1 ACCOUNTANCY TERM PAPER ON FINANCIAL ANALYSIS: BRITANNIA INDUSTRIES LIMITED SUBMITTED TO: MS BHAVNA RANJAN MAM
Jun 14, 2015
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ACCOUNTANCY TERM PAPER
ON
FINANCIAL ANALYSIS: BRITANNIA INDUSTRIES LIMITED
SUBMITTED TO: MS BHAVNA RANJAN MAM
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TABLE OF CONTENTS
S.NO TOPIC PAGE NO.
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1. COMPANY PROFILE 01
2. COMPANY BACKGROUND 05
3. MARKETTING STRATEGY 07
4. SWOT ANALYSIS 08
5. PORTERS 5 FORCES MODEL 09
6. BCG MATRIX 10
7. BRITANNIA CSR & BISCUIT INDUSTRY 11
8. INDUSTRY ANALYSIS 13
9. FINANCIAL ANALYSIS
- PROFIT & LOSS ACCOUNT 16
- CASH FLOW STATEMENT 18
- RATIO ANALYSIS 20
- CASH FLOW ANALYSIS 37
- COMMON SIZE STATEMENT ANALYSIS 38
- COMMON SIZE BALANCESHEET 41
10. CONCLUSION 52
11. LEARNING FROM THE TERM PAPER 53
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COMPANY PROFILE
Company Name: Britannia Industries Limited
Company Location:
Registered Office
5/1/A Hungerford Street,
Kolkata - 700 017
West Bengal
Company Contact: Ph: 033 - 2287 0505 /
2287 2439 / 2287 2057
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Fax: 033 - 2287 2501
Key Executives:
Chairman- Mr. Nusli Neville Wadia
Managing Director- Ms. Vinita Bali
Directors - Mr. A.K.Hirjee, Dr.AjaiPuri, Mr.Avijit Deb, Mr.Jeh N Wadia,
Mr. KekiDadiseth, Mr. Nasser Munjee, Mr. Ness
NusliWadia,
Mr. Nimesh N Kampani, Mr.PratapKhanna, Mr.S.S.Kellkar,
Dr. Vijay L. Kelkar
VP & Chief Operating Officer:Neeraj Chandra
Background: Britannia Industries Ltd (Britannia) was established in 1892 in Kolkata,
West Bengal as a company which manufactured biscuits.Kerala businessman K.
RajanPillai secured control of thegroup in the late 1980s, becoming known in India as
the 'Biscuit King’. In 1993, the Wadia Group acquired a stake in AssociatedBiscuits
International (ABIL), and became an equal partner withGroupeDanone in Britannia
Industries Limited.Company Description: Britannia Industries Limited is a company
based in India which operates in two business segments which include bakery products
such as biscuits, bread, cakes and ruskand dairy products such as milk, butter, cheese,
ghee and dahi. Britannia manufactures dairy products from its plants locatedin Kolkata,
Delhi, Chennai, Mumbai, and Rudrapur. The company has a total installed capacity of
163,500 MTof biscuits and protein foodstuffs. Key brands include Tiger, Good Day, Milk
Bikis, Treat, and Marie. Britannia exports its products to countries in the MiddleEast
and to USA, Ghana, and Singapore.
Company Analysis:
Present Share Price as on 10th October 2012 :
BSE: 504.40 which decreased by 0.95% to its previous day closing.
NSE: 504.35 which decreased by 1.07% to its previous day closing.
Britannia has an estimated 38% market share
Britannia Industries Ltd : Milestones
Established – 1892 - initial investment Rs 295 – Britannia Biscuit Company
1910 – Mechanised operations
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1975 – Took over the distribution from Parry’s
1978 – Indian Shareholding crossed 60%
1979 – Rechristened Britannia Industries limited.
1983 - Revenues crossed 100 crores
1992 – Wadia group acquired stake and became an equal partner with Grope Danone
1993 – Sales crossed 1,00,000 tonnes of biscuits
1997 - New corporate identity - “ Eat Healthy, Think Better “ - enters Dairy market
2000 - Forbes Global Ranking - Britannia among top 300 small companies
2002 – JV with Fonterra - World’s second largest Dairy company,
Britannia New Zealand Foods Pvt Ltd. is born,
Economic Times - BIL India’s 2nd Most Trusted Brand
Forbes Global Ranking - Britannia among top 200 small companies
2004 – Volumes cross 3,00,000 tonnes of biscuits
2005 – Rebirth of Tiger – “ SwasthKhao Tan Man Jao “
Commissioning of new plant in Uttaranchal – ahead of schedule
2009 to 2012- New and renovated products came up like Nutri Choice Multigrain Thins
and Roasty, Chocolate Ecstasy, Treat Fruit Creams, Marie with Honey and Oats, Good
Day Fresh Bake
Butterscotch, 50-50-Snackuits,.Etc.. And in breads 100% Whole Wheat
Multifiberbreads , Honey-Oats, the Tiger-Zor chocolate. Etc.
In the manufacturing category BIL units of Delhi , Gwalior , Bidadi, Banglore, Khapoli
won the IMC Ramkrishna Bajaj National Quality Award 2011.
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MARKETING STRATEGY
Marketing is one of the ever changing fields in the management arena. The market
faces new challenges every day and companies need to respond to it quickly and
positively. Therefore new marketing ideas and strategies are being discovered
continuously to meet up the challenges.
Following strategies adopted by the organization.
Quality of the product and customer satisfaction:
Customers always want good quality product. Customer satisfaction is very important
thing to fulfill. Britannia has products for each level of the pyramid and has a very wide
range of good quality products to keep its customers happy.
Customer relation and retention:
Customer relation and retention are really important parts of the company’s marketing
strategy. It is important to form a good relationship with the customer while keeping the
old customer and trying to make new ones.
Awareness of competitors’ activity:
Every organization should keep a watch on the competition in the market and take steps
to outdo the competition. Parle and ITC are its main competitors in the biscuit industry,
Nestle and Amul in dairy products and MTR in ready to make foods.
Emphasis on global thinking and local marketing planning:
Companies are expanding by pursuing market beyond their borders. Britannia has a
wide range of products in the Middle-East. Those products are specially made to the
tastes of the people belonging to those regions. When a company enters other
countries it has to follow the tradition of that country and also plan for local market that
which type of product has more demand and how can it run in the market.
Promotional Strategy
Promotion is one of the 4P’s of marketing mix. It is very important in the making of the
any company. Britannia runs a lot of advertisements in print and on television. Its
taglines stay with the people for a very long time. The ‘ting ting ta ting’ music in every
advertisement is now programmed in the heads of the people who have watched the
advertisements.
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SWOT ANALYSIS OF BRITANNIA
Strengths
Widely accepted in all generations.
Easily available in all forms.
Fulfill one of the Basic requirements among Air, Water,Food& Shelter.
Preserves the non-seasonal food and makes it available all throughout the year.
Provide good instant remedy for hunger in the form of readymade food.
Weakness
Increase the cost of food product.
Decrease nutritional value
Industry and technology requires high investment
Regular usage of processed food can cause alteration in health.
Opportunities
Increase economy of India.
Good quality of product.
Generate employment opportunity.
Provide competition for foreign and domestic competitors.
Provide their products at a cheaper rate to the nation.
Threats
Sometimes there is a case of low quality product production in the process to earn more
profits.
Emerging competitors in the market.
Lack of technology.
