FINANCIAL ANALYSIS FOR ULTRA TECH CEMENT

HISTORY Soren Kristian Toubro, a civil engineer and Henning Holck Larsen, a chemical engineer, the founder of Larsen & Toubro (L&T) Company were schoolmates, later attended the same engineering college in Denmark. After becoming engineers both joined, the firm named ‗F. L. Smidth & Company‘, which was Cement machine manufacturing Company. Then both came to India in 1935 to assess the value of various cement-manufacturing groups on behalf of F. L. Smidth & Company M/S Copenhagen. These groups later merged into the Associated Cement Companies. After completing this task, they searched for proper places for F.L. Smidth‘s local offices in India. In the course of their work, both visited India, observed Indian people, and decided to start their own business here. They started a partnership concern on 1st May 1938 and started undertaking repair jobs on the imported machinery like pasteurizes, butter Chuns, creams separators since supply of these machines were stopped due to world war II. Gradually, they began to develop and manufacture several of these and other types of dairy equipments. Very soon, L & T was acknowledged as a reliable fabricator with high standards. L & T has entered in Cement business in 1980. L & T established its first plant at Awarpur, Maharashtra in 1983. Second plant was established in 1991 at Hirmi, M.P. Third and largest plant was established in 1996 at Kovaya, Gujarat. The fourth plant was established at Tadipatri, A.P. in 1998. GCW‘s operations started from 2 April 1996. It became Asia‘s largest cement producing unit with the capacity of 4.2 million-tone per annum.

PROFILE UltraTech Cement Limited, a Grasim subsidiary has an annual capacity of 18.2 million tonnes. It manufactures and markets Ordinary Portland Cement, Portland Blast Furnace Slag Cement and Portland Pozzolana Cement. UltraTech has five integrated plants, five grinding units and three terminals — two in India and one in Sri Lanka. These include an integrated plant and two grinding units of the erstwhile Narmada Cement Company Limited, a subsidiary, which has been amalgamated with the company in May 2006. UltraTech is the country's largest exporter of cement clinker. The company exports over 2.5 million tonnes per annum, which is about 30 per cent of the country's total exports. The export markets span countries around the Indian Ocean, Africa, Europe and the Middle East. The cement division of L&T was demerged in 2004 after Grasim made the 30 per cent open offer for equity shares, gaining control over the new company, christened UltraTech. Besides the long term strategic value in the wake of rising demand for cement, with the growth of housing and infrastructure sectors in the country, the acquisition brings significant synergy gains to the parent company. Ready Mix Concrete is likely to see substantial growth in the coming years. Recognizing the opportunities that this business will offer, UltraTech has commenced setting up of Ready Mix Concrete plants at various places in the country. Ultra Tech Cement Limited (Formerly known as L & T Cement Ltd.) is a very well known name in the field of cement. The registered office and head office of the company is at Mumbai. This company‘s reputation is based on a strong customer orientation, the technological sophistication that characterizes its products, and an impressive record of achievements. Ultra Tech has initiated a transformation process to ensure that it emerges as a knowledge-based premium conglomerate in the shortest possible time. Each of its plants incorporated state-of-art technology. Ultra Tech Cement has strong brand equity and commands a price premium in most markets.

Out of six cement plants of Ultra Tech, GCW at Kovaya is the largest cement plant in Asia. There are two phases in the plant, which are almost identical in layout and production capacity. The reason for laying such a big plant near a small village like Kovaya can be justified by the fact that this region is very rich of limestone resources, which is the chief raw material for cement production. The estimated resources of limestone mines are enough to supply raw material for next 40 years to GCW. Ultra Tech is India‘s largest manufacturer of premium quality cement. Ultra Tech has nationwide network of factories, offices and sales centers. Authorized stockiest dealing in the company‘s product line, including cement, is located directly or indirectly in every district of the country. UltraTech's subsidiaries are: Dakshin Cements Limited and UltraTech Ceylinco (Private) Limited. ULTRA TECH CEYLINCO (PVT.) LIMITED. Ceylinco insurance company limited and UltraTech have incorporated this subsidiary in Sri Lanka.

