PROJECT REPORT

ON

FINACIAL STATEMENT ANALYSIS

OF

OBEROI REALTY

FOR THE PARTIAL FULLFILMENT OF THE DEGREE

TO

RICS SCHOOL OF BUILT ENVIRONMENT

SUBMITTED TO SUBMITTED BY

PROF. AMIT KUMAR SEC F1 GRP 1

NIKHIL JAISWAL

ANKIT PANDEY

JASVIN DUDHAGARA

ANSHAL RASTOGI

RAJA YADAV

KUNAL DANDAWANI

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FINACIAL STATEMENT ANALYSIS

PREFACE

As a part of MBA curriculum and in order to get practical knowledge in the field of financial

management we are required to make a report on “Financial statement analysis of OBEROI REALTY” the

basic objective behind this project is to know about the study of financial health of a company using final

accounts and analysis of financial statement of the company.

In this project we have included the various financial statement, financial ratios and their effect on the

health of the company.

Doing this project report helped us to enhance our knowledge regarding the work in financial account

management of any company, how to invest and where to invest and the perspective of a company.

Through this report we come to know about importance of team work and role of devotion towards

work

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FINACIAL STATEMENT ANALYSIS

ACKNOWLEDGEMENT

To make any project, essential requirement is able guidance and references without which a project is

incomplete. We are very much thankful to Prof. AMIT KUMAR who has provided us an opportunity and

motivation to gain knowledge though this type of project. We will get practical knowledge from this

project and this will help us a lot in our career.

We are thankful to RICS SCHOOL OF BUILT ENVIRONMENT for providing facilities like library and

computer laboratory, which are proved as valuable input resources for preparing our project.

We are also obliged by our respondents whose co-operation has contributed major part in our project.

At last but not the least we are thankful to our colleagues’ friends and other persons who have directly

and indirectly helped us during preparation of report.

Thank you.

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FINACIAL STATEMENT ANALYSIS

TABLE OF CONTENT

INTRODUCTION 05

SCOPE 06

FINACIAL RATIOS 07

FINACIAL STATEMENT 12

ANALYSIS 14

CONCLUSION 20

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FINACIAL STATEMENT ANALYSIS

INTRODUCTION

Oberoi Realty is a real estate developer based in Mumbai, Maharashtra. It is led by Mr. Vikas Oberoi, CMD. The company has developed over 39 projects at locations across Mumbai. Its main interest is in Residential, Office Space, Retail, Hospitality and Social Infrastructure properties in Mumbai. Three Sixty West, the second tallest tower in India, is developed by Oberoi Realty.

It was incorporated in early 1980 as Oberoi Constructions which later changed to Oberoi Realty Limited.

It was listed on Bombay Stock Exchange in 2010.

For over three decades now, Oberoi Realty has been an insignia of trust, transparency, and cutting-edge technology and differentiated service in the Real Estate sector in Mumbai. Rooted in values, our growth and respectability have both been built on adherence to our vision, mission and the six pillars we stand on, in all we do and deliver.

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FINACIAL STATEMENT ANALYSIS

SCOPE

To understand the information contained in the financial statements with a view to know the strength or weakness of the firm and to make forecast about the future prospects of the firm and thereby enabling the financial analyst to take different decisions regarding the operation of the firm.

Objective of ratio

A. Solvency -

1) Long term

2) Short term

3) Intermediate

B. Stability

C) Profitability

D) Operational efficiency

E) Credit Standing

F) Structural Analysis

G) Effective utilization of resource

H) Leverage or external finding

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FINACIAL STATEMENT ANALYSIS

FINANCIAL RATIOS

Liquidity ratios

Liquidity ratios measure a company’s ability to meet its maturing short-term obligations. In other words, can a company quickly convert its assets to cash without a loss in value if necessary to meet its short-term obligations? Favorable liquidity ratios are critical to a company and its creditors within a business or industry that does not provide a steady and predictable cash flow. They are also a key predictor of a company’s ability to make timely payments to creditors and to continue to meet obligations to lenders when faced with an unforeseen event.

Current ratio = current assets

current liability

This ratio reflects the number of times short-term assets cover short-term liabilities and is a fairly accurate indication of a company's ability to service its current obligations. A higher number is preferred because it indicates a strong ability to service short-term obligations. The composition of current assets is a key factor in the evaluation of this ratio. Depending on the type of business or industry, current assets may include slow-moving inventories that could potentially affect analysis of a company's liquidity how long could it potentially take to convert raw materials and inventory into finished products?

