Leverage Analysis

Working Capital Management Analysis

FM II ProjectGroup 14

PraveenKumar J R PGP14057 Praveen PGP14056 Rituraj Dhir PGP14058

FM II - Group 141Leverage AnalysisTVS Motors

Mar '14Mar '13Mar '12Mar '11Mar '10Mar'09

EBIT37794215323735532042151539571

EPS 625421

Sales796185716925714152628802436311367092

Net Income2616311602249071945888013108

Debt/Equity011111

DOL6.831392563-109.08897841.2216044012.526335624NA

DFL1.6617617381.2611111651.6888785081.0864197013.140708701

DTL11.35214678-137.57332862.0631414182.744660792NA

(Indian Rupee .in Lakhs)

The degree of combined leverage has increased considerably over the years, more so in the past year. Now their leveraged state is healthy. A 1% change in their sales would incur them an increase of 11.35% in their EPS, which is a very good sign .By maintaining, a high operating leverage they have considerably reduced their business riskTheir capital structure also has been refined in 2014, moving from maintaining a D/E ratio of 1 to eliminating debt.

Wipro


Wipro maintain a steady degree of leverage. Their increased recruitments of personnel for the previous year has skewed their operating leverage. There is more variable operating costs than fixed costs and hence the reduction of operating leverage.Their capital structure is pure equity and have maintained zero debts in the past 5 years. The shareholders have gained from no debt, as though they have maintained a moderate leverage ratio, the EPS has increased as the payment of debts have not eaten away the revenue

Taj GVK Hotels


The DOL has decreased from '75.85 to 3.026' during the period 2013-2014. It shows that with 1% increase in sales the operating profit is increasing by 3.173%, which is not very good as compared to the previous year. The DFL has increased from '1.847 to 4.083' during the period 2013-2014. It shows that with 1% change in operating profit the EPS is changing by 4.083% which is a good sign The degree of combined/Total leverage has decreased considerably over the years, more so in the past two years. Now their leveraged state is unhealthy. A 1% change in their sales would incur them an increase of 12.35% in their EPS, which is a not very good sign as compared to the previous year. Their capital structure has been maintained at 1 in 2014, indicating 50% debt and 50% equity.

Monte Carlo

Mar '14Mar '13Mar '12Mar '11Mar '10Mar '09

EBIT931971948336000

EPS252128000

Sales503734024137301000

Net Income553845945192000

Debt/Equity000000

DOL1.1731730671.738127146NANANANA

DFL0.6448403361.824868651NANANANA

DTL0.7565093153.171853741NANANANA


The DOL has increased from '-1.738 to 1.173' during the period 2013-2014. It shows that with 1% increase in sales the operating profit is increasing by 1.173%, which is good sign for the company. The DFL has decreased from '1.824 to 0.644' during the period 2013-2014. It shows that with 1% change in operating profit the EPS is changing by only 0.644% which needs to be improved. The degree of combined/Total leverage has decreased considerably over the years, more so in the past two years. Now their leveraged state is unhealthy. A 1% change in their sales would incur them an increase of 7.35% in their EPS, which is a not very good sign. Their capital structure also has been refined in 2014, moving from maintaining a D/E ratio of 0 indicating no debt.


Return = (P1 P0)/P0 + D1/P0 = Capital Gain Yield + Dividend Yield

TAJ GVK HOTELS & RESORTS

Dividends Declared

AnnouncementDateEffectiveDateDividendTypeDividend (%)Remarks

12-05-1424-07-14Final10.00Rs.0.2000 per share(10%)Dividend

30-04-1323-07-13Final25.00Rs.0.5000 per share(25%)Dividend

30-04-1219-07-12Final75.00-

28-04-1120-07-11Final100.00-

27-04-1021-07-10Final100.00-

04-05-0920-07-09Final100.00-

29-04-0824-07-08Final160.00AGM

25-04-0719-07-07Final150.00AGM

25-04-0620-07-06Final100.00AGM

26-04-0521-07-05Final45.00AGM

28-04-0420-07-04Final15.00AGM

14-01-0429-01-04Interim15.00-

23-04-0322-05-03Interim20.00-

23-04-0219-06-02Interim15.00-

23-05-0219-06-02Interim15.00-

28-07-0131-08-01Final10.00-

Source:Dion Global Solutions Limited

As is evident from the above line of dividend payments, the amount paid as dividend in 2015 has considerably decreased from the 2008 levels. This is attributed to the decreasing EBITDA.As the revenue decreases, so is the amount available to payout the dividends The managers tried to stabilize the dividend payout to constant levels from 2009, which should have been the strategy adopted from the onset. But due to the decreasing PAT, the levels were not sustainable and hence the dividends reduced

