CA group project

Assessment of Industry’s Financial performance

Introduction:

Aditya Birla Fashion and Retail Limited (ABFRL) is an Indian fashion retail company
headquartered in Mumbai. The apparel company operates in three segments: Men’s wear,
Women’s wear and Kids Wear. ABFRL has a network of 3031+ stores with 6,500+ point of
sales in department stores across India the Company sells approximately 400 brands, which
comprise a mix of private labels, licensed brands and other brands. The comprise brands
owned by the Company through, Akkriti, Rangmanch, Ajile, Annabelle, Trisha, Honey and
Chalk. ABFRL was previously known as Pantaloons Fashion & Retail Limited prior to its
acquisition by the Aditya Birla Group.
While weaving its magic across lifestyle segments, Pantaloons caters to the discerning and
trendy Indian consumer. Pantaloons stores have an abundance of choices across categories
that range from western to Indian wear, formal to party wear and active wear for men,
women and kids. To further add to the customer's innumerable choices that reflect style,
attitude, and comfort, Pantaloons has extended its horizons to fashion accessories like
fragrances, footwear, handbags, watches, sunglasses and much more. With a chain of 71
fashion stores across 35 cities and towns, Pantaloons is constantly extending its foot-prints
into the rest of modern India.
Pantaloons was awarded as the Best Fashion Retail Partner by Sweet Dreams and
appreciated by Triumph for providing the best business support in the large format stores
category for 2017.
ABFRL won the following awards for its Corporate Social Responsibility and Sustainability
initiatives:
- “Sustainable Business of the Year”, “Sustainable Leadership” and “Sustainable
Professional of the Year”, by World Sustainability - a global not-for-profit organisation;
- “Special Commendation” for Corporate Social Responsibility at the ‘Golden Peacock
Awards 2017’, by the Institute of Directors; and
- “Arogya World Platinum Award for Global Healthy Workplaces, 2017”.

Market summary of ABFRL:

Stock gave a 3-year return of 20.12%.

Ownership of the company:

In the Dec2021 qtr we have:
Number of FII/FPI investors is 249 and the number of MF schemes is 40.
Dividend history:
Aditya Birla Fashion & Retail - RE has not declared any dividend for the last several years. As
per the Profit & Loss account.

Technical Analysis:

Board of directors:

Name Designation
Mr. Kumar Mangalam Birla Chairman & Non-Exe.Director
Mr. Nish Bhutani Independent Director
Ms. Sukanya Kripalu Independent Director
Mr. Sunirmal Talukdar Independent Director
Mr. Arun Adhikari Independent Director
Ms. Preeti Vyas Independent Director
Mr. Yogesh Chaudhary Independent Director
Mr. Ashish Dikshit Managing Director
Mr. Vikram Rao Non Executive Director
Mr. Himanshu Kapania Vice Chairman & Non Exe.Director
Mr. Vishak Kumar Whole Time Director
Ms. Sangeeta Pendurkar Whole Time Director
ABFRL overview:

ABFRL Income statement analysis:

ABFRL Balance sheet analysis:
ABFRL cash flow analysis:
ABFRL current valuations:

Ratios:
Profitability:

Liquidity
Turnover
Solvency
Earnings
 Aditya Birla Fashion and Retail Ltd (ABFRL IN) - Valuation Ratios
Ratios Formulae 2018 2019 2020 2021
(Net income-preferred
Earnings per share (EPS)= dividends)/outstanding number of common 1.505 4.103 -2.076 -7.934
shares
Price earnings (P/E) ratio= share price/earnings per share (EPS) 98.825 52.942 -72.592 -25.365
P/E ratio (company wide)= Market capitalization/Net income 98.828 53.059 -72.804 -28.056
Dividend declared (per share)/current share
Dividend yield= 0.000 0.000 0.000 0.000
price
Retention rate (RR)= Net income-dividends declared/net income 1.000 1.000 1.000 1.000
Dividend payout = Dividends declared/Net income 0.000 0.000 0.000 0.000
Market cap/sales= Market capitalization/total sales 1.623 2.119 1.360 3.620
Enterprise value to Revenue= Enterprise value/Total revenue 1.858 2.302 1.921 4.231
Enterprise value to EBITDA= Enterprise value/EBITDA 28.347 33.648 13.902 41.605
Earnings Yield= EPS/Current price 0.010 0.019 -0.014 -0.039
Sustainable growth rate (g) = RR x ROE 1.375 1.463 -2.061 1.610
RR 1.000 1.000 1.000 1.000
ROE 1.375 1.463 -2.061 1.610