Quick ratio = current assets−stock/inventories

current liability

This ratio, also known as the acid test ratio, measures immediate liquidity - the number of times cash, accounts receivable, and marketable securities cover short-term obligations. A higher number is preferred because it suggests a company has a strong ability to service short-term obligations. This ratio is a more reliable variation of the Current ratio because inventory, prepaid expenses, and other less liquid current assets are removed from the calculation.

Cash ratio = cash+bank balance+current investements

current liability

The cash ratio is the ratio of a company's total cash and cash equivalents to its current liabilities. The

metric calculates a company's ability to repay its short-term debt; this information is useful to creditors

when deciding how much debt, if any, they would be willing to extend to the asking party. The cash ratio

is generally a more conservative look at a company's ability to cover its liabilities than many other

liquidity ratios because other assets, including accounts receivable, are left out of the equation.

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FINACIAL STATEMENT ANALYSIS

Leverage ratios

Companies rely on a mixture of owners' equity and debt to finance their operations. A leverage ratio is any one of several financial measurements that look at how much capital comes in the form of debt (loans), or assesses the ability of a company to meet financial obligations. Too much debt can be dangerous for a company and its investors. Uncontrolled debt levels can lead to credit downgrades or worse. On the other hand, too few debts can also raise questions. If a company's operations can generate a higher rate of return than the interest rate on its loans, then the debt is helping to fuel growth in profits.

Debt-Equity ratio = debt

equity

This ratio measures the financial leverage of a company by indicating what proportion of debt and equity a company is using to finance its assets. A lower number suggests there is both a lower risk involved for creditors and strong, long-term, financial security for a company.

Debt ratio = debt

assets

The debt ratio is defined as the ratio of total – long-term and short-term – debt to total assets, expressed as a decimal or percentage. It can be interpreted as the proportion of a company’s assets that are financed by debt.

Interest coverage ratio = EBIT

total interst

The interest coverage ratio is a debt ratio and profitability ratio used to determine how easily a company can pay interest on outstanding debt. The interest coverage ratio may be calculated by dividing a company's earnings before interest and taxes (EBIT) during a given period by the amount a company must pay in interest on its debts during the same period.

Turnover Turnover is a term that calculates how quickly a business collects cash from accounts receivable or how fast the company sells its inventory. In the investment industry, turnover represents the percentage of a portfolio that is sold in a particular month or year. A quick turnover rate generates more commissions for trades placed by a broker. Turnover ratios reflect the number of times assets flow into and out of the company during the period. It is a gauge of the efficiency of putting assets to work.

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FINACIAL STATEMENT ANALYSIS

Inventory turnover = cost of good sold

average inventories

Inventory turnover is a ratio showing how many times a company's inventory is sold and replaced over a period of time. The days in the period can then be divided by the inventory turnover formula to calculate the days it takes to sell the inventory on hand. It is calculated as sales divided by average inventory

Receivable turnover = net credit sale

average receivables

An accounting measure used to quantify a firm's effectiveness in extending credit and in collecting debts on that credit. The receivables turnover ratio is an activity ratio measuring how efficiently a firm uses its assets.

Fixed assets turnover = net sale

average net fixed asset

The fixed-asset turnover ratio is used to measure operating performance. This ratio specifically measures how able a company is to generate net sales from fixed-asset investments, namely property, plant and equipment (PP&E), net of depreciation. In a general sense, a higher fixed-asset turnover ratio indicates that a company has more effectively utilized investment in fixed assets to generate revenue.

Total assets turnover = net sale

average total asset

Asset turnover ratio is the ratio of the value of a company’s sales or revenues generated relative to the value of its assets. The Asset Turnover ratio can often be used as an indicator of the efficiency with which a company is deploying its assets in generating revenue

Profitability Profitability ratios measure a company’s ability to use its capital or assets to generate profits. Improving profitability is a constant challenge for all companies and their management. Evaluating profitability ratios is a key component in determining the success of a company. It is important to note that all profitability ratio calculations are based on earnings before taxes.

Gross profit margin = gross profit

net sales

Gross profit margin is a financial metric used to assess a company's financial health and business model by revealing the proportion of money left over from revenues after accounting for the cost of goods sold (COGS). Gross profit margin, also known as gross margin, is calculated by dividing gross profit by revenues. Also known as "gross margin."

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FINACIAL STATEMENT ANALYSIS

Net profit margin = net profit

net sales

Net profit margin is the ratio of net profits to revenues for a company or business segment. Typically expressed as a percentage, net profit margins show how much of each dollar collected by a company as revenue translates into profit.