Ceylinco is one of the most respected business groups in Sri Lanka with activities in the field of banking, insurance and finance.

A bulk Cement terminal has been established near Colombo with annual output of 0.5 MT.

Cement in bulk is sourced from Ultra Tech‘s Gujarat Cement works and transported by carriers to Colombo.

Definition and Explanation of Financial Statement Analysis:

Financial statement analysis is defined as the process of identifying financial strengths andweaknesses of the firm by properly establishing relationship between the items of the balancesheet and the profit and loss account.

There are various methods or techniques that are used in analyzing financial statements, such as comparative statements, schedule of changes in working capital, common size percentages, funds analysis, trend analysis, and ratios analysis.

Financial statements are prepared to meet external reporting obligations and also for decision making purposes. They play a dominant role in setting the framework of managerial decisions. But the information provided in the financial statements is not an end in itself as no meaningful conclusions can be drawn from these statements alone. However, the information provided in the financial statements is of immense use in making decisions through analysis and interpretation of financial statements.

Tools and Techniques of Financial Statement Analysis:

Following are the most important tools and techniques of financial statement analysis:

1. Horizontal and Vertical Analysis

2. Ratios Analysis

1.Horizontal analysis

Comparison of two or more year's financial data is known as horizontal analysis.

2007 2008 2009 2010 2011

total income2,646.4

13,363.16 4,939.70 5,634.52 6,547.19

%increase27.0838

646.8767

514.0660

416.1978

3Profit 2.85 229.76 782.28 1,007.61 977.02

%increase7961.75

4 240.47728.8042

6 -3.0359

total assets2,598.5

12,490.10 3,342.41 4,437.49 5,743.73

%increase-

4.1720134.2279

432.7631

929.4364

6

2007 2008 2009 2010 2011

-10

0

10

20

30

40

50

%increase income%increase assets

2007 2008 2009 2010 2011-1000

0

1000

2000

3000

4000

5000

6000

7000

8000

9000

%increase profit

%increase profit

Interpretation-

Trend Percentage:

Definition and Explanation:

Horizontal analysis of  financial statements can also be carried out by computing trendpercentages. Trend percentage states several years' financial data in terms of a base year.The base year equals 100%, with all other years stated in some percentage of this base.

2011 2010 2009 2008 2007 2006total income 6,547.19 5,634.52 4,939.70 3,363.16 2,646.41 2,309.62

income trend 283.4748 243.9587 213.875 145.6153 114.5821 100total expenses 4,728.64 3,808.35 3,454.65 2,776.96 2,330.73 1,912.89

expense trend 247.1987 199.0888 180.5985 145.1709 121.8434 100

2011 2010 2009 2008 2007 20060

50

100

150

200

250

300

income trendexpense trend

Interpretation-

Vertical Analysis and Common Size Statements:

Definition and Explanation of Vertical Analysis and Common Size Statements:

Vertical analysis is the procedure of preparing and presenting common size statements.Common size statement is one that shows the items appearing on it in percentage form as well as in dollar form.

Each item is stated as a percentage of some total of which that item is a part. Key financial changes and trends can be highlighted by the use of common size statements.

Mar '11

common size

statement for 2011

Mar '10

common size

statement for 2010

Mar '09

common size

statement for 2009

Mar '08

common size

statement for 2008

Mar '07

common size

statement for 2007

12 mths 12 mths 12 mths 12 mths 12 mths

Income

Net Sales 6,385.50 97.53 5,512.43 97.83 4,909.05 99.379523,299.4

598.11 2,681.05 101.31

Other Income 75.35 1.15 98.67 1.75 61.41 1.243193 24.59 0.73 -55.54 -2.10

Stock Adjustments

86.34

1.32 23.42 0.42 -30.76 -0.62271 39.12 1.16 20.9 0.79

Total Income 6,547.19 100.00 5,634.52 100.00 4,939.70 1003,363.1

6100.00 2,646.41 100.00

Expenditure

Raw Materials 1,280.31 27.08 1,032.34 27.11 871.3 25.22108 772.84 27.83043 630.03 27.03145

