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SINTEX INDUSTRIES: BSE: 502742 ; ISIN: INE429C01035
Scope of work:
Ajay Kumar (1411211), Gokulram (1411229) Naseef K.P.O. (1411246), and Amit
Kumar Sah (1411280), Group 7, Sec-D students of IIM Bangalore undertook the
study of 2013-14 financials of Sintex Industries. The scope of the study is restricted to
Strategic Analysis, Ratio Analysis, Accounting Analysis and Cash Flow Statement
Analysis. The report was prepared as part of project-II for Financial Accounting taught
by Padmini Srinivasan at Indian Institute of Management Bangalore. The financial
reports for years ranging from 2011 to 2014 have been taken up from bseindia.com.
The views and analysis presented here belong to individuals of the groups and they are
no way responsible for losses arising from the interpretation of the document.
SINTEX INDUSTRIES: BSE: 502742 ; ISIN: INE429C01035
Contents 1. Strategy Analysis: .............................................................................................................. 3
1.1 Risks and vulnerabilities: ................................................................................................. 3
1.2 Future Prospects:............................................................................................................. 3
2. Major Accounting Standards and Policies followed: ............................................................. 4
3. Financial Analysis............................................................................................................... 4
3.1 Horizontal Analysis: .................................................................................................... 4
3.2 Vertical analysis:......................................................................................................... 5
3.3 Ratio Analysis: ............................................................................................................ 5
4. Cash Flow Analysis ............................................................................................................. 7
5. Conclusion: ....................................................................................................................... 7
6. References: ....................................................................................................................... 8
7. Annexures ......................................................................................................................... 9
Annexure 1: Balance Sheet and Profit and Loss Statement 2013-2014 ...................................... 9
Annexure 2: Horizontal Analysis ........................................................................................... 11
Annexure 3: Vertical Analysis: .............................................................................................. 12
Annexure 4 Profitability Ratios: ............................................................................................ 13
Annexure 5: Operating Figures ............................................................................................. 14
Annexure 6 Liquidity Ratios.................................................................................................. 16
Annexure 7: Valuation Ratios ............................................................................................... 17
Annexure 8: Solvency Ratios: ............................................................................................... 17
SINTEX INDUSTRIES: BSE: 502742 ; ISIN: INE429C01035
1. Strategy Analysis: a) Plastic Industry: Plastic Industry has positive and growing outlook for upcoming years.
It is expected to more than double by 2020i, ie, an annual average growth of 17%.
b) Company Analysis: It supplies plastic products for infrastructure purposes such as
tanks, doors and sheds; it supplies customized plastic industrial products ranging from
for electrical equipments, aerospace, automobiles defence, telecommunication etc.
c) Mergers and Acquisitions related: July 2014: Sintex Industries successfully acquired
France based SIMONIN Group3 which manufactures technical components and metal-
plastic sub-assemblies. August 2014: Sintex Wausaukee Composites Inc., owned by
Sintex, is bringing its light resin transfer moulding expertise to India. 4
d) Company Growth vs. Industry growth: 1.The plastic industry grew by a healthy 10-12%
%1. Revenue from plastic industry grew by only 6.77% however; the Operating Profit
has increased by 21.2%. 2. The textile revenues grew by a healthy 15.7% as compared
to an industry average of 11%5
e) Company export vs. Industry Export: Company Export grew at meagre 5.3 %. Indian
plastics exports have grown at a rate of 16.56% 2
1.1 Risks and vulnerabilities:
1. Pre-fabricated and monolithic segment which accounts for over quarter of their
revenues is entirely dependent on government projects.
2. China has near about the same population as India and is 3 to 20 times better
positioned in volumes of plastic manufacturing.
3. Despite having 29% share in cotton production, China houses 46% of world spinning
capacity and 45% of global trade.
1.2 Future Prospects:
1. The per capita income has increased by a percentage of 10.4% as compared to 2012-13.
Innovative demands for Water management, Nursery Management, Surface cover
Cultivation, Controlled Environment Agriculture and Innovative Packaging Solutions
are some of the new market potentials.
