A

PROJECT ON

‘FINANCIAL STATEMENTS ANALYSIS OF ITC LTD. ’

SUBMITTED TO:

RASHTRASANT TUKADOJI MAHARAJ NAGPUR UNIVERSITY

NAGPUR.

SUBMITTED IN PARTIAL FULFILMENT OF THE REQUIREMENTS FOR THE AWARD OF

BACHELOR OF BUSINESS ADMINISTRATION (BBA)

SUBMITTED BY:

SAISHREE DEVARKONDA

UNDER THE GUIDANCE OF:

Dr. JIGISHA NAIDU.

Ms.ELISHA JOSEPH.

2022-23

DEPARTMENT OF COMMERCE, MANAGEMENT & COMPUTERS

HISLOP COLLEGE , NAGPUR

INDEX
 INTRODUCTION

Finance is defined as the provision of money when it is required. Every enterprise

needs finance to start and carry out its operation. Finance is the life blood of an
organization. So finance should be managed effectively. Financial statements are
prepared primarily for decision making. Financial statement Analysis refers to the
process of determining financial strength and weakness of the firm by properly
establishing strategic relationship between the items of the balance sheet and profit
and loss account.There are various methods and techniques used in analyzing
financial statement such as comparative statements, trend analysis, common size
statement, fund flow and cash flow analysis and ratio analysis. The analysis of
financial statement is used for decision making by various parties. Financial
statement analysis is the process of reviewing and analyzing the company's
financial statements to make better economic decisions. It is used by a variety of
stakeholders. Every management aims to utilize its funds in a best possible and
profitable way. Profitability is a barometer for measuring efficiency and economic
prosperity of a business enterprise. To know whether the organization strategies is
profitable or not, it is necessary to have an analysis of financial statements of the
company.

Financial statement analysis is the process of analyzing a company's financial

statements for decision-making purposes. External stakeholders use it to
understand the overall health of an organization as well as to evaluate financial
performance and business value. Internal constituents use it as a monitoring tool
for managing the finances. Financial statement analysis is used by internal and
 external stakeholders to evaluate business performance and value. Financial
accounting calls for all companies to create a balance sheet, income statement, and
cash flow statement which form the basis for financial statement analysis.
Horizontal, vertical, and ratio analysis are three techniques analysts use when
analyzing financial statements.

Objectives of Financial Statement Analysis

The main objectives of financial statement analysis of any given entity are as
follows:

 To review the company’s performance over the past years. This review helps in
deciding whether to invest in the company. The analysis is done by examining the
trend of past sales, debt-equity structure, profitability, cash flows, return on
investment, and operating expenses.
 To examine the current status of the company, i.e., to find the operating
performance and earning capacity of the company.
 To predict the future profitability of the company by analysing its financial
statement. We can find the probability of failure of the company or bankruptcy by
analysing these reports.
 The analysis of these statements helps the bank and authorities to decide on giving
the loan to the company by determining the credit risk.

Significance of Financial Statements

 For Finance Manager: A finance manager assesses and analyses the financial
statements to understand the managerial effectiveness and operational efficiency of
the company. This statement also helps them analyse the financial strength and
 weakness of the particular entity. A finance manager analyses the position of the
entity and the types of assets owned by it. They also easily determine the liabilities
and the current cash positions of the company. They calculate the debts of the
company as well. After all these analyses, the finance manager can take a proper
and adequate decision for the company.
 For Top Management: The analysis of the financial statement is crucial for the top
management of the company. The financial analysis helps them understand the
best use of available resources by the firm, the financial condition of the firm, and
the determination of the company’s success. They can also conclude the
individual’s performance and evaluate the internal control of the system.
 For Trade Payables: The analysis of financial statements helps the trade payables
to determine the company’s capability to fulfil the short- and long-term
obligations. It also helps in the determination of the company to meet any short-
term debts and other claims of creditors over a brief period.
 For Lenders: The lenders or the long-term suppliers of the firm analyse these
financial statements concerning the firm’s long-term solvency and survival in the
future. They help in the determination of the company’s ability to generate cash to
clear the interest and principal amount, and also in determining its experience to
generate the probability of the future success rate. These statements help the
lenders to also determine the credit risk and loan if sanctioned to the firm or
company.
 For Labour Unions: Labour Unions analyse the financial statement to conclude
whether they can apply for an increase in their wages according to the company’s
profitability. They may also assess if the firm can elevate the productivity or the
price of their services to absorb their increment in wages.
 For Investors: To ensure the profitability and security of the invested money, the
investors require the annual report of the company to analyse any bankruptcy or
failure to fulfil debts. In case of such mishappening, the investors shall take
different measures to prevent loss. They may help the company in paying off its
debts.

