Project Title:

Financial Analysis
Of
Simmonds-Marshall

By: Smita Gole (Fin+IT, 2140/09) 20 Nov. 2010.

 TABLE OF CONTENTS

S.NO. CONTENTS

1. EXECUTIVE SUMMARY

2. INTRODUCTION

About us

Production capability

Products

Customers

3. Techniques used

Fundamental analysis

4. Cash flow Analysis

5. Annual result analysis

6. Balance sheet analysis

7. Ratio analysis

8. Conclusion

9. Recommendations

10. Bibliography
1.EXECUTIVE SUMMARY
PROJECT TITLE:

Financial Analysis of SME

NAME OF THE ORGANIZATION:

Simmonds Marshall Limited

Industry:  

Fasteners

BSE: 507998

NSE: N.A

ISIN: INE657D01021

The project has done for analyzing the financial statements of the Simmonds
Marshall Limited SME Company. The analysis is done to find out the pros and cons
of the company. And conclusion and recommendation are given on the area of
improvement.
2. Introduction
SIMMONDS MARSHALL LIMITED was incorporated in 1960 as a Private Limited
Company in technical and financial collaboration with Firth Cleveland Fastenings
Ltd., U.K. holding 51% of the equity of the company. This shareholding was
diluted progressively and the balance of foreign holding was purchased fully by
the promoters in 1987. In 1986, the company went public and is now a quoted
company on the Stock Exchange. The company manufactures a range of
Specialized Nylon Insert Self Locking Nuts and other Special Fasteners.

The company has been augmenting its cold forming capacity and can produce
over 500 million nuts per annum in a wide range from M4 to M48 diameter and
equivalent imperial sizes. These nuts are manufactured either to American,
British, Japanese, ISO or Indian Standards in a variety of thread forms and
protective finishes.
The company also has a battery of multi-spindle automatic bar turning centers’
capable of producing related automotive components as well.

The company is fully equipped to supply a wide range of Bolts from our associated
companies ranging from M5 to M70.

SIMMONDS MARSHALL LIMITED caters to the Automotive and Industrial sectors

and supplies to almost all the major Automobile Manufacturers in India as OE
Suppliers. Furthermore, General Motors, Fiat, Honda, Caterpillar, Suzuki, Leyland,
Dana, New Holland are some of the world's finest companies that source their
requirements from us.
Raw material
Cold nut forging
Secondary operations
Heat treatment
Automatic plating
Tool room
Quality control

Products
Customers:
 Tata Motors
 Ashok Leyland
 Bajaj
 Hero Honda
3. Techniques used
Fundamental Analysis:

Fundamental analysis is the cornerstone of investing. In fact,

some would say that you aren't really investing if you aren't
performing fundamental analysis. Because the subject is so
broad; however, it's tough to know where to start. There are an
endless number of investment strategies that are very different
from each other, yet almost all use the fundamentals.
4. Cash Flow analysis
 Simmonds-Marshall
Cash Flow ------------------- in Rs. Cr. -------------------
Mar '05 Mar '06 Mar '07 Mar '08 Mar '09

12 mths 12 mths 12 mths 12 mths 12 mths

Net Profit Before Tax 1.89 1.94 3.16 4.56 2.60
Net Cash From Operating Activities 0.47 0.60 1.08 1.05 2.21
Net Cash (used in)/from
-0.36 -0.54 -0.64 -6.11 -3.16
Investing Activities
Net Cash (used in)/from Financing Activities -0.06 0.06 -0.41 5.72 0.08
Net (decrease)/increase In
0.05 0.11 0.04 0.65 -0.87
Cash and Cash Equivalents
Opening Cash & Cash Equivalents 0.58 0.64 0.75 0.78 1.43
Closing Cash & Cash Equivalents 0.64 0.75 0.78 1.43 0.57

BSE:  507998 NSE:  N.A Reuters:  SIMR.BO   N.A

Large cash holdings reduces profitability .Similarly, inadequate cash

holdings would have effect on liquidity and therefore on the
profitability. Here we see that net cash from operating activities are
increased, means company‘s cash receipts (sale of products, future
contracts) are more than payments. But we see that the investing
decisions of company are not right as it shows negative figure.
5.Annual result analysis
Simmonds-Marshall
BSE: 507998 NSE: N.A ISIN: INE657D01021
Industry : Fasteners
Yearly Results ------------------- in Rs. Cr. -------------------

