Professional Documents
Culture Documents
ON
ITC Limited
One of Indias Most Admired and Valuable Companies
INTRODUCTION
Itc limited is a public conglomerate company head quartered in Kolkata .The Company is
currently headed by Yogesh Chander Deveshwar. It employs over 26,000 people at more than
60 location.
Rated by BCG amongst Top 10 consumer goods companies in the world in terms of total
shareholder returns (TSR) Suring 2005-2009.
One of the foremost in the private sector in terms of:
Sustained value creation (BT-Stern Stewart survey)
Operating profits
Cash Profits
Itc is the only Indian FMCG Company to feature in Forbes 2000 List, A comprehensive
ranking of worlds biggest companies measured by a composite of sales, profits, assets &
market value.
ITCs ranking amongst all listed private sector cos.
PBT: No. 6
PAT: No. 5
Market Capitalization: No. 3
Financial analysis is the process of identifying the financial strengths and weaknesses of the
firm by property establishing relationships between the item of the balance sheet and the
profit and loss account.
Trade creditors
Lenders
Investors
Management
Liquidity Ratio
Itc have high liquidity ratios, the higher the margin of safety that the company possess to
meet its current liabilities. Liquidity ratios greater than 1 indicate that the company is in good
financial health and it is less likely fall into financial difficulties. Seen in all the years above
2013, 2012, 2011.
Current ratio indicates Itc's ability to meet short-term debt obligations. The current ratio
measures whether or not a firm has enough resources to pay its debts over the next 12 month.
Profitability Ratio
Activity Ratio
A high debtor turnover ratio implies either that the company operates on a cash basis or that
its extension of credit and collection of accounts receivable are efficient. Also, a high ratio
reflects a short lapse of time between sales and the collection of cash, while a low number
means collection takes longer.
A low inventory turnover ratio can be seen because of rescission but it is very well aligned
with FMCG industry average.
Leverage Ratio
A very high interest cover suggest that the company is not capitalizing on the relatively
cheaper source of finance (i.e. debt) and in such instances an increase in gearing ratio may
actually add value to the enterprise.
Interest coverage is an indication of the margin of safety it does not run the risk of non-
payment of interest cost which could potentially threaten its solvency.
Market Ratio
PE Ratios 33.2
Current Share 311.65
price
Generally, stocks that are expected to grow earnings will have a higher P/E, Itc companies
with high growth have a higher ratio. Itc with the higher P/E is said to be overvalued by the
market.
The share price should reflect a firms future value creation potential, greater value creation
can indicate greater future dividends from the company. A higher P/E ratio should reflect
greater expected future gains because of perceived growth opportunities and/or some
competitive advantages and/or lesser risk, but at the same time it indicates that the share price
is relatively more expensive.
Du Point Analysis
DuPont analysis tells us that ROE is affected by three things:
Operating efficiency, which is measured by profit margin
Asset use efficiency, which is measured by total asset turnover
Financial leverage, which is measured by the equity multiplier
Mar'13 Mar'12
ROA (%) 23.55 22.65
ROE (%) 36.21 35.58
ROCE (%) 52.45 51.66
The return on capital employed is another measure of the returns that the business generates.
This is expressed as the ratio between the profit before interest and taxes (PBIT) to the
Capital Employed (Loans and Owners Fund) in the business. The ROCE is increased to
52.45% from 51.66% signifies that the company is getting good return out of its investment
decisions.
The return on Total Assets is yet another method of calculating the return of the company.
This is calculated by taking the ratio between the PBIT (Profit before Interest and Taxes) to
the Total Assets of the company. Earning power of the company, i.e. 23.55%is quiet good
and the company is doing well.
