Financial Management I Project - Group 3 - Section D

Financial Management I
Project
Consumer Durables-Electronics
PGDM 2017-19
Submitted By
Group 3 (Section D)
Aditya Agarwal – 17PGDM184
Karan Garg – 17PGDM197
Karan Tiwari – 17PGDM198
Rahul Arora – 17PGDM209
Shivangi Nahata – 17PGDM220
Varsha Bhardwaj – 17PGDM235
FINANCIAL MANAGEMENT I PROJECT – CONSUMER DURABLES-ELECTRONICS
1 TABLE OF CONTENTS
2 About Industry ................................................................................................................................ 2
3 WACC Analysis ................................................................................................................................ 3
3.1 FY 2012-13 .............................................................................................................................. 3
3.2 FY 2013-14 .............................................................................................................................. 5
3.3 FY 2014-15 .............................................................................................................................. 7
3.4 FY 2015-16 .............................................................................................................................. 9
3.5 FY 2016-17 ............................................................................................................................ 11
1|Page
WACC & Financial Analysis – Consumer

Durables-Electronics
2 ABOUT INDUSTRY
The consumer durables market is estimated to be US$ 15 billion as on May 2017 and is
expected to reach US$ 20.6 billion by 2020. Urban markets account for the major share (65
per cent) of total revenues in the consumer durables sector in India. There is a lot of scope
for growth from rural markets with consumption expected to grow in these areas as
penetration of brands increases. Consumer electronics exports from India reached US$
186.7 million during April-September 2017. Also, demand for durables like refrigerators as
well as consumer electronic goods are likely to witness growing demand in the coming years
in the rural markets as the government plans to invest significantly in rural electrification.
Under the Budget Scheme 2017-18, the government retained its focus on rural economy by
continuing the pro-poor and pro-farmer schemes.
Growing awareness, easier access, and changing lifestyles have been the key growth drivers
for the consumer market. The Government of India's policies and regulatory frameworks
such as relaxation of license rules and approval of 51 per cent foreign direct investment (FDI)
in multi-brand and 100 per cent in single-brand retail are some of the major growth drivers
for the consumer market.
For WACC & Financial Analysis of previous five years, we have chosen following companies
 Videocon
 BPL Ltd
 PG Electroplast
 Jindal Photo Ltd
 MIRC Electronics
 Whirlpool
2|Page
3 WACC ANALYSIS
3.1 FY 2012-13
FY 2012-2013
Particulars (fig in cr) PG MIRC
Videocon BPL Ltd Jindal Photo WhirlPool
Electroplast Electronics
Equity Share Capital 3,187.64 48.89 136.40 103.21 14.19 617.54
Preference Share Capital 153.30 169.59 - - - -
Total Debt 21,897.71 37.09 80.02 77.98 112.84 -
Kd 7.11% 8.62% 9.72% 3.83% 24.01% 0%
Ke 8.77% 8.77% 9.00% 8.13% 8.77% 8.83%
Kp 8.00% 0.001% 0% 0% 0% 0%
WACC 7.15% 2.93% 9.12% 6.28% 22.31% 8.83%
 The overall cost of capital of the consumer durable industry (electronics) in FY 2012-
13 ranges from 2% to 23% depending upon the capital structure of the company.
 Also, the average cost of debt is around 9% while the average cost of equity is 8% for
the industry.
 The capital structure of majority of companies include long term borrowings and
equity share capital which means that all the firms are taking advantage of the
leverage.
 Majority of the companies have a great amount of debt in their capital structure
indicating a higher financial risk as well as financial leverage.
Cost of Equity 2012-13

9.00%
9.00% 8.77% 8.77% 8.77% 8.83%
8.80%
8.60%
8.40% 8.13%
8.20%
8.00%
7.80%
7.60%
Videocon BPL Ltd PG Jindal Photo MIRC WhirlPool
3|Page
Cost of Debt 2012-13

24.01%
25.00%
20.00%
15.00% 9.72%
8.62%
7.11%
10.00% 3.83%
5.00% 0%
0.00%
Cost of Preference Shares 2012-13

8.00%
8.00%
7.00%
6.00%
5.00%
4.00%
3.00%
2.00%
1.00% 0.001% 0% 0% 0% 0%
0.00%
WACC - 2012-13
25.00% 22.31%
20.00%
15.00%
9.12% 8.83%
10.00% 7.15% 6.28%
5.00% 2.93%
0.00%
4|Page
3.2 FY 2013-14
FY 2013-2014
Equity Share Capital 334.46 48.89 230.87 122.91 14.19 740.06
Preference Share Capital - 169.59 - - - -
Total Debt 40,148.36 28.55 77.61 44.81 267.55 -
Kd 6.79% 8.71% 10.40% 12.12% 9.98% 0%
Ke 18.43% 136.27% 18.53% 13.70% 17.40% 10.18%
Kp 0% 0.001% 0% 0% 0% 0%
WACC 7.01% 27.98% 16.49% 13.28% 10.35% 10.18%
 The overall cost of capital of the consumer durable industry ranges from 7% to 28%
depending upon the capital structure of the company.
 Also, the average cost of debt is around 9% while the average cost of equity is 16% for
the industry.
 Majority of the companies have a great amount of debt in their capital structure
indicating a higher financial risk as well as financial leverage.
 All the firms in the industry are levered which means that they are enjoying the
advantages of leverage.

