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PRESENTED BY

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• ROHIT VERMA 111268 • SHUBHI JAIN 111338 • SHUBHAM DWIVEDEE 111339 • ANKIT SAHA 111340

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Larsen & Toubro Limited (L&T) is amongst one of the India’s largest technology, engineering construction and manufacturing conglomerate. • L&T is considered to be the "bellwether of India's engineering sector“, and was recognized as the company of the year in 2010. • L&T’s business structure has a dominant presence in India's infrastructure, power, hydrocarbon, machinery, shipbuilding and railway sectors. • L&T has an international presence. The company's businesses are supported by a wide marketing and distribution network, and have established a reputation for strong customer support. • With more than a seven decades of dedicated customer-focused service and continuous quest for world class quality have established them as the leader of the E&C sector in India.
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The evolution of L&T into the country's largest engineering and construction organization is among the most remarkable success stories in Indian industry. Henning Holck-Larsen and Soren Kristian Toubro.9 million that year. 4 . L&T became a Public Company with a paid-up capital of Rs. • L&T was founded in Bombay (Mumbai) in 1938 by two Danish engineers.10. And now. • In the year 1950. In 2012 the company generated a total revenue of US $13.2 million and a sales turnover of Rs. Both of them were strongly committed to developing India's engineering capabilities to meet the demands of industry.5 billion.

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RATIO ANALYSIS

LIQUIDITY RATIOS

LEVERAGE RATIOS

TURNOVER RATIOS

PROFITABILITY RATIOS

VALUATION RATIOS

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Current Ratio
Quick Ratio
Can they meet their current obligations??

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It is a measure of the firm’s short term solvency i.e., it indicates the availability of current assets in rupees for every one rupee of current liability. It represents a margin of safety for the creditors of the firm.

CR
1.40
1.20 1.00 0.80 0.60 0.40 0.20 0.00 2006 2007 2008 2009 2010 2011 CR

CR (times) 1.10

YEAR 2006

1.03 0.92
1.18 1.02 1.02

2007 2008
2009 2010 2011
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where quick assets refer to those assets which can be converted into cash immediately or reasonably soon without loss of value. Acid-Test Ratio establishes relationship between quick assets and current liabilities.69 0.00 2006 2007 2008 2009 2010 2011 QR (times) 0. QR 0.71 QR YEAR 2006 2007 2008 2009 2010 0.80 0.61 0.k.86 0.50 0.40 0.90 0.70 0.30 0.20 0.60 2011 11 .a.79 0.10 0.60 0.Quick Ratio a.

some good companies can have less than 1 or even a negative current ratio when they receive money faster from their customers than they have to pay to their vendors. 12 . we can say that L&T will not be able to meet its current obligations as long as they do not use their inventories efficiently as its inventories form a large part of their current assets. Though there can be exceptions. They give a general idea of the firm's ability to pay its short-term debts.5. Ideally the current ratio should be greater than 1. So.ANALYSIS: (LIQUDITY RATIOS) Liquidity refers to the readiness of assets to be converted to cash.

What debtequity mix do they prefer ?? Financial Leverage Ratios • Debt Ratio • Debt-Equity Ratio • Debt-Asset Ratio Coverage Ratios • Interest Coverage Ratio 13 .

00 20.00 25.33 2006 2007 2008 2009 2010 2011 14 .63 25. etc.00 10. public deposits. DR 30.88 17.00 15.DEBT RATIO It tells us about the proportion of the interest-bearing debt in the capital structure of the firm. Total debt will include short & long-term borrowings from financial institutions.67 23. deferred payment arrangements . debentures/bonds.91 22.00 0.00 5.00 2006 2007 2008 2009 2010 2011 DR DR (times) YEAR 15. bank borrowings.53 19.

DER 0.00 2006 2007 2008 2009 2010 2011 DER DER (times) 0.30 0.10 0.33 2008 2009 2010 2011 15 .DEBT-EQUITY RATIO This ratio describes the lender’s contribution for each rupee of the owner’s contribution.20 0.60 0.36 YEAR 2006 2007 0.40 0.53 0.50 0.38 0.32 0.37 0.

