Hindalco Snapshot

Hindalco Industries Limited

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Hindalco Industries Limited - SWOT Profile Page 1


Fast Facts

Headquarters Address Aditya Birla Centre, Mumbai, 400030,India

Telephone + 91 22 66525000

Fax + 91 22 66525841

Website www.hindalco.comindex.htm

Ticker Symbol, Stock Exchange

500440, Bombay Stock ExchangeHINDALCO, National Stock

Exchange of India

Number of Employees 20,238

Fiscal Year End March

Revenue (in US$ million) 15,190

SWOT Analysis

Strengths Weaknesses

Business Diversity Low Debt to Equity Ratio

Dominant Market Position Trade Accounts Receivable

Efficient Liquidity Position

Opportunities Threats

Business Expansion Activities Fluctuations in Commodity Prices

Growing Demand for Aluminium Project Execution Risk

Positive Outlook for Copper Market Structural Deficit

Financial Snapshot

Operating Performance

The company reported revenue of US$15,190 million during the fiscal year 2013 (2013). The company's revenue grew at a CAGR of 2.72% during 20092013, with an annual decline of 0.49% over 2012. In 2013, the company recorded an operating margin of 4.81%, as against 5.32% in 2012.

Revenue and Margins


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TABLE OF CONTENTS

1 Hindalco Industries Limited - Business Analysis ............................................................................... 5

1.1 Hindalco Industries Limited - Company Overview ............................................................................................. 5

1.2 Hindalco Industries Limited - Business Description........................................................................................... 5

1.3 Hindalco Industries Limited - Major Products and Services............................................................................... 7

2 Hindalco Industries Limited - Analysis of Key Performance Indicators ............................................. 8

2.1 Hindalco Industries Limited - Five Year Snapshot: Overview of Financial and Operational Performance

Indicators ..................................................................................................................................................................... 8

2.2 Hindalco Industries Limited - Key Financial Performance Indicators ............................................................... 11

2.2.1 Hindalco Industries Limited - Revenue and Operating Profit ....................................................................... 11

2.2.2 Hindalco Industries Limited - Asset and Liabilities ...................................................................................... 12

2.2.3 Hindalco Industries Limited - Net Debt vs. Gearing Ratio ........................................................................... 13

2.2.4 Hindalco Industries Limited - Operational Efficiency ................................................................................... 14

2.2.5 Hindalco Industries Limited - Solvency....................................................................................................... 15

2.3 Hindalco Industries Limited - Key Competitors ............................................................................................... 16

3 Hindalco Industries Limited - Recent Developments ....................................................................... 17

4 Hindalco Industries Limited - SWOT Analysis .................................................................................. 18

4.1 Hindalco Industries Limited - SWOT Analysis - Overview ............................................................................... 18

4.2 Hindalco Industries Limited - Strengths .......................................................................................................... 18

4.3 Hindalco Industries Limited - Weaknesses ..................................................................................................... 19

4.4 Hindalco Industries Limited - Opportunities .................................................................................................... 19

4.5 Hindalco Industries Limited - Threats ............................................................................................................. 20

5 Hindalco Industries Limited - Company Statement .......................................................................... 21

6 Hindalco Industries Limited - History ............................................................................................... 23

7 Hindalco Industries Limited - Key Employees .................................................................................. 24

8 Hindalco Industries Limited - Key Employee Biographies ............................................................... 26

9 Hindalco Industries Limited - Locations and Subsidiaries ............................................................... 27

9.1 Hindalco Industries Limited - Head Office....................................................................................................... 27

9.2 Hindalco Industries Limited - Other Locations and Subsidiaries ...................................................................... 27

10 Appendix ........................................................................................................................................... 29

10.1 Methodology .................................................................................................................................................. 29

10.2 Ratio Definitions ............................................................................................................................................ 29

10.3 Disclaimer ..................................................................................................................................................... 33


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List of Tables

Table 1: Hindalco Industries Limited - Major Products and Services ................................................................................. 7

Table 2: Hindalco Industries Limited - Key Ratios - Annual .............................................................................................. 8

Table 3: Hindalco Industries Limited - Key Capital Market Indicators .............................................................................. 10

Table 4: Hindalco Industries Limited - History ................................................................................................................ 23

Table 5: Hindalco Industries Limited - Key Employees ................................................................................................... 24

Table 6: Hindalco Industries Limited - Key Employee Biographies ................................................................................. 26

Table 7: Hindalco Industries Limited - Subsidiaries ........................................................................................................ 27

Table 8: Hindalco Industries Limited - Locations ............................................................................................................ 28


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List of Figures

Figure 1: Hindalco Industries Limited - Revenue and Operating Profit ............................................................................ 11

Figure 2: Hindalco Industries Limited - Financial Position ............................................................................................... 12

Figure 3: Hindalco Industries Limited - Net Debt vs. Gearing Ratio ................................................................................ 13

Figure 4: Hindalco Industries Limited - Operational Efficiency ........................................................................................ 14

Figure 5: Hindalco Industries Limited - Solvency ............................................................................................................ 15


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1 Hindalco Industries Limited - Business Analysis

1.1 Hindalco Industries Limited - Company Overview

Hindalco Industries Limited (Hindalco) is a aluminium and copper company. The company is a part of Aditya Birla Group. It operates in two business segments, namely, Aluminium and Copper. The aluminium operation also includes mining of bauxite to produce not only primary aluminium but also value added downstream products. Hindalco provides a wide range of aluminum products including standard and specialty grade aluminas & hydrates, billets, wire rods, extrusions, aluminium ingots, flat rolled products, foil and alloy wheels and broad spectrum of copper products including cathodes, continuous cast copper rods along with other by-products, including gold, silver and DAP fertilisers. It has its operations in Europe, Canada, Asia, Australia and the US. Hindalco is headquartered in Mumbai, India. The company follows a integrated business model in case of its aluminium business. The upstream strategy of its aluminium products is to focus on the continuing existing low cost operations and progressing on new greenfield projects. This will enable the company to reduce the cost competitiveness through lowest production costs. The company strategy for its downstream product is to leverage its strength further. Recently, it has acquired Novelis which has provided a well diversified geographical market base to the company.

