35360936 Ratio Analysis of ITC

1. Objective of the Assignment

The assignment assigned was to analyze the Annual Report of any company in the country and to study its financial health. ITC Ltd. is one of India’s biggest companies (under the leadership of Mr. Y.C. Deweshwar) in a sector that has rapidly grown over the last few years. ITC Ltd. has been able to diversify successfully. Through this report, we try and analyze and evaluate the various ratios to appreciate their impact on company’s performance over the last few years.A Dupont analysis is also done to check the credibility of company as per shareholders, financial analysts and other mutual funds.

The financial statements of last few years are identified, studied and interpreted in light of company’s performance. As a benchmark, we also analyze various components of the company vis-à-vis other competitors in the same segment.

2. Prospects of FMCG Sector The fast moving consumer goods (FMCG) sector would witness over 40 per cent growth in the semi-urban and urban areas, according to an analysis carried out by the Associated Chambers of Commerce and Industry of India on `Future prospects of FMCG'. The size of the sector would go up from the present Rs 38,500 crore to Rs 50,000 crore by 2010, says the analysis. In urban India alone, the sector would witness over 100 per cent growth with its size increasing to Rs 35,000 crore by 2010 from the present Rs 16,500 crore, says the analysis adding that the overall size of the sector, which would include the rural and semi-urban market, would grow to Rs 85,000 crore. Over the years the FMCG sector has registering an increase of double digit per cent. Currently, the urban market for FMCG is growing at an annual growth rate of around 20 per cent while the growth for semi-urban and rural areas is less than 10 per cent, says the analysis. Though the semi-urban and urban market for FMCG would grow larger, according to the analysis, it is bound to put a severe pressure on the margins of manufacturers of FMCG products due to intense competition. With 12.2% of the world population living in the villages of India, the Indian rural FMCG market is something no one can overlook. More focus on farm sector will boost the rural income thus providing better growth prospects to the FMCG companies. Better infrastructure facilities will improve their supply chain. Also, with rising income and growing consumerism, FMCG sectors are likely to benefit. Growth potential for all the FMCG companies is huge as the per capita consumption of almost all products in the country is amongst the lowest in the world. Further, if these companies can change consumer’s mindset and offer new generation products, they would be able to generate higher growth in the future. Source:

3. Company Overview

ITC is one of India's foremost private sector companies with a market capitalisation of nearly US $ 18 billion and a turnover of over US $ 5.1 Billion. ITC is rated among the World's Best Big Companies, Asia's 'Fab 50' and the World's Most Reputable Companies by Forbes magazine, among India's Most Respected Companies by BusinessWorld and among India's Most Valuable Companies by Business Today. ITC also ranks among India's top 10 `Most Valuable (Company) Brands', in a study conducted by Brand Finance and published by the Economic Times. ITC has a diversified presence in Cigarettes, Hotels, Paperboards & Specialty Papers, Packaging, Agri-Business, Packaged Foods & Confectionery, Information Technology, Branded Apparel, Personal Care, Stationery, Safety

Matches and other FMCG products. While ITC is an outstanding market leader in its traditional businesses of Cigarettes, Hotels, Paperboards, Packaging and Agri-Exports, it is rapidly gaining market share even in its nascent businesses of Packaged Foods & Confectionery, Branded Apparel, Personal Care and Stationery. As one of India's most valuable and respected corporations, ITC is widely perceived to be dedicatedly nation-oriented. Chairman Y C Deveshwar calls this source of inspiration "a commitment beyond the market". In his own words: "ITC believes that its aspiration to create enduring value for the nation provides the motive force to sustain growing shareholder value. ITC practices this philosophy by not only driving each of its businesses towards international competitiveness but by also consciously contributing to enhancing the competitiveness of the larger value chain of which it is a part." ITC's diversified status originates from its corporate strategy aimed at creating multiple drivers of growth anchored on its time-tested core competencies: unmatched distribution reach, superior brand-building capabilities, effective supply chain management and acknowledged service skills in hoteliering. Over time, the strategic forays into new businesses are expected to garner a significant share of these emerging high-growth markets in India. ITC's Agri-Business is one of India's largest exporters of agricultural products. ITC is one of the country's biggest foreign exchange earners (US $ 3.2 billion in the last decade). The Company's 'e-Choupal' initiative is enabling Indian agriculture significantly enhance its competitiveness by empowering Indian farmers through the power of the Internet. This transformational strategy, which has already become the subject matter of a case study at Harvard Business School, is expected to progressively create for ITC a huge rural distribution infrastructure, significantly enhancing the Company's marketing reach. ITC's wholly owned Information Technology subsidiary, ITC Infotech India Limited, is aggressively pursuing emerging opportunities in providing end-toend IT solutions, including e-enabled services and business process outsourcing. ITC's production facilities and hotels have won numerous national and international awards for quality, productivity, safety and environment management systems. ITC was the first company in India to voluntarily seek a corporate governance rating. ITC employs over 24,000 people at more than 60 locations across India. The Company continuously endeavors to enhance its wealth generating

