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Net Profit/ Sales
Godrej
Purvankara
Key financial ratios
Net Profit/ Sales ratio reveals the
remaining profit after all costs of
construction, administration, and
financing have been deducted from
sales, and income taxes recognized.
As such, it is one of the best measures
of the overall results of a firm,
especially when combined with an
evaluation of how well it is using its
working capital. It is also used to
compare the results of a business
with its competitors.
Puravankara Projects

Year Net Profit (Cr) Sales(Cr) Net Profit/Sales
2013 228.22 1245.89 18.32%
2012 131.42 814.51 16.13%
2011 119.07 599.21 19.87%
2010 130.04 478.36 27.18%
Table : Puravankara Projects Net profit & Sales figures
Godrej Properties

Year Net Profit(Cr) Sales(Cr) Net Profit/Sales
2013 197.29 1037.12 19.02%
2012 128.79 770.05 16.72%
2011 142.68 447.06 31.92%
2010 123.97 241.24 51.39%
Table : Godrej Properties Net profit & Sales figures
Godrej properties had a very good Net profit/ Sales ratio in 2010 above 50% but it has dipped to 19% in
2013. Puravankara’s net profit to the sales ratio was comparably lower that of Godrej in 2010 but both
companies almost had the same ratio in 2013 (18.32% - Puravankara). As Godrej uses a capital lite
model (Asset lite model) which works on developing projects on prime land without outright purchase,
the Net profit/ Sales ratio was higher in 2010 but still the ratio has decreased in 2013 due to increasing
costs of construction, administration & financing. Puravankara, on the other hand works on a traditional
model and the Net profit/ Sales ratio has been consistent in the range of 18%- 27% throughout the years
(2009-2013)


Figure : Comparison of Net profit/ Sales ratio for the fiscal years 2009-'13
Sales/ Net worth Ratio
This ratio is a good index of the utilization of the owner’s funds. It also indicates whether there is over
trading or under trading (i.e., too much sales in relation to owner capital or low sales in relation to
owner capital) and whether there is over – capitalization or under capitalization.
Purvankara Projects

Year Sales Net Worth Sales/Net Worth
2013 1245.89 1899.51 0.66
2012 814.51 1687.31 0.48
2011 599.21 1576.38 0.38
2010 478.36 1485.23 0.32
Table : Puravankara Projects Sales & Net worth figures
Godrej Properties

Year Sales Net Worth Sales/Net Worth
2013 1037.12 1428.95 0.73
2012 770.05 1442.65 0.53
2011 447.06 911.59 0.49
2010 241.24 817.27 0.30
Table : Godrej Properties Sales & Net worth figures


The Sales/ Net worth ratio was higher for Godrej than Puravankara over the three years (2011-2013),
2010 being the only exception where Puravankara’s Sales/ Net worth ratio was higher (0.32-
Puravankara Vs 0.30- Godrej). Godrej has been able to take up advantage of its asset lite model in
increasing their net worth over the past three years.
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Godrej
Figure : Comparison of Sales/Net worth ratio for the fiscal years 2010-'13
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Return on Equity (ROE)
Purvankara Godrej
Dupont Analysis
Return on Equity
Return on Equity is an important measure for a company because it compares it against its
peers. With return on equity, it measures performance and generally the higher the better.
Some industries have a high ROE as they require little or no assets while others require large
infrastructure builds before they generate profit. A business that has a high return on equity is
more likely to be one that is capable of generating cash internally. The higher the ROE, the
more easily, the company will be able to raise money for growth.
Return on Equity = Net profit/Sales *Sales/ Net worth
Puravankara Projects

Year Net Profit/Sales(1) Sales/Net Worth (2) ROE (1*2)
2013 18.32% 0.66 12.02%
2012 16.13% 0.48 7.79%
2011 19.87% 0.38 7.55%
2010 27.18% 0.32 8.75%
Table : Puravankara Projects Return on Equity (ROE) figures (2010-2013)
Godrej Properties

