financial analysis of india infoline ltd final

8/9/2019 Financial Analysis of India Infoline Ltd Final

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ACKNOWLEDGEMENT

First of all, I would like to thank the Management of INDIA INFOLINE LTD for giving me the

opportunity to do my two-month Summer Internship Project Training in their renowned

organization. I am highly obliged to MD. JAVED HARUN (Sr.Branch Manager) for granting

me to undertake my training at KOLKATA Shakespeare sarani Zonal office.

I am also grateful to my training supervisor MR.SAJAL OJHA ( team leader) from INDIA

INFOLINE & MR.SANDIP BHOGAL (Faculty Guide) from United World School of

Business under whose able guidance & direction, I was able to give shape to my training. His

constant review & excellent suggestions throughout the project are highly commendable.

My heartfelt thanks go to all the executives who helped me to gain knowledge about the actual

working & the processes involved in the various steps of the project.

I thank to my project friends who were so helpful in carrying out my project work.

Finally, I thank my family members for their support & encouragement.


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DECLARATION

I, Pratik Das, hereby declare that project entitled “ FINANCIAL ANALYSIS OF INDIA

INFOLINE“ submitted in the partial fulfillment of the Post Graduate Program in Management ,

is of my own work.

I further declare that all the facts and figures furnished in this project report are true

and fair.

This report is based on our personal opinion hence cannot be referred to legal

purpose.

SUBMITTED BY:-

PRATIK DAS

STUDENT ID: 010102021

SECTION: B

UNITEDWORLD SCHOOL OF BUSINESS


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PREFACE

Decision making is a fundamental part of the analytical process. Decisions regarding that

what you want to do, how you want to do, what tools and techniques must be used for the

successful completion of the project. In fact it is the analyst’s efficiency as a decision maker that

makes project fruitful for those who concern to the area of study. Basically when we are playingwith computer in every part of life, I used it in my project not for the ease of my but for the ease

of result explanation to those who will read this project. The project presents the financial analysis

of India Infoline ltd.I had toiled to achieve the goals desired. Being a neophyte in this highlycompetitive World of business, I had come across several difficulties to make the objectives a

reality. My research project “Financial analysis of India infoline Ltd.” is based on Studyconducted by me under the guidance of Md Javed Harun and Sandip Bhogal.

I believe that my project report will have been very helpful to the Practical knowledge in

the field of financial analysis of any organization. This includes the following:

1. The executive summary which gives the brief description about the work. And what basically isdone in the assigned project work.

2. Preface also comprises of the company profile of India Infoline Ltd, Which includes detailedinformation about the company.

3. third chapter it includes the introduction to the topic, which clearly explains about the

topic upon which work is done.

4. Fourth chapter includes Objective of the project which is being considered foraccomplishment of the project work.

5- Fifth chapter include the research methodology applied for conducting the research work it alsoinclude the limitation of the study.

6. Sixth chapter include summary of the financial position of India Infoline ltd.

7. Seventh chapter covers the analysis and interpretation of the gathered data through ratio

analysis and cash flow analysis.

8 Findings count for the eighth chapter of the project report, which explains the outcome of

interpreted data.

9. Suggestion and recommendation covers the forwarded measures that should be adopted by thecompany to make strong its financial analysis.

10.Preface also include conclusion, which explains what actually being concluded from the

project work after analysis and interpretation of the data.

.


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TABLE OF CONTENT

PARTICULARPAGENO.

1. EXECUTIVE SUMMARY 5

2. COMPANY PROFILE 6

3. INTRODUCTION 13

4. OBJECTIVE OF STUDY 23

5. RESEARCH METHODOLOGY 23

6. FINANCIAL POSITION OF INDIA INFOLINE LTD. 24

7. DATA ANALYSIS & INTERPRETATION 34

8. FINDINGS 46

9. SUGGESTION & RECOMMENDATION 48

10. CONCLUSION 49

11. BIBLOGRAPHY 50


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EXECUTIVE SUMMERY

The project is to study the financial health of India Infoline Ltd.India Infoline Ltd has rapidly

grown over the last few years and a company where leaders like Mr. Nirmal Jain are present.Through this report, I try and analyze the financial environment in which India Infoline

Ltd is operating. Through a thorough financial analysis, my aim to understand the financialfactors is influencing the company and its decision making. Later, I try and evaluate the various

ratios to appreciate their impact on company’s performance. Critical decisions of distributing

dividends, Issue of bonus Debentures and other current news are analyzed and their impact on thebottom line of the company is assessed.

Finally, I study ratio analysis and cash flow analysis of the company to analyzing the financial

position.


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Board of Directors

Mr. Nirmal JainChairman & Managing Director

Mr. R. Venkataraman Executive Director

Mr. Sat Pal Khattar Non Executive Director

Mr. Nilesh Vikamsey Independent Director

Mr. Kranti Sinha Independent Director

Mr. A.K. Purwar Independent Director

Committee of Board Audit Committee

Mr. Nilesh Vikamsey, ChairmanMr. Sat Pal Khattar

Mr. Kranti SinhaCompensation/ Remuneration

Committee

Mr. Kranti Sinha, ChairmanMr. Nilesh Vikamsey

Mr. Sat Pal Khattar

Share Transfer and Investor

Grievance CommitteeMr. Kranti Sinha, Chairman

Mr. Nirmal Jain

Mr. R. VenkataramanChief Financial Officer

Mr. Kapil KrishanCompany Secretary

Ms. Falguni Sanghvi


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Core Management TeamMr. Bharat Parajia

MD, IIFL (Asia) Pte Ltd

Mr. Apul Nayyar

CEO, Moneyline Credit Ltd Mr. Karan Bhagat

CEO, IIFL Wealth Management Ltd

Mr. H. Nemkumar

President, Institutional Equities

Mr. Aniruddha Dange

Head of Research, Institutional Equities

Mr. Vasudev Jagannath

Head of Sales, Institutional Equities

Mr. Ajit Menon

President, Investment Banking

Mr. Donald D'Souza

President, Investment BankingMr. Sateesh Kumar

President, Insurance

Mr. Deepesh Pandey

Co-head, Investments, IIFL Capital Pte Ltd

Mr. Manish Srivastava

Co-head, Investments, IIFL Capital Pte Ltd

Mr. R. Mohan

Chief Compliance Officer

Mr. Narendra Jain

Chief Operating Officer

Registrar and Share Transfer AgentsLink Intime India Pvt. Ltd

C-13, Pannalal Silk Mills Compound,L.B.S. Marg, Bhandup (West),

Mumbai - 400 078.