The tools which we are going to use here for financial statement analysis are:

 Ratio Analysis
 Comparative Balance Sheet
 Common Size Balance Sheet

1. RATIO ANALYSIS

By its definition, ratio analysis is a process to scrutinise and compare financial data
of a company using its financial statements. This method actively uses the data
from financial statements to calculate the financial health and performance of a
company. Therefore, this process eliminates the need of analysing and comparing
line items from each financial statement.
This prevailing method primarily helps the management of a company as well as
its investors to gather information on its growth percentage. Besides, this method
also clarifies the operational drawbacks of an organisation. As a result, the
management can take suggestions from the ratio analysis to take the right course of
financial action. Thereby, a company benefits largely from this widely prominent
method.
Companies use a wide array of ratio analysis types to understand the financial
condition and position within a sector. As a result, they can gather effective
information on the level of cash flow circulating within the organisation.
Therefore, these types of ratio analysis helps an investor know about an
institution’s solvency, profitability, and asset liquidity.

2. COMPARATIVE BALANCE SHEET

A comparative statement is a document used to compare a particular financial

statement with prior period statement. Previous financials are presented alongside
the latest figures in side-by-side columns , enabling investors to identify trends ,
track a company’s progress and compare it with industry rivals.

A comparative balance sheet presents side-by-side information about an entity's

assets, liabilities, and shareholders' equity as of multiple points in time. For
example, a comparative balance sheet could present the balance sheet as of the
end of each year for the past three years.

Objectives of comparative balance sheet include:

 It is used to show capital structure improvements over a period of time.

 It helps in identifying trends in accompany that help a company makes an
informed decision by providing the context required by the company.
 It shows the financial health of a company by providing an overview of
how much a company owns and how much it owes.
 3. COMMON SIZE BALANCE SHEET

A common size balance sheet is a balance sheet that displays both the numeric
value and relative percentage for total assets, total liabilities, and equity accounts.

Common size balance sheets are used by internal and external analysts and are
not a reporting requirement of generally accepted accounting principles (GAAP).

Common size balance sheets show numeric values and their relative percentages
for total assets, liabilities, and equity accounts.This form of balance sheet is not
required for generally accepted accounting principles (GAAP) reporting.The
advantages of common size balance sheets are that they allow for quick
comparison across line items against their total value, such as a single asset
compared to the value of total assets.Common size balance sheets also allow
internal and external stakeholders to analyze trend lines and see any major
changes that may have occurred in the balance sheet.

Objectives of Common Size Balance Sheet

Different objectives of a Common-size Balance Sheet are as follows:

1. The basic objective of a Common-size Balance Sheet is to analyse the changes

in the individual items of a Balance Sheet.

2. It is also prepared to see the trends of different items of assets, equity and
liabilities of a Balance Sheet.

3. Lastly, it is prepared for the assessment of the financial soundness of the

organisation and to understand its financial strategy
Comparative vs Common Size Statement

comparitive financial statements present financial information for several years

side by side in the form of absolute values, percentages or both.

Common size financial statements present all items in percentage terms where
balance sheet items are presented as percentages of assets and income statement
items are presented as percentages of sales.

Purpose

⭕ Comparative statements are prepared for internal decision making purpose

⭕ Common size statements prepared for reference purpose for stakeholders

Usefulness

⭕ Comparative statements become more useful when comparing company results

with previous financial years.