Year Net Profit/Sales(1) Sales/Net Worth(2) ROE(1*2)
2013 19.02% 0.73 13.81%
2012 16.72% 0.53 8.93%
2011 31.92% 0.49 15.65%
2010 51.39% 0.30 15.17%
Table : Godrej Properties Return on Equity (ROE) figures (2010-2013)
Return on Equity is higher for
Godrej than Puravankara over the
years 2010-2013. Godrej
Properties, with its capital lite
model is able to generate more
cash internally and it is able to
raise more money for growth
than Puravankara. Puravankara,
with its traditional model is able
to generate lesser cash than
Godrej Properties but is able to
maintain a good ROE of 12%
Figure : Comparison of Return on Equity for the fiscal years 2010-'13
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2013 2012 2011 2010 2009
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Return on Net worth
Purvankara Godrej
Return on capital employed (ROCE)
ROCE is a useful metric for comparing profitability across companies based on the amount of capital
they use. A higher ROCE indicates more efficient use of capital. ROCE should be higher than the
company’s capital cost; otherwise it indicates that the company is not employing its capital effectively
and is not generating shareholder value.

Figure: Comparison of ROCE figures over the years 2009-2013
Puravankara’s Return on capital is a steady increase whereas for Godrej Properties the graph bounces
up and down. In general, investors tend to favor companies with stable and rising ROCE numbers over
companies where ROCE is volatile and bounces around from one year to the next. Puravankara’s high
ROCE implies how effectively a company uses the money (borrowed or owned) invested in its
operations.
Return on Net worth (RONW)
RONW is important to measuring
whether the business is making the
best use of those resources, or if there
is a need to make changes that will
help increase the percentage of
return that is generated as a result of
the shareholders equity. RONW
considers only equity shareholding as
the base for deciding efficiency of a
company’s operations. Godrej’s
RONW has declined steadily from
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Purvankara Godrej
Figure : Comparison of Return on Net worth for the fiscal years 2009-'13
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Debt Equity Ratio
Puravankara Godrej
25% in 2009 to 10% in 2013. Puravankara’s RONW has actually increased from 10.58% in 2009 to 12.51%
in 2013.
Debt-Equity Ratio
The debt to equity ratio is a financial, liquidity ratio that compares a company's total debt to total
equity. The debt to equity ratio shows the percentage of company financing that comes from creditors
and investors. A higher debt to equity ratio indicates that more creditor financing (bank loans) is used
than investor financing (shareholders). A lower debt to equity ratio usually implies a more financially
stable business. Companies with a higher debt to equity ratio are considered more risky to creditors and
investors than companies with a lower ratio. Creditors view a higher debt to equity ratio as risky
because it shows that the investors haven't funded the operations as much as creditors have. In other
words, investors don't have as much skin in the game as the creditors do.
Puravankara’s Debt- Equity Ratio
has increased steadily over the
years from 0.6 to 0.85 (2009 to
2013). The company has
increased its financing from
debts over the years as
traditional model would require
huge amounts of money for
outright purchase of land and
for other financial and
administration services. Godrej
Properties Debt-equity ratio has
bounced up and down over the
past and it is close to 1.16 in
2013 which implies that the portion of assets provided by creditors is greater than the portion of assets
provided by stockholders. A ratio of 1: 1 is normally considered satisfactory for both of the companies.
Fixed Asset Turnover ratio
The fixed asset turnover ratio is the ratio of net sales to net fixed assets (also known as property, plant,
and equipment). A high ratio indicates that a business is:
 Doing an effective job of generating sales with a relatively small amount of fixed assets
 Outsourcing work to avoid investing in fixed assets
 Selling off excess fixed asset capacity


Figure : Comparison of Debt Equity ratio for the fiscal years 2009-'13
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Total Asset Turnover ratio
Purvankara Godrej
A low ratio indicates that a business:
 Is overinvested in fixed assets
 Needs to issue new products to revive its sales
 Has made a large investment in fixed assets, with a time delay before the new assets start
generating revenues
 Has invested in areas that do not increase the capacity of the bottleneck operation, resulting in
no additional throughput
The fixed asset turnover ratio trends for both the companies are shown in the graph below


Total Asset Turnover ratio
The total asset turnover ratio measures the ability of a company to use its assets to efficiently generate
sales. This ratio considers all assets, current and fixed. Those assets include fixed assets, like plant and
equipment, as well as inventory, accounts receivable, as well as any other current assets. The total asset
turnover ratios for both the companies are shown in the graph for the years 2009-2013.



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Fixed Assets Turnover ratio
Godrej
Puravankara
Figure : Comparison of Total Asset turnover ratio for the fiscal years 2009-'13
Figure : Comparison of Fixed Asset turnover ratio for the fiscal years 2009-'13