1.2 Hindalco Industries Limited - Business Description

Hindalco Industries Limited (Hindalco) operates as the metals flagship company of the Aditya Birla Group. It produces broad range of aluminum and copper products as well as exports these aluminium products. After the acquisition of Novelis Inc., the company placed as the top five aluminium majors across the world and the largest vertically integrated aluminium company in India. The companys Aluminium segment is engaged in the production and distribution of hydrate and alumina, aluminum and aluminum products. The aluminium units of the segment encompass the entire gamut of operations, from bauxite mining, alumina refining, aluminium smelting to downstream rolling, extrusions and recycling in India. The Aluminium segment operates across India. Hindlaco operates aluminium units across the world, which consists of the entire gamut of operations, from bauxite mining, alumina refining and aluminium smelting to downstream rolling, extrusions, foils, along with captive power plants and coal mines. The major aluminium products of Hindalco are standard and specialty grade aluminas and hydrates, aluminium ingots, billets, wire rods, flat rolled products, extrusions and foil. The company's integrated facility at Renukoot comprises an alumina refinery and an aluminium smelter, along with facilities for the production of semi-fabricated products such as redraw rods, flat rolled products and extrusions. The plant gas has support of a co-generation power unit and a 742 MW captive power plant at Renusagar, which will help to ensure the continuous supply of power for smelter and other operations. The Aluminium segment's facilities are an aluminium smelter at Hirakud (Odisha) with a captive power plant and coal mine, alumina refineries at Muri (Jharkhand), and Belgaum (Karnataka), and rolling mills at Belur (West Bengal), and Taloja, Mouda (Maharashtra), foil rolling at Kalwa (Maharashtra) and Silvassa (Union Territory of Dadra and Nagar Haveli) and an extrusions plant at Alupuram (Kerala). Being a leading player in the extrusions industry in India, Hindalco offers a range of alloys including hard alloys and some special alloys for the defense and space sectors. It has a extrusions capacity of 31,000 tpa. Hindalco is an India's largest manufacturer of the entire range of flat rolled products. The Aluminium segment also offers services through its subsidiary, Novelis, an aluminium rolled products producer based on shipment volume, which is the leading producer of aluminium rolled products in Europe, South America and Asia, and the second leading producer in North America. Novelis is engaged in recycling used aluminium beverage cane. The company serves to industries such as automotive, transportation, packaging, construction and printing. For the fiscal year ended March, 2012, the Aluminium segment generated INR 90411.7m, reflecting an increase of 13.5% over the revenue 2011. In 2012, the Aluminium segment accounted for 33.97% of the companys total revenue. The Copper segment of the company carries out operations of a copper unit, Birla Copper, is the largest single-location copper smelter in the world, which is located at Dahej in Gujarat, India with a capacity of 500,000 tpa. Birla Copper unit provides copper cathodes, continuous cast copper rods and other by-products such as gold, silver and DAP fertilizers. Birla Copper unit also produces precious metals, fertilizers and sulphuric and phosphoric acid. The copper unit has captive power plants that can provide continuous power generation and a captive jetty to facilitate logistics and transportation. The company's copper cathode products are distributed under the brand name of Birla Copper and Birla Copper II. For the fiscal year ended March, 2012, the Copper segment generated INR 175745.6m, reflecting an increase of 10.5% over the revenue of 2011. In 2012, the Copper segment accounted for 66.03% of the companys total revenue. Under research and development activities, Hindalco operates two R&D centers at Belgaum and Taloja, both recognized by the Department of Scientific & Industrial Research (DSIR), the Government of India. The Belgaum R&D center carries out research in the field of bauxite, Bayer process and alumina. The Taloja R&D center specially focuses on the field of oil and lube and aluminium related metallurgical services. Hindalco also offers industry leading technology and operating expertise to a large base of customers across the world. For the fiscal year ended 2012, the research and development expenditure was INR 71.3m.


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Geographically, the company operates through two regions namely, India and Rest of World. For the fiscal year ended 2012, India accounted for 70.26% of the company's total revenue followed by Rest of World with 29.74%. The subsidiaries of the company are Bihar Caustic and Chemicals Limited, Dahej Harbour and Infrastructure Limited, East Coast Bauxite Mining Company Private Limited, Hindalco - Almex Aerospace Limited, Indal Exports Limited, Lucknow Finance Company, Aditya Birla Minerals Limited, AV Minerals (Netherlands) B.V. and Birla Resources Pty Limited. Hindalco owns 51% in Aditya Birla Minerals Ltd., (ABML), which wholly-owned Birla Nifty Pty Limited and Birla Mt. Gordon Pty Limited located in Western Australia and Queensland, respectively. Hindalco acquired two Australian copper mines, namely, Nifty and Mt. Gordon. Its Nifty copper mine encompasses an underground mine, heap leach pads and a solvent extraction and electrowinning (SXEW) processing plant, which involves in producing copper cathode. The Mt. Gordon copper operation includes an underground mine and a copper concentrate plant. Till date, the operation unit produced copper cathode by using the ferric leach process. Hindalco-Almex Aerospace Limited (HAAL) is established through a joint venture between Hindalco Industries Limited (70% interest) and Almex USA Incorporated (30% interest). HAAL manufactures high-strength aluminium alloys that useful in the aerospace, sporting goods and surface transport industries. Hindalco planned an Aditya Aluminium project of a 359 ktpa, Aluminium smelter along with a 900 MW captive power plant in Odisha, which will be completed in 2013. The company also planned out a Aditya Refinery Project of 1.5 million tonnes per annum of alumina Refinery along with a 90 MW cogen plant in Odisha, which will be operational in 2014. In September 2012, the company subsidiary Novelis, signed a multi year agreement with Jaguar Land Rover to supply automotive sheet products. In April, Novelis has signed an agreement with the Changzhou National Hi-Tech district to build the companys first automotive sheet manufacturing facility in China.


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1.3 Hindalco Industries Limited - Major Products and Services

Hindalco Industries Limited (Hindalco) is an India-based company, engaged in the production of aluminum and copper. The companys key products and brands include the following:

Table 1: Hindalco Industries Limited - Major Products and Services

Products:

Alumina

Primary Metal

Wire Rods

Value Added Products (VAP)

Flat Rolled products

Extrusions

Foils

Wheels

Copper

Primary Aluminium Ingots

Brands:

Birla Copper

Birla Copper II

Source: World Market Intelligence


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2 Hindalco Industries Limited - Analysis of Key Performance Indicators

2.1 Hindalco Industries Limited - Five Year Snapshot: Overview of Financial and Operational

Performance Indicators

The company reported revenue of US$15,190 million during the fiscal year 2013 (2013). The company's revenue grew at a CAGR of 2.72% during 20092013, with an annual decline of 0.49% over 2012. During 2013, operating margin of the company was 4.81% in comparison with operating margin of 5.32% in 2012. In 2013, the company recorded a net profit margin of 3.73% compared to a net profit margin of 4.16% in 2012.

