Financial Statement Analysis

1Presented byLavanya KosuriAditya Yadav Aradhyula

The financial data given in the statement should be re-organized and rearranged.

A relationship is established among financial statements with the help of tools and technique of analysis such as ratio, trend, common size, fund flow etc.

The information is interpreted in a simple and understanding way.

The conclusion drawn from interpretation and presented to the management in the form of report.

Financial Statement Analysis 2

The analysis and interpretation of financial statements is used to determine the financial position and the results of operation as well. A number of methods or devices are used to study the relationship between different statements. An effort is made to use those devices which clearly analyze the position of the enterprise.

The following methods of analysis are generally used: Comparative statement. Trend analysis. Common size statement. Cash flow analysis. Ratio analysis.

Financial Statement Analysis 3

prese fsa.xlsx

Statement of P&LNet sales ( 43,336.99 cr) include sales to government agencies recognized on provisional contract prices during the year ended 31st march 2016, 3,376.11cr (PY 2,907.36 cr) and cumulatively up to 31st march 2016 13,074.67 cr (PY 9,750.99 cr).

Financial Statement Analysis 4

Interpretation of Revenue:

Changes in Operating revenue: During F.Y 2015-16 the company had registered a growth of 4% in sales volume from 11.8MT in 2014-15 to 12.2MT in 2015-16, despite of registering the growth in sales volume the company’s revenue has been declined by 14.12% due to the oversupply scenario globally. Thereby, unprecedented imports which forced significant price cuts by the steel producers leading to a squeeze in margin.

To support the domestic steel industry, the government has imposed restriction on import of steel by fixing Minimum Import Price (MIP) with effect from 5th Feb 2016, which lead to an increase in price of steel.

-6,000.00

4,000.00

14,000.00

24,000.00

34,000.00

44,000.00

54,000.00

31-Mar-16 31-Mar-15 31-Mar-14

Income

Revenue From Operations

Less: Excise duty

Other Income

Total Revenue

Financial Statement Analysis 5

Interpretation of Expenses: Changes in Raw materials: During the F.Y

15-16 the company has consumed 24.83 million tons of captive iron and 0.98MT of Dolomite, 1.28 metric tons of lime stone compared to 23.18 million tons of captive of iron and 1.11 million tons of lime stone and 0.97 million tons of dolomite. Even though there’s an increase in consumption, due to the reduction of input prices the cost of material consumed has decreased.

Changes in Finance costs: Finance costs had tremendously increased over the previous year by 40% ( 590.52crores) which is due to the increase in the borrowings from 29,898 crores in F.Y 14-15 to 33,217 crores in F.Y 2015-16.

0.00

5,000.00

10,000.00

15,000.00

20,000.00

31-Mar-16 31-Mar-15 31-Mar-14

Expenses

Cost Of Materials Consumed Finance Costs

Financial Statement Analysis 6

Changes in Employee costs: During the year, the Employees' Remuneration & Benefits have increased mainly due to increase in travel concession from 32.54 crores to 251.34 crores and welfare expenses from

481.18 crores to 502.96 crores.

Changes in R&D Expenditure: The R&D expenditure has an significant increase from 262 crore in 2014-15 to 277 crores in 2015-16 and the R&D expenditure as percentage of turnover (net of excise) has increased from 0.58 in 2014-15 to 0.64 in 2015-16.

Expenses: In the same way analyze all related costs and expenses like employee cost, Depreciation and other expenses.

Eg: The increase in other expenses was on account of increase in the cost of stores & spares, power & fuel, repairs & maintenance, freight outward, handling expenses, conversion expenses, security expenses, royalty & cess, etc.

Financial Statement Analysis 7

Equity and Liabilities: Changes in Shareholders Funds: Share capital: No change as there is no issue

of Equity shares. Reserves & Surplus: Due to loss of 4,137.26

crores in current year the R&S has been decreased by 10%.

Changes in Non Current Liabilities: Long term Borrowings: Increase in long term

borrowings by 14% was due to issue of non-convertible bonds.

Long term Provisions: The decrease in long term provisions by 62 crore was mainly on account of decrease in the Gratuity and others.

0.00

10,000.00

20,000.00

30,000.00

40,000.00

31-Mar-16 31-Mar-15 31-Mar-14

Shareholders Funds

a) Share Capital b) Reserves and Surplus

0.00

4,200.00

8,400.00

12,600.00

16,800.00

31-Mar-16 31-Mar-15 31-Mar-14

Non-Current Liabilities

Longterm borrowings Deferred Tax Liabilities

other Long term liabilities Long term provisionsFinancial Statement Analysis 8

Changes in current Liabilities:Short term Borrowings: The short term borrowings

increased by 1,335 crore on account of raising of loans from banks.

Other Current liabilities: There was an increase in other current liabilities from 14,016.53 crores to 15,805.56 crores, due to increase in advances from customers.

Assets: Changes In Non-current Assets:

Tangible Assets: During FY 2015-16, the company has capitalized its Steel plant worth 9,171.10 Crores, due to which there is an increase in tangible assets and depreciation.

Intangible Assets: Intangible assets are increased due to mining rights.

Long Term Loans & Advances: The Company paid a refundable contribution of 270.34 crore to Indian Railways for construction of rail link between Dalli-Rajhara and Rowghat.

0.005,000.00

10,000.0015,000.0020,000.00

31-Mar-16 31-Mar-15 31-Mar-14

Current Liabilities

a) Short Term Borrowings

b) Trade Payables

c) Other Current Liabilities

d) Short Term Provisions

0.00

2,000.00

4,000.00

6,000.00

31-Mar-16 31-Mar-15 31-Mar-14

Non-current Assets

b) Non-Current Investments

c) Deferred Tax Assets [Net]

d) Long Term Loans And Advances

Financial Statement Analysis9

Capital work in progress: During FY 2015-16 CWIP has decreased by 4,300 crores due to the capitalization of steel plant as a result there is an increase in tangible asset.

Changes In Current Assets:

Inventories: During FY 15-16 the inventories decreased by 2,600 crore mainly on account of decrease in raw materials inventory by 1,590 crore, finished/semi-finished products inventory by 674 crore and stores & spares inventory by 336 crore.

Trade receivables: During FY 15-16 trade receivables decreased by 359 crore mainly on account of reduction in debtors.

• Cash & Bank Balances: Decreased by 2,008 crore.

0.00

5,000.00

10,000.00

15,000.00

20,000.00

31-Mar-16 31-Mar-15 31-Mar-14

Current Asset

a) Inventories

b) Trade Receivables

c) Cash And Cash Equivalents

d) Short Term Loans And Advances

e) OtherCurrentAssets

Financial Statement Analysis 10

Financial Statement Analysis 11

Conclusion The company had a pending court cases in SC, that has been disclosed as contingent liabilities in the

Annual report.

Adverse outcome of the following cases results in huge decrease in value of Assets.

Due to non-recognition of the above effect an understatement of Loss after Tax for

the year by 1,321.35 crore was witnessed. We also witnessed:- (Over statement of profit of Previous

Year ended 31st March, 2015 by 1,906.75 crore), overstatement of Reserves & Surplus by 1,321.35

crore (As at 31st March, 2015 1,906.75 crore), understatement of Current Liabilities by 2,020.66

crore (As at 31st March, 2015- 1,906.75 crore) and understatement of Total Assets by 699.31 crore

(Previous Year ended 31st March, 2015 Nil).