Registered OfficeBuilding No. 75, Nirlon Complex,

Off: Western Express Highway,Goregaon (East), Mumbai - 400 063.

AuditorsM/s Sharp & Tannan AssociatesChartered Accountants

Internal AuditorsM/s Kalyaniwalla & MistryChartered Accountants


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Bankers Allahabad Bank Axis Bank Ltd

Bank of Baroda Citibank N.A.

HDFC Bank Ltd The Hongkong and Shanghai Banking

Corporation Ltd

ICICI Bank Ltd Kotak Mahindra Bank Ltd

Punjab National Bank Standard Chartered Bank

State Bank of India State Bank of Travancore

UCO Bank Union Bank of India

Yes Bank Ltd


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Company Structure

India Infoline Limited is listed on both the leading stock exchanges in India, viz. the Stock

Exchange, Mumbai (BSE) and the National Stock Exchange (NSE) and is also a member of both

the exchanges. It is engaged in the businesses of Equities broking, Wealth Advisory Services andPortfolio Management Services. It offers broking services in the Cash and Derivatives segmentsof the NSE as well as the Cash segment of the BSE. It is registered with NSDL as well as CDSL

as a depository participant, providing a one-stop solution for clients trading in the equitiesmarket. It has recently launched its Investment banking and Institutional Broking business.

A SEBI authorized Portfolio Manager; it offers Portfolio Management Services to clients. Theseservices are offered to clients as different schemes, which are based on differing investment

strategies made to reflect the varied risk-return preferences of clients.


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As on March 31, 2009, your Company’s subsidiaries and step downSubsidiaries are as follows

I. India Infoline Investment Services Limited

II. Moneyline Credit Limited India Infoline Distribution Company Limited

III. India Infoline Housing Finance Limited

IV. India Infoline Marketing Services Limited

V. India Infoline Insurance Services Limited

VI. India Infoline Insurance Brokers Limited

VII. India Infoline Commodities Limited

VIII. India Infoline Media and Research Services Limited

IX. IIFL Realty Limited

X. IIFL Wealth Management Limited

XI. IIFL Ventures Limited

XII. IIFL Capital Limited

XIII. India Infoline Commodities DMCC

XIV. IIFL (Asia) Pte Limited

XV. IFL Capital Pte Limited

XVI. IIFL Securities Pte Limited

XVII. IIFL Inc


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Company’s philosophy on Corporate Governance

The India Infoline Group is committed to placing the Investor First, by continuously striving toincrease the efficiency of the operations as well as the systems and processes for use of corporate

resources in such a way so as to maximize the value to the stakeholders. The Group aims atachieving not only the highest possible standards of legal and regulatory compliances, but also of

effective management.

Audit Committee

Terms of reference & Composition, Name of members and Chairman: The Audit committeecomprises Mr Nilesh Vikamsey, Chairman of the Committee, Mr Sat Pal Khattar, Mr Sanjiv

Ahuja and Mr Kranti Sinha, three of whom are independent Directors. The Managing Director,the Executive Director along with the Statutory and Internal Auditors are invitees to the Meeting.

The Terms of reference of this committee are as under: - To investigate into any matter that may

be prescribed under the provisions of Section 292A of The Companies Act, 1956 -Recommendation and removal of External Auditor and fixation of the Audit Fees. - Reviewing

with the management the financial statements before submission of the same to the Board. -Overseeing of Company’s financial reporting process and disclosure of its financial information.

- Reviewing the Adequacy of the Internal Audit Function.

Compensation/ Remuneration Committee

Terms of reference & Composition, Name of members and Chairman: The Compensation /

Remuneration Committee comprises Mr Sanjiv Ahuja, Chairman of the Committee, Mr Nilesh

Vikamsey and Mr Kranti Sinha, all of whom are independent Directors. The Terms of reference

of this committee are as under: - To fix suitable remuneration package of all the ExecutiveDirectors and Non Executive Directors, Senior Employees and officers i.e. Salary, perquisites,bonuses, stock options, pensions etc. - Determination of the fixed component and performance

linked incentives alongwith the performance criteria to all employees of the company - ServiceContracts, Notice Period, Severance Fees of Directors and employees. - Stock Option details:

whether to be issued at discount as well as the period over which to be accrued and over whichexercisable. - To conduct discussions with the HR department and form suitable remuneration

policies.

Share Transfer and Investor Grievance Committee

Details of the Members, Compliance Officer, No of Complaints received and pending andpending transfers as on close of the financial year. The committee functions under the

Chairmanship of Mr Kranti Sinha, a Non-executive independent Director. The other Members of the committee are Mr Sanjiv Ahuja, Independent Director and Mr R Venkataraman, Executive

Director. Ms Komal Parikh, Company Secretary is the Compliance Officer of the Company.


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INTRODUCTION

Meaning of Financial StatementFinancial statements refer to such statements which contains financial information about anenterprise. They report profitability and the financial position of the business at the end of

accounting period. The team financial statement includes at least two statements which theaccountant prepares at the end of an accounting period. The two statements are: -

The Balance Sheet

Profit And Loss AccountThey provide some extremely useful information to the extent that balance Sheet mirrors

the financial position on a particular date in terms of the structure of assets, liabilities and

owners equity, and so on and the Profit and Loss account shows the results of operationsduring a certain period of time in terms of the revenues obtained and the cost incurred during

the year. Thus the financial statement provides a summarized view of financial position andoperations of a firm

Meaning of Financial AnalysisThe first task of financial analysis is to select the information relevant to the decisionunder consideration to the total information contained in the financial statement. The

second step is to arrange the information in a way to highlight significant relationship. The final

step is interpretation and drawing of inference and conclusions. Financial statement is theprocess of selection, relation and evaluation.

Features of Financial Analysis

1.To present a complex data contained in the financial statement in simple andunderstandable form.

2.To classify the items contained in the financial statement inconvenient and rational

groups.3.To make comparison between various groups to draw various conclusions.