Table 2: Hindalco Industries Limited - Key Ratios - Annual

Key Ratios Unit/Currency 2013 2012 2011 2010 2009

Equity Ratios

EPS (Earnings per Share) INR 15.81 17.74 12.83 22.16 3.21

Dividend per Share INR 1.40 1.55 1.50 1.35 1.35

Dividend Cover Absolute 11.29 11.45 8.55 16.42 2.38

Book Value per Share INR 184.53 166.68 151.61 112.60 92.68

Profitability Ratios

Gross Margin % 28.98 27.25 28.41 30.64 25.55

Operating Margin % 4.81 5.32 5.29 10.13 -0.91

Net Profit Margin % 3.73 4.16 3.38 6.43 0.73

Profit Markup % 41.53 37.96 40.07 44.51 34.81

PBT Margin (Profit Before Tax) % 4.81 5.32 5.29 10.13 -0.91

Return on Equity % 8.57 10.64 8.46 18.22 3.07

Return on Capital Employed % 4.01 5.36 5.90 11.50 -1.17

Return on Assets % 2.51 3.35 2.89 5.47 0.70

Return on Fixed Assets % 4.80 6.35 7.33 12.73 -1.24

Return on Working Capital % 24.50 34.17 30.38 119.51 -20.09

Growth Ratios

Sales Growth % -0.78 11.94 18.93 -7.97 9.91

Operating Income Growth % -10.04 13.06 -37.82 -120.48

EBITDA Growth % -3.71 6.28 -26.61 269.64 -55.40

Net Income Growth % -10.89 38.29 -37.42 711.23 -77.94

EPS Growth % -14.46 46.08 -42.04 575.66 -80.65

Working Capital Growth % 25.48 0.51 144.62 71.78 -29.23

Cost Ratios

Operating Costs (% of Sales) % 95.19 94.68 94.71 89.87 100.91

Administration Costs (% of Sales) % 15.25 13.49 8.30 8.32 8.03

Liquidity Ratios

Current Ratio Absolute 1.69 1.63 1.64 1.29 1.17

Quick Ratio Absolute 1.07 0.97 0.94 0.66 0.68

Cash Ratio Absolute 0.46 0.40 0.41 0.12 0.13

Leverage Ratios

Debt to Equity Ratio Absolute 1.61 1.29 1.02 1.20 1.80


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Table 2: Hindalco Industries Limited - Key Ratios - Annual

Key Ratios Unit/Currency 2013 2012 2011 2010 2009

Net Debt to Equity Absolute 1.67 1.37 1.09 1.26 1.87

Debt to Capital Ratio Absolute 0.58 0.51 0.45 0.48 0.55

Efficiency Ratios

Asset Turnover Absolute 0.67 0.80 0.86 0.85 0.97

Fixed Asset Turnover Absolute 1.47 1.92 2.55 2.27 2.53

Inventory Turnover Absolute 3.95 4.42 3.75 3.73 5.74

Current Asset Turnover Absolute 2.08 2.47 2.24 2.63 3.29

Capital Employed Turnover Absolute 2.30 2.56 2.51 2.83 4.23

Working Capital Turnover Absolute 5.09 6.42 5.75 11.80 22.14

Revenue per Employee INR 39,624,864.00

Net Income per Employee INR 1,495,647.00

Capex to Sales % 14.62 15.33 10.88 7.02 4.01

R&D to Sales % 0.34 0.28 0.26 0.31 0.29



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Table 3: Hindalco Industries Limited - Key Capital Market Indicators

Key Ratios 12-Jun-2014

P/E (Price/Earnings) Ratio 10.71

Dividend Yield 0.01

Note: Above ratios are based on share price as of 12-Jun-2014. The above ratios are absolute numbers.



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2.2 Hindalco Industries Limited - Key Financial Performance Indicators

2.2.1 Hindalco Industries Limited - Revenue and Operating Profit

The consolidated group revenue of the company for 2013 stood at US$15,190 million, which corresponds to a decline of 0.49% over the previous year. The operating margin of the company was 4.81% in 2013, a decrease of 51.00 basis points over the previous year.

Figure 1: Hindalco Industries Limited - Revenue and Operating Profit



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2.2.2 Hindalco Industries Limited - Asset and Liabilities

The company's assets grew 18.92% over the previous year to US$22,557 million in 2013. The company's liabilities grew 22.69% over the previous year to US$15,948 million in 2013. The company's asset to liability ratio reduced from 1.46 in 2012 to 1.41 in 2013.

Figure 2: Hindalco Industries Limited - Financial Position



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2.2.3 Hindalco Industries Limited - Net Debt vs. Gearing Ratio

The company recorded higher net debt of US$10,653 million at the end of fiscal year 2013 when compared to the previous year's net debt of US$7,677 million. The company's gearing ratio for the year 2013 was 1.41, which was higher when compared to the previous year's gearing ratio of 1.16. The gearing ratio remained higher in 2013 due to higher debt funding activities over equity.

Figure 3: Hindalco Industries Limited - Net Debt vs. Gearing Ratio



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2.2.4 Hindalco Industries Limited - Operational Efficiency

The company's working capital turnover for 2013 declined to 5.09, from the previous year's working capital turnover of 6.42. In 2013, the company's asset turnover declined to 0.67 from the previous year's asset turnover of 0.80.

Figure 4: Hindalco Industries Limited - Operational Efficiency



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2.2.5 Hindalco Industries Limited - Solvency

In 2013, the company's current ratio increased to 1.69 from the previous year's current ratio of 1.63. The companys quick ratio increased to 1.07 in 2013 from the previous year's quick ratio of 0.97. In 2013, the companys debt ratio increased to 0.47 from the previous year's debt ratio of 0.40.

Figure 5: Hindalco Industries Limited - Solvency



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2.3 Hindalco Industries Limited - Key Competitors

The following companies are the major competitors of Hindalco Industries Limited: Aleris International, Inc.

Companhia Brasileira de Aluminio

Furukawa-Sky Aluminum Corp. (Ticker: 5741)

Sumitomo Light Metal Industries, Ltd. (Ticker: 5738)

Wise Metal Group LLC Alcoa


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3 Hindalco Industries Limited - Recent Developments

Hindalco Announces Standalone And Consolidated Audited Results For Year Ended 31 March 2014

Hindalco Industries Limited, the flagship company of the Aditya Birla Group, announced its standalone as well as consolidated audited financial results for the year ended 31 March 2014. Published Date : 5/29/2014 12:00:00 AM L&T wins metallurgical, material handling & water sector projects India based Larsen & Toubros (L&T) has secured orders aggregating to INR11.26 billion ($251 million) from M/s. Sterlite Industries India Limited, M/s. Hindalco Industries Limited, M/s. TATA Steel Limited, M/s. Delhi Jal Board and M/s. Uttar Pradesh Jal Nigam Limited. Published Date : 3/30/2010 12:00:00 AM



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4 Hindalco Industries Limited - SWOT Analysis

4.1 Hindalco Industries Limited - SWOT Analysis - Overview

Hindalco Industries Limited (Hindalco) is one of the leading companies in aluminium and copper industries in India. The company operates in two business segments, namely, Aluminium and Copper. The company retains strong foothold in the market with efficient business diversity coupled with strong liquidity/cash flow. However, the companys increasing trade accounts receivable along with low debt to equity is a cause of concern for the company to look upon. Nevertheless, it can utilize the opportunity of growing aluminium and copper market along with strategic business expansion activities. However, the company faces threat from the volatility of commodity prices and project execution risks.

