I being a possible investor would wish to analyze and understand the industry before doing the investing to guarantee a good return on the investing and range of growing.
Industry Introduction
After analyzing the assorted industries i have decided to put in tyre fabrication industry. The beginning of the Indian Tyre Industry dates back to 1926 when Dunlop Rubber Limited set up the first Sur company in West Bengal. MRF followed suit in 1946. Since so, the Indian Sur industry has grown quickly. The program to put is made due to the undermentioned grounds
Harmonizing to a survey by Credit Analysis and Research Limited ( CARE ) , the Sur industry is expected to demo a healthy growing rate of 9-10 per centum over the following five old ages.
Many inventions go oning.
Four major companies entirely hold 63 % of the organized ty rhenium market out of the 40 listed companies in the Sur sector.
Tyre is in demand at 3 different phases. Original equipment market, replacing market and export market.
The portions of Sur industries have been executing good in the stock market.
I would reexamine the public presentation of the major companies in Sur sector to make up one’s mind which company to put so that maximal return can be generated. In order to reexamine the public presentation of the company I would analyze the Balance sheet and Income statement of the company and compare it with the old old ages. Common size statements will be prepared to do easy comparings of the public presentation with the anterior old ages. Assorted ratio analysis tools besides helps in understanding the company ‘s fiscal wellness better.
Company Introduction
In tyre companies i had a survey on the following 4 companies since these are the best 4 companies which put together make up 63 % of the entire market portion.
Apollo Surs
MRF
JK Surs
Ceat
I have decided to take the following two company ‘s on the footing of market capitalisation, gross revenues turn over & A ; gross. Both the company ‘s are into fabricating broad scope of Surs such as truck, coach, light truck, radial and cross-ply, rider auto radial, farm radial and cross-ply, off-the-road, earthmover & A ; industrial Surs.
Apollo Tyres Limited
It ‘s the fastest turning top T Sur maker, with one-year turnover of Rs 5036.80 crores ( 2009-2010 ) . It was founded in 1976. Its first works was commissioned inA PerambraA inA KeralaA province. In 2006 the company acquired Dunlop Tyres International ofA South Africa. The company now has four fabricating units in India. It has a web of over 4,000 franchises in India, of which over 2,500 are sole mercantile establishments. “ Apollo Tyres Ltd. ” has been pioneer in the execution of “ Six Sigma ” among all the Sur companies in India, and is in the list of top 15 tyre makers of the universe in footings of Revenues.
MRF
MRF is the leader in the Sur industry for over 21 old ages. First tyre company to accomplish a bend around of around 5000 crores. This shows MRF ‘s laterality in the industry. Global presence across 65 states and besides the first company to export Sur to US. The one-year turnover of MRF is around Rs 5672.84 crores ( 2009-2010 ) . The company now has Six fabricating units in India.
Common Size Statements
Common size fiscal statements explains the company ‘s financials statements as a per centum of a common base figure. Normally the balance sheet entire is considered as a base for common size balance sheets and for common size income statement the gross revenues sum is considered as base. The advantage of common size statements is that since all the figures are expressed as per centums to the base it becomes really easy to compare and analyze the public presentation between companies and between the different clip period. It facilitates comparing of the different size companies and besides the same company for over different period of clip.
The common size balance sheet and income statement of Apollo Surs and MRF is prepared in order to do easy comparings between the companies every bit good as between the old ages.