Power & Fuel Cost

1,712.98 36.23 1,253.26 32.91 1,138.32 32.95037 910.11 32.77361 783.13 33.6002

Employee Cost 216.76 4.58 171.55 4.50 117.22 3.393108 92.26 3.322338 72.96 3.13035

Other Manufacturing Expenses

92.58 1.96 61.52 1.62 56.22 1.627372 48.19 1.735351 56.27 2.414265

Selling and Admin Expenses

1,405.51 29.72 1,267.57 33.28 1,241.44 35.93533 935.24 33.67855 746.6 32.03288

Miscellaneous Expenses

28.88 0.61 35.48 0.93 30.15 0.872737 18.32 0.659714 41.74 1.790855

Preoperative Exp Capitalised

-8.38 -0.18 -13.37 -0.35 0 0 0 0 0 0

Total Expenses 4,728.64 100.00 3,808.35 100.00 3,454.65 1002,776.9

6100 2,330.73 100

Interpretation-

Ratio Analysis

1.Profitability ratioswhich use margin analysis and show the return on sales and capitalemployed.

2.Rate of Return Ratio (ROR) or Overall Profitability Ratio: The rate of return ratios arethought to be the most important ratios by some accountants and analysts. One reason why the rate of return ratios is so important is that they are the ratios that we use to tell if the managing director is doing their job properly.

3.Liquidity ratios: measure the availability of cash to pay debt, which give a picture of a company'sshort term financial situation.

4.Solvency or Gearing ratios: measures the percentage of capital employed that is financed by debtand long term finance. The higher the gearing, the higher the dependence on borrowing and long term financing. The lower the gearing ratio, the higher the dependence on equity financing.Traditionally, the higher the level of gearing, the higher the level of financial risk due to the increasevolatility of profits. It should be noted that the term Leverage is used in some texts.

5.Turn over Ratios or activity group: ratios indicate efficiency of organization to various kinds ofassets by converting them to the form of sales.

6.Investors ratios: usually interested by investors.

LIQUIDITY RATIOS:The two liquidity ratios, the current ratio and the acid test ratio, are the most important ratios in almost the whole of ratio analysis and they are also the simplest to use. Liquidity ratios provide information about a firm‘s ability to meet its short- term financial obligations. They are of particular interest to those extending short term credit to the firm. Two frequently-used liquidity r atios are current and quick ratio.While liquidity ratios are most helpful for short-term creditors/suppliers and bankers, they are also important to financial managers who must meet obligations to suppliers of credit and various government agencies. A company's ability to turn short-term assets into cash to cover debts is of the utmost importance when creditors are seeking payment. Bankruptcy analysts and mortgage originators frequently use the liquidityratios to determine whether a company will be able to continue as a going concern. A complete liquidity ratio analysis can help uncover weaknesses in the financial position of the business. Generally, the higher the value of the ratio, the larger the margin of safety that the company possesses to cover short-term debts.

1.Current ratio Current ratio=current assets/current liabilities

.year-> 2007 2008 2009 2010 2011current assets 837.65 772.52 960.17 1303.89 1361.61current liabilities 439.3 556.05 755.18 1278.56 1242.72current ratio 1.906784 1.3893 1.271445 1.019811 1.095669

2007 2008 2009 2010 20110

0.5

1

1.5

2

2.5

current ratio

current ratio

Comments:The ratio is mainly used to give an idea of the company‘s ability to pay back its short- term liabilities (debt and payables) with its short-term assets (cash, inventory, receivables). The higher the current ratio, the more capable the company is of paying its obligations. A ratio in each year suggests that the company would be able to pay off its obligations if they came due at that point, but the company has shown constant decreasing trend in its financial health in subsequent years, Since low current ratio does not necessarily mean that the firm will go bankrupt, but it is definitely is not a good sign. Short term creditors prefer a high current ratio since it reduce their risk.