capabilities in a globalizing environment to consistently reward more than 3,81,000 shareholders, fulfill the aspirations of its stakeholders and meet societal expectations. This over-arching vision of the company is expressively captured in its corporate positioning statement: "Enduring Value. For the nation. For the Shareholder."

HISTORY OF ITC TC was incorporated on August 24, 1910 under the name of 'Imperial Tobacco Company of India Limited'. Its beginnings were humble. A leased office on Radha Bazar Lane, Kolkata, was the centre of the Company's existence. The Company celebrated its 16th birthday on August 24, 1926, by purchasing the plot of land situated at 37, Chowringhee, (now renamed J.L. Nehru Road) Kolkata, for the sum of Rs 310,000. This decision of the Company was historic in more ways than one. It was to mark the beginning of a long and eventful journey into India's future. The Company's headquarter building, 'Virginia House', which came up on that plot of land two years later, would go on to become one of Kolkata's most venerated landmarks. The Company's ownership progressively Indianised, and the name of the Company was changed to I.T.C. Limited in 1974. In recognition of the Company's multi-business portfolio encompassing a wide range of businesses - Cigarettes & Tobacco, Hotels, Information Technology, Packaging, Paperboards & Specialty Papers, Agri-Exports, Foods, Lifestyle Retailing and Greeting Gifting & Stationery - the full stops in the Company's name were removed effective September 18, 2001. The Company now stands rechristened 'ITC Limited'. Though the first six decades of the Company's existence were primarily devoted to the growth and consolidation of the Cigarettes and Leaf Tobacco businesses, the Seventies witnessed the beginnings of a corporate transformation that would usher in momentous changes in the life of the Company. ITC's Packaging & Printing Business was set up in 1925 as a strategic backward integration for ITC's Cigarettes business. It is today India's most sophisticated packaging house. In 1975 the Company launched its Hotels business with the acquisition of a hotel in Chennai which was rechristened 'ITC-Welcomgroup Hotel Chola'. The objective of ITC's entry into the hotels business was rooted in the concept of creating value for the nation. ITC chose the hotels business for its

potential to earn high levels of foreign exchange, create tourism infrastructure and generate large scale direct and indirect employment. Since then ITC's Hotels business has grown to occupy a position of leadership, with over 70 owned and managed properties spread across India. In 1979, ITC entered the Paperboards business by promoting ITC Bhadrachalam Paperboards Limited, which today has become the market leader in India. Bhadrachalam Paperboards amalgamated with the Company effective March 13, 2002 and became a Division of the Company, Bhadrachalam Paperboards Division. In November 2002, this division merged with the Company's Tribeni Tissues Division to form the Paperboards & Specialty Papers Division. ITC's paperboards' technology, productivity, quality and manufacturing processes are comparable to the best in the world. It has also made an immense contribution to the development of Sarapaka, an economically backward area in the state of Andhra Pradesh. It is directly involved in education, environmental protection and community development. In 2004, ITC acquired the paperboard manufacturing facility of BILT Industrial Packaging Co. Ltd (BIPCO), near Coimbatore, Tamil Nadu. The Kovai Unit allows ITC to improve customer service with reduced lead time and a wider product range. In 1985, ITC set up Surya Tobacco Co. in Nepal as an Indo-Nepal and British joint venture. Since inception, its shares have been held by ITC, British American Tobacco and various independent shareholders in Nepal. In August 2002, Surya Tobacco became a subsidiary of ITC Limited and its name was changed to Surya Nepal Private Limited (Surya Nepal).

