RESEARCH PAPER

COURSE CODE: UM23BC141B

COURSE TITLE: MANAGEMENT ACCOUNTING
NAME: RISHI MAHESH
SRN: PES1 UG23BC172
GUIDED : ASSISTANT PROF SANGEETHA S KUMAR , PES
UNIVERSITY

A Comparative Analysis of Annual Report of

“United Spirits Ltd” Across Industries

Abstract:

This study conducts a comprehensive comparative analysis of the annual reports

of United Spirits Ltd across diverse industries to discern key financial, operational,
and strategic trends. United Spirits Ltd, a prominent player in the alcoholic
beverages sector, operates in a dynamic business environment shaped by
regulatory changes, consumer preferences, and global economic conditions.

The research focuses on extracting valuable insights by juxtaposing USL's annual

reports against those of companies in related and unrelated industries. By
employing financial ratios, performance indicators, and qualitative information, we
aim to identify patterns, benchmarks, and potential areas for improvement within
USL's annual disclosures.
Key aspects of the comparative analysis include financial performance metrics
such as revenue growth, profitability, liquidity, and leverage. Operational efficiency
and strategic initiatives will also be evaluated to gauge USL's competitive
positioning within its industry and vis-à-vis other sectors.

Furthermore, the study explores the impact of macroeconomic factors, market

dynamics, and regulatory frameworks on USL's financial health and operational
strategies. Insights drawn from this comparative study will not only benefit
investors, stakeholders, and industry analysts but will also provide actionable
recommendations for United Spirits Ltd to enhance transparency, governance, and
overall corporate performance.

The findings of this research aim to contribute to the broader understanding of

corporate reporting practices and offer a valuable perspective on the challenges
and opportunities faced by companies operating in different industries, with United
Spirits Ltd serving as a focal point for analysis.
Keywords: Ratio, United Spirits, Financial performance, Tools, Financial
statements.

Introduction:

In an era marked by rapid economic globalization, dynamic consumer preferences,

and ever-evolving regulatory landscapes, corporations are faced with the
imperative to adapt and thrive in diverse business environments. Annual reports
serve as a crucial window into a company's financial health, strategic direction,
and overall performance, offering stakeholders and investors valuable insights.
This study endeavours to conduct a comprehensive comparative analysis of the
annual reports of United Spirits Ltd (USL), a prominent player in the alcoholic
beverages sector, across a spectrum of industries.

United Spirits Ltd, a subsidiary of Diageo, operates in an industry characterized by

unique challenges, ranging from shifting consumer preferences to stringent
regulatory frameworks. To gain a deeper understanding of USL's performance, this
research aims to juxtapose its annual reports against those of companies within
related and unrelated industries. By doing so, we seek to identify patterns,
benchmarks, and outliers that may reveal underlying trends, challenges, and
opportunities.

The scope of the comparative analysis extends beyond traditional financial metrics
to encompass operational efficiency, strategic initiatives, and the broader
economic and regulatory contexts. This multi-faceted approach allows for a
holistic examination of USL's annual disclosures, shedding light on the company's
competitive positioning and adaptive strategies.

As we delve into this analysis, our goal is not only to extract valuable insights for
investors, industry analysts, and stakeholders but also to provide United Spirits
Ltd with actionable recommendations for refining its reporting practices and
enhancing overall corporate performance. By examining annual reports from
diverse industries, we aim to contribute to the broader discourse on corporate
transparency, governance, and resilience in the face of industry-specific
challenges.
The findings of this study are anticipated to offer a nuanced perspective on the
dynamic interplay between corporate performance and industry dynamics, using
United Spirits Ltd as a focal point for examination.

Board of directors:

Industry analysis:

India has a young demographic profile and over 15 million people are expected to
enter the drinking age every year which represents significant growth
opportunities for the alcohol beverage industry. Total household consumption is
expected to reach Rs.300 trillion by 2030. Further, with the proportion of high-
income households getting widely distributed, the contribution from tier 2, 3 and 4
cities to consumption is likely to increase. The youngest economy in the world has
the potential of adding 100 million ‘new drinkers’ in the next 5 years.