2.Quick or Acid-Test RatioThe essence of this ratio is a test that indicates whether a firm has enough short-term assets to cover its immediate liabilities without selling inventory. So it is the backing available to liabilities that must be paid almost immediately. There are two terms of liquid asset and liquid liabilities in this formula, Liquid asset is all current assets except the inventories and prepaid expenses, because prepaid expenses cannot be converted to cash. The liquid liabilities include all current liabilities except bank overdraft and cash credit since they are not required to be paid off immediately.

Quick ratio= liquid asset/liquid liabilities

year 2007 2008 2009 2010 2011liquid asset 553.94 392.95 526.59 694.13 669.64liquid liabilities 439.3 556.05 755.18

1278.56

1242.72

quick ratio1.26096

10.70668

10.69730

4 0.54290.5388

5

2007 2008 2009 2010 20110

0.2

0.4

0.6

0.8

1

1.2

1.4

quick ratio

quick ratio

Comments:The acid-test ratio is far more forceful than the current ratio, primarily because the current ratio includes inventory assets which might not be able to turn to cash immediately. Companies with ratios of less than 1 cannot pay their current liabilities and should be looked at with extreme caution. Furthermore, if the acid-test ratio is much lower than the current ratio, it means current assets are highly dependent on inventory.

TURN OVER RATIOSAccounting ratios that measure a firm's ability to convert different accounts within their balance sheets into cash or sales. Companies will typically try to turn their production into cash or sales as fast as possible because this will generally lead to higher revenues.Such ratios are frequently used when performing fundamental analysis on different companies.

1.FIXED ASSETS TURN OVER RATIO:It shows how the company uses its fixed assets to achieve sales. The formula is as follows:

Fixed asset turn over ratio=net sales/fixed assets

2007 2008 2009 2010 2011net sales 2681.06 3299.45 4910.83 5508.78 6,383.08fixed asset 2597.08 2678.24 3214.23 4783.61 5312.97fixed asset turnover ratio 1.032336 1.231947 1.52784 1.151595 1.201415

2007 2008 2009 2010 20110

0.2

0.4

0.6

0.8

1

1.2

1.4

1.6

1.8

fixed asset turnover ratio

fixed asset turnover ratio

Comments:A High fixed asset turnover ratio indicates the capability of the firm to earn maximum sales with the minimum investing in fixed assets. So it shows that the company is using its assets more efficiently. As it is shown in above the Company is using its assets specially fixed assets more efficiently each year although it had a light decrease in efficiency in 2008 and 2009 compared to 2007.

2.CURRENT ASSETS TURN OVER RATIO:It is almost like the fixed asset turnover ratio, it calculates the capability of organization to earn sales with usage of current assets. So it indicates with what r atio current assets are turned over in the form of sales.

This ratio is calculated as: Current asset turnover ratio=net sales/current assets

2007 2008 2009 2010 2011

net sales2681.0

6 3299.45 4910.83 5508.786,383.0

8current assets 837.65 772.52 960.17 1303.89 1361.61current asset turnover ratio

3.200692

4.271022

5.114542

4.224881

4.687892

2007 2008 2009 2010 20110

1

2

3

4

5

6

current asset turnover ratio

current asset turnover ra-tio

Comments:In this formula current assets are balance sheet accounts that represent the value of all assets that are reasonably expected to be converted into cash within one year in the normal course of business. A higher current assets turnover ratio is more desirable since it shows the better financial position of company and better usage of these current assets. It can be seen from above figure that the company has shown high ratio in 2007, 2008, 2009, and 2011, never mind the slight decrease in 2010. It means the company is using itscurrent assets more efficiently. The comparison between two ratios over the same period of time, also shows that company has used its current assets better than its fixed assets

3.Capital Employed Turnover RatioThe capital employed turnover ratio tells us the state of the relationship between the shareholders' investment in the business and the sales that the management of the business has been able to generate from it.CETR=net sales/capital employed

