23.13
Page | 62 Srei Infrastructure Finance Limited Consolidated Balance Sheet (Rs in Cr)- Common Size Analysis Important Indicators
Particulars Mar '13 % of Total Liabilities
12 mths 12 mths
Sources of Funds
Total Share Capital 95.92 2.54
Equity Share Capital 95.92 2.54
Share Application Money 0 0.00
Preference Share Capital 0 0.00
Init. Contribution Settler 0 0.00
Preference Share Application Money 0 0.00
Employee Stock Opiton 0 0.00
Reserves 3,288.37 86.93
Revaluation Reserves 0 0.00
Networth 3,384.29 89.47
Secured Loans 58.53 1.55
Unsecured Loans 179.13 4.74
Total Debt 237.66 6.28
Minority Interest 160.77 4.25
Policy Holders Funds 0 0.00
Group Share in Joint Venture 0 0.00
Total Liabilities 3,782.72 100.00
Page | 63 Srei Infrastructure Finance Limited Particulars Mar '13 % of Total Assets 12 mths 12 mths
Application of Funds Gross Block 3,429.37 90.66 Less: Accum. Depreciation 988.4 26.13 Net Block 2,440.97 64.53 Capital Work in Progress 59.21 1.57 Investments 280.68 7.42 Inventories 1,830.29 48.39 Sundry Debtors 980.88 25.93 Cash and Bank Balance 751.98 19.88 Total Current Assets 3,563.15 94.20 Loans and Advances 444.95 11.76 Fixed Deposits 0 0.00 Total CA, Loans & Advances 4,008.10 105.96 Deffered Credit 0 0.00 Current Liabilities 2,466.85 65.21 Provisions 539.39 14.26 Total CL & Provisions 3,006.24 79.47 Net Current Assets 1,001.86 26.49 Minority Interest 0 0.00 Group Share in Joint Venture 0 0.00 Miscellaneous Expenses 0 0.00 Total Assets
3,782.72 100.00
Page | 64 Srei Infrastructure Finance Limited Consolidated Profit & Loss account (in Crores) - Trend Analysis Increase/Decrease in % ( Taking base year as 2009) Increase Percentage
Decrease Percentage
Particulars Mar '13 Mar '12 Mar '11 Mar '10 Mar '09 Mar '13 Mar '12 Mar '11 Mar '10 Mar'9 12 mths 12 mths 12 mths 12 mths 12 mths 12 mths 12 mths 12 mths 12 mths 12mts Income
Page | 66 Srei Infrastructure Finance Limited Consolidated Profit & Loss A/C (Rs in Crores)- Common Size Analysis Important Indicator
Particulars Mar '13 % of Sales
12 mths 12 mths
Income
Sales Turnover 12,600.41 110.27
Excise Duty 1,173.06 10.27
Net Sales 11,427.35 100.00
Other Income 114.52 1.00
Stock Adjustments 194.69 1.70
Total Income 11,736.56 102.71
Expenditure
Raw Materials 6,627.32 58.00
Power & Fuel Cost 110.28 0.97
Employee Cost 623.56 5.46
Other Manufacturing Expenses 19.59 0.17
Selling and Admin Expenses 501.74 4.39
Miscellaneous Expenses 2,007.61 17.57
Preoperative Exp Capitalised 0 0.00 Total Expenses
9,890.10 86.55
Page | 67 Srei Infrastructure Finance Limited
Operating Profit
1,731.94 15.16 PBDIT 1,846.46 16.16 Interest 36.65 0.32 PBDT 1,809.81 15.84 Depreciation 154.6 1.35 Other Written Off 0
Profit Before Tax 1,655.21 14.48 Extra-ordinary items 3 0.03 PBT (Post Extra-ord Items) 1,658.21 14.51 Tax 498.69 4.36 Reported Net Profit 1,159.52 10.15 Minority Interest 45.64 0.40 Share Of P/L Of Associates 0
Net P/L After Minority Interest & Share Of Associates 1,110.88 9.72 Total Value Addition 3,262.78 28.55 Preference Dividend 0
Equity Dividend 441.23 3.86 Corporate Dividend Tax 74.29 0.65 Per share data (annualised)
Shares in issue (lakhs) 959.2 8.39 Earning Per Share (Rs) 120.88 1.06 Equity Dividend (%) 0
Book Value (Rs) 352.83 3.09
Page | 68 Srei Infrastructure Finance Limited Ratio Analysis Increase
Decrease
Particulars Mar '13 Mar '12 Mar '11 Mar '10 Mar '09 Investment Valuation Ratios Face Value 10 10 10 10 10 Dividend Per Share -- -- -- -- -- Operating Profit Per Share (Rs) 180.56 161.02 137.42 129.09 73.01 Net Operating Profit Per Share (Rs) 1,191.34 1,042.76 833.82 723.97 598.38
9.65 9.81 10.44 11.93 6.88 Return On Capital Employed(%) 46.71 48.42 52.84 62.58 44.25 Return On Net Worth(%) 32.91 35.97 38.54 48.86 33.06 Adjusted Return on Net Worth(%) 34.17 37.11 39.81 46.58 35.68 Return on Long Term Funds(%) 49.29 52.76 56.87 68.21 52.03
Page | 69 Srei Infrastructure Finance Limited
Liquidity And Solvency Ratios Current Ratio 1.24 1.16 1.01 0.94 1.09 Quick Ratio 0.72 0.66 0.47 0.49 0.74 Debt Equity Ratio 0.07 0.12 0.11 0.13 0.25 Long Term Debt Equity Ratio 0.01 0.03 0.03 0.04 0.06