Purpose of Analysis of financial statements

1. To know the earning capacity or profitability.2. To know the solvency.

3. To know the financial strengths.4. To know the capability of payment of interest & dividends.

5. To make comparative study with other firms.6. To know the trend of business.

7. To know the efficiency of mgt.

8. To provide useful information to mgt


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Procedure of Financial Statement Analysis

Analyzing financial statements involves evaluating three characteristics of a company. Its

liquidity, its profitability, and its insolvency. A short- term creditor, such as a bank, is primarily

interested in the ability of the borrower to pay obligations when they come due. The liquidity of the borrower is extremely important in evaluating the safety of a loan. A long-term creditor, suchas a bondholder, however, looks to profitability and solvency measures that indicate the

company’s ability to survive over a long period of time. Long- term creditors consider suchmeasures as the amount of debt in the company’s capital structure and its ability to meet interest

payments. Similarly, stockholders are interested in the profitability and solvency of the company.They want to assess the likelihood of dividends and the growth potential of the stock.

1. Intra-company basis.This basis compares an item or financial relationship within a company in the current year with

the same item or relationship in one or more prior years. For example, Sears,Roebuck and Co. can

compare its cash balance at the end of the current year with last year‘s balance to find the amountof the increase or decrease. Likewise, Sears can compare the percentage of cash to current assetsat the end of the current year with the percentage in one or more prior years. Intra-company

comparisons are useful in detecting changes in financial relationships and significant trends.

2. Industry averages.

This basis compare an item or financial relationship of a company with industry averages(or norms) published by financial ratings organizations such as Dun & Bradstreet, Moody’s

and Standard & Poor’s. For example, Sears’s net income can be compared with the averagenet income of all companies in the retail chain-store industry. Comparisons with industry

averages provide information as to a company’s relative performance within the industry.

3. Intercompany basis.This basis compares an item or financial relationship of one company with the same item

or relationship in one or more competing companies. The comparisons are made on the basisof the published financial statements of the individual companies. For example, Sears’s

total sales for the year can be compared with the total sales of its major competitors such

as Kmart and Wal-Mart. Intercompany comparisons are useful in determining a company’scompetitive position

Tool s of Financial Statement AnalysisVarious tools are used to evaluate the significance of financial statement data. Three

commonly used tools are these:

1. Ratio Analysis2. Funds Flow Analysis3. Cash Flow Analysis


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Ratio Analysis:Fundamental Analysis has a very broad scope. One aspect looks at the general (qualitative)

factors of a company. The other side considers tangible and measurable factors (quantitative).This means crunching and analyzing numbers from the financial statements. If used in

conjunction with other methods, quantitative analysis can produce excellent results. Ratio

analysis isn't just comparing different numbers from the balance sheet, income statement,and cash flow statement. It's comparing the number against previous years, other companies, theindustry, or even the economy in general. Ratios look at the relationships between

individual values and relate them to how a company has performed in the past, and mightperform in the future.

Meaning of Ratio:A ratio is one figure express in terms of another figure. It is a mathematical yardstick that

measures the relationship two figures, which are related to each other and mutually inter

dependent. Ratio is express by dividing one figure by the other related figure. Thus a ratio is anexpression relating one number to another. It is simply the quotient of two numbers. It can be

expressed as a fraction or as a decimal or as a pure ratio or in absolute figures as ‘ so

many times’. As accounting ratio is an expression relating two figures or accounts or twosets of account heads or group contain in the financial statements.

Meaning of Ratio Analysis:Ratio analysis is the method or process by which the relationship of items or group of items in thefinancial statement are computed, determined and presented. Ratio analysis is an attempt to

derive quantitative measure or guides concerning the financial health and profitability of

business enterprises. Ratio analysis can be used both in trend and static analysis. There areseveral ratios at the disposal of an analyst but their group of ratio he would prefer

depends on the purpose and the objective of analysis. While a detailed explanation of ratioanalysis is beyond the scope of this section, we will focus on a technique, which is easy to use. It

can provide you with a valuable investment analysis tool. This technique is called Cross-

sectional analysis. Cross-sectional analysis compares financial ratios of several companies fromthe same industry. Ratio analysis can provide valuable information about a company's financial

health. A financial ratio measures a company's performance in a specific area. For example, you

could use a ratio of a company's debt to its equity to measure a company's leverage. Bycomparing the leverage ratios of two companies, you can determine which company uses greater

debt in the conduct of its business. A company whose leverage ratio is higher than a competitor's

has more debt per equity. You can use this information to make a judgment as to which companyis a better investment risk.

However, you must be careful not to place too much importance on one ratio. You obtaina better indication of the direction in which a company is moving when several ratios are taken as

a group.


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Objective of Ratios:Ratios are worked out to analyze the following aspects of business organization-

A) Solvency-

Long term

Short term

ImmediateB) Stability

C) Profitability

D) Operational efficiency

E) Credit standing

F) Structural analysis

G) Effective utilization of resources

H) Leverage or external financing

Importance of Ratio Analysis:As a tool of financial management, ratios are of crucial significance. The importance of ratio

analysis lies in the fact that it presents facts on a comparative basis & enables thedrawing of interference regarding the performance of a firm. Ratio analysis is relevant inassessing the performance of a firm in respect of the following aspects:

1] Liquidity position2] Long-term solvency

3] Operating efficiency

4] Overall profitability5] Inter firm comparison

6] Trend analysis.

Liquidity position

With the help of Ratio analysis conclusion can be drawn regarding the liquidity position of a firm.The liquidity position of a firm would be satisfactory if it is able to meet its currentobligation when they become due. A firm can be said to have the ability to meet its short-term

liabilities if it has sufficient liquid funds to pay the interest on its short maturing debtusually within a year as well as to repay the principal. This ability is reflected in the

liquidity ratio of a firm. The liquidity ratio is particularly useful in credit\analysis by bank & other

suppliers of short term loans.

Long-term solvencyRatio analysis is equally useful for assessing the long-term financial viability of a firm. This

respect of the financial position of a borrower is of concern to the long-term creditors,security analyst & the present & potential owners of a business. The long-term solvency is

measured by the leverage capital structure & profitability ratio .Ratio analysis that focus onearning power & operating efficiency. Ratio analysis reveals the strength & weaknesses of a firm

in this respect. The leverage ratios, for instance, will indicate whether a firm has a reasonable

proportion of various sources of finance or if it is heavily loaded with debt in which caseits solvency is exposed to serious strain. Similarly the various profitability ratios would reveal

whether or not the firm is able to offer adequate return to its owners consistent with therisk involved.


