Post on 02-Dec-2014
Indian Textile Industry
• Second largest textile industry in the world after China• 14% of the country's industrial output• 17% of export earnings• Employs maximum number of people (35 million) after agriculture•18% of employment in industrial sector • 16 % share in the country’s export• Contributes around 4% of GDP• The market size is expected to reach US$110 billion the domestic market is expected to reach US $ 60 billion by 2012• India is
• Largest producer of Jute• 2nd largest producer of Silk• 3rd largest producer of Cotton and Cellulosic Fibre / Yarn •5th largest producer of synthetic Fibers/Yarn
Arvind Limited• One of the major and fully vertically integrated composite mills
player in India.• It has large production in denim, shirting and knitted garments • It is now adding value by manufacturing denim apparel • Sales: US$ 300 million• Founded: 1931 • Headquarters: Ahmedabad• Brands
– Flying Machine– Newport– Ruf & Tuf– Excalibur
Raymond Limited• Large, diversified integrated business model, which is spread across
the value chain from yarn to retail• Specialized in Diversified woolen textiles• Sales: US$ 254.4 million• Founded: 1925• Headquarters: Mumbai• Brands
– Raymond Premium Apparel– Manzoni– Park Avenue– ColorPlus– Parx – Notting Hill
Prediction of Z scores
• It uses Statistical Techniques to predict a company’s probability of failure or Bankruptcy using the following 8 variables:
– 1. Earnings Before Interest & Taxes :EBIT– 2. Total Assets– 3. Net Sales– 4. Market Value of Equity– 5. Total Liabilities– 6. Current Assets– 7. Current Liabilities– 8. Retained Earnings
• The 5 financial ratios in the Altman Z-Score and their respective weight factor is as follows:
• Z-Score=A*3.3+B*0.999+C*0.6+D*1.2+E*1.4
Ratio Weightage
A EBIT/Total Assets 3.3
B Net Sales/Total Assets 0.999
C Market Value of Equity/Total Liabilities 0.6
D Working Capital/Total Assets 1.2
E Retained Earnings/Total Assets 1.4
The Interpretations of Z Score:
• Z-SCORE ABOVE 3.0 -The company is safe based on these financial figures only.
• Z-SCORE BETWEEN 2.7 and 2.99 - On Alert. This zone is an area where one should exercise caution.
• Z-SCORE BETWEEN 1.8 and 2.7 - Good chances of the company going bankrupt within 2 years of operations from the date of financial figures given.
• Z-SCORE BELOW 1.80- Probability of Financial embarassment is very high.
Mar ' 07 Mar ' 08 Mar ' 09 Mar ' 10 Mar ' 11 0.00
0.50
1.00
1.50
2.00
2.50
3.00
1.82 1.82
1.66
1.79
2.16
2.68
2.29
0.86
1.741.68
Altman Z Score
Arvind Ltd.Raymond Ltd.
Profitability Ratios
Mar ' 07 Mar ' 08 Mar ' 09 Mar ' 10 Mar ' 11
-25
-20
-15
-10
-5
0
5
10
15
20
1.36 1.22
-1.99
2.2
5.02
15.01
4.71
-18.34
1.87
-6.71
Net Profit Margin
Arvind Ltd.Raymond Ltd.
Mar ' 07 Mar ' 08 Mar ' 09 Mar ' 10 Mar ' 11 0
2
4
6
8
10
12
8.1
4.17
5.75
8.44
10.05
6.58
0.78
2.18
1.28
7.51
Gross Margin
Arvind Ltd.Raymond Ltd.
Mar ' 07 Mar ' 08 Mar ' 09 Mar ' 10 Mar ' 11
-15.00
-10.00
-5.00
0.00
5.00
10.00
15.00
3.60
0.81
-1.48
1.58
3.74
9.43
3.15
-10.89
1.03
-4.31
Return on Assets
Arvind Ltd.Raymond Ltd.
Basic Earning Power = EBIT/ Total Assets
Mar ' 07 Mar ' 08 Mar ' 09 Mar ' 10 Mar ' 11
-10.00
-5.00
0.00
5.00
10.00
15.00
20.00
13.09
10.1710.96 10.84
12.78
16.28
9.68
-5.03
9.36
2.21
Basic Earning Power
Arvind Ltd.Raymond Ltd.
Mar ' 07 Mar ' 08 Mar ' 09 Mar ' 10 Mar ' 11
-30
-25
-20
-15
-10
-5
0
5
10
15
20
1.68 1.8
-4.38
3.82
9.04
14.83
4.72
-23.99
2.24
-9.84
Return on Equity
Arvind Ltd.Raymond Ltd.
