Industry

Textile Industry 2.3% Contribution to GDP

2nd largest employment 28% Expected CAGR

12% Contribution to Export

 Companies

• The Bombay Dyeing & Manufacturing Company Ltd

• Grasim Industries Ltd
• Welspun India Ltd
• Raymond
• The Lakshmi Mills Company Ltd
Bombay Dyeing Limited

About the company:

The Bombay Dyeing and Manufacturing Company Limited

(Bombay Dyeing), established in 1879 is the flagship
company of the Wadia Group, engaged primarily in the
business of Real Estate Development, Polyester Staple
Fibre and Retail.

Bombay Dyeing and Manufacturing Company is one of the

six producers of Polyester Staple Fibre (PSF) in the country
with a market share of about 15%.
Bombay Dyeing Limited

Ratios 2019 2018 2017

• Current Ratio increased from
Current Ratio 2.17 2.10 0.85
0.85 to 2.17 from 2017 to 2019.
Quick Ratio 0.80 1.75 0.51
• Current Ratio can be attributed
Cash Ratio 0.05 0.11 0.15
to the fact that the Inventories
Debt to Equity 27.39 5.51 2.84 increased from 800 to 2200
Debt to Asset 0.96 0.85 0.74 from 2017 to 2019.This is due to
Asset Turnover 0.86 0.65 0.43 the implementation of policies
Fixed Asset Turnover 8.32 4.27 3.04 like RERA, GST, DCPR
Inventory Turnover 2.48 4.22 2.69 • The D/E Ratio of the company
Debtors Turnover 6.85 15.54 14.91 has increased from 3.68 to
Creditors Turnover 10.67 81.45 0.64 18.63 from 2018 to 2019
Operating Profit Ratio 0.28 0.07 -0.03
• This significant increase can be
attributed to the increase in
Net Profit Ratio 0.28 0.01 -0.06
borrowings due to demerger of
Return on Asset 0.24 0.01 -0.03
Real Estate Business
Return on Equity 6.74 0.06 -0.10
 • The Companies A/E Ratio increased
DuPont Analysis from 3.84 to 28.39 which indicates
35
that the company is using Equity to
invest in its asset
30
• The Receivables turnover ratio has
25 drastically decreased from 15.54 to
20 6.85 from 2018 to 2019
• This is due to change in accounting
15
policy as per requirement of Ind AS
10 115 for recognition of revenue from
5 Percentage of Completion Method
0 to Project Completion Method.
2017 2018 2019 • The DuPont Analysis shows that the
-5
company has been trying to improve
its profit margins. It had incurred
Profit Margin Asset Turnover Equity Multiplier
loss in 2017 which has been
converted into profit, even though
minimal by 2019. The company went
aggressive and raised a lot of debt
from 2017 to 2019 to bring this
change in profits.
Grasim
Ratios 2019 2018 2017 • Net profit margin of the
Current Ratio 1.06 0.95 1.73 company has decreased from 6%
Quick Ratio 0.91 0.81 1.33 to 4% from 2018 to 2019 Even
Cash Ratio 0.04 0.03 0.22
though sales has increased by 25
percent.
Debt to Equity 1.20 0.98 0.26
• This happened due to increase in
Debt to Asset 0.64 0.60 0.34
prices of global cotton and
Asset Turnover 0.32 0.27 0.64 polyester, and even chemicals
Fixed Asset Turnover 1.39 1.20 1.23 like caustic soda, the expenses
Inventory Turnover 10.08 8.72 8.36 for raw material has also
Debtors Turnover 11.35 10.96 13.37 drastically increased.
Creditors Turnover 5.42 4.08 3.46
• The Debt to Equity ratio has
increased significantly from 2017
Operating Profit Ratio 0.11 0.12 0.15
to 2018.
Net Profit Ratio 0.04 0.06 0.11 • This is because of borrowing of
Return on Asset 0.01 0.02 0.07 money by the subsidiary,
Return on Equity 0.03 0.04 0.10 UltraTech Company for the
expansion of project.
 DuPont Analysis If we look at the DuPont Analysis,
3 the profit margin is almost constant,
but there has been significant
2.5 increase in the equity multiplier.
The company has been increasing
2
its financial leverage but with
1.5 decreased asset turnover, it can be
interpreted that the company is
1 unable to capitalize this debt into
converting into assets. The
0.5
company can improve by using its
0 asset more efficiently and paying off
2017 2018 2019
some debt.
Profit Margin Asset Turnover Equity Multiplier
Lakshmi Mills
Ratios 2019 2018 2017
• The financial ratios, the company
Current Ratio 0.71 0.76 0.72
has been performing poorly
Quick Ratio 0.38 0.43 0.29