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Operating efficiency

Yet another dimension of the useful of the ratio analysis, relevant from the viewpoint of management, is that it throws light on the degree of efficiency in management &

utilization of its assets. The various activity ratios measure this kind of operational efficiency. In

fact, the solvency of a firm is, in the ultimate analysis, dependent upon the sales revenuesgenerated by the use of its assets- total as well as its components.

Overall profitabilityUnlike the outsides parties, which are interested in one aspect of the financial position of a firm,

the management is constantly concerned about overall profitability of the enterprise. Thatis, they are concerned about the ability of the firm to meets its short term as well as long

term obligations to its creditors, to ensure a reasonable return to its owners & secure optimum

utilization of the assets of the firm. This is possible if an integrated view is taken & all theratios are considered together.

Inter firm comparison

Ratio analysis not only throws light on the financial position of firm but also serves as a stepping-stone to remedial measures. This is made possible due to inter firm comparison & comparisonwith the industry averages. A single figure of a particular ratio is meaningless unless it is

related to some standard or norm. One of the popular techniques is to compare the ratiosof a firm with the industry average. It should be reasonably expected that the performance of

a firm should be in broad conformity with that of the industry to which it belongs. An inter firm

comparison would demonstrate the firms position vice-versa its competitors. If the results are atvariance either with the industry average or with those of the competitors, the firm can

seek to identify the probable reasons & in light, take remedial measures.

Trend analysis

Finally, ratio analysis enables a firm to take the time dimension into account. In otherwords, whether the financial position of a firm is improving or deteriorating over theyears. This is made possible by the use of trend analysis. The significance of the trend analysis of

ratio lies in the fact that the analysts can know the direction of movement, that is, whether themovement is favorable or unfavorable. For example, the ratio may be low as compared to the

norm but the trend may be upward. On the other hand, though the present level may be

satisfactory but the trend may be a declining one.

Advantages of Ratio AnalysisFinancial ratios are essentially concerned with the identification of significant accounting data

relationships, which give the decision-maker insights into the financial performance of acompany. The advantages of ratio analysis can be summarized as follows:

1. Ratios facilitate conducting trend analysis, which is important for decision making andforecasting.

2. Ratio analysis helps in the assessment of the liquidity, operating efficiency, profitability and

solvency of a firm.3. Ratio analysis provides a basis for both intra-fir m as well as inter-firm comparisons.

4. The comparison of actual ratios with base year ratios or standard ratios helps the managementanalyze the financial performance of the firm.


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Purpose of Ratio Analysis:1] To identify aspects of a business’s performance to aid decision making

2] Quantitative process may need to be supplemented by qualitative factors to get a completepicture.

3] 5 main areas-

LiquidityThe ability of the firm to pay its way

Investment/shareholdersInformation to enable decisions to be made on the extent of the risk and the earning potential of a

business investment

GearingInformation on the relationship between the exposures of the business to loans as opposed to

share capital

Profit ability

How effective the firm is at generating profits given sales and or its capital assets

FinancialThe rate at which the company sells its stock and the efficiency with which it uses its assets

Role of Ratio Analysis:It is true that the technique of ratio analysis is not a creative technique in the sense that it uses the

same figure & information, which is already appearing in the financial statement. At thesame time, it is true that what can be achieved by the technique of ratio analysis cannot be

achieved by the mere preparation of financial statement. Ratio analysis helps to appraise thefirm in terms of their profitability & efficiency of performance, either individually or in

relation to those of other firms in the same industry. The process of this appraisal is not

complete until the ratio so computed can be compared with something, as the ratio all bythem do not mean anything. This comparison may be in the form of intra firmcomparison, inter firm comparison or comparison with standard ratios. Thus proper comparison

of ratios may reveal where a firm is placed as compared with earlier period or in comparisonwith the other firms in the same industry. Ratio analysis is one of the best possible techniques

available to the management to impart the basic functions like planning & control. As the

future is closely r elated to the immediate past, ratio calculated on the basis of historical financialstatements may be of good assistance to predict the future. Ratio analysis also helps to locate &

point out the various areas, which need the management attention in order to improve thesituation. As the ratio analysis is concerned with all the aspect of a firms financial

analysis i.e. liquidity, solvency, activity, profitability & overall performance, it enables theinterested per sons to know the financial & operational characteristics of an organization & take

the suitable decision.


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Functions of ratios.Accounting ratios can also be classified according to their functions in to liquidity ratios,

leverage ratios, activity ratios, profitability ratios & turnover ratios.

Liquidity ratios

It shows the relationship between the current assets & current liabilities of the concern e.g. liquidratios & current ratios.

Leverage ratios:It shows the relationship between proprietors funds & debts used in financing the assets of the

concern e.g. capital gearing ratios, debt equity ratios, & Proprietary ratios.

Activity ratios:

It shows relationship between the sales & the assets. It is also known as Turnover ratios& productivity ratios e.g. stock turnover ratios, debtors’ turnover ratios.

Profitability ratios:a) It shows the relationship between profits & sales e.g. operating ratios, gross profit ratios,operating net profit ratios, expenses ratios

b) It shows the relationship between profit & investment e.g. return on investment, return onequity capital.


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Limitations of Ratio AnalysisRatio analysis has its limitations. These limitations are described below:

Information problems

1.Ratios require quantitative information for analysis but it is not decisive about analytical

output.2. The figures in a set of accounts are likely to be at least several months out of date, and so mightnot give a proper indication of the company’s current financial position.

3. Where historical cost convention is used, asset valuations in the balance sheet could bemisleading. Ratios based on this information will not be very useful for decision-making.

Comparison of performance over time1.When comparing performance over time, there is need to consider the changes in price.

The movement in performance should be in line with the changes in price.2.When comparing performance over time, there is need to consider the changes in

technology. The movement in performance should be in line with the changes in

technology.3. Changes in accounting policy may affect the comparison of results between differentaccounting years as misleading.

