CHAPTER I

INTRODUCTION

1.1 Introduction to Capstone Project

A capstone project is a mixed assignment that serves as a supreme academic and learned
experience for students, typically during their final year of graduation, or at the end of an
academic program or learning-pathway experience. Capstone projects are generally designed
to encourage students to think unfavorably, solve challenging problems, and develop skills
such as oral communication, public speaking, research skills, media literacy, teamwork,
planning, self-sufficiency, or goal setting., skills that will help prepare them for college, modem
careers, and adult life. In most cases, the projects are also interdisciplinary, in the sense that
they require students to apply skills or investigate issues across many different subject areas or
domains of knowledge. A capstone project that helps students demonstrate their knowledge
and skills and it can also be used as an employment portfolio. Capstone projects are a great
way of demonstrating the proficiency of learning. This type of work can help young people
determine their competence and readiness to demonstrate what they have learned through the
course of their project. Capstone projects also tend to encourage students to connect their
projects to community issues or problems, and to integrate outside-of-school learning
experiences, including activities such as interviews, scientific observations, or internships.

1.2 Financial Statement Analysis

Financial statement analysis is the process of reviewing and analysing a company's

financial statements to make better economic decisions to earn income in future. These
statements include the income statement, balance sheet, statement of cash flows, notes to
accounts and a statement of changes in equity.

1.3 Objectives of the Study

• To understand the financial performance of the selected industry and respective

company.
• To make inter firm comparison of financial position of the selected company from year
2017-18 to 2020-21
• To ascertain financial position of the selected company on the basis on key ratios and
parameters.
• To forecast financial statements of the company
• To perform equity valuation for the firm

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 • To recommend suggestion to the company to improve the financial position.

1.4 Methodology
The research design constitutes the blueprint for the collection, measurement and
analysis of data. The research applied in the study is analytical research design. Analytical
study is a system of procedures and techniques of analysis applied to quantitative data. It
consists of mathematical models or statistical techniques applicable to numeric data.

Source of Data
The study is based on secondary data. Data regarding industries is collected from the
annual report of selected industries with the help of websites, books and journals.

Sample Size: The companies are selected on the basis of top market capitalisation

The companies are listed under BSE / NSE

Those companies who are having the financial data reports for a minimum of
past 10 years

Duration of the study: 2016-17 to 2020-21

2016-17
2017-18
2018-19
2019-20
2020-21
1.5 Tools For Financial Statement Analysis.

Horizontal Analysis:

Horizontal analysis is used in financial statement analysis to compare historical data, such as
ratios, or line items, over a number of accounting periods. Horizontal analysis can either use
absolute comparisons or percentage comparisons, where the numbers in each succeeding
period are expressed as a percentage of the amount in the baseline year, with the baseline
amount being listed as 100%. This is also known as base-year analysis.

Horizontal analysis is used in the review of a company's financial statements over multiple
periods.

It is usually depicted as percentage growth over the same line item in the base year.

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Horizontal analysis allows financial statement users to easily spot trends and growth patterns.

Horizontal analysis shows a company's growth and financial position versus competitors.

Horizontal analysis can be manipulated to make the current period look better if specific
historical periods of poor performance are chosen as a comparison.

Horizontal analysis allows investors and analysts to see what has been driving a company's
financial performance over several years and to spot trends and growth patterns. An analysis
of the income statement, balance sheet, and cash flow statement over time gives a complete
picture of operational results and reveals what is driving a company’s performance and whether
it is operating efficiently and profitably.

HORIZONTAL ANALYSIS FORMULA = {(COMPARISON YEAR AMOUNT - BASE

YEAR AMOUNT) / BASE YEAR AMOUNT} X 100

Vertical Analysis:

Vertical analysis is a method of financial statement analysis in which each line item is
listed as a percentage of a base figure within the statement. Thus, line items on an income
statement can be stated as a percentage of gross sales, while line items on a balance sheet can
be stated as a percentage of total assets or liabilities, and vertical analysis of a cash flow
statement shows each cash inflow or outflow as a percentage of the total cash inflows.

Vertical analysis can become a more potent tool when used in conjunction with horizontal
analysis, which considers the finances of a certain period of time.

It also makes it easier to compare previous periods for time series analysis, in which quarterly
and annual figures are compared over a number of years, in order to gain a picture of whether
performance metrics are improving or deteriorating.

VERTICAL ANALYSIS FORMULA = {(COMPARISON YEAR AMOUNT - BASE

YEAR AMOUNT) / BASE YEAR AMOUNT} X 100

Compound Annual Growth Rate (CAGR):

The compounded annual growth rate (CAGR) is one of the most accurate ways to calculate and
determine returns for anything that can rise or fall in value over time.

Investors can compare the CAGR of two alternatives to evaluate how well one stock performed
against other stocks in a peer group or a market index.

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The CAGR does not reflect investment risk.

The compound annual growth rate isn’t a true return rate, but rather a representational figure.

In reality, this sort of performance is unlikely. However, the CAGR can be used to smooth
returns so that they may be more easily understood compared to alternative methods.

The formula for CAGR is as follows:

CAGR = ^ (1/n) - 1

Ratio Analysis:

Ratio analysis compares line-item data from a company's financial statements to reveal insights
regarding profitability, liquidity, operational efficiency, and solvency. Ratio analysis can mark
how a company is performing over time, while comparing a company to another within the
same industry or sector.

Liquidity Ratio:

Liquidity ratios measure a company's ability to pay debt obligations and its margin of safety
through the calculation of metrics including the current ratio, quick ratio, and operating cash
flow ratio.

Types Of Liquidity Ratios

Current Ratio:

The current ratio is the simplest liquidity ratio to calculate and interpret. Anyone can easily
find the current assets and current liabilities line items on a company’s balance sheet. Divide
current assets by current liabilities, and you will arrive at the current ratio.

CURRENT RATIO = CURRENT ASSETS / CURRENT LIABILITIES

2. Quick Ratio:

The quick ratio is a stricter test of liquidity than the current ratio. Both are similar in the sense
that current assets is the numerator, and current liabilities is the denominator.

However, the quick ratio only considers certain current assets. It considers more liquid assets
such as cash, accounts receivables, and marketable securities. It leaves out current assets such

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as inventory and prepaid expenses because the two are less liquid. So, the quick ratio is more
of a true test of a company’s ability to cover its short-term obligations.

QUICK RATIO = (CASH + ACCOUNTS RECEIVABLES + MARKETABLE

SECURITIES) / CURRENT LIABILITIES

3. Cash Ratio:

The cash ratio takes the test of liquidity even further. This ratio only considers a company’s
most liquid assets – cash and marketable securities. They are the assets that are most readily
available to a company to pay short-term obligations.

In terms of how strict the tests of liquidity are, you can view the current ratio, quick ratio, and
cash ratio as easy, medium, and hard.

CASH RATIO = (CASH + MARKETABLE SECURITIES) / CURRENT

LIABILITIES

4. Profitability Ratios:

Profitability ratios are a class of financial metrics that are used to assess a business's ability to
generate earnings relative to its revenue, operating costs, balance sheet assets, or shareholders'
equity over time, using data from a specific point in time.

Types Of Profitability Ratio

Net profit ratio

Operating profit ratio

Gross profit ratio

Net Profit:

This ratio measures the overall profitability of company considering all direct as well as
indirect cost. A high ratio represents a positive return in the company and better the company
is.

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Formula:

NET PROFIT = GROSS PROFIT + INDIRECT INCOME – INDIRECT

EXPENSES

Operating Profit Ratio

Operating Profit Ratio is referred to as the ratio that is used to define a relationship between
the operating profit and the net sales. Operating profit is also known as Earnings before interest
and taxes (EBIT) and net sales can also be defined as the revenue that is earned from the
operations.

Operating profit ratio is calculated by dividing the operating profit with the net sales. The
formula for calculating operating profit can be represented as follows

OPERATING PROFIT RATIO = OPERATING PROFIT / NET SALES × 100.

OPERATING PROFIT = NET PROFIT + NON-OPERATING EXPENSES –

NON-OPERATING INCOMES.

5. Growth Ratios:

Growth ratios indicate how fast a company or its business is growing. These ratios measure the
rate at which the company is growing.

Types Of Growth Ratio

Sales volume growth ratio

Sales value growth ratio

EBITDA growth ratio

Sales Growth Ratio

Sales growth is the percent growth in the net sales of a business from one fiscal period to
another. Net sales are total sales revenue less returns, allowances and discounts.

