FINANCIAL ANALYSIS OF HAVELLS INDIA LTD.

Chapter – 1 Introduction1 1. OBJECTIVE OF THE STUDY Financial statement analysis is an important part of overall financial statement. It refers to an assessment of the viability, stability and profitability of a business, sub-business or project. This study has been undertaken with a view to achieve the following objectives: • • • Reviewing the Earning Capacity Or Profitability Reviewing the Short & Long- Term Solvency Of The Concern Analyzing operational efficiency of the business. Intra firm comparison of firm. • To gain in-depth knowledge about the financial statements and their use in decision making. • NEED FOR STUDY The project titled “Financial Analysis of HAVELLS is the study on the recent trends and developments happening in the field of finance in HAVELLS. This study tells about the financial statements of HAVELLS INDIA LTD. To know about the profitability and efficiency of the company this study was to be undertaken. SCOPE OF STUDY For doing the financial analysis of HAVELLS INDIA LTD. the whole organization has been taken and not only a single unit. The consolidated balance sheets and profit & loss account from 2006-2009 has been taken into account for the analysis. Financial analysis helps to assess profitability, liquidity, solvency and stability of a concern. This study will help me a lot as I will be able to analyze a company’s financial position in the market. 2 2. INTRODUCTION OF PROJECT Financial data summarized in the form of financial statements are of outstanding significance to the various parties interested in and concerned with (directly or indirectly) the operation and the financial growth of business concern. These financial documents act as ‘beackonlight’ to the business executives in chalking out the various effective policies and in assessing the results of their efforts. In fact, these financial statements render a Yeoman’s service to owners, suppliers, govt. agencies, employees, customers and even common public in their respective fields of interest. But, however mere presentation of these statements does not serve the purpose of none of the aforesaid parties in any way. In other words, the significance of these statements lies not in their preparation but in their analysis and interpretation. Financial analysis is also known as interpretation of financial statements. It refers to the process of determining financial strengths and weakness of firm by establishing strategic relationship between the items of balance sheet, profit and loss account and other operative data. It is only by interpreting the balance sheet and the profit & loss account the figures appearing there are made to tell the story of actual progress and financial position of a business concern in a clear and simple language easily understood by the layman who is typically the most typical shareholder in our country. Financial analysis involves the division of facts on the basis of some definite plans, classifying them into classes on the basis of certain conditions and presenting them in most convenient, simple and understandable form. Not only this, Analysis attempts to study the relationship between different items of financial data and factors. The process of analysis may partake the varying types and normally it is classified into different categories on the basis of information used and on the basis of modus operandi of analysis. In this project, I have done the analysis on the basis of horizontal analysis, vertical analysis, and ratio analysis. 3 An attempt has been made to study the significance of financial data, examine the earning-capacity and efficiency, to determine short-term and long-term solvency of the concern and to determine the profitability of the concern with the help of interpreted data and information. 3. INTRODUCTION OF THE COMPANY Havells India Limited was established in 1958 and is a part of the QRG Group a leading solution provider in the power distributionequipment industry in India. The company is one of the foremost manufacturers and suppliers of low-voltage electrical equipment in the country. It manages its operations through its three divisions – switchgear, cable and wire, and electrical consumer durable. QRG Enterprises which is the QIMAT RAI GUPTA GROUP is one of the fastest growing Electrical and Power Distribution Equipment Company in the country, manufacturing products ranging from Building Circuit Protection, Industrial & Domestic Switchgear, Cables & Wires, Energy Meters, Fans, CFL’s, Luminaries, Bath Fittings and Modular Switches The group comprises of 5 companies:- • Havells India Ltd. (the flagship company) • Standard Electrical • Sylvania 4 • TTL. • Crabtree 5 Its 20 state-of-theart manufacturing plants spread over