In 1990, ITC acquired Tribeni Tissues Limited, a Specialty paper manufacturing company and a major supplier of tissue paper to the cigarette industry. The merged entity was named the Tribeni Tissues Division (TTD). To harness strategic and operational synergies, TTD was merged with the Bhadrachalam Paperboards Division to form the Paperboards & Specialty Papers Division in November 2002. Also in 1990, leveraging its agri-sourcing competency, ITC set up the Agri Business Division for export of agri-commodities. The Division is today one of India's largest exporters. ITC's unique and now widely acknowledged eChoupal initiative began in 2000 with soya farmers in Madhya Pradesh. Now it extends to 10 states covering over 4 million farmers. ITC's first rural mall, christened 'Choupal Saagar' was inaugurated in August 2004 at Sehore. On the rural retail front, 24 'Choupal Saagars' are now operatonal in the 3 states of Madhya Pradesh, Maharashtra and Uttar Pradesh.

In 2000, ITC launched a line of high quality greeting cards under the brand name 'Expressions'. In 2002, the product range was enlarged with the introduction of Gift wrappers, Autograph books and Slam books. In the same year, ITC also launched 'Expressions Matrubhasha', a vernacular range of greeting cards in eight languages and 'Expressions Paperkraft', a range of premium stationery products. In 2003, the company rolled out 'Classmate', a range of notebooks in the school stationery segment. ITC also entered the Lifestyle Retailing business with the Wills Sport range of international quality relaxed wear for men and women in 2000. The Wills Lifestyle chain of exclusive stores later expanded its range to include Wills Classic formal wear (2002) and Wills Clublife evening wear (2003). ITC also initiated a foray into the popular segment with its men's wear brand, John Players, in 2002. In 2006, Wills Lifestyle became title partner of the country's most premier fashion event - Wills Lifestyle India Fashion Week - that has gained recognition from buyers and retailers as the single largest B-2-B platform for the Fashion Design industry. To mark the occasion, ITC launched a special 'Celebration Series', taking the event forward to consumers. In 2007, the Company introduced 'Miss Players'- a fashion brand in the popular segment for the young woman. In 2000, ITC spun off its information technology business into a wholly owned subsidiary, ITC Infotech India Limited, to more aggressively pursue emerging opportunities in this area. Today ITC Infotech is one of India’s fastest growing global IT and IT-enabled services companies and has established itself as a key player in offshore outsourcing, providing outsourced IT solutions and services to leading global customers across key focus verticals - Manufacturing, BFSI (Banking, Financial Services & Insurance), CPG&R (Consumer Packaged Goods & Retail), THT (Travel, Hospitality and Transportation) and Media & Entertainment. ITC's foray into the Foods business is an outstanding example of successfully blending multiple internal competencies to create a new driver of business growth. It began in August 2001 with the introduction of 'Kitchens of India' ready-to-eat Indian gourmet dishes. In 2002, ITC entered the confectionery and staples segments with the launch of the brands mint-o and Candyman confectionery and Aashirvaad atta (wheat flour). 2003 witnessed the introduction of Sunfeast as the Company entered the biscuits segment. ITC's entered the fast growing branded snacks category with Bingo! in 2007. In just six years, the Foods business has grown to a significant size with over 200 differentiated products under six distinctive brands, with an enviable distribution reach, a rapidly growing market share and a solid market standing.

