STAKEHOLDERS EMPOWERMENT SERVICES LML LTD…€¦ · · 2016-06-08STAKEHOLDERS EMPOWERMENT SERVICES 1 | P A G E SECTOR: AUTOMOBILE REPORTING DATE: 1ST JUNE, 2016 LML LTD. LML Ltd

Stakeholders’ Education | Corporate Governance Research | Corporate Governance Score | Proxy Advisory

STAKEHOLDERS EMPOWERMENT SERVICES

1 | P A G E

SECTOR: AUTOMOBILE REPORTING DATE: 1ST JUNE, 2016

LML LTD. www.lmlworld.com

LML Ltd 1st June, 2016 TABLE 1 - MARKET DATA (STANDALONE) (As on 31st May, 2016)

NSE Code - LML NSE Market Price (₹) 6.85 NSE Market Cap. (₹Cr.) 55.91

Sector - Automobile Face Value (₹) 10.00 Equity (₹Cr.) 81.98

52-week High/Low (₹) 11.25/5.95 Net worth (₹Cr.) -584.94

Business Group - Singhania Deepak TTM P/E N.A. Traded Volume (Shares) 15,064

Year of Incorporation - 1972 TTM P/BV N.A. Traded Volume (lacs) 1.03

Source - Capitaline

Corporate Office: COMPANY BACKGROUND

C-3, Panki Industrial Estate, LML Limited manufactures and sells motorized two-wheelers in India. It offers scooters

and motorcycles. The company also exports its products to the United States, the

European Union, Africa, Latin America, Asia, etc. LML Limited was incorporated in 1972

and is based in Kanpur, India.

Site-I,

Kanpur – 208 022, Uttar Pradesh.

Company Website:

www.lmlworld.com

TABLE 2 - PRICE PERFORMANCE

31st May,

2016

29th May,

2015

30th May,

2014

% Change CAGR for

2 years 2016 vs 2015 2015 vs 2014

Price (₹) 6.85 6.95 6.55 -1.44% 6.11% 2.26%

Trading Volume (Shares)

(yearly avg.) 3,25,456 3,64,734 1,55,747 -10.77% 134.18% -

NSE Market Cap. (in ₹Cr.) 56.16 56.98 53.70 -1.44% 6.11% 2.26%

Source - Money Control

TABLE 3 - FINANCIALS

(₹Cr.) 2015 2014 2013 % Change CAGR for 2

years 2015 vs 2014 2014 vs 2013

Net Worth -584.94 -498.77 -425.94 N.A. N.A. N.A.

Current Assets 140.95 166.79 147.27 -15.49% 13.25% -2.17%

Non-Current Assets 62.95 78.57 92.19 -19.88% -14.77% -17.37%

Total Assets 203.9 245.36 239.46 -16.90% 2.46% -7.72%

Investments 27.86 34.33 0.98 -18.85% 3,403.06% 433.18%

Finance Cost 43.15 40.57 36.58 6.36% 10.91% 8.61%

Long Term Liabilities 15.21 13.3 10.41 14.36% 27.76% 20.88%

Current Liabilities 773.64 730.83 655 5.86% 11.58% 8.68%

Turnover 203.77 262.02 243.45 -22.23% 7.63% -8.51%

Profit After Tax (PAT, ₹Cr.) -81.09 -72.83 -65.45 N.A. N.A. N.A.

EPS (₹) -10.00 -9.00 -8.00 N.A. N.A. N.A.

Source - Money Control/Annual Report

Discussion as per Company: During the year 2014-2015 Company’s performance during the year was adversely affected inter

alia due to global recessionary conditions and especially political and economic condition prevailing in African and developed

economies as well as weak domestic demand.

http://www.lmlworld.com/




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AUDIT QUALIFICATIONS

Audit Qualifications in last 3 years: Qualified Opinion

Basis of Qualified Opinion all three years.

a) As mentioned in note no. 26 of standalone financial statements, balances of some of the trade receivable/ payable,

lenders and loans and advances being subject to confirmation/ reconciliation and subsequent adjustments, if any. As

such, we are unable to express any opinion as to the effect thereof on the financial statement for the year.