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Porters 5 Forces Model : Britannia
Threat of New Entrants is Medium
Since there is very high product differentiation and a very powerful distribution network
which makes it very hard for a new entrant to enter the market. The prices can’t be
increased to a great extent i.e. there is not much flexibility in prices, so we can say that
it is an extremely price sensitive. It has a great dependency on the agricultural sector for
wheat which is a main component for most of its products
Rivalry among existing firms is High
The major players in this industry areBritannia, Parle, ITC Ltd., PriyaGold, Bakeman,
Bonn etc.The companies Britannia &Parlehave an almost equal market share as
compared to these ITC ltd holds a lower market share. Since there is a neck to neck
competition the companies keep a close notice of the changing strategies of each other
Bargaining power of suppliersisHigh
The main ingredient required for the manufacturing of biscuits is Wheat. When there is
inflation they have to purchase wheat at the price which the farmers quote since wheat
does not have a close substitute and leaves the companies with no other option.
Threat of Substitute Products is Medium
The substitutes which are consumedinstead of biscuits are namkeens, chips, potato
wafers etc. Even though the biscuits have such substitutes theyhave become a staple
part of people’s everyday life. The biscuits are a low priced commodity, but even if there
is a small increase in the price, it would still be acceptable by people in the urban areas
but in case of rural areas it may cause people to shift to substitutes.
Bargaining power of buyers is High
The consumers have an option of switching from one brand to the other with due
accordance to their liking of price, quality and taste. This is the reason why there is not
much flexibility given to the biscuit manufacturers to increase the prices of their products
or compromise on the quality of their product. The consumers are also going for bulk
purchases at cheaper rates from bakery stores.
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BCG Matrix
STARS:
There is high market growth rate, there is a huge market share, thereis huge cash
generation and consumption. Also there is a huge investment in the growing
market.They become cash cows when market growth rate declines. The Britannia
products which are included in stars are Milk Treat, 50-50, Tiger and Little Hearts.
CASH COWS:
There is low market growth but high market share. They are the leaders in the mature
market. Here we find more of cash generation than consumption. There is low prospect
for future growth so new investments are made in this category. The products which are
included in this category are Marie Gold, Good-Day and Treat.
QUESTION MARKS:
There is high market growth rate but a low market share. There is low cash generation
than cash consumption. The market situation is carefully analysed, investment is done
in high growth potential market. The decision making process becomes very critical for
managers. The products included here are Time Pass and PureMagic.
DOGS:There is a low market growth rate and low market share. There is neither large
cash generation nor consumption. They are also known as Cash Traps. The Dogs
should be old off or liquidated. The products included here are NutriChoice.
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Britannia :CSR
Britannia India Limited is a company which stands at a great position in India. The
children and the adults can associate with the brand as in it brings back fond memories
of theirs. The company has carved a place for itself in the Indian lives and it has also
made tea-time special for generations. This is a fact that is of great consideration to the
Managing Director Vinita Bali and she does not take this lightly.
In 1997 Britannia underwentre-branding and adopted the mantra 'Eat Healthy, Think
Better', and eventually cut out all transfats from the formulation of all its biscuits. It was
the first company in India to do this and became the first to acknowledge the health
problems that were associated with a diet which was high in. They were also the first
ones to reduce sodium and sugar levels in their products. Sustainability and the health
of the public key issues for all CSR activities at Britannia. The Britannia Nutrition
Foundation works towards the control and prevention of malnutrition. The Navjyoti
project was launched to fight iron malnutrition through the supplementation of biscuits
with iron. These biscuits are distributed to many mid-day meal schemes in Andhra
Pradesh that reach underprivileged children. During the recession, the company
adopted various other CSR measures to cut costs and improve productivity. Bali says
that focusing on reducing energy requirements and cutting wastes through better use of
energy was an essential part of revenue management.
SNEAK PEAK INTO INDIA’S BISCUIT INDUSTRY
Indian Biscuit Industry contribute Rs8000 crore to the FMCG industry and provide vast
opportunity for growth. Indian Biscuit Industry can be segregated into 2 sectors:
ORGANIZED AND UNORGANIZED. Market share for organized sector stands at
whopping 70 % and that of Unorganized sector is at 30%. Apart from big 3 companies
(ITC, PARLE, BRITANNIA) there are 150 medium to small biscuit factories operating in
India. The Industry is now facing problem from increase in prices of raw material, also
increased government VAT to 12.5% has increased the woes.
States which have higher intake of biscuits are Uttar Pradesh,
Karnatka,Maharashtra,West Bengal and Andhra Pradesh..The Most industrially
developed states; hold maximum amount of consumption of biscuits.The jaw dropping
fact is that rural India consumes 55% of biscuit produced in india.
The Federation of Biscuit Manufacturers of India have confirmed a bright future of
India’s Biscuit Industry. According to FBMI growth of 10 % will be achieved for next 10
years without comprehensive fluctuations.
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LIST OF PLAYERS IN THE INDUSRTY
PARLE, ITC, SURYA FOODS, CADBURY, SMITH KLIME BEECHAM, UNITED
BISCUITS AND OTHERS
LIST OF REGIONAL BRANDS
HARVEST GOLD, CREMICA, PRIYAGOLD, BONN, MRS BECTOR, SABISCO.
LIST OF FOREIGN PLAYERS
HEINZ, UNITED BISCUITS, NESTLE, McVITTIES.
BRITANNIA VS. PARLE
DESCRIPTION BRITANNIA PARLE
Established 1896 1929
Nature of busness Public limited Family run business
No. of Manufacturing Units 5 own,40 CMU 8 own,60 CMU
Market Share 32.80% 32.94%
Promotion Cricket events and players celebrities
New Scope Environment Health and Wellness
MARKET SHARE – BRAN DWISE
BRITANNIA 32%
PARLE 32%
ITC 11%
PRIYA GOLD 15%
OTHERS 10%
MARKET SHARE – SECTOR WISE
URBAN RURAL
85-75% 65-75%
MARKET SHARE – REGION WISE
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NORTH ZONE 25%
WEST ZONE 23%
EAST ZONE 28%
SOUTH ZONE 24%
CRITICAL SUCCESS FACTORS OF BISCUIT INDUSTRY WITH REFRENCE TO
BRITANNIA
1. India’s lower and middle class segment will continue to hold the key
2. Distribution and Advertising and Launching of new products
3. Britannia to add new variants in its existing basket
4. Focus on urban markets
5. Alliances with suppliers, retailers, distributors, other linkages.
INDUSTRY ANALYSIS
BRITANNIA PARLE ITC MRS. BECTOR BONN Market share: 35% Market share:
31% Market share: 9%
Market share: <5%
Market share: <5%
Tiger: Tiger; Tiger Cream: Orange, Elaichi, Chocolate, Pineapple, Strawberry, Butterscotch; Tiger Banana; Tiger Crunch
Parle G: Rs. 1, 2, 3, 4, 5, 10, 20, 30, 40, 50
Sunfeast Glucose:
Cremica Glucose: Glucose, Cashew, Nice Malt & Milk
Glucobon:
50-50: 50-50: Sweet and Salty; Maska Chaska; Italiano Pizza, Swiss cheese & Chilly and Chinese Hot & Sweet; Snackuits Time Pass: Classic Salted, Nimkee; Baked: Mindless Masala, Loafer Lemon, Tapori Tomato.