India. Luminaries.Havells India Ltd. Energy Meters. Commercial & Industrial application and Modular Switches. ranging from Industrial manufacturing Building & Circuit Domestic Switchgear. Concord. Havells India Ltd is a name synonymous with excellence and expertise in the electrical industry. CFL Lamps. and one of the largest & India's fastest growing electrical and power distribution equipment products Protection. With 91 branches / representative offices and over 8000 professionals spread over 50 countries across the globe. Havells owns some of the prestigious global brands like Crabtree. CFL’s etc. Luminaries for Domestic. range industrial consumers both in India and 6 . a billion-dollar-plus organization. Today Havells and of its brands individual have and emerged as the preferred choice for a discerning abroad. the group has achieved rapid success in the past few years. Sylvania. company. and Sylvania: Linolite. Luminance. Latin America & Africa churns out globally acclaimed products like Switchgear. Fans. Europe. SLI Lighting & Zenith. Its 20000 strong global distribution network is always ready to service its clients. Claude. Cables & Wires. Havells has its exports in more than 53 countries like United Kingdom. Havells India Ltd has recorded a turnover of Rs. Havells core strength lies in its 13 manufacturing plants in India. Spain. Germany. the ability to adapt quickly. Singapore. Bulgaria. 5002 crores in the previous financial year and is poised for another quantum growth. Lebanon. The company has acquired a number of International certifications. Havells is now perceived as a single source for all your low voltage electrical requirements. Iran. Syrian Arab Republic. and Uruguay. Sri Lanka. Nigeria. strong relationship with associates. United Arab Emirates. Myanmar. Greece. Zimbabwe. Thailand. Egypt. Iraq. like : 7 . Malaysia. Australia. Bangladesh. Nepal. France. Turkey. Norway. Kenya. Philippines. Peru. Saudi Arabia.The essence of its success lies in the expertise of a fine team of professionals. Hence its customers place an unconditional trust in us. Mauritius. and it is a matter of pride that the company is widely perceived as a quality manufacturer with a reputed brand image. efficiently and ably supported with the vision to think ahead. Havells was initially an electrical company but now it is turning towards consumer oriented company. which are producing world class standard electrical products. Kuwait. Most of its products have both national and international certifications from independent testing authorities. Ghana. Oman. Some of the international certifications are: KEMA. The company access to markets in 40 countries.EDD (Bahrain).TSE (Turkey).SPRING (Singapore).ROHS (European Directive) However the company also had a world wide market.CB.However the company also have some international certifications too which makes the Havells a world renowned company. The company has one of the strongest product portfolios in the industry supported by a strong R&D base.SEMKO. 8 .SNI (Indonesia).ASTA.CP. And also increasing its presence in developing markets like Asia and Africa.SIRIUM(Malaysia). Leadership by example. VALUES Customer Delight : A commitment to surpassing our customer expectations. customers. A commitment to set standards in our business and transactions based on mutual trust. Integrity and Transparency : A commitment to be ethical. delivered by best-in-class people. partners. sincere and open in our dealings. global reach. technological expertise. and employees. business ethics. building long term relationships with all our associates.VISION To be a globally recognized corporation that provides best electrical & lighting solutions. Pursuit of Excellence : A commitment to strive relentlessly. MISSION To achieve our vision through fairness. to constantly improve 9 . 3.ourselves.1 MILESTONES A look at the milestones in over five decades of QRG journey to excellence. our services and products so as to become the best in class Product Range. our teams. maps its Emergence as a major industrial force in the country and abroad. 10 . UP for Changeover Switches.1958: • Commenced trading operations in Delhi. Haryana for Control Gear Products. Delhi. Delhi in Joint Venture with Geyer 1990: • Set up a manufacturing plant at Sahibabad. 1976: • Set up the first manufacturing plant for Rewireable Switches and Changeover Switches at Kirti Nagar. and turned it into a profitably Manufacturing Energy Meters Company in 1 year. 1993: • Set up another manufacturing plant at Faridabad. 1980: • Started manufacturing high quality Energy Meters at Tilak Nagar. 1983: • Acquired Towers and Transformers Ltd. 1996: • Acquired a manufacturing plant at Alwar. Delhi. 