In 2002, ITC's philosophy of contributing to enhancing the competitiveness of the entire value chain found yet another expression in the Safety Matches initiative. ITC now markets popular safety matches brands like iKno, Mangaldeep, Aim, Aim Mega and Aim Metro. ITC's foray into the marketing of Agarbattis (incense sticks) in 2003 marked the manifestation of its partnership with the cottage sector. ITC's popular agarbattis brands include Spriha and Mangaldeep across a range of fragrances like Rose, Jasmine, Bouquet, Sandalwood, Madhur, Sambrani and Nagchampa. ITC introduced Essenza Di Wills, an exclusive range of fine fragrances and bath & body care products for men and women in July 2005. Inizio, the signature range under Essenza Di Wills provides a comprehensive grooming regimen with distinct lines for men (Inizio Homme) and women (Inizio Femme). Continuing with its tradition of bringing world class products to Indian consumers the Company launched 'Fiama Di Wills', a premium range of Shampoos, Shower Gels and Soaps in September, October and December 2007 respectively. The Company also launched the 'Superia' range of Soaps and Shampoos in the mass-market segment at select markets in October 2007 and Vivel De Wills & Vivel range of soaps in February and Vivel range of shampoos in June 2008. Source: http://itcportal.com

4. Financial Statement Analysis 1.

Liquidity Ratios

Year

2008

a.

Current ratio: Current assets / Current Liabilities

II.3:Current assets, Loans and advances II.4:Current liabilities and provisions (II.3/II.4)

7019.27 4432.30 1.58

The current ratio of 1.58 times says that the company is in relatively good short-term financial standings. The ratio is an indication of a company's ability to meet short term debt obligations; the higher the ratio, the more liquid the company is. The reason why the ratio increases mainly is because of a more than proportionate increase of the Current Assets when compared to the Current Liabilities. Refer Table # 1

1.

Liquidity Ratios

Year

2008

b.

Quick ratio or Acid test ratio: (Current assets - inventories)/ Current Liabilities

II.3: Current assets, Loans and advances Less: II.3a: Inventories II.4: Current liabilities and provisions (II.3-II.3a)/(II.4)

7019.27 4050.52 2968.75 4432.30 0.67

The small ‘Quick ratio’, i.e. 0.67 times says that the company's financial strength is not so strong. In general, a quick ratio of 1 or more is accepted by most creditors; however, quick ratios vary greatly from industry to industry and ITC does not have as such any worries in getting creditors. ITC has strong financial positions in many other aspects. The company has also shown an increasing trend in the liquidity ratio over the years. The current assets (less inventories) have again increased more than proportionately reflecting in an increasing liquidity ratio. Refer Table # 1

1.

Liquidity Ratios

Year

2008

c.

Cash ratio or Absolute liquidity ratio: (Cash + Marketable securities) /Current liabilities

II.3c:Cash and bank Balances Add: Marketable securities II.4: Current liabilities and provisions (II.3c)/(II.4)

570.25 0.0 570.25 4432.3 0.13

The cash ratio of 0.13 times says that the company is not in the position to very quickly liquidate its assets and cover short-term liabilities. But there is no such liquidity need for the company and so the small value of the ratio has no such important implications. (The ratio is of interest to short-term creditors) The absolute cash ratio follows more or less the same trend as the other two liquidity measures. The increase again is because of a more than proportionate increase in the cash items (and near cash items) of ITC Limited. Refer Table # 1

2.

Solvency Ratios

Year

2008

a.

Debt – equity ratio: Long term debt/ equity (net worth)

I.2: Loan funds I.1: Shareholders funds (I.2)/(I.1)

214.43 12057.67 0.018

The debt-to-equity ratio offers one of the best pictures of a company's leverage. The higher the figure, the higher is the leverage the company enjoys. The ratio of 0.018 times, which means that the company has not been aggressive in financing its growth with debt. Thus its earnings are stable. The company has better support from the shareholders. Over the years, ITC Limited has shown a mix-match of the debt-equity ratio. Refer Table # 1

2.

Solvency Ratios

Year

2008

b.

Debt ratio: debt (long term)/ (debt (long term) + equity) or debt /capital employed

I.2: Loan funds I.1: Shareholders funds (I.2)+(I.1) (I.2)/(I.2+I.1)

214.43 12057.67 12272.1 0.018

The ratio of 0.018 times signifies that the company has employed more capitals over its debts. Thus the company is efficiently utilizing its loan funds. 2.

Solvency Ratios

Year

2008

c.