Krack Jack: Rs. 5, 7, 10, 15, 20 Nimkin: Rs.: 5, 10 Monaco: Plain; Jeera flavor (Zabardast Jeera) Rs. 5, 7, 10, 20
Sunfeast Snacky: Classic Salted, Chilli Flakes Sunfeast Sweet ‘n Salty:
Cremica Salties: Cremica Party Crackers: Cremica Tik Tok:
Mini Bits: Zeera Cheese, Chilly Tomato, Twin Bite
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Pure Magic: Chocolate, Vanilla, Praline Treat: Jim Jam: Rs. 5, 15, 25; Treat-O: Vanilla, Chocolate: Rs. 5, 10, 20; Treat Fruit Creams: Strawberry, Mango, Pineapple, and Orange: Rs. 5, 12, 25
Kreams: Chocolate: Rs. 2, 5, 10; Orange, Pineapple, Elaichi, Mango: Rs. 5,10; Bourbon: Rs. 10, 18 Festo: Tangy Orange, Creamy Chocolate, Traditional Elaichi, Zingy Pineapple, Sweet Mango Rs. 5, 10
Sunfeast Dream Cream: Dream Cream: Choco-Vanilla, Strawberry-Vanilla; Burbon; Orange Cream; Butterscotch Cream Sunfeast Special: Special Cream: Orange, Chocolate & Elaichi
Cream Collection: Premium: Orange, Elachi, Chocolate, Strawbery, Banana Cream Collection: Regular: Orange, Chocolate, Mixed Fruit, Milk, Elaichi
Burbon: Chocolate, Cappuccino: Rs. 5, 12, 15, 22
Hide & Seek: Rs. 5, 12, 20,30,50 Hide & Seek- Milano: Rs. 15, 30 Hide & Seek- Burbon: Rs. 5, 12, 25 Happy Happy: Rs. 5, 10
Sunfeast Dark Fantasy: Cocoa, Vanilla Sunfeast Dark Fantasy Choco Fills:
Nutri Choice: Hi-Fibre DigestiveNutriBix, 5 Grain NutriBix, NutriChoice Crackers, Nature Spice Crackers, Arrowroot, Multigrain Thins, Multigrain Roasty, NutriBix
Actifit Digestive Marie: Rs. 5, 15, 25
Marie Gold: Marie Gold, Vita Marie Gold, Vita Marie Honey Oats
Marie: Rs. 5, 10, 15, 20, 22
Sunfeast Marie Light: Original Orange Light Oats
MarieBon:
Milk Bikis: Milk Cream Almond Cookies: Rs. 12, 25
Milk Shakti: Rs. 5, 10
Sunfeast Milky Magic:
Cookies: Butter Elaichiz; Fruit Dhamaka
20-20 Cookies: Butter: Rs. 5, 10, 18; Cashew: Rs. 5,
Sunfeast Special: Special Cookies: Cashew & Butter
Mast Makhan: Crac Nut Cookies, Cashew Butter,
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Good Day: Cashew, Butter, Pista Badam, Chocochips, Choconut
10, 20 Top: Rs. 5, 10, 20 Magix: Rs. 6, 10 Coconut Cookies: Rs. 10
Butter Cookies, Coconut Crunchies
Golden Arcs: Orange; Pineapple Rs. 10, 20
Rusks:
Prime Time Rusk: Milk Rusk, Kaju Rusk, Suji Toast
Nice Time: Little Hearts: Plain, Chocolate, Sesame
Sunfeast Nice:
Prime Time Cookies: Butter Cookies, Chocochip Cookies, Choconut Cookies, Masala Cookies, Atta Cookies, Zeera Cookies
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CHAPTER II- Financial Analysis (FINANCIAL REPORTS)
In order to identify the current financial statement of a company, presence of the
financial accounts is mandatory. The financial accounts are mainly categorized into
three ,viz :-
Profit and Loss account
Balance sheet of the company
Cash flow statement of the company
PROFIT & LOSS ACCOUNT
PROFIT AND LOSS A/C : BRITANNIA INDUSTRIES LIMITED
amount in INR ,Crores Mar-12 Mar-11 Mar-10 Mar-09
INCOME :
Sales Turnover 5032.81 4255.79 3426.64 3142.89 Excise Duty 58.62 32.27 23.18 30.68 Net Sales 4974.19 4223.52 3403.46 3112.21 Other Income 58.53 48.92 50.83 84.59 Stock Adjustment 4.79 17.89 21.35 19.61 TOTAL INCOME 5037.51 4290.33 3475.64 3216.41
EXPENDITURE :
Raw Materials 3184.54 2782.23 2184.97 1930 Power & Fuel Cost 38.25 29.55 22.38 21.47 Employee Cost 145.87 119.93 99.94 90.01 Other manufacturing expenses 450.01 359.94 313.76 289.32 Selling & Administration expenses 725 614.6 558.28 464.16 Miscellaneous Expenses 156.08 103.68 129.9 139.58
less : Pre operative expenses capitalised 0 0 0 0
TOTAL EXPENDITURE 4699.75 4009.93 3309.23 2934.54
OPERATING PROFIT 337.76 280.4 166.41 281.87 Interest 38.07 37.75 8.21 16.01 GROSS PROFIT 299.69 242.65 158.2 265.86
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Depriciation 47.32 44.59 37.54 33.46 PROFIT BEFORE TAX 252.37 198.06 120.66 232.4
Tax 63.71 39.95 20.67 34.38 Fringe Benefit Tax 0 0 0 5.3 Deffered Tax 1.92 12.82 -16.52 12.32 REPORTED NET PROFIT 186.74 145.29 116.51 180.4
Extraordinary Items 18.87 15.57 -28.15 -10.44 NET PROFIT: 167.87 129.72 144.66 190.84
BALANCE SHEET
BALANCE SHEET : BRITANNIA INDUSTRIES LIMITED
amount in INR ,Crores
Mar-12
Mar-11
Mar-10
Mar-09
SOURCES OF FUNDS:
Share Capital 23.89 23.89 23.89 23.89
Reserves 496.15 427.41 372.36 800.65
TOTAL SHAREHOLDERS FUND 520.04 451.3 396.25 824.54
Secured Loans 406.92 407.76 408.1 2.2
Unsecured Loans 27.57 23.68 21.51 22.97
TOTAL DEBT 434.49 431.44 429.61 25.17
TOTAL LIABILITIES 954.53 882.74 825.86 849.71
APPLICATION OF FUNDS :
Gross Block 677.36 593.56 547.83 511.5
less :Accumulated Depriciation 298.27 289.86 266.33 233.66
NET BLOCK 379.09 303.7 281.5 277.84
Capital Work In Progress 79.73 11.7 9.97 6.02
Investments 428.94 545 490.64 423.1
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CURRENT ASSET,LOANS & ADVANCES
Inventories 382.28 311.2 268.34 253.63
Debtors 52.14 57.26 39.49 49.61
Cash & Bank 30.94 28.75 23.36 40.8
Loans & Advances 182.08 70.63 207.7 195.3
TOTAL CURRENT ASSETS 647.44 467.84 538.89 539.34
CURRENT LIABILITIES & PROVISIONS
Current Liabilities 448.11 358.19 310.89 265.8
Provisions 124.8 96.65 190.83 147.48 TOTAL CURRENT LIABILITIES & PROVISIONS 572.91 454.84 501.72 413.28
NET CURRENT ASSETS 74.53 13 37.17 126.06
Miscellaneous exp. Not written off 0 0 0 26.64
Deffered Tax Assets 23.68 22.87 31.18 14.31
Deffered Tax Liability 31.84 29.11 24.6 24.26
NET DEFFERED TAX -8.16 -6.24 6.58 -9.95
TOTAL ASSETS 954.13 867.16 825.86 849.71
CASH FLOW STATEMENT
CASH FLOW STATEMENTS : BRITANNIA INDUSTRIES LIMITED
amount in INR ,Crores
Mar-12 Mar-11
CASH FLOWS FROM OPERATI NG ACTIVITIES
Profit before Tax 252.37 198.06 adjustments for:
Depriciation & Amortisation 47.32 44.59 Profit on sale of investments -9.1 -8.66 Profit on sale of Fixed Assets -16.4 -12.8 Dividend Income -0.19 -0.28 Interest Income -32.12 -24.84 Interest Expense 38.07 37.75
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Provision for doubtful debts Provision for reduction in value of an asset 2.35 -1.78
Compensation of VRS Reversal of previous year provisions Unrealised foreign exchange
Operating profit before working capital changes 282.30 232.04
Inventories -71.08 -42.86 Trade receivables 5.12 -17.77 Loans and advances -62.7 72.55 Bank balance -0.88 3.13 Provisions 107.54 31.71 cash from operations 260.30 278.80 taxes paid -49.64 -32.48 NET CASH FROM OPERATING ACTIVITIES (I ) 210.66 246.32
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of fixed asset -191.2 -82.35 Proceeds from sale of fixed asset 20.14 14.64 Sale of Investments 122.82 -43.91 Inter corporate deposits 0 -50 Loans given to subsidaries -37.96 -27.64 Loans repaid by subsidaries 2.27 10.23 Interest Received 32.18 22.33 Dividend Received 0.19 0.28
NET CASH FLOWS FROM INVESTING ACTIVITIES (II) -51.56 -156.42
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of secured loans -0.83 -0.34 Interest Paid -37.66 -37.5 Dividend paid ,inclusive of tax -90.06 -69.55
NET CASH FLOWS FROM FINANCING ACTIVITIES (III) -128.55 -107.39
Net increase in cash and its equivalents (I + II + III ) 30.55 -17.49 Opening cash balance -4.36 13.13
Closing cash balance 26.19 -4.36
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One of the primary techniques of assessing the current financial position of the
companyis:Rationanalysis.