Common Size Balance Sheet of Apollo Tyres
( Rs. in Crores )
Particulars
Mar ’09
Mar ’08
Mar ’07
Beginnings Of Fundss
Entire Share Capital
50.41
2.46 %
48.85
2.88 %
46.41
2.91 %
Equity Share Capital
50.41
2.46 %
48.85
2.88 %
46.41
2.91 %
Share Application Money
0
0.00 %
4.57
0.27 %
11.72
0.73 %
Preference Share Capital
0
0.00 %
0
0.00 %
0
0.00 %
Militias
1302.18
63.48 %
1176.84
69.47 %
917.56
57.44 %
Reappraisal Militias
3.12
0.15 %
3.16
0.19 %
3.16
0.20 %
Networth
1355.71
66.09 %
1233.42
72.81 %
978.85
61.27 %
Secured Loans
462.39
22.54 %
223.15
13.17 %
473.76
29.66 %
Unbarred Loans
233.13
11.37 %
237.51
14.02 %
144.94
9.07 %
Entire Debt
695.52
33.91 %
460.66
27.19 %
618.7
38.73 %
Entire Liabilitiess
2051.23
100.00 %
1694.08
100.00 %
1597.55
100.00 %
Application Of Fundss
Gross Block
1838
89.60 %
1569.66
92.66 %
1492.51
93.43 %
Less: Accum. Depreciation
694.66
33.87 %
598.66
35.34 %
541.66
33.91 %
Net Block
1143.34
55.74 %
971
57.32 %
950.85
59.52 %
Capital Work in Advancement
281.41
13.72 %
94.41
5.57 %
80.46
5.04 %
Investings
297.45
14.50 %
302.71
17.87 %
258.11
16.16 %
Inventories
417.05
20.33 %
513.29
30.30 %
451.95
28.29 %
Assorted Debtors
87.28
4.26 %
155.13
9.16 %
203.06
12.71 %
Cash and Bank Balance
175.36
8.55 %
156.13
9.22 %
131.7
8.24 %
Entire Current Assets
679.69
33.14 %
824.55
48.67 %
786.71
49.25 %
Loans and Progresss
590.65
28.79 %
538.56
31.79 %
451.75
28.28 %
Fixed Deposits
165.24
8.06 %
109.73
6.48 %
40.3
2.52 %
Entire CA, Loans & A ; Progresss
1435.58
69.99 %
1472.84
86.94 %
1278.76
80.05 %
Deffered Recognition
0
0.00 %
0
0.00 %
0
0.00 %
Current Liabilitiess
627.15
30.57 %
718.31
42.40 %
681.64
42.67 %
Commissariats
479.55
23.38 %
428.83
25.31 %
289.12
18.10 %
Entire CL & A ; Commissariats
1106.7
53.95 %
1147.14
67.71 %
970.76
60.77 %
Net Current Assetss
328.88
16.03 %
325.7
19.23 %
308
19.28 %
Assorted Expenses
0.15
0.01 %
0.26
0.02 %
0.12
0.01 %
Entire Assetss
2051.23
100.00 %
1694.08
100.00 %
1597.54
100.00 %
Common Size Balance sheet of MRF Tyres
( Rs. in Crores )
Particulars
Sep ’09
Sep ’08
Sep ’07
Beginning of financess
A
Entire Share Capital
4.24
0.26 %
4.24
0.20 %
4.24
0.27 %
Equity Share Capital
4.24
0.26 %
4.24
0.20 %
4.24
0.27 %
Share Application Money
0
0.00 %
0
0.00 %
0
0.00 %
Preference Share Capital
0
0.00 %
0
0.00 %
0
0.00 %
Militias
1,357.18
82.04 %
1,116.55
53.60 %
981.91
61.60 %
Reappraisal Militias
0
0.00 %
0
0.00 %
0
0.00 %
Networth
1,361.42
82.30 %
1,120.79
53.81 %
986.15
61.87 %
Secured Loans
189.75
11.47 %
634.29
30.45 %
395.55
24.81 %
Unbarred Loans
103.04
6.23 %
327.9
15.74 %
212.31
13.32 %
Entire Debt
292.79
17.70 %
962.19
46.19 %
607.86
38.13 %
Entire Liabilitiess
1,654.21
100.00 %
2,082.98
100.00 %
1,594.01
100.00 %
Application Of Fundss
A
Gross Block
2,734.33
165.30 %
2,422.56
116.30 %
2,046.74
128.40 %
Less: Accum. Depreciation
1,800.77
108.86 %
1,556.01
74.70 %
1,389.99
87.20 %
Net Block
933.56
56.44 %
866.55
41.60 %
656.75
41.20 %
Capital Work in Advancement
286.24
17.30 %
443.68
21.30 %
243.03
15.25 %
Investings
148.57
8.98 %
68.56
3.29 %
72.02
4.52 %
Inventories
650.47
39.32 %
984.28
47.25 %
693.34
43.50 %
Assorted Debtors
580.03
35.06 %
610.05
29.29 %
551.92
34.62 %
Cash and Bank Balance