Cash Ratio 0.03 0.04 0.03 • The profitability ratios clearly

Debt to Equity 0.28 0.25 0.30 indicate the company has been
Debt to Asset 0.22 0.20 0.23 incurring losses in 2019
Asset Turnover 0.44 0.39 0.49
• ROA and ROE have also been
Fixed Asset Turnover 1.62 1.50 1.49
negative. The current and quick
Inventory Turnover 7.81 7.57 6.29
ratios are also too low.
Debtors Turnover 7.57 7.10 11.44

Creditors Turnover 4.07 4.50 5.40 • This indicates that the company is
Operating Profit Ratio -0.02 0.02 0.02 neither able to meet its short-term
liabilities nor the long-term
Net Profit Ratio -0.03 0.01 0.005
liabilities. If such situation
Return on Asset -0.01 0.002 0.002
continues further, company will be
Return on Equity -0.02 0.003 0.003 in huge debt and trouble.
 DuPont Analysis
The financial leverage of the company
1.4
is too low. The company needs to be
1.2 more aggressive and increase their
debt by borrowings, and then skilfully
1
use them to generate more sales and
0.8 thus higher profits.
0.6

0.4

0.2

0
2017 2018 2019

-0.2

Profit Margin Asset Turnover Equity Multiplier

Raymond
Ratios 2019 2018 2017
• As the financial ratios explains, the
Current Ratio 0.97 1.00 1.06
Quick Ratio 0.51 0.53 0.60
company is growing calmly
Cash Ratio 0.03 0.03 0.02
Debt to Equity 2.27 2.24 2.01
• The company has a very good
Debt to Asset 0.69 0.69 0.67 current ratio
Asset Turnover 0.99 0.97 1.03
Fixed Asset Turnover 3.24 3.03 3.44 • It has witnessed an increase in
sales as well overall profit both in
Inventory Turnover 3.66 4.02 4.21 terms of units and value

Debtors Turnover 5.61 5.53 10.26 • Increased sales were achieved due
Creditors Turnover 1.35 1.41 1.73 to their new B2B business
Operating Profit Ratio 0.04 0.03 0.02 segment named Made to Measure
which augmented its client
Net Profit Ratio 0.03 0.02 0.01 relationships
Return on Asset 0.03 0.02 0.01
Return on Equity 0.09 0.07 0.02
 DuPont Analysis

3.5 The financial leverage of the company

is too low. The company needs to be
3 more aggressive and increase their
debt by borrowings, and then skilfully
2.5
use them to generate more sales and
2
thus higher profits.

1.5 Taking a look on the DuPont analysis, it

is noticed that Raymond is heavily
1 leveraged. Its debt has even increased
from 2017 to 2019 due to set up of a
0.5
new plant. It has raised a lot of debt
0
but as far as they are able to effectively
2017 2018 2019 use the debt to generate sales, they
wouldn’t be in any financial problems.
Profit Margin Asset Turnover Equity Multiplier
Welspun India Limited
Ratios 2019 2018 2017
• As the financial ratios explains, the
Current Ratio 1.25 1.42 1.41
company is growing calmly
Quick Ratio 0.79 0.89 0.88
Cash Ratio 0.05 0.05 0.05 • The company has a very good
Debt to Equity 1.72 1.72 2.01 current ratio
Debt to Asset 0.63 0.63 0.67
Asset Turnover 0.84 0.84 0.91 • The company has been
Fixed Asset Turnover 1.83 1.81 1.87 maintaining a 5% cash with respect
Inventory Turnover 2.23 2.00 2.23 to its current liabilities through out
Debtors Turnover 6.06 6.50 6.92 the years
Creditors Turnover 7.45 8.13 15.61
• Even though 2019 saw total
Operating Profit Ratio 0.08 0.09 0.15
income growth of 7.8%,
Net Profit Ratio 0.03 0.07 0.05 predominantly their operating
Return on Asset 0.03 0.06 0.05 profit has declined due increase in
Return on Equity 0.08 0.15 0.15 price of raw materials.
Welspun India Limited