Return on assets = net profit

average total assets

Return on assets (ROA) is an indicator of how profitable a company is relative to its total assets. ROA gives an idea as to how efficient management is at using its assets to generate earnings. Calculated by dividing a company's annual earnings by its total assets, ROA is displayed as a percentage.

Earning power = PBIT

average total assets

This ratio measures how effectively a company's assets are being used to generate profits. It is one of the most important ratios when evaluating the success of a business. A higher number reflects a well-managed company with a healthy return on assets. Heavily depreciated assets, a large number of intangible assets, or any unusual income or expenses can easily distort this calculation.

Return on capital employed = PBIT(1−T)

average total assets

Return on capital employed (ROCE) is a financial ratio that measures a company's profitability and the efficiency with which its capital is employed. A higher ROCE indicates more efficient use of capital. ROCE should be higher than the company’s capital cost; otherwise it indicates that the company is not employing its capital effectively and is not generating shareholder value.

Return on equity = equity earnings

average net worth

Return on equity (ROE) is the amount of net income returned as a percentage of shareholders equity.

Return on equity measures a corporation's profitability by revealing how much profit a company

generates with the money shareholders have invested.

Valuation

Price earnings ratio = market price per share

earning per share

The price-earnings ratio (P/E Ratio) is the ratio for valuing a company that measures its current share

price relative to its per-share earnings.

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FINACIAL STATEMENT ANALYSIS

FINACIAL STATEMENTS

CONSOLIDATED BALANCE SHEET ( in Lakh)

AS AT MARCH 31, 2016 2015

EQUITY AND LIABILITIES Shareholders’ funds Share capital 33,930.38 32,823.80 Reserves and surplus 4,96,497.93 4,30,604.82 5,30,428.31 4,63,428.62 Non-current liabilities Long term borrowings 48,444.88 72,991.61 Deferred tax liabilities 2,287.11 2,424.77 Trade payables 700.95 645.59 Other long-term liabilities 5,031.03 7,824.42 Long-term provisions 138.53 119.09 56,602.50 84,005.48 Current liabilities Short-term borrowings 10,814.17 10,814.17 Trade payables 4,642.81 3,532.37 Other current liabilities 1,73,192.17 1,41,926.32 Short-term provisions 297.10 8,288.91 1,88,946.25 1,64,561.77 Total 7,75,977.06 7,11,995.87

ASSETS Non-current assets Fixed assets

Tangible assets 97,452.71 1,01,327.73 Intangible assets 257.75 149.27 Capital work in progress 5,394.68 2,177.34

Goodwill on consolidation 26,538.27 26,538.27 Non-current investments - 1.21 Long-term loans and advances 1,37,890.96 1,25,316.06 2,67,534.37 2,55,509.88 Current assets Current investments 7,441.12 - Inventories 3,93,059.07 3,48,174.73 Trade receivables 11,702.91 8,281.35 Cash and bank balances 32,085.91 29,368.49 Short-term loans and advances 61,483.96 70,302.15 Other current assets 2,669.72 359.27 5,08,442.69 4,56,485.99 Total 7,75,977.06 7,11,995.87

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FINACIAL STATEMENT ANALYSIS

CONSOLIDATED STATEMENT OF PROFIT AND LOSS (in Lakh)

FOR THE YEAR ENDED MARCH 31, 2016 2015

INCOME

Revenue from operations 1,40,809.00 92,266.75

Other income 3,620.60 1,748.52

Total revenue 1,44,429.60 94,015.27

EXPENSES

Operating costs 62,970.34 31,480.67

Employee benefits expense 5,763.36 5,264.54

Other expenses 5,330.10 4,142.18

Total expenses 74,063.80 40,887.39

Profit before interest, depreciation and 70,365.80 53,127.88 amortization and taxes (EBITDA)

Depreciation and amortization 4,899.49 4,029.30

Interest and finance charges 16.11 176.24

Profit before tax 65,450.20 48,922.34

Tax expense

Current tax 21,663.25 15,662.62

Deferred tax (137.54) 240.13 Short / (excess) provision of tax in earlier years 45.87 (8.63)

MAT credit (entitlement) / written off 1,287.42 1,316.24

Profit after tax 42,591.20 31,711.98 Earnings per equity share (face value of H10)