2007 2008 2009 2010 2011

net sales2681.0

6 3299.45 4910.83 5508.786,383.0

8

capital empoyed2598.8

4 2490.01 3342.41 4436.72 5742.05capital employed turnover ratio

1.031637

1.325075

1.469248

1.241633

1.111638

2007 2008 2009 2010 20110

0.2

0.4

0.6

0.8

1

1.2

1.4

1.6

capital employed turnover ratio

capital employed turnover ratio

Comments:Capital employed can be expressed in different terms, all generally refer to the investment required for a business to function. By "employing capital" you are making an investment. So, capital employed indicated the long term funds supplied by creditors and owners of the firms. So it can be computed as:Capital Employed = share capital + Long term liabilities + reserve and surpluses

This ratio shows the efficiency of the firm with which the capital employed is being utilized. A high ratio is a sign of capability of firm to earn maximum sales with minimum amount of capital employed and this firm is constantly improving its ratio from 2005 to 2007 except for 2008 and 2009 it is due to current economic slowdown prevailing in the country as well as in the world.

SOLVENCY OR GEARING RATIOS:Gearing is concerned with the relationship between the long terms liabilities that a business has and its capital employed. The idea is that this relationship ought to be in balance. It is a general term describing a financial ratio that compares some form of owner's equity (or capital) to borrowed funds. The shareholdersand lenders of long term loans may be interested in this ratio.

1.Debt Equity ratio:This ratio reflects the relative claims of creditors and share holders against the assets of the firm, debt equity ratios establishment relationship between borrowed funds and owner capital to measure the long term financial solvency of the firm. The ratio indicates the relative proportions of debt and equity in financing the assets of the firm.It is calculated as

Debt equity ratio=debt/shareholder’s fund2007 2008 2009 2010 2011

debt1531.3

8 1451.83 1578.63 1740.52,141.6

3shareholder's fund

1067.13 1038.27 1763.78 2696.99 3602.1

debt-equity ratio

1.435045

1.398316

0.895027

0.645349

0.59455

2007 2008 2009 2010 20110

0.2

0.4

0.6

0.8

1

1.2

1.4

1.6

debt-equity ratio

debt-equity ratio

Comments:In this ratio shareholders‘ fund is the share capital plus reserve and surpluses. In case of high debt equity it would be obvious that the investment of creditors is more than owners. And if it is so high then it brings the firm in a risky position. Or if it is too low it might indicate that the organization has not utilized its capacity of borrowing which must be utilized and that is because the borrowing from outsiders is a good source of fund for business with lower returns in compare to equity. The UltraTech Cement Ltd. is trying to lower itsdebt equity ratio by lowering its liabilities and increasing its equity. So if it wants to improve its position since, a relatively lower ratio is favorable.

2.Proprietary ratio/equity ratio:It is primarily the ratio between the proprietor‘s funds and total assets. It indicates the relationship between owners fund and total assets. And shows the extent to which the owner s‘ fund are sunk in assets or different kinds of it.Proprietary ratio=proprietors fund/total assets

2007 2008 2009 2010 2011

owner's fund1067.1

3 1038.27 1763.78 2696.99 3602.1

total asset3619.5

2 3623.11 4657.85 6258.4 7709.38proprietary ratio

0.294826

0.286569

0.378668

0.430939

0.467236

2007 2008 2009 2010 20110

0.050.1

0.150.2

0.250.3

0.350.4

0.450.5

proprietary ratio

proprietary ratio

Comments:This ratio indicates the proportion of proprietor‘s funds used for financing the total assets. As a very rough measure, it is suggested that 2/3to ¾ of the total assets should be financed through borrowings. A highratio will indicate high financial strength but a very high ratio will indicate that the firm is not using external funds adequately.

PROFITABILITY RATIOAs the name itself suggests, this ratio is calculated to determine profitability of the firm. The basic objective of almost every business is to earn profit which is essential for survival of the business. A business needs profits not only for its existence but also for its expansion and diversification. The investors want an adequate return on their investments, workers want higher wages, creditors want higher security for interest and loan and the list could continue.It is a class of financial metrics that are used to assess a business's ability to generate earnings as compared to its expenses and other relevant costs incurred during a specific period of time. For most of these ratios, having a higher value relative to a competitor's ratio or the same ratio from a previous period is indicative that the company is doing well.