1987: • Started manufacturing MCBs at Badli. Delhi. Rajasthan for Power Cables & Entered into a Joint Venture with Electrium. 1979: • Set up a manufacturing plant for HBC Fuses at Badli. UK for manufacturing Dorman 1997: 11 . HP for manufacturing of Domestic Switchgear. MCCB of Crabtree India Limited. Germany. 2000: • Acquired controlling stake in Duke Arnics Electronics (P) Limited engaged In manufacturing of Electronic Meters-Single Phase. • Set-up our own marketing office in London through our wholly owned 12 . Multi Function. UP for manufacturing Customized packaged solutions. • Set up a manufacturing plant for manufacturing of CFL at existing Manufacturing plant in Faridabad. Haryana • Set up a manufacturing plant for manufacturing of Ceiling Fans at Noida. Tri Vectors. Merged ECS Limited in the company to consolidate its area of competence 2002: • • Standard Electrical Company becomes a 100% Subsidiary of the company. 2001: Acquired business of Havells Industries Ltd. 2004: • Set up manufacturing plant at Baddi . UP. • Acquired controlling interest in an industry major-Standard Electricals Ltd. Three Phase. Attained the IEC certification for Industrial switchgear and CSA certification for all manufacturing plants. 1998: • Introduced high-end Ferraris Meters in Joint Venture with DZG.• Acquired Electric Control & Switchboards at NOIDA. K. a 13 . • Expansion at Baddi manufacturing plant and set-up of an Export Oriented Unit. Mauritius and the debenture will be converted in June. • In December.O. Shine Ltd. Ltd. Rajasthan caters to 10. • Awarded the KEMA certification by The Dutch Council for Accreditation. • Expansion at Alwar manufacturing plant for increase of production capacity.000 KVAR per month..2006 2005: • Set up manufacturing plant in Haridwar. • Acquired the Lighting business of a Frankfurt based company "Sylvania". • 2006: • Crabtree India merged with Havells India. • • First Company to get the ISI Certification for complete range of CFLs.000 Students from 77 schools. Uttaranchal for manufacturing Fans. 2007: • Set-up of Capacitor manufacturing plant in Noida. 00. Started mid-day meal program at Alwar. • Added CFL production unit in Haridwar manufacturing plant. 10 Lacs on M/s. 2004 placed 235 fully convertible debentures of Rs. Set up of R&D Center in Noida H.Subsidiary company Havells U. UP with the capacity of 6. making QRG the only group to attain this certification. • QRG Group entered healthcare business by acquiring a majority stake in Central Hospital and Research Centre. • Set up of Global Corporate office. • Warburg Pincus.Global leader in lighting business and now the company's turnover crosses US$ 1 Billion.2% Of the fully diluted share capital of the company. Havells Issued fresh shares to Warburg Pincus. 2008: • Emerges the first Indian CFL manufacturers to have adopted RoHS. QRG Towers at Expressway Noida Investment of Rs.50 Crores in Global Center for Research and Innovation 3.2 SWOT ANALYSIS OF HAVELLS 14 . representing approximately 11. invested US $110 million in Havells India Ltd. Faridabad. a global private equity firm and one of the largest Investors in India. European norms on Restriction of Hazardous Substances in CFLs. skills and capabilities that seriously impedes effective performance. Strength is a distinctive competence that gives the firm comparative advantages in the market place. Sources of outfit: • • Globally small market share Slowdown of Real Estate 15 .Europe) Largest Manufacturing Capacity R & D Facilities Green Products - - Weakness: A weakness is a limitation or deficiency in resources. Strengths: Strength is a resource. this approach essentially involves matching of the internal capabilities with the environmental opportunities and threat and is known as SWOT (strength and weakness. The key strengths are: - International approvals Leveraging upon Sylvania Network (10000 distributor) World class infrastructure Global presence (Latin America. opportunities and threats) analysis. skill or other advantage relative to competition and the needs of markets a firm serves of anticipates serving.UK.The diagnosis of a firm’s strengths and weakness can be fruitful only if the environment factors and market conditions are considered along with the internal capabilities. identification of a previously overlooked market segment. 16 . • • • Global Opportunities Leveraging upon motor business in India.82 crores in 2008-09.43% in 2007-08 to 6.6%. Threats: A threat is a major unfavorable situation in the firm’s environment.• Slowdown in global markets will affect more adversely now after Sylvania acquisition.23 crores in 2008-09. PAT to Sales Ratio has decreased from 6.18%. 26 in 2007-08 to Rs. Unrelated diversification. changes in competitive of regulatory circumstances. are examples. 