You are on page 1of 2

Hi Ashutosh,

Hope you are doing well.

I have completed my assignment, I have performed a brief analysis on Air Indigo financial
report 2015-16 with the help of financial ratios .Along with the mail I have attached the
financial report for reference.

Analysis of Air Indigo Annual Report of 2015-16

Brief Description of company:

Indigo airlines were founded by Rahul Bhatia in 2006 and currently are one of the Indias
largest airlines with market share of almost 38% as of 2017 with Net Income of 19.9 billion.
Current share price of the company is 1035.80/1038.80 (BSE/NSE) with Market cap of
37,762.79 Cr.

Price to equity ratio of the company stock is currently at 21 % which itself shows that the
company is growing today market and has a good potential growth in future as well hence if
the stocks are held for longer duration the earning will to good.

Analysis of Annual Report 2015-2016 through Key Financial Ratios:

1. Liquidity of the Firm:

a) Current Ratio = Current Asset /Current Liabilities

= 56007.86/3985.74
= 14.0520

Current ratio of 2.0 or higher is considered good and in this case company is maintaining a
good current ratio which indicates that company has sufficient liquidity to meet its liabilities
for the present year.

b) Quick Ratio = Current Asset Inventories /Current Liabilities -(Short Term

Provisions + Deferred interest)
= 130191.11-1267.20/130191.11-(6883.18+4050.07)

Quick Ratio of more than 1 is considered good it indicates capacity of the firm to meet its
quick liabilities mainly useful for banks and financial intuitions. In present scenario the
company is able to achieve a decent result.

2. Financial Strength:

a) Debt Equity Ratio = Long Term Debt /Shareholders equity

= Long term borrowings +Other Long term Liabilities /
Shareholders equity
= 29498.61+24722.47/18342.77
= 2.9559

Favorable debt to equity ratio is considered less than 1 but in this case debt equity ratio is
considerably on the higher side for FY 2015-16 it indicates financial soundness of the firm.
This measure shows the dependency of firm on outside funds.
b) Interest Coverage Ratio = Operating Profit / Interest Expense
= 33255.02/1348.53
= 24.6602
Interest coverage ratio is the best indicator of how many time profits will cover its interests
and expense, in present scenario the company can cover its expenses almost 24.5 times
hence it is a good indicator of financial stability.

3. Efficiency of the firm:

a) Return on Equity (ROE) = Net Income/Shareholders Equity

= 1.0847 (i.e 10.847%)
ROE is the profitability measure of the company, as per the data the company has
recorded 10% profit in income statement in the current financial year 2015-16
compared to their previous earnings.

b) Return on Asset (ROA) = Net Income / Total Asset

= 19897.20/130191.11
=0.1528 (i.e 15.28%)
ROA indicates profitability of the company relative to its assets. As per the above
data companies asset are 15% efficient to generate its earnings out of the
investment made which is relatively a good number.

In FY 2015-16 the company has booked profit of 19.9 billion and still advancing
further with a positive note.