STRATEGIC FINANCIAL

MANAGEMENT
PROJECT
FINANCIAL MANAGEMENT PRACTICES OF
UNITED PHOSPHORUS LIMITED

Presentation by:
SAURABH 14PGDMBFS17

 UPL Limited(formerly known as United Phosphorus Limited) is a global generic

crop protection, chemicals and seeds company, headquartered in India (Mumbai).
The revenue of the Company has grown at a CAGR of 26% over the last 5 years.
6000.00
5000.00
4000.00
3000.00
2000.00
1000.00
0.00

ABOUT UPL

REVENUE
Linear (REVENUE)

UPL Limited is engaged in the business of not only manufacturing and marketing
crop protection chemicals but also offering crop protection solutions.
The Companys market capitalisation as on 31st March, 2015 stood at Rs. 18,953
crore.
The Company is listed on the National Stock Exchange and Bombay Stock
Exchange in India.
UPL Limited has entrenched its presence in 122 countries across six continents.
UPL operates 13 manufacturing units within India and 15 units outside India,
enhancing its operational flexibility.
UPL has a team of 3,827 employees, each with specialised domain skills and
experience.
Source: http://www.uplonline.com/about/index.php

CONTINUED

SEGMENT WISE PERFORMANCE

4%

AGRO ACTIVITY
NON - AGRO
ACTIVITY

96%

Source: Management Discussion & Analysis

 The agriculture sector contributed just 15% of India's

GDP.
But over 50% of the population was still dependent on
it.

INDIAN
AGRICULTU
RE SECTOR

India emerged as a significant agricultural exporter in

commodities like cotton, rice, meat, oil meals, pepper
and sugar.
The agricultural and allied sectors registered a growth
of 1.1% during the current financial year.
Despite the monsoon rainfall falling 12% short of
expectations during 2014-15, the loss in production
was contained at ~3.0% over 2013-14.
Agricultural credit flow target for 2014-15 was fixed at
Rs. 8,00,000 crore against which Rs. 3,70,828.6 crore
has already been achieved.
Source: KPMG

 FY 2014-15
During 2014-15, the Company commissioned a new herbicide plant and a 50-MW
equivalent coal-fired boiler in Jhagadia.
UPL commissioned two herbicide manufacturing plants at Jhagadia within nine
months.

FY 2013-14

CAPITAL
EXPENDITUR
E

UPL erected its UPH-203 plant in a record 83 days against the global benchmark of
240 days.
The company invested in environmental management infrastructure across
manufacturing units.
The company made a forward looking investment in environment management
assets.
Invested 193 crore in building capacity for the manufacture of Carbon Disulphide,
the key raw material for the manufacture of Mancozeb (largest product for the
Company).

FY 2012-13
Invested Rs.175 crore to enhance the yield of Mancozeb.

FIXED ASSET
TREND
INDUSTRY
COMPARASION

ASSET AS % OF TOTAL ASSETS

26% 4FIXED
3.59
24%
23%
3.24
2.94
3.15
3.08
2.643 2.97
2.48 2.94
TIMES

2.23

2.48

FIXED ASSET TURNOVER RATIO

24%
INDUSTRY
FIXED ASSET TURNOVER
2.97
20%
2.74
17%
2.64
RATIO
2.23
2.18

FIXED ASSET TURNOVER RATIO

FY 20150

FY 2014

FY 2011

FY 2012

FY 2013
FY 2013

FY 2014

FY 2012
FY 2015

Source: Management Discussion & Analysis

FY 2011

FY 2010

CRITICAL
EVALUATION
OF CAPITAL
EXPENDITUR
E POLICY

Fixed asset as percentage of total assets has increased

from 20% in FY 2010-11 to 26% in FY 2014-15.
Fixed asset turnover ratio is almost same i.e. around the
2.6. This is so because fixed assets have increased in
6000.00
2500.00
F
same proportion as the sales. 2000.00
5000.00
I the

X
E
D
A
S
S
E
T
S

4000.00
3000.00
2000.00
1000.00
0.00

1500.00
1000.00
500.00
0.00

S
A
L
E
S

FIXED ASSETS
SALES

Purchase of assets has increased from 88.1 crore in FY

2010-11 to 358.08 crore in FY 2014-15.
Investments in fixed assets have increased because of
the commissioning of the new coal-fired plant jhagadia,
Gujarat
and other reasons mentioned above.
Source: Management Discussion & Analysis

