Financial Analysis

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Financial Analysis

• M/s Aditya Birla Nuvo Ltd
• And
• M/s Raymonds Ltd

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• The Presentation contains the following
• 1)A brief Overview of Aditya Birla Nuvo Ltd and
  Raymond's Ltd.
• 2)Inter Firm Analysis - Aditya Birla Nuvo Ltd.
• 3) Comparative Ratio Analysis of both the
  Organizations.
• 4)Conclusions and Suggestions on the basis of the
  analysis.

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1) Overview of M/s Aditya Birla Nuvo Ltd

• Aditya Birla Nuvo Ltd (erstwhile Indian Rayon and
  Industries Ltd) is a diversified conglomerate
  within Aditya Birla Group
• It is a leading player in most of its business
  segments, including Viscose Filament Yarn (VFY)
  ,Carbon Black ,Branded Garments, Fertilisers,
  Textiles and Insulators

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• Aditya Birla Nuvo, through its subsidiaries and
  joint ventures, has made successful forays into
  Life Insurance, Telecom, Business Process
  Outsourcing (BPO), IT services, Asset Management
  and other Financial Services.

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Overview of M/s Raymonds Ltd

• Years ago, the Singhania family was building,
  consolidating and expanding its various
  businesses in Kanpur.
• At the same time Mr. Wadia was in a similar
  manner setting up a small woolen mill in the area
  around Thane creek, 40 kms away from Bombay. The
  Sassoons, a well-known industrialist family of
  Bombay, soon acquired this mill and renamed it as
  The Raymond Woolen Mills.

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• Soon the Singhanias aimed to broaden their
  business horizons. The family's sharp business
  foresight led to the acquisition of The Raymond
  Woolen Mills.
• Gradually the mill became a world-class factory
  and the Raymond brand became synonymous with fine
  quality woolen Fabrics .

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• Today, with a 33 million-meter capacity in wool
  wool-blended fabrics, Raymond commands an over
  60 market share in worsted suiting in India and
  ranks amongst the first three fully integrated
  manufacturers of worsted suiting in the world.
• A 100 subsidiary of Raymond Ltd., Raymond
  Apparel Ltd. (RAL) ranks amongst India's largest
  apparel brand company. It has prestigious brands
  like Park Avenue, Manzoni, Color Plus and many
  more.

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2) Inter Firm Analysis

• Net sales of the Company have gone up by 29 in
  2006-2007.
• During the year, Operating Margin (PBIT) has gone
  up from 11.8 to 13.4.
• Though the sales growth in fertilizers is more
  than 100, Percentage growth in its profit is 81
  almost equivalent to Garment segments where sales
  growth has been only 13 over last year.

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• There is an increase in operating other
  expenses by 1 to the total revenues i.e. profit
  would have been higher by another 37 crores, in
  case company would have maintained the same level
  of operating and other expenses.

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2) Comparative Ratio Analysis Aditya Birla Nuvo
Ltd and Raymonds Ltd

• Each slide will contain one type of ratio after
  which the comparative analysis for that
  particular type of ratio will be shown by way of
  graphs.
• The Comparative analysis is done in order to
  analyze which company has an overall better
  financial position.

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Profitability Ratios
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Operating Margin
Raymonds Ltd
Aditya Birla Nuvo Ltd
Operating Profit Margin has decreased by 1.36
over last year. It shows that Company is making
lower margin on sales in comparison to last year.
Operating Profit Margin has increased by 0.46
over last year. It shows that Company is making
higher margin on Sales.
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Gross Profit margin
Aditya Birla Nuvo
Raymonds
Gross Profit margin has been decreased in
2006-2007 because of high interest cost during
the year.
Decrease in 2006-07 because of low margin on
sales due to increase in selling and general
expenses, employment cost etc.
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Net profit Margin

• Aditya Birla Nuvo
  Raymonds

Net profit margin reduced in 2006-2007
Increased in 2006-07 due to contribution of
exceptional items to profit against loss last
year.
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Return on Average Net Worth

• Aditya Birla Nuvo Raymonds

Return on average decreased in 2006-2007
Increased due to exceptional income of Rs.81.25
cr. This year.
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Liquidity Ratios
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Current ratio