[Qualification since FY 2003-05]

b) As mentioned in note no. 27 of standalone financial statements, the Company has valued the inventories except finished

goods at cost instead of at cost or realizable value, whichever is lower which is not in compliance with the Accounting

Standard 2 – Valuation of Inventories prescribed in under Section 133 of the Act, read with Rule 7 of the Companies

(Accounts) Rules, 2014. As explained to us the process of possible utilization of slow / non-moving items of inventory will

be undertaken upon - finalization of the product plan and the restructuring/revival plan and its implementation. Since

the realizable value as on 31st March, 2015 has not been determined, we are unable to express any opinion as to the

effect thereof on the standalone financial statement for the year [Qualification since FY 2006-07].

c) As mentioned in note 31 of standalone financial statements, the Company has become a Sick Industrial Company due to

erosion of its net worth and it’s current liabilities have also exceeded its current assets by ₹63269.13 lakhs as at Balance

Sheet date. These factors, along with other matters as set forth in the said note, raise doubt that the Company will be

able to continue as a going concern. The Company is in the process of restructuring/revival of its business under the

aegis of BIFR and has submitted the draft revival scheme and as directed by BIFR, the Company has also submitted the

updated revival scheme, considering this the accounts have been prepared on a going concern basis. The Company’s

ability to continue, as a going concern is dependent upon successful restructuring and revival of its business. In case the

going concern concept is vitiated, necessary adjustments will be required on the carrying amount of Assets and

Liabilities which are not ascertainable. [Qualification since FY 2005-06]

d) As mentioned in note no. 38 of standalone financial statements, regarding non-compliance of requirements under

Micro, Small and Medium Enterprises Development Act, 2006, in the absence of information available with the

Company. As such, we are unable to express any opinion as to the effect thereof if any, on the standalone financial

statements for the year [Qualification since FY 2007-08]

The consequential possible effects of sub Para (a), (b), (c) and (d) above on assets and liabilities as at 31st March, 2015 and loss

for the year ended 31st March, 2015 are not ascertainable

Management Response in Last three years

a) As given in Note No. 26 of Notes of Accounts Balances of some of the Trade Receivables, Trade Payable, lenders, loans

and advances are subject to confirmation from the respective parties and consequential adjustments arising from

reconciliation, if any. The management however is of the view that there will be no material adjustment in this regard.

b) As given in Note No. 27 of Notes of Accounts the Company is in the process of restructuring/revival of its business under

the aegis of BIFR which inter alia includes finalization of the product plan. The process of possible utilization of slow I

non-moving items of inventory will be undertaken upon - finalization of the product plan and the restructuring/revival

plan. Pending such ascertainment determination, the management has considered the inventories except finished goods

at cost. Requisite accounting effect, if any, will be given upon such ascertainment determination, approval and

implementation of revival plan.

c) The Company became a Sick Industrial Company within the meaning of Section 3(1)(0) of Sick Industrial Companies

(Special Provisions) Act, 1985 (SICA) due to erosion of its net worth and the Company -was declared a Sick Industrial

Company by BIFR on 8th May, 2007. The Company resumed operations in a small way from April, 2007 and is working

inter-alia on the development of various new products and technologies. The Company had earlier submitted its draft

revival scheme to BIFR. As directed by BIFR, the Company has since submitted the updated revival scheme. In view of

this, the accounts have been prepared on the basis of going concern.

d) As given in Note No. 38 of Notes of Accounts In the absence of information from Trade Payable regarding status under

The Micro, Small and Medium Enterprises Development Act, 2006, liability of interest if any cannot be reliably

estimated, nor required disclosures can be made.




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Response Comment

Frequency of Qualifications Some qualifications repetitive from 2005-06

Have the auditors made any adverse remark in last

3 years? No

TABLE 4: BOARD PROFILE (As on 31st March, 2015)

Regulatory Norms Company

% of Independent Directors on the Board 50% 50%

% of Promoter Directors on the Board - 27.27%

Number of Women Directors on the Board At least 1 1

Classification of Chairman of the Board - Executive Promoter Director

Is the post of Chairman and MD/CEO held by

the same person? - Yes

Average attendance of Directors in the Board

meetings (%) - 82.98%

Source - Money Control/Annual Report

Composition of Board: As per Regulation 17(i)(b) of the Listing Regulations, 2015, the Company should have at least 50%

Independent Directors as the Chairman of the Board is a Promoter Director. The Company as on 31st March, 2015 has 50% of

Independent Directors and hence, it meets the regulatory requirements.

Board Diversity: The Company has 12 directors out of which 11 are male and 1 is are female.

Holding of position of MD & Chairman by same person: The Company has appointed Mr. Deepak Kumar Singhania as the

Chairman and Managing Director of the Company. Appointment of a single person as the Chairman and Managing Director of

the Company is not a good governance practice as this may lead to concentration of power in a single person.