59.6
3.60 %
102.06
4.90 %
72.88
4.57 %
Entire Current Assets
1,290.10
77.99 %
1,696.39
81.44 %
1,318.14
82.69 %
Loans and Progresss
405.59
24.52 %
307.03
14.74 %
244.5
15.34 %
Fixed Deposits
0.29
0.02 %
0.29
0.01 %
0.29
0.02 %
Entire CA, Loans & A ; Progresss
1,695.98
102.53 %
2,003.71
96.19 %
1,562.93
98.05 %
Deffered Recognition
0
0.00 %
0
0.00 %
0
0.00 %
Current Liabilitiess
966.41
58.42 %
1,039.90
49.92 %
729.36
45.76 %
Commissariats
443.73
26.82 %
259.62
12.46 %
211.36
13.26 %
Entire CL & A ; Commissariats
1,410.14
85.25 %
1,299.52
62.39 %
940.72
59.02 %
Net Current Assetss
285.84
17.28 %
704.19
33.81 %
622.21
39.03 %
Assorted Expenses
0
0.00 %
0
0.00 %
0
0.00 %
Entire Assetss
1,654.21
100.00 %
2,082.98
100.00 %
1,594.01
100.00 %
Common Size Income Statement of Apollo Tyres
( Rs. in Crores )
Particulars
Mar ’09
Mar ’08
Mar ’07
Income:
Gross saless Employee turnover
4,559.23
100.00 %
4,255.04
100.00 %
3,781.01
100.00 %
Excise Duty
468.37
10.27 %
549.11
12.90 %
490.07
12.96 %
Net Gross saless
4,090.86
89.73 %
3,705.93
87.10 %
3,290.94
87.04 %
Other Income
9.64
0.21 %
11.29
0.27 %
17.43
0.46 %
Stock Adjustments
-37.41
-0.82 %
51.32
1.21 %
39.41
1.04 %
Entire Income
4,063.09
89.12 %
3,768.54
88.57 %
3,347.78
88.54 %
Outgo
Natural Materials
2,947.64
64.65 %
2,523.61
59.31 %
2,375.82
62.84 %
Power & A ; Fuel Cost
149.29
3.27 %
134.82
3.17 %
132.68
3.51 %
Employee Cost
207.55
4.55 %
226.83
5.33 %
199.22
5.27 %
Other ManufacturingExpenses
59.85
1.31 %
51.52
1.21 %
12.77
0.34 %
Selling and Admin Expenses
304.56
6.68 %
285.58
6.71 %
243.86
6.45 %
Assorted Expenses
28.19
0.62 %
44.68
1.05 %
34.59
0.91 %
Preoperative Exp Capitalised
0
0.00 %
0
0.00 %
0
0.00 %
Entire Expenses
3,697.08
81.09 %
3,267.04
76.78 %
2,998.94
79.32 %
Operating Net income
356.37
7.82 %
490.21
11.52 %
331.41
8.77 %
PBDIT
366.01
8.03 %
501.5
11.79 %
348.84
9.23 %
Interest
103.83
2.28 %
80.26
1.89 %
89.23
2.36 %
PBDT
262.18
5.75 %
421.24
9.90 %
259.61
6.87 %
Depreciation
98.01
2.15 %
87.81
2.06 %
74.23
1.96 %
Other Written Off
0
0.00 %
0
0.00 %
0
0.00 %
Net income Before Tax
164.17
3.60 %
333.43
7.84 %
185.38
4.90 %
Extra-ordinary points
6.98
0.15 %
0
0.00 %
0
0.00 %
PBT ( Post Extra-ord Items )
171.15
3.75 %
333.43
7.84 %
185.38
4.90 %
Tax
63.05
1.38 %
114.14
2.68 %
72
1.90 %
Reported Net Net income
108.12
2.37 %
219.3
5.15 %
113.42
3.00 %
Entire Value Addition
749.44
16.44 %
743.43
17.47 %
623.11
16.48 %
Preference Dividend
0
0.00 %
0
0.00 %
0
0.00 %
Equity Dividend
22.68
0.50 %
25.2
0.59 %
20.88
0.55 %
Corporate Dividend Tax
3.86
0.08 %
4.28
0.10 %
2.93
0.08 %
Per portion informations ( annualised )
Shares in issue ( hundred thousand )
5,040.25
4,884.45
464.02
Gaining Per Share ( Rs )
2.15
4.49
24.44
Equity Dividend ( % )
45
50
45
Book Value ( Rs )
26.84
25.09
207.74
Common Size Income Statement of MRF
( Rs. in Crores )
Particulars
Sep ’09
Sep ’08
Sep ’07
Income:
Gross saless Employee turnover
6,164.06
100.00 %
5,731.63
100.00 %
5,054.20
100.00 %
Excise Duty
484.49
7.86 %
670.82
11.70 %
643.98
12.74 %
Net Gross saless
5,679.57
92.14 %
5,060.81
88.30 %
4,410.22
87.26 %
Other Income
11.29
0.18 %
-2.22
-0.04 %
11.94
0.24 %
Stock Adjustments
-214.24
-3.48 %