Capital Gains

The decrease in dividend yield is not compensated through capital gains, instead it is gone down the spiral as well. Looking at this scenario, the large amounts of interim dividends paid out could have been retained either as cash reserves or used to invest in other activities to hedge the negative spiral they are in right now.

The Company has consistently declared dividends for the last 5 years. It still is paying out paying dividends despite the decrease in revenues

Taj had one instance of stock split happening in 2005.The details are as follows

MONTE CARLO

Monte Carlo Fashions has no history of paying out dividends .They have very recently listed themselves on the exchange

But the shareholders have enjoyed good capital gains on their investments. Looking at the recent stock performance, the companys performance has resulted in a steep increase in the price With an outlook of the performance continuing, the shareholders tend to gain in terms of capital gains

WIPRO Dividend Policy

Dividend Declared


07-01-1522-01-15Interim250.00Rs.5.0000 per share(250%)Interim Dividend

17-04-1421-07-14Final250.00Rs.5.0000 per share(250%)Final Dividend (B C Dates has been revised from 01/07/2014 to 23/07/2014)


19-04-1327-06-13Final250.00Rs.5.0000 per share(250%)Final Dividend


25-04-1228-06-12Final200.00-

10-01-1224-01-12Interim100.00-

27-04-1129-06-11Final200.00-

17-01-1127-01-11Interim100.00-

23-04-1015-06-10Final300.00(Revised from BC 01/07/2010 to 22/07/2010)

22-04-0929-06-09Final200.00-

21-04-0827-06-08Final200.00AGM

10-10-0725-10-07Interim100.00-

20-04-0728-06-07Final50.00AGM

14-03-0726-03-07Interim250.00-

19-04-0629-06-06Final250.00AGM

22-04-0529-06-05Final250.00AGM

16-04-0406-05-04Final1,450.00The Board has also proposed a Final Dividend of Rs 4 per share and an one time dividend of Rs 25 per share.

17-04-0301-07-03Final50.00AGM

19-04-0228-06-02Final50.00AGM

20-04-0118-06-01Final25.00-

of 1.2%.The company has a good dividend track report and has consistently declared dividends for the last 5 years.* Dividend Yield: (Dividend per share / Current Share Price)

Last Five Year Dividend Policy representation of Wipro.D = DividendB = Bonus IssueWipro is a really lucrative opportunity to invest considering the steady dividend payment rolled out and also considering they are growing in terms of revenue year on year can make us forecast that the dividend payments are going to be on a steady upward spiral in the coming years

Last Five Year EBITDA, PBT and PAT representation of WiproThe increase in EBITDA are welcoming signs, which signal solid dividend pay-outs in the futureAlso considering the increase in share price the shareholders stand to capitalize on a combination of capital and dividend yields

TVS MOTORS Dividend Policy

Dividend Declared



16-04-1402-05-14Interim75.00Rs.0.7500 per share(75%)Second Interim Dividend


11-04-1303-05-13Interim60.00Rs.0.6000 per share(60%)Second Interim Dividend


24-05-1204-06-12Interim70.00Second Interim Dividend

29-02-1220-03-12Interim60.00-


10-01-1125-01-11Interim50.00-


07-01-1025-01-10Interim70.00-

11-06-0929-06-09Interim70.00Interim Dividend for the year ended 31.03.2009.