2. Govt thrust on social spending to drive the Prefab and Monolithic business: The new
government at centre came to power with promised focus on rural/urban housing.
Monolithic and Prefab business will receive a boost on this account.
3. SIMMON gives Sintex capabilities of metal stamping as well as plastic moulding on
metals7. Addition of customers like Valio, Vignal Systems, SKF to portfolio in future.
4. India as a global hub for small cars, revival of transportation and car segment,
packaging industries robust growth estimates and rapid urbanisation creates demand.
5. SIL is planning to setup a spinning unit with a capacity of producing 4.06 crore Kg of
yarn per annum at Amreli, Gujarat6. This will be commercialized from April 1, 2016.
6.
SINTEX INDUSTRIES: BSE: 502742 ; ISIN: INE429C01035
2. Major Accounting Standards and Policies followed:
Type of account Accounting Policy used
1. Depreciation Depreciation on Buildings, Plant and
Machinery is provided on straight line method; Furniture, Fixtures, Office Equipments, Borewell and Vehicles is
written down value method. Method is same for peer companies.
Amortisation Intangible assets are amortised over a period of five years.
Inventory Inventories are carried at lower of cost or
net realizable value; COGS is accounted on Weighted Average Method
The cost of fixed assets is based on the purchase price and the expenses incurred to
bring it to its intended use. Borrowing of funds not directly related to the acquisition of
qualifying assets are expensed or else they are capitalised.
Current Investments are stated at lower of cost or fair value.
Current tax is based on companys analysis of tax to be paid, and deferred tax is
accounted on account of timing difference between Income Tax department and
company accounts.
The accounting methodologies have remained the same for the past 3 years, and there
has been no deviation from the used methods.
The financial information of subsidiaries reflecting total assets (net) of 1,280.65 crore
as at 31st March, 2014, total revenues of 1,520.72 crore and net cash inflows amounting to 25.97 crore for the year ended on that date have not been prepared by the
same auditors. This information has been furnished to Deloitte who prepared the rest of the report.
3. Financial Analysis
3.1 Horizontal Analysis:
a) Shareholders Funds: There has been healthy growth of reserves and surplus over
the last three years. The growth in year 2011-12 and 2013-14 was not that
substantial and was meagre 7.4%. The reason was substantial dependence on
monolithic sector which is highly dependent on government projects. 2011-12 was
the zenith of policy
paralysis.
b) Borrowings: Over the last
three years the %age of
debt over total assets has
remained pretty constant at
0
500
1000
1500
2000
2500
3000
2011-2012 2012-2013 201-2014
Long Term borrowings
Borrowings
(Crore)
SINTEX INDUSTRIES: BSE: 502742 ; ISIN: INE429C01035
46%. Loans have been steadily rising at the rate of 13% per annum, and total assets
have been posting a similar growth. So loans are not being used to repay interest
cost, and pay dividends. They are being used to build assets.
c) Trade Receivables and
payables: Trade receivable
is a sizeable amount of sales
for every year. The average
collection period is high and
remains in 140 days range.
Government projects,
subsidies all amount. On the
contrary Sintex is good in
terms of payment to its
suppliers.
d) Inventory: The ratio of assets to inventory has fallen by 8% from 30% to 22.8% in
2013-14. The reasons are better management of inventory by Sintex.
e) Profit year on year: Year 2011-12 saw a drop in profit after tax on account of
reduced sales. However, they managed quite well not to be ever in red. Monolithic
sector gave them nightmares that year. However, the year on year returns have been
good.
3.2 Vertical analysis:
a) Profit after Tax as percentage of Revenue: The profit for the year 20013-2014 has
been a healthy 10%. It has increased from 8.7% in 2012-2013 to 10.11% present
value. The cause of this has been increase in sales, also to a certain extent better
containment of costs.
b) EBITA of Revenue: EBITA has been good for year 2013-14 at 25%. It has shown a
positive improvement from 21.88% in 2012-2013.
c) Fixed Assets of Revenue: Fixed Assets have been healthy and form close to 1/3rd of
total assets.
d) Finance Cost of Revenue: Financial cost as part of Revenues has increased to 7%.