Interest Coverage ratio : (earnings before interest and tax) / Interest

P/L:III: profit before taxation and exceptional items II.4a-13: Interest accrued but not due on loans (P.III)/(II.4a-13)

4571.77 0.74 6178.1

The interest coverage ratio is a measurement of the number of times a company could make its interest payments with its earnings before interest and taxes. Lower the ratio, higher is the company’s debt burden. This is measured as the ratio between the profit before interest and taxes to the interest amount paid that year. The ratio of 6178.1 times is magnificently very high and hence the company has very sound financial position. It has no tension of paying interests over its loans. Refer Table # 1

3.

Turnover Ratios

Year

2008

a.

Inventory turnover: Cost of goods sold or net sales /Average (or closing) inventory.

P/L:IB:Net sales II.3a:Inventories

(P/L:IB)/(II.3a:)

13947.53 4432.43 3.15

The ratio of 3.15 times signifies that the company is efficient in selling its stocks. 3.

Turnover Ratios

Year

2008

b.

Days of Inventory holding: Number of days in the year (say 360)/ Inventory turnover ratio.

Number of days in a year Inventories turnover ratios (360)/(ITR)

365 3.15 116

116 about four months periods for the liquidation of stocks is quiet 3. days or Turnover Ratios efficient. Year 2008 c.

Debtors turnover ratio: Credit sales or net sales/ Average (or closing) debtors (or accounts receivable (total debtors +bills receivable)

P/L:IB:Net sales II.3b:Sundry debtors (P/L:IB)/(II.3b)

13947.53 736.93 18.93

The ratio of 18.93 times signifies that the company is getting good returns and has no visible risk but benefits out of its debtors.

3.

Turnover Ratios

Year

2008

d.

Collection period: Number of days in the year (say 360)/ Debtors turnover

Number of days in the year Debtors turnover (365)/(DTR)

365 18.93 19.28

The debt collection period of 19 days is quiet good and the company is efficient in getting back its dues.

3.

Turnover Ratios

Year

2008

e.

Current assets turnover: Net sales/ Current assets

P/L:IB:Net sales II.3: Current assets, loans and advances ((P/L:IB)/(II.3)

13947.53 4432.30 3.15

The ratio of 3.15 times signifies that, in spite of the current liabilities, the company is efficient in making sales revenue.

3.

Turnover Ratios

Year

2008

f.

Net current assets turnover: Net sales/ Net current assets

P/L:IB:Net sales Net Current assets (P/L:IB)/(NCA)

13947.53 2586.97 5.39

The ratio of 5.39 times signifies that the company is highly efficient in utilizing its net current assets and generating sales revenue.

3.

Turnover Ratios

Year

2008

g.

Fixed assets turnover: Net sales/ Net fixed assets

P/L:IB:Net sales II.1:Net Fixed Assets (P/L:IB)/(II.1)

13947.53 7295.65 1.91

The ratio of 1.91 times signifies that the company is very efficiently utilizing its fixed assets for generating sales revenue.

3.

Turnover Ratios

Year

2008

h.

Net assets turnover: Net sales/ Net assets or capital employed : (Net assets = all assets – accumulated depreciation)

P/L:IB:Net sales II.1:Net Fixed Assets II.2: Investments Net Current assets Net assets (P/L:IB)/(NA)

13947.53 7295.65 2934.55 2586.97 12817.17 1.09

4. Profitability Ratios The ratio of 1.09 times signifies that the company is efficient in utilizing its Year net assets in2008 generating sales revenue but needs to improve more. a. Profit Margin: (Profit before interest and tax (PBIT)/ Net sales)×100

P/L:III:Profit before Exceptional items P/L:IB:Net Sales (P/L:III)/(P/L:IB)×100

taxation

and 4571.77 13947.53 32.78

The ratio between the profit before interest and taxes (equal to the operating income, in our case) to that of the sales for the given period during which the profit has been earned is a measure of the profitability of the company for that period. The Profit margin of 32.78% is quiet impressive and the company is making good profits. ITC Limited has done well in the last few years and has continuously reported higher and higher profit every subsequent time. The sales of the company have also experienced a similar trend that has led to the expansion of profit. Because the growth in the two components has nearly been equal, the ratio between them has not changed significantly. Refer Table # 1

4.