You would be comparing an earlier period of lower sales with a later one of higher sales.
Generally, the two periods are also of a corresponding length

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Formula for how to calculate sales growth subtract the net sales of the prior period from that
of the current period. Then, divide the result by the net sales of the prior period. Multiply the
result by 100 to get the percent sales growth.

EBITDA Growth Ratio

EBITDA growth is an extensively used parameter when it comes to studying the fundamentals
of a company. It is a financial ratio used to measure a company’s ability to optimize the expense
to sales ratio. A financial ratio is a representation of selected numerical values from a
company’s financial statements. It helps in deciding the growth of a company. There are a lot
of ratios such as PE Ratio, Net profit margin, interest coverage ratio, etc

EBITDA GROWTH RATIO=

(CURRENT PERIOD EBITDA- PRIOR PERIOD EBITDA)/PRIOR PERIOD

EBITDA.

7. Stability Ratio

Stability is the long-term counterpart of liquidity. Stability analysis investigates how much debt
can be supported by the company and whether debt and equity are balanced. The most common
stability ratios are the Debt-to-Equity ratio and gearing (also called leverage).

Types Of Stability Ratio

Debt equity ratio

Long term debt/equity

Debt Equity Ratio

The debt-to-equity (D/E) ratio is used to evaluate a company's financial leverage and is
calculated by dividing a company’s total liabilities by its shareholder equity. The D/E ratio is
an important metric used in corporate finance. It is a measure of the degree to which a company
is financing its operations through debt versus wholly owned funds. More specifically, it
reflects the ability of shareholder equity to cover all outstanding debts in the event of a business
downturn. The debt-to-equity ratio is a particular type of gearing ratio.

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Long Term Debt/Equity

The long-term debt to equity ratio shows how much of a business' assets are financed by long-
term financial obligations, such as loans. To calculate long-term debt to equity ratio, divide
long-term debt by shareholders' equity. As we covered above, shareholders' equity is total
assets minus total liabilities.

8. Efficiency Ratio

The efficiency ratio is typically used to analyze how well a company uses its assets and
liabilities internally. An efficiency ratio can calculate the turnover of receivables, the
repayment of liabilities, the quantity and usage of equity, and the general use of inventory and
machinery.

Type Of Efficiency Turnover Ratio

Asset turnover ratio

Receivables turnover ratio

Inventory Turnover Ratio

Inventory Ratios

The inventory turnover ratio measures a company's ability to manage its inventory efficiently
and provides insight into the sales of a company. The ratio also shows how well inventory is
being managed including whether too much or not enough inventory is being bought. An
efficiency ratio can also track and analyze commercial and investment bank performance.

The ratio is calculated by dividing the cost of goods sold by the average inventory.

Asset Turnover Ratio

The asset turnover ratio measures a company's ability to efficiently generate revenues from its
assets. In other words, the asset turnover ratio calculates sales as a percentage of the company's
assets.

The ratio is calculated by dividing a company's revenues by its total assets

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Receivables Turnover Ratio

The receivables turnover ratio measures how efficiently a company can actively collect its
debts and extend its credits. The ratio is calculated by dividing a company's net credit sales by
its average accounts receivable.

9. Coverage Ratio

A coverage ratio, broadly, is a metric intended to measure a company's ability to service its
debt and meet its financial obligations, such as interest payments or dividends. The higher the
coverage ratio, the easier it should be to make interest payments on its debt or pay dividends.

Types Of Coverage Ratios

Interest coverage ratio

Debt service coverage ratio

Net debt to EBITDA

INTEREST COVERAGE RATIO

The interest coverage ratio measures the ability of a company to pay the interest expense on its
debt. The ratio, also known as the times interest earned ratio.

INTEREST COVERAGE RATIO = EBIT / INTEREST EXPENSE

EBIT = Earnings before interest and taxes

An interest coverage ratio of two or higher is generally considered satisfactory.

Debt Service Coverage Ratio

The debt service coverage ratio (DSCR) measures how well a company is able to pay its entire
debt service. Debt service includes all principal and interest payments due to be made in the
near term.

DSCR = Net Operating Income / Total Debt Service

A ratio of one or above is indicative that a company generates sufficient earnings to completely
cover its debt obligations.

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Net Debt-To-EBITDA

The net debt-to-EBITDA (earnings before interest depreciation and amortization) ratio is a
measurement of leverage, calculated as a company's interest-bearing liabilities minus cash or
cash equivalents, divided by its EBITDA. The net debt-to-EBITDA ratio is a debt ratio that
shows how many years it would take for a company to pay back its debt if net debt and EBITDA
are held constant. However, if a company has more cash than debt, the ratio can be negative. It
is similar to the debt/EBITDA ratio, but net debt subtracts cash and cash equivalents while the
standard ratio does not.

NET DEBT TO EBITDA = EBITDA TOTAL DEBT− CASH &

EQUIVALENTS/EBITDA

10. Dupont Analysis:

The DuPont analysis (also known as the DuPont identity or DuPont model) is a framework for
analysing fundamental performance popularized by the DuPont Corporation. DuPont analysis
is a useful technique used to decompose the different drivers of return on equity (ROE).

DUPONT ANALYSIS=NET PROFIT MARGIN×AT×EM

NET PROFIT MARGIN=REVENUE/NET INCOME

ASSET TURNOVER(AT)=AVERAGE TOTAL ASSETS/SALES,
EQUITY MULTIPLIER(EM)=AVERAGE SHAREHOLDER’S/ EQUITYAV
ERAGE TOTAL ASSETS

Net Profit Margin

The net profit margin is the ratio of bottom-line profits compared to total revenue or total sales.
This is one of the most basic measures of profitability.

PROFIT MARGIN=REVENUE NET /INCOME

Asset Turnover Ratio

The asset turnover ratio measures how efficiently a company uses its assets to generate
revenue.

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 ASSET TURNOVER RATIO=AVERAGE /ASSETS REVENUE

Financial Leverage

Financial leverage, or the equity multiplier, is an indirect analysis of a company's use of debt
to finance its assets.

FINANCIAL LEVERAGE=AVERAGE EQUITY/AVERAGE ASSETS

11. Working capital analysis

Working capital is the amount of available capital that a company can readily use for day-to-
day operations. It represents a company's liquidity, operational efficiency, and short-term
financial health. Working capital is computed by calculating the difference between the
company’s current assets and current liabilities. The net working capital is calculated by
subtracting the current liabilities from non-cash current assets. Working capital turnover is a
ratio that measures how efficiently a company is using its working capital to support sales and
growth. It measures the relationship between the funds used to finance a company's operations
and the revenues a company generates to continue operations and turn a profit.

Net working capital = Current assets (Less cash) – Current liabilities

Working capital turnover ratio = Net annual sales / Working capital

12. Cash Conversion Cycle

The cash conversion cycle is a metric that expresses the length of time in days that it takes for
a company to convert its investments in inventory and other resources into cash flows from
sales. This metric takes into account the time needed to sell its inventory, the time required to
collect receivables, and the time the company is allowed to pay its bills without incurring any
penalties. It is also known as the Net operating cycle and represents how fast a company can
convert the invested cash from start (investment) to end (returns).

Cash Conversion Cycle = Inventory Days + Receivable Days - Payable Days

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1.6 Limitations of the study:

The study is based on secondary data and the limitation of secondary dat may affect the results.

The secondary data is collected from annual reports, if the data in annual reports does not reflect
actual performance, the results will also be not the actual one.

The time period of the study is 5 years.

1.7 Chapter Scheme

Chapter 1: Introduction, About the Capstone project and industry, Objectives, Methodology

Chapter 2: Industry Analysis for respective company & Company details

Chapter 3: Financial Statement Analysis: Vertical and Horizontal Analysis, Ratios, CAGR,

Dupont Analysis

Chapter 4: Financial Modeling: Financial Statements Forecasting

Chapter 5: Equity Valuation for a Firm

Chapter 6: Findings, Conclusion.

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 CHAPTER II

INDUSTRY ANALYSIS & COMPANY DETAILS

Automobile industry

The Automobile industry of India, currently manufactures 22.7 min vehicles including
Passenger Vehicles, Commercial Vehicles, Three Wheelers, Two Wheelers, and quadricycles
in April-March 2020, of which 4.1 mn are exported. India holds a strong position in the
international heavy vehicles arena as it is the largest tractor manufacturer, second-largest bus
manufacturer, and third largest heavy trucks manufacturer in the world.

The EV market is expected to grow at CAGR of 44% between 2020-2027 and is expected to
hit 6.34 million-unit annual sales by 2027. The EV industry will create five crore direct and
indirect jobs by 2030.