RATIO ANALYSIS
It can be defined as the method of defining relationships among various financial
statement items. It helps to identify trends over time for one company or to compare two
or more companies at one point in time.
The historical trends of these ratios can be used to infer a company’s financial condition
and its attractiveness for potential investors.
Ratios are segregated mainly in four types based on the nature of aspect they are to
compute, viz:-
Liquidity Ratios-which give a picture of a company's short term financial
situation or solvency.
Profitability Ratios- which use margin analysis and show the return on
sales and capital employed.
Turnover Ratios- which use turnover measures to show how efficient a
company is in its operations and use of assets.
Leverage Ratios- which show the extent that debt is used in a company's
capital structure.
In accordance with the nature of our industry and operations of Britannia Industries ltd,
we analyzed various elements of the financial statements and their relationship with a
comparative view of data of four years.
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Ratio
Analysis
Liquidity
Profitability
Leverage
Turnover
Current ratio
Liquid ratio
Absolute liquid ratio
Gross Profit ratio
Net profit ratio
Operating ratio
Return on Assets
Return on Equity
Return on capital
employed
Inventory turnover
Ratio
Debtor turnover ratio
Creditors’ turnover
ratio
Working Capital
turnover ratio
Debt Equity ratio
Debt to Asset ratio
Interest coverage
ratio
Debt service
coverage ratio
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I LIQUIDITY RATIOS
Measure the ability of a company to repay its short-term debts and meet unexpected
cash needs.
i) Current Ratio
The Ratio deals with assessing the liquidity of the firm. It finds out the ability of
the company to pay its short term loans.
The bench mark for Current ratio is 2:1 ,i.e, Currents assets should be twice that
of current liabilities.
It is computed by division of current assets by current liabilities. It is denoted by :-
A comparative view of ratios since 2009 till 2012 is given as follows:-
Particulars 2012 2011 2010 2009
Current ratio (A/B) 1.10 1.08 1.17 1.24
Table 1.Fig 1
1
1.05
1.1
1.15
1.2
1.25
1.3
2009 2010 2011 2012
Current Ratio
Current Ratio
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Current ratio reduced to 1.10 in current year because current assets such as inventories
and debtors reduced far more than combined value of entire current liabilities.Inflation
can be cited as one of the reason.
ii) Liquid Ratio
It may be defined as a relationship between quick/ liquid assets and current
liabilities. This ratio measures the capacity of the firm to pay its current liabilities
immediately.
The bench mark Quick ratio is 1:1.
It is computed by Dividing Liquid assets by current liabilities.
It is denoted as follows:-
A comparative view of ratios since 2009 till 2012 is given as follows:-
Particulars 2012 2011 2010 2009
Current ratio (A/B) 0.46 0.34 0.54 0.69
Table2,Fig2
Liquid assets = Current assets – Stock – prepaid expenses
Liquid Ratio = CA-Stock-Prepaid expenses = Liquid assets
Current liabilities Current liabilities
0
0.2
0.4
0.6
0.8
2009 2010 2011 2012
Liquid Ratio
Liquid Ratio
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Liquid ratio showed a marginal rise in year 2012 as compared to 2010 as inventory at
Britannia industries increased comprehensively from 253 crore to 382 crore. Stock piled
up as there was decrease in demand from the market and company was not able to
create a new market for themselves..
iii) Absolute liquid Ratio
It defines the relationship between Absolute liquid assets and current liabilities.
Also, eliminates accounts receivable (sundry debtors and bills receivables).
The bench mark absolute liquid ratio is ).5:1.
It is computed by Dividing Absolute liquid assets by current liabilities.
It is denoted as follows:-
A comparative view of ratios since 2009 till 2012 is given as follows:-
Particulars 2012 2011 2010 2009
ABSOLUTE LIQUID RATIO
0.05 0.06 0.05 0.10
Table3,Fig3
Absolute Liquid assets = Cash + Bank + short term marketable securities.
Absolute Liquid Ratio = Cash + Bank + short term marketable securities
Current liabilities
0
0.02
0.04
0.06
0.08
0.1
0.12
2009 2010 2011 2012
ABSOLUTE LIQUID RATIO
ABSOLUTE LIQUID RATIO
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Absolute liquid ratio includes cash and marketable securities which saw a decline from
41 crore to 31 crore from 2009 – 2012.There was almost a reduction of 9 % in cash
balanace of the firm from 2009-2012.Reduction in cash can be cited due payment of
interest charges of secured loans, meeting the rise in costs and cost of maintaining the
inventory.
II PROFITABILITY RATIOS
Ratios that focus on how well a firm is performing are termed as such. Profit margins
measure performance with relation to sales. These are computed in the form of
percentage.They are of two orientations :-
Related to sales
i) Gross profit ratio
The gross profit margin ratio measures how efficiently a company uses its
resources.
There is no theoretical benchmark for this ratio as the higher it is, the better.
It is expressed as a percentage of gross profit from net sales. Where
It is denoted as follows:-
A comparative view of ratios since 2009 till 2012 is given as follows:-
Particulars 2012 2011 2010 2009
GROSS PROFIT RATIO
6.02 5.75 4.65 8.54
Gross profit Ratio = GP 100
NET SALES
Net sales
Gross profit= Sales- Cost of goods sold
27
Table4,Fig4
As from the profit & Loss account it is evident that sales reduced by 1862 crores
in 2012 after paying excise taxes, due to prevailing inflation in the economy gross
profit also reduced by 34 crores which was the main culprit of downward slope in
GP ratio.
ii) Net profit ratio
NP ratio is used to measure the overall profitability of the firm and hence its
computation is relevant to proprietors.
There is no theoretical benchmark for this ratio as the higher it is, the better.
It defines the percentage of net profit(after tax) over sales of a company
It is denoted as follows:-
comparative view of ratios since 2009 till 2012 is given as follows:-
Particulars 2012 2011 2010 2009
NET PROFIT RATIO 3.37 3.07 4.25 6.13
0
2
4
6
8
10
2009 2010 2011 2012
GROSS PROFIT RATIO
GROSS PROFIT RATIO
Net Profit Ratio = Net Profit 100
Net Sales
28
Table5, Fig5
Net profit is calculated after deducting taxes from the available gross profit. Profit
& Loss account showed almost 100 % increase in taxes from 34 crores to 64
crores approx., in 4 years tenure also to add to the woes of the company, net
profit increased marginally by 6 crores which caused downward slope in net profit
ratio trend line .
iii) Operating Ratio
It may be defined as a ratio that shows the efficiency of a company's
management.