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TABLE 5 - FINANCIAL RATIOS

Ratios 2015 2014 2013 % Change

2015 vs 2014 2014 vs 2013

Turn

ove

r

Rat

ios

Inventory Turnover 2.15 2.26 2.46 -4.96% -8.17%

Debtors Turnover 203.77 48.61 197.93 319.17% -75.44%

Fixed asset Turnover 3.24 3.33 2.64 -2.93% 26.28%

Current Asset Turnover 1.45 1.57 1.65 -7.97% -4.97%

Ret

urn

Rat

ios Operating Profit Margin -39.79% -27.80% -26.88% N.A. N.A.

Net Profit Margin -39.79% -27.80% -26.88% N.A. N.A.

Return on Assets (ROA) -39.77% -29.68% -27.33% N.A. N.A.

Return on Equity (ROE) N.A. N.A. N.A. N.A. N.A.

Return on Capital Employed (ROCE) N.A. N.A. N.A. N.A. N.A.

Liq

uid

ity

Rat

ios

Current Ratio 0.18 0.23 0.22 -20.17% 1.50%

Quick Ratio 0.06 0.07 0.07 -14.41% -5.72%

Cash Ratio 0.06 0.06 0.07 -6.36% -13.49%

Working Capital Turnover ratio N.A. N.A. N.A. N.A. N.A.

Solv

ency

Rat

ios Debt to equity ratio N.A. N.A. N.A. N.A. N.A.

Interest Coverage Ratio N.A. N.A. N.A. N.A. N.A.

Trad

ing

Rat

ios

Market Cap / Sales 0.30 0.23 0.25 28.59% -7.09%

Market Cap/ Net Worth N.A. N.A. N.A. N.A. N.A.

Market Cap/PAT N.A. N.A. N.A. N.A. N.A.

Market Cap/EBITDA N.A. N.A. N.A. N.A. N.A.

Trading Volume (shares) (avg. of 1 year) 3,28,688 4,02,876 1,28,404 -18.41% 213.76%

Trading Volume (shares) (high in 1 year) 29,14,417 77,60,097 32,91,030 -62.44% 135.80%

Trading Volume (shares) (low in 1 year) 39,450 28,828 3,561 36.85% 709.55%

Ratio - High/low trading volume 73.88 269.19 924.19 -72.56% -70.87%

Ratio - High/average trading volume 8.87 19.26 25.63 -53.97% -24.85%

Source - Money Control




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TABLE 6 (A): OWNERSHIP & MANAGEMENT RISKS

Mar' 2016 Mar’2015 Mar' 2014 Comments

Shar

eho

ldin

g

Promoter shareholding 26.57% 26.57% 26.57% No new equity shares were issued during

the period Dec’13 to Dec’15. There is no

major change in shareholding pattern of

the Company. The promoter shareholding

constant during same period. The

promoters have pledged 51.29% of their

shareholding.

Public - Institutional

shareholding 1.53% 1.53% 1.54%

Public - Others shareholding 71.90% 71.90% 71.89%

Non Promoter Non Public

Shareholding 0.00% 0.00% 0.00%

TABLE 6 (B): OWNERSHIP & MANAGEMENT RISKS

Market Activity of Promoters The promoters have not sold/bought any shares.

Preferential issue to promoters No preferential issue of shares was made to the promoters in last three years.

Preferential issue to others No preferential issue of shares was made to other shareholders during last three years.

GDRs issued by the Company The Company did not issue any GDRs during last three years.

Issue of ESOPs/Issue of shares other

than Preferential allotment The Company does not have any ESOP Scheme.

Source - Annual Report




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Glossary

Equity: The equity shares capital of the Company

Net Worth: The amount by which the Assets exceeds the liabilities excluding shareholders’ funds of the Company

Turnover: The revenue earned from the operations of the Company

EPS: Earning Per Share is net profit earned by the Company per share

𝐸𝑃𝑆 =Profit After Tax

Number of outstanding shares

P/E ratio: It is the ratio of the Company’s share price to earnings per share of the Company

𝑃/𝐸 𝑟𝑎𝑡𝑖𝑜 =Price of each share

Earnings per share

Current Assets: Cash and other assets that are expected to be converted to cash in one year

Fixed Assets: assets which are purchased for long-term use and are not likely to be converted quickly into cash, such as land,

buildings, and equipment

Total Assets: Current Assets + Fixed Assets

Investments: An investment is an asset or item that is purchased with the hope that it will generate income or appreciate in the

future.

Finance Cost: The Financing Cost (FC), also known as the Cost of Finances (COF), is the cost and interest and other charges

incurred during the year in relation to borrowed money.

Long Term Liabilities: Long-term liabilities are liabilities with a maturity period of over one year.

Current Liabilities: A company's debts or obligations that are due within one year.