Huge populations in India are migrating towards bigger cities, where they are
exposed to a wider variety of alcoholic beverage products, including Indian-made
foreign liquor (IMFL) and significantly contributing to the market growth. India is
also seeing women emerging as a key driver of societal change building a more
inclusive consumption narrative.

There has been an increase in the variety of alcoholic beverages and brands with
most of them easily available in government licensed outlets, government shops,
private licensed retail chains, restaurants, pubs and bars.

In terms of consumption of volumes, the South zone steadily continues to

dominate the Indian market with the West and North zone fiercely competing for
the second position.

The alcohol beverage industry is expected to grow at a CAGR of 7.29 percent

between 2022-2025. This sector is expected to receive Foreign Direct Investment
(FDI) and there are many states that offer subsidies for local manufacturing. The
alcohol and beverages industry provides about 1.5 million job opportunities and
generated about USD 48.8 billion in sales during 2019.

Corporate governance:

United spirits Code sets out what we stand for as a company. Underpinned by a
corporate governance structure and robust risk, controls, and compliance and
ethics programme, our Code enables our employees to make the right choices and
demonstrate the highest standards of integrity and ethical behaviour.

United spirits are underpinned by our purpose and ambition to create the best
performing, most trusted and respected consumer products company in the world,
and is supported by a comprehensive framework of global policies and standards.

United spirits global policies are applied within Diageo regardless of where we
work or what level we are. All Diageo employees are required to undertake
training on the requirements of our Code.

Research Methodology:

This particular research paper involves several methodological considerations,

including the choice of ratios, the selection of data sources, and the interpretation
of results. Researchers have discussed these considerations in detail and provided
guidelines for conducting effective ratio analysis. The methodology used in this
paper is published data, i.e., Secondary data and not first-hand data.

Purpose of analysis:

The purpose of the financial analysis I provided is multifaceted, depending on your

specific needs and goals:

1. Understanding the Company's Financial Health:

• Identify strengths and weaknesses: By analysing various financial ratios,
the analysis helps assess the company's profitability, liquidity, solvency, and
efficiency. This sheds light on its ability to generate profits, meet short-term
obligations, manage debt, and utilize resources effectively.
 • Evaluate investment potential: If you're considering investing in the
company, the analysis provides valuable insights into its financial stability
and potential for growth. It can help you determine if the company is a good
fit for your investment goals and risk tolerance.
• Make informed business decisions: For business owners or managers, the
analysis can inform strategic decisions regarding resource allocation,
expansion plans, financing options, and overall financial management.

2. Benchmarking against Industry and Competitors:

• Compare performance: By comparing the company's financial ratios to
industry averages and competitor data, you gain a clearer understanding of
its relative position. This helps identify areas where the company excels or
falls behind, allowing for targeted improvement strategies.
• Identify competitive advantages: Understanding the company's strengths
relative to its competitors can help you identify and capitalize on any unique
advantages it possesses.
• Monitor industry trends: Analysing the company's performance in the
context of broader industry trends can help you anticipate future challenges
and opportunities.

3. Communication and Transparency:

• Present financial information clearly: The analysis provides a structured
and organized way to present the company's financial data, making it easier
for stakeholders to understand its financial position and performance.
• Enhance communication: By providing a comprehensive overview of the
company's finances, the analysis can facilitate better communication and
decision-making among investors, creditors, management, and other
stakeholders.
• Build trust and confidence: A well-presented financial analysis can build
trust and confidence in the company by demonstrating its financial
transparency and accountability.

Ultimately, the purpose of the financial analysis is to provide you with valuable
insights into the company's financial health, performance, and future prospects,
enabling you to make informed decisions and take advantage of opportunities.