There is no theoretical benchmark for this ratio. The lower it is, the better.
It expresses company's operating expenses as a percentage of revenue. Where
It is denoted as follows:-
0
1
2
3
4
5
6
7
2009 2010 2011 2012
NET PROFIT RATIO
NET PROFIT RATIO
Operating Ratio = Operating cost 100
Net sales
Operating costs = COGS + Operating expenses
Operating expenses = Administration and office expenses + Selling and distribution expenses
29
A comparative view of ratios since 2009 till 2012 is given as follows:-
Particulars 2012 2011 2010 2009
OPERATING RATIO 1.1 1.08 1.17 1.24
Table6, Fig6
Operating expenses such as Employee cost which increased by 62%,selling and
administration expenses which shooted up by 64% and misc. expenses
increased by 16 crores which were in almost same proportion i.e 63% as
compared to the net sales hence Britannia industries limited recorded next to
linear trend in their operating ratio.
Related on Investment
i) Return on assets ratio
An indicator of how profitable a company is relative to its total assets.
There is no theoretical benchmark to this ratio; it merely helps in comparison in
companies competing in the same industry.
It indicates as to how profitable a company’s assets are in generating revenue. It
is denoted as follows :-
0
0.2
0.4
0.6
0.8
1
1.2
1.4
2009 2010 2011 2012
OPERATING RATIO
Column1 Column2 OPERATING RATIO
Return On assets = Net profit after tax 100
Total assets
30
A comparative view of ratios since 2009 till 2012 is given as follows:-
Particulars 2012 2011 2010 2009
RETURN ON ASSETS 19.75 16.75 14.11 21.23
Table7,Fig7
Total assets of Britannia Industries limited increased merely by 105 crore,,
where in net sales increased more i.e ..1862 crores, hence there is an upward
trend in the ratio.
ii) Return on Equity
Return on equity measures a company's profitability in accordance with the profit
a company generates with the money shareholders have invested.
There is no benchmark for ROE, the higher it is the better because it implies
profit after tax and preference dividend will be more than the equity shareholder’s
funds/ equity share capital respectively.
It is the amount of net income returned as a percentage of shareholders equity,
denoted as follows:-
Or
0
5
10
15
20
25
2009 2010 2011 2012
RETURN ON ASSETS
RETURN ON ASSETS
Return On equity = Profit after tax &preference dividend 100
Equity share capital
Return On equity = Profit after tax & Interest 100
Equity shareholder’s funds
31
A comparative view of ratios since 2009 till 2012 is given as follows:-
Particulars 2012 2011 2010 2009
RETURN O N EQUITY 781.67 608.16 487.69 755.13
Table8,Fig8
Equity ratio showed a steep rise in 2011 and 2012 as compared to 2009 as profit
generated was more over equity share capital. Return on equity shooted up in 2011 and
2012 as company was able to generate considerable amount of profits compared to
past years.
III TURNOVER RATIOS
These ratios quantify the efficiency of business by computing how fast the assets are
churned in a given time period. It is always calculate in “times”.
i) Inventory turnover ratio
It establishes how many times the inventory is churned and converted into sales
during the accounting period
There is no theoretical benchmark as Higher would imply scarcity of stock and
lesser number would imply excess inventory with the company. Thus, it is relative
to the nature of the business.
0
200
400
600
800
1000
2009 2010 2011 2012
RETURN ON EQUITY
RETURN ON EQUITY
32
It is expressed as cost of goods sold over Average inventory, denoted as
follows:-
Where:-
A comparative view of ratios since 2009 till 2012 is given as follows:-
Particulars 2012 2011 2010 2009
INVENTORY TURN OVER TATIO
13.01 13.57 12.68 12.27
Inventory conversion period is the time taken to convert the inventory into sales.
It is expressed in “number of days “. Denoted as follows
The data can be expressed in the form of following chart
Table9.Fig9 10
15
2009 2010 2011 2012
INVENTORY TURN OVER RATIO
INVENTORY TURN OVER RATIO
Inventory Turnover Ratio = Cost of goods sold 100
Average inventory
COGS= Opening stock +Purchases – Closing stock
Average inventory = Opening + closing stock
2
Inventory conversion period = 365 / ITR days
33
as due to recession during 2009 ,the company’s inventory kept on piling up as there
was decrease in demand as a result manufactured product was not sold hence there
was a dip in inventory turnover ratio. Such was the phenomena in entire FMCG sector.
ii) Creditors’ turnover ratio
It defines how many times in an accounting period are we making payments
to our creditors.
There is no theoretical benchmark for CTR. From company’s point of view,
the higher it is the better and from lender’s point of view the lower it is the
better.
It is expressed as Net credit purchases over Average creditors, denoted as
follows:-
Where:-
A comparative view of ratios since 2009 till 2012 is given as follows:-
Particulars 2012 2011 2010 2009
Average payment period
51 47 52 50
Creditors turnover ratio 7.11 7.77 7.03 7.26
Average payment period is the time taken to estimate the time in which the
company will make payment to its creditors’. It is expressed in “number of
days “. Denoted as follows
The data can be expressed in the form of following chart
Creditors Turnover Ratio = Net credit purchases
Average creditors
Average Creditors = Opening creditors + closing creditors / 2
34
Table10,Fig10
Raw material purchased (assumed credit purchases) in Profit & Loss account increased
to 1254 from 2009-2012 and current liabilities inclusive of creditors increased by 183
crores.
iii) Working capital turnover ratio
It that shows the number of times the working capital is converted into
revenue in an accounting period.
There is no theoretical benchmark, the higher it is the better.
It is expressed as cost of sales or merely sales over Average working capital
of a firm in an accounting period. It is denoted as follows:-
Where:-
A comparative view of ratios since 2009 till 2012 is given as follows:-
Particulars 2012 2011 2010 2009
Working capital turnover ratio
67.53 327.37 92.19 24.93
The data can be expressed in the form of following chart
44
46
48
50
52
54
2012 2011 2010 2009
CREDITORS TURN OVER RATIO
CREDITORS TURN OVERRATIO
35
Table11,Fig11
Britannia industries showed a dismal performance in converting their working capital
into revenue due to high pressure to invest more in current assets so as to keep a pace
with day to day operations of the business. There is a comprehensive decrease which is
a area of concern.
IV LEVERAGE RATIOS
These ratios describe the amount of equity in comparison to debt or the amount
of earnings in comparison to debt. They also help in assessing the risk from the
use of debt capital.
Structural ratios
i) Debt equity Ratio
It indicates the relative proportion of shareholders' equity and debt used to
finance a company's assets.
The benchmark for this ratio is 2:1. It is usually lower in the labour intensive
businesses and higher in case of capital intensive businesses.
It is the relationship of Debt over equity shareholders’ funds in a company.
A comparative view of ratios since 2009 till 2012 is given as follows:-
Particulars 2012 2011 2010 2009
Debt equity ratio 0.84 0.96 1.08 0.03
The data can be expressed in the form of following chart
0
50
100
150
200
250
300
350
2012 2011 2010 2009
WORKING CAPITAL TURN OVER RATIO
WORKING CAPITAL TURNOVER RATIO
36
Table12,Fig12
As the industry was clouded with depression, interest rates were surging like hey grey
.the prudent approach by any company would have been to reduce the dependency on
debt so as to cut the cost of interest payment hence capital was raised with the help of
equity which is much more cheap, as a result Britannia industries limited debt equity
ratio declined in 2012 as compared to 2010.
ii) Debt Asset Ratio
It defines as to how many times Assets of the firm were financed through
debt.