4.2 Hindalco Industries Limited - Strengths

Strengths - Efficient Liquidity Position

During 2011, the company generated free cash flow of INR8,777.20m, maintaining a good liquidity along with minimal project financing during the year. The company generated this free cash flow after maintaining capital expenditure, interest, and tax. Additionally, its current ratio was 1.29 at the end of fiscal year 2011.A higher current ratio indicates that the company is in a strong financial position and is more capable of meeting its short term obligations than other companies in the sector. Additionally, its quick ratio reflected at 0.64 along with cash ratio of 0.12 during the fiscal 2011. Further, the company's current asset was INR279,848.4m in 2011, compared to current liabilities of INR216,840.3m. Such an efficient liquidity position of the company indicates its strong financial position and stability. Strengths - Dominant Market Position

The company operates and maintains business as one of the largest producers of primary aluminium in Asia and also one of the world's largest aluminium rolling companies. The company retains business operation under two segments, namely, Aluminium and Copper. Hindalco is placed among the top five aluminium manufacturers across the world and as the largest vertically integrated aluminium company in India. The company has obtained international certifications for its business activities such as ISO-9001:2000 for quality management system, ISO-14001:2004 for environmental management system and OHSAS-18001:2007 for occupational health and safety management systems. Presently, the company has spread operations through 51 units including aluminium refinery, extrusion plant, foil plant, rolled product plant, smelters, coating, converting and technology center. It renders wide product portfolio and maintains global footprint across 13 countries. For the fiscal year 2011, the company recorded a consolidated turnover of $15.85 billion and is placed in the Fortune 500 league. Such a strong position of the company enables it to strengthen its market position and financial growth prospect. Strengths - Business Diversity

Wider reach in terms of geography would mean reaping more benefits, eventually improving the profit margins, attaining economies of scale and recognition on a worldwide basis. Hindalco caters to the requirements of wide customer base through diverse operations including alumina refinery, extrusion plant, aluminium foil plant, aluminium rolled product plant, aluminium smelter, cold rolled, converting, integrated aluminium and copper complex, bauxite, coal & copper mines, as well as research & development activities. The company has business operations spread across 13 countries, with units located at North America, Europe, Asia, South America and Australasia. For the fiscal year 2011, the company registered 23% revenue generated from India and the remaining 77% from rest of the world. Diversity endows the company with a wider customer base, stronger brand presence and growth across emerging markets. In addition, it enables the company to mitigate market volatility and attain economic stability. The company maintains a strong product portfolio covering standard and specialty grade aluminas and hydrates, aluminium ingots, billets, wire rods, flat rolled products, extrusions and foil. Thus, diverse business operations enable the company to serve diverse customers base supporting the company to mitigate market volatility in any specific market.


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4.3 Hindalco Industries Limited - Weaknesses

Weaknesses - Low Debt to Equity Ratio

Hindalcos low debt to equity ratio indicates that it is exposing itself to a large amount of equity. In fiscal year 2011, Hindalco recorded debt-equity ratio of 101.51%, compared to 119.66% in 2010. The company recorded total equity of INR290,232.90m in 2011, compared to INR215,446.40m in 2010. The total debt stood at INR294,603.60m in 2011, as against INR257,803.10m in 2010. This indicates that the company is heavily dependent on equity for its finance. Financing a project with debt rather than equity will normally increase shareholder returns, because of the low cost of debt (interest - tax) than the cost of equity. Low debt-to-equity ratios indicate that a company is not taking advantage of the increased profits that financial leverage may bring.

Weaknesses - Trade Accounts Receivable

Increasing accounts receivable affect the companys competitiveness and profitability. Its total accounts receivables increased to INR79,995.7m in 2011 from INR65,436.9m in 2010, showing an increase of 22.2% over the period. The company entered into several factoring agreements with third party credit providers and ventures on short term of 30 to 90 days. For which, the company reported a provision of INR678.19m of doubtful accounts provision for impairment of loss, during 2011. Such increasing doubtful debts, along with accounts receivable, reflect inefficient credit management by the company. In the backdrop of growing economic recession, the probability of defaults by creditors increased, which may impact the overall financial position as well as profitability of the company.

4.4 Hindalco Industries Limited - Opportunities

Opportunities - Positive Outlook for Copper Market

According to International Copper Study Group (ICSG), an increase in copper production and lower demand for the metal are expected to create a balanced market by 2013. ICSG estimates that mine production, refined production, and refined usage are expected to grow 9.4%, 3.4%, and 3.6% in 2012 reaching 17.61 million tons, 20.13 million tons, and 20.39 million tons respectively over that in the previous year. By 2012, copper producers anticipate a strong growth of 9% or 1.5 million metric tons mainly due to higher capacity utilization at existing mines as few new projects are expected to start. Most of the developed countries are facing issues such as economic crisis, political disturbances in the Middle East and North Africa, and market price volatility, which are leading to significant uncertainty. Emerging economies such as China are expected to drive the growth in copper demand. China is expected to account for about 1% of the world copper demand in 2011, which would increase in the future. Global copper consumption is expected to reach close to 38 million tons per year (Mt/y) by 2035, more than double the current consumption. Catering to the higher demand in such markets would increase the earning capabilities of the company.

Opportunities - Business Expansion Activities

The company under its operational efficiency has undertaken several expansion activities, for expanding its product profile as well as asset base. Some of the expansion activities include, Hirakud smelter expansion at Hirakud from 155 KTPA to 161 KTPA was completed in 2011; it is also further expanding its capacity from 161 KTPA to 213 KTPA, along with a 100MW captive power plant to be completed by 2012. In addition, the company is evaluating the next phase of expansion for the smelter 213 KTPA to 360 KTPA, with a corresponding increase in power plant capacity from 467.5MW to 967.5MW. It also has Hirakud flat rolled products project under development with underway of all key equipment for FRP production from Novelis plant at Rogerstone, UK to Hirakud. In addition, Belgaum special alumina plant is under expansion from 189 KTPA to 301 KTPA, with a coal based co-generation power plant. Besides, the companys Greenfield projects is on course of development, of these projects, two aluminum smelters and one large alumina refinery viz. Mahan Aluminium, Aditya Aluminium and Utkal Alumina are in advance stage of execution with a capital outlay of $5 billion. With such project expansion and business development activities, the company would expand its productivity as well as financial growth prospects.

Opportunities - Growing Demand for Aluminium

With the growing requirements of industrial, automobile and infrastructure sector, the growth momentum of aluminium from most economies has commenced facing strong headwinds of growth modernization. In 2010, the world aluminium consumption stood at around 41 million tones with a sharp increase of over 20% over 34 million tones consumption during 2009. Production of aluminium stood marginally with higher rate of 42 million tones against production of 38 million tonnes during 2009. Strong demand from both emerging markets and developed markets on the back of increased Industrial activity fuelled the demand for commodities. However, the emerging markets continued to be the torchbearer for this growth; whereas the strong demand for aluminium from developed market was primarily driven by restocking post crisis. For instance, China continued to be the driving force behind this demand growth which grew at 21% and contributed over 41% of global aluminium demand in the year 2010. Besides, the global aluminium production too increased as the producers restarted their capacities with the recovery in the aluminium market. Such long-term fundamentals for aluminium remain strong with a diverse and growing demand base coupled with high levels of supply-side activity.