A market size of $50 bn for the financing of EVs in 2030 has been identified—about 80% of
the current size of India’s retail vehicle finance industry, worth $60 bn today.

India's passenger vehicle industry is expected to post a growth of 22% - 25% in FY22

India’s Automotive Industry is worth more that $100 bn and contributes 8% of the country’s
total export and accounts for 2.3% of India's GDP and is set to become the 3rd largest in the
world by 2025.

The automotive industry comprises a wide range of companies and organizations involved in
the design, development, manufacturing, marketing, and selling of motor vehicles. It is one of
the world's largest industries by revenue. It is also the industry with the highest spending on
research & development. india’s annual production of automobiles in FY21 was 22.65 million
vehicles, and 13 million vehicles were produced between April-October 2021.

The two wheelers segment dominates the market in terms of volume owing to a growing middle
class, and a huge percentage of India’s population being young. Moreover, the growing interest
of the companies in exploring the rural markets further aided the growth of the sector.

India is also a prominent auto exporter and has strong export growth expectations for the near
future. In addition, several initiatives by the Government of India and major automobile players
in the Indian market is expected to make India one of the leaders in the two-wheeler and four-
wheeler market in the world by 2022.

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Market Size
For the calendar year (CY) 2021, all segments showed growth, and total sales increased by
5.8% to 18.49 million units, compared to 17.47 million units in January-December 2020.

In CY21, passenger vehicles sales increased by 26.6% to 3.08 million units, up from 2.43
million units in CY20. The total number of commercial cars sold was 677,119, up 34% from
505,102 in the previous year.

In FY21, the total passenger vehicles production reached 22.65 million vehicles.

Two wheelers and passenger vehicles dominate the domestic Indian auto market. Passenger car
sales are dominated by small and mid-sized cars. Two wheelers and passenger cars accounted
for 81.21% and 14.56% market share, respectively, accounting for a combined sale of over
17.8 million vehicles in FY21.

Company Detail

Eicher Motors Limited is an Indian multinational automotive company that

manufactures motorcycles and commercial vehicles, headquartered in New Delhi. Eicher is
the parent company of Royal Enfield, a manufacturer of middleweight motorcycles.

in 2008, Eicher Motors Limited and Sweden’s Volvo Group entered into a joint venture
to form VE Commercial Vehicles Limited (VECV). Since then, the company has
engaged in selling a range of Eicher branded trucks & buses, VE Powertrain, eicher

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components, sales & distribution of Volvo trucks, and providing after-sales support for
Volvo buses in India.

The oldest motorcycle brand in continuous production, Royal Enfield made its first motorcycle
in 1901. A division of Eicher Motors Limited, Royal Enfield has created the mid-sized
motorcycle segment in India with its unique and distinctive modern classic bikes. With its new
manufacturing base in Chennai, India, Royal Enfield is able to grow its production rapidly
against a surge in demand for its motorcycles. The Compounded Annual Growth Rate (CAGR)
for the past 5 years was 17%. CAGR was 32% during CY2010 and FY2020. Royal Enfield is
fast becoming a very important player in the global mid-size motorcycle market and is working
towards re-inventing this space with motorcycles that are evocative and engaging and great fun
toride.

The Eicher Group has diversified business interests in design and development, manufacturing,
and local and international marketing of trucks, buses, motorcycles, automotive gears, and
components. Eicher has invested in the potential growth areas of management consultancy
services, customized engineering, and maps and travel guides.

VE Commercial Vehicles (VECV) Limited is a joint venture between Volvo Group and Eicher
Motors Limited (EML). VECV is divided into five business units.

• Eicher Trucks and Buses

• Volvo Trucks India
• Eicher Engineering Components
• VE Powertrain

Royal Enfield Motors, the motorcycle manufacturing subsidiary, is a part of Eicher Motors.

VISION

To be recognized as the industry leader driving modernization in commercial transportation in

India and the developing world.

MISSION

VECV aims to continuously improve transportation efficiency in India and developing

markets, thereby reducing logistics costs for goods and people – leading to higher enablement

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of specialization in manufacturing, agriculture and services, thereby increasing the nation's
economic activity and productivity.

• We choose to do this in a sustainable manner by having the safest, most durable and
efficient products in the market.

• We care for our customers holistically by offering not just trucks and buses, but also
the best services and soft products which enable them to achieve maximum profits.

• We work with the driver community to enhance their productivity and overall working
environment

• We ensure a level of quality and innovation that will continue to set standards in the
commercial transportation industry.

• We work with professionalism, passion, and the greatest respect for all individuals.

Subsidiaries of Eicher Motors Limited (EML)

• Royal Enfield North America Ltd.
• Royal Enfield (Thailand)Ltd.
• Royal Enfield Brasil Comercio de Motorcicletas Ltda.
• Royal Enfield UK Ltd.
• VE Commercial Vehicles Ltd.
• Eicher Group Foundation

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 CHAPTER III

Financial statement analysis

In this chapter, the company’s financial statements are taken from past five years and the
financial statement analysis has been done. Main focus given to Horizontal analysis, Vertical
analysis, Ratios, CAGR, Dupont Analysis, Cash conversion cycle.

Balance Sheet
Horizontal Analysis
Particulars 2017 2018 2019 2020 2021
EQUITIES AND LIABILITIES
SHAREHOLDER'S FUNDS
Equity Share Capital 100 99.96 99.85 99.78 99.71
Total Share Capital 100 99.96 99.85 99.78 99.71
Reserves and Surplus 100 90.70 79.12 70.68 55.66
Total Reserves and Surplus 100 90.70 79.12 70.68 55.66
Employees Stock Options 100 0.00 0.00 0.00 0.00
Total Shareholders Funds 100 90.72 79.16 70.74 55.76
NON-CURRENT LIABILITIES
Long Term Borrowings 100 0.00 0.00 0.00 0.00
Other Long Term Liabilities 100 70.67 48.76 20.91 15.90
Long Term Provisions 100 57.65 54.18 58.78 74.42
Total Non-Current Liabilities 100 80.66 72.87 60.72 37.22
CURRENT LIABILITIES
Short Term Borrowings 100 267.52 245.46 317.40 256.36
Trade Payables 100 96.09 57.47 69.02 65.54
Other Current Liabilities 100 67.26 78.75 62.84 90.82
Short Term Provisions 100 0 0 0 0
Total Current Liabilities 100 88.12 67.86 70.32 75.93
Total Capital And Liabilities 100 89.86 76.85 70.28 58.78
ASSETS
NON-CURRENT ASSETS
Tangible Assets 100 71.43 74.86 57.89 49.95

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Intangible Assets 100 0.00 100 100 100
Capital Work-In-Progress 100 0 0 0 0
Intangible Assets Under Development 100 0 0 0 0
Fixed Assets 100 93.80 91.83 79.35 62.64
Non-Current Investments 100 0 0 0 0
Deferred Tax Assets [Net] 100 0.00 0.00 0.00 0.00
Long Term Loans And Advances 100 0 0 0 0
Other Non-Current Assets 100 49.48 41.82 54.24 57.43
Total Non-Current Assets 100 54.34 57.41 65.88 66.03
CURRENT ASSETS
Current Investments 100 95.36 46.74 12.55 17.98
Inventories 100 77.23 50.54 55.93 34.85
Trade Receivables 100 52.36 28.72 27.91 22.51
Cash And Cash Equivalents 100 214.16 108.38 108.92 44.52
Short Term Loans And Advances 100 67.84 0.02 0.19 0.10
OtherCurrentAssets 100 113.62 69.89 72.66 62.70
Total Current Assets 100 156.75 113.44 78.57 45.11
Total Assets 100 89.86 76.85 70.28 58.78

INTERPRETATION

➢ The equity capital of the company has remained stable from the base year 2017 till the
financial year 2021.
➢ In the year 2018 the reserves and surplus decreased to 90.70 from 100 in 2017. It
declined to 55.66 in 2021 and increased to 70.68 in 2020 and 79.12 during 2019.
➢ The total shareholder fund increased in the year 2018 to 90.70 from that of the base year
and decreased in the year 2019 from 90.70 to 55.76 and increased in the year 2020 as
70.74 and 2021 as 55.76.
➢ The total non-current liabilities have steadily increased during the study period. It has
increased from 100 in the base year to 80.66 in 2018. There is no long-term borrowing
for our company.
➢ The total non- current assets decreased in the years 2018 and 2019 as 54.34 and 57.41
and it starts increase in the years 2020 and 2021 as 65.88 and 66.03.