Holding Pattern
TRENDS
IN DEBT-EQUITY RATIO & INTEREST COVERAGE RATIO
1.40
20
20 1.40
DEBUNTURE
REDEMPTION
RESERVE
LONGTERM
BORROWINGS
18
D
1.20

1.20
1.16
16
17.47
1.12
14
2500.00
400
1.00
15 1.00
12
0.80
DEBUNTURE
REDEMPTION
RESERVE
I
2000.00
10
0.80
DEBT-EQUITY RATIO
300
RATIO
LONGTERM
BORROWINGS
C -EQUITY
8 DEBT
ICR
10 0.60
ICR
Linear
(DEBUNTURE
REDEMPTION
1500.00
0.61
0.60
6
R
0.40
DEBT-EQUITY
RATIO
Linear
(LONGTERM
BORROWINGS)
200 0.20
4 INDUSTRY
INDUSTRY
ICR
RESERVE)
0.45
0.43
1000.00
0.40
0.39
2
5
3.93
0.00
0
3.28
100
3.08
2.87
S 0.20 500.00
R
1.72
FY 2010
FY 2011
FY 2012
FY 2013
FY 2014
FY 2015
A
0.00
T 0.00
00
I
FY
2010
FYFY
2011
FY2012
2012
FY
2013
FY 2014
2014FY FY
FY
FY 2010 FY
2011
FY
FY23%
2013
FY
2015
FY 2010
FY
2011
2012
FY2014
2013
FY 2015
2014
FY 2015
2010
FY 2011
FY 2012
FY 2013
FY
2015
O
E
B
T
C
R
E
Q
O
U
I
R
T
E
Y

CAPITAL
STRUCTURE

In FY 2010-11, their debt-equity ratio 6%

was around 1.12. It has gradually reduced to .39 in the FY
3%
2014-15.
62%
This is largely owing to a decline of 2%
25% in long-term borrowings along with an increase in 12%
in the reserve & surplus.
2%
The reason for this is less dependence
on debt which ultimately leads to lower interest cost.
1%
Earlier their debt-equity ratio
1% was higher than industry average, but with time they have
reduced their leverage and now it is similar to the industry average.
Their interest coverage ratio as compared to industry is better.

RIGHTS

The last rights shares that UPL had issued were in 1995 in the ratio of 127:1 at a premium of Rs 10 per
share.
The share has been quoting ex-rights from November 13, 1995.

PERIOD
INSTRUMENT
FROM

AUTHORIZE
D CAPITAL

TO

CAPITAL
STRUCTURE
2014
2015
Equity Share

CONTINUED

2013

2014

Equity Share

2012

2013

Equity Share

2011

2012

Equity Share

2010

2011

Equity Share

2009

2010

Equity Share

2008

2009

Equity Share

2007

2008

Equity Share

2006

2007

Equity Share

YEAR
RATIO
Equity Share
2008
1:1
BONUS
HISTORY
1995 Share1:1
2004
2005
Equity
1992
1:1had
The last bonus
that UPL
2005

2006

ISSUED
CAPITA
L

SHARES

4286042
74
4286042
255
85.72
74
4426042
255
88.52
74
4618042
255
92.36
74
4618042
255
92.36
74
4395635
255
87.91
68
4395635
155
87.91
68
2196457
155
43.93
56
1875220
55
37.5
68
SHARE
SHARES
1871348
55
BEFORE 37.43 AFTER
07
219781784
439563568
3312322
55245000 33.12 490000
122500
245000 0
255

85.72

FACE
VALU
E

CAPITAL

85.72

85.72

88.52

92.36

92.36

87.91

87.91

43.93

37.5

37.43

10

33.12

announced was in 2008 in the ratio of 1:1.

The share has been quoting ex-bonus from October 29, 2008.

SPLIT

DATE
27-Sep-05
26-Sep-05

NO OF
SHARES
169879840
33975968

EQUITY
CAPITAL
33.98
33.98

FACE
VALUE
2
10

UPL had last split the face value of its shares from Rs 10 to Rs 2 in 2005.
Source: Management Discussion & Analysis
The share has been quoting on an ex-split basis from September 27, 2005.