The DuPont Analysis, suggests that

DuPont Analysis
the company needs to yet improve its
3.50 asset turnover ratio and generate
more sales. While the company has
3.00
high financial risk as it is borrowing a
2.50 lot of debt to invest in new plants and
2.00
projects.

1.50

1.00

0.50

0.00
2017 2018 2019

Profit Margin Asset Turnover Equity Multiplier

 Operating Cycle & Cash Conversion Cycle
• If we observe the operating cycle,
Cash Conversion Cycle= Inventory Conversion Period + Debtor Conversion Period- Creditor
Welspun is taking the shortest time
Deferral Period to convert its raw materials into sales
Year Bombay Grasim Raymond Welspun Lakshmi Mills
and receiving payments for it. As
Dyeing compared Raymond and Lakshmi
2017 -75 9 180 78 -4
Mills take enormous amount of time
2018 67 29 180 78 15
to convert its inventories into cash
2019 113 39 178 70 12
Average 35 26 179 75 8
• Even though Lakshmi Mills has a very
long operating cycle but it has the
Operating Cycle= Inventory Conversion Period + Debtor Conversion Period shortest cash conversion cycle. This
Year Bombay Grasim Raymond Welspun Lakshmi Mills is because it holds its cash for a long
Dyeing
time before paying it off to the
creditors
2017 67 113 180 78 131
• Raymond has the longest cash
2018 68 118 182 84 153 conversion cycle. , even though it
2019 120 106 180 73 137 takes enormous amount of time to
Average 85 112 181 78 140
convert inventory to cash, it can’t
gain any relaxed policy from creditors
Regression Charts
O p e rta in g P ro fit R a tio

Net Profit Ratio

0.02
0.01
0.00
0.03 f(x) = − 0 x + 0
0.02 R² =0.00
0.13
0.02 -5 -0.01 0 5 10 15 20
f(x) = − 0 x + 0.01
R² =0.01
0.13 -0.01
0.00 -0.02
0.00
-5 -0.01 0 5 10 15 20
-0.02
-0.01 -0.03
-0.02 -0.03
-0.02 -0.04
-0.03

Cash Conversion Cycle Cash Conversion Cycle

R eturn on Equity
Return on Asset

0.00
0.00
0.00
0.00
f(x) =0.00
−0 x −0 f(x) = − 0 x − 0
-5 -5 0.13 0 5 10 15 20
0.13 0
R² =0.00 5 10 15 20 R² =-0.01
0.00 -0.01
-0.01
-0.02
-0.01
-0.01 -0.02
-0.01 -0.03
Cash Conversion Cycle Cash Conversion Cycle
Impact of working capital ratios on profitability (Lakshmi
Mills)
Profitability Ratios Cash Conversion Cycle
Operating Profit Ratio
Net Profit Ratio
Return on Asset
Return on Equity
• The Cash Conversion Cycle has a
negative relationship with
Profitability. As Lakshmi Mills
Negative
decreased its cash conversion cycle,
its profits kept on increasing
• It is observed that their Debtor
Negative
Conversion Period is not too high,
which indicates it is able to receive
cash from its debtors quickly.
Negative
• In addition, the negative relationship
between receivables and firm’s
profitability suggest that less
Negative
profitable firms can also pursue a
decrease of their accounts
receivables in an attempt to reduce
their cash gap in the cash conversion
cycle