⭕ Common size statements can be used to compare company results with similar

companies.
 COMPANY PROFILE

ITC is one of India's foremost private sector companies and a diversified

conglomerate with businesses spanning Fast Moving Consumer Goods, Hotels,
Paperboards and Packaging, Agri Business and Information Technology. The
Company is acknowledged as one of India's most valuable business corporations
with a Gross sales value of ₹ 90,104 crores and Net Profit of ₹ 15,058 crores (as on
31.03.2022). ITC was ranked as India's most admired company, according to a
survey conducted by Fortune India, in association with Hay Group
Group.

ITC Limited is an Indian company, headquartered in Kolkata, West Bengal, which

deals in consumer goods, hotels, paperboards and packaging, agri business and
information
ion technology. The company was established in 1910 as the Imperial
Tobacco Company of India Limited. Later in 1970, it was renamed as the Indian
Tobacco Company Limited and further to I.T.C. Limited in 1974.

NAME
Established in 1910 as the Imperial Tobacco Company of India Limited, the
company was renamed as the India Tobacco Company Limited in 1970 and later to
I.T.C. Limited in 1974. The company now stands renamed ITC Limited, where
"ITC" today is no longer an acronym

HISTORY AND BACKGROUND

Established in 1910, ITC Limited is a diversified conglomerate with businesses

spanning Fast Moving Consumer Goods comprising Foods, Personal Care,
Cigarettes and Cigars, Education & Stationery Products, Incense Sticks and Safety
Matches; Hotels, Paperboards and Packaging, Agri Business and Information
Technology. The Company was incorporated on August 24, 1910 under the name
Imperial Tobacco Company of India Limited. As the Company's ownership
progressively Indianised, the name of the Company was changed to India Tobacco
Company Limited in 1970 and then to I.T.C. Limited in 1974. In recognition of the
ITC's multi-business portfolio encompassing a wide range of businesses, the full
stops in the Company's name were removed effective September 18, 2001. The
Company now stands rechristened 'ITC Limited,' where 'ITC' is today no longer an
acronym or an initialised form.

A Modest Beginning

The Company's beginnings were humble. A leased office on Radha Bazar Lane,
Kolkata, was the centre of the Company's existence. The Company celebrated its
16th birthday on August 24, 1926, by purchasing the plot of land situated at 37,
Chowringhee, (now renamed J.L. Nehru Road) Kolkata, for the sum of Rs
310,000. This decision of the Company was historic in more ways than one. It was
to mark the beginning of a long and eventful journey into India's future. The
Company's headquarter building, 'Virginia House', which came up on that plot of
land two years later, would go on to become one of Kolkata's most venerated
landmarks.
1925: Packaging and Printing: Backward Integration
Though the first six decades of the Company's existence were primarily devoted to
the growth and consolidation of the Cigarettes and Leaf Tobacco businesses, ITC's
Packaging & Printing Business was set up in 1925 as a strategic backward
integration for ITC's Cigarettes business. It is today India's most sophisticated
packaging house.
1975: Entry into the Hospitality Sector - A 'Welcom' Move
The Seventies witnessed the beginnings of a corporate transformation that would
usher in momentous changes in the life of the Company. In 1975, the Company
launched its Hotels business with the acquisition of a hotel in Chennai which was
rechristened 'ITC-Welcomgroup Hotel Chola' (now renamed Welcomhotel by
ITC Hotels, Cathedral Road, Chennai). The objective of ITC's entry into the
hotels business was rooted in the concept of creating value for the nation. ITC
chose the Hotels business for its potential to earn high levels of foreign exchange,
create tourism infrastructure and generate large scale direct and indirect
employment. Since then ITC's Hotels business has grown to occupy a position of
leadership, with over 115 owned and managed properties spread across India under
four brands namely, ITC Hotels, Welcomhotel, Fortune Hotels and
WelcomHeritage.
ITC Hotels recently took its first step toward international expansion with
an upcoming super premium luxury hotel in Colombo, Sri Lanka.

