TTK PRESTIGE LIMITED

ANALYSIS OF ANNUAL REPORT 2009 OF TTK PRESTIGE LIMITED

Introduction
The TTK Group is an Indian business conglomerate with a presence across several segments of the industry including consumer durables, pharmaceuticals and supplements, bio-medical devices, maps and atlases, consular visa services, virtual assistant services and health care services. The TTK Group was started in 1928 by T. T. Krishnamachari, and is largely owned by the family. The group has revenues of over Rs. 10 billion with a presence across India and several international markets. The group has joint ventures with global corporations such as SSL International, who are the makers of Durex condoms and Dr. Scholl's foot care products. The group is also associated with several charitable and social organizations, such as the TTK Voluntary Blood Bank, the T.T. Ranganathan Clinical Research Foundation (a hospital for alcohol and drug addiction) and TTK Schools for the underprivileged. The TTK Group has been associated with several brands, which are now household names in India, such as: * Brylcreem * Kiwi (shoe polish) * Kohinoor condoms * Prestige pressure cookers * Woodward's gripe water
TTK PRESTIGE LIMITED

It was in the year 1928 that Mr. T.T.Krishnamachari the first finance minister of India founded TTK Prestige Limited one of oldest business houses in the country today. It made its humble beginning as a pressure cooker manufacturing and marketing company and soon rose to attain the status of being the market leader of pressure cookers in India. Through its constant research and product innovations, it offered the most comprehensive range of kitchen ware in the world.TTK attained its leadership status by providing, its customers quality products at an affordable price. It innovated and explored new business categories, all the while retaining its Indianess. Prestige has emerged as a household name and market leader with its unmatchable quality and customer appeal. It has successfully taken a big leap as a one- stop kitchen solutions provider bringing a smile of ease and satisfaction on every Prestige customers face. Prestige have introduced a wide range of Gas stoves, mixer grinders, non-stick cookware, life- style products, hobs, electric

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TTK PRESTIGE LIMITED

chimneys and the latest addition being modular kitchens to become a complete kitchen solution provider. Its products are here to stay with a promise of quality and comfort.

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TTK PRESTIGE LIMITED

BALANCE SHEET As At 31/03/2010 SOURCES OF FUNDS : Share Capital Reserves Total Equity Share Warrants Equity Application Money Total Shareholders Funds Secured Loans Unsecured Loans Total Debt Total Liabilities APPLICATION OF FUNDS : Gross Block Less : Accumulated Depreciation Less:Impairment of Assets Net Block Lease Adjustment Capital Work in Progress Producing Properties Investments Current Assets, Loans & Advances Inventories Sundry Debtors Cash and Bank Loans and Advances Total Current Assets Less : Current Liabilities and Provisions Current Liabilities Provisions Total Current Liabilities Net Current Assets Miscellaneous Expenses not written off Deferred Tax Assets Deferred Tax Liability Net Deferred Tax Total Assets Contingent Liabilities

(Rs in Cr.) 2010/03 2009/03 2008/03 2007/03 2006/03 11.33 112.84 0 0 124.17 0 2.8 2.8 126.97 11.33 73.31 0 0 84.64 17.86 2.84 20.7 105.34 11.33 57.55 0 0 68.88 20.48 26.39 46.87 115.75 11.33 43.77 0 0 55.1 46.92 26.61 73.53 128.63 11.33 35.99 0 0 47.32 46.15 11.1 57.25 104.57

83.49 43.02 0 40.47 0 23.53 0 0.39 61.29 60.26 43.97 42.58 208.1 90.25 52.16 142.41 65.69 0 1.1 4.21 -3.11 126.97 12.54

75.45 39.57 0 35.88 0 23.69 0 0.39 50.31 48.9 10.9 21.32 131.43 59.18 23.73 82.91 48.52 0 1.02 4.16 -3.14 105.34 16.94

67.42 36.09 0 31.33 0 25.28 0 0.39 60.68 47.28 10.64 16.99 135.59 59.18 14.58 73.76 61.83 0 0.82 3.9 -3.08 115.75 14.96

64.24 34.67 0 29.57 0 6.26 0 18.12 73.9 41.32 6.74 17.92 139.88 53.5 8.75 62.25 77.63 0.11 0 3.06 -3.06 128.63 20.99

56.8 32.48 0 24.32 0 0.93 0 18.12 57.29 27.7 9.26 11.55 105.8 39.53 4.77 44.3 61.5 0.23 2.33 2.86 -0.53 104.57 15.08