2333.54 crores in 2007-08 to Rs. it is key impediment to the firm’s current or desired future positions. appearance if a substitute product is examples. the entrance of a new competitor. • • • Unorganized market. 145. • • • Profit after Tax has increased from Rs. Vertical Integration into Havells retail outlets. 3. 2231.22% in 2008-09.93 in 200809. Delays in execution of projects. a growth of 4. 24. an increase of 1.17 crores in 2007-08 to Rs.3 Financial Highlights of year 2008-09 • Turnover has increased from Rs. major technological change. technological changes etc. Opportunities: An opportunity is a major favorable situation in the firm’s environment. slow market growth. 143. Earnings per Share have decreased from Rs. 102. Net Worth has increased from Rs. 154.93 crores in 2007-08 to Rs.31 crores in 2008-09.04 in 2007-08 to Rs.• • Book Value per Share has increased from Rs. 648.91 in 2008-09. 17 . 931. Chapter – 2 Research Methodology RESEARCH METHDOLOGY 18 . RESEARCH OBJECTIVE • To get insight into financial Health of the Company. i. liquidity and solvency of the company RESEARCH PROBLEM Every study has got some problems in it.e. To make comparisons on the basis of performances of past year. A problem defined is a problem half-solved. Havells India Limited. SOURCES OF DATA COLLECTION • • Printed Annual Reports of the company. And so in this study the problem is • • • To know the financial health of the company. secondary data is used. As this study is based on published financial data. Whether the capital invested in it is efficiently utilized or not. RESEARCH DESIGN In this study the method adopted is descriptive as well as causal research. To examine critical areas of profitability. internet and interaction with executives of the company. • • To analyze financial statements employing ratio analysis methodology. Research Technique • • Horizontal analysis Vertical analysis 19 . Further information from other records. ) Sometimes difficult to interpret deviations in ratios.) The time was a big constraint as the two months was a short span of time.) Some of the points concerning to this study as this is a general study. 5. 6.) Industry ratios may not be desirable targets. 20 . 2. 7.) Accounting practices differ across firms. hypothesis could not be drawn 4.• • Ratio analysis Time Period = 3 years Limitations of the study 1.) It was not possible to study various aspect of the organization in detail. 3.) Seasonality affects ratios. Chapter – 3 Financial Analysis 21 . • • • Issue stock pr negotiate for a bank loan to increase its working capital. 22 . A company’s degree of profitability is usually based on the income statement. Make or purchase certain products in the manufacture of its products. Based on there reports management may: • • • Continue or discontinue its main operations or part of its business.FINANCIAL ANALYSIS Financial analysis refers to an assessment of the viability stability and profitability of a business sub-business or project. It is performed by professionals who reports using ratios that make use of information taken from financial statements and other reports. PROFITABILITY: its ability to earn income and sustain growth in both short-term and long-term. These reports are usually presented to top management as one of there bases in making business decisions. which reports on the company’s results of operations. SOLVENCY: its ability to pay its obligation to creditors and other third parties in the long-term. Other decisions that allow management to make an informed selection on various alternatives in the conduct of its business. Acquire or rent/lease certain machines and equipments in the production of its goods. Making decisions regarding investing or lending capital. GOALS Financial analysis often assess the firm’s. 200. ratio sometimes is expressed in the form of rate.000 and $100. as well as financial and non-financial indicator. For instance ratio between two numeric facts. The current ratio would be expressed as C.e. ratio analysis can predict future bankruptcy. e. stock turnover is three times a year. without having to sustain significant losses in the conduct of its business. percentage. Ratio can be found out by dividing one number by another. They are of particular interest to those extending short-term credit to the 23 . Financial ratios are useful indicators of a firm's performance and financial situation.L.L (i.A/C. in budgetary control system or in any other part of accounting or organizational accounting ratios thus shows the relationship between accounting data. C. FINANCIAL RATIOS: The term accounting ratios” is used to describe significant relationship between figures shown on a balance sheet. satisfying immediate obligations. For example the current asset and current liabilities of