3.3 Ratio Analysis:
3.3.1 Liquidity Ratios:
a) Current Ratio: The current ratio of 1.53 shows capability of Sintex to pay its
liabilities. The industry is asset intensive industry and all competitors have current
ratios greater than 1.
b) Operating Cycle: The operating cycle has been reducing however still it is at a high
level of 168 days. The major contributor in the huge operating cycle is average
0
100
200
300
400
Trade Payable
Trade Payable
(Crore)
SINTEX INDUSTRIES: BSE: 502742 ; ISIN: INE429C01035
collection period, which itself is 143 days. Government projects, and infrastructure
projects is a major source of this lateness of payment.
3.3.2 Profitability Ratios:
a) Profit Margin: Profit Margin has been improving since last three years marginally.
Presently the profit margin is 10.36%. Operating Profit Margin stood at 22.14%. So
22.14% of total revenue generated was profit and had been generated from operating
activities. The reason for this has been higher %age increase in sales and lower
%age increase in expenses leading to higher operating profit.
b) Return on Asset: The return on asset,
was at 4.54% as compared to 4.09% of
last year. The ROA of industry has been
near about 5%, so the number is not bad.
However, operating ROA has been
showing good numbers of close to 10%.
c) Return on Equity: Return on Equity
has marginally increased from 10.49%
to 11.47%. This was mainly because
of higher increase in PAT.
3.3.3 Market Ratio:
a) Earnings Per Share: Earnings per share been increasing for the company because of
enhanced profits after tax. Presently Basic EPS stands at 10.77. SupremeInd and
FinolexInd have better EPS, hinting towards their shareholders getting better value
per rupee invested.
3.5 4
4.5 5
Return on Asset(%)
Return on asset(%)
0
500
1000
1500
2011-2012 2012-2013 201-2014
Return on Equity(%)
Return on Equity(%)
SINTEX INDUSTRIES: BSE: 502742 ; ISIN: INE429C01035
b) P/E ratio: The people in market are ready to pay 6.8 times the income on one share.
The industries P/E of competitors are in the range of 22 to 26. This either means the
buyers are not much optimistic of the share, or the share is undervalued.
c) Price-book ratio: The price-book ratio of Sintex is 0.748. The companies balance
sheets is fine, and business is continuous so Sintex is undervalued.
3.3.4 Solvency Ratios:
a) Debt Equity Ratio: The debt to equity ratio of Sintex is 1.12. It is in the same range
of FinolexInd 1.36.
b) Interest-cover ratio: The interest cover ratio is 2.85, and is a good value as the
profit before interest and tax is fully capable of paying of interest on debts.
4. Cash Flow Analysis
a) Cash generated from operations is 803.96 Crore , and the Profit Before Tax was 438 Crore.
So the earning quality of Sintex is indeed good. The amount of collection is 98% of total
sales for this year. A good part of the cash generated from Operations and 664 crore from
cash and cash equivalents was used to i) buy assets worth 1293.62 crore
b) A long term loan of 757 crore was taken to pay interest, dividends, and reduce other high
interest rate borrowings by 382 crore.
c) There is a healthy cash flow from operations and the increase of long term borrowings is
not a strain on the company. In the end of 2013 the company was sitting on a cash balance
of over 700 crore. The utilisation of this money in purchasing of assets is a sound decision.
d) Cash Flow from operations covered interest payment by a factor of 2.6 times, meaning
even if there is a downfall in the operations still the company will be in a position to
honour its debtors.
e) The free cash flow of Sintex is negative, and it has been rapidly expanding itself through
modernization and acquisitions.
f) The firm enjoys a current ratio of 1.53 which is good enough to help it sail through
unfortunate times without risking operations.