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4.5 Hindalco Industries Limited - Threats

Threats - Project Execution Risk

The metal and mining companies are subject to various risks associated with the industry and its processes. These risks range from prospecting to extraction and getting the product to the market. The risk category includes land acquisition, project management skills, timely delivery of equipments, regulatory approvals, changes in government policies, inflationary factors and security risks. Project risks include factors like feasibility determination, mine development and mine closure while Technical risks include mine planning, grade control, reserve risk, metallurgic risk, input costs and extraction risks. Social risks include employee health, safety, community and environmental while product chain risks include stockpiling, intermediate processing, blending, joint and by products and transportation. The company also faces Political and security risks associated with political uncertainties as well as mine and product security risks. Thus, any failure by Hindalco in assessing its risk exposure as well as processes and procedures could have a major impact on its business operations.

Threats - Fluctuations in Commodity Prices

The commodity markets are vulnerable to changes in economic conditions. Refinancing needs of approximately 300 billion in the PIIGS countries (Portugal, Ireland, Italy, Greece and Spain) are expected to spill over to other regions resulting in adverse feedback loop. In early 2010, fears of a sovereign debt crisis raised concerns about some European countries, including Portugal, Ireland, Italy, Greece, Spain, and Belgium. Such crises could lead to increasing deficit, followed by an increase in debt and economy downgrades, ultimately leading to high defaults. Concerns about European debt have now been combined with crises in the Middle East and North Africa, along with uncertain US economic recovery. The price of copper slumped from $10,190/ton in February 2011 to $7,600/ton in November 2011, as a result of the global crisis. Such uncertain market conditions leading to changes in commodity prices could have an adverse impact on the results of operation and financial condition of mining companies.

Threats - Structural Deficit

Copper is one of the main indicators of global economic growth as it is used in the construction of buildings, power generation, and transmission and manufacture of consumer electronics. As per historical data it has been noticed that higher the demand for copper stronger the economic growth. According to International Copper Study Groups (ICSG) projections, the global demand for copper in 2011 is expected to exceed global growth in copper production, and a production deficit of about 200,000 metric tons of refined copper is projected for the full year. Higher demand with low supply levels is known as structural deficit. For 2012, ICSG projects a deficit of about 250,000 tons as supply growth will continue to lag behind demand growth. The major reasons behind such deficit include falling copper ore grades in existing mines, production disruptions due to labor strikes, and delay in commissioning new projects. All these factors could lead to an increase in production costs, which will have a negative impact over the companys business, operating results and financial condition.


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5 Hindalco Industries Limited - Company Statement A statement by Mr. Kumar Mangalam Birla, the chairman of Hindalco Industries Limited is given below. The statement has been taken from the companys 2011-12 annual report. Almost four years after the greatest financial and economic upheaval since the Great Depression, the global economy is regaining a measure of stability and confidence. But the risks to growth looks unsteady once again, with the problems in the Euro Zone. The IMF projects that the global economic growth will decline from 4% in 2011 to 3.5% in 2012, before picking upto 4% in 2013. The Euro zone shows signs of slipping into a recession again, though that is expected to be offset by around 2% growth in the US and 6% in the emerging and developing economies. The economies of Africa, particularly Sub-Saharan Africa, are demonstrating structural improvement. Japan is on the road to normalcy after the twin disasters of the tsunami and the Fukushima nuclear reactor accident. The global supply chains, disrupted by the disasters in Japan and the floods in Thailand, have been restored. The financial condition of the large global corporations is extremely strong and their cash holdings at an all-time high. The worst-case scenarios for the global economy have not come to pass. That, in no small measure, is due to the unprecedented stimulus provided by governments and central banks. Europe has also reached a degree of consensus on fiscal reforms. The ECB has also put in place firewalls to ward off a widespread economic contagion. Clearly, the road ahead is not yet smooth. The bond, inter-bank and sovereign debt markets in Europe remain jittery. The process of financial deleveraging still has a long way to go. Oil prices remain stubbornly high. Unemployment is proving extremely sticky and concerns about inequality are growing. A major worry is the political gridlock in many major countries, that makes it difficult to strike the right trade-offs between growth and fiscal and monetary restraint. The Indian economy was quick off the mark in recovering after the 2008 shocks. But the growth momentum has slowed considerably over the past year. GDP growth in the third quarter of FY 2011-12 was 6.1%, down from 8.3% in the corresponding quarter of FY 2010-11. Some of the key indicators are bearish. Gross Fixed Capital formation has contracted in recent months. Growth in Industrial production in the April 2011-February 2012 period slid to 3.5% compared to 8.1% during the same period last year. Inflation particularly in food items, remains high. There have been major slippages on the fiscal side. The Current account deficit, in the April-December 2011 period widened to 4.0% of GDP, a clear warning sign. On a trade-weighted basis the Rupee depreciated around 8% in the past year. Given the slippage in growth, RBIs decision to ease monetary policy was timely. Even so monetary policy will not be effective unless it is supported by fiscal restraint. Indias economy is poised delicately. Recent policies have not taken the economy forward. For the Financial Year 2011-12, your Companys performance has been outstanding both at the Standalone and Consolidated level. Your Companys net revenue on a Consolidated basis stood at US$ 17 billion (` 80,821 crore) vis--vis US$ 15.85 billion (` 72,202 crore) achieved in the previous year. Net profit is in excess of US$ 700 million (` 3,397 crore) as against US$ 540 million (` 2,456 crore). These numbers are indeed very encouraging. Your Companys model of a balanced portfolio with strong value added businesses and operational excellence have been the key drivers of this commendable performance. Aluminium business in India recorded the highest ever metal production. Cost pressures were largely neutralized through greater efficiencies. Copper business in India attained the highest ever profitability led by improvement in recovery, product-mix and by maximizing the value from by-products. Novelis too reported strong operating results, braving the economic headwinds globally, recording the second straight year of adjusted EBITDA in excess of $1 billion. Even as its shipments slowed, its EBITDA per ton continued to grow. Significant initiatives taken towards optimizing the Companys footprint and rationalizing the cost structure, have stood the Company in good stead. Novelis increased the recycled content in its production to 39% in FY12 from 33% in the previous year, which is notable. All of its major strategic expansions in Brazil, South Korea and the United States are on track. Importantly, we have ventured into China with a plant that will initially focus on automotive sheet fin ishing capabilities. This will further solidify our global automotive leadership position. All through the year, at Novelis strateg ic investments were made in global recycling facilities in South America, Europe and Germany. These facilities ensure metal supply and optimization of the overall cost base. Novelis investments have been strategically geared to leverage growth opportunities in the emerging markets, the increasing emphasis on light-weighting in the automobile industry and recycling in all the four operating regions. Our efforts to actively consolidate our pole position in the metals business in India as well are firmly rooted. All of your Companys expansion projects are on course. Let me highlight a few projects, which should be up and running in the near future, in India. The Mahan Aluminium Project, Aditya Aluminium Project and Utkal Alumina Refinery are all at an advanced stage of implementation. Poststabilization these will be amongst the lowest cost producers globally. The Flat Rolled Products (FRP) project at Hirakud in Odisha which is underway will enable your Company to produce high-end canbody stock. It will be distinctive being the only plant of its kind in India. It will give your Company a head start in the domestic and export markets. The Consolidated capex spends in FY 2011-12 was over US$ 2.3 billion (` 12,500 crore). Outlook Your Company is poised to achieve a quantum leap in the next few years in every respect volume, capabilities and enhanced value for all its stakeholders. It is well on its way to becoming a premium global metals major with a robust presence across the Upstream and Downstream parts of the value chain of both Aluminium and Copper. Your Company has displayed tremendous resilience in the last few years with its impressive performance despite the significant slack in