a business on particular date are$200. In some cases.LIQUIDITY: its ability to maintain positive cash flow. Ratios show how one number is related to another.A is two times the C. or rate.000) i. proportion. in a profit n loss account.g.000/100. Financial ratios can be used to analyze trends and to compare the firm's financials to those of other firms. It may be expressed in the form of co-efficient.000 respectively. STABILITY: the firm’s ability to remain in business in the long run. Assessing a company’s stability requires the use of the income statement and the balance sheet.e. Classification of Accounting Ratios: LIQUIDITY RATIOS: Liquidity ratios provide information about a firm's ability to meet its short-term financial obligations. usually over a period of time. Most ratios can be calculated from information provided by the financial statements. The quick ratio is an alternative measure of liquidity that does not include inventory in the current assets. As current assets can decline in value but liabilities are not subject to any decline in value. Typical values for the current ratio vary by firm and industry. Shareholders may prefer a lower current ratio so that more of the firm's assets are working to grow the business. accounts receivable.28 2008-09 1. These assets essentially are current assets less inventory. The quick ratio often is referred to as the acid test and a ratio of 1:1 is considered satisfactory. Two frequently-used liquidity ratios are the current ratio (or working capital ratio) and the quick ratio.20 Current ratio YEAR Current Ratio 24 . firms with less than 2:1 current ratio may be doing well as compared to firms with current ratio more than 2:1. Quick ratio YEAR 2006-07 2007-08 2008-09 2007-08 1. One drawback of the current ratio is that inventory may include many items that are difficult to liquidate quickly and that have uncertain liquidation values.Inventory Quick Ratio = Current Liabilities The current assets used in the quick ratio are cash.15 T-1 Short-term creditors prefer a high current ratio since it reduces their risk.firm. For example. The quick ratio is defined as follows: Current Assets . and notes receivable. The current ratio is the ratio of current assets to current liabilities: Current Assets Current Ratio = Current Liabilities 2006-07 1. A current ratio of 2:1 or more is considered satisfactory. 81 G-1 G-2 LIQUIDITY POSITION OF HAVELLS 25 .43 0.QUICK RATIO 0.42 T-2 0. = Shareholders fund Total assets Proprietary ratio Solvency 26 . The times interest earned ratio indicates how well the firm's earnings can cover the interest payments on its debt.81 in year 2008-09 is a clear indicator of that. A quick ratio of 0.Current ratio of HAVELLS is more or less the same in each year. This ratio also is known as the interest coverage and is calculated as follows: Interest Coverage EBIT Interest Coverage = Interest Charges Where. Higher the ratio. SOLVENCY RATIOS The Debt-To-Equity ratio is total debt divided by total equity: Total Debt Debt-to-Equity Ratio = Total Equity Debt ratios depend on the classification of long-term leases and on the classification of some items as long-term debt or equity. Quick ratio of HAVELLS indicates that company is improving its short term financial position with time. The company is able to maintain a current ratio of more than 1 which shows the availability of current assets in rupees is more than current claims against them. EBIT = Earnings before Interest and Taxes The Proprietary ratio shows the extent to which the total assets have been financed by the proprietor. greater the satisfaction for lenders and creditors. 08 9.95 2008-09 0.06 8.82 2007-08 0.21 7.92 0.16 0.39 0.93 T-3 G-3 27 .Year Debt-equity ratio Interest coverage Proprietary ratio 2006-07 0. still it is increasing with every coming year. Debt equity ratio of Havells has decreased over the years and is low due to negligible amount of loan on Havells as compare to its equity. showing the number of times interest charges are covered by funds that are ordinarily available for their payment. which indicates high degree of protection enjoyed by its lenders. Interest coverage ratio has increased year by year. Though low proprietary ratio is alarming for creditors as they may have to loose in the event of liquidation.G-4/G-5 Solvency This ratio determines the ability of firm to meet its long term obligations. 28 . Havells maintains a strong financial position in this case. But. Omission of purchase invoices from accounts. 4. Decrease in the selling price of goods. On the other hand. However. or omission of sales. 3. 2. the decrease in the gross profit ratio may be due to the following factors. Increase in the cost of goods sold without any increase in selling price. 