.00 16.06 17. DAR 20.e.00 8.06 12.00 14.00 4.00 0.79 DAR YEAR 2006 2007 13.00 2.00 2006 2007 2008 2009 2010 2011 DAR (times) 10.00 18.00 6.DEBT-ASSET RATIO It measures the extent to which borrowed funds i.05 2008 2009 2010 2011 16 .00 10.83 11. It indicates the proportion of debt invested in getting assets for the firm. debt support the firm’s assets.00 12.40 14.

5.ANALYSIS: (FINANCIAL LEVERAGES) Financial leverage indicates the reliability of a business on its debts in order to operate. In case debt ratio is less than 0. 17 . the company is less riskier. Lower value of debt ratio is favorable and a higher value indicates that higher portion of company's assets are claimed by it creditors which means higher risk in operation. L&T has low proportion of debt in its capital structure and thus the assets supported by them and cost of debt against a rupee of equity show a similar trend. Thus. lower values of debt-to-equity ratio are favorable indicating less risk.This indicates that company’s assets are financed through equity and less of debt.

k.00 15.00 2006 2007 2008 2009 2010 2011 ICR ICR (times) 12.63 YEAR 2006 2007 2008 12.00 10.00 5.INTEREST COVERAGE RATIO ICR a. times-interest-earned is used to test the firm’s debt servicing capacity.00 0.47 10. ICR 35.a.00 20.00 25. It shows the number of times the interest charges are covered by funds that are ordinarily available for their payment.94 13.00 30.47 24.90 2009 2010 2011 18 .29 28.

In case of L&T the ratios are comparatively moderate. If a company has no debt or the loan interest is being paid by interest income from investments or other activities the ratio is zero which of course is excellent. stay far away from such companies. 19 . A negative ratio tells us that the company cannot even pay its interest on loans from its operating income.ANALYSIS: (COVERAGE RATIOS) The higher the coverage ratios the less a company is burdened by debt.

What do the turnovers depict?? Inventory Turnover Ratio • Days of Inventory Holding Debtors Turnover Ratio Average Collection Period Asset Turnover Ratios • Total Assets Turnover Ratio 20 .

99 ITR 2006 2007 2008 3.00 6.00 2006 2007 2008 2009 2010 2011 5.88 5.84 3.00 7.80 5.00 0.00 ITR (times) YEAR 6. ITR 8.00 5.00 1.INVENTORY TURNOVER RATIO It indicates the efficiency of the firm in producing and selling its product.00 2.92 4.00 4. It shows how rapidly the inventory is turning into receivables through sales.54 2009 2010 2011 21 .

00 20.00 50. DIH 80.00 0.00 10.00 40.00 60.00 2006 2007 2008 2009 2010 2011 DIH DIH (days) YEAR 53 60 61 2006 2007 2008 61 74 102 2009 2010 2011 22 .Days of Inventory Holding It gives us an idea of the stock management of the company.00 30.00 70.

98 2.50 DTR DTR (times) YEAR 2.00 0.50 2.00 1. It is also called account receivable turnover ratio because we debtor and bill receivables' total is used for calculation.00 2006 2007 2008 2009 2010 2011 1.50 3.96 2006 2007 2008 1. DTR 3.00 2.61 1.05 0.DEBTORS TURNOVER RATIO The debtors turnover ratio is the is the relationship between net sales and average debtors.93 2009 2010 2011 23 .50 0.11 1.

11 2006 2007 2008 4.00 2.00 12.00 8.00 10.91 2009 2010 2011 24 .59 6.02 4.38 12. ACP 14.00 6.00 2006 2007 2008 2009 2010 2011 10.00 ACP ACP YEAR (months) 4.84 11.AVERAGE COLLECTION PERIOD The average collection period is the ratio of the number of days in a period and the inventory turnover ratio.00 0.

ASSET TURNOVER RATIO The asset turnover ratio is the measure of the ability of a company or a firm to use its assets efficiently in order to generate sales.55 2006 2007 2008 0.40 0. ATR 1.00 0.31 0.85 0.25 2009 2010 2011 25 .60 ATR ATR (times) YEAR 1.20 1.12 0.40 0.80 0.00 2006 2007 2008 2009 2010 2011 0.20 0.