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 ➢ The cash and cash equivalents were increased in the year 2018 as 214.16 and decreased
in the year 2021 as 108.82 where it stood at increased to 108.38and decreased in the year
2019 where it stood at 44.52.
Income Statement
Horizontal Analysis
Particulars 21-Mar 20-Mar 19-Mar 18-Mar 17-Mar
INCOME
Revenue From Operations
[Gross] 110.4 94.4 98.9 105.9 100.0
Revenue From Operations [Net] 113.5 97.1 101.7 108.9 100.0
Other Operating Revenues 193.7 263.7 100.0 145.3 100.0
Total Operating Revenues 114.9 97.3 102.1 109.3 100.0
Other Income 157.4 161.8 193.9 158.3 100.0
Total Revenue 116.2 99.2 104.9 110.8 100.0
EXPENSES
Cost Of Materials Consumed 62.4 54.7 50.4 54.7 48.8
Purchase Of Stock-In Trade 3.7 2.9 2.7 2.3 1.7
Operating And Direct Expenses 0.0 0.0 0.0 0.0 0.0
Changes In Inventories Of
FGWIP And Stock In Trade -1.6 -2.2 0.9 -2.3 -0.4
Employee Benefit Expenses 143.1 147.0 138.7 122.4 100.0
Finance Costs 351.7 308.1 353.6 137.3 100.0
Provsions and Contingencies 0.0 0.0 0.0 0.0 0.0
Depreciation And Amortisation
Expenses 202.4 201.8 170.9 134.5 100.0
Other Expenses 143.5 104.6 125.7 120.6 100.0
Total Expenses 134.6 116.0 115.5 112.8 100.0
Profit/Loss Before Exceptional,
ExtraOrdinary Items And Tax 84.1 68.4 93.4 102.0 100.0
Profit/Loss Before Tax 74.9 61.8 81.3 106.3 100.0
Tax Expenses-Continued
Operations

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Current Tax 59.9 56.2 62.6 107.4 100.0
Deferred Tax 0.0 -70.3 -36.5 230.6 100.0
Total Tax Expenses 56.2 48.2 56.4 115.1 100.0
Profit/Loss After Tax And
Before ExtraOrdinary Items 240.7 286.6 217.5 145.6 100.0
Profit/Loss From Continuing
Operations 84.1 68.4 93.4 102.0 100.0
Profit/Loss For The Period 94.9 77.3 105.4 115.2 100.0
INTERPRETATION

✓ The revenue from operations (net) of the company has remained stable from the base
year 2017 and it showed an increasing trend in 2021 as 113.5 it stands at 100 in the year
2017.
✓ The cost of materials consumed increased in the year 2017 to 2021 from 100 to 134.6.
✓ Finance cost was increasing in trend in the year 2017 till 2021 from 100 to 315.7 and
there is an increase in depreciation and amortization expenses in the year 2021 it stood
at 202.4. it shows the company has acquired new fixed and intangible assets.
✓ There is an increasing trend in the profit before tax it has increased from 100 in 2017to
240.7in 2021.
✓ The PAT has increased over the 5 years from 100 to 115.2

Balance Sheet
Vertical Analysis
Particulars 2017 2018 2019 2020 2021
SHAREHOLDER'S FUNDS
Equity Share Capital 0.17 0.19 0.22 0.24 0.29
Total Share Capital 0.17 0.19 0.22 0.24 0.29
Reserves and Surplus 77.65 78.38 79.95 78.09 73.54
Total Reserves and Surplus 77.65 78.38 79.95 78.09 73.54
Employees Stock Options 0.00 0.00 0.00 0.00 0.00
Total Shareholders Funds 77.82 78.57 80.17 78.32 73.83
NON-CURRENT LIABILITIES
Long Term Borrowings 0.00 0.00 0.00 0.00 0.00
Other Long Term Liabilities 2.16 1.70 1.37 0.64 0.59

20
Long Term Provisions 0.24 0.15 0.17 0.20 0.31
Total Non-Current Liabilities 3.76 3.38 3.57 3.25 2.38
CURRENT LIABILITIES 0.00 0.00 0.00 0.00 0.00
Short Term Borrowings 0.36 1.08 1.16 1.64 1.58
Trade Payables 11.04 11.80 8.25 10.84 12.31
Other Current Liabilities 6.08 4.55 6.24 5.44 9.40
Short Term Provisions 0.93 0.62 0.61 0.51 0.50
Total Current Liabilities 18.41 18.06 16.26 18.42 23.79
Total Capital And Liabilities 100.00 100.00 100.00 100.00 100.00
ASSETS
NON-CURRENT ASSETS
Tangible Assets 18.1 14.37 17.61 14.89 15.36
Intangible Assets 0.0 2.34 1.48 1.57 0.41
Capital Work-In-Progress 0.0 0.44 0.21 2.39 1.49
Intangible Assets Under Development 0.0 0.00 0.00 0.00 0.00
Fixed Assets 18.1 18.87 21.60 20.41 19.27
Non-Current Investments 45.0 19.41 25.99 39.11 51.96
Deferred Tax Assets [Net] 0.0 0.00 0.00 0.00 0.00
Long Term Loans And Advances 0.0 0.00 0.00 0.00 0.00
Other Non-Current Assets 2.2 1.21 1.20 1.70 2.15
Total Non-Current Assets 65.3 39.50 48.80 61.22 73.38
CURRENT ASSETS 0.0 0.00 0.00 0.00 0.00
Current Investments 113.6 120.51 69.07 20.27 34.73
Inventories 7.0 6.01 4.60 5.56 4.14
Trade Receivables 1.9 1.09 0.70 0.74 0.71
Cash And Cash Equivalents 16.8 40.05 23.70 26.04 12.73
Short Term Loans And Advances 4.2 3.15 0.00 0.01 0.01
OtherCurrentAssets 2.2 2.82 2.03 2.30 2.38
Total Current Assets 34.7 60.50 51.20 38.78 26.62
Total Assets 100.0 100.00 100.00 100.00 100.00

21
INTERPRETATION

✓ The share of equity share capital in the total capital and liabilities has decreased from
0.17 in 2017 to 0.29 in 2021.
✓ The total shareholders fund was decreasing in trend in the year 2017 it was 77.82 and
starts decreasing in the following year as 73.83.
✓ The share of reserves and surplus has steadily decreased. It stood at 77.65 in 2017 and
decreased to 73.54 in 2021
✓ The short-term borrowings were not much more in the year 2020 as 1.64. The total
capital and liabilities were same in all the 5 years as 100.
✓ In the year 2017 the fixed asset was 18.1 and decreased in the year 2017 as 18.1 and
slowly started increased in the year 2019 as 2160 in the year 2020 as 2041.
✓ The total assets of all the 5 years were remains stable as 100.
Profit and loss
Vertical Analysis
Particulars 21-Mar 20-Mar 19-Mar 18-Mar 17-Mar
INCOME
Revenue From Operations [Gross] 100.0 100.0 100.0 100.0 102.9
Revenue From Operations [Net] 100.0 100.0 100.0 100.0 100.0
Other Operating Revenues 0.6 0.9 0.3 0.5 0.3
Total Operating Revenues 101.7 100.7 100.9 100.8 100.5
Other Income 4.4 5.2 6.0 4.6 3.1
Total Revenue 106.0 105.9 106.9 105.4 103.6
EXPENSES 0.0 0.0 0.0 0.0 0.0
Cost Of Materials Consumed 56.9 49.9 46.0 49.9 44.6
Purchase Of Stock-In Trade 3.3 2.6 2.5 2.1 1.6
Operating And Direct Expenses 0.0 0.0 0.0 0.0 0.0
Changes In Inventories Of FGWIP
And Stock In Trade -1.5 -2.0 0.8 -2.1 -0.3
Employee Benefit Expenses 8.1 9.7 8.8 7.2 6.4
Finance Costs 0.2 0.2 0.2 0.1 0.1
Provsions and Contingencies 0.0 0.0 0.0 0.0 0.0