2. higher the gross profit better it is. the gross profit earned should be sufficient to recover all operating expenses and to build up reserves after paying all fixed interest charges and dividends. Unfavorable purchasing or markup policies. without corresponding decrease in the cost of goods sold. It reflects efficiency with which a firm produces its products. 5. 1. 1. 4. Over valuation of opening stock or under valuation of closing stock 29 . As the gross profit is found by deducting cost of goods sold from net sales. Decrease in cost of goods sold without corresponding decrease in selling price. Increase in the selling price of goods sold without any corresponding increase in the cost of goods sold. Causes / reasons of increase or decrease in gross profit ratio: It should be observed that an increase in the GP ratio may be due to the following factors. Inability of management to improve sales volume. There is no standard GP ratio for evaluation.PROFITABLITY RATIO Gross profit ratio: Gross profit ratio may be indicated to what extent the selling prices of goods per unit may be reduced without incurring losses on operations. Under valuation of opening stock or overvaluation of closing stock. 3. It may vary from business to business. 68 6.47 6. But while interpreting the ratio it should be kept in mind that the performance of profits also be seen in relation to investments or capital of the firm and not only in relation to sales.41 6.59 2007-08 8. low demand.Hence. mark-ups and markdowns. Net profit Net profit ratio = Net sales YEAR Gross profit ratio Net profit ratio 2006-07 8. the firm shall not be able to achieve a satisfactory return on its investment.57 30 .97 2008-09 8. Gross profit Gross profit ratio = Net sales NET PROFIT RATIO: NP ratio is used to measure the overall profitability and hence it is very useful to proprietors. etc. higher the ratio the better is the profitability. an analysis of gross profit margin should be carried out in the light of the information relating to purchasing. The ratio is very useful as if the net profit is not sufficient. This ratio also indicates the firm's capacity to face adverse economic conditions such as price competition. Obviously. credit and collections as well as merchandising policies. T-4 G-6 G-7 31 . the increasing cost of other raw materials and global slowdown in 2008-09 has again brought the profitability ratio down.Advertising campaign during IPL.PROFITABILITY POSTITON OF HAVELLS Profitability ratio increased in 2007-08 due to acquisition of Chinese firms that helped in manufacturing products at a lower cost. This ratio measures how quickly the inventory is sold showing efficient inventory management. ACTIVITY RATIOS These are concerned with measuring efficiency in asset management. Depending upon the various types of assets. there are various types of activity ratios. Example. In this concern the inventory turnover ratio is increasing. The greater is the rate of turnover or conversion. It is based on the relationship between the cost of goods sold and assets/ investment of a firm. ASSETS TURNOVER RATIO This ratio is also known as investment turnover ratio. In HAVELLS profit are tendered to measure management efficiency and risk. 32 . which shows utilization of inventories in generating sales is good. However. In HAVELLS new innovative different marketing strategies boost up the sale of the company which helps in the increase of profit. the more efficient is the utilization / management. And so they are also called efficiency or assets utilization ratios. Depending upon the different concepts of assets employed. An activity ratio may be defined as a test of the relationship between cost of sales and the various assets of the firm. The inventory turnover ratio is high in case of HAVELLS. INVENTORY (STOCK) TURNOVER RATIO This ratio indicates the number of times inventory is replaced during the year. It measures the relationship between the cost of goods sold and the inventory level. there are many variants of this ratio. Net cost of goods sold Stock turnover ratio = Net stock Capital turnover ratio = Net sales Capital employed Working capital turnover ratio = Net sales Fixed assets turnover ratio = Net sales Net fixed assets YEAR Capital turnover ratio Working capital turnover ratio Fixed assets turnover ratio Inventory Turnover Ratio 2006-07 4.85 2007-08 2.03 4.92 2008-09 2.41 11.46 14.53 T-5 33 .37 6.46 5.28 13.82 6.19 21.56 7. G-9 G-10 34 . The capital employed is increasing every year but not in the same proportion as profits.G-11 G-12 These ratios show how the resources are efficiently utilized in the concern. Though 35 . it gives a view of the comparative earnings or earnings power of the firm. in some firms. DIVIDEND PAYOUT RATIO: The payout ratio