Comparative Balance Sheet Statement
Particulars MAR'12 MAR'11
( Cr.) ( Cr.) Absolute %Change
change
EQUITY AND LIABILITIES
Share Capital 781.84 773.81 8.03 1.04%
Share Warrants & Outstandings
Total Reserves 18,010.05 15,179.46 2830.59 18.65%
Shareholder's Funds 18,791.89 15,953.27 2838.62 17.79%
Long-Term Borrowings 0 0 0 0.00%
Secured Loans 0 0 0 0.00%
Unsecured Loans 77.32 86.58 -9.26 -10.70%
Deferred Tax Assets / Liabilities 872.72 801.85 70.87 8.84%
Other Long Term Liabilities 15.52 20.82 -5.3 -25.46%
Long Term Trade Payables 0 0 0 0.00%
Long Term Provisions 107.12 93.82 13.3 14.18%
Total Non-Current Liabilities 1,072.68 1,003.07 69.61 6.94%
Current Liabilities
Trade Payables 1,424.84 1,395.31 29.53 2.12%
Other Current Liabilities 3,371.27 3,067.77 303.5 9.89%
Short Term Borrowings 1.77 1.94 -0.17 -8.76%
Short Term Provisions 4,303.95 4,012.46 291.49 7.26%
Total Current Liabilities 9,101.83 8,477.48 624.35 7.36%
Total Liabilities 28,966.40 25,433.82 3532.58 13.89%
ASSETS
Non-Current Assets 0 0 0 0.00%
Gross Block 14,144.35 12,765.86 1378.49 10.80%
Less: Accumulated Depreciation 5,045.16 4,420.75 624.41 14.12%
Less: Impairment of Assets 0 0 0 0.00%
Net Block 9,099.19 8,345.11 754.08 9.04%
Lease Adjustment A/c 0 0 0 0.00%
Capital Work in Progress 2,269.26 1,322.60 946.66 71.58%
Intangible assets under development 7.49 10.8 -3.31 -30.65%
Pre-operative Expenses pending 0 0 0 0.00%
Assets in transit 0 0 0 0.00%
Non-Current Investments 1,953.28 1,563.30 389.98 24.95%
Long Term Loans & Advances 1,193.61 1,146.47 47.14 4.11%
Other Non-Current Assets 0 0 0 0.00%
Total Non-Current Assets 14,522.83 12,388.28 2134.55 17.23%
Current Assets Loans & Advances
Currents Investments 4,363.31 3,991.32 371.99 9.32%
Inventories 5,637.83 5,269.17 368.66 7.00%
Sundry Debtors 986.02 885.1 100.92 11.40%
Cash and Bank 2,818.93 2,243.24 575.69 25.66%
Other Current Assets 136.89 93.26 43.63 46.78%
Short Term Loans and Advances 500.59 563.45 -62.86 -11.16%
Total Current Assets 14,443.57 13,045.54 1398.03 10.72%
Net Current Assets (Including Current 5,341.74 4,568.06 773.68 16.94%
Investments)
Total Current Assets Excluding Current 10,080.26 9,054.22 1026.04 11.33%
Investments
Miscellaneous Expenses not written off 0 0 0 0.00%
Total Assets 28,966.40 25,433.82 3532.58 13.89%
Contingent Liabilities 287.08 255.17 31.91 12.51%
Total Debt 89.12 99.2 -10.08 -10.16%
Book Value (in ) 23.97 20.55 3.42 16.64%
Adjusted Book Value (in ) 23.97 20.55 3.42 16.64%
Trend Analysis
From the analysis we can see that co. is growing at steady rate and remarkable points are:
1. We can see below that companys capital is increased by 105.33%, this is because of
issue of bonus shares in the year 2010-2011. This shows that the companys owned
fund is increasing. Reserve and Surplus is constantly increasing which shows that the
companys accumulated
2. Profits is increasing at a growing rate. It shows that company is making more profit.
3. By analysing sources of fund we can state that, company is more dependent on
owners fund rather than borrowed fund.
4. Investment is also growing at increasing rate. In last 4 years it has increased by
89.28%.
5. Current asset is increasing by 45.09%. This is due to increase in cash and bank
balance and other current assets.
6. Net income and expenses are increasing by 51.02% and 47.38% respectively. This
shows that the income of the co. is 3.64% higher than its expenses.
Cross sectional analysis