Mar '06 Mar '07 Mar '08 Mar '09 Mar '10

Sales Turnover 18.05 23.78 30.10 32.72 48.02

Other Income 0.10 0.11 0.11 -- 0.22
Total Income 18.15 23.88 30.21 32.72 48.24
Total Expenses 15.00 19.46 23.88 28.23 37.92
Operating Profit 3.05 4.32 6.22 4.49 10.10
Profit On Sale Of Assets -- -- -- -- --
Profit On Sale Of Investments -- -- -- -- --
Gain/Loss On Foreign Exchange -- -- -- -- --
VRS Adjustment -- -- -- -- --
Other Extraordinary Income/Expenses -- -- -- -- --
Total Extraordinary Income/Expenses -- -- -- -- -0.04
Tax On Extraordinary Items -- -- -- -- --
Net Extra Ordinary Income/Expenses -- -- -- -- --
Gross Profit 3.15 4.43 6.33 4.49 10.32
Interest 0.70 0.83 1.39 2.12 1.97
PBDT 2.45 3.58 4.95 2.38 8.31
Depreciation 0.39 0.45 0.62 0.80 1.14
Depreciation On Revaluation Of Assets -- -- -- -- --
PBT 2.06 3.13 4.33 1.58 7.17
Tax 0.63 1.04 1.44 1.00 2.53
Net Profit 1.43 2.09 2.89 0.58 4.64
Prior Years Income/Expenses -- -- -- 0.48 --
Depreciation for Previous Years Written Back/ Provided -- -- -- -- --
Dividend -- -- -- -- --
Dividend Tax -- -- -- -- --
Dividend (%) -- -- -- -- --
Earnings Per Share 6.82 9.96 13.74 2.75 4.14
Book Value -- -- -- -- --
Equity 2.10 2.10 2.10 2.10 2.24
Reserves -- -- -- -- --
Face Value 10.00 10.00 10.00 10.00 2.00

We see the Sales turnover is continuously increasing which is a very

good sign.

Income is more than expenditure.

Around 55% increase in Gross Profit.

The debt should be repaid (50%).

There is no reserve to the company.

EPS is decreasing.

6.Balance sheet analysis

Simmonds-Marshall

BSE: 507998 NSE: N.A ISIN: INE657D01021

Industry : Fasteners
Balance Sheet ------------------- in Rs. Cr. -------------------

Mar
Mar '07 Mar '08 Mar '09 Mar '10
'06

12
12 mths 12 mths 12 mths 12 mths
mths
Sources Of Funds

Total Share Capital 2.10 2.10 2.10 2.10 2.24

Equity Share Capital 2.10 2.10 2.10 2.10 2.24

Share Application Money 0.00 0.00 0.00 0.00 0.00

Preference Share Capital 0.00 0.00 0.00 0.00 0.00

Reserves 2.39 4.03 6.34 7.72 13.16

Revaluation Reserves 0.00 0.00 0.00 0.00 0.00

Net worth 4.49 6.13 8.44 9.82 15.40

Secured Loans 5.26 6.49 11.76 14.27 12.78

Unsecured Loans 1.21 1.01 2.89 3.09 0.93

Total Debt 6.47 7.50 14.65 17.36 13.71

10.9
Total Liabilities 13.63 23.09 27.18 29.11
6
Mar
Mar '07 Mar '08 Mar '09 Mar '10
'06
12
12 mths 12 mths 12 mths 12 mths
mths
Application Of Funds

Gross Block 7.37 7.87 14.12 17.22 19.09

Less: Accum. Depreciation 4.72 5.12 5.75 6.43 7.57

Net Block 2.65 2.75 8.37 10.79 11.52

Capital Work in Progress 0.00 0.11 0.00 0.00 0.00

Investments 0.13 0.13 0.13 0.13 0.13

Inventories 6.02 7.87 10.03 12.18 12.13

Sundry Debtors 3.58 4.98 7.79 8.19 12.22

Cash and Bank Balance 0.47 0.40 0.47 0.33 1.39

10.0
Total Current Assets 13.25 18.29 20.70 25.74
7
Loans and Advances 1.67 2.96 4.36 4.53 6.53

Fixed Deposits 0.28 0.38 0.97 0.24 0.00

12.0
Total CA, Loans & Advances 16.59 23.62 25.47 32.27
2
Deffered Credit 0.00 0.00 0.00 0.00 0.00

Current Liabilities 2.67 3.91 5.35 4.47 7.60

Provisions 1.15 2.03 3.69 4.73 7.22

Total CL & Provisions 3.82 5.94 9.04 9.20 14.82

Net Current Assets 8.20 10.65 14.58 16.27 17.45

Miscellaneous Expenses 0.00 0.00 0.00 0.00 0.00

10.9
Total Assets 13.64 23.08 27.19 29.10
8
Contingent Liabilities 0.52 1.42 2.59 0.38 7.85
21.3
Book Value (Rs) 29.17 40.21 46.74 13.75
9

The capital structure of the company is not good, as company’s debt is higher
than the equity capital.