and the retained earning ratio are the indicators of the amount of earnings that have been ploughed back in the business. This ratio is considered to be a yardstick of operating efficiency but it should be used cautiously because it may be affected by a number of uncontrollable factors beyond the control of the firm. An operating ratio ranging between 75% and 80% is generally considered as standard for manufacturing concerns. EARNINGS PER SHARE (EPS) RATIO: The earnings per share is a good measure of profitability and when compared with EPS of similar companies. EPS ratio calculated for a number of years indicates whether or not the earning power of the company has increased. Moreover.93 36 . Year 2006-07 2007-08 2008-09 Earning per share(Rs) 19 26 24. The lower the payout ratio. the higher will be the amount of earnings ploughed back in the business and vice versa. A lower payout ratio or higher retained earnings ratio means a stronger financial position of the company.assets turnover is quite high in HAVELLS but efficiency is still a matter of concern as it has fallen as compared to previous year. non-operating expenses from a substantial part of the total expenses and in such cases operating ratio may give misleading results. Lower operating ratio shows higher operating profit and vice versa. OPERATING RATIO Operating ratio shows the operational efficiency of the business. 5 2.5 T-6 G-12/G-13 RETURN ON EQUITY 37 .5 2.Dividend per share(Rs) 2. 38 .44 38.54 666. Interpretation of the ratio is similar to the interpretation of return on shareholder's investments and higher the ratio better is.92 2007-08 143.It is the bottom line measure for the shareholders.23 934.52 2008-09 145.15 262.33 15.97 21.54 RETURN ON INVESTMENT This ratio is more meaningful to the equity shareholders who are interested to know profits earned by the company and those profits which can be made available to pay dividends to them. Return on equity is defined as follows: Net Income Return on Equity = Shareholder Equity Year Net profit Equity shareholder’s fund Ratio 2006-07 102. measuring the profits earned for each dollar invested in the firm's stock. 56 702. tax and dividend Capital employed Ratio 2006-07 148. In other words this ratio is a test of liquidity of the debtors of a firm which can be examined in two ways: (i) DEBTORS / RECEIVABLES TURNOVER = Sales/Avg.5 46. It shows how quickly receivables or debtors are converted into cash.72 2008-09 209.61 20.32 2007-08 204.13 1004.93 318.77 29. And closely related to this ratio is the average collection period.89 T-8 G-14/G-15 RECEIVABLES (DEBTORS) TURNOVER RATIO AND AVERAGE COLLECTION PERIOD The second major activity ratio is the receivables or debtors turnover ratio. Debtor 39 .Year Profit before interest. (ii) AVERAGE COLLECTION PERIOD = 360/Debtors Turnover Year Debtor turnover 2006-07 19.49 G-16 40 .35 2008-09 28.42 2007-08 42.50 2008-09 12.83 Year Avg.53 2007-08 8. Collection period 2006-07 18. G-17 This ratio indicates the speed with which debtors/accounts receivable are being collected.35 times during the financial year 2007-08 and 28. And the debtors got collected in 8. A turnover ratio of 42.5 days.35 signifies that debtors get converted into cash 42.5 days in 2007-08 which is quite early as compared to 2008-09 in which they got collected in 12. 41 . This ratio shows that there is high turnover in 2007-08 and the collection period is also less which means that the liquidity of debtors is better and there is prompt payment on the part of debtors.83 times during 2008-09. But in 2008-09 the turnover has decreased and the collection period has increased which means there is a delayed payment by debtors. Chapter – 4 Conclusion & Recommendations 42 . Strong LIQUIDITY POSITION No debt burden Net profit are also increasing.     SOME NEGATIVE POINT:   Efficiency is a concern as Asset Turnover is decreasing year by year.FINDINGS The findings from this project are:SOME POSITIVE POINTS:  Good financial condition as was able to maintain even in times of slowdown. Aggressive Marketing. Not PROACTIVE enough. Should try and introduce more innovative products.  CONCLUSION 43 . • HAVELLS has a strong financial position. Should try and manufacture products in the low price range for middle class.    