136.27%
140.00%
120.00%
100.00%
80.00%
60.00%
40.00% 18.43% 18.53% 13.70% 17.40%
10.18%
20.00%
0.00%
5|Page
14.00% 12.12%
12.00% 10.40% 9.98%
8.71%
10.00%
6.79%
8.00%
6.00%
4.00%
2.00% 0%
0.00%
Cost of Prefrence Shares 2013-14

0.001%
0%
0%
0%
0%
0% 0% 0% 0% 0% 0%
0%
WACC - 2013-14
27.98%
30.00%
25.00%
20.00% 16.49%
13.28%
15.00%
10.35% 10.18%
10.00% 7.01%
5.00%
0.00%
6|Page
3.3 FY 2014-15
FY 2014-2015
Equity Share Capital 334.46 48.89 158.23 132.09 19.63 915.78
Total Debt 18,588.00 17.99 46.22 43.37 211.61 -
Kd 601.00% 8.26% 17.89% 1.74% 10.89% 0%
Ke 5.51% 0.60% 23.36% 17.60% 20.42% 6.85%
Kp 0% 0.001% 0% 0% 0% 0%
WACC 5.99% 0.75% 22.26% 13.68% 11.67% 6.85%
 WACC ranged from 0.75% to 13.68% where cost was minimum for company having
share preferences for year 14-15
 While cost of equity decreased for each company from previous year the cost of equity
increased resulting in overall increased WACC

23.36%
25.00% 20.42%
17.60%
20.00%
15.00%
10.00% 5.51% 6.85%
5.00% 0.60%
0.00%
700.00% 601.00%
600.00%
500.00%
400.00%
300.00%
200.00%
100.00% 8.26% 17.89% 1.74% 10.89% 0%
0.00%
7|Page

0.001%
0%
0%
0%
0%
0% 0% 0% 0% 0% 0%
0%
WACC - 2014-15
25.00% 22.26%
20.00%
13.68%
15.00% 11.67%
10.00% 5.99% 6.85%
5.00%
0.75%
0.00%
8|Page
3.4 FY 2015-16
FY 2015-16
Equity Share Capital 334.46 48.89 191.23 164.45 19.64 1,613.16
Total Debt 17,918.00 62.22 42.20 21.64 197.22 -
Kd 5.42% 7.54% 16.01% 2.87% 10.21% 0%
Ke 9.76% 7.25% 7.25% 15.02% 7.25% 6.14%
Kp 0% 0.001% 0% 0% 0% 0%
WACC 5.14% 2.94% 8.83% 13.61% 9.95% 6.14%
 WACC ranged from 0.75% to 13.61% where cost was minimum for company having
share preferences for year 15-16
 While cost of equity decreased for each company from previous year the cost of equity
increased resulting in overall increased WACC
20.00%
15.02%
15.00%
9.76%
10.00% 7.25% 7.25% 7.25%
6.14%
5.00%
0.00%
20.00% 16.01%
15.00%
10.21%
10.00% 7.54%
5.42%
2.87%
5.00%
0%
0.00%
9|Page

0.001%
0%
0%
0%
0%
0% 0% 0% 0% 0% 0%
0%
WACC - 2015-16
13.61%
14.00%
12.00% 9.95%
10.00% 8.83%
8.00% 6.14%
5.14%
6.00%
2.94%
4.00%
2.00%
0.00%
10 | P a g e
3.5 FY 2016-17
FY 2016-17
Equity Share Capital 334.46 48.89 301.78 96.32 21.19 1,483.06
Total Debt 17,194.19 220.67 96.16 - 165.16 -
Kd 5.35% 6.77% 7.29% 0.00% 10.00% 0%
Ke 9.76% 96.46% 16.66% 14.63% 31.16% 8.09%
Kp 0% 0.001% 0% 0% 0% 0%
WACC 5.43% 14.14% 14.39% 14.63% 15.87% 8.09%
 The overall cost of capital of the consumer durable industry (electronics) in FY 2016-
17 ranges from 5% to 16% depending upon the capital structure of the company.
 Also, the average cost of debt is around 5.50% while the average cost of equity is 12%
for the industry.
 The capital structure of majority of companies include long term borrowings and
equity share capital which means that all the firms are taking advantage of the
leverage.

96.46%
100.00%
80.00%
60.00%
31.16%
40.00%
16.66% 14.63%
9.76% 8.09%
20.00%
0.00%

10.00%
10.00% 7.29%
6.77%
8.00% 5.35%
6.00%
4.00%
2.00% 0.00% 0%
0.00%
11 | P a g e

0.001%
0%
0%
0%
0%
0% 0% 0% 0% 0% 0%
0%
WACC - 2016-17
15.87%
16.00% 14.14% 14.39% 14.63%
14.00%
12.00%
10.00% 8.09%
8.00%
5.43%
6.00%
4.00%
2.00%
0.00%
***********************************
12 | P a g e

Financial Management I Project - Group 3 - Section D

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Financial Management I

WACC & Financial Analysis – Consumer

Cost of Equity 2012-13

Cost of Debt 2012-13

Cost of Preference Shares 2012-13

Cost of Equity 2013-14

Cost of Debt 2013-14

Cost of Prefrence Shares 2013-14

Cost of Equity 2014-15

Cost of Debt 2014-15

Cost of Prefrence Shares 2014-15

10.00% 5.99% 6.85%

Cost of Equity 2015-16

Cost of Debt 2015-16

Cost of Prefrence Shares 2015-16

Cost of Equity 2016-17

Cost of Debt 2016-17

Cost of Prefrence Shares 2016-17

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