1.GROSS PROFIT RATIO:The gross profit margin ratio tells us the profit a business makes on its cost of sales. It is a very simple idea and it tells us how much gross profit our business is earning. Gross profit is the profit we earn before we take off any administration costs, selling costs and so on. So we should have a much higher gross profit margin than net profit margin.High ratios are favorable in this, since it indicates the business is earning a good return on the sale of its merchandise.Gross profit ratio=gross profit/net sales*100

2007 2008 2009 2010 2011gross profit ratio 265.02 501.62 1392.44 1507.01 1684.46

net sales2681.0

6 3299.45 4910.83 5508.786,383.0

8gross profit ratio

9.884896

15.20314

28.35447

27.35651

26.38945

2007 2008 2009 2010 20110

5

10

15

20

25

30

gross profit ratio

gross profit ratio

Comments:This ratio indicates the r elation between production cost and sales and the efficiency with which goods are produced or purchased. If it has a very high gross profit ratio it may indicate that the organization is able to produce or purchase at a relatively lower cost. Gross profit is the profit we earn before we take off any administration costs, selling costs and so on. Here company has achieved very good efficiency in 2009 compared to other financial years.

2.NET PROFIT RATIO:This shows the portion of sales available to owners after all expenses. A high profit ratio is higher profitability of the firm. This ratio shows the earning left for shareholder as percentage of Net sales.Net Margin Ratio measures the overall efficiency of production, Administration selling, financing, pricing and Taste Management.Net profit ratio=net profit after tax/net sales

2007 2008 2009 2010 2011net profit 2.85 229.76 782.28 1007.61 977.02

net sales2681.0

6 3299.45 4910.83 5508.786,383.0

8net profit ratio

0.106301

6.963585

15.92969

18.29098

15.3064

2007 2008 2009 2010 201102468

101214161820

net profit ratio

net profit ratio

Comments:It is depicted from the above diagram that company has been trying to improve its profitability year by year except for 2009 because of environmental instability which includes the economic meltdown in the country and whole world.

3.OPERATING NET PROFIT RATIO:This ratio establishes the relation between the net sales and the operating net profit. The concept of operating net profit is differ ent from the concept of net profit operating net profit is the profit arising out of businessoperations only. This is calculated as follows:Operating net profit = Net Profit + Non operating expenses – non operating income.Alternatively, this profit can also be calculated by deducting only operating expenses from the gross profit.This ratio is calculated with help of the following formula.Operating Net Profit ratio=operating net profit/net sales

2007 2008 2009 2010 2011operating profit 272.81 554.26 1417.81 1720.06 1760.29

net sales2681.0

6 3299.45 4910.83 5508.78 6,383.08operating net profit ratio

10.17545

16.79856

28.87109

31.22397

27.57744

2007 2008 2009 2010 20110

5

10

15

20

25

30

35

operating net profit ratio

operating net profit ratio

OVERALL PROFITABILITY OR ROR RATIOS:The ROR is perhaps the most important ratio of all. It is the percentage of return on funds invested in the business by its owners. In short, this ratio tells the owner whether or not all the effort put into the business has been worthwhile. If the ROI is less than the rate of return on an alternative, the owner may be wiser to sell the company, put the money in risk-free investment such as a bank savings account, , and avoid the daily struggles of small business management.These Liquidity, Leverage, Profitability, and Management Ratios allow the business owner to identify trends in a business and to compare its progress with the performance of others through data published by various sources. The owner may thus determine the business's relative strengths and weaknesses.

1.RETURN ON ASSETS:This ratio actually measures the profitability of the investments in the firm. And the related formula is:Return on asset ratio=net profit after tax/assets

2007 2008 2009 2010 2011NPAT 2.85 229.76 782.28 1007.61 977.02

Total asset3619.5

2 3623.11 4657.85 6258.47,709.3

8return on asset 0.07874

6.341513

16.79487

16.10012

12.67313

2007 2008 2009 2010 20110

2

4

6

8

10

12

14

16

18

return on asset

return on asset

Comments:Because this ratio shows the profitability of investment in the firm so higher the ratio, the better is the return to the owners of the company.