Valuation ratios measure the value of common equity. This ratio shows the relation between
the company's market value or its equity and some financials of the company. The main
motive of valuation ratio is to indicate that the price of a particular stock is cheap or
expensive when it compares to a certain measure (like earnings, sales etc.,). They typically
indicate the intrinsic value per one common share of a firm’s outstanding stock.
The company is generating negative income or the company is losing money and incurring
losses after the financial year 2019. Hence the EPS and P/E ratio is negative for the financial
years 2020 and 2021. The company is not earning money for its shareholders. In the
FY2017-18, FY2018-19 we can see that the PE ratio is high as the company was growing
and after which the negative ratio shows the slow growth of the company and debt burden of
the company. From the market capitalization to sales ratio, we find that in the FY2017-18,
FY2018-19 the company is rightly rated after which it underrated in the FY2019-20 and
overrated its stock as it needed money to run the business as it was incurring losing.
Enterprise Value-to-EBITDA Ratio is above 10 which means the investment is considered
risky and overvalued but for the FY2019-20 and FY2020-21 the ratio is not useful as the
company is having negative net profits. The company is not paying any dividends to its
shareholders and it is also incurring loss even after the company is crediting back the money
in business as we see from retention ratio. So, it is not a good option to invest in this
company.
Solvency ratios:
Liquidity is about meeting current liabilities, while solvency refers to the ability of a firm to
cover long-term liabilities and short-term debt obligations. The solvency ratios indicate
whether the company's cash flow is sufficient or not to pay off its debts. Prospective lenders
and bond investors use solvency ratios to evaluate a company's creditworthiness.
 Aditya Birla Fashion and Retail Ltd (ABFRL IN) - Solvency Ratios
Ratios Formulae 2018 2019 2020 2021
Debt -to-equity= total debt/total shareholder's equity 1.609 1.192 4.858 1.345
Debt-to-capital= total debt/(total debt+total shareholder's equity) 0.617 0.544 0.829 0.574
Debt-to-assets= total debt/total assets 0.307 0.257 0.541 0.354
earnings before interest and taxes/interest
Interest coverage= 1.136 1.479 0.781 -0.871
payments
(earnings beforein terest and taxes+lease
Fixed charge coverage= 1.017 1.068 0.960 0.596
payments)/(interest payments+lease payments)
Financial leverag= average total assets/average total equity 5.250 4.899 6.511 5.297
Short-term debt to equity= short-term debt/total shareholders equity 0.522 0.685 2.397 0.385
shareholders equity= total shareholders equity/total assets 0.191 0.216 0.111 0.263
Debt to EBITDA= total debt/EBITDA 3.740 3.066 4.351 6.745
Assets to shareholders
total assets/total shareholders equity 5.245 4.634 8.977 3.801
equity=
CFO to debt= cash flow from operation/total debt 0.305 0.246 0.042 0.175

The debt-to-equity ratio, Shareholder’s equity ratio and Debt to Capital Ratio is very high in
the FY2019-2020 which shows extremely high debt burden on the company i.e., more than
half of the assets are funded by debts and a large portion of the company’s capital is
financed by debt rather than equity. It shows the weak solvency position of the company as
more assets are funded using debts. In FY2020-21 the company had stable debts which
shows the company is acquiring more equity capital. Till the financial year 2019 the company
had enough operating profits to pay off its interest expenses. In the FY2019-20 and FY2020-
21 the company had less interest coverage and it had insufficient EBIT to pay its debt
obligations i.e., unavailability of the earnings to cover the interest. There is deficiency in the
cash flow operations to cover the debts. It is highly risky to invest in this company and
investors have very less claim on the company’s assets if it faces liquidation.
Resources:
https://bba.bloomberg.net/Content/Html5/Citrix/src/SessionWindow.html?
launchid=1646101355986
https://www.topstockresearch.com/INDIAN_STOCKS/RETAIL/
FundamentalAnalysisOfAditya_Birla_Fashion_and_Retail_Ltd.html