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the economy globally. The new assets that the Company is building will undeniably encircle it with an even greater competitive edge. Given thedistinctive growth path that we have charted, the onlydirection that your Company can go in the years ahead is upward. To our teams I thank all our teams for their solid performance, undiluted commitment and laser sharp focus on delivering results. The Aditya Birla Group in perspective Despite a choppy global economy, our Group turned in a solid performance in FY 2011-12, anchored by our 133,000 strong workforce comprising 42 nationalities spanning 36 countries. Our consolidated revenues were a little over USD 40 billion, reflecting a 14% growth. It is my abiding belief that our people are the single most important enablers from every perspective. It is with a sense of deep pride that I share with you the fact that our continuous investment in the people area has paid rich dividends. Our Group has been ranked fourth in the Global Top Companies for Leaders and first in Asia Pacific in the Top Companies for Leaders 2011 study conducted by Aon Hewitt, Fortune and the RBL Group. 470 companies worldwide participated in this study. This recognition is personally heartening for me, given that we have competed against the best of breed global companies. I personally am convinced that we are now forging ahead on the people front. Our dedicated efforts in enhancing the quality of life of our employees and their families, continues unabated. Our Talent Management and Leadership Development processes have been further enhanced, to meet our very specific talent requirements, with many more employees being included. To mention a few, launched: A Global Manufacturing Leadership Program to induct lateral recruits and fortify our technical talent in our Units. AContinuing Education Policy to support managers in acquiring higher specialist education for skills upgradation while they continue to be in their jobs. Cutting Edge, the accelerated P&L Leadership Development Program, to enable function leaders to transition to P&L roles. And over 30,000 touch points to our learners through multiple learning formats. With these the number of people being targeted for honing competencies and developing skills has risen many times over. This is in sync with our World of Opportunities proposition. The customization of these learning programmes is far sharper this year on. Beyond Business Given that our employees have a desire to contribute to the larger community, including those of their colleagues who need support, we are setting up a new trust called the World Of Opportunities Foundation, thorough which our employees can contribute to supporting the higher education of children in need. Last Man Standing First Man Forward And finally let me add that over the years, we have through determined and deliberate effort come to be in this position of being the Last Man Standing, almost across each of our businesses. And when we do face a downturn today, from our position of strength, the message I want to convey is that, the last man standing has the best chance at being the first man forward. The first man forward to consolidate market positions, to show superior performance in each industry and get a few steps ahead of competition.


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6 Hindalco Industries Limited - History

Table 4: Hindalco Industries Limited - History

Year Event type Description

2011

Corporate Changes/Expansions

In June, the company announced the investment of $15.8 million in the construction of a new continuous casting line at its production facility in Pieve Emanuele, Italy.

2010


In October, the company started setting up a 1.5 mtpa alumina refinery in the eastern state of Orissa to feed Mahan and Aditya smelters.

2010

Corporate Awards

Hindalco Renukoot won the Golden Peacock Award 2010 for corporate social responsibility.

2008

Contracts/Agreements

Hydromine Inc., together with its strategic partners Hindalco Industries Limited and Dubai Aluminium Co., established a new mineral firm, Cameroon Alumina Ltd.

2007

Acquisitions/Mergers/Takeovers

The company completed the acquisition of Novelis.

2007


The company acquired 100% interest of Alcan Inc. Canada (Alcan) in Utkal Alumina International Ltd.

2003


The company completed the acquisition of copper mining assets in Australia.

2003


The company completed the acquisition of the Nifty copper mine and the rights to explore seven more mines.

2000


Hindalco completed the acquisition of Indal.

1998


Hindalco established new aluminum foil plant in Silvassa.

1994

Others

The company got ISO 9002 certification.

1967


The company opened its new plant at Renusagar.

1962

Others

Hindalco started production of aluminum metal and alumina.

1958

Incorporation/Establishment

Hindalco Industries Limited was incorporated in 1958.



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7 Hindalco Industries Limited - Key Employees

Table 5: Hindalco Industries Limited - Key Employees

Name Job Title Board Level Since Age

Sanjay Sehgal President - Chemicals & International Trade

Senior Management

Anil Malik Secretary Senior Management

Askaran Agarwala Director Non Executive Board

Bharat Bhushan Jha President - Corporate Projects & Procurement

Senior Management

Chaitan Manbhai Maniar Director Non Executive Board 75

Debnarayan Bhattacharya Vice Chairperson - Novelis Inc, Managing Director, Chairperson - Aditya Birla Minerals Limited

Executive Board 62

Dilip Gaur President - Copper Senior Management

Dinesh Kumar Kohly Chief Operating Officer - Renukoot & Renusagar Units

Senior Management

Jagdish Khattar Director Non Executive Board

Kailash Nath Bhandari Director Non Executive Board 69

Kumar Mangalam Birla Chairperson Non Executive Board 44

Madhukar Manilal Bhagat Director Non Executive Board

Meleveetil Damodaran Director Non Executive Board

Narendra Jamnadas Jhaveri

Director Non Executive Board

Philip Martens Chief Executive Officer - Novelis Inc. , President - Novelis Inc.

Senior Management

Praveen Maheshwari Chief Financial Officer Senior Management 2012

Raghavendra Dhulkhed Senior President Operations Senior Management

Rajashree Birla Director Non Executive Board 65

Ram Charan Director Non Executive Board 2011

Sachin Satpute Chief Marketing Officer - Aluminium Senior Management

Satish M Bhatia President Foil & Packaging Senior Management


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Table 5: Hindalco Industries Limited - Key Employees

Name Job Title Board Level Since Age

Sunil Kulwal Chief Executive Officer - Aditya Birla Minerals Limited, Managing Director - Aditya Birla Minerals Limited

Senior Management

Suryakant Mishra Chief Executive Officer - Utkal Alumina International Ltd

Senior Management

Vineet Kaul Chief People Officer Senior Management



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8 Hindalco Industries Limited - Key Employee Biographies

Table 6: Hindalco Industries Limited - Key Employee Biographies

Praveen Maheshwari Job Title : Chief Financial Officer

Mr. Maheshwari has been the chief financial officer of the Hindalco Industries Limited since 2012.



