Torrent power: Horizontal analysis of balance sheet

Particulars Year Treand in %

In crores(Rs) (Mar-2017 as base year)
Mar-17 Mar-18 Mar-19 Mar-17 Mar-18 Mar-19

EQUITIES AND LIABILITIES:

SHAREHOLDER'S FUNDS
Equity Share Capital 480.62 480.62 480.62 100 - -
Reserves and Surplus 6403.86 7212.07 8456.18 100 112.62 132.05
Total Shareholders Funds 6884.48 7692.69 8936.8 100 111.74 129.81
100
NON-CURRENT LIABILITIES 100
Long Term Borrowings 8111.74 8502.4 8033.38 100 104.82 99.034
Deferred Tax Liabilities [Net] 1312.39 1469.74 1556.26 100 111.99 118.58
Other Long Term Liabilities 1737.82 1929.23 2135.99 100 111.01 122.91
Long Term Provisions 95.91 78.96 83.15 100 82.327 86.696
Total Non-Current Liabilities 11257.86 11980.33 11808.78 100 106.42 104.89

CURRENT LIABILITIES
Short Term Borrowings 76.62 - 300.05 100 - 391.61
Trade Payables 733 657.28 785.13 100 89.67 107.11
Other Current Liabilities 1618.51 1740.3 1951.61 100 107.52 120.58
Short Term Provisions 44.15 31.81 42.29 100 72.05 95.787
Total Current Liabilities 2472.28 2429.39 3079.08 100 98.265 124.54
Total Capital And Liabilities 20614.62 22102.41 23824.66 100 107.22 115.57

ASSETS

NON-CURRENT ASSETS
Tangible Assets 16591.07 16792.56 16995.13 100 101.21 102.44
Intangible Assets 7.4 13.23 17.31 100 178.78 233.92
Capital Work-In-Progress 320.37 390.47 358.77 100 121.88 111.99
Intangible Assets Under Development 2.61 2.04 - 100 78.161 -
Other Assets 0.53 - - 100 - -
Fixed Assets 16921.98 17198.3 17371.21 100 101.63 102.65
Non-Current Investments 200.8 375.01 689.93 100 186.76 343.59
Long Term Loans And Advances 14.99 16.73 145.15 100 111.61 968.31
Other Non-Current Assets 521.58 683.37 1105.43 100 131.02 211.94
Total Non-Current Assets 17659.35 18273.41 19311.72 100 103.48 109.36

CURRENT ASSETS
Current Investments 552.92 614.12 472.46 100 111.07 85.448
Inventories 368.88 454.38 626.67 100 123.18 169.88
Trade Receivables 968.91 1124.48 1170.53 100 116.06 120.81
Cash And Cash Equivalents 268.9 269.73 326.25 100 100.31 121.33
Short Term Loans And Advances 58.88 634.49 204.02 100 1077.6 346.5
OtherCurrentAssets 736.78 731.8 1713.01 100 99.324 232.5
Total Current Assets 2955.27 3829 4512.94 100 129.57 152.71

Total Assets 20614.62 22102.41 23824.66 100 107.22 115.57

▪ Equity share capital is stable throughout all 3 years but reserve and surplus
has shown upward trend which means company is incurring adequate profit.
Reserve & surplus increased 12.62% in 2018 and 32.05% in 2019.
▪ Long term borrowings increased 4.82% in 2018 and decreased .97% in
2019 which means company has good market credibility.
▪ Total non-current liabilities increased 6.42% in 2018 and 4.89% in 2019.
▪ Short term borrowings was nil in 2018 but increased 291.61% in 2019
which indicates that company relies on short term borrowings to run its
operations.
▪ Total current liabilities decreased 1.73% in 2018 and increased 24.54% in
2019.
▪ Total capital and liabilities increased 7.22% in 2018 and 15.57% in 2019
▪ Tangible assets increased 1.21% in 2018 and 2.44% in 2019 which is not a
drastic change and it also means that company has high rate of return on
investment.
▪ Total non-current liabilities increased 6.42% in 2018 and 4.89% in 2019 as
against which total non-current assets increased 3.48% in 2018 and 9.36%
in 2019.
▪ Total current liabilities increased 1.735% in 2018 and 24.54% in 2019
against which current assets increased 29.57% in 2018 and 52.71% in 2019
thus company has a good current ratio and good short term capital
management.
▪ Thus from the balance sheet we can conclude that company has good short
term as well as long term capital management.
 Adani power: Horizontal analysis of balance sheet
Particulars Year Change in %
In Crores(Rs) (Mar-2017 as base year)
Mar-17 Mar-18 Mar 19 Mar-17 Mar-18 Mar 19

EQUITIES AND LIABILITIES:

SHAREHOLDER'S FUNDS
Equity Share Capital 3856.94 3856.94 3856.94 100 100 100
Reserves and Surplus 816.38 5682.19 5270.89 100 696.0227 645.6417
Total Shareholders Funds 4673.32 9539.13 9127.83 100 204.1189 195.3179
Hybrid/Debt/Other Securities - - 8000 - - -

NON-CURRENT LIABILITIES
Long Term Borrowings 17227.41 2244.05 8374.66 100 13.02604 48.61241
Other Long Term Liabilities 3315.32 51 51 100 1.538313 1.538313
Long Term Provisions 8.05 1.98 2.49 100 24.59627 30.93168
Total Non-Current Liabilities 20550.78 2297.03 8428.15 100 11.17734 41.01134

CURRENT LIABILITIES
Short Term Borrowings 8046.78 7287.96 2364.7 100 90.56989 29.38691
Trade Payables 4508.71 250.39 138.52 100 5.553473 3.072276
Other Current Liabilities 3973.54 326.33 867.66 100 8.212576 21.83594
Short Term Provisions 4.35 1.37 1.18 100 31.49425 27.12644
Total Current Liabilities 16533.38 7866.05 3372.06 100 47.57678 20.39547
Total Capital And Liabilities 41757.48 19702.21 28928.04 100 47.18247 69.27631

ASSETS:

NON-CURRENT ASSETS
Tangible Assets 22711.79 638.03 600.61 100 2.809246 2.644486
Intangible Assets 5.86 4.22 2.16 100 72.01365 36.86007
Capital Work-In-Progress 68.48 0.18 0.18 100 0.26285 0.26285
Fixed Assets 22786.13 642.43 602.95 100 2.819391 2.646127
Non-Current Investments 7662.08 7768.08 17156.9 100 101.3834 223.9196
Long Term Loans And Advances 5970.92 7137.34 9767.87 100 119.535 163.5907
Other Non-Current Assets 1493.46 782.51 1232.9 100 52.39578 82.55327
Total Non-Current Assets 37912.59 16330.36 28760.62 100 43.07371 75.86034

CURRENT ASSETS
Current Investments 78.31 100 - -
Inventories 1084.83 74.69 4.09 100 6.88495 0.377018
Trade Receivables 1744.46 41.72 12.27 100 2.391571 0.70337
Cash And Cash Equivalents 337.63 211.03 128.8 100 62.50333 38.14827
Short Term Loans And Advances 10.37 2776.91 9.16 100 26778.3 88.33173
OtherCurrentAssets 589.29 267.5 13.1 100 45.39361 2.223014
Total Current Assets 3844.89 3371.85 167.42 100 87.69692 4.354351

Total Assets 41757.48 19702.21 28928.04 100 47.18247 69.27631

▪ Equity share capital is stable throughout all 3 years but reserve and surplus
has shown upward trend but company is incurring losses for past years also
thus increase in reserves and surplus can be attributed to:
▪ Sudden decrease in both current and non-current assets ie, current assets
decreased 12.30% in 2018 and 95.65% in 2019, non-current assets also
decreased 56.92% in 2018 and 24.14%.
▪ Non-current liabilities decreased 88.82% in 2018 and 58.98% in 2019,
current liabilities decreased 52.43% in 2018 and 79.61% in 2019.
▪ Thus, company has been writing off its assets both current and non-current
to meet liabilities and raising reserves by surplus. Company is also using
some of the surplus to diversify its portfolio by raising hybrid securities
which can be seen in year 2019.
▪ Due to fluctuations in assets and liabilities current ratio of company is low.
▪ There is gradual decrease in current liabilities which indicates company is
becoming less dependent on short term capital year by year.
▪ Long term borrowings decreased 86.97%% in 2018 and 51.38% in 2019 but
company’s assets also decreased which debt has been paid by selling assets.
▪ Fixed assets decreased 97.19% in 2018 and 97.36% in 2019 which is a
drastic change and it also means that company had low rate of return on
assets.
▪ Thus from the balance sheet we can conclude that company has been selling
its assets to meet liabilities which means company incurred heavy
expenditure on assets by incurring debts but, it should not be forgotten that
adani power is subsidiary of adani group which are engaged in other
activities of energy transmission, logistics, mining thus, reduction in assets
can be a restructuring of subsidiaries.
Ratio analysis

𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝑎𝑠𝑠𝑒𝑡𝑠
1) Current ratio =
𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝑙𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠

Torrent power 2019 2018 2017

Current assets (in cr) 4,512.94 3,829 2,955.27
Current liabilities (in cr) 3,079.08 2,429.39 2,472.28
Current ratio 1.46 1.57 1.19

Adani power 2019 2018 2017

Current assets (in cr) 167.42 3,371.85 3,844.89
Current liabilities (in cr) 3,372.06 7,866.05 16,533.38
Current ratio 0.05 0.43 0.23