22
Depreciation And Amortisation
Expenses 4.5 5.2 4.2 3.1 2.5
Other Expenses 13.3 11.4 13.0 11.7 10.5
Total Expenses 84.9 85.5 81.3 74.1 71.6
Profit/Loss Before Exceptional,
ExtraOrdinary Items And Tax 16.0 15.2 19.8 20.2 21.6
Profit/Loss Before Tax 21.2 20.4 25.6 31.3 32.0
Tax Expenses-Continued Operations 0.0 0.0 0.0 0.0 0.0
Current Tax 5.2 5.7 6.0 9.7 9.8
Deferred Tax 0.0 -0.5 -0.2 1.4 0.7
Total Tax Expenses 5.2 5.2 5.8 11.1 10.5
Profit/Loss After Tax And Before
ExtraOrdinary Items 43.6 60.8 44.0 27.5 20.6
Profit/Loss From Continuing
Operations 16.0 15.2 19.8 20.2 21.6
Profit/Loss For The Period 16.0 15.2 19.8 20.2 19.1

INTERPRETATION

✓ The net revenue from operation was remains stable in all the 5 years. the revenue in the
year 2017 it was 100 and starts decreasing in the year 2021 as 100.
✓ The cost of materials consumed in the year 2017 as 56.9 and decreased in the year 2019
as 46.0 and increased 49.9 and increased in the year 2020 as 49.9.it shows that the
company is not able to produce raw materials at a lower cost now.
✓ The finance cost remains stable in all the 5 years with slight change.
✓ The profit before tax for the year 2017 as 16.0 it stars decrease in the year 2019 and
2019 15.2 and 19.8 and decrease in the year 2020 and 2021 as 20.2 and 19.
CAGR Calculations
Particulars 21-Mar 20-Mar 19-Mar 18-Mar 17-Mar CAGR
INCOME
Revenue From
Operations [Gross] 10127.07 8661.56 9073.55 9717.44 9175.16 2.50%

23
Revenue From
Operations [Net] 10127.07 8661.56 9073.55 9717.44 8920.86 3.22%
Other Operating
Revenues 58.79 80.03 79.62 44.10 30.35 17.97%
Total Operating
Revenues 10297.83 8720.35 9153.58 9797.06 8964.96 3.53%
Other Income 440.82 453.19 543.25 443.39 280.1 12.00%
Total Revenue 10738.65 9173.54 9696.83 10240.45 9245.06 3.81%
EXPENSES
Cost Of Materials
Consumed 5765.24 5052.57 4661.17 5053.96 4515.6 6.30%
Purchase Of Stock-In
Trade 339.03 266.1 250.68 213.58 161.76 20.32%
Operating And Direct
Expenses 0 0 0 0 0 0.00%
Changes In Inventories
Of FGWIP And Stock In
Trade -148.59 -205.9 84.09 -210.16 -33.87 44.73%
Employee Benefit
Expenses 821.02 843.23 795.78 702.44 573.68 9.38%
Finance Costs 18.78 16.45 18.88 7.33 5.34 36.94%
Provsions and
Contingencies 0 0 0 0 0 0.00%
Depreciation And
Amortisation Expenses 451.93 450.73 381.54 300.28 223.3 19.27%
Other Expenses 1348.88 983.1 1181.51 1134.13 940.16 9.44%
Total Expenses 8596.29 7406.28 7373.65 7201.56 6385.97 7.71%
Profit/Loss Before
Exceptional,
ExtraOrdinary Items
And Tax 1616.45 1315.76 1795.73 1961.85 1923.16 -4.25%
Profit/Loss Before Tax 2142.36 1767.26 2323.18 3038.89 2859.09 -6.96%

24
 Tax Expenses-
Continued Operations
Current Tax 525.91 492.7 548.86 941.94 877.35 -12.01%
Deferred Tax 0 -41.2 -21.41 135.1 58.58 -100.00%
Total Tax Expenses 525.91 451.5 527.45 1077.04 935.93 -13.42%
Profit/Loss After Tax
And Before
ExtraOrdinary Items 4,419.82 5,263.75 3,994.99 2,674.11 1,836.38 24.55%
Profit/Loss From
Continuing Operations 1616.45 1315.76 1795.73 1961.85 1923.16 -4.25%
Profit/Loss For The
Period 1616.45 1315.76 1795.73 1961.85 1703.11 -1.30%
INTERPRETATION:

✓ The company’s net revenue from operations has CAGR rate of 3.22% which means the
revenue of the company will continue to grow by 3.22% every year.
✓ Total operating revenue has grown by 3.53% over a period of 5 years.
✓ The cost of materials consumed has increased by 7.71% an increase in the company
spending on raw material.
✓ Profit after tax was decreased as -1.30% the basic earnings per share and diluted
earnings per share has CAGR 46%.

RATIO ANALYSIS

LIQUIDITY RATIO:

Particulars Formulas
2021 2020 2019 2018 2017
Current Assets /
Current Ratio Current Liabilities 1.88 3.35 3.15 2.10 1.12
(Cash + Recevables ) /
Quick Ratio Current Liabilities 1.01 2.28 1.50 1.45 0.57

INTERPETATION:

➢ Current ratio is at its lowest of 1.12 in 2017 then shows increased trend. It
stands at 1.88 in 2021.

25
 ➢ Quick ratio is at its lowest of 0.57 in 2017 then shows increased trend and
stands at 1.01 in 2021.

PROFITABILITY RATIO:

Particulars Formulas 2021 2020 2019 2018 2017

Operating profit
margin EBITDA / SALES 1.06 1.06 1.07 1.05 1.01
Net profit margin EBIT /SALES 21% 20% 26% 31% 32%
Profit after tax NET PROFIT / SALES 16% 15% 20% 20% 19%
INTERPETATION:

➢ In EBITDA MARGIN is more or less stable during the study period from (2017 -
2021). There is only a slight change.
➢ Even same in EBIT MARGIN as 32% in the year 2017 and it is decrease for 21% in
the year 2021.
➢ So, there is no much difference in this PROFITABILITY RATIO in all the years
(2017-2021) with some increase in the year 2019 and 2020 as 20% and decreased in
the year 2021 as16%.

EFFICIENCY RATIO:

Particulars Formulas 2021 2020 2019 2018 2017

Inventory
Sales / Inventory
Turnover Ratio 8.94 9.90 15.85 15.34 22.61
Assets Turnover Sales / Total
Ratio Assets 0.63 0.59 0.73 0.85 0.94
Receivables Sales /
Turnover Ratio Receivable 33.53 54.76 104.58 115.29 131.19
Payable Turnover
Sales/Payable
Ratio 5.66 5.04 8.83 7.87 7.61
Fixed Assets Sales / Total
Turnover Ratio Fixed Assets 3.46 3.15 3.37 4.18 4.86
INTERPETATION:

➢ Inventory turnover Ratio it is showing a decreasing trend as it has declined from 2017
as 22.61 in 2021 it shows as 8.94 shows the bad sign for the company.
➢ Payable turnover ratio is an activity ratio, measuring how efficiently a firm uses its
assets. Payable Turnover Ratio of the company as decreased in (2017) and (2018) as

26
 (17.61 to 7.87) and it as decreased in the year (2019) and (2020) as (5.04 to 8.83) and
again it as increased in the year (2021) when compared to (2019) and (2020) as (5.66).
➢ Receivables turnover ratio is an activity ratio, measuring how efficiently a firm uses its
assets. Receivables Turnover Ratio of the company as increased in (2017) as (131.19)
and decreased in 2018 as (115.49) and it as decreased in the year (2019) as (104.58)
and it is decreased in 2020 as 54.76 and again it as decreased in the year 2021 as (33.53)
when compared to (2020).
➢ Fixed Assets Turnover ratio of the company shows that it has a declined in 2017 to 4.86
from 2018 – 2020 it decreased from (4.18 to 3.15) and again declined in the year 2021
as 3.46.
➢ Assets Turnover Ratio of the company shows an increasing trend with some fluctuating
in the year 2017 it as its highest to 0.94 and in the year 2021 it stands at 0.63.
➢ Overall, this indicates company is efficiently managing its assets.