5. Conclusion: a)
i) Strong areas is economic development of the nation will lead to more purchase of plastics
in both urban areas and development areas.
ii) Sintex is focussed on both organic growth, and acquisitions which leads to more customers
and more market penetration.
iii) The operating cash flow is good making the business sustainable in terms of payments and
other fulfilment of obligations.
iv) The weak area is monolithic sector which is heavily dependent of government policies such
as JnNURM.
SINTEX INDUSTRIES: BSE: 502742 ; ISIN: INE429C01035
v) 65% of shares owned by owners has been pledged8.
b)
i) Where to find which item in Financial Statement.
ii) Understanding the financial health of a company. In case I want to buy a share I can at-least
realise how is the company doing; what is the source of dividend payments; historically
what have been the dividends corresponding to earnings.
iii) Is the business cyclic, in case it is cyclic what makes it cyclic. For instance, the monolithic
sector if Sintex is heavily dependent on Government projects.
6. References:
1.http://www.plasticsnews.com/article/20140123/NEWS/140129959/indian- industry-
looks-to-double-plastics-use-by-2020#
2. http://www.ficci.com/spdocument/20396/Knowledge-Paper-ps.pdf
3. http://commerce.nic.in/eidb/ecomq.asp (specific commodity: 39)
4.http://www.vccircle.com/news/engineering/2014/07/25/sintex-buys-out- french-
plastic-products-maker-groupe-simonin-242m
5.http://www.plasticsnews.com/article/20140812/NEWS/140819976/sintex-wausaukee-
composites-opens-manufacturing-plant-in- india
6.http://www.commodityonline.com/news/indian-textile-industry-to-grow-11-annually-
to-$220-bn-by-2020-57558-3-57559.html
7.http://www.careratings.com/upload/CompanyFiles/RR/Sintex%20Industries%20Limi
ted-03-21-2014.pdf
8. http://content.icicidirect.com/mailimages/IDirect_Pledgedshares_Q3FY14.pdf
SINTEX INDUSTRIES: BSE: 502742 ; ISIN: INE429C01035
7. Annexures
Annexure 1: Balance Sheet and Profit and Loss Statement 2013-2014
SINTEX INDUSTRIES: BSE: 502742 ; ISIN: INE429C01035
SINTEX INDUSTRIES: BSE: 502742 ; ISIN: INE429C01035
Annexure 2: Horizontal Analysis
Description %age change 14-13
%age change 13-12
%age change 12-11
A. BALANCE SHEET
Total Assets: 12.1 % 11.42 % 8.03 %
Fixed Assets (Net) 23.22 % 6.99 % 13.07 %
Investments 7.64 % 7.72 % -22.2 %
Total Liabilities: 12.1 % 11.42 % 8.03 %
Net Worth 8.67 % 19.94 % 7.43 %
Loan Funds 13.12 % 12.92 % 10.37 %
Deferred Tax Liability (Net) 14.91 % 18.14 % 18.97 %
B. STATEMENT OF PROFIT & LOSS
Gross Sales 8.14 % 16.55 % -1.67 %
Earning before interest, tax and depreciation 23.76 % 15.86 % -10.77 %
Finance Costs 64.29 % 30.77 % 27.26 %
Depreciation 12.3 % 25.63 % 9.86 %
Profit before Exceptional Items 12.73 % 8.83 % -21.66 %
Exceptional Items -82.22 % 93.72 % 647.44 %
Profit Before Tax 40.18 % -3.41 % -32.42 %
Taxation 137.96 % -53.88 % -22.57 %
Profit After Tax 24.47 % 17.19 % -35.76 %
Dividend (including dividend distribute tax) 0.63 % 23.57 % 8.24 %
