asian paints bs analysis

8/7/2019 Asian Paints BS Analysis

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BALANCE SHEET ANALYSIS

2009 2010

Submitted To: Dr. Vibha Jain Submitted By: Group 8Abhinandan Jakhar 043002

Anirudh Singh 043010Sumeet Anand 043056Vakul Sharma 043057Vineet Bhadu 043060


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About Asian PaintsAsian Paints is India's largest paint company and ranked among the top ten Decorative coatingscompanies in the world with a turnover of INR 66.80 billion. Asian Paints has operations in 17countries across the world with 23 paint manufacturing facilities, servicing consumers in 65 countries.

Horizontal Balance Sheet of Asian Paints Ltd. As at 31 st March 2010Horizontal Balance Sheet of Asian Paints Pvt Ltd as at 31st March 2010

2010 2009 Increase/Decrease over 2009

(Rs in Crores) (Rs in Crores) (Rs in Crores) %age

FUNDS EMPLOYED

Shareholders' Funds

Share Capital 95.92 95.92 0 0.00

Reserves and Surplus 1,461.30 998.55 462.75 46.34

1,557.22 1,094.47 462.75 42.28

Loan Funds

Secured Loans 24.59 25.59 24.59 1 4.07

Unsecured Loans 43 49.94 -6.94 -13.90

68.59 74.53 -5.94 -7.97

Deferred Tax Liability (Net) 47.9 47.91 -0.01 -0.02

TOTAL 1,673.71 1,216.91 456.8 37.54

APPLICATION OF FUNDS

Fixed Assets

Gross Block 1,194.39 1,116.93 77.46 6.94

Less : Depreciation/Amortisation 486.93 494.02 -7.09 -1.44

Net Block 707.46 622.91 84.55 13.57

Add : Capital Work in Progress 380.72 88.86 291.86 328.45

1,088.18 711.77 376.41 52.88

Investments 703.69 234.77 468.92 199.74

Current Assets, Loans and Advances

Interest accrued on investments 0.16 0.16 0 0.00

Inventories 763.14 546.71 216.43 39.59

Sundry debtors 331.43 311.02 20.41 6.56

Cash and Bank Balances 28.6 128.26 -99.66 -77.70

Other Current Assets 66.55 48.3 18.25 37.78

Loans and Advances 152.4 193.97 -41.57 -21.43

1342.28 1228.42 113.86 9.27

Less : Current Liabilities and Provisions

Current Liabilities 1,156.27 771.9 384.37 49.80

Provisions 304.17 186.15 118.02 63.40

1,460.44 958.05 502.39 52.44

Net Current Assets -118.16 270.37 -388.53 -143.70

TOTAL 1,673.71 1,216.91 456.8 37.54


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Analysis of Balance Sheet

1) Total Assets / Liabilities up by 37.54%2) Sharp increase in net worth by 42.28%, Loan Funds show a decline by 7.97%. Strong Financial Position.

3) Fixed Assets increase by 52.88% while the net sales have increased by 20.16%. Not a very efficient way to utilize fixed assets.4) Tremendous increase in Investments by 199.74%. Ratio of investment to net worth is alsohigh, 45.18% in 2010 as compared to 21.45% in 2009. Asian Paints has wisely invested itsmoney.5) There is a 39.59% increase in inventory as compared to last year, while the sales have grownonly by 20.16%. This indicates lack of efficiency with regards to inventory management.6) 6.56% increase in sundry debtors is small as compared to 20.16% increase in sales. Thisindicates efficient management of receivables.7) Current Liabilities grew by 49.80%. Indicates the increase in debt of the company is quitehigh.


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Common-sized Balance Sheet of Asian Paints Ltd as at 31 st March 2010

Common Sized Balance Sheet of Asian Paints Pvt Ltd as at 31st March 20102010 2009

(Rs inCrores)

Commom Sized%age

(Rs inCrores)

Commom Sized%age

FUNDS EMPLOYEDShareholders' FundsShare Capital 95.92 5.73 95.92 7.88Reserves and Surplus 1,461.30 87.31 998.55 82.06

1,557.22 93.04 1,094.47 89.94

Loan FundsSecured Loans 24.59 25.59 1.53 24.59 2.02Unsecured Loans 43 2.57 49.94 4.10

68.59 4.10 74.53 6.12

Deferred Tax Liability (Net) 47.9 2.86 47.91 3.94

TOTAL 1,673.71 100.00 1,216.91 100.00

APPLICATION OF FUNDSFixed AssetsGross Block 1,194.39 71.36 1,116.93 91.78Less : Depreciation/Amortisation 486.93 29.09 494.02 40.60Net Block 707.46 42.27 622.91 51.19Add : Capital Work in Progress 380.72 22.75 88.86 7.30