Lower debtor turnover ratio is bad because it means. money is being collected and liquidity position will become weak. slowly. A high ratio implies either strong sales or ineffective buying. Companies with low profit margins tend to have high asset turnover. therefore.ANALYSIS: (TURNOVER RATIOS) A low turnover implies poor sales and. Debtors turnover indicates the velocity of debt collection of a firm. 26 . the company has high profit margins. Thus. From the year 2006 to 2008 the ratio is high but for the latter part the ratio is low. while those with high profit margins have low asset turnover. excess inventory.

How are the profits shaping up? Profit Margin Ratios • Gross Profit Margin Ratio • Net Profit Margin Ratio • Expenses Ratio • Operating Expenses Ratio Rate of Return Ratios • • • • • Return on Investment Return on Equity Earnings per Share Dividend per Share Dividend-Payout Ratio 27 .

15 GPM 2006 2007 2008 12.00 16.00 6.GROSS PROFIT MARGIN RATIO The gross profit margin reflects the efficiency with which management produces each unit of product.56 13.56 15.00 12.00 2.76 13.00 0. GPM 18.00 2006 2007 2008 2009 2010 2011 GPM (%) YEAR 9.00 14.00 10.13 2009 2010 2011 28 . It implies how cost efficiently a firm can produce its goods.00 8.00 4.20 11.

00 10.80 8. NPM 14.00 2006 2007 2008 2009 2010 2011 10.73 7.00 8.00 0.00 2.00 6.13 11.93 2009 2010 2011 29 .70 8.NET PROFIT MARGIN RATIO It establishes a relationship between net profit and sales and indicates the firms efficiency in manufacturing.00 NPM NPM (%) YEAR 6. administering and selling its products.59 2006 2007 2008 4.00 12.

98 OER 2007 2008 2009 2010 2011 30 91.00 84.00 85.57 87.21 87.70 .00 83.00 2006 2007 2008 2009 2010 2011 OER (%) 90.00 82.00 86.44 YEAR 2006 89.00 90.88 85.00 87.00 88.00 91.00 89. OER 92.OPERATING EXPENSES RATIO It indicates the operating expenses incurred by the company in its production and working.

It also indicates that the cost of goods sold remains constant and there is an increase in the proportionate volume of higher margin items. it indicates that the company has an efficient management. 31 .ANALYSIS: (PROFIT MARGIN RATIOS) Since the profitability ratios are high. The company has increasing profits till the year 2010 after which there is a slight depreciation which can be a result of the global economic slowdown.

Return on Investment ROI ROTA RONA 32 .

pool of funds supplied by shareholders and lenders is being used in terms of total assets.95 ROTA YEAR 2006 2007 2008 2009 2010 2011 33 4.00 6.e.54 7..00 2006 2007 2008 2009 2010 2011 7.66 .00 ROTA (%) 7.00 2.04 6.Return on Total Assets ROTA tells us about the how effectively the investment in the firm i.24 9. ROTA 10.92 9.00 0.00 8.

00 20.67 59.00 2006 2007 2008 2009 2010 2011 RONA (%) 76.56 2010 2011 34 .62 79.00 10.00 80.00 0.00 50. RONA 90.97 RONA YEAR 2006 2007 2008 2009 74. pool of funds supplied by shareholders and lenders is being used in terms of net assets.00 70.00 60.Return on Net Assets RONA tells us about the how effectively the investment in the firm i.73 79.e.53 84..00 30.00 40.

00 2006 2007 2008 2009 2010 2011 18.92 2008 2009 2010 2011 35 10.00 5.00 20.00 25.00 15.47 YEAR 2006 2007 22.00 ROE ROE (%) 22. ROE 30.04 24.00 23.81 28.Return on Equity ROE indicates how well the firm has used the resources of owners. It is calculated to see the profitability of owner’s investment in the firm.00 0.13 .

ANALYSIS: (ROTA. RONA. The company follows a favorable outcome as values are generally increasing till 2010. ROE) ROTA-Higher values of return on assets show that business is more profitable. the company’s return on investment and equity is considerably good till the year 2009. 36 . ROE-Higher values are generally favorable meaning that the company is efficient in generating income on new investment. An improving trend in this ratio indicates that the institution is increasing its net assets and is likely to be able to set aside financial resources to strengthen its future financial flexibility..After that the company’s position deteriorates to a little extent. Overall. RONA.