Inventory Turnover ratio: Inventory Turnover is a ratio showing how many times a company's inventory is sold and replaced over

a period.

𝐼𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑦 𝑇𝑢𝑟𝑛𝑜𝑣𝑒𝑟 𝑟𝑎𝑡𝑖𝑜 =Sales Turnover

Inventory

Debtors Turnover: Accounts receivable turnover is an efficiency ratio or activity ratio that measures how many times a business

can turn its accounts receivable into cash during a period

𝐷𝑒𝑏𝑡𝑜𝑟𝑠 𝑇𝑢𝑟𝑛𝑜𝑣𝑒𝑟 𝑟𝑎𝑡𝑖𝑜 =Sales Turnover

Accounts recievables

Fixed Asset Turnover: The fixed-asset turnover ratio is a financial ratio of net sales to fixed assets

𝐹𝑖𝑥𝑒𝑑 𝐴𝑠𝑠𝑒𝑡 𝑇𝑢𝑟𝑛𝑜𝑣𝑒𝑟 𝑟𝑎𝑡𝑖𝑜 =Sales Turnover

Fixed Assets

Current Asset Turnover: The current-asset turnover ratio is a financial ratio of net sales to fixed assets

𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝐴𝑠𝑠𝑒𝑡 𝑇𝑢𝑟𝑛𝑜𝑣𝑒𝑟 𝑟𝑎𝑡𝑖𝑜 =Sales Turnover

Current Assets




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Operating Profit Margin: Operating margin is a measurement of what proportion of a Company’s revenue is left over after

paying for variable costs of production such as wages, raw materials etc. It can be calculated by dividing a Company’s operating

income (also known as “operating profit”) during a given period by its sales during the same period.

𝑂𝑝𝑒𝑟𝑎𝑡𝑖𝑛𝑔 𝑃𝑟𝑜𝑓𝑖𝑡 𝑀𝑎𝑟𝑔𝑖𝑛 =Operating profit

Sales Turnover

Net Profit Margin: Net profit margin is the percentage of revenue left after all expenses have been deducted from sales

𝑁𝑒𝑡 𝑃𝑟𝑜𝑓𝑖𝑡 𝑀𝑎𝑟𝑔𝑖𝑛 =Net profit

Sales Turnover

Return on Assets: ROA tells you what earnings were generated from invested capital (assets)

𝑅𝑒𝑡𝑢𝑟𝑛 𝑜𝑛 𝐴𝑠𝑠𝑒𝑡𝑠 =Net profit

Total Assets

Return on equity/net worth: return on equity (ROE) is the amount of net income returned as a percentage of shareholders’

equity.

𝑅𝑒𝑡𝑢𝑟𝑛 𝑜𝑛 𝐸𝑞𝑢𝑖𝑡𝑦 =Net profit

Net worth

Return on Capital Employed: Return on capital employed (ROCE) is a financial ratio that measures a company's profitability

and the efficiency with which its capital is employed.

𝑅𝑒𝑡𝑢𝑟𝑛 𝑜𝑛 𝐶𝑎𝑝𝑖𝑡𝑎𝑙 𝐸𝑚𝑝𝑙𝑜𝑦𝑒𝑑 =Net profit

Total Debt + Equity share capital

Current ratio: The current ratio is a financial ratio that measures whether or not a firm has enough resources to pay its debts

over the next 12 months. It compares a firm's current assets to its current liabilities.

𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝑟𝑎𝑡𝑖𝑜 =Current Assets

Current Liabilities

Quick ratio: The quick ratio is a measure of how well a Company can meet its short term financial liabilities.

𝑄𝑢𝑖𝑐𝑘 𝑟𝑎𝑡𝑖𝑜 =Current Assets − Inventories

Current Liabilities

Cash ratio: The ratio of the liquid assets of a Company to its current liabilities.

𝑄𝑢𝑖𝑐𝑘 𝑟𝑎𝑡𝑖𝑜 =Current Assets − Inventories − Account Recievables

Current Liabilities

Working Capital Turnover ratio: The working capital turnover ratio is also referred to as net sales to working capital. It indicates a

Company's effectiveness in using its working capital.

𝑊𝑜𝑟𝑘𝑖𝑛𝑔 𝐶𝑎𝑝𝑖𝑡𝑎𝑙 𝑇𝑢𝑟𝑛𝑜𝑣𝑒𝑟 𝑟𝑎𝑡𝑖𝑜 =𝑆𝑎𝑙𝑒𝑠 𝑇𝑢𝑟𝑛𝑜𝑣𝑒𝑟

Current Assets − Current Liabilities

Debt to Equity ratio: The debt-to-equity ratio (D/E) is a financial ratio indicating the relative proportion of

shareholders' equity and debt used to finance a company's assets.