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9 Hindalco Industries Limited - Locations and Subsidiaries

9.1 Hindalco Industries Limited - Head Office


Aditya Birla Centre

Mumbai

Zip: 400030

India

Tel: + 91 22 66525000

Fax: + 91 22 66525841

9.2 Hindalco Industries Limited - Other Locations and Subsidiaries

Table 7: Hindalco Industries Limited - Subsidiaries

Novelis Inc.

3560 Lenox Road

Suite 2000

Atlanta

Zip: 30326

United States of America

Tel: + 1 404 7604000

Tubed Coal Mines Limited

Latehar

India

Lucknow Finance Company Limited

India

Minerals & Minerals Limited

India

Aditya Birla Minerals Limited

Level 3, Septimus Roe Square

256 Adelaide Terrace

Perth

Zip: 6000

Australia

Tel: + 61 8 93668800

Fax: + 61 8 93668805

Novelis (India) Infotech Limited

Pune

India

Tel: + 91 20 25888681

Aditya Birla Chemicals (India) Limited

10 Camac Street

Industry House,17th Floor

Kolkata

Zip: 700 017

India

Tel: + 91 3322 826130

Fax: + 91 3322 826139

Dahej Harbour & Infrastructure Limited

Bharuch

India


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Table 7: Hindalco Industries Limited - Subsidiaries

Utkal Alumina International Limited

India

Birla Resources Pty Limited

Australia

Hindalco-Almex Aerospace Limited

Century Bhavan, 3rd Floor

Dr. Annie Besant Road

Mumbai

Zip: 400 030

India

Tel: + 91 22 66626666

Fax: + 91 22 24227586


Table 8: Hindalco Industries Limited - Locations


Vandhana, 5th Floor

11 Tolstoy Marg

New Delhi

Zip: 110 001

India

Tel: + 91 11 42200204

Fax: + 91 11 23721595


Industry House, 7th Floor

45, Race Course Road

Bangalore

Zip: 560 001

India

Tel: + 91 80 40416010


Ahura Centre, 1st Floor

82, Mahakali Caves Road

Mumbai

Zip: 400 093

India

Tel: + 91 22 66917031

Fax: + 91 80 22533086


Jeevan Deep, 2nd Floor

1, Middleton Street

Kolkata

Zip: 700 071

India

Tel: + 91 33 22809710

Fax: + 91 33 22886139



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10 Appendix

10.1 Methodology

World Market Intelligence company reports are based on a core set of research techniques which ensure the best

possible level of quality and accuracy of data. The key sources used include:

Company Websites

Company Annual Reports

SEC Filings

Press Releases

Proprietary Databases

Notes

Financial information of the company is taken from the most recently published annual reports or SEC filings

The financial and operational data reported for the company is as per the industry defined standards

Revenue converted to US$ at average annual conversion rate as of fiscal year end

10.2 Ratio Definitions

Capital Market Ratios

Capital Market Ratios measure investor response to owning a company's stock and also the cost of issuing stock.

Price/Earnings Ratio (P/E)

Price/Earnings (P/E) ratio is a measure of the price paid for a share relative to the annual income earned per share. It is a financial ratio used for valuation: a higher P/E ratio means that investors are paying more for each unit of income, so the stock is more expensive compared to one with lower P/E ratio. A high P/E suggests that investors are expecting higher earnings growth in the future compared to companies with a lower P/E. Price per share is as of previous business close, and EPS is from latest annual report. Formula: Price per Share / Earnings per Share

Enterprise Value/Earnings before Interest, Tax, Depreciation & Amortization (EV/EBITDA)

Enterprise Value/EBITDA (EV/EBITDA) is a valuation multiple that is often used in parallel with, or as an alternative to, the P/E ratio. The main advantage of EV/EBITDA over the PE ratio is that it is unaffected by a company's capital structure. It compares the value of a business, free of debt, to earnings before interest. Price per share is as of previous business close, and shares outstanding last reported. Other items are from latest annual report. Formula: (Market Cap + Debt + Preferred Stock - Cash & Cash Equivalents) / (Net Income + Interest + Tax + Depreciation + Amortization)

Enterprise Value/Sales

Enterprise Value/Sales (EV/Sales) is a ratio that provides an idea of how much it costs to buy the company's sales. EV/Sales is seen as more accurate than Price/Sales because market capitalization does not take into account the amount of debt a company has, which needs to be paid back at some point. Price per share is as of previous business close, and shares outstanding last reported. Other items are from latest annual report. Formula: (Market Cap + Debt + Preferred Stock - Cash & Cash Equivalents) / Sales

Enterprise Value/Operating Profit

Enterprise Value/Operating Profit measures the company's enterprise value to the operating profit. Price per share is as of previous business close, and shares outstanding last reported. Other items are from latest annual report. Formula: (Market Cap + Debt + Preferred Stock - Cash & Cash Equivalents) / Operating Income


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Enterprise Value/Total Assets

Enterprise Value/Total Assets measures the company's enterprise value to the total assets. Price per share is as of previous business close, and shares outstanding last reported. Other items are from latest annual report. Formula: (Market Cap + Debt + Preferred Stock - Cash & Cash Equivalents) / Total Assets

Dividend Yield

Dividend Yield shows how much a company pays out in dividends each year relative to its share price. In the absence of any capital gains, the dividend yield is the return on investment for a stock. Formula: Annual Dividend per Share / Price per Share

Equity Ratios

These ratios are based on per share value.

Earnings per Share (EPS)

Earnings per share (EPS) is the portion of a company's profit allocated to each outstanding share of common stock. EPS serves as an indicator of a company's profitability. Formula: Net Income / Weighted Average Shares

Dividend per Share

Dividend is the distribution of a portion of a company's earnings, decided by the board of directors, to a class of its shareholders.

Dividend Cover

Dividend cover is the ratio of company's earnings (net income) over the dividend paid to shareholders. Formula: Earnings per share / Dividend per share

Book Value per Share

Book Value per Share measure used by owners of common shares in a firm to determine the level of safety associated with each individual share after all debts are paid accordingly. Formula: (Shareholders Equity - Preferred Equity) / Outstanding Shares

Cash Value per Share

Cash Value per Share is a measure of a company's cash (cash & equivalents on the balance sheet) that is determined by dividing cash & equivalents by the total shares outstanding. Formula: Cash & equivalents / Outstanding Shares

Profitability Ratios

Profitability Ratios are used to assess a company's ability to generate earnings, based on revenues generated or resources used. 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.