1,088.18 65.02 711.77 58.49

Investments 703.69 42.04 234.77 19.29

Current Assets, Loans and AdvancesInterest accrued on investments 0.16 0.01 0.16 0.01Inventories 763.14 45.60 546.71 44.93Sundry debtors 331.43 19.80 311.02 25.56Cash and Bank Balances 28.6 1.71 128.26 10.54Other Current Assets 66.55 3.98 48.3 3.97Loans and Advances 152.4 9.11 193.97 15.94

1342.28 80.20 1228.42 100.95

Less : Current Liabilities andProvisions

Current Liabilities 1,156.27 69.08 771.9 63.43Provisions 304.17 18.17 186.15 15.30

1,460.44 87.26 958.05 78.73

Net Current Assets -118.16 -7.06 270.37 22.22

TOTAL 1,673.71 100.00 1,216.91 100.00


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Multi-step Profit&Loss account for the year ended 31 st March 2010

Vertical Horizontal Common Sized

Multi-step Profit & Loss account for the year ended 31st March 2010

2010 2009

Increase orDecrease Commom sized 2010Commom sized2009Amount Amount

Gross Sales 5505.87 4795.23 710.64 14.8197271 107.9131657 112.9312436

Less: Excise Duty 403.74 549.08 -145.34 -26.46973119 7.913165 12.9312436

Net Sales 5102.13 4246.15 855.98 20.15896754 100 100

0

Materials Cost (Materials Consumed,Purchase of goods & Stock Adjustments) 2840.24 2606.93 233.31 8.949607393 55.66773093 61.39514619

Manufacturing Expenses 129.46 115.09 14.37 12.48588062 2.537371647 2.710455354

Employee Cost 260.84 238.9 21.94 9.183758895 5.112374636 5.626273212

Cost of Goods Sold (COGS) 3230.54 2960.92 269.62 9.105953555 63.31747721 69.73187476Gross Profit 1871.59 1285.23 586.36 45.62296243 36.68252279 30.26812524

Employee Remuneration - Other than Factory 0 0 0

Administrative, Selling & other Expenses 884.54 747.86 136.68 18.27614794 17.33668095 17.61266088

(+) Other income (Operating) 22.95 23.9 -0.95 -3.974895397 0.449812137 0.562862829

0 0 0 0 0 0Profit before Depreciation, interest & tax PBDIT 1010 561.27 448.73 79.94904413 19.79565397 13.21832719

Depreciation, Amortisation 60.74 57.15 3.59 6.281714786 1.19048319 1.345925132

Operating Profit - OP/PBIT 949.26 504.12 445.14 88.30040467 18.60517078 11.87240206

Interest & Finance charges 13.76 10.4 3.36 32.30769231 0.269691286 0.244927758

(+) Other income (Non Operating) 143.85 60.06 83.79 139.5104895 2.8 1.41

Profit before tax and extra ordinary items PBTEOT 1079.35 553.78 525.57 94.90591932 21.15489021 13.0419321

(+)/(-) Extra Ordinary Items 25.46 5.9 19.56 331.5254237 0.499007277 0.138949401

Profit before tax for the year - (PBT - Y) 1104.81 547.88 556.93 101.6518216 21.65389749 12.9029827

(+)/(-) Prior year adjustments 0.14 1.95 -1.81 -92.82051282 0.002743952 0.045923955

Profit Before Tax PBT 1104.67 545.93 558.74 102.3464547 21.65115354 12.85705875Provision for Tax: 0

Current Income TAX 334.01 162.8 171.21 105.1658477 6.5464 3.834061444Deferred Income Tax liability/asset 2.45 16.39 -13.94 -85.05186089 0.0480192 0.385996726

Fringe Benefit Tax 6.78 -6.78 -100 0.159674058

Tax adjustments for previous years 6.29 2.4 3.89 162.0833333 0.2904 0.05652179

Total Income Tax 330.17 183.57 146.6 79.86054366 6.471 4.323210438

Add:Balance brought down from previousyear 230 200 30 15 4.50792 4.710149194

Profit after tax -NP/PAT 1004.5 562.36 442.14 78.62223487 19.6878559 13.2439975

Horizontal Analysis1.

Net Sales growth by 20.15896754

2.

