CORPORATE ACCOUNTS

A PROJECT ON

“RATIO ANALYSIS”
FOR

RAYMOND LIMITED (Financial Year: 2007 & 2008)

Submitted to

Ms. Kamini
Submitted by

Pragya Azad Roll No. 598 B. Com (H) 2nd Year Bharati College, New Delhi
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BHARATI COLLEGE
C-4 JANAK PURI, NEW DELHI-11064

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1. 2. Financial performance of company ~ 3 ~ . Ratio’s Return on Investment Ratios 1. 2. 2. 1. 1. 4. 2. 3.CONTENTS 1. 1. Rate of Net Worth (RONW) Earnings Per Share (EPS) Net Asset Value (NAV) Debt Equity Interest Coverage Ratio Current Ratio Quick Ratio Collection Period Allowed to Customers Suppliers Credit Inventory Holding Period Fixed Assets Turnover Inventory Turnover Gross Profit Margin Net Profit Margin P/E Ratio Market Capitalisation Solvency Ratios Liquidity Ratios Turnover Ratio Profitability Ratio Valuation Ratio 3. Company Profile 2. 5. 1. 2. 3. 2.

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The Company has also forayed into the women’s wear segment with offerings in the corporate and smart clothing category. • Addition of a manufacturing facility at Vapi with latest machinery which became fully operational and providing efficient and cost effective production lines. To cater to the growing domestic and export markets. dampen consumer sentiment and moderate growth going forward. The Company plans to invest significantly in the coming years in expanding its state of the art manufacturing capacities. the Company has undertaken the following initiatives: • Implementation of ERP in textile division. The company is on its way to become a lifestyle solution for discerning customers with an offering of a range of fabrics. • Setting up a suit plant at Bangalore to cater to the growing demand. The Company continues to focus on the booming retail sector and is now concentrating on penetrating into the Tier 3 and 4 towns of the country.Company Profile The Company is a market leader in the textiles sector in India. However. high inflation – especially in food. company is now also establishing itself as a preferred supplier of valueadded premium fabric in the international markets. ~ 6 ~ . during the past few months. strengthening and extending the product offerings under its brand and expanding its marketing and distribution network. fuel and commodities – have emerged. This could increase costs of operations. worrying developments like the housing crisis in USA. While focusing on its vision of being the leader in fashion and lifestyle segment. India has been on a high growth path for some years now. has a powerful brand ‘Raymond’ and strong retail presence in the form of ‘The Raymond Shop’ (‘TRS’) domestically. garment and accessories in a premium shopping environment.

Also company has created more reserves for its future projects. ~ 7 ~ .RATIO’s Return on Investment Ratios (ROI) 1.38 % Previous Year –: RONW = = 7. The reason could the economic conditions of the economy. Current Year –: RONW = = 5. This implies Overall profitability of company has fallen down. Return on Net Worth (RONW) Note: This ratio measures the net profit earned on the equity shareholders fund.92% ANALYSISThe return on net worth has dropped down drastically with comparison to last year.

 Shareholders will receive low dividends in contrast to last year. 12. Earnings Per Share (EPS) Note: The ratio measures the overall profitability in terms of per equity share of capital contributed by the owners. 2.51 which has fallen to Rs. Current Year -: EPS = = Rs. 17.51 ANALYSISLast year EPS of company was Rs.28.  The investors in the company will be highly disappointed because of its performance. 12.  New investors will not find the company lucrative to invest. This ratio shows that with the same shareholders fund the profit of the company decreased. 17.28 Previous year -: EPS = = Rs. This is not good for company as well as for investors.  Suppliers will strict the credit policy as risk for them has increased. ~ 8 ~ . Their earnings have fallen down.

Solvency Ratios 1. Current Year -: NAV = = Rs.94 ANALYSIS~ 9 ~ .  Company needs to increase its EPS as it is a important measure which helps company to survive in future. Net Asset Value Ratio (NAV) Note: This ratio seeks to assess as to what extent the value of equity share of a company contributed at par or at premium or the value created for the shareholders.  In case company want to raise funds through initial public offer company won’t be able to attract many investors. 227. Also company won’t be able to attract new investors.80 Previous Year -: NAV = = Rs. Moreover chances of existing shareholders selling their shares also increase. 220.

2. Debt.Equity Ratio = = 0.Equity Ratio Note: This ratio measures the debt.485 times Previous Year -: Debt – Equity Ratio = = 0. not to put shareholders fund at risk when profitability of company is low. Company has raised ~ 10 ~ . So it can rely on these reserves for internal financing.equity proportion in capital structure of the company. NAV of company will help it to raise further capital. But in comparison to last year this ratio has increased. They have reduced the risk of defaulting in payment of interest. Company has created more of reserves as it has undertaken many new projects. This shows the efficiency of company management.borrowed as well as equity because investors will believe that company has significant growth prospects.e. Current Year -: Debt. It is a prudent practice i.Even though the profit of company has fallen down still Net Asset Value of company has increased though marginally.435 times ANALYSISLast year when the profitability of company was high As the profitability of company has reduced significantly they are playing safe by not raising more debt.