1979: Paperboards & Specialty Papers - Development of a Backward Area

In 1979, ITC entered the Paperboards business by promoting ITC Bhadrachalam
Paperboards Limited. Bhadrachalam Paperboards amalgamated with the Company
effective March 13, 2002 and became a Division of the Company, Bhadrachalam
Paperboards Division. In November 2002, this division merged with the
Company's Tribeni Tissues Division to form the Paperboards & Specialty Papers
Division. ITC's paperboards' technology, productivity, quality and manufacturing
processes are comparable to the best in the world. It has also made an immense
contribution to the development of Sarapaka, an economically backward area in
the state of Andhra Pradesh. It is directly involved in education, environmental
protection and community development. In 2004, ITC acquired the paperboard
manufacturing facility of BILT Industrial Packaging Co. Ltd (BIPCO), near
Coimbatore, Tamil Nadu. The Kovai Unit allows ITC to improve customer service
with reduced lead time and a wider product range.
1985: Nepal Subsidiary - First Steps beyond National Borders
In 1985, ITC set up Surya Tobacco Co. in Nepal as an Indo-Nepal and British joint
venture. In August 2002, Surya Tobacco became a subsidiary of ITC Limited and
its name was changed to Surya Nepal Private Limited (Surya Nepal). In 2004, the
company diversified into manufacturing and exports of garments.
1990: Paperboards & Specialty Papers - Consolidation and Expansion
In 1990, ITC acquired Tribeni Tissues Limited, a Specialty paper manufacturing
company and a major supplier of tissue paper to the cigarette industry. The merged
entity was named the Tribeni Tissues Division (TTD). To harness strategic and
operational synergies, TTD was merged with the Bhadrachalam Paperboards
Division to form the Paperboards & Specialty Papers Division in November 2002.
1990: Agri Business - Strengthening Farmer Linkages
Also in 1990, leveraging its agri-sourcing competency, ITC set up the Agri
Business Division for export of agri-commodities. The Division is today one of
India's largest exporters. ITC's unique and now widely acknowledged e-Choupal
initiative began in 2000 with soya farmers in Madhya Pradesh. Now it extends to
10 states covering over 4 million farmers. Also, through the 'Choupal Pradarshan
Khet' initiative, the agri services vertical has been focusing on improving
productivity of crops while deepening the relationship with the farming
community.
2002: Education & Stationery Products - Offering the Greenest products
ITC launched line of premium range of notebooks under brand Paperkraft in
2002. To augment its offering and to reach a wider student population,
the Classmate range of notebooks was launched in 2003. Classmate over the
years has grown to become India's largest notebook brand and has also
increased its portfolio to occupy a greater share of the school bag. Years 2007-
2009 saw the launch of Practical Books, Drawing Books, Geometry Boxes, Pens
and Pencils under the 'Classmate' brand. 'Paperkraft' offers a diverse portfolio in
the premium executive stationery and office consumables segment.
2000: Information Technology - Business Friendly Solutions
In 2000, ITC spun off its information technology business into a wholly owned
subsidiary, ITC Infotech India Limited, to more aggressively pursue emerging
opportunities in this area. Today ITC Infotech is one of India's fastest growing
global IT and IT-enabled services companies and has established itself as a key
player in offshore outsourcing, providing outsourced IT solutions and services to
leading global customers across key focus verticals - Banking Financial Services &
Insurance (BFSI), Consumer Packaged Goods (CPG), Retail, Manufacturing,
Engineering Services, Media & Entertainment, Travel, Hospitality, Life Sciences
and Transportation & Logistics.
2001: Branded Packaged Foods - Delighting Millions of Households
ITC's foray into the Foods business is an outstanding example of successfully
blending multiple internal competencies to create a new driver of business growth.
It began in August 2001 with the introduction of 'Kitchens of India' ready-to-eat