Inventory is increasing. But debtors are also increasing means company is not able
to collect the receivables. Liabilities are also increased. Cash holdings and assets
are increasing.
STOCK STATS

Market Cap 51.86 cr

Dividend 12.00%

EPS (TTM) 5.91

PE 7.83

Book Value 21.38

Face Value 10.00

Market Lot 1.00

Market capitalization (no. of outstanding shares X market price) is satisfied.

Price-Earning ratio is not as good (Balanced should be 15).Satisfied Dividend is given to the
share holders.
7.Ratio Analysis
Key Financial Ratios of Simmonds-Marshall ------------------- in Rs. Cr. -------------------

Mar '06 Mar '07 Mar '08 Mar '09 Mar '10

Investment Valuation Ratios

Face Value 10.00 10.00 10.00 10.00 2.00

Dividend Per Share 1.20 1.50 2.00 1.20 0.40

Operating Profit Per Share (Rs) 14.27 20.42 30.38 24.52 8.74

Net Operating Profit Per Share (Rs) 86.17 113.53 143.02 155.64 42.96

Free Reserves Per Share (Rs) 11.39 19.17 30.21 36.74 --

Bonus in Equity Capital 5.23 5.23 5.23 5.23 4.91

Profitability Ratios

Operating Profit Margin(%) 16.56 17.98 21.24 15.75 20.33

Profit Before Interest And Tax Margin(%) 14.19 16.06 19.11 13.35 17.85

Gross Profit Margin(%) 13.04 14.79 19.16 13.39 17.97

Cash Profit Margin(%) 9.20 10.38 11.36 6.61 11.70

Adjusted Cash Margin(%) 9.19 10.03 11.36 6.61 11.70

Net Profit Margin(%) 6.90 8.53 9.64 5.08 9.34

Adjusted Net Profit Margin(%) 6.88 8.18 9.64 5.08 9.34

Return On Capital Employed(%) 24.12 28.72 25.23 16.46 30.75

Return On Net Worth(%) 27.91 33.31 34.40 16.97 29.39

Adjusted Return on Net Worth(%) 27.86 31.94 33.13 14.21 29.39

Return on Assets Excluding Revaluations 8.48 29.17 40.21 46.74 13.75

Return on Assets Including Revaluations 8.48 29.17 40.21 46.74 13.75

Return on Long Term Funds(%) 42.74 52.05 43.21 26.38 30.75

Liquidity And Solvency Ratios

Current Ratio 0.90 0.91 0.84 0.86 2.18

Quick Ratio 1.57 1.47 1.50 1.44 1.36

Debt Equity Ratio 1.44 1.23 1.73 1.77 0.89

Long Term Debt Equity Ratio 0.38 0.23 0.60 0.73 0.89

Debt Coverage Ratios

Interest Cover 3.81 4.76 4.28 2.12 4.53

Total Debt to Owners Fund 1.44 1.23 1.73 1.77 0.89

Financial Charges Coverage Ratio 4.36 5.19 4.69 2.45 5.10

Financial Charges Coverage Ratio Post Tax 3.38 3.96 3.56 2.14 3.86

Management Efficiency Ratios

Inventory Turnover Ratio 3.02 3.04 4.82 4.61 4.14

Debtors Turnover Ratio 5.03 5.57 4.70 4.09 4.72

Investments Turnover Ratio 4.95 4.81 4.82 4.61 4.14

Fixed Assets Turnover Ratio 6.99 8.65 2.13 1.90 2.52

Total Assets Turnover Ratio 1.65 1.75 1.30 1.20 1.65

Asset Turnover Ratio 2.46 3.03 2.13 1.90 2.52

Average Raw Material Holding 37.46 42.90 53.37 71.13 --

Average Finished Goods Held 25.53 21.39 24.26 27.27 --

Number of Days In Working Capital 162.90 160.71 174.82 179.12 130.63

Profit & Loss Account Ratios

Material Cost Composition 56.35 56.26 52.12 51.87 45.73

Imported Composition of Raw Materials Consumed 71.89 68.05 54.83 50.24 51.77

Selling Distribution Cost Composition 2.30 3.32 3.24 3.22 --

Expenses as Composition of Total Sales 14.06 19.59 17.97 15.41 5.38

Cash Flow Indicator Ratios

Dividend Payout Ratio Net Profit 22.92 17.60 16.91 17.69 11.57

Dividend Payout Ratio Cash Profit 17.18 14.45 13.91 12.08 9.25

Earning Retention Ratio 77.04 81.65 82.44 78.88 88.43

Cash Earning Retention Ratio 82.80 85.04 85.65 86.41 90.75

AdjustedCash Flow Times 3.88 3.13 4.28 8.01 2.42

Mar '06 Mar '07 Mar '08 Mar '09 Mar '10

Earnings Per Share 5.97 9.71 13.83 7.93 4.04

Book Value 21.39 29.17 40.21 46.74 13.75

Net operating profit per share is decreasing means the position of