Increase in expenses like material cost by 8.949607393, interest & finance charges by 32.30769231 and extra-ordinary expenses by 331.5254237 much more than growth innet sales. However increase in interest & finance charges is inconsequential in view of the very small base last year as well as in absolute terms. In case of extra-ordinary expenses absolute figures are not high compared to sales.


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3.

Depriciation increased by 6.2817147864.

Decrease in operating income by -3.974895397 because of decrease in processing

charges.5.

Growth in Non operating income by 139.5104895 due to increase in short term & long term investments.

6. PBT has grown by 102.3464547 due to profit from exceptional items

Return on Investment Ratios:

1)

(RONW% )Return on Net Worth

2010=56.52009=35.24The Increase in the ratio means a high Dividend, more Internal Accruals, suppliers willing toextend more favourable terms, strengthening of the financial position of the Company .

2)

EPS Earning Per Share

2010= 78.092009=38.39The portion of a company's profit allocated to each outstanding share of common stock.Earnings per share serves as an indicator of a company's profitability.


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3)

CEPS Cash Earning Per Share

2010=84.422009=43.12The company would be able to fulfil its financial obligations in the long term in a bettermanner.A measure of financial performance that looks at the cash flow generated by a company on a per share basis. The higher a company's cash EPS, the better it is considered to haveperformed over the period. A company's cash EPS can be used to draw comparisons to othercompanies or to the company's own past results.

Solvency Ratios:1)

NAV Net Asset Value

2010: 162.32009: 114.1The Company has built reserves & surplus to fall back upon.Higher the ratio higher is the capacity of the co. to raise further capital .

2)

Debt Equity

2010: .442009: .68


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Co. is relying less on Debt and more on Equity shareholding fund indicating that the co. istaking less financial risk.

3)

Interest Cover

2010: 62.012009: 41.33The Co,s ability to pay interst out of revenue has increased. The f inancial risk of co. defaulting

has reduced leading to higher comfort level of lenders.

4)

DSCR Debt Service Coverage Ratio

2010: 62.012009: 41.33Increased ability to service debt.

Liquidity Ratios:

1)

Current Ratio

2010: .9182009: 1.2822A Ratio of under 1 suggests that a co. would be unable to pay of its obligations if they came updue at that point. While this shows the company is not in good financial health, it does not necessarily mean that it will go bankrupt - as there are many ways to access financing - but it isdefinitely not a good signThe current ratio can give a sense of the efficiency of a company's operating cycle or its ability to turn its product into cash.

2) Quick Ratio

2010-0.39652009-0.7155


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It adds further value to all the analytical values of the current ratio. The quick ratio is moreconservative than the current ratio because it excludes inventory and other current assets, whichare more difficult to turn into cash. Therefore, a higher rat io means a more liquid current position.Therefore it means there liquidity has reduced.

3)

Inventory Holding Period

2010: 89.0172009: 69.47Inventory holding period has increased by around 20 days leading to more cash being blockedtowards keeping inventories.Advantage: there would be enough raw material present incase of sudden increase in demand.

Disadvantage: Income could have been used for generating profit instead.

Turnover Ratios1)

Fived Asset Turnover Ratio

2010: 7.2112009: 6.816

The fixed-asset turnover ratio measures a company's ability to generate net sales from fixed-asset investments. A higher fixed-asset turnover ratio shows that the company has been moreeffective in using the investment in fixed assets to generate revenues.


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2)

Net Worth Turnover Ratio

2010:1.34992001:3.87It measures the extent of turnover of gross income generated by the networth of the co.The co.s efficiency of using its net worth to generate net sales has reduced.

Profitability/Profit margin Ratios1)

GP Gross profit Margin

2010: 36.682009: 30.27The co. has reduced its manufacturing expenses and employee costs leading to higher GP%

Materials Cost (Materials Consumed, Purchase of goods & Stock Adjustments) 2840.24 2606.93

Manufacturing Expenses 129.46 115.09

Employee Cost 260.84 238.9

Cost of Goods Sold (COGS) 3230.54 2960.92

Gross Profit 1871.59 1285.23

2)

PBDIT2010: 19.792009: 13.21By excluding depreciation, taxes and interest expenses, the figure hones in on thecompany's ability to profit and thus makes for easier cross-company comparisons.


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3)

OP Operating Profit Margin / PBIT profit before interest and tax

2010: 18.62009: 11.87As operating margin has increased the co. is earning more.

4)

Ratios of Individual Costs and Expenses to Sales (%)

2010: 55.662009: 61.39Rawmaterial used more efficiently. Co. has increased its productivity.

