AGRO- BASED INDUSTRY

PI Industries Ltd Rallis India Ltd Bayer CropSciences Ltd

Page | 1
Executive Summary
Industry Brief
In this Financial Statement Analysis Assignment, we have taken up the Agro-based industry. Within
the Agro-based industry we have taken a detailed analysis of the Agro-Chemical industry. The reason for
the above is that the companies in this industry were similar with respect to their product segment,
making the comparison between them relatively accurate.
Recommendation
These inference help us to pick the best recommended company amongst the three. Bayer CropScience
Ltd is clearly the best recommended company with highest Enterprise value and book value per share.
It has highest assets base and huge reserves which highlight huge growth potential from the investors
viewpoint. PI Industries is the second most recommended company. Rallis India Ltd is much smaller
compared to these two and ranks last in our analysis.
Bayers Crop Science FY2012 FY2013 FY2014 FY2015 FY2016 CAGR
EPS 35.19 294.11 75.14 104.59 83.41 24.1%
Earnings Retention Ratio 88.06 98.31 93.06 79.93 80.03 -2.4%
Reserves 753.20 1,891.80 1,705.70 1,996.30 1,720.50 22.9%
Enterprise value 2,739.78 3,785.45 5,029.97 11,042.94 12,578.00 46.4%
Book Value/ Share 200.68 488.94 476.04 555.44 496.02 25.4%
Net Sales 2,204.40 2,626.00 3,146.20 3,615.30 3,644.10 13.4%
ROE 17.53 60.15 16.61 18.84 17.13 -0.6%

PI Industries FY12 FY13 FY14 FY15 FY16 CAGR

EPS 40.27 7.57 13.52 17.84 22.9 -13.16%
Earnings Retention Ratio 87.55 85.95 85.19 85.97 86.44 -0.32%
Reserves 306.68 511.05 669.47 868.87 1142.09 38.92%
Enterprise Value 1557.63 1925.73 3835.46 8370.91 7861.67 49.89%
BVPS 126.72 192.97 50.05 64.62 84.29 -9.69%
Sales 874.97 1147.56 1586.29 1936.37 2075.94 24.11%
ROE 31.67 18.42 26.96 27.56 27.11 -3.81%

If you are the Management of the Company-what specific actions(if any) will
positively impact asset utilization, operating efficiency, leverage, liquidity,
profitability?
 The management has major role in steering the company. To increase the asset utilisation the
management must make effective utilisation of the assets it has and try to multiply the sales per unit
of asset. This can be achieved by increasing sales through better quality products. The company
should invest in R&D in use technology to innovate new ideas to capture market.
 At the same time reducing unnecessary expenses will improve profits. Total quality management
and kaizen costing method should be implemented to remove non value added items from the
supply chain. This will improve operating profits and operating efficiency of the companies.
Page | 2
 All the companies that we took were having very low leverage. The management should try using
leverage by taking debts and use it to invest in profitable ventures. This will increase return on
equity. The company will need to trade-off between cheaper debts and costlier equity and strike the
right balance of optimum capital structure.
 As far as Liquidity the current ratio should be near to industry average. Bayer CropScience is having
current ratio of around 3 as against the industry average of 2. Though it signifies better liquidity
and more security for investors but at the same time it also means higher inventory which results in
higher inventory holding and carrying costs. Bayer CropScience is having huge inventories and
common size income statement of 2016 reveals that purchase of inventory is 43% of total sales.
This is a negative aspect for the management and it try improving on it by increasing inventory
turnover ratio. It should follow Just-in Time inventory system to reduce the stock of inventory in
hand.

Page | 3
Page | 4