 BUY BACK SHARES

1,40,00,000 cumulative number of shares bough back 3rd
Feb 2014.
4.00%
COST OF FUNDING2.00%
f(x) = 0.21x - 00.00%
-10.00%R = 0.23
-5.00% -2.00%
0.00%
-4.00%
-6.00%
-8.00%

CONTINUED

5.00%

10.00%

Beta () of UPL Limited = 1.11

Risk free rate (91 day T-bill rate as on 4/9/2015) = 7.43%
Market return = 14%
Cost of equity = 7.43% + (14% - 7.43%)*1.11 = 14.72%
Cost of debt = 8.52% ( CARE AA+ RATED) = 6% (After tax)
Debt = 1376.59 crore
Equity = 3524.08 crore
WACC = 12.35 %

Source: https://www.rbi.org.in/ & http://www.spacapital.com/debtmorning.aspx

 INVENTORY HOLDING PERIOD (Days)

YEAR
INVENTORY HOLDING PERIOD
INDUSTRY INVENTORY HOLDING
PERIOD

WORKING
CAPITAL

FY
2015
66.19

FY
2014
52.04

103.06

68.14

FY 2013
51.65

FY
2012
50.27

FY
2011
41.54

FY
2010
53.90

70.22

71.9

59.39

65.66

Companies face challenges due to the seasonal nature of

demand, unpredictability of pest attacks and high monsoon
dependence. Month-end skews and high inventory across
the channel remain perennial industry problems.
ACCOUNTS RECEIVABLE PERIOD (Days)
YEAR
ACCOUNTS RECEIVABLE PERIOD
INDUSTRY ACCOUNTS
RECEIVABLE PERIOD

FY
2015
91.69

FY
2014
112.14

FY
2013
140.96

FY
2012
126.59

FY
2011
105.74

FY
2010
94.68

93.8

71.76

77.37

74.67

64.28

75.13

ACCOUNTS PAYABLE
PERIOD
FY
FY
FY (Days)
FY
YEAR
ACCOUNTS PAYABLE PERIOD
INDUSTRY ACCOUNTS
PAYABLE PERIOD

2015
116.76

2014
98.39

2013
83.70

2012
75.49

FY
2011
77.08

FY
2010
69.14

104.33

79.11

78.53

72.73

62.29

86.08

 OPERATING CYCLE & CASH CYCLE

YEAR
OPERATING CYCLE
INDUSTRY OPERATING
CYCLE
CASH CYCLE
INDUSTRY CASH CYCLE

FY 2015
157.88

FY 2014
164.18

FY 2013
192.61

FY 2012
176.86

FY 2011
147.29

FY 2010
148.58

196.86
41.12
92.53

139.90
65.79
60.79

147.59
108.91
69.06

146.57
101.37
73.84

123.67
70.21
61.38

140.79
79.43
54.71

CURRENT & QUICK RATIO

CONTINUED

20%

5.00

15%

4.00

10%

TIMES
5%

3.00
2.00
1.00

0%

QUICK RATIO
INDUSTRY QUICK RATIO
Linear (INVENTORIES AS % TOTAL
ASSET)CURRENT RATIO
INDUSTRY CURRENT RATIO
INVENTORIES AS % TOTAL ASSET

FY0.00
2010 FYFY
2011FYFY
2012FY FY
2013FY FY
2014
FY 2015
2010
2011
2012
2013
FY 2014
FY 2015

Current ratio has decreased 4.46 times in FY 2010-11 to 1.22 in FY 2014-15.

Current ratio of UCL Limited has declined more as compared to other player in
the same industry.
In FY 2014-15, their quick ratio is less than 1, which means that the company
cannot currently fully pay back its current liabilities.

 COMPETITORS OPERATING CYCLE

YEAR
BAYER CROPSCIENCE
TATA CHEMICALS
PI INDUSTIRES LIMITED
RALLIS INDIA LIMITED

CONTINUED

FY 2015 FY 2014 FY 2013 FY 2012 FY 2011 FY 2010

97.97

95.67

101.44 113.91 103.66 108.98

132.58 135.60 130.51

93.19

73.84

103.28

111.39 106.68 118.83 121.51 113.87 118.59

96.71

79.4

82.39

87.6

83.02

94.9

FUNDING OF WORKING CAPITAL

FY 2014-15: Unsecured working capital loan of Rs. 25,285 lacks
carrying interest rate varying from 2.45% to 14.13% per annum
and base rate/LIBOR plus 0.70% to 4% p.a.
FY 2013-14: Working capital loan of Rs. 21,016 lacks carrying an
interest rate of base rate / LIBOR plus margin ranging from 70 bps
to 400 bps.
FY 2012-13: Working capital loan of Rs. 22,470 lacks carrying an
interest rate of base rate / LIBOR plus margin ranging from 70 bps
to 400 bps.
FY 2011-12: Working capital loan of Rs. 25,886 lacks carrying an
interest rate of base rate / LIBOR plus margin ranging from 175 bps
to 400 bps.