Management Efficiency Ratios Inventory Turnover Ratio 6.88 7.1 6.96 8.09 8.67 Debtors Turnover Ratio 12.96 14.62 14.18 12.46 11.12 Investments Turnover Ratio 6.88 7.1 6.96 8.09 8.67 Fixed Assets Turnover Ratio 3.48 4.95 4.17 4.82 4.06 Total Assets Turnover Ratio 3.14 3.23 3.3 3.59 3.88 Asset Turnover Ratio 3.26 3.48 3.51 4.82 4.06 Average Finished Goods Held -- 43.53 41.62 37.23 31.26 Number of Days In Working Capital 31.56 25.91 10.25 4.06 29.22 Profit & Loss Account Ratios Material Cost Composition 57.99 59.75 58.18 55.9 59.29 Selling Distribution Cost Composition 4.39 16.07 15.95 15.62 15.7 Cash Flow Indicator Ratios Dividend Payout Ratio Net Profit 46.28 45.1 42.34 36.17 49.45 Dividend Payout Ratio Cash Profit 40.64 40.17 37.33 32.88 41.66 Earning Retention Ratio 55.43 56.29 59.01 62.05 54.18 Cash Earning Retention Ratio 60.69 60.93 63.72 65.66 60.95
Page | 70 Srei Infrastructure Finance Limited
Cash Flow Increase
Particulars Mar '13 Mar '12 Mar '11 Mar '10 Mar '09 Net Profit Before Tax 1515.88 1362.93 1122.83 1104.81 547.88 Net Cash From Operating Activities 1081.12 753.67 743.25 847.41 325.21 Net Cash (used in)/from -424.87 -464.87 -410.23 -241.81 -16.69 Investing Activities Net Cash (used in)/from Financing Activities -590.35 -297.06 -321.15 -237.99 -221.61 Net (decrease)/increase In Cash and Cash Equivalents 65.9 -8.26 11.85 367.61 86.91 Opening Cash & Cash Equivalents 500.97 509.23 495.55 127.94 41.35 Closing Cash & Cash Equivalents 566.87 500.97 507.4 495.55 128.26
PEER COMPARISON Highest
Company Name Last Price Market Cap. Sales Net Profit Total Assets (Rs. cr.) Turnover Asian Paints
1751.39 2211.69 2495.2 2363.38 Other Current Assets [Inc(+)/Dec(-)] 95.59 103.01 102.91 149.81 Other Current Liabilities [Inc(+)/Dec(-)] -255.4 -230.39 -252.2 -95.58 Other Incone/Expenses
-102.63 -119.36 -137.8 -160.5 Net Cash from Operations
2013.83 2458.43 2782.29 2469.65
Page | 82 Srei Infrastructure Finance Limited 7.CASH FLOW STATEMENT (Rs in Crores) CASH FLOW STATEMENT 2012 2013 2014 2015 2016 Audited Audited Audited Estimated Projection Operating Sector Net Sales 11424.87 13392.88 15322.99 17364.28 Debtors(Trade) [Inc(+)/Dec(-)] 199.63 129.4 146.44 201.07 Cash From Sales 11225.24 13263.48 15176.55 17163.21 Costs-Interest & Finance Charges 36.65 42.22 48.63 55.47 Expenses on stock purchases 6254.94 7205.28 8286.07 9528.98 Trade Creditors [Inc(+)/Dec(-)] -179.12 -304.15 -366.63 -288 Manufacturing Expenses 2800.35 3376.2 3725.52 4229.41 Cash cost of Sales 8912.82 10319.55 11693.59 13525.86 Expenses for inc/dec in stocks 59.34 160.73 289.73 408.67 Cash from Asset Conversion Cycle 2253.08 2783.2 3193.23 3228.68 Selling,Gen & Admin Exp 0 0 0 0 Advance Payments [Inc(+)/Dec(-)] 0 0 0 0 Advance Received [Inc(+)/Dec(-)] 0 0 0 0 Taxation 501.69 571.51 698.03 865.3 Dividends 0 0 0 0 Cash from Operations 1751.39 2211.69 2495.2 2363.38 Other Current Assets [Inc(+)/Dec(-)] 95.59 103.01 102.91 149.81 Other Current Liabilities [Inc(+)/Dec(-)] -255.4 -230.39 -252.2 -95.58 Other Incone/Expenses -102.63 -119.36 -137.8 -160.5 Net Cash from Operations 2013.83 2458.43 2782.29 2469.65 Investment Sector Capital Expenditure [Inc(+)/Dec(-)] 728.43 223.11 394.39 539.66 Investment in Group Companies [Inc(+)/Dec(-)] 0 0 0 0 Intangibles/Other Term Assets [Inc(+)/Dec(-)] 1.38 223.06 138.54 148.94 Cash before Funding 1284.02 2012.26 2249.36 1781.05 Financing Sector Dues to Banks [Inc(+)/Dec(-)] -90.14 8.77 4.2 27.42 Short Term Debt [Inc(+)/Dec(-)] 0 0 0 0 Term Debt [Inc(+)/Dec(-)] 54.65 26.88 33.81 40.72 Equity [Inc(+)/Dec(-)] 0 0 0 0 Other Loans & Reserves [Inc(+)/Dec(-)] -1275.32 -1469.73 -1944.26 -1416.07 Total -1310.81 -1434.08 -1906.25 -1347.93 Movement in Cash Assets -26.79 578.18 343.11 433.12 Cash & Bank Balance [Inc(+)/Dec(-)] 127.67 179.68 222.57 288.3 Investments (Other than long term) [Inc(+)/Dec(-)] -154.46 398.5 120.54 144.82 Movement in Cash Assets -26.79 578.18 343.11 433.12