COVERAGE RATIO:

Particulars Formulas 2021 2020 2019 2018 2017

Interest Coverage
Ratio Ebit / Interest 86.07 79.99 95.11 267.65 360.14
(Ebitda -Current Tax ) /
Debt Service (Debt Repayment +
Coverage Ratio Interest) 4.52 4.61 3.67 2.91 2.82
(Debt - Cash & Cash
Net Debt To Ebitda Equivalents) / Ebitda -0.09 -0.47 -0.21 -0.18 0.00
INTERPETATION:

➢ As in INTEREST COVERAGE is fluctuating over the study period (2017 -2021) in

2017 is at is highest as 360.14 and stand at 86.07 in the year 2021.
➢ As in DEBT SERVICE COVERAGE RATIO reflects the relative claim of creditors
and shareholders against the assets of the firm. The company has not paid any debt to
the company in all the years (2017-2021) as (2.82 to 4.52). The company has
maintained the actions in good position.
STABILITY RATIO:

Particulars Formulas 2021 2020 2019 2018 2017

Long term
DEBT EQUITY Borrowing +
RATIO Short term 0.58% 1.82% 1.59% 1.92% 1.69%

27
 Borrowing) / Net
worth
TOTAL LONG
LONG TERM DEBT / TERM DEBT /
EQUITY EQUITY 2.23% 1.79% 1.62% 1.35% 0.83%

INTERPETATION:

➢ As in the DEBT EQUITY RATIO in all the years it is same it as only slights changes
in all the years in decreasing in trend from the year 2017 to 2021 as (1.69 to 0.58) t's a
signal that your company may be in financial distress and able to pay your debtors.
➢ The long-term debt has increased from the year 2017 till the year 2021 as 0.83 to 2.23
because it provides some financial leverage if the company is able to generate enough
cash flows.

RETURN RATIO:
Particulars Formulas 2021 2020 2019 2018 2017
Net Profit After
Minority Interest / Net
Return On Equity Worth 0.01 -3.86 -9.72 -10.96 -49.75
Return On Total
Assets Ebit / Total Assets 0.29 0.15 0.28 0.44 0.76
Net Profit / Net Worth
Return On Capital (Share Capital +
Employed Reserve And Surplus) 0.89 0.75 1.70 1.56 1.60
INTERPETATION:

➢ The return on equity was 2017 as -49.75% and in the year 2018 it was slight increase
as -9.72% and in the year 2019 it was increased as -3.86% and in the year 2020 and
2021 decreased and it was stable as 0.01%.
➢ The return on total assets in the year 2017 it was 0.76% and in the year 2018 it was
slight decrease as 0.44% and in the 2019 it was 0.28% and in the year 2020 and 2021 it
was slight decrease and it stayed stable as 0.29%.
➢ The return on capital employed in the year 2017 as 1.60% and in the year 2018
decreased as 1.56% and in the year 2019 starts increased as 1.70% and in the year 2020
and 2021 it was decreased and stable as 0.89%

28
DUPONT ANALYSIS:

Particulars 2021 2020 2019 2018 2017

ROE 0.17 0.17 0.32 0.46 0.59
NPM 0.17 0.16 0.20 0.23 0.22
ASSET
TURNOVER 0.63 0.59 0.73 0.85 0.94
LEVERAGE
(GEARING) 0.17 0.19 0.22 0.24 0.29
INTERPETATION:

➢ The ROE of the company was started increasing in the year 2017 it was (0.59) and it
decreases in the year 2021 as (0.17)
➢ The Net profit margin also started increases in the year 2017 it was (0.22) and its
decreases in the year 2021 as (0.17)
➢ There is a slight increase in the asset turnover ratio in the year 2017 it was (1.38) and
in the year 2021 as (1.78)
➢ There is a increase in the leverage also in the year 2017 as (0.29) and in the year 2021
it was Increased as 0.17.
CASH CONVERSION CYCLE:

Particulars 2021 2020 2019 2018 2017

INVENTORY DAYS 40.81 36.86 23.02 23.79 16.15

RECEVABLES DAYS 10.89 6.66 3.49 3.17 2.78

PAYABLE DAYS 64.45 72.40 41.34 46.35 47.95

CASH CONVERSION
CYCLE -60.70 -66.87 -34.74 -38.84 -42.14
INTERPETATION:

➢ Inventory days shows an increasing trend during the study period 2017 to 2021 as
16.15 days to 40.81 days.

➢ The receivables days of the company is high which indicates the company can collect
payments from its customers latter in the year 2017 it was 2.78 days and in the year
2021 it was 10.89 days.

29
➢ The payable days have increased from 49.95 days during 2017 to 60.45s days during
FY 21.
➢ The cash conversion cycle or the net operating cycle of the company is showing in
2017 as -42.14 days and in the year 2018 and 2019 and 2020 it was gone to negative as
-38.84 & -34.74 & -66.87 days and in the year 2021 it was come to positive as 60.70
days. This cycle is lower and indicates that the company can quickly convert its
inventory into sales and receive cash from sales. So, the Cash conversion cycle of the
company is acceptable.

30
 CHAPTER IV

FINANCIAL MODELING: FINANCIAL STATEMENTS

FORECASTING

Financial Modelling:

Financial Modelling is the task of building an abstract representation (a model) of a real world
financial situation. This is a mathematical model designed to represent (a simplified version
of) the performance of a financial asset or portfolio of a business, project, or any other
investment. Financial modelling helps to Financial Statement Forecasting with available data
of previous years. Thus, Financial Modelling is prediction of future cash flows inside the
organisation.

Here, we have taken the previous years data of Indigo Airlines for the last three years (FY 17,
FY 18, FY 19). And with available data we forecasted the cash flows for the next two years

Revenue
Drivers FY17 FY18 FY19 FY20 FY21 FY22 FY23 FY24
Installed
Capacity 85,000 1,30,000 90,000 1,30,000 1,40,000 1,50,000 1,60,000 1,70,000
Vehicles
Sales -
Total 2,70,00,000 2,90,00,000 3,63,00,000 5,26,00,000 6,10,00,000 13,00,000 13,00,000 13,00,000
Revenue
from
Operations 10,127 8,662 9,074 9,717 8,921 192 194 196
Price per
Vehicle 3,751 2,987 2,500 1,847 1,462 1,477 1,492 1,507

Particulars FY17 FY18 FY19 FY20 FY21 FY22 FY23 FY24

Cost of Material 5,765 5,053 4,661 5,054 4,516 129 117 114
Purchases of Stock-in-
Trade 339 339 339 339 339 7 7 7
3.3% 3.9% 3.7% 3.5% 3.8% 3.7% 3.7% 3.7%
Change in Inventories
of FG,WIP (149) (206) 84 (210) (34) (1) (2) (1)
-1.5% -2.4% 0.9% -2.2% -0.4% -0.5% -1.0% -0.6%

31
Employee Benefits
Expenses 821 843 796 702 574 14 14 13
8.1% 9.7% 8.8% 7.2% 6.4% 7.5% 7.0% 7.0%

Other Expenses 1,349 983 1,182 1,134 940 23 22 22

13.3% 11.4% 13.0% 11.7% 10.5% 11.7% 11.3% 11.2%
Depreciation And
Amortisation Expenses 452 452 452 452 452 9 9 9
4.5% 5.2% 5.0% 4.7% 5.1% 4.9% 4.9% 4.9%
Cost of Material per
vehicles 2,135 1,742 1,284 961 740 995 899 878
Cost of Material 57% 58% 51% 52% 51% 51% 52% 53%

Working
Capital
Drivers FY17 FY18 FY19 FY20 FY21
Short Term
Borrowings Rs Crore 151 187 144 157 59

Trade Payables Rs Crore 1,172 1,234 1,028 1,718 1,788

Other Current
Liabilities Rs Crore 895 620 776 663 986
Short Term
Provisions Rs Crore 47 58 76 90 151

Inventories Rs Crore 395 633 572 875 1,132

Trade
Receivables Rs Crore 68 84 87 158 302
Short Term
Loans and
Advances Rs Crore 1 1 0 459 677
Other Current
Assets Rs Crore 2,535 4,415 6,375 8,808 5,619
Working
Capital as %
of Sales
Short Term
Borrowings as % of sales 1.5% 2.2% 1.6% 1.6% 0.7%
Trade Payables as % of sales 11.6% 14.2% 11.3% 17.7% 20.0%
Other Current
Liabilities as % of sales 8.8% 7.2% 8.6% 6.8% 11.1%
Short Term
Provisions as % of sales 0.5% 0.7% 0.8% 0.9% 1.7%
Inventories as % of sales 3.9% 7.3% 6.3% 9.0% 12.7%
Trade
Receivables as % of sales 0.7% 1.0% 1.0% 1.6% 3.4%
Short Term
Loans and
Advances as % of sales 0.0% 0.0% 0.0% 4.7% 7.6%
Other Current
Assets as % of sales 25.0% 51.0% 70.3% 90.6% 63.0%

32
In terms of
days worth of
sales
Short Term in terms of
Borrowings days 5.4 7.9 5.8 5.9 2.4
in terms of
Trade Payables days 42.2 52.0 41.3 64.5 73.2
Other Current in terms of
Liabilities days 32.3 26.1 31.2 24.9 40.3
Short Term in terms of
Provisions days 1.7 2.4 3.1 3.4 6.2
in terms of
Inventories days 14.2 26.7 23.0 32.9 46.3
Trade in terms of
Receivables days 2.5 3.6 3.5 5.9 12.4
Short Term
Loans and in terms of
Advances days 0.0 0.1 0.0 17.2 27.7
Other Current in terms of
Assets days 91.4 186.1 256.4 330.9 229.9