Profitability Ratios

Year

2008

b.

Net margin: Profit after tax (PAT) ×100 / Net sales

P/L:III:Profit after taxation P/L:IB:Net Sales (P/L:III)/(P/L:IB)×100

3120.1 13947.53 22.4

PAT or, the profit after tax is directly correlated with the profit before tax. The interest component is the sole parameter that can differentiate the trend followed by the ratio above and this one. The net margin of 22.4% is quiet impressive, and the company is performing well. PAT for ITC Limited, like PBIT, has shown an upward trend. The financing decisions and also the tax have altered the overall impact on the profitability of the company.

4.

Profitability Ratios

Year

2008

c.

Net assets turnover: Net sales/ Net assets or capital employed : (Net assets = all assets – accumulated depreciation)

P/L:III:Profit before Exceptional items II.1:Net Fixed Assets II.2: Investments Net Current assets Net assets (P/L:IB)/(NA)x100

taxation

and 5471.77 7295.65 2934.55 2587.97 12817.17 42.69

The Return of 42.69% is quiet good and company is performing well.

4.

Profitability Ratios

Year

2008

d.

Return on equity: (PAT/Equity (net worth)) ×100

P/L:III:Profit after taxation I.1:Shareholders funds (P/L:III)/(P/L:IB)×100

3120.1 12057.67 25.88

The ratio of net income after taxes to total end of the year net-worth of the company is called the RONW for that company. This ratio indicates the return on stockholder's total equity that is invested in the business. The ratio of 25.88% is quiet good and the company is utilizing the shareholders funds in a better way. Refer Table # 1

5.

Equity-related Ratios

Year

2008

a.

Earning per share (EPS): PAT/Number of ordinary shares

P/L:III:Profit after taxation 3120.1 P/L:IV-19(iv):Weighted average Number 3764167486 of ordinary shares outstanding (P/L:III)/(P/L:IV)(×10^7: to convert in per 8.28 rupee)

Earnings per share, as it is called, are a company's profit after tax (PAT) divided by its number of outstanding (equity) shares. It is therefore measured as the portion of a company's profit allocated to each outstanding share of common stock. EPS serves as an indicator of a company's profitability. In comparison to the face value of Re.1/share the EPS of Rs.8.28 is very good. It is to be noted that there was a stock split in the year 2005-06 due to which the face value of the shares changes from Rs. 10/- per share to from Rs. 1/per share. Refer Table # 1

5.

Equity-related Ratios

Year

2008

b.

Dividends per share (EPS): PAT/Number of ordinary shares

P/L:IV:Proposed Dividend 1319.01 P/L:IV-19(iv):Weighted average Number 3764167486 of ordinary shares outstanding (P/L:III)/(P/L:IV)×10^7(to convert into unit 3.50 ruppes)

Dividend per share (DPS) is a simple and intuitive number. It is the amount of the dividend that shareholders have (or will) receive, over a year, for each share they own. As mentioned earlier, there was a stock split for ITC Limited in the year 2005-06 that resulted in more than a 10 fold increase in the number of equity shares in the market. In compared to the face value of the shares, i.e. Re.1.00/share. DPS of Rs.3.50 is quiet good. Refer Table # 1

5.

Equity-related Ratios

Year

2008

c.

Pay out ratios: DPS/EPS or Dividends/PAT

DPS EPS (DPS)/(EPS)

3.5 8.28 .42

A very low payout ratio indicates that a company is primarily focused on retaining its earnings rather than paying out dividends. The payout ratio also indicates how well earnings support the dividend payments: the lower the ratio, the more secure the dividend because smaller dividends are easier to pay out than larger dividends. So the value of 0.43 times is quiet good.

5.

Equity-related Ratios

Year

2008

d.

Dividend Yield: DPS/Market value per share

We have to get the Market value per share of the relevant period.

Market Price Per Share The closing price of the common or preferred stock as reported on the applicable stock exchange consolidated tape as of the date indicated

5.

Equity-related Ratios

Year

2008

e.

Price/Earning ratio: Market value per share/ EPS

We have to get the Market value per share of the relevant period.