Source: Management & Discussion Analysis

 TREND IN DIVIDEND DIVIDEND RATE, PAYOUT, YIELD

Year End

DIVIDEND
POLICY

Mar-2015
Mar-2014
Mar-2013
Mar-2012
Mar-2011
Mar-2010
Mar-2009
Mar-2008
Mar-2007
Mar-2006
Mar-2005

Dividend %
250.00
200.00
125.00
125.00
100.00
100.00
75.00
100.00
60.00
50.00
40.00

Dividend
Yield %
1.13
2.17
2.13
1.92
1.33
1.34
1.53
0.76
0.37
0.38
0.55

Dividend per
Share(Rs)
5.00
4.00
2.50
2.50
2.00
2.00
1.50
2.00
1.20
1.00
4.00

Face
Value(Rs)
2.00
2.00
2.00
2.00
2.00
2.00
2.00
2.00
2.00
2.00
10.00

The company does not have a defined way of paying dividend. In some of the
years it pays an interim dividend and in some of the years it only pays the final
dividend.
However the company has never defaulted in payment of a dividend throughout
its history which shows the financial stability of the company
There is a difference between the dividend and the adjusted dividend as the
company has undergone a capital restructuring very often. So a closer look at the
adjusted dividend instead of dividend per share was desired.
All along, the Company rewarded its shareholders with attractive dividends and
increased value. The original allot tee's shareholding of 100 shares had grown to
Rs.7,03,200 by the end of the financial year under review.
The Company went public in 1986 with an issue of 14,50,000 shares.
Over the years, the Company emerged as one of the most attractive wealth
creators within its industry space.
Hundred shares allotted in 1986 had grown to 6,000 shares at the end of 201213.

 DIVIDEND PAYOUT RATIO

CONTINUE
D...

70%
60%
50%
40%
30%
20%
10%
0%

DIVIDEND PAYOUT
RATIO
Linear (DIVIDEND
PAYOUT RATIO)

The company has had a fairly steady pay-out ratio

since the past decade in the range of 45%-50%.

 ROE / ROCE / ROA TREND

18%
16%
14%
12%
10%
8%
6%
4%
2%
0%

OVERALL
IMPACT

ROE
ROCE
Linear (ROCE)
ROA

FY 2010

FY 2011

FY 2012

FY 2013

FY 2014

FY 2015

ROE has increased from 10% in FY 2010-11 to 14$ in FY 2014-15.

Crop prices started strongly in the year 2013-14 & 2013-15.
Improving glyphosate prices.
With increasing population, demand of food grain is also increasing.
India is second largest manufacturer of pesticides in Asia, second only to
Japan.
Government initiatives
to provide credit facilities to the farmers has
benefited the agriculture Industry as a whole.

DuPont ANALYSIS
DESCRIPTION
NET MARGIN (%)
TOTAL ASSET TURNOVER RATIO(x)
FINANCIAL LEVERAGE (x)
ROE (%)

Mar15
8.21
0.77
2.15
13.56

Mar14
7.94
0.74
2.12
12.47

Mar13
5.03
0.62
1.93
6.06

Mar12
6.52
0.57
2.10
7.88

Mar11
5.15
0.57
2.58
7.54

Mar10
6.38
0.58
2.62
9.70

DuPont Analysis is a useful technique to break down the ROE into its
constituent elements.
Though financial leverage has decreased over the time, but ROE has
increased due to increase in the net margin ratio and total asset turnover

R & D: Risks relating to the immunity developed

against companys products by insects/pests and
innovative products are not introduced to counter such
immunity.

GEOGRAPHY: Risks relating to excessive dependence

on one or two geographies, which can impact
revenues in case of localized downturn.

RISK
MANAGEME
NT POLICY

RECEIVABLES: Risks relating to high receivables at

certain times of seasons, impacting the working
capital negatively.

Regulations: Risks relating to inadequate compliance

to regulations worldwide and non-compliance arising
out of failure to address changes in government
policies from time to time, resulting in cancellation of
registration of some products.

FOREIGN EXCHANGE RISK: Risks relating to

fluctuations in the foreign currency, that can severely
hamper the profits of the Company.

Source: Management Discussion & Analysis

THANK YOU !