Inter-firm comparison1. Companies may have different capital structures and to make comparison of performance when

one is all equity financed and another is a geared company it may not be a good analysis.2. Selective application of government incentives to various companies may also distort

intercompany comparison. Comparing the performance of two enterprises may be misleading.3. Inter-firm comparison may not be useful unless the firms compared are of the same size and

age, and employ similar production methods and accounting practices.

4. Even within a company, comparisons can be distorted by changes in the price level.5. Ratios provide only quantitative information, not qualitative information.6. Ratios are calculated on the basis of past financial statements. They do not indicate future

trends and they do not consider economic conditions.


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Fund Flow Analysis

Fund may be interpreted in various ways as(a) Cash,

(b) Total current assets,

(c) Net working capital,(d) Net current assets.For the purpose of fund flow statement the term means net working capital. The flow of fund will

occur in a business, when a transaction results in a change i.e., increase or decrease in theamount of fund. According to Robert Anthony the funds flow statement describes the

sources from which additional funds were derived and the uses to which these funds were put.In short, it is a technical device designed to highlight the changes in the financial

condition of a business enterprise between two balance sheets.

Objectives of Fund Flow Statement

The main purposes of FFS are:

1.To help to understand the changes in assets and asset sources which are not readilyevident in the income statement or financial statement.2. To inform as to how the loans to the business have been used.

3. To point out the financial strengths and weaknesses of the business.


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Cash Flow Analysis

Cash is a life blood of business. It is an important tool of cash planning and control. A firmreceives cash from various sources like sales, debtors, sale of assets investments etc. Likewise,the

firm needs cash to make payment to salaries, rent dividend, interest etc. Cash flow statement

reveals that inflow and outflow of cash during a particular period. It is prepared on the basis of historical data showing the inflow and outflow of cash.

Objectives of CFS1. To show the causes of changes in cash balance between the balance sheet dates.

2. To show the actors contributing to the reduction of cash balance inspire of increasing of profitor decreasing profit.

Uses of CFS1. It explaining the reasons for low cash balance.

2. It shows the major sources and uses of cash.

3. It helps in short term financial decisions relating to liquidity.4. From the past year statements projections can be made for the future.5. It helps the management in planning the repayment of loans, credit arrangements etc.

Usefulness of the Statement of Cash Flows

The information in a statement of cash flows should help investors, creditors, and others assessthe following aspects of the firm’s financial position.

The entity’s ability to generate future cash flows.

By examining relationships between items in the statement of cash flows investors and

others can make predictions of the amounts, timing, and uncertainty of future cash flowsbetter than they can from accrual basis data.

The entity’s ability to pay dividends and meet obligations.If a company does not have adequate cash, employees cannot be paid, debts settled, or

dividends paid. Employees, creditors, and stockholders should be particularly interested in

this statement, because it alone shows the flows of cash in a business.

The cash investing and financing transact ions during the period.By examining a company’s investing and financing transactions, a financial statement reader

can better understand why assets and liabilities changed during the period.


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Objective of Study

To understand the information contained in financial statements with a view to know the strength

or weaknesses of the firm and to make forecast about the future prospects of the firm and thereby

enabling the financial analyst to take different decisions regarding the operations of the firm.

Research Methodology

Research is defined as a systematic, gathering recording and analysis of data about problem

relating to any particular field. It determines strength reliability and accuracy of the project.

1. Research Design: Research Design pertains to the great research approach or strategy adopted

for a particular project. A research project has to be the conducted scientifically makingsure that the data is collected adequately and economically. The study used a descriptiveresearch design for the purpose of getting an insight over the issue. It is to provide an

accurate picture of some aspects of market environment. Descriptive research is used whenthe objective is to provide a systematic description that is as factual and accurate as possible.2. Method of Data Collection:

Secondary Data:Through the internet and published data


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FINANCIAL POSITION OF INDIA INFOLINE LTD(2005-2009)


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FINANCIAL STATEMENT OF 2008-2009


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Accounting Policy Year: Mar '09

1) Basis of preparation of financial statements

The financial statements have been prepared under historical cost convention on an accrual basis

in compliance with all material aspects of the applicable Accounting Standards in India and the

relevant provisions of the Companies Act, 1956. The accounting policies have been consistentlyapplied by the Company.

2) Use of Estimates

The presentation of financial statements in conformity with the generally accepted accounting

principles requires estimates and assumptions to be made that affect the reported amount of assets and liabilities on the date of the financial statements and the reported amount of revenues

and expenses during the reporting period. Difference between the actual result and estimates arerecognized in the period in which the results are known / materialized.

4) Translation of foreign currency items

Transactions in foreign currencies are recorded at the prevailing rates at the time transactionswere affected. Foreign currency assets & liabilities outstanding at the year-end are translated at

the rates of exchange ruling on that day; gain / loss on transactions are accounted in the Profit &Loss account.

5) Investments

Investments are classified into current and long-term investments. Current investments arestated at lower of cost or market value. Long-term investments are carried at cost less provisions,

if any, for permanent diminution in the value of such Investment.


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6) Stock in Trade

Closing stock is valued at cost or market value whichever is lower. Cost is computed on FIFO

basis.

7) Revenue Recognition

Brokerage income earned on secondary market operations is accounted (inclusive method) on

trade dates. Depository & related income is accounted (inclusive method) on accrual basis.Dividend income is accounted for when the right to receive the payment is established.

8) Retirement Benefits

The company’s contribution towards Provident Fund and Family Pension Fund is charged

against revenue on actual basis. The Company has provided Gratuity and leave encashment onthe basis of actuarial valuation.

9) Deferred Employee Stock Compensation

The stock options granted by the Company are accounted for as per the accounting treatment

prescribed by Employee Stock Option Scheme and Employee Stock Purchase Guidelines, 1999issued by Securities and Exchange Board of India and the guidance note on Accounting for

Stock Options issued by The Institute of Chartered Accountant of India, whereby the intrinsicvalue of the options are recognized as deferred employee compensation. The deferred employee

compensation is charged to the Profit and Loss Account on a straight line basis over the vesting

period of the options. The Employee Stock Options Outstanding Account, net of unamortizedDeferred Employee Compensation is shown separately as part of Reserves.