(in Rs. Crs) FY17 FY18 FY19 FY20 FY21 FY22 FY23 FY24
Liabilities
ShareHolder
Funds

Share Capital 27 27 27 27 27 27 27 27
Reserves &
Surplus 7,003 8,891 9,954 11,411 12,581 11,864 11,158 10,454
Total
Shareholder's
Funds 7,030 8,919 9,981 11,438 12,608 11,891 11,186 10,482
Non Current
Liabilities
Long Term
Borrowings 0 0 0 0 0 0 19 38
Deferred Tax
Liabilities (Net) - - - - - - - -
Other Long
Term Liabilities 350 97 104 239 105 105 105 105
Long Term
Provisions 29 73 171 248 350 350 350 350
Total Non
Current
Liabilities 227 370 444 492 610 455 474 493
Current
Liabilities
Short Term
Borrowings 151 187 144 157 59 2 2 2

Trade Payables 1,172 1,234 1,028 1,718 1,788 31 35 36

33
Other Current
Liabilities 895.33 620 776 663 986 17 17 19
Short Term
Provisions 47 58 76 90 151 2 2 3
Total Current
Liabilities 2,265 2,098 2,025 2,629 2,983 53 57 59

Total Liabilities 9,522 11,387 12,450 14,559 16,201 12,399 11,717 11,034
Assets

Non-Current Assets (Net Assets)

Tangible Assets 5,484 7,311 9,577 10,608

Intangible Assets 46 210 223 183

Capital Work in
Progress 863 611 1,942 2,621
Total Fixed
Assets 6,392 8,132 11,741 13,412 14,142 4,053 (6,036) (16,126)

Non Current
Investments 1,111 1,393 1,849 1,305 9,817 9,817 9,817 9,817
Long Term
Loans and
Advances 1,255 1,672 1,279 1,638 1,349 1,349 1,349 1,349
Other Non
Current Assets 47 26 895 9 44 44 44 44
Current Assets
Current
Investments 3,996 4,754 5,230 8,813 2,996 2,996 2,996 2,996

Inventories 1,415 1,797 1,841 1,706 2,615 18 20 21

Trade
Recievables 825 938 1,424 1,414 1,070 4 5 5
Cash and Bank
Balances 2,509 2,436 775 630 18 11,490 20,887 30,299
Short Term
Loans and
Advances 684 778 1,115 1,251 1,173 8 11 11
Other Current
Assets 193 376 540 358 326 143 148 140
Total Current
Assets 9,620 11,079 10,925 14,172 8,198 14,659 24,065 33,472

Total Assets 18,425 22,302 26,688 30,536 33,550 29,922 29,239 28,556

(in Rs. Crs) FY17 FY18 FY19 FY20 FY21 FY22

Revenue
from 9,073.55 10,127.07
Operations 9,175 9,717 8,661.56 192 194 196

34
Less: Excise
Duty - 0 0 0 0 - - -

Net Sales 9,175 8,920.86 9,717.44 9,073.55 9,073.55 192 194 196
Other
Operating
Revenue 769 8,964.96 9,797.06 9,153.58 8,720.35 8,720 8,720 8,720
Other
Income 509 280.1 443.39 543.25 453.19 453 453 453
Total
Operating
Revenue 9,945 17,886 19,515 18,227 17,794 8,912 8,914 8,916
Expenses
Cost of
Material 27,142 4,515.60 5,053.96 4,661.17 5,052.57 129 117 114
Purchases of
Stock-in-
Trade 1,278 161.76 213.58 250.68 266.1 7 7 7
Change in 84.09 -205.9
Inventories
of FG,WIP (56) -33.87 -210.16 (1) (2) (1)
Employee
Benefits
Expenses 704 573.68 702.44 795.78 843.23 14 14 13
Other
Expenses 3,938 4,165 5,774 5,922 6,643 23 22 22
Finance
Costs (25) (42) (44) (34) 9 9 9
Total
Operational
Expenses 32,981 9,340 11,490 11,680 12,599 182 166 164

EBIDTA (23,036) 8,546 8,025 6,547 5,195 8,731 8,748 8,752

EBIDTA
Margins -251.1% 95.8% 82.6% 72.2% 57.3% 4546.8% 4510.6% 4468.0%
Depreciation
&
Amortization
Expense 223 9,717 9,074 8,662 10,127 10,127 10,127 10,127

EBIT (23,259) (1,171) (1,049) (2,114) (4,932) (1,396) (1,379) (1,375)

Finance
Costs 5 9,717 9,074 8,662 10,127 0 2 4

EBT (22,756) (10,609) (9,679) (10,232) (14,606) (943) (928) (926)

Taxes 877 942 549 493 526 (226) (223) (222)

-4% -9% -6% -5% -4% 24% 24% 24%

PAT (23,633) (11,551) (10,228) (10,725) (15,132) (717) (705) (704)

35
 CHAPTER V

EQUITY VALUATION

The main purpose of Equity Valuation is to estimate a value for a firm or its security. A key
assumption of any fundamental value technique is that the value of the security (in this case an
equity or a stock) is driven by the fundamentals of the firm’s underlying business at the end of
the day. Equity value is the value of a company available to the owners or shareholders. It is
the enterprise value plus all the cash and cash equivalents, short and long term investments,
and less all short term debt, long term debt, and minority interests.

Mainly we are using three methods for calculating Equity Valuation for a company, they are:

• Discounted Cash Flow method (DCF)

• Free Cash Flow to Equity (FCFE)
• Free Cash Flow to Firm (FEFF)

Here, we are using the third method, which is Free Cash Flow to Firm represents the amount
of cash flow from operations available for distribution after depreciation expenses, taxes,
working capital, and investments are accounted for and paid. FCFF is essentially a
measurement of a company’s profitability after all the expenses and reinvestments. It is one of
the many benchmarks used to compare and analyse a firm’s financial health.

FCFF = EBIT * (1 – tax) + depreciation – Capex – Changes in working Capital

FCFF CALCULATION
2021
EBIT 4,419.82
EBIT (1- t) 3,093.87
Capex 0
Depreciation 451.93
Changes in Working Capital -148.59
FCFF 3,694.39

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Calculating P/E Ratio

P/E Ratio = Share Price / EPS

P/E RATIO
Share Price 2690.45
EPS 61
Earnings 525.91
P/E RATIO 44.11

Calculating P/B Ratio

P/B Ratio = Share Price / BV

P/B RATIO
Share Price 2,690.45
BV per Share (SC +
12,608.00
RS)
P/B RATIO 0.21

Calculating P/S Ratio

P/S Ratio = Share Price / Sales Revenue

P/S RATIO
Share Price 2,690.45
-Sales Revenue 10,127.07
P/S RATIO 0.27
EV/EBITDA Ratio Calculation
EV = Market Capitalization + Debt + Cash

P/S RATIO
Share Price 2,001.49
-Sales Revenue 52,363.46
P/S RATIO 26.16

Interpretations:
The price/earnings ratio is the ratio of a company’s price to the company’s earnings per share.
The ratio is used for valuing companies and to find out whether they are overvalued or
undervalued. Generally, speaking, a high P/E ratio indicates that investors expect higher
earnings. However, a stock with a high P/E ratio is not necessarily a better investment than one
with a lower P/E ratio, as a high P/E ratio can indicate that the stock is overvalued. Here, P/E

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ratio is high(44.11). P/B ratio used when EPS is not available. P/B ratio > 1 is good, here it is
0.21. So the company is performing high. P/S ratio is used when there is no EPS and BV of the
firm. Here, we use sales. P/S > 1 is good. It shows 0.27. So, it is less. EV/EBITDA is a ratio
that compares a company’s Enterprise Value (EV) to its Earnings before interest, Taxes,
depreciation & Amortization (EBITDA). EBITDA focuses on the operating decisions of a
business because it looks at the business profitability from core operations before the impact
of capital structure. EV/EBITDA ratio shows Positive, it is good situation for the company.
The Equity valuation of Eicher motors shows the above results. As per the results, P/E ratio
and EV/EBITDA shows positive numbers. And P/B ratio and P/S ratios are less than 1.
According to the equity valuation ratios the company performance is good. They need to
sustain situation. And this is right time to buy shares of Eicher Motors.