Indian gourmet dishes. In 2002, ITC entered the confectionery and staples
segments with the launch of the brands mint-o and Candyman confectionery and
Aashirvaad Atta (wheat flour). 2003 witnessed the introduction of Sunfeast as
the Company entered the biscuits segment. ITC entered the fast growing branded
snacks category with Bingo! in 2007. In 2010, ITC launched Sunfeast Yippee! to
enter the Indian instant noodles market. In September 2014, ITC
launched GumOn Chewing Gum marking the entry into the category of gums. The
Company entered the Fruit-based juices and beverages market with the launch of B
Natural Fruit beverages in January 2015. ITC's forayed into the dairy segment
with the launch of Aashirvaad Svasti Ghee in November 2015. Launched in April
2016, Fabelle chocolates are ITC's premier offering in the luxury chocolate space.
ITC forayed into the branded coffee category in July 2016 with the launch
of Sunbean Gourmet Coffee. In February 2017, ITC launched ITC MasterChef
super safe spices - the first-of-its-kind spices launched in India, offering export
quality super safe spices to the Indian homemaker. ITC MasterChef Prawns were
launched in June 2017 as the Company entered the Frozen foods segment. ITC's
first foray into fresh fruits and vegetables segment was marked with the launch
of Farmland Potatoes in November 2017. In 2018, ITC forayed into the packaged
milk segment with the launch of Aashirvaad Svasti pouch milk and into dairy-
based beverages with the Sunfeast Wonderz range of milkshakes. The ITC
Master Chef Frozen Snacks range was also introduced the same year, marking
the Company's first venture into the frozen snacks segment. In July 2020, ITC
acquired spices maker Sunrise Foods, looking to augment its product portfolio.
2002: Agarbattis & Safety Matches - Supporting the Small and Cottage Sector
In 2002, ITC's philosophy of contributing to enhancing the competitiveness of the
entire value chain found yet another expression in the Safety Matches initiative.
ITC now markets popular safety matches brands like iKno, Mangaldeep and Aim.
ITC's foray into the marketing of Agarbattis (incense sticks) in 2003 marked the
manifestation of its partnership with the cottage sector. Mangaldeep is a highly
established national brand and is available across a range of fragrances like Rose,
Jasmine, Bouquet, Sandalwood and 'Fragrance of Temple'.
2005: Personal Care Products - Expert Solutions for Discerning Consumers
ITC entered the Personal Care Business in 2005 and the portfolio has grown
under 'Essenza Di Wills', 'Fiama', 'Vivel' 'Superia' brands which have received
encouraging consumer response and have been progressively extended nationally.
In May 2013, the business expanded its product portfolio with the launch
of Engage deodorants. ITC marked its foray into the health space with the
acquisition of the brand Savlon and Shower to Shower in 2015. In 2017, the
business acquired the brand Charmis to enhance its skincare portfolio. In 2018,
ITC acquired the brand Nimyle to enter the floor cleaner space. In 2018, the
business also launched the Dermafique brand, foraying into the premium skincare
product territory. In 2020, the Personal Care Product Business launched multiple
personal and home hygiene products and entered the fruit and vegetable wash
category with the launch of brand Nimwash. In 2021, dishwash gel Nimeasy was
launched.
2010: Expanding the Tobacco Portfolio
In 2010, ITC launched its handrolled cigar, Armenteros, in the Indian market.
Armenteros cigars are available exclusively at tobacco selling outlets in select
hotels, fine dining restaurants and exclusive clubs.
BRANDS

Overview

⭕ Foods :

 Aashirvaad
 Sunfeast
  Bingo
 Kitchens of India
 Sunfeast Yippee
 B Natural
 mint-o
 Candyman
 GumOn
 Fabelle
 Sunbean
 Sunfeast Wonderz Milk
 ITC Master Chef

⭕ Personal Care :

 Essenza Di Wills
 Dermafique
 Fiama
 Vivel
 Engage
 Superia
 Nimyle
 Nimwash
 Savlon
 Shower to Shower
 CharmisFarmland

⭕ Education :
  Classmate
 Paperkraft

⭕ Matches and Agarbattis :

 AIM
 Mangaldeep
 Homelites

⭕ Lifestyles :

 WLS

⭕ Body oils :

 Fiama

⭕ Shower Gel:

 Vivel
 Fiama

⭕ Body Wash:

 Vivel
 Fiama