FRA Report:

GMR Infrastructure

Submitted to: Submitted By:

Professor: Ashish Kumar

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Executive Summary

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Content

1. Profitability Ratio

2. Solvency Ratio

3. Coverage Ratio

4. Activity Ratio

5. Common Size Statement

6. Reference

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1. Profitability Ratios:

These ratios compare income statement accounts and categories to show a company's ability to generate profits from its operations. Profitability ratios focus on a company's return on investment in inventory and other assets. These ratios basically show how well companies can achieve profits from their operations.

Investors and creditors can use profitability ratios to judge a company's return on investment based on its relative level of resources and assets. In other words, profitability ratios can be used to judge whether companies are making enough operational profit from their assets.

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2015 2014 2013 2012 2011

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Operating Profit Margin(%)Gross Profit Margin(%)Net Profit Margin(%)Profit Before Interest And Tax Margin(%)

Some of the key profitability ratios are:

1.1. Gross Margin Ratio:

The gross margin ratio is calculated by subtracting cost of goods sold from total sales in a given period and then dividing by net sales. It is also known as Gross Profit Margin Ratio.

It tells us how good a company is, in selling its inventory in the market for a specific period. It is an important profitability ratio as it shows how the company is doing.

Analysis:

Gross profit margin is maximum in the year 2015.

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1.2. Operating Profit Margin Ratio:

It is defined as the amount of net income earned on each dollar of sales generated by the company. It is calculated by comparing net income by net sales. This ratio is often used by the company to set its future goals.

Analysis: From the graph operating profit margin is maximum for the year 2015. Operating profit margin has increased significantly in the year 2015.

1.3. Profit-before interest And Tax margin:

It is defined as the company’s earnings before tax as a percentage of total sales or revenues and calculated by dividing earning before tax by total revenue. It indicates the way of company’s profitability is headed.

Pretax Margin indicates of how effectively the company controlling costs to maximize profits.

Analysis:

According to graph EBIT is less than operating profit margin and gross profit margin.

Net profit margin: A ratio of profitability calculated as net income divided by revenues, or net profits divided by sales. It measures how much out of every dollar of sales a company actually keeps in earnings.

Net Profit Margin= Net Income / Total revenueProfit margin is very useful when comparing companies in similar industries as in our case. A higher profit margin indicates a more profitable company that has better control over its costs compared to its competitor.

Analysis: Negative profit margin showing that company is spending more than it earns during

2015. For the year 2014,13,12,11 company was not spending more than its earning.

2. Solvency ratios

Graph

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2015 2014 2013 2012 20110

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Current RatioQuick RatioDebt Equity Ratio

2.1. Current ratio: The current ratio is a solvency ratio that measures a company’s ability to pay short-term and long-term obligations.To gauge this ability, the current ratio considers the total assts of company relative to that company’s total liablities.

Analysis: From graph companies current ratio is fairly increased in the year 2015 as comapred to

previous years. This shows company has now more capable to payoff the obigations.

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2.2. Quick Ratio: An indicator of a company’s short-term liquidity.The quick ratop measures a compnay’s ability to meet it’s short term obligations with its most liquid assets.For this reason, the ratio excludes inventories from current assets, and is caluclated as follows: Quick ratio=(current assets-inventories)/current liablities

Analysis: From the graph company has ~$5 for the year 2015 of liquid assets available to cover

each $1 of current liablities. Copmany has the highest quick ratio for the year 2011, higher the quick ratio, the better

the company’s liquidity position. Also known as “acid-test ratio”

2.3. Debt to Equity ratio:

A high debt to equity ratio implies that the company has been aggressively financing its activities through debt and therefore must pay interest on this financing. If the company's assets generate a greater return than the interest payments, then the company can generate greater earnings than it would without the debt. If not, however, and the company's debt outweighs the return from its assets, then the debt cost may outweigh the return on assets. Over the long-term, this would lead to bankruptcy. Investors should take this into consideration when investing in a company with a high debt to equity ratio, especially in times of rising interest rates.

Debt to Equity ratio= Total liabilities/Share holder’s equity

If the Debt to equity ratio high and the profit percentage is higher than the debt borrowed than the company will be able to pay the interest on the debt and will be able to liable to borrow more money market to increase the profits.

Analysis: The companies has very little change in debt to euity ratio. This ratio is important to a lender when considering a candidate for a loan. A company with high Debt to Equity ratio has higher amount of debt relative to their

available equity .

2.4.Long-term Debt Equity Ratio: In risk analysis, a way to determine a company’s leverage.The ratio is calculated by taking the company’s long term debt and dividing it by the total value of it’s preferred and common stock.

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Analysis:

The greater a company’s leverage ,the higher the ratio. The companies has very little change in this ratio over the five years. Higer ratio thought to be more risky because it has more laibaities and less equity.

3. Coverage ratio

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2015 2014 2013 2012 2011-1

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Interest CoverTotal Debt to Owners FundFinancial Charges Coverage Ratio

3.1. Interest Coverage Ratio (ICR):

Interest coverage ratio determines the ease with which the company can payback the interest on its debts. It is calculated by dividing the company’s earnings before interest and taxes (EBIT) of a period by the interest expenses that the company bears for the same period.

Interest coverage ratio = EBIT / Interest Expense

Higher the value of ICR better is the company’s position to repay its interest expenses. If ever the company’s ICR dips below 1.5, the ability to pay back interest becomes questionable. If it is less than 1, then it sends out a signal that the company is not making enough money to satisfy interest expenses.

Analysis:

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Short term financial health is good as it is less than 2.5 for all the years. Although it has increased in 2015 to 0.84

3.2. Total debt to owners fund: An indicator that measures the total amount of debt in a company’s capital structure.

Analysis: Lower debt to owners fund may be preferrable to keep the debt burden within easily

managable levels. In the year 2015 comaonies has 0.56 which is less than 0.71

3.3. Financial charge coverage ratio: A ratio that indicates a firm's ability to satisfy fixed financing expenses, such as interest and leases.

4. Activity Ratio: Accounting ratios that measure a firm's ability to convert different accounts within its balance sheets into cash or sales. Activity ratios are used to measure the relative efficiency of a firm based on its use of its assets, leverage or other such balance sheet items. These ratios are important in determining whether a company's management is doing a good enough job of generating revenues, cash, etc. from its resources.

4.1.Inventory turnover ratio: A ratio showing how many times a company's inventory is sold and replaced over a period. 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 or "inventory turnover days."

Analysis:

Company has very high turnover in 2015 is a good sign because the sales of products has increased significantly large as compared to previous years.

4.2.Debtors turnover ratio: Debtor turnover ratio is the relationship between net sales and average debtors.

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2015 2014 2013 2012 20110

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Debtors Turnover Ratio

Debtors Turnover Ratio

Analysis:

Higher debtor turnover ratio is good because more higher debtor turnover ratio means, more fastly, company is collecting money.

In the year 2015 this ratio has fallen down which means money from the debtors are not

5. Common Size Statement:

Common size statements can be used to analyze the company’s financial statements over the years. It can also be used to compare two companies of different size as everything in common size statement is written in percentage form. In Income statement the values are written as a percentage of revenue and for the balance sheet it is written as a percentage of the total assets/liabilities.

The common size statements for GMR Infrastructure can be found in the Excel sheet that is send with the report.

References:

http://www.myaccountingcourse.com/financial-ratios/

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http://www.investopedia.com/

http://www.accountingtools.com/

https://in.finance.yahoo.com/

http://www.nasdaq.com/

http://www.moneycontrol.com/

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