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 CHAPTER VI
FINDINGDS, SUGGESTIONS AND CONCLUSION
FINDINGDS

➢ In horizontal analysis the total shareholder fund increased in the year 2018 to 90.70 from
that of the base year and decreased in the year 2019 from 90.70 to 55.76 and increased
in the year 2020 as 70.74 and 2021 as 55.76.
➢ In horizontal analysis the revenue from operations (net) of the company has remained
stable from the base year 2017 and it showed an increasing trend in 2021 as 113.5 it
stands at 100 in the year 2017.
✓ In CAGR profit after tax was decreased as -1.30% the basic earnings per share and
diluted earnings per share has CAGR 46%.
➢ There is no much difference in this PROFITABILITY RATIO in all the years (2017-
2021) with some increase in the year 2019 and 2020 as 20% and decreased in the year
2021 as16%.
➢ Current ratio is at its lowest of 1.12 in 2017 then shows increased trend. It stands at
1.88 in 2021. it should be maintained.
➢ Installed Capacity is increased trend and it should be maintained.
➢ The net revenue from operation was remains stable in all the 5 years. the revenue in the
year 2017 it was 100 and starts decreasing in the year 2021 as 100
➢ Assets Turnover Ratio of the company shows an increasing trend with some fluctuating
in the year 2017 it as its highest to 0.94 and in the year 2021 it stands at 0.63.
➢ Inventory turnover Ratio it is showing a decreasing trend as it has declined from 2017
as 22.61 in 2021 it shows as 8.94 shows the bad sign for the company
➢ As in the DEBT EQUITY RATIO in all the years it is same it as only slights changes
in all the years in decreasing in trend from the year 2017 to 2021 as (1.69 to 0.58) t's a
signal that your company may be in financial distress and able to pay your debtors.
➢ Inventory days shows an increasing trend during the study period 2017 to 2021 as
16.15 days to 40.81 days.
➢ The company’s net revenue from operations has CAGR rate of 3.22% which means the
revenue of the company will continue to grow by 3.22% every year.

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SUGGESTIONS:
➢ The company has to increase its net profit in order to increase the shareholders’ funds
as well as to maintained the reserves and surplus.
➢ The profitability position of the company can be utilized in a better or other effective
purpose.
➢ It is advisable to take more efforts to increase the overall efficiency of the business.
➢ They should have good systematic plan on utilization of the resources provided to them
and should use its available resources to its best
➢ The company has to make an increasing trend in growth of net profit and it should be
maintained.

CONCLUSION:

Eicher Motors Limited is an Indian multinational automotive company in the world. The
company shows a fluctuating trend in its financial position over the years. A steady increase
cannot be seen but also it never moves to a loss-making situation. Managerial issues and the
pandemic year may be the reason for the fluctuations. The company is trying to solve these
issues but hasn’t reached in its fullest. More effort should be given to protect the smooth
functioning of the company. It can be concluded that company’s liquidity and solvency position
is satisfactory and at the same time the company needs to improve its profitability position.

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 ANNEXURE
BALANCE SHEET OF NESTLE COMPANY FOR 2017 – 2021:
Eicher motors
Consolidated Balance Sheet
21-Mar 20-Mar 19-Mar 15-Dec 17-Mar
EQUITIES AND LIABILITIES
SHAREHOLDER'S FUNDS
Equity Share Capital 27.34 27.33 27.3 27.28 27.26
Total Share Capital 27.34 27.33 27.3 27.28 27.26
Reserves and Surplus 12580.66 11410.75 9953.63 8891.44 7002.81
Total Reserves and Surplus 12580.66 11410.75 9953.63 8891.44 7002.81
Employees Stock Options 0 0 0 0 0
Total Shareholders Funds 12608 11438.08 9980.93 8918.72 7030.07
NON-CURRENT LIABILITIES
Long Term Borrowings 0 0 0 0 0
Other Long Term Liabilities 350.44 247.66 170.87 73.26 55.72
Long Term Provisions 39.13 22.56 21.2 23 29.12
Total Non-Current Liabilities 609.63 491.72 444.22 370.15 226.92
CURRENT LIABILITIES
Short Term Borrowings 58.84 157.41 144.43 186.76 150.84
Trade Payables 1788.08 1718.13 1027.65 1234.05 1171.86
Other Current Liabilities 985.79 663.08 776.28 619.5 895.33
Short Term Provisions 150.65 90.19 76.21 57.65 47.21
Total Current Liabilities 2983.36 2628.81 2024.57 2097.96 2265.24
Total Capital And Liabilities 16200.99 14558.61 12449.72 11386.83 9522.23
ASSETS
NON-CURRENT ASSETS
Tangible Assets 2929.06 2092.13 2192.69 1695.58 1463.03
Intangible Assets 0 341.17 184.83 179 38.66
Capital Work-In-Progress 0 63.91 26.75 272.14 141.89
Intangible Assets Under Development 0 0 0 0 0
Fixed Assets 2929.06 2747.59 2689.69 2324.32 1834.9
Non-Current Investments 7295.89 2826.06 3236.27 4453.71 4947.44
Deferred Tax Assets [Net] 0 0 0 0 0
Long Term Loans And Advances 0 0 0 0 0
Other Non-Current Assets 356.7 176.48 149.17 193.49 204.85
Total Non-Current Assets 10581.65 5750.13 6075.13 6971.52 6987.19
CURRENT ASSETS
Current Investments 18,396.91 17,543.90 8,599.03 2,308.39 3,307.21
Inventories 1132.4 874.6 572.35 633.38 394.64
Trade Receivables 302.04 158.16 86.76 84.29 68

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Cash And Cash Equivalents 2722.47 5830.36 2950.59 2965.29 1212
Short Term Loans And Advances 676.79 459.16 0.12 1.29 0.7
OtherCurrentAssets 360.95 410.12 252.27 262.25 226.3
Total Current Assets 5619.34 8808.48 6374.59 4415.31 2535.04
Total Assets 16200.99 14558.61 12449.72 11386.83 9522.23

PROFIT AND LOSS OF NESTLE COMPANY FOR 2017 – 2021:

Eicher motors
Consolidated Profit & Loss account
21-Mar 20-Mar 19-Mar 18-Mar 17-Mar
INCOME
Revenue From Operations [Gross] 10127.07 8661.56 9073.55 9717.44 9175.16
Revenue From Operations [Net] 10127.07 8661.56 9073.55 9717.44 8920.86
Other Operating Revenues 58.79 80.03 79.62 44.10 30.35
Total Operating Revenues 10297.83 8720.35 9153.58 9797.06 8964.96
Other Income 440.82 453.19 543.25 443.39 280.1
Total Revenue 10738.65 9173.54 9696.83 10240.45 9245.06
EXPENSES
Cost Of Materials Consumed 5765.24 5052.57 4661.17 5053.96 4515.6
Purchase Of Stock-In Trade 339.03 266.1 250.68 213.58 161.76
Operating And Direct Expenses 0 0 0 0 0
Changes In Inventories Of FGWIP And
Stock In Trade -148.59 -205.9 84.09 -210.16 -33.87
Employee Benefit Expenses 821.02 843.23 795.78 702.44 573.68
Finance Costs 18.78 16.45 18.88 7.33 5.34
Provsions and Contingencies 0 0 0 0 0
Depreciation And Amortisation Expenses 451.93 450.73 381.54 300.28 223.3
Other Expenses 1348.88 983.1 1181.51 1134.13 940.16
Total Expenses 8596.29 7406.28 7373.65 7201.56 6385.97
Profit/Loss Before Exceptional,
ExtraOrdinary Items And Tax 1616.45 1315.76 1795.73 1961.85 1923.16
Profit/Loss Before Tax 2142.36 1767.26 2323.18 3038.89 2859.09
Tax Expenses-Continued Operations
Current Tax 525.91 492.7 548.86 941.94 877.35
Deferred Tax 0 -41.2 -21.41 135.1 58.58
Total Tax Expenses 525.91 451.5 527.45 1077.04 935.93
Profit/Loss After Tax And Before
ExtraOrdinary Items 4,419.82 5,263.75 3,994.99 2,674.11 1,836.38
Profit/Loss From Continuing Operations 1616.45 1315.76 1795.73 1961.85 1923.16
Profit/Loss For The Period 1616.45 1315.76 1795.73 1961.85 1703.11

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REFERENCE LINKS
www.moneycontrol.com

www.wikipedia.com\

https://www.eicher.in/

https://www.ibef.org/industry/india-automobiles

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