Gross Margin

Gross margin is the amount of contribution to the business enterprise, after paying for direct-fixed and direct variable unit costs. Formula: {(Revenue-Cost of revenue) / Revenue}*100

Operating Margin

Operating Margin is a ratio used to measure a company's pricing strategy and operating efficiency. Formula: (Operating Income / Revenues) *100

Net Profit Margin

Net Profit Margin is the ratio of net profits to revenues for a company or business segment - that shows how much of each dollar earned by the company is translated into profits. Formula: (Net Profit / Revenues) *100

Profit Markup

Profit Markup measures the company's gross profitability, as compared to the cost of revenue. Formula: Gross Income / Cost of Revenue

PBIT Margin (Profit Before Interest & Tax)

Profit Before Interest & Tax Margin shows the profitability of the company before interest


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expense & taxation. Formula: {(Net Profit + Interest + Tax) / Revenue} *100

PBT Margin (Profit Before Tax)

Profit Before Tax Margin measures the pre-tax income over revenues. Formula: {Income Before Tax / Revenues} *100

Return on Equity

Return on Equity measures the rate of return on the ownership interest (shareholders' equity) of the common stock owners. Formula: (Net Income / Shareholders Equity)*100

Return on Capital Employed

Return on Capital Employed is a ratio that indicates the efficiency and profitability of a company's capital investments. ROCE should always be higher than the rate at which the company borrows; otherwise any increase in borrowing will reduce shareholders' earnings. Formula: EBIT / (Total Assets Current Liabilities)*100

Return on Assets

Return on Assets is an indicator of how profitable a company is relative to its total assets, the ratio measures how efficient management is at using its assets to generate earnings. Formula: (Net Income / Total Assets)*100

Return on Fixed Assets

Return on Fixed Assets measures the company's profitability to its fixed assets (property, plant & equipment). Formula: (Net Income / Fixed Assets) *100

Return on Working Capital

Return on Working Capital measures the company's profitability to its working capital. Formula: (Net Income / Working Capital) *100

Cost Ratios

Cost ratios help to understand the costs the company is incurring as a percentage of sales.

Operating costs (% of Sales)

Operating costs as percentage of total revenues measures the operating costs that a company incurs compared to the revenues. Formula: (Operating Expenses / Revenues) *100

Administration costs (% of Sales)

Administration costs as percentage of total revenue measures the selling, general and administrative expenses that a company incurs compared to the revenues. Formula: (Administrative Expenses / Revenues) *100

Interest costs (% of Sales)

Interest costs as percentage of total revenues measures the interest expense that a company incurs compared to the revenues. Formula: (Interest Expenses / Revenues) *100

Leverage Ratios

Leverage ratios are used to calculate the financial leverage of a company to get an idea of the company's methods of financing or to measure its ability to meet financial obligations. There are several different ratios, but the main factors looked at include debt, equity, assets and interest expenses.

Debt to Equity Ratio

Debt to Equity Ratio is a measure of a company's financial leverage. The debt/equity ratio also depends on the industry in which the company operates. For example, capital-intensive industries tend to have a higher debt equity ratio. Formula: Total Liabilities / Shareholders Equity

Debt to Capital Ratio

Debt to capital ratio gives an idea of a company's financial structure, or how it is financing its operations, along with some insight into its financial strength. The higher the debt-to-capital ratio, the more debt the company has compared to its equity. This indicates to investors whether a company is more prone to using debt financing or equity financing. A company with high debt-to-capital ratios, compared to a general or industry average, may show weak financial strength because the cost of these debts may weigh on the company


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and increase its default risk. Formula: {Total Debt / (Total assets - Current Liabilities)}

Interest Coverage Ratio

Interest Coverage Ratio is used to determine how easily a company can pay interest on outstanding debt, calculated as earnings before interest & tax by interest expense. Formula: EBIT / Interest Expense

Liquidity Ratios

Liquidity ratios are used to determine a company's ability to pay off its short-terms debts obligations. Generally, the higher the value of the ratio, the larger the margin of safety that the company possesses to cover short-term debts. 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 liquidity ratios to determine whether a company will be able to continue as a going concern.

Current Ratio

Current Ratio measures a company's ability to pay its short-term obligations. The ratio gives 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 under 1 suggests that the company would be unable to pay off its obligations if they came due at that point. Formula: Current Assets / Current Liabilities

Quick Ratio

Quick ratio measures a company's ability to meet its short-term obligations with its most liquid assets. Formula: (Current Assets - Inventories) / Current Liabilities

Cash Ratio

Cash ratio is the most stringent and conservative of the three short-term liquidity ratio. It only looks at the most liquid short-term assets of the company, which are those that can be most easily used to pay off current obligations. It also ignores inventory and receivables, as there are no assurances that these two accounts can be converted to cash in a timely matter to meet current liabilities. Formula: {(Cash & Bank Balance + Marketable Securities) / Current Liabilities)}

Efficiency Ratios

Efficiency ratios measure a company's effectiveness in various areas of its operations, essentially looking at maximizing its use of resources.

Fixed Asset Turnover

Fixed Asset Turnover ratio indicates how well the business is using its fixed assets to generate sales. A higher ratio indicates the business has less money tied up in fixed assets for each currency unit of sales revenue. A declining ratio may indicate that the business is over-invested in plant, equipment, or other fixed assets. Formula: Net Sales / Fixed Assets

Asset Turnover

Asset turnover ratio measures the efficiency of a company's use of its assets in generating sales revenue to the company. A higher asset turnover ratio shows that the company has been more effective in using its assets to generate revenues. Formula: Net Sales / Total Assets

Current Asset Turnover

Current Asset Turnover indicates how efficiently the business uses its current assets to generate sales. Formula: Net Sales / Current Assets

Inventory Turnover

Inventory Turnover ratio shows how many times a company's inventory is sold and replaced over a period. A low turnover implies poor sales and, therefore, excess inventory. A high ratio implies either strong sales or ineffective buying. Formula: Cost of Goods Sold / Inventory

Working Capital Turnover

Working Capital Turnover is a measurement to compare the depletion of working capital to the generation of sales. This provides some useful information as to how effectively a company is using its working capital to generate sales. Formula: Net Sales / Working Capital


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Capital Employed Turnover

Capital employed turnover ratio measures the efficiency of a company's use of its equity in generating sales revenue to the company. Formula: Net Sales / Shareholders Equity

Capex to sales

Capex to Sales ratio measures the company's expenditure (investments) on fixed and related assets' effectiveness when compared to the sales generated. Formula: (Capital Expenditure / Sales) *100

Net income per Employee

Net income per Employee looks at a company's net income in relation to the number of employees they have. Ideally, a company wants a higher profit per employee possible, as it denotes higher productivity. Formula: Net Income / No. of Employees

Revenue per Employee

Revenue per Employee measures the average revenue generated per employee of a company. This ratio is most useful when compared against other companies in the same industry. Generally, a company seeks the highest revenue per employee. Formula: Revenue / No. of Employees

Efficiency Ratio

Efficiency Ratio is used to calculate a bank's efficiency. An increase means the company is losing a larger percentage of its income to expenses. If the efficiency ratio is getting lower, it is good for the bank and its shareholders. Formula: Non-interest expense / Total Interest Income

Source : World Market Intelligence

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Intelligence.

The data and analysis within this report is driven by World Market Intelligence from its own primary and secondary

research of public and proprietary sources and does not necessarily represent the views of the company profiled.

The facts of this report are believed to be correct at the time of publication but cannot be guaranteed. Please note that the

findings, conclusions and recommendations that World Market Intelligence delivers will be based on information gathered

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such World Market Intelligence can accept no liability whatever for actions taken based on any information that may

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