It is expresses relationship of Debt over total assets of a firm in an accounting
period. It is denoted as follows:-
A comparative view of ratios since 2009 till 2012 is given as follows:-
Particulars 2012 2011 2010 2009
Debt Asset ratio 0.46 0.50 0.52 0.03
The data can be expressed in the form of following chart
0
0.2
0.4
0.6
0.8
1
1.2
2012 2011 2010 2009
DEBT EQUITY RATIO
DEBT EQUITY RATIO
37
Table13,Fig13
0
0.1
0.2
0.3
0.4
0.5
0.6
2012 2011 2010 2009
DEBT ASSET RATIO
DEBT ASSET RATIO
38
CASH FLOW ANALYSIS
The cash flow statement, also known as the funds flow statement, shows the changes
in the balance sheet & this breaks it down to the operating, investing & financing
activities of the company.
The purpose of the cash flow statement is:-
1. It provides information about the company’s liquidity & solvency.
2. It provides information on the changes in assets, liabilities & equity.
3. It also provides information on the probability of future cash flows
OPERATING ACTIVITIES
In the comparison of last two years we saw that the profit before tax (PBT) rose to Rs.
252.37 crores (in 2011-12) from Rs. 198.06 crores (in 2010-11). Non-cash expenses
have increased and the non-cash incomes have also increased, which have in turn
affected the increase in operating profits before working capital changes from Rs.
232.04 to 282.30 crores.
INVESTING ACTIVITIES
More fixed assets have been purchased; also more loans have been given to
subsidiaries. Sales of fixed assets and investments have increased that is cash inflow
occurred. Thus, cash used in investing has fallen from Rs. 156.42 to Rs.51.56 crores.
FINANCING ACTIVITIES
The company has re-paid the secured loans, interest & the dividend inclusive of tax.
Thus, cash has been used in the financing activities from Rs. 107.39 to Rs. 128.55
crores.
In the end, the net increase in cash & cash equivalents is Rs. 30.55 crores in 2011-12,
as compared to Rs. -17.49 crores in 2010-11. Thus, the opening balance, from Rs. -
4.36 crores, has become Rs. 26.19 crores.
Chapter III
39
“COMMON SIZE FINANCIAL STATEMENT ANALYSIS And
COMPARATIVE FINANCIAL STATEMENT ANALYSIS”
Introduction:-
Common Size Financial Statements
The Common Size Financial Statements are used for reporting the monetary
purposes & also for the decision making process. These are also beneficial for investors
who want to invest & cannot decide between two companies. Due to different sizes of
companies, wrong comparisons can be made by the investors & this is one such
limitation. These statements are used by investors to overcome the limitation in which
comparisons can be made between two unrelated companies. This statement removes
the bias between two companies & the investor can easily decide on where to invest, by
comparing the companies small or large. The statements also allow the company to
compare its statements of different periods, so as to check their performance in the
current accounting-period. In the common size financial statements, the figures used
are in the form of percentage. A base figure is fixed & this determines the figures in the
statement.
The financial statements are divided as:-
1. Common Size Balance Sheet
2. Common Size Income Statement
Comparative Financial Statement
Financial statement is a tool of financial statement analysis that depicts change in each
item of the financial statement in both absolute and percentage term, talking the item in
preceding accounting period as base.
40
Comparative Balance Sheet
A comparative balance sheet of an enterprise presents side-by-side information about
assets, liabilities, and shareholders' equity as of multiple points in time i.e. two or more
dates. It ascertains increase and decrease in items stated in the balance sheet. For
example, a comparative balance sheet could present the balance sheet as of the end of
each year for the past three years.
. Objectives of Comparative Balance Sheet
Comparative Balance Sheet is an important tool of financial analysis. It compares the
financial position of the firm on two different dates and throws light on the changes and
progress made in respect of each item of assets, liabilities and capital.
Its emphasis is on change rather than being on status and thus helps to determine the
future trends of assets, liabilities and capital which helps in the planning process.
Comparative Income Statement
A Comparative Income statement shows the operating results for a number of
accounting periods so that changes in data in terms of money and percentage from one
period to another may be known.
The comparative income statement shows the increase or decrease in cost of goods
sold, gross profit, operating profit, gross sales, net sales, operating expenses, non-
operating expenses etc.
Objectives of Comparative Income Statement
1. To analyze the income and expenditure for two or more years.
2. To analyze the increase or decrease in the income and expenditure in terms of
rupee and also the percentage.
3. To review the business operations of the last year and its future repercussions.
Analysis
The common size financial statement analysis and the comparative financial statements
of Britannia Industries Limited is shown below. The financial analysis of the last four
41
years has been worked upon i.e. year 2008-09, 2009-10, 2010-11 & 2011-12.Through
the following analysis, we can understand the performance of the company in the last
four years. As cited above, these statements help an investor to look into the
performance & then can compare these figures with the competitors of Britannia
Industries, such as ITC, Parle etc. Accordingly, after the comparisons are made, the
investment can be made to the right company.
42
Common Size Financial Statement Analysis
COMMON SIZE BALANCE SHEET
Common Size Balance Sheet Analysis
amount in INR ,Crores
Mar-12 Mar-11 Mar-10 Mar-09
SOURCES OF FUNDS:
Share Capital 2.50% 2.71% 2.89% 2.81%
Reserves 51.98% 48.42% 45.09% 94.23%
TOTAL SHAREHOLDERS FUND 54.48% 51.12% 47.98% 97.04%
Secured Loans 42.63% 46.19% 49.42% 0.26%
Unsecured Loans 2.89% 2.68% 2.60% 2.70%
TOTAL DEBT 45.52% 48.88% 52.02% 2.96%
TOTAL LIABILITIES 100.00%
100.00%
100.00%
100.00%
APPLICATION OF FUNDS :
Gross Block 70.99% 68.45% 66.33% 60.20%
less :Accumulated Depriciation 31.26% 33.43% 32.25% 27.50%
NET BLOCK 39.73% 35.02% 34.09% 32.70%
Capital Work In Progress 8.36% 1.35% 1.21% 0.71%
Investments 44.96% 62.85% 59.41% 49.79%
CURRENT ASSET,LOANS & ADVANCES
Inventories 40.07% 35.89% 32.49% 29.85%
Debtors 5.46% 6.60% 4.78% 5.84%
Cash & Bank 3.24% 3.32% 2.83% 4.80%
Loans & Advances 19.08% 8.14% 25.15% 22.98%
TOTAL CURRENT ASSETS 67.86% 53.95% 65.25% 63.47%
43
CURRENT LIABILITIES & PROVISIONS
Current Liabilities 46.97% 41.31% 37.64% 31.28%
Provisions 13.08% 11.15% 23.11% 17.36% TOTAL CURRENT LIABILITIES & PROVISIONS 60.05% 52.45% 60.75% 48.64%
NET CURRENT ASSETS 7.81% 1.50% 4.50% 14.84%
Miscellaneous exp. Not written off 0.00% 0.00% 0.00% 3.14%
Deffered Tax Assets 2.48% 2.64% 3.78% 1.68%
Deffered Tax Liability 3.34% 3.36% 2.98% 2.86%
NET DEFFERED TAX -0.86% -0.72% 0.80% -1.17%
TOTAL ASSETS 100.00%
100.00%
100.00%
100.00%
Sources of Funds – The sources of funds include:-
1. Share Capital
2. Reserves
3. Secured Loans
4. Unsecured Loans
The Share Capital for the 4 years has been the same at 23.89 crores. But the common
size statement is different for the same span. This is because the base factor has been
fixed as the TOTAL LIABILITIES& these have been varying for the different financial
periods. Thus, the percent of share capital has fallen from 2.81% in 2008-09 to 2.50% in
2011-12.