02-07-0806-08-08Final70.00AGM

28-06-0710-08-07Final15.00-

10-10-0627-10-06Interim70.00-


14-10-0531-10-05Interim70.00-

20-05-0503-06-05Final60.00-

07-10-0429-10-04Interim70.00-


14-10-0330-10-03Interim60.00-

13-05-0313-06-03Interim70.00Second Interim Dividend & AGM

25-09-0223-10-02Interim50.00-

29-06-0212-09-02Final0.00AGM & Nil Final Dividend

29-07-0212-09-02Final0.00AGM & Nil Final Dividend

06-02-0222-02-02Interim90.00-

30-07-0129-08-01Final80.00AGM

Dividend Yield: (Dividend per share / Current Share Price)

Last Five Year Dividend Policy representation of TVS Motors.D = DividendB = Bonus IssueThe share price is on a solid upward spiral due to a combination of factors on the basis of the companys performance. This has resulted in a potential for high capital gains for the shareholders. Another thing to be looked out is they have also paid out dividends on a regular basis and the dividend payments have been steady. So future dividends pay-outs would be in the same range

Last Five Year EBITDA, PBT and PAT representation of TVS Motors.

A steady revenue as observed above points that the shareholders would have a solid payouts in terms of dividends So TVS Motors is one where the shareholder stands to gain both in terms of dividend yields and capital gains


Working Capital Management: Taj GVC

Taj GVC Operating & Cash Conversion Cycle

Mar-14Mar-13Mar-12

Average age of inventory13.4711.38.37

Average collection period12.5110.5612.24

Operating cycle25.9821.8620.61

Accounts payable period49.0743.4543.41

Cash conversion cycle-23.09-21.59-22.8

Table: Operating & Cash conversion cycle of Taj

Industry Operating & Cash Conversion Cycle

Mar-14Mar-13Mar-12





Cash conversion cycle43.0640.5222.15

Table: Operating & Cash conversion cycle of Industry

Operating Cycle:The operating cycle of Taj is way below the industry standards. They hold their inventory for a shorter time and also have a short collection period compared to its industry peers. So their operating cycle is shorter, which gives them a competitive advantage over their peers in the industry

Figure 4: Comparison of Operating Cycle of Taj vs Industry

Cash conversion cycle:Their payable period is shorter than the industry average, but with the respect to their collection period, they have an extended period to hold on to their resources. They dont pay their debts until they collect the receivables.These parameters make Taj an outlier in their industry and gives them a clear competitive advantage over their peers

Figure: Comparison of Cash Conversion Cycle of Taj vs Industry

Working Capital Management: Monte Carlo

Monte Carlo Operating & Cash Conversion Cycle

Mar-14Mar-13Mar-12






Table: Operating & Cash conversion cycle of Monte Carlo


Mar-14Mar-13Mar-12







Operating cycle:

The operating cycle is slightly higher than the industry average. This could be mainly attributed to the fact they hold their inventory longer than their peers in the industry .They should look to effectively manage their inventory and also try reducing their collection period.

Figure: Comparison of Operating Cycle of Monte Carlo vs Industry.

Cash conversion Cycle:They have increased their payable period over the years to better manage their working capital. They have come closer to the industry average, but still there is scope to increase on this front by managing their inventory better

Figure: Comparison of Cash Conversion Cycle of Monte Carlo vs Industry

Working Capital Management: Wipro

Wipro Operating & Cash Conversion Cycle

Mar-14Mar-13Mar-12





Cash conversion cycle-0.4517.419.34

Table: Operating & Cash conversion cycle of Wipro


Mar-14Mar-13Mar-12







Operating Cycle:

They are maintaining their operating close to the industry average. But, they could do better by handling their inventory management better.

Figure: Comparison of Operating Cycle of Wipro vs Industry.

Cash Conversion Cycle:Their payable period exceeds the industry average. This puts them in position to hold to their assets longer. They have increased this over the years to better manage their working capital. They have managed their working really well compared to the industry standards.

Figure: Comparison of Cash Conversion Cycle of Wipro vs Industry.

Working Capital Management: TVS Motors

TVS Operating & Cash Conversion Cycle

Mar-14Mar-13Mar-12





Cash conversion cycle-37.593.7141.62

Table: Operating & Cash conversion cycle of TVS Motors


Mar-14Mar-13Mar-12







Operating Cycle:

TVS should be one of those who handle their working capital efficiently in the industry. Both their inventory period and ACP are well below the industry average proving that they have managed their short term financing really well

Figure: Comparison of Operating Cycle of TVS vs Industry.

Cash Conversion Cycle:Their payable period is just above the industry average, which also makes their cash conversion cycle lower than the industry average .This makes TVS motors an outlier in their industry in terms of handling their working capital

Figure: Comparison of Cash Conversion Cycle of TVS vs Industry.

Documents

Leverage Analysis