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TTK PRESTIGE LIMITED

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TTK PRESTIGE LIMITED

PROFIT AND LOSS AS ON 31/09/2010 2010/03 INCOME : Sales Turnover 516.8 Excise Duty 8.86 Net Sales 507.94 Other Income 5.38 Stock Adjustments 5.17 Total Income EXPENDITURE : Raw Materials Power & Fuel Cost Employee Cost Other Manufacturing Expenses Selling and Administration Expenses Miscellaneous Expenses Less: Pre-operative Expenses Capitalised Total Expenditure Operating Profit Interest Gross Profit Depreciation Profit Before Tax Tax Fringe Benefit tax Deferred Tax Reported Net Profit Extraordinary Items Adjusted Net Profit Adjst. below Net Profit P & L Balance brought forward Statutory Appropriations Appropriations P & L Balance carried down Dividend Preference Dividend Equity Dividend % 518.49

2009/03 416.21 14.93 401.28 0.5 -2.62 399.16

2008/03 339.85 14.25 325.6 25.81 -4.01 347.4

(Rs in Cr.) 2007/03 2006/03 293.25 11.85 281.4 0.66 8.65 290.71 231.83 9.93 221.9 0.75 0.22 222.87

269.8 4.91 33.83 6.83 113.02 7.64 0

218.84 4.39 28.98 5.78 96.02 5.39 0

174.9 2.53 25.47 5.51 75.74 25.72 0

161.64 2.92 17.83 4.24 73.28 3.95 0

118.86 2.9 16.54 2.93 57.28 3.85 0

436.03 82.46 3.47 78.99 3.59 75.4 22.99 0 -0.03 52.44 0 52.44 0 0 0 18.44 34 11.32 0 100

359.4 39.76 7.28 32.48 3.48 29 5.99 0.57 0.06 22.38 0 22.38 0 0 0 8.86 13.52 5.66 0 50

309.87 37.53 9.22 28.31 3.84 24.47 2.72 0.45 0.63 20.67 2.81 17.86 0 0 0 20.67 0 3.97 0 35

263.86 26.85 8.05 18.8 2.2 16.6 1.81 0.5 2.52 11.77 -0.07 11.84 0 0 0 11.77 0 3.41 0 30

202.36 20.51 6.62 13.89 1.89 12 0.98 0.36 3.55 7.11 -0.08 7.19 0 0 0 7.11 0 2.83 0 25

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TTK PRESTIGE LIMITED

Earnings Per Share-Unit Curr Earnings Per Share(Adj)-Unit Curr Book Value-Unit Curr

44.62 44.62 107.7

18.91 18.91 72.81

17.64 17.64 58.9

9.88 9.88 45.82

5.92 5.92 38.95

CASH FLOW - TTK Prestige Ltd AS ON 31/03/2010 2010/03 2009/03 Cash Flow Summary Cash and Cash Equivalents at 10.9 10.64 Beginning of the year Net Cash from Operating Activities 61.66 42.83 Net Cash Used in Investing Activities -2.93 -6.09 Net Cash Used in Financing -25.66 -36.48 Activities Net Inc/(Dec) in Cash and Cash 33.07 0.26 Equivalent Cash and Cash Equivalents at End of 43.97 10.9 the year

2008/03 6.74 46.34 -4.11 -38.33 3.9 10.64

( Rs in Cr.) 2007/03 2006/03 9.26 3.97 -12.66 6.17 -2.52 6.74 8.63 21.52 -5.14 -15.75 0.63 9.26

KEY FINANCIAL RATIOS - TTK Prestige Ltd Debt-Equity Ratio has come down to 0.11% from 0.45 %. This is due to company has repaid its entire secured load with cash surplus they had this year. Current ratio has increased to 1.36 in FY10 compare to FY 09 which was 1.27. Which is a good sign. This is due to company able to increase its flow of cash from operations. Bank balances of Company rise to Rs43 cr from 10cr. Interest cover ratio has drastically increased to 22.73 from 4.98 i.e. more than 350%. Again, this is because company has paid its entire secured loan.