• Aditya Birla Nuvo
  Raymonds

Current ratio has decreased
Current Ratio has decreased marginally
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Quick ratio

• Aditya Birla Nuvo
  Raymonds

Quick ratio has also decreased
Quick Ratio has increased Marginally
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Efficiency Ratios
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Stock Turnover

• Aditya Birla Nuvo
  Raymonds

Stock turnover ratio has improved
T/o ratio has decreased this year due to lower
conversion of stocks.
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Fixed Assets Turnover

• Aditya Birla Nuvo Raymonds

Fixed assets turnover ratio has shown improvement
from 2005-06 in 2006-07
It has decreased this year due to funds invested
in fixed assets generated low sales.
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Total Assets Turnover

• Aditya Birla Nuvo
  Raymonds

Total assets turnover ratio has decreased due to
the huge investment of Rs.2051 cr.
Decreased this year due to increase in
shareholders funds and loans, also additional net
investment.
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Leverage Ratios
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Debt-Equity Ratio

• Aditya Birla Nuvo Raymonds

Has marginally increased from 0.71 to 0.91
It has decreased this year from 0.65 times to
shareholders funds to 0.58 times
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Interest Coverage ratio

• Aditya Birla Nuvo
  Raymonds

Interest coverage ratio has decreased
It decreased this year from 7.97 times to 5.67
times
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Other Ratios
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Earning Per Share

• Aditya Birla Nuvo
  Raymonds

It is marginally higher in 2006-07 from the last
year
Higher than last year due to exceptional income.
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Dividend Per Share

• Aditya Birla Nuvo
  Raymonds

Same as in last year.
Dividend per share is also higher than last year.
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Book Value of Shares
Aditya Birla Nuvo
Raymonds
Higher in 2006-07 because of retained earnings
Book Value of the share is high this year due to
retained earnings .
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Price Earning ratio
Aditya Birla Nuvo
Raymonds
Increased in 2006-07
Decreased this year from 25.98 last year to 13.00
this year.
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Conclusion

• From the comparison of the above ratios it is
  evident that M/s Aditya Birla Nuvo Ltd (ABNL) is
  financially better than M/s Raymond Ltd (RL)
  because
• 1) ABNL has posted a Sales growth of 29 with
  36 higher operating profit over last year.
  However, in case of RL, there is de growth with
  reduction in operating margin.
• 2) Operating Margin as to sales has increased
  by 0.46in case of ABNL whereas it has gone down
  during the year in case of RL by 1.36.Even in
  absolute terms the operating margin in case of
  ABNL is 16.35 i.e. higher by 2.61 over RL.

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• 3)Lower gross profit margin in case of ABNL due
  to high Interest Cost appears to be temporary, as
  strategic Investments of Rs.2051 Crs. made in JVs
  and Subsidiaries during the year will start
  providing income in due course of time.
• 4) Sharp increase in Net Profit of RL is due to
  extraordinary income accrued in the current year
  and may not be recurring.
• 5) Though both ABNL and RL are financially
  solvent, Liquidity ratios are better in case of
  ABNL.
•  

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• 6) Funds invested in business are used more
  efficiently in case of ABNL as evident from
  Efficiency or Turnover ratios
• 7) ABNL has a balanced financial structure of
  Debt and Equity.
• 8) Interest coverage ratio is adequate to make
  timely payment of interest to Creditors.
• 9) Book value of share of Rs10 is higher at
  Rs335 in ABNL than Rs.221 in RL.
• 10) In case of ABNL the Market Price of the
  share is increasing faster than multiple of
  earning per share.

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Suggestions

• Company either should make efforts to increase
  the Sales or review to rationalize the costs as
  portion of the business has been divested during
  the year.
• Companys Funds are not being used in an
  efficient manner. Stocks, Fixed assets etc are
  way above the accepted levels. Company has to
  review productivity of these assets, monitor
  stock levels as per the industry standards.

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• Companys investment of Rs.985 Crs. in JVs
  /stocks / Debenture etc. needs to be reviewed to
  assess the economic feasibility.

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• Thank you