𝐷𝑒𝑏𝑡 𝑡𝑜 𝐸𝑞𝑢𝑖𝑡𝑦 𝑟𝑎𝑡𝑖𝑜 =𝑆ℎ𝑜𝑟𝑡 𝑇𝑒𝑟𝑚 𝐷𝑒𝑏𝑡 + 𝐿𝑜𝑛𝑔 𝑇𝑒𝑟𝑚 𝐷𝑒𝑏𝑡

𝑁𝑒𝑡 𝑊𝑜𝑟𝑡ℎ

Interest Coverage ratio: The Interest coverage ratio is a debt ratio and profitability ratio used to determine how easily a

Company can pay interest on outstanding debt.

𝐼𝑛𝑡𝑒𝑟𝑒𝑠𝑡 𝐶𝑜𝑣𝑒𝑟𝑎𝑔𝑒 𝑅𝑎𝑡𝑖𝑜 =𝐸𝑎𝑟𝑛𝑖𝑛𝑔 𝐵𝑒𝑓𝑜𝑟𝑒 𝐼𝑛𝑡𝑒𝑟𝑒𝑠𝑡 𝑎𝑛𝑑 𝑇𝑎𝑥

𝐹𝑖𝑛𝑎𝑛𝑐𝑒 𝐶𝑜𝑠𝑡


http://www.investopedia.com/terms/i/invested-capital.asp

http://www.investopedia.com/articles/stocks/05/04405.asp



8 | P A G E



Market Cap/Sales ratio: Market Cap/sales ratio, Price–sales ratio, P/S ratio, or PSR, is a valuation metric for stocks. It is calculated

by dividing the company's market cap by the revenue in the most recent year; or, equivalently, divide the per-share stock price by

the per-share revenue.

𝑀𝑎𝑟𝑘𝑒𝑡 𝐶𝑎𝑝/𝑆𝑎𝑙𝑒𝑠 𝑟𝑎𝑡𝑖𝑜 =𝑀𝑎𝑟𝑘𝑒𝑡 𝐶𝑎𝑝

𝑆𝑎𝑙𝑒𝑠 𝑇𝑢𝑟𝑛𝑜𝑣𝑒𝑟

Market Cap/ Net Worth ratio: It is a valuation ratio calculated by dividing Company’s market cap to net worth.

𝑀𝑎𝑟𝑘𝑒𝑡 𝐶𝑎𝑝/𝑁𝑒𝑡𝑤𝑜𝑟𝑡ℎ 𝑟𝑎𝑡𝑖𝑜 =𝑀𝑎𝑟𝑘𝑒𝑡 𝐶𝑎𝑝

𝑁𝑒𝑡𝑤𝑜𝑟𝑡ℎ

Market Cap/ PAT ratio: It is a valuation ratio calculated by dividing Company’s market cap to net profit.

𝑀𝑎𝑟𝑘𝑒𝑡 𝐶𝑎𝑝/𝑃𝐴𝑇 𝑟𝑎𝑡𝑖𝑜 =𝑀𝑎𝑟𝑘𝑒𝑡 𝐶𝑎𝑝

𝑛𝑒𝑡 𝑝𝑟𝑜𝑓𝑖𝑡

Market Cap/ EBITDA ratio: It is a valuation ratio calculated by dividing Company’s market cap to EBITDA.

𝑀𝑎𝑟𝑘𝑒𝑡 𝐶𝑎𝑝/𝐸𝐵𝐼𝑇𝐷𝐴 𝑟𝑎𝑡𝑖𝑜 =𝑀𝑎𝑟𝑘𝑒𝑡 𝐶𝑎𝑝

𝐸𝐵𝐼𝑇𝐷𝐴

Trading Volume (shares) (avg. of 1 year): Average number of shares/day traded in 1 year

Trading volume (shares) (high in 1 year): Highest number of shares/day traded in 1 year

Trading volume (shares) (minimum in 1 year): Lowest number of shares traded on any one day in 1 year


https://en.wikipedia.org/wiki/Stock

https://en.wikipedia.org/wiki/Market_cap

https://en.wikipedia.org/wiki/Stock



9 | P A G E



DISCLAIMER

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Contact Information

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Malad East,

Mumbai – 400 097

Tel +91 22 4022 0322

[email protected]

[email protected]

www.sesgovernance.com.

Research Analyst: Sudarshan Shetty


mailto:[email protected]

mailto:[email protected]

http://www.sesgovernance.com/