The Reserves of the company has increased from 51.12%, in 2010-11, to 54.48%, in
2011-12. In the 2008-09 period, the company had huge reserves of 94.23%, but this
decreased to 45.09% due to the investment activities of the company in the period
2009-10.
The Secured Loans in the period 2008-09 were at 0.26%. But this figure rose to
49.42% in the following period as the company secured long term loans by lease. By
repayment, the company’s secured loans have come down to 42.63% in the period
2011-12. The company takes majority of its debts through secure loans such as through
bonds & debentures, long-term maturities of finance lease obligations etc.
44
The Unsecured Loans of the company have increased from 2.68% to 2.89% from the
period of 2010-11 to 2011-12. From the figures, we can see that the company takes
less of the unsecured loans i.e. long term loans from banks.
TOTAL LIABILITIES = SHARE CAPITAL + RESERVES (TOTAL SHAREHOLDERS
FUNDS) + SECURED LOANS + UNSECURED LOANS (TOTAL DEBT)
Application of Funds- The application of funds includes:-
1. Net Block
2. Capital Work in Progress
3. Total Current Assets
4. Total Current Liabilities & Provisions
5. Net Current Assets
6. Net Deferred Tax
The TOTAL ASSETS have been fixed as the base factor.
Net Block–The Net Block includes the Gross Block, less the accumulated depreciation.
Gross Block tells us about the total assets that the company owns.The Gross Block
consists of both the Tangible asset & the Intangible asset. The Accumulated
Depreciation is subtracted from the Gross Block to give the Net Block.
NET BLOCK = GROSS BLOCK – ACCUMULATED DEPRECIATION
The Net Block of the company has increased over the four year period, to 39.73% in the
period 2011-12. This means that the company has acquired some assets in the
accounting period.
Capital Work in Progress – The capital work in progress has increased from 1.35% to
8.36%. This means that the capital employed for material that has entered the
production process has increased. This is not good & companies should keep the
Capital WIP as low as possible.
Investments – The investments have gone down from 62.85% to 44.96%. Thus, the
company has made lesser investments than the earlier period.
Total Current Assets – The Total Current Assets have gone up from 53.95% to
67.86%. This is due to the increase in the Inventory & the Loans & Advances
paid.There is no significant change in the cash at bank, but the debtors have decreased
from 6.60% to 5.46%.
45
Total Current Liabilities & Provisions– The current liabilities & provisions have gone
up from 52.45% to 60.05%. There has been a rise in the current liabilities i.e. from
41.31% to 46.97%. The provisions have also gone up from 11.15% to 13.08%.
Net Current Assets – The net current assets is the difference between the total current
assets & the total current liabilities & provisions.The net current assets have risen
sharply from 1.50% to 7.81% in the period 2011-12.
NET CURRENT ASSETS = TOTAL CURRENT ASSETS – TOTAL CURRENT
LIABILITIES & PROVISIONS
46
COMMON SIZE INCOME STATEMENT
Common Size Income Statement
amount in INR ,Crores
2012 March
2011 March
2010 March
2009 March
INCOME :
Sales Turnover
Excise Duty
Net Sales 100.00% 100.00% 100.00% 100.00%
Other Income 1.18% 1.16% 1.49% 2.72%
Stock Adjustment 0.10% 0.42% 0.63% 0.63%
TOTAL INCOME 101.27% 101.58% 102.12% 103.35%
EXPENDITURE :
Raw Materials 64.02% 65.87% 64.20% 62.01%
Power & Fuel Cost 0.77% 0.70% 0.66% 0.69%
Employee Cost 2.93% 2.84% 2.94% 2.89%
Other manufacturing expenses 9.05% 8.52% 9.22% 9.30%
Selling & Administration expenses 14.58% 14.55% 16.40% 14.91%
Miscellaneous Expenses 3.14% 2.45% 3.82% 4.48%
less : Pre operative expenses capitalised 0.00% 0.00% 0.00% 0.00%
TOTAL EXPENDITURE 94.48% 94.94% 97.23% 94.29%
OPERATING PROFIT 6.79% 6.64% 4.89% 9.06%
Interest 0.77% 0.89% 0.24% 0.51%
GROSS PROFIT 6.02% 5.75% 4.65% 8.54%
Depriciation 0.95% 1.06% 1.10% 1.08%
PROFIT BEFORE TAX 5.07% 4.69% 3.55% 7.47%
Tax 1.28% 0.95% 0.61% 1.10%
Fringe Benefit Tax 0.00% 0.00% 0.00% 0.17%
Deffered Tax 0.04% 0.30% -0.49% 0.40%
47
REPORTED NET PROFIT 3.75% 3.44% 3.42% 5.80%
Extraordinary Items 0.38% 0.37% -0.83% -0.34%
NET PROFIT: 3.37% 3.07% 4.25% 6.13%
The Net Sales has been set as the base figure for the Common Size Income Statement.
Thus, the figures depicted in the common size statement are shown as 100%. But, the
actual amount of the Net Sales has varied throughout the different financial periods.
TOTAL INCOME – The total income includes the Net Sales, the other income& stock
adjustment. The sales turnover, less the excise duty gives us the Net Sales.The total
income has decreased from 101.58% to 101.27%, mainly due to the decrease in the
stock adjustment of period 2011-12.
TOTAL EXPENDITURE–The total expenditure has decreased marginally from 94.94%
to 94.48%. The total expenditure includes the raw materials, power & fuel, employee,
other manufacturing costs, selling & administration expense and miscellaneous
expenses.
Profit Before Tax–The profit before tax has increased from 4.69% to 5.07%. The profit
before tax includes the operating profit less the interest (Gross Profit) & the
depreciation.
Net Profit – The net profit has also increased from 3.07% to 3.37%. The net profit is
calculated by subtracting the PBT with tax, fringe benefit tax, deferred tax &
extraordinary items. Thus the company has had an increase in the NET PROFIT from
the previous year.
Comparative Financial Statement Analysis
Comparative Balance Sheet
A. Sources Of Funds
1. Total Shareholders Fund
The total shareholder fund is the total of Share capital and the reserves.
If we see the last four years annual reports of Britannia Industries Ltd. The
share capital price is constant so there is no change in it.
But when we see the comparative balance sheet , the reserve’s value is
increasing this can be seen. This is because in the column B (comparison of
48
yrs. 2009-10 & 2010-11) the rise in reserves was 14.78% and in column A
(comparison of yrs. 20010-11 & 2011-12) it rose to 16.08% increase in
reserves. This shows each financial year major portions of profits is being
transferred to the general reserves so to have a strengthen funds (those can
be used for the business expansion or any other activity which helps in
growth of business).
Particulars 20010-11 & 2011-12( Column A) % Change
2009-10 & 2010-11 (Column B) % change
Share Capital 0% 0%
Reserves 16.08% 14.78%
Total shareholder Funds 15.23% 13.89%
2. Total Debt
In column B of the comparative balance sheet the change in the total debts is
seen to be 0.43%. During this comparison the unsecured loan from banks is
raised at the increase rate of 10.09% and in column A the increase rate in
unsecured loan is being raised to 16.43%.
And the company is repaying back the secured loans taken by the company.
Particulars 20010-11 & 2011-12( Column A) % Change
2009-10 & 2010-11 (Column B) % change
Secured Loans -0.21% -0.08%
Unsecured loans 16.43% 10.09%
Total Debt 0.71% 0.43%
B. Applications Of Funds
1. Net Block (Gross Block – Accumulated depreciation)
In the column B comparison we can see a positive change of 7.89% in the net
block this is because the company added buildings, leasehold land, plant and
machinery , data processing equipment and furniture & fittings to its net block.