44 . should try to introduce more products in the low price range for the middle class. cash reserves towards fruitful investment. Therefore. Recommendations   They can invest in large projects. • Sales have increased in proportion to the increase in cost of raw materials and other manufacturing expenses. • Moreover. which is clear from the profits and sales it was able to maintain even in the period of slowdown. They should expand their business in order to utilize their funds. They have to continue PROACTIVE marketing in order to utilize the huge Should also explore other areas of opportunity. relying on quantity and not sacrificing quality. • Due to use of SAP all units of the organization have been able to create a common database and thus are able to easily access to all data including information related to inventory. ANNEXURES 45 . Cr.88 28. ------------------Mar '05 12 mths Mar '06 12 mths Mar '07 12 mths Mar '08 12 mths Mar '09 12 mths Sources Of Funds Total Share Capital Equity Share Capital Share Application Money 5.Balance Sheet ------------------in Rs.96 30.57 0 235.56 0 620.08 5.42 Preference Share Capital Reserves 0 80.07 0 901.8 12.88 28.99 0 17.08 0 0.96 30.94 2.82 0 162.83 Revaluation Reserves 0 0 46 0 0 0 .8 12.45 26.45 26. Depreciation Net Block 15.79 430.06 666.99 42.88 54.88 244.36 164.07 15.52 507.33 24.84 0 56.36 212.44 56.47 239.09 176.85 Mar '06 12 mths 318.48 934.08 163.61 Mar '09 12 mths Application Of Funds Gross Block 104.26 3.77 Mar '08 12 mths 1.93 449.5 30.69 Capital Work in Progress Investments Inventories Sundry Debtors 4.62 128.62 6.74 Cash and Bank Balance 0.17 190.54 262.01 108.36 32.87 207.28 Total Liabilities 260.5 Mar '07 12 mths 702.89 57.77 3.62 Less: Accum.23 1.8 45.13 3.62 142.45 146.11 168.Networth Secured Loans Unsecured Loans Total Debt 86.35 344.17 29.29 66.3 109.79 12.64 47 .63 301.97 31.2 22.92 70.79 387.43 31.53 86.06 4.32 35.56 26.44 0.004.91 88.17 106.96 83.85 Mar '05 12 mths 285.14 174. 33 129.88 48 .24 66.1 702.73 244. Loans & Advances Deffered Credit Current Liabilities Provisions 306.1 Total CL & Provisions Net Current Assets 140.84 0.77 6.61 Contingent Liabilities Book Value (Rs) 10.21 601.75 647.06 0 127.83 12.16 595.05 1.73 70.32 0 456.24 348.74 7.69 424.65 31.18 47.73 Total CA.33 370.9 374.004.77 575.31 48.9 19.53 296.25 509.38 52.13 38.05 123.82 112.44 0 386.81 74.36 0 223.06 154.77 0.21 Miscellaneous Expenses Total Assets 0.05 285.14 318.59 21.03 102.01 260.5 0.04 0 265.92 37.Total Current Assets 270.4 494.35 297.41 86.92 297.64 152.91 Loans and Advances 28.23 165.44 72.8 Fixed Deposits 7.14 319.86 0.63 151. -----------------Mar '05 Mar '06 Mar '07 Mar '08 Mar '09 49 .Profit & Loss account -----------------. Cr.in Rs. 88 2.61 1.43 363.63 50 .01 13.8 1.681.08 21 74.466.55 53.06 56.66 176.71 582.11 2.203.196.37 17.52 9.82 339.32 129.47 36.18 1.04 25.333.604.45 135.14 Other Manufacturing Expenses 23.88 15 41.93 78.63 38.45 2.82 83.03 1.263.062.16 13.69 1.06 2.64 42.31 40.64 88.15 Miscellaneous Expenses 8.14 1.17 2.66 Selling and Admin Expenses 102.003.63 1.74 3.054.07 264.37 21.22 5.231.81 21.72 5.99 2.35 15.115.12 mths 12 mths 12 mths 12 mths 12 mths Income Sales Turnover Excise Duty Net Sales Other Income Stock Adjustments Total Income Expenditure 666.35 1.034.83 12.545.49 1.67 Raw Materials Power & Fuel Cost Employee Cost 391.32 -173.75 625.51 168.40 2.42 111.72 130.045.83 74.89 653. 03 184.5 204.04 30.52 47.74 191.92 18.04 0.88 22.992.38 9.52 4.66 117.71 167.27 22.61 1.72 25.21 102.27 1.99 0 0 0.04 16.15 143.32 20.9 117.74 Mar '06 Mar '07 Mar '08 Mar '09 12 mths Operating Profit PBDIT Interest PBDT Depreciation Other Written Off Profit Before Tax Extra-ordinary items 12 mths 12 mths 12 mths 12 mths 61.9 15.2 166.824.28 6.456.86 0 0.94 127.14 107.42 179.9 17.28 PBT (Post Extra-ord Items) Tax Reported Net Profit 43.36 145.54 145.16 148.32 0.76 Mar '05 937.3 13.08 102.23 51 .91 78.Preoperative Exp Capitalised Total Expenses 0 0 0 0 0 561.56 1.05 0.02 0.44 78.6 85.06 204.32 64.93 25.05 43.62 209.6 166.04 0.53 63.44 12.39 166.25 22. 64 561.38 0.72 0 13.39 19 24.in Rs.43 394.88 Cash Flow -----------------.68 Earning Per Share (Rs) Equity Dividend (%) Book Value (Rs) 26.22 0 2.Total Value Addition Preference Dividend Equity Dividend 169.28 2.56 Per share data (annualised) Shares in issue (lakhs) 115. -----------------Mar '05 Mar '06 Mar '07 Mar '08 Mar '09 52 .31 48.91 248.14 50 50 50 50 50 74.34 25.9 0 6.87 284.58 579.06 154.97 2.78 24.82 112.91 537. Cr.48 0 15.73 70.21 525.46 2.04 Corporate Dividend Tax 0.44 0 14.18 601. 35 0.21 Opening Cash & Cash Equivalents 0.24 0.02 273.17 Net Cash (used in)/from Investing Activities 322.07 -79.22 53 .63 202.47 26.7 -62.25 167.35 -49.78 223.54 166.39 Net (decrease)/increase In Cash and Cash Equivalents 0.61 64.24 78.12 mths 12 mths 12 mths 12 mths 12 mths Net Profit Before Tax 43.27 Net Cash From Operating Activities -7.95 -76.61 91.58 -99.1 -315 Net Cash (used in)/from Financing Activities 57.01 129.14 142.51 120.13 37.59 140.11 26.11 0. investopedia.com I.22 155.61 64. Pandey R.com • • • 54 .K Gupta www. annual reports Havells India Ltd.43 BIBLIOGRAPHY • • • • Havells India Ltd.35 0.moneycontrol.google. M.L Gupta & V. official website www.com www.46 26.Closing Cash & Cash Equivalents 0. 55 .