Interest Coverage Ratio Note: This ratio measures the capacity of the company to pay the interest liability it has incurred on its long term borrowings.more secured loan and foreign currency loans from banks as they have undertaken few foreign projects also. 3.17 times Previous Year -: Interest Coverage Ratio = = = 5. Though in comparison to last year. But still company was able to maintain it at 5 times which implies it has funds to pay its ~ 11 ~ . Current Year -: Interest Coverage Ratio = = = 5. interest coverage ratio has fallen down.95 times ANALYSISCompany has adequate amount to fulfil its interest liability out of its revenue. out of the profit.

or current liabilities as and when they become due out of cash or current assets.interest by 5 times. Liquidity Ratio 1. The risk of default in payment is not much. So the suppliers and other creditors need not be worried about their funds. This also develops the creditability of company in market. Current Ratio Note: The ratio measures the ability of a company to discharge its day to day bills.27 times Previous Year -: ~ 12 ~ . Current Year -: Current Ratio = = = 2.

Current Ratio = = = 1. 2. interest subsidy and interest receivable have increased a lot. It will be able to discharge its obligations in time but it needs to reduce this ratio by putting current assets to use.33:1. Where as company has current ratio of 2. from this ratio it can be predicted that company’s short term default risk is reduced. net working capital out of cash or current assets it possesses. Quick Ratio Note: This ratio measures as how quickly company is able to discharge its current liabilities. Though. Short term investments and dividend.97 times ANALYSISThe standard current ratio should be 1.27 in current year and 1. Current Year -: ~ 13 ~ .97 in previous year. This shows that company is not employing its resources fully. Whereas current liabilities fallen down.

24 times Previous Year -: Quick Ratio = = = 0. But now this risk is eliminated. 3. Collection Period Allowed to Customers ~ 14 ~ .965 times ANALYSIS The standard quick ratio is 1:1. Last year company’s liquidity was not good. Now it has some assets which are not put to use efficiently. Company has improved its quick ratio which means now it has the ability to discharge its current liabilities as and when due out of its most liquid assets. Possibility of default in payment to suppliers was there.Quick Ratio = = = 1.

Note: The ratio measures the credit period allowed by the company to its debtors on credit sales or how fast a company is able to realise its outstanding dues. The reason behind this could be increase in sales. ~ 15 ~ . This shows company is selling more on credit.48 days = 75 days ANALYSISThe company is able to receive its debts in 2-3 months. Current Year -: Collection Period Allowed to Customers = = 79. It has also extended its credit period by 4 days.10 days = 79 days Previous Year -: Collection Period Allowed to Customers = = 75. But debtors have also increased.

88 days = 130 days Previous Year -: Suppliers Credit = = 159.4.37 days = 159 days ANALYSIS~ ~ 16 . Current Year -: Suppliers Credit = = 129. Suppliers Credit Note: The ratio measures the average credit period allowed to the company by its creditors or how much leverage it possesses to settle its outstanding payables.

It is dictating good terms with its suppliers. ~ 17 ~ .Company is enjoying an excellent period of credit. It has to pay to its creditors in about 4 months. Though this period has decreased in comparison to last year. This also shows company is purchasing less on credit as creditors as reduced despite increase in purchases.

Current Year -: Inventory Holding Period = = 129. Also inventory holding period has increased which shows company has blocked a lot of cash in inventory. So it needs to take action in that respect may be by ~ 18 ~ . That means it is holding inventory for long time.63 days = 130 days Previous Year -: Inventory Holding Period = = 117.5.4 days = 117 days ANALYSIS Company is facing long inventory holding period. Inventory Holding Period Note: The ratio measures the number of days that cash is blocked in inventory or how fast a company is able to convert its inventory into cash. It further implies that company is not able to sell its goods at faster rate.

But this can be because company is facing difficulty in procuring raw material because of increase in the cost of raw material.reducing its selling price. ~ 19 ~ .

~ 20 ~ . There is under usage of fixed assets. This under usage can be the cause of lower operating revenues.89 times ANALYSIS Sales have increased by 2.Turnover Ratio 1. Current Year -: Fixed Assets Turnover = = = 1. And fixed assets have increased by 6. In comparison to last year this ratio has also decreased.4%.84 times Previous Year -: Fixed Assets Turnover = = = 1. This shows company is not using its resources efficiently. Fixed Assets Turnover Note: The ratio measures the volume of gross income generated by the fixed assets of the company.98%. Company should improve its management and look towards efficient convention of its fixed assets.

This means that to sell more it has to keep a stock of more goods. The company is having adequate inventory turnover.815 times Previous Year -: Inventory Turnover = = 3. It is not too much and not too less.108 times ANALYSIS A lower turnover ratio indicates overstocking. But in respect to last year this ratio has decreased. Current Year -: Inventory Turnover = = 2.2. obsolescence and deficiencies in product line. ~ 21 ~ . Inventory Turnover Note: This ratio measures the level of inventory.