00 0. or a combination of both.Earnings Per Share This is the amount of income that the common stockholders are entitled to receive (per share of stock owned).36 4. This income may be paid out in the form of dividends.00 6.) 7.00 3.00 2.50 2008 2009 2010 2011 37 .43 5.00 EPS (Rs.95 EPS YEAR 2006 2007 5.27 6.94 7.00 7.00 2006 2007 2008 2009 2010 2011 7.00 1. EPS 8.00 4. retained and reinvested by the company.

60 0.64 0.) YEAR 1.40 0.57 0. DPS 1.Dividend Per Share Dividend per share (DPS) is the total dividends paid out over an entire year (including interim dividends but not including special dividends) divided by the number of outstanding ordinary shares issued.40 1.17 0.20 1.80 0.66 0.20 0.00 0.63 0.00 2006 2007 2008 2009 2010 2011 DPS DPS (Rs.65 2006 2007 2008 2009 2010 2011 38 .

16 0.13 DPR YEAR 2006 2007 2008 2009 2010 2011 39 0.19 .00 2006 2007 2008 2009 2010 2011 DPR 0.14 0. DPR 0.06 0.02 0.08 0.09 0.Dividend-Payout Ratio The percentage of earnings paid to shareholders in dividends.18 0.12 0.10 0.10 0.20 0.09 0.04 0.16 0.

ANALYSIS: (EPS. D/P) Having a growing in the dividend per share can be a sign that the company's management believes that the growth can be sustained. Thus. A stable dividend payout ratio indicates a solid dividend policy by the company's board of directors. 40 . More mature companies tend to have a higher payout ratio. DPS. the company is stable.

Is the value of shares rising? Price-Earnings Ratio 41 .

00 2.09 4.51 YEAR 2006 2007 2008 2009 2010 2011 42 .00 0.00 3.57 4.18 5. PER 6.54 4.00 4.39 3.00 1. It is widely used by the security analysts to analyze the firm’s performance as expected by the investors.The P/E ratio reflects the price currently being paid by the market for each rupee of currently reported EPS.00 2006 2007 2008 2009 2010 2011 PER PER (times) 4.00 5.

A high P/E ratio may signify that the company is overvalued. a high P/E could indicate great earning power and the possibility that profitability will increase over time. the company has high earning power. which means that eventually market forces will drive the price down. On the other hand. Thus. justifying the higher price. 43 .ANALYSIS: (VALUATION RATIOS) Valuation ratio measures different ways of looking at the relative value of a company's stock.

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or base year. 45 . Base-year analysis allows for comparison between current performance and historical performance.The analysis of a company's financial statements by comparing current data with that of a previous year.

70 235.78 204.35 138.06 754.86 165.51 503.99 221.96 204.38 291.20 344.96 298.74 126.64 376.90 360.28 125.39 442.38 216.04 388.16 808.05 416.18 312.07 164.89 46 .94 Investments 100 153.45 169.YEAR 2006 2007 2008 2009 2010 2011 Net Fixed Assets 100 132.23 131.19 280.82 273.48 Deferred Tax Assets Current Assets Loans & Advances Total Assets 100 100 100 100 124.06 272.

56 197.94 246.04 Total Liabilities 100 131.02 321.87 492.35 256.66 100 134.59 Borrowings Current Liabilities & Provisions Deferred Tax Liability 100 142.70 360.56 451.YEAR 2006 2007 2008 2009 2010 2011 Net Worth 100 124.43 185.46 207.38 442.25 419.55 262.89 47 .54 475.35 204.38 280.88 207.59 270.86 100 97.98 398.66 116.03 467.

50 98.17 80.48 428.YEAR 2006 2007 2008 2009 2010 2011 Sales 100 118.89 418.74 426.33 232.77 432.71 391.74 226.43 331.92 215.04 420.31 48 .01 344.84 101.19 88.95 293.13 433.95 330.03 420.26 214.62 67.65 252.39 EBDITA EBDTA EBT 100 100 100 138.65 144.48 336.76 144.36 229.56 PAT EPS 100 100 138.54 166.