2.RETURN ON CAPITAL EMPLOYED:This Ratio is considered to be very important. It indicates the percentage of net profits before interest and tax to total capital employed. It reflects the overall efficiency with which capital is used. The ratio of a particular business should be compared with other business firms in the same industry to find out the exact position of the business.It is calculated asROCE ratio=net profit before interest and tax/capital employedNote: Capital Employed = Equity Capital + Preference Capital + Reserves and Surplus + Long Term Debt-Fictitious Assets

2007 2008 2009 2010 2011NPBIT 51.03 338.23 1191.56 1482.83 1437.29

CE2598.5

1 2490.1 3342.41 4437.495,743.7

3ROCE ratio

1.963818

13.58299

35.64973

33.41596

25.02363

2007 2008 2009 2010 20110

5

10

15

20

25

30

35

40

ROCE ratio

ROCE ratio

Comments:A measure of the return that a company is realizing from its capital employed. The ratio can also be seen as representing the efficiency with which capital is being utilized to generate revenue. It is commonly used as a measure for comparing the performance between businesses and for assessing whether a business generates enough returns to pay for its cost of capital.Of course the higher the ratio, the better will be the profitability of the company.

3.RETURN ON EQUITY:This ratio also known as return on shareholders‘ funds or return on proprietors‘ funds or return on net worth, indicates the percentage of net profit available for equity shareholders to equity shareholders‘ funds and not on total capital employed.It is calculated as:ROE ratio=NPAT-preference dividend/equity shareholder’s fundNote: Here Equity Share Holders Fund = Equity Capital + Reserves and Surplus

2007 2008 2009 2010 2011

NPAT- pref dividend 2.85 229.76 782.28 1007.61 977.02equity shareholder's fund 1067 1038.27 1763.78 2696.99

3,602.10

ROE ratio0.26707

122.1291

244.3524

737.3605

427.1236

2

2007 2008 2009 2010 20110

5

10

15

20

25

30

35

40

45

50

ROE ratio

ROE ratio

Comments:This ratio indicates the productivity of the owned funds employed in the firm. However, in judging the profitability of a firm, it should not be overlooked that during inflationary periods, the ratio may show an upward trend because the numerator of the ratio represents current values whereas denominator represents historical values.

INVESTORS RATIOS

1.EARNINGS PER SHARE:EPS measures the profit earned per share. The higher EPS will attract more investors to acquire shares in the company as it indicates that the business is more profitable enough to pay the dividends in time. So it is of utmost importance to investors in order to decide the prospects.

It is calculated as:EPS=NPAT-preference dividend/no.of equity shares outstanding

2007 2008 2009 2010 2011EPS 0.22 18.47 62.84 80.94 78.5

2007 2008 2009 2010 2011

05

1015202530354045

ROE ratio

ROE ratio

Comments:As mentioned above, EPS is one of the important criteria for measuring the perfor mance of a company. If EPS increases, the possibility of a higher dividend per share also increases. However, the dividend payment depends on the policy of the company. Market price of shares of a company may also show an upward trend if the EPS is showing a rising trend. However, it should be remembered that EPS of different companies may vary from company to company due to the following different practices by different companiesregarding stock in tr ade, depreciation, source of raising finance, tax-planning measures etc.

2.DIVIDEND PAYOUT RATIOEPS described above indicates the amount of prof it available for equity share shareholders. Dividend Payout Ratio indicates the percentage of profit distributed as dividends to the shareholders. It measures the relationship between the earning belonging to the equity shareholders and the amount finally paid to them:It is calculated as:DPR ratio=dividend per share/EPS

2007 2008 2009 2010 2011DPS 0.75 1.75 4 5 5EPS 0.22 18.47 62.84 80.94 78.5

DPR340.909

19.47482

46.36537

26.17741

56.36942

7

2007 2008 2009 2010 2011

0

50

100

150

200

250

300

350

DPR

DPR

Comments:This ratio indicates the policy of management to pay cash dividend. A higher ratio indicates that the organization is following the liberal dividend policy regarding the dividend while a lower ratio indicates a conservative approach of the management towards the dividend.