I hope this clarifies the purpose of the analysis and its potential benefits for you.
 Analysis of the comparative balance sheet for the
year 2022-2023:

• Shareholder equity increased by 21.75% from 2022 to 2023. This is a positive

sign, as it indicates that the company is retaining more earnings and is less
reliant on debt financing.
• Total liabilities increased by 9.54% from 2022 to 2023. This is also a positive
sign, as it indicates that the company is growing and is able to finance its
growth with both debt and equity.
• Total assets increased by 9.54% from 2022 to 2023. This is in line with the
increase in liabilities, and it indicates that the company is growing its asset
base.
• Trade payables increased by 17.18% from 2022 to 2023. This could be a sign
that the company is increasing its inventory or that it is taking longer to pay
its suppliers.
• Trade receivables increased by 8.52% from 2022 to 2023. This could be a
sign that the company is making more sales or that it is taking longer to
collect its receivables.
• Cash and cash equivalents decreased by 28.13% from 2022 to 2023. This
could be a sign that the company is investing in its business or that it is
facing a cash flow shortage.

Overall, the balance sheet appears to be healthy, with the company showing signs
of growth. However, there are a few areas of concern, such as the increase in
trade payables and the decrease in cash and cash equivalents. It would be
important to look at the company's income statement and cash flow statement to
get a more complete picture of its financial health.

It is important to note that I am not a financial expert and this is not financial
advice. You should always consult with a qualified financial advisor before making
any investment decisions.
Balance sheet graph:

Cash flow graph:

Findings and suggestions:

Positive:

• Strong growth in shareholder equity (21.75%): This indicates the company is

retaining earnings and potentially profitable.
• Acceptable levels of debt: Debt-to-equity ratio remained moderate, and
long-term debt is minimal.
• Improved cash ratio: While still low, it shows some improvement in short-
term liquidity.
• Efficient long-term debt management: Primarily financed by equity,
suggesting financial stability.

Areas of concern:

• Decreased liquidity: Current and quick ratios declined slightly, indicating

potential difficulty meeting short-term obligations.
• Increased debt-to-equity ratio: Though still acceptable, it suggests a
growing reliance on debt financing.
• Limited information: Lack of income and cash flow statements hinders a
more comprehensive financial picture.

Suggestions:

Short-term:
• Improve inventory and receivables management: Analyse and optimize
inventory turnover and receivables collection times to enhance short-term
liquidity.
• Diversify sources of financing: Consider alternative short-term funding
options to manage cash flow and reduce reliance on debt.
• Prioritize debt repayment: Focus on reducing existing debt to improve
solvency and financial flexibility.
Long-term:

• Invest in growth opportunities: Allocate resources strategically to fuel

sustainable growth and profitability.
• Monitor industry trends: Stay informed about industry dynamics and adapt
strategies accordingly to maintain a competitive edge.
• Enhance financial transparency: Provide comprehensive financial
statements and analysis to build trust and attract investors.
• Strengthen internal controls: Implement robust financial management
practices to ensure efficient resource utilization and risk mitigation.

Conclusion:

The company's financial health presents a mixed picture. While positive aspects
like strong equity growth and moderate debt levels are encouraging, concerns
regarding declining liquidity and increasing debt reliance require attention.

Overall, the company appears to be on a stable trajectory, but proactive measures

are needed to address potential challenges and ensure long-term financial
sustainability. Implementing the suggested strategies, particularly enhancing
short-term liquidity and optimizing debt management, will be crucial in navigating
the current landscape and capitalizing on future growth opportunities.

However, a more comprehensive assessment necessitates analysing the income

and cash flow statements for a complete understanding of the company's financial
performance and risk profile. Benchmarking against industry peers can further
refine insights and tailor recommendations for optimal financial management.

By acknowledging both strengths and weaknesses, and actively adopting strategic

improvements, the company can solidify its financial footing and pave the way for
continued success in the years to come.