That's a sign of a very efficient management. have lifted the company's profit margins.FINDINGS: Index analysis of a company's financial statements is important to be able to determine whether a company is growing or shrinking. 49 . The positive inter-annual trends in the income statement components. In the case of L&T. it experienced a major increase in sales for the period reviewed and was also able to control the expense side of its business. both income and expense.

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This type of financial statement allows for easy analysis between companies or between time periods of a company.Financial statement analysis displays all items as percentages of a common base figure. 51 .

61 27.57 Deferred Tax Assets Current Assets Loans & Advances Total Assets 0.18 100 0.90 100 0.48 51.85 8.13 8.02 56.66 47.64 48.91 11.YEAR 2006 2007 2008 2009 2010 2011 Net Fixed Assets 9.62 25.86 12.23 31.93 55.10 13.47 20.10 17.25 100 52 .82 9.98 58.36 13.42 100 0.94 10.39 6.63 10.09 100 0.35 11.17 Investments 15.45 100 1.

05 53.33 51.04 54.80 0.37 47.83 11.50 34.40 14.06 17.81 36.28 50.19 32.06 12.71 Borrowings Current Liabilities & Provisions Deferred Tax Liability 10.00 37.89 1.92 Total Liabilities 100 100 100 100 100 100 53 .28 1.79 13.YEAR 2006 2007 2008 2009 2010 2011 Net Worth 34.15 0.56 1.16 0.21 48.73 33.

03 9.17 15.79 13.05 7.01 12.48 13.65 PAT EPS 6.61 12.78 17.87 15.03 8.34 0.YEAR 2006 2007 2008 2009 2010 2011 Sales 100 100 100 100 100 100 EBDITA EBDTA EBT 10.46 0.04 0.89 14.02 8.01 54 .82 12.55 8.75 13.02 11.66 10.61 0.35 13.55 0.94 12.21 14.39 9.16 11.55 0.

FINDINGS: Formatting financial statements in this way reduces the bias that can occur when analyzing companies of differing sizes. what percentage of sales is cost of goods sold and how that value has changed over time. It also allows for the analysis of a company over various time periods. for example. In this case. revealing. 55 . the sales had been considerably good till 2010 and then from the year 2010 to 2011 the income or the earnings of the company decreased.

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Punj Lloyd) due to superior product performance. 57 . NCC.• L&T has successfully outperformed its rival companies (HCC. • Lower response time with effective and efficient service that ensures a high degree of customer satisfaction. aiming at making a long-term career in the company. • L&T has great infrastructure spending plans that build a strong business prospect. being India’s largest E&C company. • L&T has a dedicated workforce of over 45000 employees. • An awesome brand image.

58 . • The customer service staff still needs training specially in the delivery and help desk areas. • Sectoral growth is constrained due to low unemployment levels and competition for staff. that threaten inviting new clients. it is not very popular in the international market. that somehow have management issues.• In spite of L&T’s global presence. processes and systems. • There are some gaps in range for certain sectors like global delivery management.

• L&T is good at converting adversities into opportunities and continue it’s march of progress . • Mainframe management capabilities will give opportunity to L&T-Ites to go for large infrastructure deals and hosting biz. 59 . • The end-users respond positively to new ideas. so there exists a great possibility that L&T could extend to overseas broadly. Europe and South-East Asia.• Demand of its services in Middle East.

• The high volume/low cost market is intensely competitive. • In spite of being among the most dominant conglomerate in the country. L&T may be vulnerable to reactive attack by its major competitors. • Lack of infrastructure in rural areas could constrain investment. 60 .• Legislation could make an impact over L&T’s business proceedings.

Overall. Other analysis techniques also reveal that sales of the company have been considerably good. 61 . Thus. the company is worth of the appreciation it has received. the company is in a fairly good position till the year 2010.Although 2010 to 2011 period saw a downfall in the performance but this can be due to global economic slowdown. The company’s profit ratios indicate that is has high profit margins and thus it is safe to invest in this company.

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moneycontrol.com • Financial Management by I M Pandey 63 .larsentoubro.com • www.cnbc.• Wikipedia • www.com • www.

. 64 .so much for bearing us for the past 20 minutes.