Retained Earnings 26.96 % 16.56 % -38.24 %
Export Growth 5.34 % 6.72 % -11.18 %
Inventory -16.27 % 14.34 % 0.62 %
SINTEX INDUSTRIES: BSE: 502742 ; ISIN: INE429C01035
Annexure 3: Vertical Analysis:
Description 31.03.2014 31.03.2013 31.03.2012
A. BALANCE SHEET
Total Assets: 100% 100% 100%
Fixed Assets (Net) 37.25% 33.89% 35.3%
Investments 13.73% 14.3% 14.79%
Total Liabilities: 100% 100% 100%
Net Worth 41.21% 42.51% 39.49%
Loan Funds 46.14% 45.73% 45.12%
Deferred Tax Liability (Net) 4.22% 4.12% 3.88%
B. STATEMENT OF PROFIT & LOSS
Gross Sales 100% 100% 100%
Earning before interest, tax and depreciation 25.03% 21.88% 22.01%
Finance Costs 7.16% 4.71% 4.2%
Depreciation 4.17% 4.02% 3.73%
Profit before Exceptional Items 13.7% 13.14% 14.08%
Exceptional Items 0.48% 2.95% 1.77%
Profit Before Tax 13.21% 10.19% 12.3%
Taxation 3.11% 1.41% 3.57%
Profit After Tax 10.11% 8.78% 8.74%
Dividend (including dividend distribute tax) 0.77% 0.83% 0.78%
Retained Earnings 9.34% 7.95% 7.95%
SINTEX INDUSTRIES: BSE: 502742 ; ISIN: INE429C01035
Annexure 4 Profitability Ratios:
Profitability Ratios 31-03-2014 31-03-2013 31-03-2012
Profit Margin 10.36 % 9.07 % 8.96 %
PAT 335.060 269.190 229.7
Sales 3233.120 2,969.26 2,562.59
Asset Turnover 0.44 times 0.45 times 0.43 times
Sales 3233.120 2,969.26 2,562.59
Total Assets 7,381.58 6,584.82 5,909.69
Return on assets 4.54 % 4.09 % 3.89 %
Profit 335.060 269.190 229.7
Assets 7,381.58 6,584.82 5,909.69
Return on Equity 11.47% 10.49% 10.19%
PAT 335.060 269.190 229.7
Equity 2920.735 2566.605 2253.145
Earning Per Share 10.767 8.650 8.473
PAT 335.060 269.190 229.7
Number of Shares 31.120 31.120 27.110
Operating Profit Margin 22.14 % 19.81 % 19.66 %
Operating Profit before Tax 715.90 588.26 517.12
Sales 3233.120 2,969.26 2,629.65
Asset Turnover 0.72 times 0.66 times 0.61 times
Sales 3233.120 2,969.26 2,629.65
Operating Assets 4,465.13 4508.69 4,280.54
Return on assets 9.97 % 8.66 % 5.46 %
Operating Profit 444.99 390.42 233.66
Operating Assets 4,465.13 4508.69 4,280.54
Return on Financial Assets 2.87 % 2.23 % 2.15 %
Net financial Income 89.479046 64.600618 48.36599
Financial Assets 3,117.01 2892 2,252.38
SINTEX INDUSTRIES: BSE: 502742 ; ISIN: INE429C01035
Annexure 5: Operating Figures
31-03-
2014 31-03-
2013 31-03-2014
Sales 3233.12 2969.26 2562.59
Raw Material Consumption 2056.52 1961.19 1657.98
Net change in inventory(Opening Invenetory- Closing Inventory) 23.37 -28.85 -4.32 spares consumption 131.62 134.91 105.37
Employee Cost 112.99 106.4 94.46 Miscellenous and administrative cost 192.72 207.35 191.98
Total Expense 2517.22 2381 2045.47
Operating Profit 715.9 588.26 517.12
Depreciation 138.33 123.18 167.82
Tax as reported 102.94 43.26 90.96
Deduct tax on other income -24.36818 -17.593
-14.4028
Add Tax on interest expense 50.79932 30.9209 29.0948
Deduct Tax on exceptional Items 3.212 18.07 9.99029
Tax on operating profit 132.58314 74.6579 115.642
Net Operating Profit after Tax 444.98686 390.42208 233.657734
Financing Cost -237.38 -144.49 -135.83
Tax @21.42% 50.846796 30.949758 29.094786