Price-Earnings ratio is a measure of the price paid for a share relative to the income or profit earned by the firm per share. A higher P/E ratio means that investors are paying more for each unit of income. Refer Table # 1

5.

Equity-related Ratios

Year

2008

g.

Book value per share: Net worth/ Number of ordinary shares

I.1:Shareholders funds 12057.67 P/L:IV-19(iv):Weighted average Number 3764167486 of ordinary shares outstanding (I.1)/(P/L:IV)×10^7(to convert into unit 32.03 Rs)

BV is considered to be the accounting value of each share, drastically different than what the market is valuing the stock at. The book value, i.e. Rs.32.03 is far higher than the face value of each share, i.e. Re.1.00. “Here “diluted” value in considering numbers of shares is not considered.”

6.

Equity-related Ratios

Year

2008

a.

Return on capital employed) ×100

P/L:III:Profit before items I:Sources of Funds ((P/L:III)/I)×100

employed

taxation

(ROCE):

and

(EBIT(PBIT)/

Capital

Exp. 4571.77 12817.17 35.67

The return on capital employed is another measure of the returns that the business generates. This is expressed as the ratio between the profit before interest and taxes (PBIT) to the Capital Employed (Loans and Owner’s Fund) in the business. The ROCE of 35.67% signifies that the company is getting good return out of its investment decisions. Refer Table # 1

6.

Equity-related Ratios

Year

2008

b.

Return on assets or earning power (ROTA): (PAT/ Average total assets (of the given years, here 2006&07)) ×100 or ((PAT+

Interest)/Average fixed assets) ×100

P/L:III:Profit after taxation Fixed assets 2008 Investments 2008 Current assets 2008 Fixed assets 2007 Investments 2007 Current assets 2007 Average total assets (PAT/ATA)×100

3120.10 7295.65 2934.55 7019.27 5610.91 3067.77 6289.72 16108.94 19.37

The return on Total Assets is yet another method of calculating the return of the company. This is calculated by taking the ratio between the PBIT (Profit before Interest and Taxes) to the Total Assets of the company. Earning power of the company, i.e. 19.37% is quiet good and the company is doing well. Refer Table # 1

6.

Equity-related Ratios

Year

2008

c.

ROTSE (return on total shareholders equity) ×100

P/L:III:Profit after taxation I.1:Shareholders funds (P/L:III)/(P/L:IB)×100

shareholders

equity):

(PAT/

Total

3120.1 12057.67 25.88

The ratio (25.88 times) is same as that of “Return on equity”, since there are no preference shares.

Du Pont analysis for year 2008: Net Profit after Tax: Net sales: Net Profit Margin:

3120.10 13947.53

Current Asset: Fixed Asset: Total Asset: Net Sales: Total Asset Turnover:

Return on Total Assets:

22.27% 7019.27 7295.65 14314.92 13947.53 0.98 times

21.70%

Du Pont analysis for year 2007:

Net Profit after Tax: Net sales: Net Profit Margin:

2699.97 12164.29

Current Asset: Fixed Asset: Total Asset: Net Sales: Total Asset Turnover:

22.20% 6289.72 5610.91 11900.63 12164.29 0.98 times

Return on Total Assets:

21.76%

Du Pont analysis for year 2006: Net Profit after Tax: Net sales: Net Profit Margin:

2280.37 9790.53

Current Asset: Fixed Asset: Total Asset: Net Sales: Total Asset Turnover:

5161.90 4405.13 9567.03 9790.53 0.98 times

Return on Total Assets:

23.29%

22.82%

Du Pont analysis for year 2005: Net Profit after Tax: Net sales: Net Profit Margin:

1837.07 7639.45

Current Asset: Fixed Asset: Total Asset: Net Sales: Total Asset Turnover:

3539.29 4136.91 7676.20 7639.45 0.99 times

24.05%

Return on Total Assets:

23.93%

Du Pont analysis for year 2004: Net Profit after Tax: Net sales: Net Profit Margin:

1592.85 6470.60

Current Asset: Fixed Asset: Total Asset: Net Sales: Total Asset Turnover:

3485.35 3612.05 7097.40 6470.60 0.91 times

Return on Total Assets:

24.62%

22.45%