Interpretation:
1.8
Current ratio
By analysing current ratio of both the
1.57
1.6
companies we can interpret that short-term 1.46
1.4
debt management of torrent power is better 1.19
1.2
than adani power. Because in all 3 years
1
torrent power has current ratio more than 1
0.8
which is a desirable position as company has
0.6
adequate assets to meet its liability obligations. 0.43
0.4
0.23
0.2
On the other hand adani power for all 3 years 0.05
0
has current ratio less than 1, which indicates 2017 2018 2019
that company does not have adequate current Torrent power adani power

assest to meets its short term debt. But we can

also see that adani power has decreased its short term debt subsequently. Although ratio of 0.05 in year 2019
does not look good but, it is also an indicator that adani power may not need short term debt in coming years
indicating non-dependency of adani on short term debts. Current ratio in simple words just means that a
company has enough current assets to cover short term liabilities if we consider what adani power is doing
may look bad but, if company decreases liability rather than increasing assets it can be beneficial to
company on long run.
 𝑇𝑜𝑡𝑎𝑙 𝑙𝑜𝑛𝑔 𝑡𝑒𝑟𝑚 𝑑𝑒𝑏𝑡𝑠
2) Debt to equity ratio =
𝑆ℎ𝑎𝑟𝑒ℎ𝑜𝑙𝑑𝑒𝑟𝑠 𝑓𝑢𝑛𝑑

Torrent power 2019 2018 2017

Long term debts (in cr) 8,033.38 8,502.40 8,111.74
Shareholders fund (in cr) 8,936.80 7,692.69 6,884.48
Debt to equity ratio 0.89 1.10 1.17

Adani power 2019 2018 2017

Long term debts (in cr) 8,374.66 2,244.05 17,227.41
Shareholders fund (in cr) 9,127.83 9,539.13 4,673.32
Debt to equity ratio 0.91 0.23 3.68

Interpretation
Debt to equity ratio
Lower debt to equity ratio implies a stable 4 3.68
business it also points out how much total 3.5

liabilities a company has and how much 3

shareholders fund and how much investors 2.5

fund are used are used to cover those 2

liabilities. 1.5 1.17 1.1

0.89 0.91
1
For 2 years torrent power had debt to equity
0.5 0.23
ration more than 1 which indicates they did
0
not have net worth to cover all the total 2017 2018 2019
market borrowings but, in 2019 D/E ratio Torrent power Adani power
was 0.89 which is lower than 1 because
company increased its shareholders fund. Thus company is now capable to pay its total market borrowings.

Adani power on the other hand had a D/E ratio of 3.68 in 2017 which is very high and means that company
took huge loans from market to fund its operations in succeeding years company has D/E ratio less than 1
which means company has not only decreased market borrowings but also has increased its net worth
 𝐶𝑜𝑠𝑡 𝑜𝑓 𝑔𝑜𝑜𝑑𝑠 𝑠𝑜𝑙𝑑(𝑟𝑒𝑣𝑒𝑛𝑢𝑒 𝑓𝑟𝑜𝑚 𝑜𝑝𝑒𝑟𝑎𝑡𝑖𝑜𝑛𝑠)
3) Inventory turnover ratio =
𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝑠𝑡𝑜𝑐𝑘(𝑖𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑦)

Torrent power 2019 2018 2017

Revenue from operations (in cr) 11,990.71 10,341.25 9,569.49
Average inventory (in cr) 626.67 454.38 368.88
Inventory turnover ratio 19 23 26

Adani power 2019 2018 2017

Revenue from operations (in cr) 3,695.10 10,114.67 13,832.96
Average inventory (in cr) 4.09 74.69 1,084.83
Inventory turnover ratio 903 135 13

Interpretation:
Inventory turnover
Inventory turnover is a measure of how
1000
903
efficiently a company can control its 900

merchandise, so it is important to have a high 800

700
turnover. This shows the company does not
600
overspend by buying too much inventory and
500
wastes resources by storing non-salable 400
inventory. It also shows that the company can 300

effectively sell the inventory it buys. 200 135

100 26 23 19
13
Torrent power has started to hold inventory 0
2017 2018 2019
thus turnover rate was 26(2017) went down to
Torrent power Adani power
19(2019) thus inventory management is
overall good in torrent power.