10) Taxes on Income

Provision for current tax is computed in accordance with relevant tax provisions. Deferred tax is

recognized for all timing differences between accounting income & taxable income and isquantified using enacted / substantially enacted tax rates as at the balance sheet date. Deferred

tax assets are recognized subject to the management judgment that the realization is virtually / reasonably certain.

11) Operating Leases

Lease rentals in respect of operating lease arrangements are charged to the Profit & Loss

Account in accordance with Accounting Standard 19 – Leases, issued by the Institute of

Chartered Accountants of India.


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Notes to Accounts Year End : Mar '09

1) At balance sheet date, there were outstanding commitments for capital expenditure (net of advances) to the tune of Rs. 76,135,859 (previous year Rs. 22,371,790) of the total contractualobligation entered during the year.

2) The Company does not have contingent liabilities not provided for other than an income tax

matter amounting to Rs. 3,413,731. The company has filed an appeal with the Income Tax

Appellate Tribunal against the said demand.

3) The Company has provided a Corporate Guarantees on behalf of wholly owned subsidiaryIndia Infoline Commodities Limited amounting to Rs. 129,000,000. (previous year 80,000,000)

4) The Company commenced buy-back of equity shares through open market using Stock Exchange system pursuant to the resolution of the Board of Directors passed at the Meeting heldon November 29, 2008 and Public Announcement released on December 5, 2008. As on March

31, 2009 the Company had bought Back 2,557,915 Equity Shares of Rs. 2 each utilizing Rs.108

million and the same stand extinguished.

5) 11,000,000 Equity Warrants issued on Preferential Basis to seven identified persons includingthe Promoters on July 04, 2007 had lapsed during the year due to non-exercise of warrants. The

advance received on the above Equity Warrants amounting to Rs. 484 million stands forfeited bythe Company and the said amount has been credited to Capital Reserves.

6) As disclosed in the Annual Report for 2007-08 the accounts mobilized through preferentialallotment of equity warrants / equity shares were fully utilized in 2007-08. During the year theCompany had not mobilized any equity capital and accordingly no additional disclosures are

required.

7) Company has reduced its Gross block and accumulated depreciation for those assets having

zero net block as on 31st March 2009 amounting

8) During the year Company has acquired IIFL Inc from IIFL (Asia) Pte Ltd (wholly ownedsubsidiary) for a total consideration of Rs. 35,152,849.

9) Company has pledged fixed deposits to the extent of Rs.1554.20 million with banks for bank guarantees/overdraft facilities and with stock exchanges.

10) In the opinion of the management, there is only one reportable business segment as

envisaged by AS 17 Segment Reporting, issued by the Institute of Chartered Accountants of India. Accordingly, no separate disclosure for segment reporting is required to be made in the

financial statements of the Company. Secondary segmentation based on geography has not beenpresented as the Company operates primarily in India and the Company perceives that there


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is no significant difference in its risk and returns in operating from different geographic areas

within India.

11) Financial income includes dividend on non trade and other investments of Rs. 151,667,039

(previous year Rs. 47,844,562). The amount is net of TDS on interest of Rs. 162,376,930

(previous year Rs.275,808,967).

12) Interest expenses include the interest on Debentures Rs. 28,289,522 (Previous year Rs.

98,489,300) and Discount on Commercial paper Rs.47,834,812 (Previous year 75,839,398).

13) The Company provides for the use of its wholly owned subsidiaries certain facilities like useof premises, infrastructure and other facilities and services and the same are termed as ‘SharedServices’. Such shared services consisting of administrative and other revenue expenses paid for

by the company are recovered on an actual basis from subsidiaries and estimates are used whereactual are difficult to determine.


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DATA AN

RATIO ANALYSIS

Financial ratios are useful indica

ratios can be used to analyze tre

Financial ratios can be classified

of ratios frequently are used:

LIQUIDITY RATIOS

Liquidity ratios are the first ones

relationship of a firm’s cash and

discussed under Liquidity ratios.

1. Current ratio: This ratio ind

assets expected to be converted t

marketable securities, accounts raccounts payable, short-term not

and other accrued expenses (prin

Current Ratio=Current Assets

Following table shows the Curre

Following details shows the cha

ALYSIS AND INTERPRETATION

tors of a firm's performance and financial situati

ds and to compare the firm's financials to those

according to the information they provide. The

to come in the picture. These ratios actually sh

other current assets to its current liabilities. Tw

They are:

icates the extent to which current liabilities are

o cash in the near future. Current assets normall

eceivables, and inventories. Current liabilities ces payable, current maturities of long-term debt

cipally wages).

/Current Liabilities

nt ratio of India Infoline Ltd in different years:

ge of Current ratio over different periods:

on. Financial

of other firms.

following types

w the

ratios are

overed by those

y include cash,

onsist of , accrued taxes,


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Comments: The current ratio in

desirable later the company recti

Now the firm is maintaining the

2. Quick/ Acid Test ratio: Thi

refers to the extent to which curr

Quick Ratio= (Current Assets-

Following table shows the Quick

Following graph shows the chan

Comments: Here the acid test rat

so the company is maintaining l

3. Debt equity Ratio: A measur

total liabilities by stockholders' e

company is using to finance its a

Debt equity ratio= Total Liabiliti

etween 2005-2007, was very much unstable w

ied. The standard ratio is 2:1.In year 2005 it w

lower liquidity position.

s ratio indicates the firm’s liquidity position as

ent liabilities are covered by those assets except

Inventories)/Current Liabilities

/ acid test ratio of India Infoline Ltd in differen

ge of Quick ratio over different periods

io was highest in 2006 and after that it came do

wer quick liquidity.

of a company's financial leverage calculated b

quity. It indicates what proportion of equity an

ssets.

s/Shareholders fund

ich was not

s most suitable.

ell. It actually

inventories.

years:

wn year by year,

y dividing its

debt the


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Following table shows the Debt equ

Year 2005 2007 2008 2009

Ratio 0.03 0.28 0.13

Following graph shows the change

Comments: Here the firm maintain

very low.