Summary table of financial ratios:

Key Financial RatiosMar '11 Mar '10 Mar'09

Mar '06

Mar '05

Investment Valuation Ratios

Face Value 10 10 10 10 10

Dividend Per Share 5 5 4 1.75 0.75

Operating Profit Per Share (Rs) 140.03 138.77 114.36 45.15 29.84

Net Operating Profit Per Share (Rs)

512.95 442.82 394.35 265.23 215.52

Free Reserves Per Share (Rs) 267.12 191.59 116.03 60.27 63.37

Profitability Ratios

Operating Profit Margin(%) 27.29 31.33 29 17.02 13.84

Profit Before Interest And Tax Margin(%)

21.9 26.61 24.1 10.4 5.52

Gross Profit Margin(%) 22.24 27.03 28.07 14.9 10.58

Cash Profit Margin(%) 20.41 22.02 20.3 13.41 8.31

Adjusted Cash Margin(%) 20.41 22.02 20.23 12.99 11.14

Net Profit Margin(%) 15.06 17.99 15.75 6.91 0.1

Adjusted Net Profit Margin(%) 15.06 17.99 15.67 6.49 2.94

Return On Capital Employed(%) 26.45 35.55 37.54 14.8 6.58

Return On Net Worth(%) 27.13 37.37 44.35 22.13 0.27

Adjusted Return on Net Worth(%) 27.8 36.94 44.13 20.79 7.45

Return on Assets Excluding Revaluations

289.22 216.59 141.69 6.33 0.08

Return on Assets Including Revaluations

289.22 216.59 141.69 6.33 0.08

Return on Long Term Funds(%) 27.93 38.25 37.78 14.89 6.97

Liquidity And Solvency Ratios

Current Ratio 0.59 0.58 0.71 0.67 0.68

Quick Ratio 0.34 0.38 0.4 0.34 0.54

Debt Equity Ratio 0.59 0.65 0.9 1.4 1.44

Long Term Debt Equity Ratio 0.51 0.53 0.88 1.38 1.3

Debt Coverage Ratios

Interest Cover 12.75 20.85 14.45 4.11 1.6

Total Debt to Owners Fund 0.59 0.65 0.9 1.4 1.44

Financial Charges Coverage Ratio

13.74 22.15 15.99 6.03 3.07

Financial Charges Coverage Ratio Post Tax

10.7 16.19 11.89 5.6 2.75

Management Efficiency Ratios

Inventory Turnover Ratio 22.89 31.16 11.46 8.75 9.53

Debtors Turnover Ratio 31.71 27.55 27.58 19.16 15.34

Investments Turnover Ratio 22.89 31.16 34.61 21.2 11.04

Fixed Assets Turnover Ratio 0.86 1.11 1.67 1.25 1.01

Total Assets Turnover Ratio 1.11 1.24 1.47 1.33 1.03

Asset Turnover Ratio 0.86 1.11 1.03 0.72 0.62

Earnings Per Share78.48 80.94 62.84

18.470.23

Observation and FindingsThe year 2009 could be called the peak on the business during last five year which almost divides the ratios into two parts, before 2009 and after that.Liquidity ratios shows that the firm has been facing some problems regarding paying short term liabilities for 3 years, but it is trying to improve the situation.The usage ratio of the company had followed a comparable pattern. The overall efficiency of the company to use its assets, capital or the working capital had increased from 2007 to 2009. However in the later years, it is declining and falling to a lower level of efficiency, for which we can blame the environmental conditions of the country, and that involves the economical and political challenges of India and the world.The Company fails to increase its profitability in the last year, though it should be mentioned that we see a noticeable net profit point in the 2010. It also fails to give satisfactory rate of return in the two years compared to 2009.