89.23
1.56 %
77.21
1.53 %
Entire Income
5,476.62
88.85 %
5,147.82
89.81 %
4,499.37
89.02 %
Outgo
Natural Materials
3,613.20
58.62 %
3,645.42
63.60 %
3,124.83
61.83 %
Power & A ; Fuel Cost
285.54
4.63 %
294.88
5.14 %
220.51
4.36 %
Employee Cost
316.82
5.14 %
275.71
4.81 %
240.02
4.75 %
Other Fabrication Expenses
76.17
1.24 %
87.87
1.53 %
51.47
1.02 %
Selling and Admin Expenses
446.66
7.25 %
387.64
6.76 %
376.88
7.46 %
Assorted Expenses
21.51
0.35 %
20.44
0.36 %
22.05
0.44 %
Preoperative Exp Capitalised
0
0.00 %
0
0.00 %
0
0.00 %
Entire Expenses
4,759.90
77.22 %
4,711.96
82.21 %
4,035.76
79.85 %
Operating Net income
705.43
11.44 %
438.08
7.64 %
451.67
8.94 %
PBDIT
716.72
11.63 %
435.86
7.60 %
463.61
9.17 %
Interest
68.92
1.12 %
66.25
1.16 %
49.24
0.97 %
PBDT
647.8
10.51 %
369.61
6.45 %
414.37
8.20 %
Depreciation
249.32
4.04 %
169.52
2.96 %
153.41
3.04 %
Other Written Off
0
0.00 %
0
0.00 %
0
0.00 %
Net income Before Tax
398.48
6.46 %
200.09
3.49 %
260.96
5.16 %
Extra-ordinary points
-3.29
-0.05 %
13.89
0.24 %
0
0.00 %
PBT ( Post Extra-ord Items )
395.19
6.41 %
213.98
3.73 %
260.96
5.16 %
Tax
142.16
2.31 %
69.42
1.21 %
89.18
1.76 %
Reported Net Net income
256.32
4.16 %
141.97
2.48 %
171.78
3.40 %
Entire Value Addition
1,146.70
18.60 %
1,066.54
18.61 %
910.93
18.02 %
Preference Dividend
0
0.00 %
0
0.00 %
0
0.00 %
Equity Dividend
10.6
0.17 %
8.48
0.15 %
8.48
0.17 %
CorporateDividend Tax
1.8
0.03 %
1.44
0.03 %
1.44
0.03 %
Per portion informations ( annualised )
Shares inissue ( hundred thousand )
42.41
42.41
42.41
Gaining Per Share ( Rs )
604.37
334.74
405.03
Equity Dividend ( % )
250
200
200
Book Value ( Rs )
3,210.03
2,642.66
2,325.20
RATIO ANALYSIS
Ratio analysis is a tool used to quantitatively analyze the information in a company ‘s fiscal statements. Ratios areA calculated from current twelvemonth Numberss and are so compared to old old ages, other companies, the industry, or even the economic system to judge the public presentation of the company.
Significance of Ratio Analysis
Evaluation of liquidness
Evaluation of Profitableness
Evaluation of Operating Efficiency
Evaluation of Financial Strength
Inter-firm and Intra-firm comparing
Budgeting
Profitability Ratios:
Ratio
Formula
Numerator
Denominator
Significance
Operating Net income Ratio
Operating Profit/ Gross saless
Gross saless Less Cost of gross revenues
Gross saless cyberspace of returns
Index of Operating Performance of concern.
Net Net income Ratio
Net Profit/ Gross saless
Net net income as per P & A ; L Account
Gross saless cyberspace of returns
Index of Overall Profitability.
Tax return on Capital Employed
Entire Earnings/ Capital Employed
Net incomes after Tax
( + ) Int.on Debt Fund
( + ) Non-Operating Adjts.
Capital employed can be computed utilizing ( a ) Assets Route or ( B ) Liability Route
Overall profitableness of the concern on the entire financess employed. If ROCE & gt ; Interest Rate, usage of debt financess is justified.
Return on Net Worth
Equity Earnings/ Shareholder ‘s Fundss
Net incomes after Tax
Net Fixed Assetss
( + ) Internet Working Capital
( – ) External Liabilitiess
Indicates profitableness of Equity Funds and Owner ‘s financess invested in the concern.