2010/03 2009/03 Key Ratios Debt-Equity Ratio Long Term Debt-Equity Ratio Current Ratio Turnover Ratios Fixed Assets Inventory Debtors Interest Cover Ratio ROCE (%) RONW (%) 0.11 0.03 1.36 0.45 0.14 1.27

6.68 9.26 9.47 22.73 69.18 51.28

6.01 7.5 8.65 4.98 33.47 30

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TTK PRESTIGE LIMITED

Increase in Debtors turnover ratio shows the how the company is efficient in managing its debtors. It shows positive growth of 0.82 ROEC Return in equity capital has increased more than 106% compare to FY09. Which show good increase in profit for equity share holders. RONW also increased more than 70%. This is also the reason behind increase in share price in market. DUPONT Analysis - TTK Prestige Ltd 2010/03 2009/03 15.96 9.55 4.07 3.95 The increase in Sales and PBIDT is due to increase in sales volume. PBIDT / Sales has also gone up by 6.41% which indicate company is making good profit on sales. ROE has been increased to 51.28% more than 96% increase. Because company able to increase its sales by 24%, and at the same time there is increase in cash inflow etc.,

PBIDT/Sales(%) Assets Turnover ratio(sales / net assets) PAT/PBIDT(%) Net Assets/Net Worth ROE(%)

63.59 1.04 51.28

56.29 1.28 30

VALUATION RATIOS - TTK Prestige Ltd.

2010/03 2009/03 Price Earning (P/E) Price to Book Value ( P/BV) Price/Cash EPS (P/CEPS) EV/EBIDTA Market Cap/Sales 13.72 5.68 12.81 8.45 1.34 4.8 1.25 4.13 2.84 0.25 P/E ratio has increased to 13.72 when compare to FY09 (4.8). This indicates the investors are paying more for each unit of net income, so the stock is more expensive. A higher P/B ratio implies that investors expect management to create more value from the investment. It increased to 5.68.

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TTK PRESTIGE LIMITED

1. Directors report says that they have lunched new product in market like apple range inner lid pressure cooker, Induction Cook Tops, induction Compatible Pressure Cookers and Cookware etc., but it should be taken into consideration that whether this product will do good in market. Sometimes company makes minor improvements in existing products that make their way into their Annual Report but do not impact the top line as much as it appears at first glance. 2. Report also state that the company there has been threat to the domestic market from the unorganized markets and the regional brands because of their low unviable pricing strategy. But, I personally believe that, unviable pricing strategies are not long term events. In the long run companies that follow it, weather organized or un-organized, will go bankrupt so that is not something to worry about.

3. Sales grew by over 24%. But when we bifurcate sales into domestic and export, Domestic Sales grew 26.4% while exports declined by 20%. -Domestic sales may be increased due to the Government scheme for rural employment guarantee which is creating purchasing power in semi- urban and rural markets and in urban area also. -Export sales have been declined may be due to economic crisis in Middle East and Sri Lanka. 4. The company reports claim that free cash flow has been generated because of better inventory and debtor management which is INCORRECT. Debtors and inventory, it shows, have grown approx 23% & 22% respectively whereas on part of sales and Cost of Goods sold have increased by 24% and 16% respectively i.e. almost same percentage. It seems that increase in operating cash flow has come from increase in Sundry creditors. It seems that the company has outsourced its most of work to third party manufacturers and hence there is big increase in Creditors. But if we deduct the Creditors (29.58cr) the increase in Operating cash flow Rs18.83cr to Rs 61.66 cr from Rs 42.83 cr in Fy09 become miserable & the company has done worse off in terms of operating cash flow. 5. Reports says that company has came up with new outlets namely Prestige Smart Kitchen network but it did not indicate the value of increased stores because in the absence of

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TTK PRESTIGE LIMITED

that one cannot make out whether the numbers are significant or not. Apart from this they have also not mention whether the current outlets are doing well. 6. The Company has paid off its loans and become almost debt free. (good sign) 7. Company wants to go in rental income, but why? when it is generating free cash flow and having better business competitiveness. Investments in Property is always a grey area and instead of trying to secure their main business by entering into rental income business they should raise the cash & either expand their operations in their non cooker segment or Just return the money back to the shareholders. 8. CAPEX: Report Say Company incurred a capital expenditure of around Rs.10cr during the year including investments in the New Unit 2 of Uttarakhand. Main motive behind this may be, Uttarakhand enjoys Excise and Sales Tax benefits. Eventhough there is excess capacity at their current units in South India, it makes sense from the financial and logistics angle to have one unit in North to take care of the demand in North and West. It is great idea.

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