Exceptional Items -16.06 -90.35 -46.64
Tax @21.42% 3.440052 19.35297 9.990288
Net Operating Profit after tax 245.83371 205.88481 90.272808
SINTEX INDUSTRIES: BSE: 502742 ; ISIN: INE429C01035
Total Assets 7381.58 6584.82 5909.69
Non-current Investment 1013.66 941.71 841.71
Long term loans and advances 1800.03 877.61 157.82
Current Investments 15.58 24.84 32.52 Short-term loans and advancements 87.18 231.97 597.1
Operating Assets 4465.13 4508.69 4280.54
Financial Income 89.479046 64.600618 48.366
Other Income 113.87 82.21 61.55
Deduct Income [email protected] 24.390954 17.609382 13.184
Financial Asset 3117.01 2892 2252.38
Non-current investments 1013.66 941.71 841.71
Long-term loans and advances 1800.03 877.61 157.82
Current investments 15.58 24.84 32.52
Cash and bank balances 102.7 781.29 605.63
Short-term loans and advances 87.18 231.97 597.1
Other current Asset 97.86 34.58 17.6
SINTEX INDUSTRIES: BSE: 502742 ; ISIN: INE429C01035
Annexure 6 Liquidity Ratios
Liquidity Ratios 31-03-2014 31-03-
2013 31-03-
2012
Current Ratio 1.530 1.765 1.136
Current Asset 1771.240 2510.280 2561.540
Current Liabilities 1157.870 1422.020 2254.970
Quick Ratio 1.384 1.624 1.058
Current Assets- Inventories 1602.960 2309.310 2385.770
Current Liabilities 1157.870 1422.020 2254.970
Accounts Receivable Turnover 2.550 2.492 2.583
Sales 3233.120 2969.260 2562.590
Average Accounts Receivable 1268.135 1191.350 992.095
Accounts Payable Turnover 8.338 10.772 9.481
COGS 2655.550 2504.180 2143.520
Average Accounts Payable 318.495 232.480 226.095
Inventory Turnover Ratio 14.383 13.294 12.233
COGS 2655.550 2504.180 2143.520
Inventories 184.625 188.370 175.230
Average Collection Period 143.165 146.448 141.308
Days 365.000 365.000 365.000
Accounts Receivable Turnover 2.550 2.492 2.583
Inventory Holding Period 25.376 27.456 29.838
Days 365.000 365.000 365.000
Inventory Turnover Ratio 14.383 13.294 12.233
Operating Cycle Days 168.541 173.904 171.146
SINTEX INDUSTRIES: BSE: 502742 ; ISIN: INE429C01035
Annexure 7: Valuation Ratios
Valuation Ratios 31-03-2014 31-03-2013 31-03-
2012
Dividend Payout Rates 0.065 0.081 0.077
Dividend 21.920 21.920 17.740
Net Income 335.060 269.190 229.700
P/E Ratio 6.789
Market Price 73.100
Earning Per Share 10.767
Book-ratio 97.755 89.953 74.996
Net-worth 3042.130 2799.340 2333.870
Number of share 31.120 31.120 31.120
P/Book Ratio 0.748
Market Price 73.100
Book-ratio 97.755
Annexure 8: Solvency Ratios:
Debt-Equity Ratio 1.12 1.08
Debt 3406.01 3011.00
Equity 3042.13 2799.34
Liabilities-Equity Ratio 1.43 1.35
Liabilities 4,339.45 3,785.48
Equity 3042.13 2799.34
Interest-Cover 2.85 times 3.79 times
Profit-before-interest and tax 675.38 547.29
Interest expense 237.38 144.49
Total Debt 3,406.01 3,011.00
Long-term borrowings 2,856.06 2,078.94
Short-term borrowings 549.95 932.06
Other-current Liabilities 202.95 200.22
Liabilities 4,339.45 3,785.48
Non-current liabilities 3,181.58 2,363.46
Current liabilities 1,157.87 1,422.02
SINTEX INDUSTRIES: BSE: 502742 ; ISIN: INE429C01035