Tax return on entire plus
Operating profit/ entire net assets
Gross saless Less Cost of gross revenues
Net sum assets
Shows return on entire assets used in concern
Liquidity / Solvency Ratio:
Ratio
Formula
Numerator
Denominator
Significance
Current Ratio
Current Assets/ Current Liabilitiess
Inventories/ Stockss
( + ) Drs & A ; B/R
( + ) Cash & A ; Bank
( + ) Receivables
( + ) Short-term loans
( + ) Marketable Investing
S. Creditors
( + ) O/S disbursals
( + ) Short term loans & A ; Progresss
( + ) Bank o/d / hard currency recognition
( + ) Prov for Tax
( + ) Proposed Dividend
( + ) unclaimed dividend
Ability to refund short-run committednesss quickly. Ideal ratio is 2:1
High Ratio indicates being of idle current assets
Quick Ratio
Quick Assets/ Quick Liabilities
Current Assetss
( – ) Inventories
( – ) Prepaid Expenses
Current Liabilitiess
( – ) Bank o/d
( – ) Cash recognition
Ability to run into immediate liabilities. Ideal ratio is 1.33: 1
Long-run Solvency Ratio:
Ratio
Formula
Numerator
Denominator
Significance
Debt-Equity Ratio
Debt/Equity
Unsecured bonds + Long term loans from fiscal Institutions
Debt + Equity or Fixed Assets + Net working capital
Indicates the relationship between debt & A ; Equity. Ideal ratio is 2:1
Coverage Ratios:
Ratio
Formula
Numerator
Denominator
Significance
Interest Coverage Ratio
EBIT/Interest
Net incomes before Interest and Tax
Interest on Debt
Indicates ability to run into involvement duties of the current twelvemonth. Should by and large be greater than 1.
Turnover/ Performance Ratios:
Ratio
Formula
Numerator
Denominator
Significance
Debtors Turnover Ratio
Credit Sales/ Avg a/cs receivable
Credit gross revenues cyberspace of returns
Average a/cs receivable = A? ( Opg. bal + Clg. Bal )
Indicates the velocity of aggregation of recognition gross revenues / Debtors.
Stock Turnover Ratio
Cost Of Goods Sold/ Average Stock
Opening Stock
( + ) Purchases
( – ) Closing Stock
( Opening Stock + Closing Stock ) /2
Indicates how fast stock list is used/ sold. High T/O ratio indicates fast moving stuff while low ratio may intend dead or inordinate stock.
Fixed Assets Turnover Ratio
Turnover/ Net Fixed Assetss
Gross saless cyberspace of returns
Net Fixed Assetss
Ability to bring forth gross revenues per rupee of Fixed Asset
Using the expression explained the undermentioned ratios are calculated for the two company ‘s
A
Ratios of Apollo Surs
Ratios of MRF
Profitability Ratios
Mar ’09
Mar ’08
Mar’07
Sep’09
Sep ’08
Sep’07
Operating Net income Margin ( % )
8.71
13.22
10.07
12.42
8.65
10.24
Net Net income Margin ( % )
2.63
5.89
3.42
4.5
2.8
3.89
Tax return On Capital Employed ( % )
13.02
24.6
17.44
27.88
13.11
18.97
Return On Net Worth ( % )
7.99
17.89
11.62
18.82
12.66
17.42
Tax return on Assetss Including Reappraisals
3.43
7.73
4.42
2.47
4.2
6.78
Liquidity/Solvency Ratios
A
A
A
A
A
A
Current Ratio
1.15
0.99
0.83
1.16
0.9
1.05
Quick Ratio
0.91
0.83
0.84
0.73
0.78
0.92
Long-run Solvency Ratio
A
A
A
A
A
A
Debt Equity Ratio
0.51
0.38
0.64
0.22
0.86
0.62
Coverage Ratios
A
A
A
A
A
A
Interest Coverage ratio
3.67
7.51
4.04
6.69
4.12
6.14
Turnover/ Activity/ Performance Ratios
A
A
A
A
A
A
Inventory Turnover Ratio
11.77
8.72
7.33
10.17
6.09
6.37
Debtors Turnover Ratio
33.75
20.69
17.4
9.54
8.71
8.08
Entire Assets Turnover Ratio
2.01
2.21
2.08
3.47
2.45
2.78
Cash Flow Indicator Ratios
A
A
A
A
A
A
Dividend Payout Ratio Net Net income
24.54
13.44
20.99
4.83
6.98
5.77
Gaining Retention Ratio
73.45
86.71
79.64
95.05
92.79
93.96