company in stock market is not good. Gross profit and net profit
are increasing but at slow rate. Return on capital employed is
increased by 50% means capital is efficiently used by the
company. Current ratio is not good as it shows excessive cash in
hand. Debt equity ratio is very good as it is less than 1.It means
company has paid 50% of its debt. Interest cover is increasing.
Inventory turnover ratio is stable it means they are not able to
produce and selling more products. Debtor’s turnover ratio is
increased means company is able to collect the receivables. Assets
are used efficiently.
Investments are not proper. Working capital is decreasing which
is very good that company produces finished products in less time
period than the previous years. In comparison with expenses, sales
are higher in multiple of three. Dividend percentage is decreasing
means retained profit is used for repaying the loans and to pay for
the dividend. Cash earning retention ratio is increasing.
Simmonds-Marshall
Raw Materials      ------------------- in Rs. Cr. ------------------- Mar 2010
Product Name Unit Quantity Value
Steel Kgs 2,695,015 18.74
Cage, Clips etc Numbers 17,869,630 1.96
Plating Materials Kgs 115,878 0.6
Nylon Inserts Numbers 5,776,369 0.05
Moulding Powder (Nylon) Kgs 3,203 0.05
Total 21.40

Simmonds-Marshall
Finished Products ----------------- in Rs. Cr. ----------------- Mar 2010
Product Name Unit Installed Production Sales Sales
Capacity Quantity Quantity Value
Nylon Self - Locking Nuts Metric Tonnes 2,400 175,526,537.00 176,082,401.00 47.98

Hexagonal NA NA 1,916,900.00 0.13

Total 48.11

Here we see that sales value is 50% more than the raw material value.
8. Conclusion:
Overall performance of the company is good. Company is growing.

Company’s profit is rising but not hugely.

Company maintains good relationship with big Companies like Honda, FIAT and
more.

The Quality of the products is very good as they have ISO and two other quality
certificates.

The company has not followed any VRS scheme which means it having cable
working force.

The investing strategy of the company is not followed rightly as it not gives
satisfied returns.

Cash flow of the company is escalating means income is more than expenses.

The company doesn’t hold any reserve with it, so it is problematical for the
company that if any crisis or the company wants to invest in new projects.

The company is tackling raw material pressures. So the demand should not
be satisfied.
9.Recommendations:
The company has to follow new investing strategy.
The company has to expand and try to keep up with huge surge in
demand and has plans going forward as well.
Company wants large capacity expansion plan in place over the next 9
to 12 months which should enable the company to more or less double
the current capacity. So, there is a lot in the pipeline and machines
coming on a monthly basis.
Debt to equity ratio is fairly stable right now and the plans going
forward are to probably use both avenues to fund the expansion.

The margins have been fairly good; it has to be managed to sustain the
margins. As to continue to grow at the rate the company is growing, I
hope that the margins will only improve in the time to come.
As far as raw material is concerned company has to manage to pass on
a fair amount of that to our customers.
10.Bibliography
BOOKS AND JOURNALS:

 Financial Management
Author:- Prof. A.P.Rao

 Project Report Writing

Author:-M.K.Rampal & S.L.Gupta

WEBSITES:

 http://www.bseindia.com
 http://www.simmondsmarshall.com
 http://www.moneycontrol.com