Asset Management Ratios
Mar ' 07 Mar ' 08 Mar ' 09 Mar ' 10 Mar ' 11 0
0.2
0.4
0.6
0.8
1
1.2
0.74
0.8 0.79 0.78
0.93
1.011.04
0.92
0.79
0.87
Fixed Assets Turnover Ratio
Arvind Ltd.Raymond Ltd.
Mar ' 07 Mar ' 08 Mar ' 09 Mar ' 10 Mar ' 11 0.00
0.10
0.20
0.30
0.40
0.50
0.60
0.70
0.80
0.55
0.68
0.730.70
0.75
0.600.58
0.56 0.56
0.64
Total Assets Turnover Ratio
Arvind Ltd.Raymond Ltd.
Mar ' 07 Mar ' 08 Mar ' 09 Mar ' 10 Mar ' 11 0
0.5
1
1.5
2
2.5
3
3.5
4
4.5
5
3.28
3.76
4.07
4.58 4.62
4.34 4.38
4.184.32 4.29
Inventory Turnover Ratio
Arvind Ltd.Raymond Ltd.
Liquidity Ratios
Jan-07 Jan-08 Jan-09 Jan-10 Jan-110.00
0.50
1.00
1.50
2.00
2.50
3.00
3.50
4.00
4.50
3.58
4.22
2.68
3.35
2.83
2.22
2.61
2.39
2.60
2.23
Current Ratio
Arvind Ltd.Raymond Ltd.
Mar 07 Mar 08 Mar 09 Mar 10 Mar 11 0.00
0.50
1.00
1.50
2.00
2.50
3.00
2.34
2.63
2.20 2.24
1.95
1.80
2.22
1.85
2.03
1.66
Quick Ratio
Arvind Ltd.Raymond Ltd.
Debt Management Ratios
Jan-07 Jan-08 Jan-09 Jan-10 Jan-110.00
0.20
0.40
0.60
0.80
1.00
1.20
1.40
1.60
1.80
1.39
1.30
1.69
1.32
1.01
0.580.62
1.17
1.07
1.18
Debt-Equity Ratio
Arvind Ltd.Raymond Ltd.
Mar ' 07 Mar ' 08 Mar ' 09 Mar ' 10 Mar ' 11
-50
-40
-30
-20
-10
0
10
20
30
40
1.06 1.14-2.26
2.215.3
32.79
10.77
-44.05
4.3
-17.09
EPS
Arvind Ltd.Raymond Ltd.
Stock Performance
Referenceshttp://www.indialawoffices.com/pdf/textileindustry.pdf
Analysis :: Arvind Mills
• The current ratio of 2.83:1 for company signifies that current assetsare more than three-fold its obligations.
• Generally a current ratio of 2:1 is considered satisfactory. So there is sufficient cushion in the firm and even with two-thirds shrinkage in the value of its assets, it will be able to meet its obligations in full.
Analysis :Arvind Mills
• The ideal ratio for quick ratio is 1:1.The quick ratio for the company decreased in 2009 and then increased in 2010. Although the ratio is more than the ideal ratio indicating its ability to pay current liabilities, higher current ratio indicates that its assets are not being utilized to its full capacity
Analysis :Arvind Mills
• If the Debt equity ratio is more than 2:1, then it is danger signal for long termlenders. As here it is less than 2:1, it shows it provides sufficient protection to long term lenders.
• A high inventory turnover ratio of 4.63 is good from the viewpoint of liquidity. It signifies how inventory sells fast. Here increasing ratio indicates good performance of the company in terms of inventory selling.
• The debtors turn over ratio measures how rapidly receivables are collected. Here decreasing ratio indicates that the ability to quickly collect debts is reducing and that debts are not being collected rapidly.
• Total assets turnover ratio measures how efficiently assets are employed. If the total assets turnover ratiois high it implies that there is high degree of efficiency in assets utilization and vice-versa. Here, the ratio has decreased but quite insignificantly, so this suggests that the company is still in a good shape.
Fixed Assets Turnover Ratio
• Fixed Assets Turnover Ratio = Cost Of Goods Sold / Average Fixed AssetsInterpretation :
• As the ratio decreases from the last year ratio, it shows that there is nobetter utilization of fixed assets.
Coverage Ratio
Interest Coverage Ratio= Earnings before Interest and Taxes (EBIT) / Interest
Interpretation:• This low interest coverage ratio is a danger
signal that the firm is using excessive debt and does not have the ability to offer assured paymentof interest to the lenders
Return On Assets Ratio
• As is seen here, the ratio first declined from 63.11 in 2008 to 52.18 in2009, but then further increased to 60.93. This indicates that after the downfall of the ratio, the company managed to utilize its assets in the most efficient way, but it still needs improvement as the ratio is less than that of year 2008.