- Basic (in H) 12.68 9.66

- Diluted (in H) 12.68 9.66

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FINACIAL STATEMENT ANALYSIS

FINANCIAL RATIOS

Financial Ratio values 2016 2015

Current Ratio 3.24 3.12

Quick Ratio 1.32 1.42

Debt to Equity ratio 0.11 0.18

Inventory Turnover 14.09 10.92

Fixed Asset Turnover 1.2 0.79

Total Assets Turnover 0.25 0.18

Gross Profit Margin % 43.92 51.31

Net Profit Margin % 30.24 34.36

Return on Assets 156.33 141.19

Return on Capital employed % 11.1 8.97

Return on Equity % 11.3 9.15

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FINACIAL STATEMENT ANALYSIS

ANALYSIS

The current ratio for Oberoi Reality is 3.24 which is good from previous year, and shows that company is doing really well and is on good financial position. But it is not using its current assets efficiently or having a large amount of bill receivables which may not be good for future investments.

The quick ratio meaures the rupee amount of liquid assets available for each rupee of current liabilities thus a Quick ratio of 1.32 shows that company can cover its liabilities, but with respect to previous year the ability of covering the current liability decresed, since the Quick ratio is declined from 1.42 to 1.32.

3.06

3.08

3.1

3.12

3.14

3.16

3.18

3.2

3.22

3.24

3.26

Current Ratio

Current ratio

2016 2015

1.26

1.28

1.3

1.32

1.34

1.36

1.38

1.4

1.42

1.44

Quick Ratio

Quick Ratio

2016 2015

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FINACIAL STATEMENT ANALYSIS

The debt to equity ratio for the company is 0.11, which compared to the baseline of 0.18 indicates a solid performance in this area. Which shows that company is in a low debt referring to low risk involvement.

Inventory turnover ratio for the company significantly rises from 10.92 to 14.09 with respect to base year, refers to the increase in the sales since the inventories are almost idle for both the year and company selling more products also there is a rise in the price of real estates. So overall company is doing really well.

0

0.02

0.04

0.06

0.08

0.1

0.12

0.14

0.16

0.18

0.2

Debt to Equity ratio

Debt-Equity ratio

2016 2015

0

2

4

6

8

10

12

14

16

Inventory Turnover

Inventory turnover ratio

2016 2015

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FINACIAL STATEMENT ANALYSIS

The ratio took a rise from 0.79 to 1.2 with respect to base year, refers that company is generating more revenues using their fixed assets efficiently, and also the company did not invested much in the fixed assets this year.

The total assets for the company is idle for the years which signifies a effective change in generating net revenues since the ratio took a rise from 0.18 to 0.25 with respect to base year, refers that company is doing very well.

0

0.2

0.4

0.6

0.8

1

1.2

1.4

Fixed Asset Turnover

Fixed Asset turnover

2016 2015

0

0.05

0.1

0.15

0.2

0.25

0.3

Total Assets Turnover

Total Assets turnover ratio

2016 2015

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FINACIAL STATEMENT ANALYSIS

The final account of the company shows that the net sales of the company increased but profit does not significantly rises as the sales hence the gross profit margin declined from 51.31 to 49.92 with respect to base year.

Since the gross profit decreased and due to rise in taxes the overall net profit margin declined for the company from 34.36 to 30.24 with respect to the base year.

40

42

44

46

48

50

52

Gross Profit Margin %

Gross Profit margin

2016 2015

28

29

30

31

32

33

34

35

Net Profit Margin %

Net Profit margin

2016 2015

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FINACIAL STATEMENT ANALYSIS

The return on assets for the company rises from 141.19 to 156.33 with respect to the base year implies that the assets of the company are used more efficiently than previous year and since there is not significant increase in the total assets but the net income rose effectively.

The company is performing well since the ROCE rose from 8.97 to 11.1 with respect to the base year, refers that company efficiently using the capital and earning more profit.

130

135

140

145

150

155

160

Return on Assets

Return on Assets

2016 2015

130

135

140

145

150

155

160

Return on Assets

Return on Capital employed

2016 2015

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FINACIAL STATEMENT ANALYSIS

It shows that the company has gained more profit on their shareholders equity with respect to previous year as ROE rose from 9.15 to 11.3

0

2

4

6

8

10

12

Return on Equity %

Return on Equity

2016 2015

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FINACIAL STATEMENT ANALYSIS

CONCLUSION

As we have studied the balance sheet and the income statement of the company and after calculating and analyzing all the financial ratios we observed that the company is efficiently using its fixed assets for generating more revenues compared to the base year, but due to recession in the real estate market of India the profit of the company got reduced, but the net sales of the company is still on the higher side.