33% ANALYSIS This ratio indicates the change in gross profit margin. 1. This implies change in cost of goods sold is much more than change in sales. ~ 22 ~ . This shows that sales have increased but the gross profit has fallen. Gross Profit Margin Current Year -: Gross Profit Margin = = 29.Profitability Ratio These ratios measure several intermediate profit margin indicators. In comparison to Net Profit Margin it can concluded that company spends more on its operating and manufacturing activities.79 % Previous Year -: Gross Profit Margin = = 31.

69 % Previous Year -: Net Profit Margin = = 8. Valuation Ratio 1. Net Profit Margin Current Year -: Net Profit Margin = = 5. ~ 23 ~ . The expenses incurred by company have increased much more than increase in income.2. P/E Ratio Note: The ratio measures as to how many times an equity share is priced in stock market in relation to its EPS.37 % ANALYSIS From this ratio it can be interpreted that overall profitability of company has fallen down drastically.

1140.44 crores ~ 24 ~ . 2.475 times Previous Year -: P/E Ratio = = 14. Despite the existing situation of markets still P/E ratio has increased. Market Capitalisation Note: The ratio provides a base for total valuation of the company based on its market price. So investors should hold on the shares as its performance in past has also been good. Current Year -: Market Capitalisation = = Rs.625 times ANALYSIS Though the market price of equity and earnings per share has reduced in comparison to last year but still its P/E ratio has increased.Current Year -: P/E Ratio = = 15. So it has scope of recovery and leading to increase in P/E ratio.

: Market Capitalisation = = Rs.31) Previous Year 37737.17 1.84) 10750.3 (9461.29 26467.10 7242.05 (1.16 (3792.45 ~ 25 ~ . Profit After Tax Particulars Profit for year after tax Add/ (Less): Prior period adjustments Add/ (Less): Tax in respect of earlier years PAT including exceptional items Add/(Less): Exceptional items PAT excluding exceptional items Current year 6612.87 7536.28 88.12 791.94 crores ANALYSIS This ratio tells the value of the company.03 629.19 2.82 27099.03) 20212.Previous Year . As the market price has decreased the valuation has also shrunk. But from the past performance of the company it can be inferred that valuation of company will improve in future. 1571.17 Previous Year 20125.3 293. Cost of Goods Sold Particulars Material Costs Manufacturing and Operating Costs (Increase)/ Decrease in Current Year 46855. Notes – 1.

57 ~ 26 ~ .finished and process stock Employment Costs COGS 23315.39 88186.03 Previous Year 128419.35 88186.78 3.12 39405.15 92846.78 40232.12 22558.98 92846. Gross Profit Particulars Sales COGS Gross Profit Current Year 132251.

• Raw Material Wool prices have remained at a high level throughout the year due to a severe drought in Australia. These stores have enhanced the brand image and uplifted the Brand positioning. to form a 50:50 joint venture from August 1. Company performance has deteriorated for the following reasons. this year has seen a spectacular growth in the branded apparel business of the Company with high growth rates being sustained quarter after quarter. Growth And Opportunities for company • During the year. 2008 financials are not strictly comparable with the previous year ending March 31. • With all these developments. Company launched “Raymond” Brand under ready to wear premium segment and also launched Brand Extension of ‘Park Avenue’ in women’s wear. Consequently the current year ending March 31. Belgium. • During the year. 2006.Financial Analysis Of Company The key business segments of the Company are Textile and Files & Tools Divisions. 2007. The erstwhile denim division of the Company was combined with the denim business of UCO NV. Rupee appreciation adversely affected export realizations. ~ 27 ~ . Consequent input price increases for the company during the year is a likely scenario. • Economy The economy has been witnessing a high inflationary situation together with steep rises in prices of steel in the last quarter of the year due to increased inputs costs like coke. The Company continued to lay emphasis on product innovation. the Company plans to increase its distribution reach further. the Company continued to focus on expansion of retail space through its exclusive branded stores. In the coming years. Alternate vendors have been developed in other countries like South Africa to mitigate the risk of higher price. iron ore.

employment cost increases and issues in the ERP implementation however resulted in a decline in profit before interest and tax of the division from Rs.35 lacs to Rs. the Company witnessed an increase in net revenues. The net sales of the company grew marginally from Rs.128419.132251. This implies with gradual increase in BSE Sensex the share will also recover. Shareholders need not worry.15 lacs. Company has undertaken many new projects last year. High wool prices. an increase of 2.47 lacs to Rs. The profit earned has fallen down about 64% in respect of last year. 8614. So shareholders should hold on the shares.98%.The overall performance of company has fallen down in comparison to last year performance. Growth in each project will be gradually leading to overall growth of company. 15172. ~ 28 ~ . Despite fierce competition in domestic and international markets and inspite of the challenges faced including teething issues in the ERP implementation. The pattern of share is similar to that of the BSE Sensex as can be seen from the diagram.85 lacs but this fall in performance is temporary and because of the current economic situation of India. The growth in revenues was largely due to an increase in volumes.

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