DEBT COVERAGE RATIO:

This ratios help to find out the abili

1. Interest cover ratio: A ratio use

debt. The interest coverage ratio is

(EBIT) of one period by the compa

Interest cover ratio=EBIT/Inte

Following table shows the Debt cov

Year 2005 2006 2007 2008 2009

Ratio 485.4 19.24 13.76 12.26 20.73

ity Ratio of India Infoline Ltd in different years:

Year 2005 2006 2007 2008 2009

Ratio 0.03 0.49 0.28 0.13

f Debt Equity ratio over different period:

d lower debt ratio in 2009, which means the risk th

y of the company to pay the interest, debt.

to determine how easily a company can pay intere

alculated by dividing a company's earnings before i

y's interest expenses of the same period.

est

erage Ratio of India Infoline Ltd in different years:

Year 2006 2007 2008 2009

Ratio 19.24 13.76 12.26 20.73

Year 2005 2006 2007 2009

Ratio 0.03 0.49 0.28

firm is bearing, is

st on outstanding

nterest and taxes

Year 2005 2006 2007 2009

Ratio 485.41 19.24 13.76 20.73


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Comments: In year 2008 the fixed

asset management, here the firm wa

2.Total asset turnover ratio: T

both measures a company's effec

the company. Total Asset Turno

assets.

Total assets turnover ratio (T

Following table shows the TAT

Year 2006 2007 2008 2009

Ratio 0.18 0.74 0.53 0.52


sset turnover ratio was highest which implies the s

s able to generate highest amount of sale from gi

e Total Asset Turnover is similar to fixed asset

tiveness in generating sales revenue from inves

er evaluates the efficiency of managing all of t

TO) = Gross Turnover/Total Assets

ratios of India Infoline Ltd in different years:

Year 005 2006 2007 2008 2009

Ratio 0.4 0.18 0.74 0.53 0.52

f total assets turnover ratio over different period

und quality of

ven fixed asset.

turnover since

ments back into

e company's

Year 2005 2006 2007 2009

Ratio 0.4 0.18 0.74 0.52


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Comments: In year 2007 the total a

asset management, here the firm wa

utilization was highest.

3. Debtors Turnover Ratio: Debto

velocity of debt collection of a firm(receivable) are turned over during

Debtors Turnover Ratio = Net Cr

Following table shows the debto

Year 2006 2007 2008 2009

Ratio 12.81 4 2.6 2.43


Comments: In year 2005 debtors’ t

2009 it came down to2.43.

set turnover ratio was highest which implies the so

s able to generate highest amount of sale from gi

rs turnover ratio or accounts receivable turnover rati

. In simple words it indicates the number of times aa year.

edit Sales / Average Trade Debtors

s turnover ratios of India Infoline Ltd in differe

Year 005 2006 2007 2008 2009

Ratio 2.44 12.81 4 2.6 2.43

of debtor’s turnover ratio over different periods:

rnover ratio was highest which shows the greater fl

nd quality of

en asset. Here the

o indicates the

erage debtors

nt years:

Year 2005 2006 2007 2009

Ratio 22.44 12.81 4 2.43

xibility, but in


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PROFITIBILITY RATIO:

Profitability is the net result of a

combined effects of liquidity, as

There are four important profita

1. Net Profit Ratio: Net Profitdollar of sales. The equation is a

Net Profit margin = Net incom

Following shows the Net Profit

Year 2006 2007 2008 2009

Ratio 54.61 18.17 23.45 18.51


Comments: In year 2005 the net pr

came down and in 2009 the ratio is

2. Gross Profit Ratio: Gross Pr

per dollar of its sales. The equati

Gross Profit Margin (GPM) =

number of policies and decisions. Profitability

et management and debt on operating results.

ility ratios that we are going to analyze:

argin gives us the net profit that the business ifollows:

available to the stockholders / gross turnov

argin of India Infoline Ltd in different years:

Year 005 2006 2007 2008 2009

Ratio 8.58 54.61 18.17 23.45 18.51

f net profit over different periods:

fit ratio was highest which was very sound for a fir

18.51 which is not bad either.

fit Margin gives us the amount of Gross profit

on is as follows:

Gross profit / Gross turnover

atios show the

earning per

r

Year 2005 2006 2007 2009

Ratio 78.58 54.61 18.17 18.51

after that it

a firm is earning


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Following shows the Gross Profi

Year 2006 2007 2008 2009

Profit 85.08 32.75 32.97 24.57


Comments: In year 2005 and 2006 t

that it came down and in 2009 the r

3. Operating Income and Operati

sometimes called, is the total pre-ta

to the owners before a few other ite

taxes. Operating income can be use

businesses. All else being equal, it i

reason is straightforward and intuiti

will flow to shareholders is going t

service.

Calculating Operating Income

Operating Income = Gross Profit

Operating Margin=Operating In

t Margin of India Infoline Ltd in different years

Year 005 2006 2007 2008 2009

Profit 7.96 85.08 32.75 32.97 24.57

f gross profit over different periods:

he gross profit ratio was good which was very soun

tio is 24.57 which is not bad either.

ng Profit Ratio: Operating income, or operating pr

profit a business generated from its operations. It i

ms need to be paid such as preferred stock dividend

to gauge the general health of a company's core bu

s one of the most important figures you will ever ne

ve: Unless a firm has a lot of assets that it can sell,

have to be generated from selling something such

– Operating Expenses

ome / Sales

:

Year 2005 2006 2007 2009

Profit 87.96 85.08 32.75 24.57

for a firm after

fit as it is

s what is available

and income

siness or

ed to know. The

ny money that

s a product or


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Following shows the Operating

Year 2006 2007 2008 2009

Ratio 88.7 31.49 36.12 29.29


Comments: In year 2005 and 2006 t

after that it came down and in 2009

4.Return On Capital Employe

how much profit we earn from t

ROCE=Profit Of The Year/Eq

Following shows the ROCE Rati

Year 2006 2007 2008 2009

Ratio 16.4 23.73 21.98 15.49

rofit Margin of India Infoline Ltd in different y

Year 005 2006 2007 2008 2009

Ratio 7.56 88.7 31.49 36.12 29.29

f operating profit over different periods:

he operating profit ratio was good which was very s

the ratio is 29.29 which is not bad either.

Ratio: The Return on Capital Employed ratio

e investments the shareholders have made in th

uity Shareholders Fund

o of India Infoline Ltd in different years:

Year 005 2006 2007 2008 2009

Ratio 5.39 16.4 23.73 21.98 15.49

ears:

Year 2005 2006 2007 2009

Ratio 87.56 88.7 31.49 29.29

ound for a firm

(ROCE) tells us

eir company.