5)

Effective Tax Rate (%)

2010: 30.152009: 29.8Effective Tax Rate hasnt changed much which implies that the co. hasnt concentrated muchon tax planning.

Valuation or Capital Market Ratios

1)

P/E (Times)

2010: 25.252009: 20.80An Investor when investing looks at EPS. So an increase means that the investors perception of the co. has improved and increased co.s perception in the borrowers market.

2)

Market Price to NAV (Times)

2010: 12.5622009: 6.847


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As the industry has come out of the economic slowdown, the share prices have increased.

3)

Market Capitalisation (Times)

2010: 19554.612009: 7539Helpful in negotiating mergers, acquisitions and takeovers. An increase suggests improvedfinancial strength of the co.

Accounting Standards followedAS 1

1. Basis of preparation of financial statement:(a) Basis of Accounting:The financial statements have been prepared and presented under the historical cost convention on accrual basis of accounting to comply with the accounting standards prescribedin the Companies (Accounting Standards) Rules, 2006 an d with the relevant provisions of the

Companies Act, 1956.(b) Use of Estimates:The preparation of financial statements in conformity with generally accepted accounting principles (GAAP) in India requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosures of contingent liabilitieson the date of financial statements.

AS 92. Revenue Recognition:

Revenue from sale of goods is recognised on transfer of all significant risks and rewards of ownership to the buyer which is on dispatch of goods. The amount recognised as sale isexclusive of sales tax/VAT and are net of returns. Sales are stated gross of excise duty as well asnet of excise duty; excise duty being the amount included in the amount of gross turnover. Theexcise duty related to the difference between the closing stock and opening stock is recognisedseparately as part of material cost.Revenue from service is recognised on rendering of services to customers.Dividend income is recognised when the right to receive payment is established.Interest income is recognised on the time proportion basis.


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AS 193. Lease Accounting:Assets taken on operating lease:Lease rentals on assets taken on operating lease are recognised as expense in the Profit andLoss Account on an accrual basis over the lease term.Assets given on operating lease:The Company has provided tinting systems to dealers on an operating lease basis. Lease rentalsare accounted on accrual basis in accordance with the respective lease agreements.

AS 24. Inventory:(a) Raw materials, work in progress, finished goods, packing materials, stores, spares, tradeditems and consumables are carried at the lower of cost and net realisable value. Thecomparison of cost and net realisable value is made on an item-by-item basis. Damaged,unserviceable and inert stocks are suitably depreciated.

(b) In determining cost of raw materials, packing materials, traded items, stores, spares andconsumables, weighted average cost method is used. Cost of inventory comprises all costs of purchase, duties, taxes (other than those subsequently recoverable from tax authorities) and allother costs incurred in bringing the inventory to their present location and condition.(c) Cost of finished goods and work -in-process includes the cost of raw materials, packing materials, an appropriate share of fixed and variable production overheads, excise duty asapplicable and other costs incurred in bringing the inventories to their present location andcondition. Fixed production overheads are allocated on the basis of normal capacity of production facilities.

AS 135. Investments:Long term investments are carried at cost. Provision for diminution in the value of long terminvestments is made only if such a decline is other than temporary in the opinion of themanagement.Current investments are carried at lower of cost and fair value. The comparison of cost and fairvalue is done separately in respect of each category of investments. Profit and loss on sale of investments is determined on a first-in-first-out (FIFO) basis.

AS 116. Transactions in Foreign Exchange:Transactions in foreign currency are recorded at the exchange rate prevailing on the date of thetransaction. Exchange differences arising on foreign exchange transactions settled during theyear are recognised in the Profit and Loss Account of the year.Monetary assets and liabilities denominated in foreign currencies, which are outstanding as at the year end are translated at the closing exchange rate and the resultant exchange differencesare recognised in the Profit and Loss Account.The premium or discount on forward exchange contracts is recognized over the period of thecontracts in the Profit and Loss Account.

AS 29


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7. Provisions and Contingencies:The Company creates a provision when there exists a present obligation as a result of a past event that probably requires an outflow of resources and a reliable estimate can be made of theamount of the obligation. A disclosure for a contingent liability is made when there is a possibleobligation or a present obligation that may, but probably will not require an outflow of resources. When there is a possible obligation or a present obligation in respect of which

likelihood of outflow of resources is remote, no provision or disclosure is made.

AS 208. Earnings Per Share:The Basic and Diluted Earnings Per Share (EPS) is computed by dividing the net profit aftertax for the year by weighted average number of equity shares outstanding during the year.

asian paints bs analysis

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