In the very next year when we see column A the rate of increase in net block
is 24.82%. This shows again in the year 2011-12 the company purchased the
fixed assets like buildings , plant and machinery , other fixed assets like motor
vehicle etc.
Particulars 20010-11 & 2011-12( Column A) % Change
2009-10 & 2010-11 (Column B) % change
Gross Block 14.12% 8.35%
less :Accumulated Depriciation 2.90% 8.83%
NET BLOCK 24.82% 7.89%
49
1. Capital Work in Progress & Investments
It is seen that in column B the Capital work I progress Is 17.35%. But it
changed to 581.45% , indicating that lots of capital amount is stuck in the
operations process. So it is advisable for the company to take care of it.
The company invests in it’s subsidiary firms and other companies share. But
the investment shows a decline in each couple of yrs. Column C shows
%change of 15.96 , then column B shows 11.08% change in investments and
then -21.30% change in investments. Indicating that Company has utilized its
investments on the Capital WIP and its not good. It has to raise the money in
investments.
Particulars 20010-11 & 2011-12( Column A) % Change
2009-10 & 2010-11 (Column B) % change
Capital Work In Progress 581.45% 17.35%
Investments -21.30% 11.08%
2. Net Current Assets (Total Current Assets – Total Current liabilities and
provisions)
The column B comparison shows a great fall in % change in the loans and
advances and also the provisions and rise in Debtors , inventories , banks &
cash and also the current liabilities. But the fall of % in loans and advances is
very high making the net current assets a – ve % change figure. But the
company wisely converted the –ve change in % under B to a positive %
change , this is all coz of positive increase in provisions and more over a
positive increase in loans and advances and it was more than the –VE fall
under column B.
Particulars 20010-11 & 2011-12( Column A) % Change
2009-10 & 2010-11 (Column B) % change
CURRENT ASSET,LOANS & ADVANCES
Inventories 22.84% 15.97%
Debtors -8.94% 45.00%
Cash & Bank 7.62% 23.07%
Loans & Advances 157.79%
TOTAL CURRENT ASSETS 38.39% -13.18%
50
CURRENT LIABILITIES & PROVISIONS
Current Liabilities 25.10% 15.21%
Provisions 29.13% -49.35%
TOTAL CURRENT LIABILITIES & PROVISIONS 25.96% -9.34%
NET CURRENT ASSETS 473.31% -65.03%
AT end From column B to Column A we can see the total of both the
Liabilities side and the assets side has shown a increase which shows
company has done a good business in the last 4 yrs.
Particulars 20010-11 & 2011-12( Column A) % Change
2009-10 & 2010-11 (Column B) % change
Total Liabilities 8.13% 6.89%
Total Assets 10.03% 5%
Comparative Income
Statement
A. Total Income
1. Net Sales (sales turnover – excise duty)
The change in net sales from column Q to Column P has declined,
due to the rise in excise duty and also the fall in turnover.
Particulars 20010-11 & 011-12( Column P) % Change
2009-10 & 2010-11 (Column Q) % change
Sales Turnover 18.26% 24.20%
Excise Duty 81.65% 39.21%
Net Sales 17.77% 24.09%
2. Other Income
It has seen a positive change from a negative % change in column Q
but could make much positive impact on total income with the net sales
(23.44% to 17.42%) because of a great negative fall in stock adjustments
from -16.21% to -73.23%.
51
Particulars 20010-11 & 011-12( Column P) % Change
2009-10 & 2010-11 (Column Q) % change
Other Income 19.64% -3.76%
Stock Adjustment -73.23% -16.21%
TOTAL INCOME 17.42% 23.44%
B. Total Expenditure
The company has managed well to sow a fall in the expenditure fares, as column
Q shows 21.17% and column P shows 17.20%change in it. This is coz operating
costs were managed very well by the company & non-operating costs has risen
up but at a very less %change.
Particulars 20010-11 & 011-12( Column P) % Change
2009-10 & 2010-11 (Column Q) % change
Raw Materials 14.46% 27.33%
Power & Fuel Cost 29.44% 32.04%
Employee Cost 21.63% 20.00%
Other manufacturing expenses 25.02% 14.72%
Selling & Administration expenses 17.96% 10.09%
Miscellaneous Expenses 50.54% -20.18%
less : Pre operative expenses capitalised 0% 0%
Total Expenditure 17.20% 21.17%
C. Profit Before Tax
Due to the high positive % change in the payment of interests and depreciation
the operatin profit had an adverse effect in turn showing a fall in profit before tax
over the yrs. of comparison from 64.15% to 27.42%.
Particulars 20010-11 & 011-12( Column P) % Change
2009-10 & 2010-11 (Column Q) % change
OPERATING PROFIT 20.46% 68.50%
Interest 0.85% 359.81%
GROSS PROFIT 23.51% 53.38%
Depriciation 6.12% 18.78%
PROFIT BEFORE TAX 27.42% 64.15%
D. Net Profit [Profit before tax-(tax + fringe benefits + deferred tax + extra ordinary
items)
A geat fall in % change in deferred tax has resulted in a rise In net profit over the
last period (last couple of yrs.) after the periods of fall in the net profits.
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Particulars 20010-11 & 011-12( Column P) % Change
2009-10 & 2010-11 (Column Q) % change
Tax 59.47% 93.28%
Fringe Benefit Tax 0.00% 0.00%
Deffered Tax -85.02% -177.60%
REPORTED NET PROFIT 28.53% 24.70%
Extraordinary Items 21.19% -155.31%
NET PROFIT: 29.41% -10.33%
SHARE HOLDING PATTERN AT BRITTANIA
INDUSTRIES LIMITED - 2012
(Hyper link)
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CHAPTER V-Conclusion
Britannia is one of the leading brands of the country and it has maintained this position
for a very long period of time.
To maintain such efficiency, a company needs strict norms and the focus to achieve
growth despite the various challenges it faces.
Britannia faced various challenges in its rise to the top of the market and to position
itself as the leader in the market. The challenges comprised of rising commodity
inflation, cost challenges and wastages in the supply chain.
The company now has a strategy and it focuses on the 3 thrust areas so as to drive
growth and they are revenue management, cost management and innovation.
Britannia has also maintained adequate stock of the seasonal products and has
provided them at adequate intervals so that there is adequate supply.
The following are some objectives of the company-
Britannia stands committed to the belief that every child has the right to grow &
develop.
Focus of improving technology to counter hunger & malnutrition in India.
Improving the accessibility of products even to people living in remote villages &
slums.
Britannia has initiated a public- private partnership named as GAIN & Naandi
foundation to develop fortified foods.
The company’s biscuit brands outpaced the market growth during the period 2010-2012
which shows the robustness of the brand and its products.
The company has maintained a lead over its competitors which include-
Parle products private ltd.
ITC ltd.
Surya Food & Agro ltd.
Cadbury India ltd.
Bonn Nutrients Private ltd.
Mrs. Bector’s Food Specialties ltd.
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Learning from the term paper
We have studied the financial reports of Britannia industries ltd. & have inferred that the
company is growing in a robust manner every year with the focus on innovation, cost
and revenue management.
This is reflected in the share prices as well as they have shown an upward trend
through the past 2-3 yrs.
Some learnings are-
Practical implementation of theoretical principals of accounting.
Synthesizing complex data into useful information.
Deriving relationship between variables from ratio analysis.
Holistically learnt how to analyze the company reports.
Cohesive Team work was the essence of the assignment.