Adani power on other hand started with low rate of 13(2017) and increased tremendously to 903 (2019) this
increased turnover rate can be attributed to two components firstly holding of average inventory which
decreased from 1084.83 crore (2017) to 4.09 crores (2019) and secondly huge purchase of stock in 2019 of
2217.59 crores which is 40% of total revenues thus a higher turnover of inventory to match the purchase and
sales.
 𝑁𝑒𝑡 𝑝𝑟𝑜𝑓𝑖𝑡 𝑎𝑓𝑡𝑒𝑟 𝑡𝑎𝑥
4) Net profit ratio = [ ] 100
𝑁𝑒𝑡 𝑠𝑎𝑙𝑒𝑠

Torrent power 2019 2018 2017

Net profit (in cr) 889.24 921.74 432.36
Net sales (in cr) 13,239.07 11,716.78 10,153.43
Net profit ratio (in %) 6.71 7.86 4.25

Adani power 2019 2018 2017

Net profit (in cr) -225.23 -23.77 -6,054.34
Net sales (in cr) 3,469.87 8,584.05 11,603.33
Net profit ratio (in %) -6.49 -0.27 -52.17

Interpretation:
Net profit ratio
20
Net profit ratio indicated relation of net
10 7.86 6.71
profit after tax to net sales high net 4.25

profit ratio means high profitability. 0

-0.27
-10 -6.49
Torrent power has been significantly
increasing its profitability almost 3.61% -20

from 2017 to 2018. In 2019 ratio -30

decreased from 7.86% to 6.71% ie -40

1.15% which is almost manageable by
-50
the company. -52.17
-60

Adani power on the other hand has been Torrent power

Adani power
running into losses from 2017 to 2019.
Company was close to break even point in 2018. But again incurred loss in 2019. It should also be kept in
mind that net profit ratio only shows relation of profit to net sales, it does not take into consideration return
on investment, projects and also it can mean that company has deliberately chosen to keep the profit margins
low to capture more market share. A company can also have high net profit ratio and performing in niche
market or low market share.
 𝑁𝑒𝑡 𝑠𝑎𝑙𝑒𝑠
5) Fixed assets turnover ratio = [ ]
𝑁𝑒𝑡 𝑓𝑖𝑥𝑒𝑑 𝑎𝑠𝑠𝑒𝑡𝑠

Torrent power 2019 2018 2017

Net sales (revenue from operations) 13,239.07 11,716.78 10,153.43
Net fixed assets 19,311.72 18,273.41 17,659.35
Fixed assets turnover ratio 0.68 0.64 0.57

Adani power 2019 2018 2017

Net sales (revenue from operations) 3,469.87 8,584.05 11,603.33
Net fixed assets 28,760.62 16,330.36 37,912.59
Fixed assets turnover ratio 0.12 0.52 0.30

Interpretation:
Fixed assest turnover ratio
A higher turnover ratio is indicative of 80

greater efficiency in managing fixed- 68

70
64
asset investments, but there is not an
60 57
exact number or range that dictates
whether a company has been efficient 50

at generating revenue from such

40
investments. Thus, we must use
30
company’s most recent ratio to both
its own historical ratios. 20

Torrent power has been doing 10

compared to its past ratios of 2018 0.3 0.52 0.12

0
and 2017 it is showing good 2017 2018 2019
Torrent power Adani power
performance without increasing or
decreasing fixed assets drastically which shows company is more revenue from more or less same fixed
assets.

Adani power in 2018 showed improvement compared to 2017 but revenue and fixed assets both declined in
2018. In 2019 company increased its fixed assets by 12430.26 crores but revenue continued to decline and
Fixed assets turnover is doing badly compared to 2017 and 2018 both. Company should yield more revenue
from new assets.
 𝐶𝑎𝑠ℎ+𝑐𝑎𝑠ℎ 𝑒𝑞𝑢𝑖𝑣𝑎𝑙𝑒𝑛𝑡𝑠
6) Cash position ratio =
𝑇𝑜𝑡𝑎𝑙 𝑐𝑢𝑟𝑟𝑒𝑛𝑡 𝑙𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠

Torrent power 2019 2018 2017

Cash and cash equivalents 326.25 269.73 268.90
Total current liabilities 3,079.08 2,429.39 2,472.28
Cash position ratio 0.11 0.11 0.11

Adani power 2019 2018 2017

Cash and cash equivalents 128.80 211.03 337.63
Total current liabilities 3,372.06 7,866.05 16,533.38
Cash position ratio 0.038 0.027 0.020

Interpretation:
The cash ratio or cash coverage ratio is a Cash position ratio
0.12
liquidity ratio that measures a firm’s 0.11 0.11 0.11

ability to pay off its current liabilities 0.1

with only cash and cash equivalents. A

0.08
ratio of 1 means that the company has the
0.06
same amount of cash and equivalents as
0.038
it has current debt. 0.04
0.027
0.02
Torrent power has a stable cash position 0.02

through all 3 years and in all 3 years

0
ration is less than 1 which means 2017 2018 2019

company is going to need much more Torrent power Adani power

than cash to pay its current liabilities.

Adani power also has cash position ratio less than 1 in all 3 years though not stable due to fluctuations in
both current liabilities and cash. Low cash position ratio does not mean company cannot pay its liabilities, it
only means liabilities cannot be paid in cash. There are other instruments to pay debt also which are not
considered in this ratio.