Year 2005 2006 2007 2009

Ratio 35.39 16.4 23.73 15.49

http://beginnersinvest.about.com/od/incomestatementanalysis/a/revenue-and-sales.htmhttp://beginnersinvest.about.com/od/incomestatementanalysis/a/operating-expense.htmhttp://beginnersinvest.about.com/od/incomestatementanalysis/a/gross-profit.htm


44/51


Comments: The return on investme

profit earned against shareholder fu

Dividend Payout Ratio: The pe

payout ratio provides an idea of

companies tend to have a higher

Dividend Payout Ratio=Yearly

Following shows the DP Ratio o

Year 2006 2007 2008 2009

Ratio 57.43 32.73 25.41 87.83


Comments: In 2005 the company di

of the firm and after that between 2

f ROCE different periods:

t was highest in 2005 35.39 and in 2009 it was 15.

nd is 15.49.

rcentage of earnings paid to shareholders in divi

ow well earnings support the dividend paymen

payout ratio.

dividend Per Share/Earning Per Share

India Infoline Ltd in different years:

Year 005 2006 2007 2008 2009

Ratio 57.43 32.73 25.41 87.83

f DP ratio different periods:

d not declare any dividend and retain its earning ful

06-2009 the company declare dividend.

9 means that the

dends. The

ts. More mature

Year 2005 2006 2007 2009

Ratio 57.43 32.73 87.83

ly for the benefit


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OTHER RATIOS


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CASH FLOW STATEMENT

TABLE-

Comments:

1. The cash flow statement shows that the net profit before tax has increased from 2005 to

2008, but decreased in 2009 in excessive liquidity.

2. The net cash from operating activity increased from 2005 to 2009 except the year 2006,

which shows a sound position.

3. The net cash in investing activity in negative in all years which shows the less

contribution of the firm in investment activities.

4. The firm’s financing activities was highest in 2008 and lowest in 2009,the contribution

of the firm in 2009 towards the financing activities was poor.5. The firm’s net increase in cash and cash equivalent was highest in2009 which shows a

good liquidity position of the firm.

6. The opening cash and cash equivalent was highest in 2009 which helps the firm to

maintain highest liquidity.


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Findings

1. The current ratio in between 2005-2007, was very much unstable which was not desirable laterthe company rectified. The standard ratio is 2:1.In year 2005 it was most suitable. Now the is

firm is maintaining the lower liquidity position.

2. In 2005 the company did not declare any dividend and retain its earning fully for the benefit of the firm and after that between 2006-2009 the company declare dividend.

3. The return on investment was highest in 2005 35.39 and in 2009 it was 15.49 means that the

profit earned against shareholder fund is 15.49.

4. In year 2005 and 2006 the operating profit ratio was good which was very sound for a firm

after that it came down and in 2009 the ratio is 29.29 which is not bad either

5. In year 2005 and 2006 the gross profit ratio was good which was very sound for a firm afterthat it came down and in 2009 the ratio is 24.57 which was not bad either.

6. : In year 2005 the net profit ratio was highest which was very sound for a firm after that it

came down and in 2009 the ratio is 18.51 which is not bad either.

7. In year 2005 debtors’ turnover ratio was highest which shows the greater flexibility, but in

2009 it came down to2.43.

8. In year 2007 the total asset turnover ratio was highest which implies the sound quality of assetmanagement, here the firm was able to generate highest amount of sale from given asset. Here

the utilization was highest.

9. Interest cover ratio helps to identify the firm’s interest obligation. In 2005 the firm could pay485.41 times of its interest because the firm had low interest to pay, but the scenario changed

afterwards.

10. Here the firm maintained lower debt ratio in 2009, which means the risk the firm is bearing,

is very low.

11. The current ratio in between 2005-2007, was very much unstable which was not desirablelater the company rectified. The standard ratio is 2:1.In year 2005 it was most suitable. Now the

is firm is maintaining the lower liquidity position.


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12. Company has issued share capital of 56.68cr whose face value was 2 Rs.

13. The company’s net worth from 2005 to 2009 is increasing in a pace and in 2009 it was

1048.18cr which is undoubtedly good.

14. Total debt of the company in 2008 was 130.57cr which later came down to 1.80cr. whichsignifies low risk.

15.The company’s sales turnover in march 2008 was 616.11cr and it came down to 542.27cr in

march 2009.this incident had a effect in the total income on 2009 but the total expenditure on

2009 is 383.42cr which is less than 2008.

16. The company’s EBDIT was 188.19cr which was less than 2008.

17. In 2009 the company’s equity dividend was 79.45cr @140% dividends.

18. In 2009 company’s operating profit was 29.29% which was lower than 2008.

19. In 2009 the cash profit margin percentage was 22.59cr where it was 26.42cr in 2008.

20. In 2009 the company’s return on net worth was 10.20%.


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Suggestion & Recommendation

1.Liquidity refers to the ability of the concern to meet its current obligations as and whenthese become due. The company should improve its liquidity position 2:1.

2. The company should make the balance between liquidity and solvency position of the

company.

3. The profit ratio is decreased in current year so the company should pay attention to this because

profit making is the prime objective of every business.

4. The short term financial position of the company is very good but it should pay a little attentionto long term solvency of the company.


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ConclusionThe company’s overall position is at a good position. The company achieves sufficient profit in

past 5 years. The long term solvency position of the company is satisfactory. The companymaintains low liquidity to achieve the high profitability. The company distributes dividends every

year to its share holders except 2005. The profit of the company deceased in the last year due tomaintaining the comparatively high liquidity. The company’s net worth from 2005 to 2009 isincreasing in a pace and in 2009 it was 1048.18cr which is undoubtedly good.


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Bibliography

REFERENCE BOOKS

FINANCIAL MANAGEMENTTheory, Concepts & problems

R.P.RUSTAGI

FINANCIAL MANAGEMENTText and problems By- M.Y. KHAN AND P. K. JAIN

FINANCIAL STATEMENT ANALYSIS

DR.JAYANTA GHOSH

ANNUAL REPORT OF INDIA INFOLINE LTD WEBSITES

1.20052.2006

3.20074.2008

5.2009

WEBSITES

www.indiainfoline.com

www.moneycontrol.com

financial analysis of india infoline ltd final

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